Improving the Odds

Jim Adams and his wife, Shirley Layne, are pretty easy to please, but remodelers were letting them down. Their expectations were on a downhill slide. Alex Olsen, of Olsen Homes & Renovation in Keizer, Ore., stopped that slide cold.

November 30, 2005

Sidebars:
The Financials
Budget History
Snapshot
Products List

Jim Adams and his wife, Shirley Layne, are pretty easy to please, but remodelers were letting them down. The contractor who already had remodeled a secondary bathroom in their Salem, Ore., house was supposed to remodel their master bath, too. To their surprise, he never contacted them, either to check on the remodeled bathroom or to get started on the next project.

A second contractor promised to bring over pictures from magazines to launch the design process. He never called, never came. Their expectations were on a downhill slide. Alex Olsen, of Olsen Homes & Renovation in Keizer, Ore., stopped that slide cold.

Removing the tub allowed Olsen to design a larger shower and give the sink more dedicated floor area so two people can use the room comfortably now. The new vanity is 36 inches high to accommodate the homeowner, who has a bad back, and features an integrated, larger sink.
After photography and head shots by EmeraldLight.com

"After I met Alex I lost all interest in the other guys," recalls Adams. Among Olsen's selling points: a promise to get the job done on time or pay the homeowners $200 for each day it ran over schedule.

"We set our own expectations with the owner," explains Olsen, "and hold ourselves to that standard." Risky business? No, just good planning. The way Olsen sees it, "Any surprise you come upon as a remodeler is probably your own fault."

He's only had to pay a client once.

Designed to please

Adams and Layne met Olsen in September 2003 at the Oregon Remodelers Association Remodelers Home Tour. They liked his work and liked him. A year later they met Olsen again, this time at the local home show. He explained the company's procedures for developing a design, preparing a reliable budget and schedule, holding weekly meetings with clients, and cleaning the job site at the end of each workday. Raring to go, the homeowners arranged to meet Olsen at their house soon after.

Before the remodel, a long counter filled one wall and the tub/shower hogged most of another. The tub line was peeling off, and the homeowners found the aluminum-frame shower door hard to keep clean.

This meeting took place as scheduled. "When Alex said he'd do something, he did it," says Adams. Olsen used the meeting mainly to listen. Adams and Layne had some specific ideas, but needed design advice about others.

Top priority was to keep the room in the character of the 1950s ranch house. Other musts: Adding a walk-in shower with rain showerhead and a handheld shower on a slide bar. Replacing the existing window with a higher, horizontal one to offer more privacy. Finding a new place for the toilet that was out of center view from the doorway.

Enlarging the small room, which measures about 7½ feet deep by 8½ feet wide, was not an option. Still, the homeowners hoped Olsen could make it feel bigger and more luxurious. He scored points right away with several ideas to do just that.

Since the homeowners didn't take baths, he suggested that they yank the tub entirely to make more room for the walk-in shower. To give the shower maximum space and create a dramatic first impression, he proposed moving it from the side wall to the wider back wall. This would also free a less conspicuous location for the toilet. And sculpting a shower enclosure with glass block would make the aesthetic contemporary yet compatible with the 1950s.

The homeowners' enthusiasm for these ideas "steered me to advise them on an overall budget of $25,000 to $31,000" for the gut remodel, says Olsen. They signed a contract on the spot for Olsen to develop a design and floor plans.

Tucked behind the door for privacy, the toilet area includes a decorative wall niche and a cabinet that's wired to hold a nightlight.

Problem prevention

After a few drafts, the plan located the vanity in the left front corner with the toilet opposite it. A glass-block wall scribes a roomy shower across the back of the room. Olsen planned the clearances with precision, assuring that the open door would not interfere with someone standing at the sink, and that the shower wall could curve gracefully and still allow a 2-foot entry opening.

Calculating the radius for the curved wall was the "most complicated" design challenge, he says. Literally placing 4- by 8-inch blocks on end to allow a more graduated arc, Olsen mapped out the wall and made a template. Guided by the template, he drew the curve on the floor, taking all guesswork out of making the curb.

After finalizing the plan, Olsen set aside a day to take the homeowners to showrooms. Once they chose their products, he presented a fixed-price construction contract for $29,500.

"We never go into construction without the clients knowing exactly what they're paying and exactly what they're getting," says Olsen. Indeed, as with most Olsen projects that don't change in scope, this one had no change orders.

Replacing a vertical window with a horizontal one offers more privacy while still allowing ventilation and light. Stepped up the shower wall, the blue-tile stripe accentuates the feeling of height and space. The handheld shower complements the in-ceiling rain shower.

"The only reason we can offer an on-time guarantee," he says, "is that we do due diligence." Olsen analyzes the existing structure and makes sure all materials are in stock or ordered with delivery date before promising a completion date.

