Remodelers Plan Ahead for 2009

You can't blame anyone for being cautious and scared in today's economic environment. It's tough out there, and it's going to last a while. So what should we do: reach for a warm blanket and hide in a dark corner? Not quite.

As you take inventory of 2008 and start formulating a plan for 2009, here are some suggestions:

Analyze every penny you spend. The bad news is that you likely have to sell and produce $2.50 for every $1 you spend in overhead. The good news is that for every $1 you cut in overhead, you can afford to sell and produce $2.50 less. Our team and our clients are the most vital elements of our remodeling business. Let's invest in them and not in other areas.

Proactively think through the tradeoff between sales and gross profit percentage. Don't just discount, give things away and chop your prices without first thinking through the holistic dynamics. Know your true costs and charge at least that amount. Without doing this, you are dying a slow death.

Aggressively capture market share. Market share pays the bills, but how do you capture more of it when you are “analyzing every penny?” First, hold on to the clients you do have — simply maintaining your volume in this down market means you are gaining market share. Second, every time you get in front of one of your core customers try to get something. It might be a two-hour project, it might be a design consultant, it might simply be a referral. But get something.

Monitor. You need a daily dashboard to monitor the key indicators of your business. Some of the “dials” on my dashboard include:

• Cash: Cash in the bank but also cash less committed costs for projects under construction along with unavoid-able/fixed overhead expenses (rent, insurance, etc.).

• Actual versus projected leads: Monitor leads daily. If you have a sales team, monitor how many leads are coming from their self-generated efforts versus more centralized marketing efforts.

• Actual versus projected pipelines: How many weeks out is my production team, how are sales tracking this month and how does the sales pipeline for next month look?

• Gross Profit Percentage: Sales are harder to come by these days, so keep a close eye on how much you can expect to make on each project. Sinking sales combined with sinking gross profit percentage is a lethal combination.

• Average Job Size: Expect it to shrink in this market. Arm your sales and production teams with tools to effectively cope with this.

• Blend of subcontracted versus in-house labor: Each of our businesses needs a healthy blend of subcontracted versus in-house labor to produce our projects. Expect your blend to shift (typically to more in-house labor) with time and as average job size shrinks. Make sure this shift doesn't put at risk the core of your business: client experience, the morale of your team, financials and quality of work.

Share some, if not all, of these key indicators with your team to ensure that you are all pushing the same wheelbarrow in the same direction at the same time.

But above all else — regardless of what specific actions you take or how you plan for 2009 — do your best to get your game face on. Attitude is where it all starts for me. My actions and behavior flow from there. I plan on being scrappy, positive and creative. I plan on dusting myself off at the end of every day and standing tall the next. I plan on choosing my attitude and limiting my focus on the negative.

Want to get some other perspectives?

The Corporate Executive Board has a wealth of information.

“Good to Great: Why Some Companies Make the Leap and Others Don't” by Jim Collins has a number of business epiphanies.

And, if a pick-me-up is what you need, Ken Blanchard has a number of books, but try “Gung Ho! Turn On the People in Any Organization!”

In today's economic environment, remodelers' need to analyze every penny they spend.