A Message, a Myth (No. 8) and a Memory

A Message

The end of January in Las Vegas saw the International Builders Show. And while it doesn’t say “Remodelers” in the title, it should. The advance rumor on the show was that it might be like an episode of Jeopardy on moping and self-pity with business and the economy crunched so badly. What we saw was a tribute to the industry both on the builder/remodeler side and on the supplier side. It was more like a celebration of those who had made it this far thinking they would make it to the top of the hill. Some quotes overheard from: exhibitors — “there may not be as many people, but these folks are asking the right questions and they are the decision-makers”; builders/remodelers — “the vendors are listening to us, giving straight answers and there’s a real sense that they want our business because we are the strong ones” and; NAHB leadership — the strength of the association shows how very important it is to the membership during these challenging times. Signs of the times — $59 double rooms at the Las Vegas Hilton, pleasant cab drivers and, while the martinis were still $12, they were bigger for the same price.

These are the signs, sights and sounds of the tough, resilient and savvy remodelers and builders who were somewhat prepared and have adjusted quickly to those things a real recession in housing throws at us. Those still standing have repeatedly gone through costs, production, waste, “slippage” looking for things to either fix or toss. Your company now should have only the people that should be on the Ark. I know it is awful to have to lay someone off, but it’s worse to not pay yourself when the company doesn’t have a shot at all without you. Come on gang, get real. The good but inexperienced people, if they have to go won’t like it, but they will understand. The good experienced people will know they are in the right place because you are showing good judgment. You built it up before and you can do it again, but you have to be around to do it.

A Myth (No. 8) – A Good Job Cost System Isn’t All That Important

Today in remodeling we are facing substandard competition, the “wage bidders,” the idiots who don’t care if they cover their costs, so long as someone will write them a check regularly. The client doesn’t know they won’t be around for customer service or warranty but they sure are cheap. Ah, long live the free lunch. How do we fight it?

We want to protect ourselves from these characters, but saying “they can’t have included everything and do it for that price,” isn’t very convincing because, to the uninformed client, it sounds like sour grapes. To combat this, and to convincingly guide the prospect toward your side of the street, you must create detailed and accurate estimates, the kind that can only come from a good, reliable and validated job cost system. Many years ago, a really smart boss of mine made the comment that, “unless we know exactly what a job will cost, we will never know how low we can quote it and still make money.”

We can argue whether you should ever lower your markup to get a needed job or only take the jobs you can get at full margin. That’s your decision. However, either way you go, the real cost is paramount to staying alive today. A simple, effective system for creating a job cost budget, assembling actual job cost data and performing the necessary variance analyses is vital today. We use our data to estimate what the job will cost; we get the job and keep track of all the costs incurred to compare to the estimated costs; and the difference or variance is subjected to an analysis to see if it’s justified or we screwed up. The analysis of variance and validation is then used to update our estimating database.

People call you because of “need,” but they decide to buy because of “confidence.” Having a thorough, updated and organized estimate can help you show a prospect where the idiot parade fell off the train. “Oh Yeah” is not a reason. Only rationale and understanding will sway the client away from the desperate crowd.

Your core clientele are there and have confidence in your ability to do the work well and at a cost that they are willing to pay. You are well advised to stay within that economic strata as you search for jobs — it is there that you have demonstrated what you are and you will showcase much better against competition; in a new type job, you are one of the crowd and have many more companies sitting in the same row. Builders are moving into remodeling and everyone is going “green,” so if you are going to prospect in these already busy waters, be prepared.

And A Memory

To the hundreds of those whose support and strength were sent to me and my family this past year, go a huge and heartfelt helping of gratitude. My bride of over 28 years was lost to cancer this past November after an eight-month battle.

When she was taken ill, almost everything else stopped in favor of her care. When people offer to help, by all means say, “Yes;” you will need all the help you can get. I was blessed with industry friends who stepped up for me to teach and write and pray, bless you all.

As with everything in life, we act, react and hopefully always learn. During my years of active day-to-day management of my company, I have had a contingent plan in place should something happen to me. There was another remodeler in the city who had agreed to take over any unfinished jobs so that clients would not be left in the lurch. It was easier than it sounds; my “reliever” and I would talk from time-to-time, and I had an amount of money set aside to cover his extra cost to keep my folks from being anxious. Andy (my friend and the contractor who agreed to take over) and I had a somewhat loose agreement to cover things. The agreement had to be loose since things were always changing but we maintained a good paper trail for our own purposes and that would make the finish easier for someone else. I was doing about $2 million per year when I first discussed it with him and I set aside $20,000, as a “grease” fund to cover extra costs certain to be present due to the unfamiliarity with the specific projects. Whatever your particular niche, there should be someone that will work like this for you. It won’t be perfect but it is far better than nothing Review your situation to see what might help if something devastating should happen — your judgment now will be more clear now than then.

I’m advising this because when a catastrophic illness or accident occurs to some key person in a company, things change very quickly and radically. In some cases it may be a family member of a key person but nevertheless, the change will occur. You can’t ever be really ready for this kind of upheaval but it is worth thinking or what-iffing about. My wife’s company was extraordinarily generous about leave and benefits and she was insured with temporary and long-term disability insurance. Some companies have policies that say a termination must occur after 90 days of absence. From the company’s standpoint, there will be communications with which to deal and believe me, the person or the family with the illness or injury will not be able to adequately deal with all the details.

No one, short of being there, has any idea how difficult this can be; I bring this up because, though painful, some advance planning may help save your company, its people and you because you will need all the help you can get, while you’re here...

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