Straight from the Heartland

At the Remodeling Show in Las Vegas last month, 2007 NAHB Remodeler of the Year Bob Peterson sat for an interview in the convention center food court. There he discussed the growth of his $6.5 million business. An overview of the Fort Collins-based enterprise was communicated in encyclopedic fashion. From the synergies of the firm’s overall structure, to the rationale for individual policies and procedures — the broad strokes as well as the details came forth with cool clarity.

What emerged was the story of a talented couple, Peterson and his wife Rita, an interior designer, who teamed up and built a company over 17 and a half years that is among the most respected companies of any kind in its local community. They accomplished this through a commitment to doing things right, learning from mistakes and improving every step of the way.

But as Peterson coolly told the story of the company, the human touch behind the commitment to excellence emerged in a surprising moment. It came during a description of a detail on the company’s checklist for preconstruction meetings, specifically: ensuring that family pets are secure during the day.

“One of my fears in this industry is to have to face a customer and let them know that we lost their pet,” says Peterson.

“Think about that. You are at their house all day. They are at work and they have this little special dog or cat and we let it out of the house somehow.”

There it was. After covering remodeling business topics from A to Z — from contracts to customer satisfaction — Peterson somewhat inadvertently showed that to a large measure the extra ingredient to his success is caring about what the customer cares about. In fact, it can be argued that nowhere in the construction world does empathy for customer needs more directly translate to success than in remodeling.

On top of the requisite drive to build great sales, estimating, design and construction operations, one of the keys, it seems, to running a $6.5 million design-build remodeling company is about how you perform as a temporary member of a customer’s household. Remembering to care for a customer’s home and everything in it is one thing. Truly taking responsibility for their things with great feeling for how bad the downside could be is totally another.

“So we set the rules,” continues Peterson. “We call them ‘darters.’ If the pet is a ‘darter,’ it has to be secured somehow. If we are not working in a bedroom, we will agree that the cat stays in that bedroom. We put a sign on that bedroom door: Do not open this bedroom door. I just don’t want to face the customer one day saying we lost your cat.”

‘I can do that’

As important of a factor a good touch with customers is to the success of Associates in Building Design Ltd., an equal measure of internal drive to be at the top of the remodeling industry, to be a leader among the best in the business, helped get Peterson where he is today.

Peterson, who grew up “building things” on a ranch in northeast Colorado, spent much of his early career being “one of those guys in a pickup truck.” He would build additions, decks, etc. Eventually he switched to a “real job” in corporate America for several years, hating every minute of it. It was then that he went to work for a remodeling company where his wife Rita was working as an interior designer. By the time that company in 1992 was taken over by the IRS, Peterson and Rita felt ready to go out on their own. “We looked at each other and knew that we could do it,” says Peterson. This same can-do approach became evident at several critical junctures in the years ahead.

Peterson describes the time he went to his first Remodelers Show in Indianapolis in 1995 as a seminal juncture. It was the same year he helped found the Remodelers Council at his local Home Builders Association. Attending the education sessions at the show, he met remodelers whom he really came to admire: Jud Motsenbacher, Mike Weiss, Tom Swartz, among others.

“I saw those guys and I said, ‘I can do that,’ ” says Peterson. “I am a very competitive person. I do not like to lose. So I looked at those guys and thought: This can be done in Fort Collins, Colo.” Until that point, ABD had been a firm that did remodeling and home building. But by 1997, the company had transitioned to a more dedicated remodeling approach.
“In 1997, we really switched gears and put all of our marketing toward remodeling. And in our first year our remodeling revenue was around $800,000,” recalls Peterson, who boiled down the subsequent several years in rapid-fire succession.

“Our biggest remodeling year was $4.5 million and that was in 2002. It was a big year and a hard year. It was a lot of work. It was almost one of those too-fast periods. In 2003, the bottom fell out of our market and over 6,000 high-tech employees, which is our client profile, got laid off from about five high-tech companies. We dropped from $4.5 million to $2.1 million (in remodeling revenue). And I went through a tough year. I laid off seven guys in one week. It was the ugliest time of my life. But we rebounded in 2004 to a little over $3 million. Our remodeling revenue has stayed somewhere in that neighborhood. But we would like to grow it. And by grow it, I mean that I would not mind being consistently at about $4 million.”

