flexiblefullpage - default
interstitial1 - interstitial
Currently Reading

Good to Grow

billboard -

Good to Grow

Growth in volume measures growth in transactions, but no one goes into business just to maximize transactions 

October 18, 2019
This article first appeared in the November 2019 issue of Pro Remodeler.

I’ve been thinking lately about how remodelers track growth. That’s partly because our daughter recently gave birth to our first grandchild, and tracking his growth is as big a deal today, 13 weeks after his delivery, as it was for the first in utero sonogram. There are a variety of growth metrics for infants—ounces of milk consumed, number of diapers soiled, hours spent sleeping—but the single-number shorthand for healthy growth is body weight. Babies lose weight immediately after birth, and gaining it back is the first major milestone. After that, more or less steady growth is the norm.

The other reason tracking growth is on my mind stems from the other end of the cycle of life, the death of a friend and neighbor, Eric Zencey. As a teacher and writer trained in political philosophy and economics, Eric was devoted to ecological economics, a school of thought that challenges the “infinite planet” assumption underlying mainstream economics. Simply put (and ignoring subtleties I don’t pretend to comprehend fully), ecological economics holds that is it impossible to sustain infinite growth on a finite planet. Yet most world economies use a constantly rising GDP (gross domestic product) as the standard for economic health. But GDP, I learned from Eric, merely measures transactions, the sum total of everything sold; it tells us nothing about the consequences of all that buying and selling for the well-being of the people engaged in and supported by those economies. 

Natural Growth 

What do infant body weight and GDP have to do with remodeling? All three interpret a steady rise in a single metric as a sign of good health. Ask a remodeler, “How’s business?” and the answer is likely to include some mention of increased volume—a single number that is the sum total dollar value of work in progress and in the pipeline. Growth in volume is an easy shorthand for economic health, but like growth in GDP, it falls short when called upon to measure overall success. 

For many remodeling companies, growth happens naturally. Early on, a sole proprietor’s growth is limited by the amount of work he or she can produce. As success generates new work, more carpenters and subcontractors are needed to produce it, which creates the need for office support staff, which in turn requires more work to generate the revenue to keep everybody employed.

Better Ways to Measure Growth

A single number is inadequate to measure the success of this enterprise. Our grandson’s body weight is a prerequisite to his intellectual and emotional development, which is also being monitored. That measurement is currently less quantitative, involving mostly close observation of behaviors, such as body posture, eye contact, and responsiveness to sound and movement. But long before his physical growth stops, intellectual and emotional growth will take its place as the growth most worth measuring.

Simply put (and ignoring subtleties I don’t pretend to comprehend fully), ecological economics holds that is it impossible to sustain infinite growth on a finite planet.

Eric Zencey was a major proponent of alternative ways to measure the success of economies and governments. Taking cues from Gross National Happiness,—a measure of the population’s collective well-being that the Constitution of Bhutan states as the goal of government—Eric became a proponent of the Genuine Progress Indicator, or GPI, which incorporates societal and environmental effects and actually separates societal progress from economic growth. In 2012, Eric was instrumental in Vermont becoming the first state to pass a law adopting GPI as an alternative success measure for government policies. Today, twenty other states also use it.

Growth in volume measures growth in transactions, but no one goes into business just to maximize transactions. Remodelers need to find ways to measure growth in the well-being of the people who make up their company, which is the real reason they start their businesses. I’ve often pointed to increased profit at steady volume as a legitimate example of successful growth, but Eric would have amended that recommendation and said that a better measure is sustainable volume and steady profit that enables higher wages and better benefits.

It may even allow more time for company owners to spend with their grandchildren.

written by

Sal Alfano

Executive Editor

Sal Alfano is executive editor for Professional Remodelersal.alfano@gmail.com, 202.365.9070

Related Stories

Study Finds Remodelers’ Net Profits Declined

How far did net profits decline and what's influencing the drop?

The Home Depot Bets on Pros Amid Predictions of Flat Sales Growth

For the first time since 2019, The Home Depot’s revenue fell short of Wall Street’s predictions amid a general softening in the home improvement market

Indicators of a Softening Market and How to Prepare

Market conditions could be changing, but don't panic. Richardson shares ways to stay on top of market conditions and how to prepare for any potential softening down the road.

Estimating Three Ways

Three remodelers reveal how they estimate a project

Grow Your Business Through Collaboration with Remodeling Peers

Remodeling Mastery Forums offers a unique business opportuniy for remodelers

Why We Hired an In-House Estimator

Bringing an estimator into your remodeling company creates sweeping benefits.

5 Tips on Setting up a Collection System

Construction lawyer Thomas Croessmann walks contractors through 5 tips on setting up a system for collecting payments from clients.

Remodeling Market Predictions: 2022

A Pro Remodeler Thought Leader reveals what he sees happening in 2022

What Profit Margin Should Specialty Contractors Aim For?

The problem with hoping to break even with a meager profit percentage is that it sets precedence. There’s no goal in mind, so there will be no goal to drive a team toward.

Should Remodelers Worry About a Homeowner's FICO Score?

Do FICO scores tell a homeowner's entire financial story? James Waite of Hearth weighs in on what home improvement pros should focus on when…
boombox1 -
native1 -

More in Category

native2 -
halfpage1 -