Five Successful Business Plans

“I’ve always monitored my business by budget on a regular basis and my business plan on a quarterly basis, but I know I have to put it down on paper and make it a working document in order to be most effective,” Hall tells QR. “I know that I have to put it on paper if I want my employees to share my vision.”

With this in mind, QR spoke with five successful remodelers and asked them to outline their business planning process. Some of the resulting conversations revealed detailed, written plans with specific revenue, profit and profitability goals for their company. Others offered a less formal, less written but nontheless successful method of business planning.

Looking out at the year ahead, many remodelers would do well to consider their personal goals and how they relate back to the companies they own and operate.

The following profiles of five very different remodelers and their business planning process offers a multitude of insights into one of the primary benefits of being an entrepreneur in the remodeling industry: the flexibility to create a work/life matrix that succeeds personally and professionally.

Wilder Expectations
When Elizabeth Wilder and her husband Anthony started Anthony Wilder Design/Build, Inc. a little more than 10 years ago, they were using the design aspect of their business as a loss-leader. Elizabeth says that now they could close down the construction phase of their business and still be profitable as designers only. That is due in large part to their business planning process, but it wasn’t the main goal of their business plan per se.

“Our main, general goal in this business is to have a sustainable, reputable company that is rewarding for both us and our employees,” says Wilder. “All of us as we get older want to have a plan for life, retirement and financial security. And you can’t do that without some kind of plan.”

Elizabeth handles the business management side of the company, and she says the things she learned about business planning came from working with Remodeler’s Advantage, a consulting firm that runs classes, workshops and round tables for those in the remodeling industry. The round tables were with various companies in noncompeting areas, and participants share their financial statements with each other. “There is a lot of preparation involved for these meetings, so it forces you to work up some sort of business plan just to participate,” says Wilder.

While their formal business plan is still in the evolutionary stage, directed only by Elizabeth and Anthony, she says their employees are still participating. “We meet with most of our employees every month to make sure we’re on top of things with each job in progress. This helps us stay on schedule and produce a gross profit every month,” says Wilder. “In addition, our entire team meets quarterly or at least semiannually to assess where we’re at as a business and make sure we are where we need to be.”

Elizabeth believes that the hardest part of the remodeling business — or any business — is the human resources aspect. And even though their business plan is still in the nascent stages, it has helped them immensely in this area, especially with their interviewing process. “Any wrong hire seriously affects our business. You have to make sure you have the right team in place, and every decision we make about hiring has to fit with our plan,” she says.

The Wilder’s business planning and the goals they have set for their company are helping them continue the steady growth that has seen them go from about $1 million to $6 million in revenues over the last 10 years. “Our plan has helped us establish the culture of our company and we can now hire to that culture. I feel it gives us our greatest chance of success.”

Smart scaling
When the economy took a downturn a few years ago, many building businesses suffered — some to the point of closing down or even bankruptcy. For Derek Reijnen, president of The Reijnen Company in Bainbridge Island, Wash., the recession is when he learned just how practical and effective his business plan was.

“We started our business plan while we were growing, but it became invaluable during the recession,” says Reijnen. “When times are great, you often don’t recognize problems and inefficiencies. It’s like someone once told me, even turkeys can fly in a hurricane.”

Before the recession, Reijnen had 50 employees. He now has 25, and he states that a solid business plan was integral in helping his company shrink while still remaining profitable. It enabled him and his employees to analyze the market, accurately assess growth and revenue projections, and remedy whatever inefficiencies plagued his company during boom times. “Our business plan helped us preserve as much of our systems and capacities as possible, even while shrinking,” says Reijnen.

Reijnen has used outside consultants to perform SWOT analyses (Strengths, Weaknesses, Opportunities, Threats) on his company, as he believes it makes sense to have an outsider’s viewpoint. But he also feels it is imperative for the owner to set the goals for the company and then go over those goals with all the employees and get them to contribute to them.

“The empowerment for your employees comes in figuring out how to accomplish those goals,” says Reijnen. “You start with the big steps you need to take to reach those goals, such as making a bigger investment in your company’s marketing. Then you drill down to incrementally smaller steps to figure out how to reach those goals. The more you include your employees in this drilling down, the more they will buy into the entire process.”

For The Reijnen Company specifically, the broad goals are to be consistently profitable from year-to-year and chart a sustainable trajectory for growth — at least in revenue if not in size. They’ve drilled that down capping volume, limiting the number of jobs taken on per year, and carefully allocating the amount of resources devoted to each project.

“We want to achieve an 8 percent net profit on our remodeling business,” says Reijnen. “To do that, we need to be able to pick and choose our jobs carefully so we don’t put too heavy a strain on our resources.”

Reijnen’s biggest piece of advice about business planning is that it must be integrated and tailored to your specific business. “It should be organic to your particular situation. Focus on your particular strengths and weaknesses and revist it every year,” says Reijnen. “You just can’t follow a boilerplate.”

Bad breaks mean new opportunities
Michael Carden, CEO of MUI Corp. in Vestavia Hills, Ala., was forced to change his business plan in 2002 for reasons that had only a little to do with his company, and more to do with his personal life. That was the year that his longtime business partner resigned, and it was also the year that he started a room addition on his own home and broke his leg in four places.

“For the previous 12 years, my life revolved around my business,” says Carden. “But when I had so much else going on, I was forced to recognize that I could lie in bed all week and my business could still stay afloat. I didn’t have to be there every single day.”

