The Bible tells us there is no new thing under the sun. Remodelers know better. They regularly confront unexpected and sometimes unpredictable challenges. And they measure success based on how well their companies cope with what tests their processes, people, and profitability. “You’re learning about and adjusting to your clients and your team all of the time,” says Gary Marrokal, CEO of Marrokal Design & Remodeling, in San Diego, a $17 million design/build firm that’s been in business for 37 years.
Marrokal Design & Remodeling is one of 15 design/build companies with annual sales ranging from $5 million to $25 million that Professional Remodeler contacted in October. We asked the leaders what lessons they’ve learned over the past year—about their companies, customers, employees, and even themselves—and whether those revelations sparked changes. Five lessons emerged, each reflecting the complexities of growing a business when uncertainties abound.
A dicey labor market requires careful hiring and relentless training.
Over the past three years, Sonrise Building Co., in Naples, Fla., has gone through six project managers. To shut that revolving door, owner Luke Fredrickson says he’s “stopped trying to help our guys advance their careers before they’re ready.” By “ready,” he means that they “start taking the initiative, start being self-sufficient.” For example, can they manage and improve a project’s schedule? “It’s all about being on a critical path,” he says.
Fredrickson contends that supers and carpenters fail as project managers when they don’t follow the company’s processes, which include staying three to four weeks ahead on a project in terms of knowing who will be needed for every inspection stage and filing regular progress reports. “You’re running the job instead of the job running you,” he explains.
Finding qualified workers in general is tougher now, say remodelers, because the job pool is shallower. Not enough younger people are entering this sector, and many who do either aren’t in it for the long haul or need a lot more training just to get the basics down.
Jason Larson, owner of Lars Remodeling & Design, in San Diego, says he’s been finding just one applicant in every dozen résumés his company receives who has the skill sets that construction and remodeling services require.
Consequently, Lars’ interviewing process has become more exacting. Once it finds someone worth speaking to, a company director calls the candidate to feel him or her out. A face-to-face interview is then scheduled, which may involve several of Lars’ managers to assess the recruit. “We screen many, many potential candidates before the right one finally lands,” Larson says.
Only one in four candidates for sales openings makes it to the finish line at Matrix Basement Systems, in Arlington Heights, Ill., which runs all new sales hires through four to six weeks of training that’s conducted by owner Nick Richmond and his sales manager.
Richmond says this training covers the company’s 12-step selling system, which is a combination of scripts, presentation materials, technical training, closing procedures, and instructions on pricing, design, measuring, estimating, and filling out paperwork.
Each fledgling salesperson is given a written exam and must make an oral presentation that includes role-playing to Richmond and his sales manager. The goal is to see whether the presenter has the charisma and fluid delivery to make the sale. The new hire must score 90 percent or better on these tests before they’re allowed to start making sales calls, Richmond says.
No vetting process is foolproof, though. This year, Harth Builders, in Spring House, Pa., has let go five of 14 people it hired for various jobs because they weren’t passing muster. In response, Greg Harth, the company’s president, created an “on-board” and training program in which all field workers, regardless of skill level, must engage. This training requires them to view, over eight weeks, eight videos produced by Katz Roadshow that provide the latest product knowledge and installation techniques for a range of remodeling and construction jobs.
During this training period, new hires interact with heads of all departments in the company, have a one-on-one 30-minute interview with the owner, and watch an institutional video that provides background about Harth Builders—“who we are, how we got here, and where we’re going,” Harth says.
In 2018, Harth Builders plans to launch Harth University, a continuing product knowledge and installation education program that will bring in experts from the ranks of suppliers, trade partners, and Remodelers Advantage, an industry organization aimed at helping remodelers achieve business success. Harth anticipates that his vendors will provide this service gratis to support his company and to make sure their products are being properly installed.
Employee-owned Harrell Remodeling, in Palo Alto, Calif., is doubling down on personnel development, too, says its president and GM Ciro Gammons. Harrell now places greater emphasis on getting its field workers certified. And in December, the firm will bring in a consultant to take a closer look at how the company can streamline the integration of its design and construction functions.
