|Case Design/Remodeling is making tough choices to make it through the industry downturn.
Photo by Joshua Roberts/Getty Images
Companies big and small are facing unprecedented challenges in 2009. Professional Remodeler talked to Mark Richardson — author, frequent industry speaker and president of Case Design/Remodeling, one of the largest remodeling firms in the country.
You're expecting a drop in business in 2009. How is the economy affecting your business going into this year?
The best way I can describe the environment this year is that it's tough. It's an environment in terms of marketing, in terms of sales, that is tough. Tough does not mean bad. Tough means tough.
What are you doing to deal with this new reality?
We very much have had to adjust our course. We went into the beginning of our fiscal year, which started in October, expecting a 7 or 8 percent growth for the year. After the perfect storm of October … the bottom fell out and we just had to go ahead and come up with a Plan B.
That [plan] looked at every aspect of our financial model, including sales and revenue on the production side and all the way through with overhead expenses. We had to scale the company back to act like we were roughly 10 percent, 15 percent smaller. We had budgeted for projects and initiatives for the future that we had to just say, well, let's wait until the storm passes before we make those investments. Then we had to just trim the fat, trim things that don't necessarily affect people on a day-to-day basis to come up with a plan that was essentially much more sensible. Moving forward I'm hoping that we don't have to go much deeper.
Have you made any changes to your marketing?
In the past, direct marketing would work. Now we're doing a lot more indirect marketing, meaning seminars. We're doing a lot more networking groups. We're focused more heavily on smaller-scale projects. We're pushing people more to the Web now than in the past. We're changing some of our messaging to focus more on low risk and trying to reduce fear more so than “follow the fantasy.”
Any changes in the day-to-day operations of the company?
We've actually scaled up our handyman group even more and our groups that do larger scale projects we've sort of pushed them back a little bit. We're presenting more lower cost options to folks.
What are some of the unique challenges Case has as a larger company?
It's sort of a double-edged sword. If you're a small company, you can be very light of foot. It's almost like a boat. If you're a speedboat you can turn on a dime. If you're a freighter, it might take you two or three miles to make a turn.
The good news if you're a small boat is you can turn on a dime. The bad news is that the guy driving the boat is the also the guy filling the gas and cleaning the boat. You don't have the luxury of being focused or specialized on a certain thing.
Given the fact that it's tough out there, you can't be operating in the same way as when it's easy. Got to be putting your ear to the ground and listening to the market and putting the right amount of time into other elements of the business. You have to be more focused on monitoring the numbers, on watching the cash flow. All of those factors are really important.
What are some of the key indicators you track?
We certainly watch the inquiries, the leads coming in. We watch the close rate of the sales. We watch the gross profits on the projects. We watch the lead time, the time between sale and beginning of the construction. That's a variable that we watch. We watch the percentage of completion numbers as we project out because it affects profitability quite a bit. We watch certainly the overhead, the 75 individual line items in overhead. We track that on a regular basis. It's like what's most important, your blood pressure or your cholesterol level? They're all important and you've got to watch all of them so they're in concert with each other.
We've talked a lot about the economy. Any other major challenges you see coming?
The economy affects consumer confidence. 2008 was unprecedented. We're talking about stock market issues that go back to the '20s. Are there other issues that will affect us moving forward? Sure, but if the economy's better the phone will be ringing and marketing will be easier. If the economy's better, consumer confidence is going to be there. If the economy's better, homes will appreciate and people will feel better about the investments they're making.
One of the great things about a market like this is that if you need to hire great people, you shouldn't have a problem. If you need to negotiate with your subs, you shouldn't have a problem. If you need to get suppliers or manufacturers to stand up and salute and get you something right away you shouldn't have a problem.
What are some of the words of advice you're sharing with other remodelers as you speak around the country?
A theme that I've been out talking about is it's survival of the fittest. Three themes within that are really critical.
First you've got to have the right mindset. Henry Ford said, “If you believe you can or can't, you're right,” and I really, really live and breathe that notion. I cannot tolerate a mindset or an attitude with people who believe they can't achieve it. The mindset also includes work ethic. You've got to work harder than ever. We're meeting more clients on weekends than ever. That's a different mindset, that that's OK.
The second is that the fundamental business needs to be fit. (Richardson's book, “How Fit is your Business”) is all about being fit and it draws the parallel between personal health and fitness and financial health and business.
It's no different than if you want to climb Mount Everest you've got to be in great shape. I don't whether or not I'm overstating the environment being Mount Everest, but what I am saying is that it's tough out there. You and your business have got to be fit.
Third is you've got to change. There's many out there that are fit and have the right mindset, but they're just stubborn and they won't change and I think they'll crash and burn and fail as a result.
When are you expecting a turnaround to start?
I had a management meeting today and that was one of the questions I asked them. When do you see the curve start to curve up, that we can start to predict sales a little bit better. Not necessarily good, but when do you see it curve up. The overall feeling of the group was that they expect to see the curve going up sometime April to June-ish. Sometime in that time frame. They could very much see it slipping, slipping for the next few months, then start to see the curve going up.
When do we see it being good again? I think we're looking at probably a year later.
The rationale for the spring is historically spring we see an uptick. We believe with the new president in place, there will be a more positive spirit of hope in there. We believe Americans are impatient and they'll say enough already, we've got to do stuff.
There are lots of rational reasons why we think spring/summer should be some positive uptick on the curve. The overall feeling is that we probably won't really see what we'd call sunny day conditions until probably 2010.
What are some of the things that need to happen before we'll see a turnaround?
I'd like to think that we see some uptick in the stock market. I'd like to think that would be something out there that would cause some positive feeling. I'd like to think that the new president getting in place. Whether it's real or Memorex, at least it's a feeling of hope. It'd be nice if Obama was doing something or announced he was doing something. Part of it's getting him in place and part of it's doing something.
Consumer confidence is probably the biggest indicator of home remodeling. All the things that affect consumer confidence will affect remodeling. I think job watching, watching unemployment and the job situation is a factor..