Dealing with the “New Customer”
Employees can be catalysts for constructive change when they become more integral to a company’s strategic decision making. In 2003, Lambert Construction, Bellingham, Wash., a DreamMaker Bath & Kitchen franchisee for five years, enjoyed a 30% sales increase, to $875,000. Owner Mark Lambert attributes those gains mostly to his associates, whom he meets with every week for 45 minutes to discuss their ideas about how the company should move forward.
Interestingly, most recommendations call for improving customer satisfaction: that Lambert’s designers need to be in the field examining projects at least twice a week; that subs need to monitored regularly to keep a project on schedule and to ensure quality; and that Lambert Construction needed to develop a salvage list for clients who want to preserve old parts of a remodeled room.
Yet, meeting customer expectations is harder today because of the propensity among homeowners to fancy themselves experts on products and design, thanks in part to the Internet and home improvement shows on television.
That remodelers are frustrated by customer declarations of independence is putting it mildly. Marion McGrath, co-owner of Jonathan McGrath Construction, says her salespeople screen potential customers in her Longwood, Fla., market with an eye toward identifying unmanageable personalities. Her company has stopped allowing homeowners to hire other contractors for any part of a project that might fall under McGrath’s permit.
Each step of a remodeling project’s work flow carries the possibility of an unpredictable outcome. That’s doubly true, say some remodelers, when homeowners control aspects of that process.
Dorfman Design Builders in Indianapolis recently remodeled a kitchen for a homeowner who insisted that she be allowed to buy appliances and other products. “She was buying stuff all over the place, including out of state, so it was almost impossible for us to stay on schedule,” recalls company owner Larry Dorfman. In the midst of the project, this customer switched out one oven for another without telling Dorfman or his subcontractor. After installing $4,500 worth of cabinets, the sub couldn’t understand why the oven didn’t fit. Dorfman figured it was his mistake, ordered another model — at $600 — and absorbed the cost. Only after reviewing paperwork did Dorfman discover what the owner had done. He has re-billed her for the price difference. Outside Influences
Remodelers can choose to deal with or avoid difficult homeowners. But there are some volatile events against which they can only stand by and watch. The terrorist attacks of September 2001 and vagaries of the economy are prime examples, particularly in the role each played in instigating the insurance industry crisis. Any remodeler can share stories of skyrocketing premiums for liability and workers’ compensation coverage or outright policy cancellations. Securing insurance has required some remodelers to make fundamental adjustments to their operations and business models.
After having its liability insurance canceled in March 2003, McKinstry Construction’s only recourse was Lloyd’s of London, which raised this Seattle remodeler’s premiums to $79,000, from $29,000 under its old policy. “That worked out to be $1.50 per man-hour and determined that we weren’t giving out raises this year,” says owner Joseph McKinstry.
To get coverage, his company agreed not to work on condominiums or apartments. It dropped mold coverage, which would have cost $150,000.
“Remodelers are being pushed into smaller and smaller boxes, and I sometimes feel like a frog in hot water,” McKinstry says. “At some point, the water gets so hot that the frog is dead.”
To stay alive, McKinstry Construction — whose projects had ranged from $150,000 to $1 million — shifted direction and chose to accept jobs as small as $20,000. As a result, the company more than doubled from 2002 the number of projects it took in 2003. To handle that extra workload, staff increased from 12 to 18. In mid-December, one staffer took over responsibility for all warranty and maintenance work.
McKinstry says these moves allowed the company to hold the line on profits, even as sales dipped to $4.2 million, from $4.7 million in 2002. Some of his staff additions included craftsmen from faltering or failed remodeling companies, which, McKinstry notes ironically, were less adaptable to change. No Choice But to Adapt
Change of a more personal and disruptive nature struck James P. D’Alessio Inc., which was shaken to its core on August 15, 2002, the day owner Jim D’Alessio was diagnosed with cancer of the esophagus. That illness forced D’Alessio, 50, to instantly become “more realistic” about his capabilities and to come to grips with the need to hire someone who could manage his Deerfield, N.H., company, even as his cancer appears to be in remission (after some early, and starkly less optimistic, predictions).
Once diagnosed, D’Alessio spent 40 days in the hospital, while his business ran on autopilot. D’Alessio’s wife, Sheri, who has worked with her husband as a designer for 12 years, couldn’t be persuaded to take over the business side. D’Alessio also didn’t see a potential business manager among his 12 very capable employees.
So the company suffered. Over two years, its sales dropped to $1.4 million, from $2.4 million in 2001. Still, D’Alessio budgeted for sales of $1.6 million in 2004, saying he’s “OK” with running a leaner business that goes after “target” projects. “Our sweet spot is $150,000,” he says. He’s also looking for jobs that are closer to the company’s office/cabinet shop.
D’Alessio’s illness gave him new perspective about planning. He has advertised for a commissioned salesperson and has put out feelers to find a general manager, and possibly a financial partner.
“If it weren’t for the cancer, my five-year plan was to wait to see if my sons wanted to come into the business,” D’Alessio says. “I don’t have that time anymore.”
— John Caulfield is a freelance reporter and editor based in New Jersey. He has reported on the home improvement industry for more than two decades.