Joe Smith (name changed for privacy)
Midwest< p> What Happened After running a full-service remodeling company for more than 20 years, “Joe Smith” was faced with four simultaneous problems. Each separately would not have been fatal, but in combination they dealt a deadly blow to the company. First, about two years before the close of his company, Smith purchased a building for his office and storage and spent a lot of money and time remodeling it. “We put everything into remodeling that building,” Smith says. “We were down to no reserves, and I put in personal funds.”
Second, he had a large job with a complicated excavation and foundation. A new employee was in charge of that job — a self-proclaimed superstar who had run his own remodeling company. “I turned over authority like I had no business doing,” Smith says. He lost more than $50,000 on this job.
Third, a brutally cold winter delayed this large project as well as a smaller job. On the smaller job, the company did most of the work in the winter. But “our efficiency went down to a fraction of what it should be,” Smith says. He lost $12,000 on that job.
Last, he and his new employee were not managing their subcontractors well. On the large excavation, the sub charged $48,000 more than the price on the original contract.
At first, Smith refused to believe the company was in trouble. But he was losing money and knew he would continue to do so until all the issues were resolved.
The issues began to take a personal toll. “I was emotionally drained and had trouble sleeping. I was not functioning near my peak, and I needed to if I was going to keep the company going,” Smith says. A lawyer told him that declaring bankruptcy was overkill, so he closed his business for a clean break.
When he closed the doors, the large job with the foundation issues was a few weeks from completion. Smith arranged for his best employee to complete the job.
Fatal Errors
- Too much time and money were spent remodeling the company office buildings.
- Hiring and shifting responsibility to employees was done without enough forethought and care.
- Subs were given too much leeway on jobs and charged far more than estimates.
Lessons Learned
During months of recovery, Smith received help from friends and peers. “I am grateful to so many people who came through for me. I can’t say enough about professional associations,” he says. He received an ironic piece of advice from his accountant, who said, “Don’t lose your perspective — it is only money.”
Though closing down was one of the most painful things he has ever done, the remodeler felt the company was out of control and running him. “I looked at it as a growth opportunity to start anew and examine priorities,” he says. His wife had talked to him about life balance for many years, but he says it took this experience for him to hear her.
At first, he was unsure about going back into remodeling, but he decided he had a powerful skill set that was worth applying to a new company. He set up a new remodeling business a few months later. He has the same client base, but the new company has 40% the volume of the original business.
Smith is working in the field again. The biggest change he has made with the new company is that he’s achieved some balance. With his first company, he worked 6:30 to 5:30 and half days on Sundays. Now, he works 7:30 to 4:30 during the week and does not work weekends. “My stress level is now a fraction of what it was,” he says.
He is also cautious about giving an employee complete authority. “I made the mistake of hiring when I was desperate for help, which can really distort the way a prospective employee looks,” he says.
Also, he admits, he failed as a manager. “I held no one accountable,” he says. He now gives his employees authority to make decisions, but with input and oversight from him. “If I turn over something to an employee to run, I will do a stronger job of looking at financial parts,” he says.
He has learned not to use untested subs on large, complicated jobs and is also choosy about his customers. “The old company became an engine I had to keep fueled,” he says. “I would take on jobs that were not a good fit.” Now, he turns down customers he feels are not right for him.
Smith is working on stronger personnel practices including written policies on repercussions for mistakes and a more thorough hiring process, including careful checks of resumes. He is also working on his assertiveness by addressing problems when they occur. “I tell the sub, you said you would be here by 8 and it is now 11. In the past, I would have accepted an excuse,” he says.
In a souvenir shop on a recent trip, he found a large can labeled “whoopass” with the tag line, “Don’t make me have to open this.” “I bought it on the spot,” he says.
The can sits on his desk as a reminder of his new attitude.