Gidus says that after PSG lost the four large jobs, he and his brother and partner, Paul, immediately laid off almost the entire staff and reviewed every single overhead item. “We renegotiated service contracts with everyone. It was amazing how much we could save by scaling back or eliminating services we did not need,” he says. He also sold two trucks and any equipment that the company was no longer using. Former employees are now subcontracting for the company. Paul is managing production and Stephen oversees sales and pre-construction.
Morris reviewed ways to save money during the design and production process. “There is no way to avoid the investment of time and resources that are unique per client, per project, per site,” he says. “We are not mass-producing everything, so our efforts to streamline do not apply.” Morris says that he also could not expect to let people go and then hire and train new employees if the clients should come back. “So for four or five months we paid to stay in business,” he says. “We felt it was temporary because people put projects on hold and did not abandon them.” He kept employees busy with administrative work and organizing the firm’s eight years of digital photos. He cut $24,000 from his marketing budget to help subsidize salaries, and employees voted to take pay cuts rather than save money with layoffs. However, Morris knew he would have to look at significant staff reductions by March 2009 if the company did not win additional work.
Diversification
Benvenuti and Stein’s volume only decreased by about 15%, part of which White attributes to the company’s maintenance department and cabinet shop. “We tailor our services any way we think we can to capture the client. We can be flexible with some of the services we offer if we know we will capture one of the other services,” he says.
Prestige Custom Builders’ home services division has also received more maintenance and repair jobs. “Instead of making large changes, [homeowners] are being proactive about how to make the current situation the best possible for their home environment,” Marshall says. The company is also receiving more green remodeling leads due to its participation in and awards from the county’s BuiltGreen program.
Last year 50% of PSG’s work consisted of new-home construction services. This year, however, the company has just one new-home project. Gidus says that it is because there are now hundreds of $1 million new homes available for sale at lower prices.
Focused Marketing
Another key to survival is understanding the services that high-end clients want and creating a marketing focus around those services. Feinmann is still spending on marketing, but has cut back on print advertisements and shifted that money to neighborhood mailings. “From our marketing spending in March, we got a $150,000 job,” he says. “In this year and this economy, that is an important job. It is critical.”
He says that some of his team suggested repackaging the company to pursue midrange jobs. “But what people buy from us is excellent design and our building reputation. That is our selling edge over our competitors,” he points out. Feinmann lowered profit margins, but continues to charge 10% to 15% more than his competitors.
Gidus has cut almost all of PSG’s marketing spending. “We’re guerrilla marketing,” he says. “Our website still has presence. We’re working with local media to feed them stories, and we’re receiving good coverage in local home magazines. We’re entering local contests.” PSG continues to qualify prospective clients by charging a retainer for consultations on sketches or pricing a plan.
Santerre says that creating and building on relationships with potential, past, and current clients is the key to surviving the recession. “There is apprehension and uncertainty. It helps them feel more comfortable and trust you more or trust you earlier on in the process,” she says. Marshall says that Prestige Custom Builders’ maintenance department helps the company build these relationships by keeping in touch about warranties or service work. The company is also hosting professional networking events and lunches with architects and interior designers.
Benvenuti and Stein recently began sending out an electronic newsletter to clients, suppliers, subcontractors, and associated professionals. “It’s a way to introduce ourselves to people we would not normally meet in our word-of-mouth circles,” White says. Steady marketing demonstrates to clients and potential clients that the company is strong. “It’s worth the investment,” he says, “because as businesses are folding around us, we are positioned to be there when things get better.”
—Nina Patel, senior editor, REMODELING.