Four years ago, Rosie Romero sold a majority stake in Legacy Custom Builders and Remodeling Inc. to Mark Olson, an apartment development specialist. One year later, Olson recruited Brian Shaurette, a residential construction professional with a new-home construction background, to manage the company. Since then, Olson and Shaurette have analyzed each part of the company, from the types of service they offer to the types of marketing they use, to determine their most profitable activities. The goal, says Olson, is to grow the company so it will hit $10 million in revenues within the next few years. Shaurette and Olson sat down with Qualified Remodeler to talk about their success, particularly in the area of sales and marketing.
QR : How do you plan your sales and marketing activity?
Brian : It is not as complex as you might think. Basically, since Mark and I joined the company, Rosie Romero has had a radio show on Saturday morning that is the No. 1 radio show on the dial. At the time, we were struggling to make sure that we were using our marketing dollars as effectively as possible. Buying print ads and hiring marketing companies for thousands of dollars had been tried with no real good turnout.
Mark : I have a financial background and I was analyzing the operation on an ongoing basis from the day that I got here. I could see that Rosie took a broader approach to remodeling services. He really didn't appear to have the people or the information systems in place to understand the profitability of each area. You have to have good reporting systems to be able to ascertain what you are doing right and what you are doing wrong. So that was an evolutionary process. And as we were doing that, we shut down the things that we felt we were not good at and focused on what we are good at. In conjunction with the marketing dollars we are spending, we track our lead sources for all of our contracts, so we know the return we are getting on each marketing dollar. So that helped us to pinpoint some of the things that we wanted to do.
QR : After you analyzed the business, what were the key remodeling segments that you stayed with?
Mark : We decided to focus on remodeling jobs, not handyman, not custom homes, not a concierge service as we had been doing in the past. That is not to take anything away from what anybody in the organization was doing prior to our coming on board. It was just inconsistent with our vision. We like to pick a farm and farm it. We wanted to direct all of our energies toward the core business.
QR : When you analyzed Legacy's most effective marketing sources, it must have had a major impact on how you allocate your marketing budget.
Brian : Our analysis showed that most of our leads were coming from our “Rosie on the House” connection — the 60-second spot that Rosie was doing during his show on Saturday morning. And Rosie would make mention of us throughout the show, so overwhelmingly, most of our leads were coming from that avenue. Like I said, Rosie had tried high-end marketing agencies spending thousands of dollars. We had tried print ads for the company, but nothing had shown so clearly as the leads from Rosie's show. The trouble was that most of the audience for Rosie's show was small-job orientated. We have a $20,000 minimum job size. We do kitchens, baths, whole-house, exterior and interior. We had to filter through a lot of those leads to get to the bread-and-butter leads.
QR : What is your process for filtering leads?
Brian : We have a very good person answering the phone who knows how to talk to the people and find that out. We don't like to make anybody feel like they are being judged on that phone call so we pretty much steer almost everything to one of our project consultants for a personal phone call and a visit to the person's house, unless it is quite evident that it is a small, one-trade job. In those cases we counsel that person back into the “Rosie on the House” referral network. After seeing those leads from Rosie's show — and I have been a longtime talk-radio listener — that is what started us getting talking about doing more radio advertising.
QR : What is your arrangement with Rosie and his radio show?
Mark : The deal I struck with Rosie when he gave up the majority ownership was to have him under a marketing services agreement for five years with the ability to extend it. We pay a monthly fee for that.
QR : What other areas do you use to generate leads to market your company?
Brian : We knew that radio was clearly the way to go. So we tried another step. We went with an upscale jazz radio station. We did not stop what we were doing on the Rosie show, but just supplemented that. We tried that for six months to a year and it did not turn out to be lucrative at all.
QR : What were the frequency and the length of the ads that you were running?
Brian : There were 30-second commercials and 60-second commercials and they were not as frequent as any ad agency would say that you need to have. But it was a big step. And there were some 15-second riders where they would put four commercials together. But we did not see anything that showed us that it was working for us. So Mark and I began to have conversations, and we decided to stay with the station that Rosie was on, but to add commercials outside of his show at other times of the day. Then we expanded on that and went to the other competitive radio station. At the same time we were increasing the frequency. We still rotated between 30s and 60s. And Rosie and I personally write those and we try to find out something that is happening within our company, or within the economy, or within the area. And that has shown to be extremely successful. I have more friends and family that tell me that they have been hearing our ads on the radio.
