Owners … and Surviving the Downturn

Owners

Sixty-four percent of respondents have one company owner; only 11% have three or more. In general, the smaller the company, the more the owner makes relative to revenue, likely attributable to small staffs and low overhead.

At the high end, two owners had base salaries of $300,000 in 2007; 11% of respondents made $100,000 or more. At the low end, 5% of sole proprietors took a base salary of $30,000 or less. The highest owner bonus was $200,000; 6% had bonuses of $40,000 or higher.

How do companies with multiple owners share the proceeds? In many cases, the “primary” owner makes twice or more than the second owner, often with the latter a spouse who works part-time. Some companies are more egalitarian: 30% of those with two owners, and 10% of those with three or more owners, pay owners the same base salaries, though bonuses may differ.

Surviving the Fall

In the short time between August, when this survey was in the field, and early November, when we conducted phone interviews, many remodelers have had little choice but to scale back on pay, if only (they hope) temporarily.

“Until 60 days ago, everything was OK,” said a Connecticut remodeler who works primarily on second homes. “But when Wall Street crashes, our clients crawl under a rock.”

This remodeler hasn’t cut staff — yet. “But they’ve been forewarned,” he said. He anticipates layoffs if he doesn’t sign contracts soon.

A few strategies being used to avoid those painful cuts:

Pay freezes and/or cuts, with the biggest paychecks bearing the brunt. One owner slashed his pay by 80%; another cut all executive pay by 30%. Others are asking trade contractors to accept small rate cuts (e.g., $5 less per hour) and to guarantee estimates.

Spot bonuses. To soften the economic blows, one company gives occasional “kickers” of $100 to $500 for exceptional performance. Another doubled some employees’ vacation time, unofficially.

Shifting health insurance. Bulwarks against rising premiums include paring back from family plans to employeeonly plans, and changing from “Cadillac” PPO plans to cheaper HMOs and health savings accounts. Some employers have suspended matching employees’ 401(k) contributions.

Other strategies: repackaging pay to be more incentive-based, longer hours, and broader work responsibilities. “Your job descriptions are over,” one remodeler told his staff.

Can’t avoid layoffs? Cut the “C-players” first — those who produce less and/or need more supervision. It’s not all nickel-and-diming. “I’m keeping my highest-paid employees who … don’t need to be babysat,” said one remodeler.

And when there’s nothing else to cut, there’s the cushion. Or there should be. “Banked money is going to be key for a lot of people,” one remodeler noted.

Specpan programmed and hosted the Web-based survey, collected and compiled the data, and provided pre- and post-survey analysis. Specpan is a business-to-business data collection provider that services the construction and home improvement markets. Specpan is owned and operated by The Farnsworth Group, an Indianapolis–based full-service research consultancy.