"We project the amount of time it will take us to do the job, and stick to it," says Olsen. "This doesn't mean we are necessarily the fastest," he adds. "Time is important to our owners, but not at the expense of a quality job."

The Adams-Layne bathroom remodel began on June 21, 2004, and was completed August 6, one day early. Project superintendent Leonard Brubaker made a commanding impression from day one, carpeting the work path with canvas mats and securely attaching dust-blocking zipper doors before doing demolition.

Olsen had the new red oak floor finished three times to match the existing flooring.

"The first few days on the job set the tenor for the entire job," Olsen explains. "If you're there taking charge and mitigating problems at the start, the homeowners relax."

Handling expectations

Even when there were occasional ripples in the road, "the issues were somewhat minor," says Adams, "and they just took care of them."

Olsen planned for challenges and anticipated most of the problems. For example, the owners wanted the plaster on the bathroom walls and ceiling to match the unusual plaster texturing in the rest of the house. "I took close-up pictures of the walls in the house, e-mailed them to the plaster guy, and asked him to practice," says Olsen.

Rot under the toilet? "Par for the course" with older houses, he says. "We tore it out and moved on." ("If we lose a day due to rot, it's likely we will pick up a day later in the job," he adds. "If the rot was pervasive, we would have revised the completion date.")

A jumble of old and new wiring? Cast-iron pipes? "We expected them," says Olsen, and included updates in the scope of work.

Olsen set the bar high for quality control. The mirror was scratched, for example, so Olsen said it had to go before the homeowners had a chance to say anything.

"I didn't even complain," says Adams, "Alex said, 'This isn't right' and replaced it."

The only problem that made Olsen nervous was the late arrival of a showerhead. "We were told we could have it in a couple of weeks," he says. "Fortunately it showed up a few days before we were scheduled to be done."

How do Adams and Layne like their remodeled bathroom? No surprise here. "It's light, bright and fresh," says Adams, and "seems twice as big as it was."

Now Olsen's getting started on a plum of a job — a total remodel of the couple's kitchen. But that's no surprise either.

 

The Financials

Launched 10 years ago, Olsen Homes & Renovation has seen dramatic revenue growth in the past two years. Little about the company, including growth, is unplanned. Alex Olsen ran the company solo until 2003 when his brother, Nick, came on board as a partner and they decided to grow the business.

The brothers wrote a new business plan featuring stepped-up marketing, a commitment to generate referrals by exceeding customer expectations, and precise planning of job costs and margins.

Estimating: After Olsen suggests a ballpark estimate that's usually within 5 to 10 percent of the final number for a given scope of work, the homeowners must sign a design contract.

On the Adams-Layne project, the homeowners paid a $2,500 design fee, with 60 percent of the fee credited to the project upon signing the construction contract.

"If we can't earn their contract to go to business, we don't deserve it," says Olsen.

Olsen prepares the final budget for the contract once the homeowners have agreed on a design and selected major products.

Profitability: The Olsens typically budget for a 35 percent gross margin, often a little higher on smaller jobs. "We try to cost out every job so we are fairly close — within 1 to 2 percent," says Alex Olsen. "Wiggle room can prohibitively drive the cost up."

Gross profit for this job came in at 35 percent, hitting the standard but slightly under the 36.7 percent goal.

"We try to keep unforeseen costs, or 'educational costs' as we call them, under 5 percent," says Olsen. On this job, Olsen Homes & Renovation paid to replace the scratched mirror. "I couldn't certify that the scratch was the mirror company's fault," explains Olsen, "and I knew it wasn't Jim and Shirley's fault."

The floor, which had to be finished three times, accounted for the remainder of the slippage. The flooring contractor absorbed the cost of the first refinishing, because sawdust had accumulated under the finish. Olsen paid for a second refinishing to make the floor smoother.

"We try to make our margins, but not at the expense of customers," says Olsen.

Budget History

Initial estimate $28,000 to $31,000
Final estimate $29,500
Final price of job $29,500
Cost to produce $19,175
Gross profit $10,325
Budgeted gross profit 36.7%
Actual gross profit 35%


Snapshot

Alex Olsen and Nick Olsen
Olsen Homes & Renovation

Location: Keizer, Ore.

Type of company: Design/build remodeling

Staff model: 4 office, 5 field

Sales history:
2001 $400,000
2002 $450,000
2003 $600,000
2004 $1.2 million
2005 $2.6 million (projected)

Annual jobs: 20 to 40

Workweek: 45 hours

Software: Microsoft Office, QuickBooks Premier Contractor Edition, Microsoft Project

Contact: 503/393-5067, alex@olsenrenovation.com


Products List

Countertop and sink: DuPont Corian. Faucets: Moen. Fixtures: American Standard. Flooring: Bruce. Fan: Broan-NuTone. Insulation: CertainTeed. Lighting: Halo, W.A.C. Tile: Dal-Tile. Window: Alside.

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