By REMODELING Magazine Staff. Our business is insurance restoration. For years we've been located in Phoenix, and from there we serve the entire metro area for jobs of every size. We also service larger jobs, statewide, out of that office.
About two years ago, one of our best and largest clients asked if we'd consider opening a branch location in Tucson to handle jobs there. We decided to go ahead, and we created a comprehensive marketing plan, including detailed information on each of four viable competitors. Then we hired a real estate agent to find us an office/warehouse location based on criteria we provided. To staff the new facility, we transferred two full-time people from our Phoenix office to Tucson and hired the rest. We set up the computer network system so that all processing was done at our Phoenix location.
Pre-marketing
In our plan, we listed all the issues that had to be addressed. We put together a time line much like a job schedule, assigning individual tasks to be completed. Without this level of detail, we wouldn't have been able to bring everything together as quickly as we did. It took four months from the day we decided to launch the Tucson office to the day we opened for business.
Our market research indicated consumers were concerned about the inability of many local contractors to complete their work in a timely manner. We heard individuals discuss how jobs would get down to the last few items, then drag on. We felt our systems and job scheduling would give us a competitive edge.
Unanticipated problems
Many of the same functions needed to be performed in both offices, and we wanted to ensure that procedures were applied consistently. So we restructured the company, creating sales manager positions at both locations and a corporate sales manager to oversee everything. Staffing was actually pretty easy. It seemed like the difficulties we anticipated with that didn't really materialize.
The biggest problems were those we hadn't anticipated. By hiring separate sales managers, we added unnecessarily to overhead. In addition, once individuals became corporate managers, they were suddenly off dealing with long-range problems, rather than focusing on the day-to-day. A corporate mentality developed at both locations, along with the requisite turf wars and internal politics. (I'd compare it to the mindset of the off-the-jobsite foreman vs. the on-the-jobsite foreman.) Phoenix office employees resented the amount of time, attention, and energy devoted to setting up the new office in Tucson.
Lessons learned
We projected that in our first year, Tucson would be bringing in 20% of company revenues. Actually, sales out of the satellite office only reached 60.92% of original projections. Why? We sold so much that production couldn't keep up with demand. That ultimately caused us to lose sales. We also got behind with some new accounts that were critical to our success.
Communications between the offices needed to be more frequent to help eliminate misunderstandings. We, as owners, were frustrated with how hard we had to work to develop an atmosphere of unity. We failed to foresee that maintaining the morale and cohesiveness of the group would take up so much of our time.
I would recommend a second location for a highly systematized and stable company with a solid market share in its original geographic location. To pull it off, you need to have complete, written, documented procedures and a monitoring system in place that can expand to handle a second location.
Above all, management must have time to deal with the personnel issues that (we discovered) are sure to come up with being in a new and changing environment. --Jim Kowalski is an owner and director of marketing at Kowalski Construction, in Phoenix and Tucson, Ariz.
