My plan for survival

I formed Rosenthal Homes in the midst of the bank failures of 1991. Prior, I had been with Saddlebrook Development Co. for 10 years and helped it grow to a $25 million per year semicustom builder. The good news, I was a nonequity partner and had no financial responsibility for the company. I started Rosenthal Homes as one of the few builders who had no debt, no inventory and a good reputation.

I loved the interaction with the clients, but not the management and operation of 40 employees. I set up shop in the den of our house. It was very strange; I was now all alone after being in an office for so long. I set about finding a lot in a good area and was able to get a construction loan surprisingly easily. I sold the house before the basement came out of the ground and that was the way I operated for a year. In 1992 my wife Emily joined me. She had been with my old company since I hired her as marketing director and customer selection manager. As we were able to take on a few projects at a time, we hired a superintendant. We continued that way for the next 18 years building custom homes and adding remodeling to our business plan in 2001.

After watching our business up close, working nights and weekends, our sons, Josh and Neal, both said while in college they did not want to join us. Josh graduated from business school and was happily climbing the corporate ladder at a marketing company. Neal graduated with a degree in business management. He began looking for a job and found the process daunting. We offered him a part-time position to help us out while he was job hunting. As the months passed, he became more and more involved and began to enjoy the out-of-the-office lifestyle that construction offered. We were fortunate that he stayed on as my wife had some very serious health issues. Neal helped keep the business going as I had to split time between our business and tending to my wife.

In 2005, Josh reached a plateau in a business owned by two brothers. Unbeknownst to Emily and me, our sons met for several weeks and came up with a plan for Josh to join the business with him in the marketing and management side while Neal would continue to be responsible for running field operations.

I must admit, our decision to have a true family business concerned Emily and me. We agreed to go forward, but we needed guidance on what we would need to do to support three families. We enlisted Dennis Duroff as our business coach. Dennis and I had become friends while working and serving on different committees at the National Association of Home Builders. We all worked hard to come up with our strategic objective which peered eight years down the road. We completed a business plan, a working budget and began our journey.

At that time the economy was blasting and our business was growing to reach the projected volume. We decided to move the office out of our house, which had been a safe haven for 18 years. We selected an office near our house and designed a professional space for us to grow. We hired two project managers, one part-time and two full-time office employees. With all the new overhead, our projects were still right on target.

The downturn begins

The economy started to turn for the worse at the end of 2007 and beginning of 2008. We were lucky because we had already booked two custom homes with a total value of $6 million and several other good prospects. We had become so busy that all our work with Dennis Duroff had become an afterthought. We fell into the common trap of working in our business instead of on our business. Our confidence made us complacent.

Within two weeks of each other, both custom homes were cancelled. We had permits and were ready to go when both clients had their financing pulled. We went from complacent to desperate. We had a family business meeting and revised our budgets and plans. We had to begin cutting overhead.

This downturn was different from the others we had survived. We had an office, a large staff and three families who were making a living on this business instead of one. We started laying off staff until we were down to family. We decreased overhead, but still had the office and all the expenses that came with it. We began to lose money and struggled to get jobs, just like most everyone in the industry.

As the market began to pick up in the D.C. area, we began to see signs of decent projects on the horizon. We had taken some risky projects in the meantime, despite my objections and three difficult clients who did not make final payments totaling about $140,000. This has never happened to us during our 20-some years in business. We reassessed our future and realized that our trade contractor debt and our uncollectable $140,000 from past clients prohibited us from taking on any new projects.

Our sons left the company in April 2010 and formed Cabin John Builders. Their relationship with our prospective clients, whom we could not build for, enabled them to start with a decent group of jobs. They are in their second year now and flourishing.

Emily and I struggled to finish up the few projects we had ongoing. We did not want to leave any of our clients with loose ends. Unfortunately we were not able to pay many of our trade contractors. We ceased business operations in early 2011. We went through a personal bankruptcy and had a difficult time envisioning our future.

What came next

Emily has worked as an independent consultant for Cabin John Builders with client management and selections. I was trying to come up with a concept for my next adventure. I knew I did not want to go back to the day-to-day grind of building. I was not going back into business and working with the trade contractors I had hurt. I had always thought I would like to consult, but to whom?

I realized the one thing that was evident in 99 percent of our projects: The client was an outsider and had to depend on many different people, all of whom had something to gain. They need somebody to “speak builder” for them. I could use all my experience to help them solve the puzzle of building or remodeling. I would set up a consulting business to advocate for the client in the process. I would help with budgeting, selecting architects that suit their project best, and write specifications so when they selected a builder, they could do so apples to apples. Emily can help them manage the selections, design kitchens, brainstorm floor plans, and create wish lists for the architects and designers.

I have spent the past several months developing a website, marketing plan and brochures, and now it is time for me to rock and roll!

 

Life lessons learned:

  • Listen to my gut. It has worked well.
  • Family businesses are very difficult; the more members, the more personalities.
  • When you seek help, listen to advice.
  • Work on the business.
  • All the stuff I had acquired over the years was just stuff.
  • Family (outside of the business) is the most important thing.
  • My risk aversion vanished and should have been remembered.

Andy Rosenthal is president and owner of Innovative Homebuilding & Remodeling Consultants. Rosenthal is also the former president of Rosenthal Homes, a company specialized in highly customized new homes and major renovations. He has served as chairman of Maryland-National Capital Building Industry Association’s Education Committee, and is an active member of the National Association of Home Builders including its Builder 20 Club. He attended Franklin & Marshall College in Lancaster, Pa., and lives in Rockville, Md. with his partner and wife, Emily. Contact Rosenthal by sending an email to editor@rdbmagazine.com.

Loading