Mark : One of the other things that provided a foundation and superseded the decision to go to talk radio was that when we did the analysis, we began to understand the demographics of our target market. We spent a lot of time reviewing and discussing with our project consultants the most suitable audience for our services, developing a profile of our clientele.
QR : And what is the profile of your clientele?
Mark : It is probably a little bit broader, but I will tell you what, we like going for doctors. Doctors don't want to be analyzing and looking over your shoulder day-in and day-out, as some people do throughout a project. They typically have a nice home and they want to do an upscale remodel. And they don't want to be involved in the day-to-day activities.
Brian : That is a very valid point. They typically have made the decision that in their life, as busy as they are, that they want a company that really knows how to manage a remodel. We do many, many $40,000 to $70,000 jobs for people who are not doctors, but they have that same kind of personality trait. They are fearful of having the horror of a bad remodeling experience happen to them and we clearly demonstrate to them that we know what we are doing. We have a lot of clients who are engineers and lawyers. They are persnickety and particular. They are difficult when you have to meet those expectations. We are extremely careful when we are setting our expectations in the sales process that we are not infallible. We do make mistakes and we are operating in a very difficult climate. But what I try to instill in our sales people is that we operate in this market as its leader. Right now, we are the best at doing it.
Mark : It occurs to me also, as I listen to Brian describe all of that, is part of that also is setting your pricing properly. And over the years we have done some experimentation in reducing our markup to try to increase our volume. We have a pricing structure that adjusts the markup from a large job to a small job by increments of $5,000 in cost. We look at what we have done in the past and how profitable each job is based on the size of the job. And we have made some decisions on how to price jobs, and how many jobs of each size we are going to be doing in a given year. So that is a pretty important component. We don't have one price and one markup for all of the jobs that we do. It is incremental. And it seems to be working. We are at 185 percent of last year's sales as of August 2005 versus all of '04 and we expect to hit 200 percent.
QR : So the expansion into talk radio, a more targeted clientele profile and enhanced attention to pricing structure are paying off?
Mark : And there is a fourth. We have also been able to attract a highly competent sales and field team. And that is at the foundation of being able to sell it. We've got good people in the field who know how to deliver it and we have people who know how to sell it.
Brian : That was the first step, even prior to going further into radio, to slowly elevate the caliber of people starting with the sales force. And Mark and I moved through the office team and out in to production.
QR : How many people sell?
Brian : We have seven people selling right now and we are probably going to settle in around nine in the next few months. I learned this some time ago; you are not going to attract good salespeople with integrity and knowledge, unless they are compensated appropriately.
QR : In terms of a sales person's activity, how do you manage them? Do you look for activity or sales results within a given period?
Brian : I am now three years into it. I understand now what can be produced by the company. People tell us what they can sell. Once I have talked with the salespeople and once Mark and I have talked, we develop two budget numbers. We have what the sales people have told me they can do. And we have what Mark and I have in mind as a more realistic goal based on what we know from having been here a few years.
QR : The sales person has an annual and monthly budget?
Brian : It is annual. We break it down monthly. We have a sales report that can show positive and negative progress. We publish that information to our team. And we have sales contests, etc. Nobody likes to see themselves falling behind their goal.
Mark : One of the things that I do to help me guide the organization is prepare static projections and budgets that remain in place throughout the year based on our knowledge and what were assumptions were at that time. But I also complete another version, which I update each month with actual results and I do that throughout the year so that I can understand the trends. I can make adjustments, and I call that my working budget. These adjustments are based on better information that I have at the time. Mid-year, we may make adjustments to our markup, schedule or whatever we need to continue to guide things in the proper direction. With the sales and the overall budget we do that.
QR : Are there additional marketing sources?
