Surviving a Time of Change

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A switch in ownership. An almost complete turnover in employees. A local housing market that soared to record highs — then swiftly slowed. To say Legacy Custom Building & Remodeling has faced a lot of changes over the last five years would be quite an understatement.

January 01, 2008
Sidebars:
Executive Summary
A week in the Life

Mark Olson has built Legacy into a maket leader in the Phoenix area by delegating to his top management and implementing extensive procedures for everything from financials to production.  
Photo by Blair Bunting/Getty Images

A switch in ownership. An almost complete turnover in employees. A local housing market that soared to record highs — then swiftly slowed. To say Legacy Custom Building & Remodeling has faced a lot of changes over the last five years would be quite an understatement.

Despite all that, Legacy has not only survived, but thrived, growing volume from about $4 million in 2002 to nearly $10 million in 2007. That happened because of a dedication to systems, to accountability and to refocusing the company on its core mission of remodeling.

Major changes started in 2002 when current President Mark Olson bought a controlling interest in the firm from founder Rosie Romero. At the same time, senior vice president and general manager Brian Shaurette came on board as sales manager.

"When we came on board, the company was going in a lot of directions," Olson says. "We had remodeling, we had custom homes, we had a handyman division and a concierge service. A lot of these things were distracting the firm from the core business: remodeling."

Immediately, they moved to shut down the handyman division and the custom home business, and eased the company out of the concierge services as existing contracts expired.

"We looked at it and said there's no way we're making money on this," says Shaurette, who is now a part-owner. "We needed to pick a farm and farm it. We were trying to be too many things to too many people."

It's a strategy that seems to have worked well. Since 2002, the company has averaged 29 percent annual growth, including a 46 percent increase from 2005 to 2006, as the Phoenix area's housing market exploded. The goal now is to manage a firm that experienced rapid growth and keep it moving forward at a steady pace.

"We've got the company going in a great financial direction," Olson says. "We want to make sure we can keep our arms around what we've got right now."

Do Your Job and Do it Well

For Olson, having Shaurette as his right-hand man has made all the difference in the company's success. Shaurette manages the day-to-day operations of the company, freeing Olson to focus on the big picture and manage the company's short- and long-term finances. All of the company's senior management report to Shaurette, who is the only direct report to Olson.

Shaurette also brings residential construction knowledge to the company. Olson, a CPA by training, had run a multifamily development company before joining Legacy in 2001. Shaurette, although new to remodeling in 2002, had spent more than 20 years working in new construction.

"I don't have the personality to go out and do what he does," Olson says. "I don't have that background or that understanding of construction."

Delegating to Shaurette has also given Olson the freedom to be away from the office at his Colorado ranch, where he can stay on top of what's going on thanks to the power of computers and an extensive system of budgets and plans that are updated constantly.

"There's nothing that happens with cash on a daily basis that I don't know about," Olson says. "My budget is set up in a way to track revenue and expenses that incorporates the daily changes in projects."

Legacy has three sets of plans that Olson uses to manage the company's finances: a constantly updated weekly cash forecast that looks six weeks out, a 12-month forecast that is updated monthly and a 5-year long-term plan.

Hand-in-hand with delegation is a culture of accountability and candidness that Olson and Shaurette have created over the last five years. That requires open communication between not only the partners, but also with every employee.

"What we tried to do is create the processes and procedures for establishing and clearly communicating the accountability for every person and each step of the process," Olson says.

Legacy has accomplished that with clearly defined job descriptions and systems that identify who is responsible for managing every aspect of the business, with extensive documentation of results.

"Candidness is important for a company to be successful," Shaurette says. "If you're not performing well in this company, there's nowhere to hide. That's passed all the way down to the superintendents."

That managment of expectations carries over into communication with the clients as well. Too many remodelers are worried about scaring off potential clients and set the bar too high.

"We're violating someone's most valuable possession, we're violating their family unit and we're violating their work schedule," Shaurette says. "We have to be honest with clients: we're going to disrupt your lives."

A Time of Transition

Although systems are important, a company's culture is dependent on its employees more than anything else. Finding the right team has been a struggle for Legacy.

"That's the single biggest problem we've faced in both sales and production," Shaurette says. "The problem is that most good, quality people that understand remodeling have their own companies."

Adding to the struggle was that, for the most part, the existing employees were not willing to accept the changes under the new ownership and management.

"As soon as you bring other people into positions of authority, you're going to change the company culture," Olson says. "This change wasn't a ripple effect; it had a tsunami effect on the organization."

In fact, Vice President of Production Mike Daniel and Mark Dixon, the company's top sales consultant, are the only ones left from the employees Olson inherited. Those two also have small ownership stakes.

"Everybody else had to leave the organization," Olson says. "They were not suited to the mindset we brought to the company."

As the management team implemented its processes and growth-focused strategies, many of the employees did not want to change the company. Too many had become comfortable with a flow of business that kept the firm small and limited its growth, Olson says.

Some employees quit and some were fired during the transition. At times, it became almost overwhelming as the scope of the employee turnover grew. While they had anticipated change, they were not prepared for the almost 100 percent turnover, Olson says.

"We started to think it was me and Mark that had the problem," Shaurette says. "We were constantly being told that by people, that we didn't understand the company. In the end, we just had to believe we were doing the right thing."

It was a painful process and one that could have easily destroyed the company.

"It wasn't easy at times," Olson says. "We didn't want to send the signal that the sky was falling."

Legacy got through the turmoil by relying on its processes and procedures to keep things running smoothly. Now, the company has a core group of employees that have bought into the company culture and have the company well-positioned for future growth.

"What we have tried to do is be competent with the jobs we do and create a reputation for integrity, quality and success," Olson says. "This attracts more competent people, who then deliver the jobs better. It's a process that never stops."

For more on Legacy, visit Jonathan Sweet's blog at www.ProRemodeler.com/blogs.

 

Executive Summary

Legacy Custom Building & Remodeling Scottsdale, Ariz.

President: Mark Olson
Owners: Mark Olson, Brian Shaurette, Mark Dixon and Mike Daniels
2007 projects: 70
2007 volume: $9.5 million
Projected 2008 volume: $10 million
Employees: 48
Founded: 1988
Biggest challenge: Finding and attracting high-quality employees who will buy into Legacy's culture of accountability
Web site: www.legacyaz.com


A week in the Life

Reviewing and updating Legacy reports 10 hours
Communicating with Legacy team members 10 hours
Developing and improving real-estate 10 hours
Monitoring investments/evaluating opportunities 5 hours
Ranching and horse training activities 25 hours

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