Creating a specialty niche with your business has to start with knowing your market and the capabilities of your employees, as well as having a willingness to strike out and do something different — yet not too different.
NEEDS-BASED WORK
When the calls stopped coming for full-service remodeling jobs, Tom DiBenedetto, owner of TDB Construction, in West Nyack, N.Y., took a step back and had a company meeting. “We decided to move from wants-based work to needs-based work,” he says. “There are no needs-based $500,000 jobs.” He created Rockland County Bathrooms, a separate LLC owned by TDB, which allows DiBenedetto to “offer large-scale customer service on a smaller scale.”
RCB offers clients three options: “traditional,” a basic rip and replace; “environmentally friendly,” incorporating things like water-saving fixtures, recycled materials, and denim insulation; and “universal design,” targeting the 50-plus market. His crew is usually in and out in a week.
“There are mostly cookie-cutter homes [high ranches] in Rockland [county 20 miles north of Manhattan],” DiBenedetto says. So he knew what to expect when he developed the business. He also researched local laws and discovered that he didn’t need a plumber to replace a toilet — which would save him time and money. As for clients, most call asking about the “green” bathroom option, but, DiBenedetto says, “Most of the jobs we sign are for the traditional bathroom. People don’t want green if it costs them green.”
CHANGES AND CHALLENGES
DiBenedetto modified the systems and processes he already had in place for building new homes and doing large-scale remodeling jobs. He approached a plumbing supply house and a tile supplier and was able to strike bulk-buying deals with them. He offers good-quality and popular materials and fixtures, so the supply houses don’t mind stocking them. And he limits selections choices. For example, “We offer [clients] three different tiles,” he says. He streamlined contracts “as best we can,” and his crew uses checklists to track client selections.
One of DiBenedetto’s main challenges is differentiating himself from other one-week–type bathroom companies. The turnkey process — having only three options — has led to his success. To increase business, DiBenedetto developed an interesting marketing strategy.
Since many home sellers want to do a quick bath makeover, DiBenedetto joined in a vendor alliance with a realty company. Any Realtor who gets TDB a signed job is given a $250 American Express gift card. “That really boosted our referrals,” DiBenedetto says. RCB does the seller’s bath all the way up to the tile, then the buyers can pick out the tile and RCB installs it.
Another option DiBenedetto offers has sparked considerable interest but no takers yet: “We bang out the bathroom, and then [the seller] doesn’t have to pay for 90 days or upon closing, whichever is sooner,” he says. Then RCB puts a lien on the house, which would get paid at closing.
A FEDERAL CASE
While DiBenedetto’s niche depended on scaling his business, John Price, owner of Artisan Construction & Design, in Merced, Calif., had to stretch further. Merced County has the dubious distinction of being the foreclosure capital of the country. Price’s business focused on both residential and commercial work. “I noticed in commercial clients that a number of projects were getting shelved before the real downturn came,” Price says. That indicator, along with lagging residential remodeling sales, led him to investigate government work, which has kept his company going: Last year he did nearly $800,000 in government work — about 90% of his current revenue.
“Government work is different from dealing with private owners,” Price says. “There are lots of rules and procedures and a lot of things you want to become familiar with, especially federal money.” While he admits that it’s not necessary to do so, Price went online to study federal acquisition rules (FAR). He also joined the Builders Exchange, a clearinghouse that collects and disseminates information on jobs to bid for as well as on general contractors and subcontractors. He suggests contacting local entities such as the city government, the county or city school system, and the local community college if you’re interested in this type of work. “Get on their list of contractors and get prequalified,” he says.
PAY ATTENTION TO PROFIT
“This kind of work is 100% competitive bid,” Price says. Everything must be tightly controlled to maintain profitability. “You have to really think [each job] through and make sure you account for everything and have built in enough to cover overhead and profit because if there’s a mistake on your part, you will pay for it.”
To lower overhead, Price brought his office back into his home but was able to retain his two supervisors and two laborers. Vendors, too, have to be on board because this kind of work is so competitive. “Streamline your processes so you can get things on time and don’t have to wait for your vendors,” Price says. And you have to be diligent abut your subcontractor management in terms of making sure they have all their paperwork in insurance or bonding ability.
Estimating must be exact, you have to pay attention to changing labor rates, all your insurances must be up to date, and you must fill out the proper forms to bid. “But anyone good at being in a residential market has to do these same things,” Price says. “To be successful in 2010 you have to pay attention.”
To keep up with everything, Price invested in comprehensive, integrated Sage Master Builder construction software that does estimating and scheduling and has a general ledger. Using it has helped him to tighten systems.
PREVAILING WAGES
One issue for many remodelers in this arena is the requirement for paying prevailing wages. “You have to compete on the same labor threshold as everyone else,” Price says.
Prevailing wages means local prevailing wages — and benefits — paid to workers on site. Typically these wages are more, sometimes a lot more, than workers normally receive. “It’s not a problem,” Price says, “just a challenge. Who can afford to pay $68 an hour for a journeyman guy to run a residential kitchen project? Maybe in Chicago or Washington, D.C., but in Merced, Calif., you’ll never get any work.” Price relies on Master Builder to help keep track of his payroll.
Within his company, prevailing wage can become an issue since everyone would like to work on these jobs. “Every [laborer] on the team wants to make $41.90 an hour,” Price says. Price worked out a system so everyone gets a chance. “It keeps morale up. The guy who doesn’t get to work on the prevailing wage job gets pretty low.” But these workers must have certain certifications and be trained in things such as CPR, first aid, and on various pieces of equipment.
VIABLE MODEL
Despite some road blocks, doing government projects has its upside and has been a boon to Price. For one, he doesn’t worry about permitting with government work. Work comes as a full-blown design with specifications. “When they put it out to bid everything is done. The only thing left is to ask clarifying questions,” Price says.
He didn’t have to change any of his office processes and procedures, but he does communicate heavily via e-mail with everyone involved — usually a large group of people. “There are a lot of players and stakeholders,” he says. Price always includes himself on e-mails as a check and asks for a return receipt. He creates a paper and/or electronic trail for every communication.
He also has established a lot of solid relationships, which have enabled him to get work (below a certain dollar threshold) without having to bid. “It’s possible to have a client for life just as with residential work,” he says. “If you step up and take care of your client and develop relationships and you’re sincere, you will get more work,” Price says, adding, “If you can make a bureaucrat’s life better you will get more work.”
One of the best byproducts of this venture is that Price feels doing this work has actually made him a better businessperson. “It has helped me pay attention to the business. When things start turning around I won’t abandon this [work]. It’s a viable business model and in some ways I like it better because there’s not as much care and feeding of clients.”
—Stacey Freed, senior editor, REMODELING.
This is a longer version of an article that appeared in the July 2010 issue of REMODELING.
