The remodeling industry has a growing problem on its hands that must be addressed immediately.
Last year was one of transition for the remodeling industry from a market of soaring growth to one where many companies struggled to maintain those highs. With more of the same likely for 2008, companies that find the most innovative ways to improve their businesses will be the most likely to succeed in a challenging market.
Last year was one of transition for the remodeling industry from a market of soaring growth to one where many companies struggled to maintain those highs. With more of the same likely for 2008, companies that find the most innovative ways to improve their businesses will be the most likely to succeed in a challenging market. The five companies on the following pages have come up with ways to separate themselves from the crowd by implementing practices that improve their companies and the industry.
|Photo by Milton Morris|
What makes Bob Fleming an Innovator? Fleming has devoted time and resources to the planning and growth of The American College of the Building Arts, the first four-year college dedicated to the construction industry.
Ask remodelers what their biggest challenge is and they inevitably say it's finding good employees. A group of construction professionals in South Carolina is trying to address that problem while simultaneously producing well-rounded students through The American College of the Building Arts.
"We all complain about there not being enough qualified people out there," says remodeler Bob Fleming, president of Classic Remodeling & Construction in Johns Island, S.C. "This is a chance to do something about it."
Fleming is a member of the college's board of trustees and is in charge of structural planning and facilities for the school. He first got involved with the Charleston, S.C. college when his company helped sponsor a fundraiser for what was then known as the School of the Building Arts as it was trying to get started. In 2004, the school began recruiting students and changed its name to The American College of the Building Arts.
What makes the college different from other construction schools is its four-year education in traditional subjects such as English, math and business along with construction skills. That curriculum makes it easier for the future construction employees to work with clients.
"My employees have college degrees, and that makes it much easier for them to communicate with the high-end clients we have to deal with," Fleming says.
The students spend half the day in class and the other half in the studio and field. Students also work as apprentices with local construction companies. The program is modeled after construction schools in Europe, most notably the Les Compagnons du Devoir in France.
"There, before people go into construction, they go into an apprenticeship," Fleming says. "Here, we don't teach them anymore. We just put them out in a pickup truck and say, 'You're a carpenter.'"
The college currently has 40 students, with an expected enrollment of 60 to 70 next year. The first class is scheduled to graduate in 2009.
Until then, the college won't receive accreditation from the U.S. Department of Education, which means students can't get government loans to cover tuition or other expenses. Because of that, the college has been heavily discounting the $18,000 a year tuition and relying on donations and a $3.2 million federal grant it received in 2004 to cover costs.
"The future is a serious concern," Fleming says. "Will it still be here a few years down the road? We've got a powerful board, and they're going to do everything they can to make sure we make it."
The college's other major challenge has been finding a permanent home. The school started out in the old Charleston city jail, but quickly outgrew that location. Currently, it operates out of the old Charleston Naval Base that is being redeveloped by the Noisette Co.
The college recently purchased the 38-acre McLeod Plantation, a historic site across the Ashley River from downtown Charleston. The students of the college will restore the main house, outbuildings and grounds to its former state. The plantation not only offers a place for the students to improve their skills but will eventually become the home the college has been searching for, Fleming says.
Classic Remodeling & Construction
Location: Johns Island, S.C.
Years in business: 18
Type of work: Design/build remodeling
2007 revenue: $7 million
|Photo by Liz Garza Williams|
What makes Mike High an Innovator? High uses a detailed estimating system that gets every job within 1 to 2 percent of budget — and tops competition from pickup truck contractors.
Like many companies, Casa Linda Remodeling faces a constant challenge of small, low-bid competition. With more than 300 remodelers in the local Yellow Pages and countless more who aren't in the phone book, the San Antonio firm has to always be thinking about the "pickup truck" contractors.
The best way to deal with the low-bid competition is to separate yourself from them, says company co-founder and vice president Mike High.
"We want to go in and make it clear that the pickup truck guys aren't even in the same realm with us," High says. "We're going to hammer that pretty hard."
One of the ways Casa Linda differentiates itself is by delivering almost every job within 1 or 2 percent of the original budget. The company accomplishes this with an 88-step estimating process intended to leave nothing out of the design and estimate. Casa Linda uses a customized version of Timberline, asking a series of simple yes/no questions. That information goes into the company's proprietary database to create a detailed estimate.
Although the software and database that supports it is important, it's the employees that make the company's estimating system nearly flawless.
"You're only as good as what you put into it," High says. "If guys are forgetting or mismeasuring things, you're going to have a problem."
When a new estimator comes on board, he or she immediately begins training with an employee who has been with the company for at least a year. Depending on the person, this is a two- to four-week process involving nothing but training.
"They don't go out on their own until we're convinced they understand our system," High says. "It's not something they can just learn overnight. To a certain extent, we are training them for a full year."
