In the first few years of running my remodeling company, as I identified the core principles that had helped it grow and become sustainable, I hashed out a “written plan for success.” I revisited this plan at the beginning of each year and monthly throughout, both to stay focused on those core principles and to adjust the plan as needed. I hope you’ll adapt it to your business.
1. Make time for the list. This is an overarching rule for every item on this list. Make appointments with yourself to review the list once a month. Set aside a defined time slot (allow plenty of time), and then stick to it. If you finish early, use the rest of the time to implement to-do items.
2. Establish your criteria for success. Think hard about this. Why are you in business anyway, what should your business do for you and your family? What type of lifestyle do you want to maintain going forward, including in retirement? How much profit will your business need to finance healthy and sustainable growth? Think big, include stretch goals, and invest in your brand, but make sure your plan includes reserve funds as insurance.
3. Establish an obtainable sales goal for the year. To support sustainable volume growth, your systems, employees, market share, brand, and profits all must grow interdependently. Set a goal that is realistic in light of past performance and the areas requiring attention going forward. Don’t rule out simply increasing prices: This alone can increase your volume without requiring you to add more resources and overhead.
4. Create a budget based on historical information. Using profit and loss statements from past years as a reference, build a budget that considers whatever changes and additional costs you’ll need to finance your plan and achieve your personal and financial goals. Don’t forget about loan payments as a cost of doing business! Use this budget to help you qualify, limit, and/or reallocate how you spend and how you will preserve planned net profits.
5. Establish the necessary markup, using this simple equation: Overhead + Profit Requirements = Your Indirect Expense. Indirect Expense ÷ Anticipated Direct Job Costs = Required Markup Percentage. Keep this in mind always: Any compromise to your markup or exceeding of your overhead budget or falling short on your volume goals will challenge you to cover indirect expenses and will cut into profits.
6. Estimate accurately, and price accordingly. Use an estimating system that will help you to collect estimating information in a structured, detailed manner. Write detailed specifications and add your required markup, and your production team should be able to build each project on time and within budget.
7. Sell the right projects at the right price to the right customers. If you’ve been in business for at least a few years, you should be able to identify the customer and project types that are idea for your company. Develop a marketing plan that speaks directly to both, and that strategically filters out undesirable prospects and project types.
8. Monitor production and overhead expenses. Use an accrual-based accounting system to enter and track expenses. If you enter your budget and project estimate summaries into your accounting system, you will also be able to create reports that compare estimated to actual results.
9. Adjust business as needed to maintain your path to planned net profit. Don’t put your plans and budgets on a shelf. Consider them live documents that you refer back to and will revise as reality happens or as new opportunities are discovered. Job costing should be reviewed during the project while there is still time to make adjustments.
10. Plan and enjoy personal and financial success. I call this “recharging the batteries.” I do this through trade shows, seminars, good books, the Caribbean, and being outside in the great outdoors, from which I always emerge with greater focus and productivity and renewed attention to quality.
—Shawn McCadden founded, operated, and sold a successful design/build company. A co-founder of the Residential Design/Build Institute and former director of education for a national K&B remodeling franchise, Shawn speaks at industry events and consults with remodeling companies. [email protected]. Visit his website at www.shawnmccadden.com.
