Case Study: Bueler Inc.

Business benchmarks and how to hit them

September 30, 2004

 

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Target Practice
Case Study: ADR Builders
Financial Definitions Used

President: Fred Bueler Jr., CKD, CGR

Location: Des Peres, Mo.

Years in business: 20

Staff model: 9 full-time, 1 part-time

Business model: 100 percent residential remodeling

Average job size: $35,000 to $40,000

Annual volume: $1.3 million to $1.4 million

Gross profit percentage target: 37.5% of sales

Markup target: 60%

Repeat and referral business: 80% to 85% of sales

Margin, markup and cost strategies:

Like Stokes, Fred Bueler Jr. has a margin target that rises as the jobs get smaller. "On a real big job, where it's more competitive, I might go a little under, but not much," says Bueler. His company uses fixed-price contracts but occasionally does a time-and-materials change order when it's for a repeat client.

Tips for high-performance business results:

1. Create a cash cushion. "Have money in the bank so when things do slow down, you're not taking a job where you can't get the right margin," advises Bueler. "Bueler keeps an amount equivalent to 10% of annual revenues in the bank in money markets and revolving CDs. He admits he didn't always have that luxury: "We started with nothing other than two big jobs. We just gradually put the money away as we've been able to."

2. Set a minimum margin standard and don't drop below it, no matter how tough the market. "When things were slow early this year, I wasn't underbidding myself to try to pick up work," says Bueler. "I might have used a 1.55 markup multiplier instead of 1.6, but I wasn't going any less than that. I told the guy who sells for me the same thing."

3. Hang on to your employees. "The longer your employees are there, the better you know how to cost a job to produce a profit," Bueler advises. He pays a bit more than the competition, offers paid holidays, and offers medical insurance as part of the total negotiated compensation package.

4. Job cost, job cost, job cost. "Good job costing is pretty darn key," says Bueler. He uses CDCI's Basic Builder program.

5. Hold the company owner(s) accountable through an outside board of directors or peer group. "When I go to Business Network meetings, I don't want to be the low guy on the totem pole," says Bueler. "It forces me to do things I might just let go of otherwise."

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