This tight estimating system allows the company to promise customers their project shouldn't cost much more once the final estimate is done. This is an important part of Casa Linda's sales process.
"We can tell them we have a very low percentage of change orders because we don't miss things during estimating," High says. "The national average is over 20 percent, and a lot of that is done when contractors mess up, not because the customer changes their mind. Instead of owning up, they're just going to try to get the client to pay for it."
High's team tells potential clients that taking the low bid usually doesn't mean the best quality and maybe not even the lowest price by the time the project is completed.
"If a contractor comes in 20 percent less than us for the same job, there's a reason," he says. "We all have basically the same costs, so they're cutting corners somewhere."
By focusing on separating Casa Linda from the competition, the company has grown revenue to $5 million in 2007 from $4 million in 2006 "after banging our head against the $3 million barrier" for years, High says.
Seventy percent of the firm's business comes from repeats and referrals, but it still advertises extensively. A few years ago, the company created "The Homeowner's Guide to Successful Remodeling," a 12-page booklet that describes the remodeling process and what homeowners should look for in a potential remodeler. It's free to any homeowner who requests it and is the centerpiece of Casa Linda's marketing efforts.
"We try to educate as much as we can, but some people are just going to do what they want to do," High says. "They'll just end up hiring us for the next project. Over the course of 20 years, that's happened a lot."
Casa Linda Remodeling
Location: San Antonio
Years in business: 20
Type of work: Design/build remodeling
2007 revenue: $5 million
|Photo by Lee White|
What makes Matt Plaskoff an Innovator? Plaskoff created a system to deliver complete bathroom remodels in only five days.
At first glance, it doesn't make a lot of sense. With a successful and respected custom homes and remodeling firm, Matt Plaskoff didn't seem like the person you'd expect to start a company called One Week Bath.
But Plaskoff was ambitious and looking for a business he could grow beyond his Southern California market.
"I was coming to the realization that the custom homes/remodeling market wasn't scalable," Plaskoff says. "The question was, how could I develop something that could be systematized?"
So in 1999, the idea for One Week Bath was born. The company's simple name describes exactly what it does: deliver a complete bathroom remodel in five days.
Plaskoff knew building a bathroom in one week wouldn't be easy. After all, this was a project his design/build firm usually took eight to 10 weeks to complete. It wasn't until Plaskoff did his first project on "Extreme Makeover: Home Edition" that he was sure it would work.
The company will undertake most complete remodels of a standard-size bathroom. The company won't do partial remodels or any project that requires adding or removing load-bearing walls.
Project cost ranges from just under $10,000 for a small powder bath up to $40,000 for larger projects.
Plaskoff says the company's success hinges on five factors:
- Training — One Week Bath has an extensive training program for its installers to break them of old habits and teach them the company's systems. The company uses no subcontractors. Before new employees are sent into the field, they have to be able to build a complete bathroom in one week in the company's training center.
- Sales and design efficiency — The customer has to understand exactly what they're getting and agree to it before construction starts. The designers handle sales, and it's their job to make sure every question is answered and the designs are completely finished before work begins.
- Having everything in place — The company won't start a job unless every item being installed in the bathroom is on-site. All of the necessary materials are delivered to the job site the weekend before construction starts and checked to make sure nothing is missing.
- Knowing the team's limits — "We can't be all things to all people," Plaskoff says. "There's a limit to what you can do in a week, so we have to be disciplined about saying no."
- Adequate supervision — Every installation team has a leader who makes sure the job gets done well and on schedule. Besides that, the company has a customer service foreman who visits all sites to check quality. He can have the crew rip something out and start over at any time.
Plaskoff now has such faith in his systems (the company completes 96 percent of its bathrooms in a week) that he pays clients a $200 per day penalty for each day the company goes over schedule, but his goal is to be even better than that.
"My dream is to be able to say, 'Your bathroom in a week or it's free,' but we're not quite there yet," he says. "I don't want to take that risk until I'm sure we can build the bathroom in three days."
One Week Bath
Location: Tarzana, Calif.
Years in business: 8
Type of work: Bath remodeling
2007 revenue: $4 million
|Photo by Lee White|
What makes Bill Simone an Innovator? Homeowners can have financing backed by the company's own financial resources.
Remodelers often pitch design/ build to clients as the advantage of one-stop shopping. Custom Design & Construction in Los Angeles takes that theory one step further with its own in-house financing.
Although plenty of remodelers offer financing through partnerships with banks or other lenders, Custom Design & Construction is unique because the company itself provides the funds.
"It's a simple, seamless method of delivering the design, the construction and the financing of the construction all in one place," says company President Bill Simone.
That design/build/financing model was the plan from the very beginning when Simone and his partners started the firm. From day one, Custom Design & Construction promoted its ability to finance its own jobs. In fact, the very first job Simone sold 22 years ago was financed by the company. Today, the company finances about 40 percent of its projects, with the rest evenly split between those who pay cash and clients who use other financing.