While skills and experience are always relevant, Andy Shore, president and owner of Seapointe Construction & Development, in Irvine, Calif., says he’s becoming a “bigger believer” in hiring people for their character and not necessarily for a specific job. He points to one employee with “a great attitude” who was struggling as a sales designer. The company didn’t want to lose this person, so it switched him to an estimating position, with more positive results. “It’s impossible to train attitude and work ethic,” Shore says.
Expect more from your employees. Then empower them.
Neal’s Design Remodel, in Cincinnati, has adopted a smart-growth business model to help it expand annual sales by 10 percent without diluting the quality of its work. And Neal’s has clearly defined, for all of its 40 employees, what their responsibilities are for the company to achieve that goal. “The biggest change for us has been this individualization,” CEO Alan Hendy says.
Neal’s encourages its people to offer ideas on how to improve operations. For example, a project manager who recently returned to the company after having worked for a competitor suggested that Neal’s switch to a software program called Smartsheet, a move that Hendy says “has completely changed how we schedule projects: We can do it live and show it to every trade.”
The management team at McClurg Remodeling & Construction, in Marcellus, N.Y., meets monthly with all 44 of its employees. Those meetings sometimes stimulate free-flowing discussions about how to make the company better. At a recent session, HR manager Jill Bristol championed a project management and team communications software program called Basecamp. McClurg has since adopted this program, which helps employees identify and fix problems on projects quicker and with less duplication.
Owner Scott McClurg adds that right after these meetings, he takes seven employees to breakfast at a local diner. He keeps the gathering small so his team is comfortable “opening up.” McClurg says “little things” have come out of those chats, such as one carpenter’s suggestion that drivers would save time getting to jobsites during the winter if they parked their trucks in a nearby pole barn instead of outside, where they waste time digging their vehicles out of the snow.
A more cautionary tale about the perils of sidelining employees comes from Richard Zaccaria, president of Remodeling Consultants, in Mamaroneck, N.Y. About a year ago, his company got caught up in the glitz of a vendor’s marketing and spent nearly $100,000 on software for 3-D modeling, estimating, CAD that didn’t work for the company, Zaccaria says.
He admits that he didn’t consult any of his eight young, tech-savvy architects before jumping the gun on the purchase. “We should have listened to our employees,” Zaccaria says, “and done a better job of utilizing resources closer to us.” After what he describes as “a year of misery,” Remodeling Consultants switched to AutoCAD, SketchUp for 3-D modeling, and an advanced version of 20/20 estimating software. The learning curve was short and the conversion costs minimal.
Communicating with customers can be a thorny dialogue.
The advent of social media has given remodelers new ways to reach broader audiences. But that marketing platform is a two-way street where a few negative reviews, left unaddressed, can drive a company’s reputation into a ditch.
Indeed, after years of resisting, Seapointe Construction finally decided about 18 months ago to start advertising on Yelp, simply to be a more proactive participant in “the trend toward consumer reviews that tell us what we’re doing right and wrong,” Shore says.
Texas-based DFW Improved used to spend $100,000 per year on advertising and membership with Angie’s List, which was generating leads that alone produced between $2 million and $3 million in business for the company. But in 2016, after Angie’s List lowered its paywall and let anyone see customer reviews of service companies, the cachet of being a member dissipated for DFW Improved. The design/build firm decided to divert 90 percent of what it was spending for marketing with Angie’s List toward Google and other social media sites. Over the past several months, the company has been driving testimonial videos, some of which it has live-streamed to more than 5,000 viewers.
“What we’ve learned,” says Gary St. John, an owner of DFW Improved, “is that you have to be vigilant in policing and responding to reviews. The worst thing you can do is to not say anything.” What frustrates St. John is how “the second a bad review goes online, it’s everywhere.” Each department at DFW Improved is responsible for crafting rebuttals, which senior management signs off on before they’re posted.
Matrix Basement System has had good luck using Facebook to create buzz about its work. But Richmond has learned that social media can also spring an avalanche of raw leads. “They haven’t necessarily expressed an interest in our products or services,” he says, “but we’ve captured their information as a result of their clicking on our ads. At times, they don’t even realize they did this.”