Brian : The first year I joined the company, we took an idea from another remodeler out of state. We now do something on a Saturday afternoon that we call ‘Remodelers Weekend.' Our clients and potential customers only get one piece of mail from us each year and it is an invitation to this event. We hand out personal invitations to friends, family and trades and people that we are working with. And it is an RSVP-only event. We discourage bringing children, so we can focus on people's remodeling projects. We have our trades set up and they talk about how they fit into our organization. Attendees come in and meet our office staff. They meet members of our CAD department. They meet the estimator.
QR : So it is an open house?
Brian : It is an open house and it is by RSVP. We offer donuts and coffee in the morning and in the afternoon we do Cajun deep-fried turkey catered by Rosie's mother and his brother from their restaurant. We now write contracts with people who have been coming to two and three of these events. They get comfortable with us, and when they want to do a remodeling project, they decide to buy from us. We get a lot of business from that. We have all types of dog-and-pony shows going on throughout that day. We have a large plasma TV in the CAD department where they can do conceptual designs for the customers in an interactive way. People can sit and relax with a laser pointer and discuss moving ‘this wall' and ‘that window.'
The third component is that we stay involved in the largest builder/remodeler show in the Valley. We focus on this one trade show. We get about 80 leads from it. And we will write five or 10 jobs from it. Our ‘Remodelers Weekend' is higher than that. We also have a well-placed Yellow Pages ad that brands Legacy and the “Rosie on the House” program.
One of the things we have learned is that we don't take a shotgun approach to advertising. We are focused. We stay the course. And if we change, it will be simply to add more frequency to what we already do.
Mark : We also have a pretty decent Web site at www.legacyaz.com.
QR : Do you pay for referrals?
Brian : We don't pay for referrals. We don't pay for them from designers or from architects. I don't pay my guys for them. I don't require them to do a certain amount of canvassing. I know that there are a lot of companies that don't believe in that. Then again, we just got voted No. 1 remodeler in the Valley.
Mark : When the receptionist takes the call, she fills out a lead sheet that provides a lot of background information and of course that includes the lead source and she maintains that information on an ongoing basis in a lead-tracking software. And then I use that to analyze the amount of leads, the amount of revenue and the profitability by lead source. So at the end of each year I know exactly what we got from each one and how much we paid to generate that.
QR : You are at 185 percent of '04, and '05 is not over yet. Is that increase something that you carefully planned for?
Brian : It is absolutely carefully planned. We don't want to overwhelm our production and pull the legs out from underneath the business that has taken so long to establish. We are staffing prior to our volume. We know our amount of volume. We know the municipalities and the time it takes to get permitting and everything. We know with our vice president of production and our general superintendent consistently interviewing and looking for people, that we knew we were going to raise our volume of business.
Mark : And I will jump in here again. We have a five-year plan for growth that is updated on an annual basis. So the strategic plan kind of provides the roadmap. Then we augment that with proper communications among the key team members so everybody understands what the visions is and what we are doing to get there. That communicative process is very important to be able to carry out.
QR : Will you grow another 100 percent in 2006?
Mark : No. We have a goal of getting to $10 million within the next few years. So we just keep pushing and pushing to move in that direction. To do that we are investing in the organizational infrastructure on an ongoing basis: the people, the systems, office improvements and everything that goes along with it. I would imagine it is probably a more modest increase but it keeps us on target to get to that $10 million.
Brian : It is going to have a lot to do with what everyone is trying to speculate and guess at, what the economy is going to do in '06. But we like to think that with our efficiencies that we have right now, that even the market does soften, that we are going to capture a good bit of it.
Mark : Well-structured companies actually excel in the difficult times. Many competitors are not as well put together and won't be able to attract the continuing level of business that we've had. So a lot of business will go to the more successful organization. That is what we hope and plan to do with Legacy; continue to attract and hire the right kind of people and put the right systems in place.
Legacy Custom Building & Remodeling Inc.
Location: Scottsdale, Ariz.
Year founded: 1988
2004 Revenue: $5,227,665
2004 Jobs: 78
Web site: www.legacyaz.com
Principal remodeling activity: Design/Build
Claim to fame: Founder Rosie Romero hosts a local Saturday morning radio show “Rosie on the House,” which is perennially No. 1 in its time slot.