Legacy Custom Building & Remodeling of Phoenix, Ariz. is well known in the remodeling industry for several reasons. First, it is a big company by remodeling standards. Last year, the firm had revenues just under $10 million with more than 30 full-time employees. Second, company founder Rosie Romero is one of a handful of remodelers around the country that helped build their respective firms by gaining respect and notoriety hosting home-improvement radio programs. But if Mark Olsen, CEO, and Brian Shaurette, the company’s general manager, have it their way, Legacy will also become well known in the industry for its leading-edge information technology platform.
A conversation with Shaurette — a former executive with a giant, Phoenix-based production home builder, T.W. Lewis Inc. — yielded the following gem. In describing the productivity gains that have accompanied Legacy’s multiyear investment in technology, he asserted that the company really does not have estimators on staff.
“Our estimator is not so much a physical person anymore. It is a database. Ours is proprietary, is managed and it works,” Shaurette explains. “Mike Daniel, our VP of construction will do the final proofing of it. And it is managed by input as far as pricing by trades by our purchasing manager, Tracy Libridian.”
In an industry where estimating is the cornerstone of all core competencies needed for success, the fact that a firm has made estimating consistent, scalable, efficient and significantly less labor intensive is worth noting. Perhaps even more remarkable is that there is no magic to what Legacy has done. They have simply made a strong investment in Information Technology, believing that it would make them more productive and profitable. And it has. Legacy is one of the very few remodeling companies who work within a single database in real time. If one of the company’s sales designers or project superintendent logs into the network, all of the files — reports, drawings, scopes of work, draft invoices — relating to his projects are synchronized with one central database on one server. It is called a SQL server and in the world of geeks is pronounced “sequel.”
“So if purchasing is saying that we have new copper prices, it gets updated across the system, We used to have to go around and update each laptop to make that pricing change,” says Shaurette. “Then, after the copper pricing was updated on all the laptops, there was the question of what to do about the scopes-of-work that were already in process, and how to get those updated. Now Tracy just inputs the copper pricing changing into the system; and the minute a laptop signs on to the network, it is synchronized. Bam! The pricing is up-to-date on all files.”
The price of a SQL server (about $50,000) and the price of having technology experts write software that allow the creation of the single database at the center of a network (hundreds of professional hours) is presently cost-prohibitive for many remodeling firms. Yet some of the steps that Legacy, under Shaurette’s direction, have taken can be applied by most firms.
Learning from a larger builder
Shaurette admittedly had a bit of culture shock when he left T.W. Lewis Inc., a large production home building operation to take a stake in one of the area’s largest remodeling firms. Despite the firm’s size, Shaurette was caught off guard by the small size of most remodeling companies. At nearly $10 million in revenue in 2006, Legacy is among the largest full-service remodeling firms in the country, but it still felt small coming from the production building industry where $10 million is a pretty commonplace volume of activity.
Shaurette was also surprised by what he perceived was a lack of business sophistication demonstrated by many fellow remodelers. Beginning three years ago when Shaurette and partner Mark Olsen purchased Legacy from legendary remodeler and local home improvement radio host Rosie Ramero, Shaurette has made it a goal to transform Legacy into a highly efficient and profitable remodeling firm. In particular, he wanted to accomplish this with productivity gains offered by the latest information technology — putting Legacy on the leading edge of technological innovation in the remodeling market.
Legacy did not transform its information technology overnight, says Shaurette. It has taken continual budgetary commitment year after year over three years to make it happen.
“Our IT program is an ongoing expenditure,” says Shaurette. “It is a budgeted item. It started with the need to synergize and power the sales force with laptops. And we decided to go with a very high-end Dell.”
That first step gave their seven salespeople the ability to use high-end CAD software from Chief Architect, 20/20 Technologies and Auto CAD in the field — depending on which software the individual salesperson was most adept at using. Armed with laptops that have a minimum of 2 gigabytes of RAM, or memory, the sales force was enabled to sell using these powerful graphical tools. At the same time, the salespeople also needed the ability to simultaneously run estimating software.
These powerful laptops allowed them to do that. Lastly, each of the laptops came equipped with wireless cards so e-mail and other files can be viewed from anywhere in the area.
Legacy’s next IT investment was to give each of the company’s nine field supervisors similarly powered laptops with smaller screens that they could use to view final CAD drawings and to keep in constant contact with the home office. Field supervisors’ laptops also included wireless cards so e-mail and up-to-date files could be accessed anytime.
Later, Legacy invested in cell phones with e-mail access for further real-time connectivity. The last piece was bringing the SQL server online. This happened in 2006.
The net effect for Legacy is that the company was able to adjust its gross profit margin downward while ultimately realizing a net income level of nearly 15 percent, says Shaurette.
“We don’t have to review things three or four times,” says Shaurette. “We simply move forward knowing that we have systems and processes that are backing up our work.”
So how specifically does IT make Legacy more profitable?
1. Better documentation: Recently, a client came back to Legacy upset about the delay in completing her job. Meeting minutes published to the server, along with a well-documented string of e-mails, complete with the signed change orders attached, put an end to the dispute before it even started, says Shaurette.
“We dodged a huge issue with this client. The son of the client is an architect. And if we did not e-mail and take notes during every step in the process, we would have been blamed for the delay. Now without saying it, the client knows perfectly well that it was her son who is dragging the process down. And if she wants to spank her son, she can get out of the e-mail loop and do that directly. But we don’t have to get in a dispute with them.”
Each project superintendent is also charged with keeping meeting minutes from the pre-construction meeting with the client. Those notes are published to the company server for all jobs. And they go out to the client within 48 hours of the pre-construction meeting. This gives them ample time to clarify things.
2. Better, more accurate project drawings. Armed with high-powered laptops, Legacy project consultants sell by drawing ideas. To generate proposals and contracts, drawings can be quickly turned into the finished designs by CAD staff in the office. Once complete, finished plans go back onto the server where everyone can quickly access the updated design. If a quick change is needed, a project consultant can get on the phone with the CAD staff and move walls, etc. Minutes later, the file is up on the server, ready to be accessed.
As a matter of quality control, all plans, before they go to the municipality for permitting, are sent to the sales staffer for a final QC check. Mistakes that are not caught by the sales staffers get deducted from their commissions.
3. Better management reports. Because most data is available on the server in real time, managers, through a series of reports, have a better shot at catching errors and making adjustments in order to make plans. Controller Mark Nygard produces a variance or work-in-progress report (WIP) that allows management to manage the profit of individual projects. Then there is a salesperson report, and monthly revenue produced by a superintendent.
“With everything happening in real time,” sasy Shaurette, “it is very difficult to hide your inefficiencies here.”
Find the estimator in Legacy’s organization chart (PDF). A new SQL database does most of the job, and is administered by the purchasing manager and the construction VP.