Many years ago, Paul Winans, past president of NARI and owner of an excellent Oakland, Calif., remodeling company, was talking about the difference between a “practice” and a “business.” He thinks the essential distinction lies in the degree to which the company owner delivers on the company's promise to the client. Even if the owner doesn't actually work in the field, if he controls and directly oversees most of what the company delivers, it operates as a practice. In a business, the owner delegates, and uses written policies and procedures to direct company performance.
In fact, most remodeling companies are practices; the owner sells and often estimates the jobs, maintaining close contact with clients during production. At the same time, most owners hope that sales growth will someday support greater overhead, allowing them to step back from daily operations.
Either way, both a practice and a business must effectively handle five primary functions to succeed:
Ownership/leadership protects financial health and provides vision, management, and motivation.
Marketing/sales/estimating meets revenue goals with qualified clients.
Production safely builds what was sold within time and budget limits.
Finance and administration efficiently manage information flow company-wide.
Resource management consistently meets the needs of people, equipment, and capital.
Complete the grid below to see where your company currently sits on the scale between practice and business.
Ultimately, what matters is what you, as owner, like. I guarantee that whatever you really like to do, you'll do well. Conversely, whatever you don't like to do, you'll do poorly or not at all. If you like control, and enjoy working with clients and watching projects come to life, focus on developing a rich practice. If, however, you enjoy the complexities of management, developing the talents of others, and watching the business come to life, focus on building a company where others implement your rich vision. —Judith Miller is a Bay Area construction business consultant and trainer specializing in accounting, finance, and computerization.
Download the Excel spreadsheet.
This hypothetical company currently operates as a practice. There is, however, a trend toward greater delegation, in that the field reports to a production manager rather than the owner. The move toward quantifiable systems for marketing and estimating also shows that the company owner wants to move the company beyond a practice.
