It is a critical moment in the evolution of a remodeling company, a delicate decision, one that can help your company thrive and prosper for years to come — deciding how many jobs you can handle at a time and how to manage people waiting for your services. In other words: building and managing your backlog.

A backlog of work is an essential and necessary part of a healthy company, allowing you to plan your finances, workloads, and labor and office needs for the coming months or years. It gives the company a sense of security, a vision of stability lasting for, at the least, as long as projects are in queue.

With a backlog, you will no longer scramble for work as one project winds down, no longer have to hire additional labor to finish jobs that spiraled out of plan. A well-orchestrated backlog demonstrates order and permanence to your company, your employees, and to current and potential clients.

The Business of Waiting Total Living Construction, Springfield, Va., generally has a six-month to one-year backlog, and, operations manager Vit Miska says, “we have a great system in place so that clients never feel they are waiting around.”

Homeowners who call with interest in contracting Total Living Construction are asked about their project's scope and are told to expect a call within 10 days. The next phone call sets up an initial, face-to-face design meeting that will take place within three months. Four weeks after that, the company comes back with design ideas and ballpark prices. The design agreement is usually faxed to the homeowner and returned within a week. Then the company sets a soft start date.

This back and forth helps the homeowners feel that the company is actively working on their project. “They watch the project grow organically and do not have a sense of rushing,” says Miska. Customers who feel that a project manager or company owner is rushed often lose faith in him or her and worry more about the project. It can lead to “nitpicking” clients or people looking for mistakes in the work. Assuring clients that there is plenty of time for their project and that you have the ability to answer their concerns and questions helps them feel greater ownership in the job. At the same time, it allows them to leave the day-to-day elements in your hands because they don't feel the need to look over your shoulder.

Pam Anderson, owner of Anderson Construction, Chambersburg, Pa., says that wait time is essential for successful completion of projects. “When I tell clients it is going to be about six months before I can start, they are able to be completely organized before any construction” as far as product selection and fixtures are concerned. The backlog forces homeowners to take the time to make proper decisions about what they want to spend their money on, instead of trying to decide in the midst of rubble and construction.

Because Anderson has a small company, she works only on one project at a time. Maintaining a healthy backlog is essential to her success. Anderson stays in constant contact with her waiting clients by sending them interesting and pertinent magazine articles, alerting them to new Web sites, and being available to discuss matters or concerns that pop up during the wait.

This time also allows the homeowners to make necessary preparations and other decisions related to the remodel, such as finding places to stay in the event that they have to move out of their home, constructing a temporary kitchen, moving bedrooms, and so on — all decisions that will make the eventual project run more smoothly.

Miska and Anderson agree that the customer's responses during this back and forth period are a good indication of the type of client they will be. Sometimes, “you can tell very early that a homeowner is not a good fit with the company,” says Miska, and you can prevent what might otherwise have been an unfortunate, lengthy, or even pricey experience.

The Magic Number
How long should your backlog be? “With a long backlog — more than a year — you're in danger of clients dropping out along the way or of running into problems with the sales department and with materials costs,” says Victoria Downing of Remodelers Advantage. “No one wants to go back to a client and tell them they have to raise prices.” Downing says that most of the companies she works with have a four- to eight-month backlog. “That seems to be a relatively safe amount for full-line and design/build folks. Specialty companies might keep just a two- or three-month backlog. You have to be aware of the impact on your company. Four to eight months gives you freedom and options.”

“If you're too far out, it's added pressure for the management team and the principals,” says Jeff Rainey of Home Equity Builders in Great Falls, Va. “In my mind, that's not controlled growth. It becomes a crisis to manage.” Rainey tells prospective clients that he has a four- to eight-month backlog and says he's uncomfortable if it's much past that.

But Chris Landis of Landis Construction has a more fluid attitude about growth. Although he says he doesn't have a backlog, he does have a three- to four-month period during which clients wait for the design to be finished. He tells them he can start as soon as design is complete. “We know what work we're going to have a few months ahead and we can hire accordingly.”

If he gets more work than he feels he and his 30 employees, including 4 project managers, can handle, he hires more people to get it done. “We expand to meet the market,” he says, acknowledging that he's lucky to be in Washington, D.C., which he says has seen a 15-year growth cycle with no end in sight. He also hires people who can wear more than one hat. “Because of the design/build model, if we're slow in design, I can use an architect as a project manager,” he says.

