Too busy running a business to plan? I hear that often when I suggest that remodelers use the approach of the new year as an excuse to map out commitments for the new year.
Then I tell them this: If you don’t pay now to map out strategies to rework structural shortcomings within your business, you’ll pay the consequences for a long time to come.
Think about how many remodeling businesses basically stay afloat year after year. By taking a week or two now to identify and commit to the changes your business needs — cost-effectiveness, efficiency, productivity — you’ll go a long way toward assuring real success for many years to come.
Numbers Tell
It all boils down to lost opportunities. At a recent seminar for remodelers, I divided attendees into groups and asked them to assess the current status of their businesses. One group of eight agreed that their production problems hurt them, on average, by at least 10% of their total volume each year.
I then asked them to reference those losses from the perspective of a $1 million company. This 10% production loss is a $100,000 deficit each year — the equivalent of foregoing an additional $100,000 in profits.
Let’s say it will cost you $10,000 to solve that production problem. That may seem like a lot, but if you don’t invest it now, and you remain in the status quo vacuum for five years, you’re throwing $490,000 out the window. That’s not even factoring in the interest you might accrue on that extra profit, starting from the first year.
Here’s an example from my own company:
When we switched to the lead carpenter system, everything seemed to be going well: the work went faster, the team liked the autonomy, and the margins looked good. But our bottom line went down.
Between our own research and the help of our accountant, we identified two problems.
First, my team had decided to average the burdened labor cost for all employees and use that number when job costing. The average proved to be way too low, making the margins appear to be much higher than they actually were. Second, lead carpenters were now spending more time in the field managing, and the production manager was managing less.
Solution: We opted to count the time lead carpenters were managing as direct job costs. Besides letting us track these hours on timecards and seeing the related costs in each project’s job cost report, this option also helped us keep our profit margins high.
The solution cost much less than $10,000, and it circumvented what could easily have become a $150,000-a-year problem.
Escape the Catch-22
How often do your employees ask you to solve the same problem again and again? If the answer is “very often,” I would guess that you’re simply handing them the solution instead of helping them to understand the how and why behind it.
My management style is to help people learn to solve problems on their own — to delegate responsibility, encourage them to grow and adapt, and reward their growth. Teach your staff to forge solutions, and they’ll solve other problems that arise. Without training, they’ll fall back into the comfort zone and do things the same old way.
Yes, training employees takes time. But before you say you’re too busy to find that time, think about the Catch-22 of being too busy to do something that makes you busier still.
Plus, there are plenty of other reasons to train. Who will replace you if you become incapacitated, or have a family issue, or just want to take a vacation? If you want to concentrate on sales, who will replace you in production?
Consider these crucial issues now. Pay now, or pay forever.
—Shawn McCadden founded, operated, and sold a successful design/build remodeling business. A co-founder of the Residential Design/Build Institute and former director of education for a national K&B remodeling franchise, he frequently speaks at industry events and consults with remodeling companies. [email protected].