That made Carden come to the conclusion that he wanted to enjoy his personal life more than he had been, which included spending more time with his three children, ages 12 to 22. And that meant he would have to scale back his business fairly dramatically, going from a high point of 38 employees to his current level of seven (including himself).

“When I finally healed and got back to the office, I cut my business back down to where it was when I started,” says Carden. “That meant I had to cut staffing and overhead. That took about a year to do, as most of it involved firing people, which is not an easy thing to do.”

To develop this new business plan, Carden relied heavily on his colleagues at the NAHB for advice, many of whom have also gone through similar cutback experiences. Much of that advice led him to take over his own books and run the office himself, which in turn enabled him to find superfluous expenses and cut them back.

“I got into the meat and bones of each and every invoice in the office,” he says. “I took the time to call many of my service providers, such as Internet, phone and utilities, and worked deals, cut costs and found savings.” He says his overhead went from a high of about $47,000 per month to where it is now — about $9,000.

This approach also enables him to interact with every employee on a more regular and meaningful basis. He meets with every employee every morning and now everyone knows everything that’s going on with their various jobs. And that kind of interaction is reaping benefits as well. His employees feel that they are an important part of the business plan, as they are in on almost everything as opposed to a small number of management types deciding things for the rest of the employees.

Carden says that aside from the painful process of letting some quality employees and friends go, the process has been fun — almost like starting a new business all over again. “I’m at the end of the first year of this process, and I’m forecasting that by the end of the third year, I’ll be more profitable than ever,” he says. “Plus, I’ve gotten back into fishing again.”

Hitting the Mark
For Mark Scott, president of Mark IV Builders in Bethesda, Md., having a written business plan has always seemed like an exercise in futility. But that was before his business started growing by leaps and bounds.

“I always avoided writing down a business plan, because then I might be held responsible for actually getting there,” says Scott, who admits that point of view had a lot to do with his being diagnosed with attention-deficit disorder. “Now, we’re bigger than I ever expected we’d be, and the lack of standard procedures and clearly defined goals has started to hurt the company. My employees — like most people — can’t operate in the same chaotic world in which I’m comfortable.”

With over $4 million in volume from 17 projects this year, Scott realized that he couldn’t run his business alone anymore. He also realized that with a million-dollar overhead, even small business mistakes could turn out to be very expensive. So several months ago, he committed himself and his company to establishing what he had always avoided. And he began by hiring consultants and building standard procedures into his operations.

Mark IV is now charting their business records: tracking sales efficiency, on-time completion percentage, materials costs and a host of other data. “We’ve always kept good records in the past, but we just didn’t do anything with them,” he says. “Now we’ll be better able to spot trends and predict our future. And we may stop tracking some things as we figure out what makes us more efficient.”

In addition to outside consultants, Scott is traveling outside his market and visiting with other successful remodeling companies around the country to discover what their best practices are. He is also including his entire staff in the process, as he fervently believes in open communication within his company. He meets with his three most senior people monthly, and holds less frequent but still regular meetings with the rest of his staff.

“I still run what I call a benevolent dictatorship; but I realize that I don’t do certain things very well so I certainly listen to and welcome input from all of my employees,” says Scott.

Mark IV’s business plan has yet to be finalized, but Scott has clear goals in his sights. “Our written plan is going to take something of a natural course, but I’m putting myself under the gun to ensure it’s completed in a timely manner,” says Scott. “The plan is to double the company in size over the next four years, and all future employee bonuses are going to be tied to meeting those expectations.”

Lean and Mean
There are a few companies in the remodeling industry that can be classified as mid-sized businesses and even fewer that can be truly called large.

The bulk of the industry is comprised of what can only be called small companies, with revenues under $1million. Bell’s Remodeling in Duluth, Minn. qualifies as one of those small companies. And owner Bob Bell, CGR, CAPS, likes it that way.

In business since 1987, he has two employees who have been with him for the past nine years. His company handles one job at a time, and he averages around $250,000 to $350,000 in revenues per year. He says he has looked at incorporating formal business plans in the past, but he prefers to run his company on a plan he has formulated in his head.

“My philosophy is if you want to grow your company, then a written business plan is important. But with my business, I don’t feel that it is,” says Bell. “That’s not the best philosophy for growth, but I want to stay the same size.”

That is not to say that Bell doesn’t have a plan for his business. He clearly states his main goal as figuring out what is a comfortable living for himself and then running his business in a manner to allow for that. To accomplish this, he focuses on what makes his company profitable, not bigger. This involves closely scrutinizing job costs for every project to discover efficiencies, inefficiencies, profits, waste and the like. This also helps him find ways to cut costs such as with insurance policies and materials orders.

“I’m also very open with my employees,” says Bell. “I include them and value their input on every job. I tell them, ‘This is how I would do it, but do you know a better way?’”

Bell is also a big proponent of continuing education, as evidenced by his designations. He spends a lot of time traveling to trade shows (his employees often accompany him as well), and he networks with colleagues and friends in the business.

“That is a great way to discover new products and technologies that I can introduce to my customers, which differentiates me from a lot of my competition,” he says. “It also helps me find new ways to increase efficiencies and profits.”

So while Bell has no formal business plan per se, he obviously has an organized plan for operations and procedures. He says that planning for anything is critical, but for him it simply boils down to what he wants from his business and making adjustments with which he’s comfortable.

“A lot of my colleagues in the NAHB and other professional organizations are much bigger than I am, and they are surprised by my philosophy,” says Bell. “But it has helped my business, which is mostly repeat customers and referrals. I often have more business than I can handle.”