To separate the wheat from the chaff, Matrix has beefed up its phone room from one person and an assistant to five full-time people who vet online leads and inquiries. Its “dialers” receive low base pay, but are rewarded with bonuses and commissions when they convert leads into appointments, which the company’s salespeople then sell, Richmond says. The profitability on these vetted leads, he says, “is much better than that of an expensive, inbound-driven lead.”
On- or offline marketing is still only the first step in a longer road to cultivating clients, most of whom demand instant gratification. “They want things in real time and expect immediate service,” say Jim and Steve Kowalski, co-owners of Kowalski Construction, in Phoenix, an insurance restoration specialist celebrating its 50th anniversary this year.
The brothers just completed a new procedure for the company’s associates to follow. On any given day, administrative employees are required to stay as long as it takes to respond to every email message and phone call received from customers.
For the past 12 to 18 months, Sonrise Building Co.’s project managers have been sending clients reports about projects in progress every Friday. “We work on a cost-plus basis on most jobs, and these reports engender trust,” Fredrickson says.
Control what you can in your business.
Marrokal Design & Remodeling has been focusing on making sure that it has access to the skilled labor it needs at a time when subs are in short supply and often take on more work than they can handle.
To keep its place in line, Marrokal says his company “educates [subs] that we pay quicker than anyone else in town, so they won’t be chasing a check.” The company also holds “appreciation meetings” for its trades, complete with tool raffles and food.
Marrokal Design & Remodeling has worked with the same cabinet installer for 37 years, and with one drywall installer for more than 30 years. But regardless of their longevity, all trades must continue to meet the company’s high standards: Its 10 project managers rate subs by project on the quality of their work, promptness, scheduling, and jobsite cleanliness. Marrokal says he personally calls every sub with high marks to complement them on their performance.
“It’s imperative that you control as many aspects of your business as possible,” says Lars Remodeling & Design’s Jason Larson. “Our mindset is to own everything that we have the ability to control.” For instance, Lars now draws all of its plans in-house. It sells appliances and plumbing fixtures directly to its customers and now offers painting and floor installation.
“Our goal is to include accessories, furniture, and window treatments as part of the design,” Larson says. The end result would be a “seamless process” and a more positive experience that, potentially, would lead to more customer referrals.
Leadership ultimately starts at the top.
Remodelers don’t need to be reminded about the pain their companies endured during the last recession. Just ask Blackdog Builders, in Salem, N.H., which cut staff by half during those years.
From that travail, Blackdog’s owner, David Bryan, inferred that companies rise or fall “on the caliber of their leadership.” He has since redefined his own role in terms of what he focuses on and how he structures his day. “It’s about taking the long view,” he says, “and being a steadying influence during tougher times.”
Bryan says he’s homing in on “legacy projects and what they will yield.” For example, a basement-finishing business that Blackdog acquired 2 ½ years ago was still failing to efficiently get budget information to its sales and project managers. The reasons are manifold, explains Bryan: The software was designed for sales, not production, so the budget information was ambiguous. His design/build business didn’t have experience working with these kinds of sub installers. And the basement-finishing business requires Blackdog to maintain and manage inventory, which it hadn’t done in the past.
Bryan’s solution has been to develop a master-pricing spreadsheet that the sales department fills out after each job is sold. The spreadsheet provides a budget breakdown for how much the company needs to spend on installers, electricians, materials, and inventory. “This will make the process for our project manager much cleaner,” Bryan says.
Matt Cole, 37-year-old CEO of Cape Associates, in Easton, Mass., is nostalgic for the days when “you could just be a good builder and the business took care of itself.” Now, he says, his job “is all about the business.”
Health care is one example. Cape Associates had worked to keep increases for employee coverage in the single digits, but last year, its carrier asked for a 22 percent bump. “That just wasn’t tolerable,” Cole says.
But, Cole says, changing carriers was extremely stressful because it would affect so many people in his company.
Cole says it took a lot of consensus building and small-group meetings with staff to ultimately determine that switching carriers, while disruptive, would be the best solution. Fortunately, Cape Associates had a really good broker, Cole says, who helped guide that process, which led to a self-insured plan where the company and its workers assume more risk to keep premiums under control.