Involved in the Industry

Many people would look at Bob Peterson’s consistent and steady involvement in the NAHB at a local and national level and correctly say that he is extraordinarily committed to the organization. (In addition to helping found his local Remodelers Council chapter, Peterson has served in several offices at the state and national level, including being a trustee and a director of the organization.) But Peterson says he has been the net beneficiary of all the work he has done.

“I truly believe that in this industry none of us is brilliant, but collectively, through networking, we are geniuses,” says Peterson. “I can call my colleagues and ask their advice about a move I am considering making. Even guys like Mike Weiss or Jud Motsenbacher, I can call them and they will help me with a problem. Anybody that is getting into the business, I will tell them: You have to join an association. If you don’t you are going to suffer and flounder. You are missing the boat.”

To that end, Peterson credits the strength of his peers in his Remodeler 20 Club — The Parrot Heads — as having an enormous influence on the highly systematized approach that ABD takes to market. ABD, in fact, may be among the most disciplined and systematized design/build remodeling companies in the country.

For starters, in 2003, the company produced a policy-and-procedures manual that was 300 pages long. Detailed and long-winded, the document has been continually refined over the years and serves as the backbone of the company’s admirable operation, which in 2006 drew 70 percent of its jobs from repeat and referral business.

Best Practices

Peterson says that ABD has succeeded in having such a high level of repeat and referral business because the company is built around doing the things that customers want most. The end result has also been greater profitability. “I believe that if our customer is happy, we’ll make money. It is the old adage, ‘if we do a job on time, within budget, with a low number of punch-list items, we will make money.’ ”

What follows is a more detailed list of ABD’s best practices.

In-house Design: “I think that one of our best practices is doing everything in-house because we can control things. We are not counting on an outsourced designer that has their own ideas about how this thing can go. Our designers have their own ideas, but it is all packaged together. Our designers are all out on our remodel jobs. We have the designers in our staff meetings and we can say, ‘You know, if we do things this way, it will be a lot easier for us out in the field.’ I think that is huge.”

Detailed Job Descriptions: “There isn’t anybody who works for me that does not have a job description. Everyone has a job description, including me, and all of them are written down. Coupled with that, in 2002, our staff put together a 300-page policy and procedures manual. We measure pay-back on this through our review process with our employees. It is a two-part review. It is a performance review, but it is also a review of their goals. We help them set standards and goals by helping them get where they want to go, where they want to be in five years.”

No Purchases without Paperwork First: “Part of our policies and procedures manual is we do not buy anything at ABD that does not have a work order or a purchase order or a subcontractor payment attached. Nobody purchases anything without the paperwork so that we can predict the cost before the invoice hits. This has been instrumental in increasing our gross profit. We used to float around 25 percent and now we are up in the high 30s. We know, before we buy it, what it is going to cost us. And when the invoice comes in, if they match, it goes through accounting to get paid. If it does not match, it gets kicked back out and somebody’s got to find out why the plumber’s bill is $250 more than what he told us it would be.”

A Group Business Planning Process: “For the last three years, we have done a full-fledged annual business plan. The business plan goes out four years, but it is updated each time. I can tell you what 2010 looks like at ABD. I have found that that gives my employees a future. It tells them that we are going to be here. ‘There is going to be a home for me. And there is potential growth for me.’ And it seems like our employee turnover has dropped tenfold.”

Hiring People: “I hire slow and I fire fast, and I always try to hire up. And by hiring up, I always try to hire to fill my weaknesses. Or I even try to hire someone that is better than I am. My newest employee is a fellow Remodeler 20 Club peer, Terry Bennett. Terry and Mary are moving to Fort Collins from Cleveland. They have unfortunately had to close their business, so I am thrilled about them coming out. He has been at it for about as long as I have and will be a great asset to our company.”

A Clear Contract: “Our contract was written by me and reviewed by my attorney. He did not write it. I hate ‘heretos’ and ‘wherefores’ and ‘thou arts’. It is written in layman’s terms. It is written in logical sequence. Our actual contract is three to four pages long. It addresses virtually everything that we have done wrong and got burned on. It is in sections or articles. It starts out with a brief description of the project, an approximate start date, an approximate finish date and it goes on from there. The last part of the contract can vary from three to 20 pages. We go in sequence and start with general conditions, then demolition, then excavation, then concrete and we take them through the sequence. We list, before we start a project, every specification. The contract actually says, we will not start this contract until you have chosen everything.”