He feels he's staffed way behind because he uses a lot of subcontractors, and if the market slows, “You self-perform more work. You can always keep your guys busy.”

Some remodelers are hesitant to quote a start date a year out because of uncertainty over project length. Anderson solves this problem by creating job templates for similar jobs she has done over the years. She then feels confident — after consulting her templates — quoting a start date within a month or two. “I usually organize my year by scheduling a big job, such as an addition, followed by a few small jobs, such as plaster repair or a small bathroom. I can overlap the small jobs much more easily if need be, or play catch-up if a job has gone over.” Not only do the templates let her gauge the average amount of time a job will take, they also detail what should be done every day.

But keep in mind it's not just start dates that are important, according to Paul Eldrenkamp of Byggmeister, Newton, Mass. “Start dates are sort of arbitrary. It's how fast can you finish once you do start.” That's where up-front planning is key.

Pay It Forward No one wants to turn down jobs because of a backlog only to have the backlogged customers cancel as well. “Payment should be made for each step of the process, from initial design fees to pre-construction costs, to final tally” to ensure your accounts are staying flexible (and full), says Miska. The contract that is signed, usually after the design phase, should lay out a general timeline, with approximate dates, for payment.

Rainey says he “doesn't consider anybody in the queue unless they sign a letter of intent. At which point, they go from being a design client to a construction client.” He has three separate steps to coordinate the flow of business: design agreement, letter of intent, and construction contract. “This helps us manage our pipeline and lets us know these individuals are really serious.”

When a $900,000 project fell out from under him earlier this year, Rainey says the letter of intent helped. Faced with a four-month window, the letter gave the company cash reserves to make payroll and “not be frantic about filling each and every day with work,” says vice president Sharon Rainey. She did a big push on their handyman marketing and was able to fill the time with smaller jobs, giving their field personnel and many of their subcontractors work.

If a client has to cancel a project because of a personal matter, having a backlog can help protect your business. It is easy to find another client within your existing backlog who is more than willing to bump up their project start date, preventing you from scratching around for a new client who wants to start a project right away.

Keeping Track
Whether you're high-tech or low, you'll somehow need to keep track of where projects are in the pipeline. Otherwise the day might come when 10 customers all have cabinets delivered simultaneously. There should be a mix of projects in various stages of development from concept to final punch list. In his conference room, Rainey has a big one-year calendar with magnetic nameplates on it showing what stage projects are in. “It helps assure the guys in the field that they have enough work,” he says. He also keeps a similar six-month calendar in view for clients to see, so they're aware of how the schedule works.

Landis has a scheduling department that puts all the information — start and finish dates, dollar amount, project manager name, likelihood of construction — on a spreadsheet. He holds biweekly design meetings to update the schedule, working back and forth between goals set and actual work completed.

If you're so inclined, you can use Microsoft Project or, even easier, Microsoft Word's Table function, as Eldrenkamp does for his macro, month-to-month schedule. For the week-to-week schedule, he uses grid paper with one-inch squares and color-coded Post-it notes to represent different projects.

Because of his background in technology, Miska was able to design Total Living Construction's Microsoft Access-based tracking system. It's accessible to everyone from the president and the office manager to the subcontractors. The system can track about 20 jobs, each in a different phase. “At any point we can pull up a report that gives us a total dollar amount of potential work of backlog. It allows us to track how long people are in the system before we start a job. We can look at a sales report and estimate how much money is in the pipeline at any given point. We can get a report by category or based on what phase a project is in,” he says. “Without having a process in place to track customers you'll get the feeling you're being swamped with customer requests.”

Whether you're design/build or not, scheduling smarts have to go hand in hand with a confidence in your ability and your business. Be realistic and flexible and look to your experience when planning ahead.

In general, building a backlog depends on these things:

  • Stable business practices. Can you gauge, within a few days or a week, how long a project will take? If so, this should allow for stronger-than-tentative future predictions.
  • Constant client interactions. Can you ensure that clients will not feel forgotten while they wait? If not, consider investing in part-time office staff to check in with them.
  • Honesty. Are you quoting a start date you know is not true, just for a sale? If so, you might not be ready just yet for the backlog length you are aiming for.