The system offers several advantages for Custom Design & Construction. One of the most notable is that it has allowed clients more freedom in their design choices.
"We've had plenty of customers who would probably not have done as large a project if we couldn't offer financing," says Randy Ricciotti, vice president of field operations. "It allows them to come into the design process without having to worry about the money. It frees them to solve the problem because they know we will give them the loan."
That's because Custom Design & Construction knows more about the value remodeling can add to the project than a typical lender, Simone says, so the company is willing to lend the money that it takes to get the project done and improve the home, knowing that in a worst-case scenario there is value in the house.
From the first customer contact, the company's employees discuss financing with the client. When clients decide to apply, they fill out a one-page credit application that Custom Design & Construction reviews like any other lender would. In many cases, the company can have an answer for the client within 15 minutes.
"In the current climate, it has helped us out real well," Simone says. "Homeowners don't have as many choices out there as they used to."
Company financing also increases homeowners' confidence in the company. It shows potential clients the company has the financial backbone to stay in business, Simone says. As the lender, Custom Design & Construction is also concerned with making sure the client doesn't overspend, he says.
Self-financing also speeds construction because there's no wait for payments from the bank or checks to clear.
"We know where our money is coming from," Ricciotti says. "The production schedule has nothing to do with a draw schedule. It really speeds completion."
The average job size for the company is $400,000, with many projects more than $500,000. The company will partially or completely finance projects on a variety of terms.
"We can be very creative because it's our money," Simone says. "We've done loans that were a year up to 30 years; we've done interest-only. We'll do anything we can to make it work best for the homeowner."
Most clients end up paying the loan back early or refinancing it with another lender. Just like any other lender, the company does occasionally have a loan default and then has to go through the collections process.
"The principals have the resources to handle that," Simone says. "You have to weigh the risk versus the reward, but we've been very fortunate."
Custom Design & Construction
Location: Los Angeles
Years in business: 22
Type of work: Design/build remodeling
2007 revenue: $4 million
|Photo by Marc Berlow|
What makes Tricia Sinn an Innovator? Sinn treats the remodeling process as a business plan, an approach the company's high-end clients understand.
When Tricia Sinn joined her husband's design/build firm she knew she wanted to change the way the company planned projects. Thanks to the Internet, clients knew more about products, and the overload of information led to frequent changes all the way through the construction phase.
With her corporate background and her knowledge of the company's high-end clientele, Sinn decided to treat every project like a business with a corresponding business plan. The company's typical clients own their own business or are professionals; they're often people with more money than time.
"I came at it like I'm the client," she says. "I know how these people think. They're not used to going forward without a business plan."
It's an approach her clients easily understand because they use business plans every day, Sinn says.
"I tell them, 'You wouldn't make a major investment in your business without planning it, so why make a major investment in your home that way?'" says Sinn, the company's principal designer.
In her first meeting with clients, Sinn explains the importance of making decisions and sticking to them; by working through the plan, every decision is made ahead of time.
"We stress that staying with the plan means we stay on schedule," she says. "If we make a change in the plan, we can lose that schedule."
She helps the clients set their goals by identifying what they need, what they want, and what the difference is. Then, they look at how those wants and needs fit into the budget. Many clients are dreaming big with the idea they can get a great price on products on the Web.
"I'll quote them a price for a specific shower, for instance, and they'll say they can find one online for $1,500," she says. "Well, we tell them they have to understand the real costs. Who makes it? Who's selling it to you? How much is it going to cost to get it here? We still have to install it, and we can't stand behind the product. That $1,500 item now costs about $8,000."
Every last product and finish decision is made during this months-long process to make the construction as smooth as possible. In some cases, that means a project never advances beyond the initial planning stages, but Sinn would rather see that than invest time in a design only to find out a client can't afford it.
"I don't think we've ever fully designed something that hasn't been built because we have all these little steps along the way where we can see what's going on," she says.
The assessment has become such an important part of the firm's success that it became part of the company's standard contract. If somebody wants to hire Sinn, they need to agree to the process. It adds time during the design stage, but an easier and faster construction phase easily makes up for it.
"By the time we get to construction documents, there are no surprises," Sinn says.
The company has received a lot of positive feedback from clients, many whom have worked with other remodelers in the past and appreciate Sinn's process.
"It's a more businesslike approach to a very complex process," Sinn says. "They seem to really appreciate that when they're throwing ideas out there we can make it all work."
The process has reduced the company's costs by almost totally eliminating change orders and other delays in the field. It's also resulted in lower labor costs because subcontractors know the company's plans are so solid changes or delays are unlikely.
"They know they don't have to fluff their bids for those things that are going to fall through the cracks," Sinn says. PR
Sinn Design Build
Location: St. Louis
Years in business: 19
Type of work: Design/build remodeling and new construction
2007 revenue: $12 million