To get more business, Peterson looked to his existing client base. “We called and said, ‘We did your kitchen last year and would like to come over to see if it’s behaving the way it’s supposed to.’ We’d send a lead carpenter over.” Sometimes people had other jobs for ABD to work on or they had warranty work. “We were able to build a bond that said we were there to take care of them.” As the company gained traction, Peterson focused more of his marketing dollars (budgeted at 2% of revenue) on those existing clients and instituted a lead tracking system and more customer analysis. The company now has a 70% repeat or referral rate.
Len McAdams, too, faced a market collapse in Seattle, but he thought he could save the company by taking a huge project “from the customer from hell.” “We spent virtually all of 2001 working feverishly to get that job done without a lawsuit,” he says. Then the tragedies of 9/11 occurred, leaving the company with nothing for 2002.
McAdams didn’t take a salary, his office manager went half-time, he laid off some field personnel, his estimator worked part-time in the field, and he rented out some space in the office. “We lost virtually our entire production crew,” he says. McAdams had people remodeling his own house to keep them busy. “We had very friendly prices for the consumer. We decreased our volume, and our margins were terrible,” he says.
It didn’t take him long to realize that “the biggest job you’ve ever done is not necessarily the way to work your way out of a problem,” he says. “Maybe I didn’t know the best thing to do, but I did know I couldn’t just sit on my hands and let the last of my capital disappear. I gathered the best people I could and worked to get back.”
Shiner would agree that taking a huge job is a mistake, but the important thing is that the jobs you do take are profitable. “It’s better to take small, profitable jobs. You’ll need less energy to pursue them, the money flows in faster, and it’s easier to keep a handle on things. And you have to use the profit from those jobs to help you pay off any debt.”
The good news, McAdams says, is that this year, McAdams Builders will bring in $3 million. “[After 9/11], I was as close to despondent as I was able to be. The things that allowed us to [get through it] were: one, the knowledge that we could bear down and survive; two, that we had once been profitable and had capital; and three, that we had a vision of a successful outcome.”
INSTITUTE CHANGES Just because you’ve made it through one tough challenge, though, doesn’t mean you’ll be able to make it through the next one, even a similar one — unless you draw from your cache of entrepreneurial skills, change some of your habits, and learn from your mistakes.
Peterson has put employee evaluations in place and says he learned that he had to “look more on the business side of things. If I find a ‘C’ or a ‘D’ player, it’s easier to convince them that they need to elevate their performance or update their résumé.” McAdams says, “a board of directors would have been useful at the time.” He has since joined a peer group. Bruno has worked on his planning skills and systemization. The Austins have changed their entire accounting system.
“Sometimes you have to hit rock bottom in order to straighten out forever. Either that or you have to have some epiphany that causes you to go to business or personal counseling,” says consultant and REMODELING columnist Victoria Downing, who is vice president of Remodeler’s Advantage Roundtables, a peer review company. “We beat them up like they’re in boot camp and build them back up,” she says. “You need someone to hold you accountable so you’ll make better decisions.”
Solvency Checklist
- Have a plan and attack it each month
- Prioritize your debt
- Stay current with current vendors
- Communicate with and make a payment plan with trade partners
- Take smaller jobs
- Take profitable jobs
- Cut overhead
- Get back to basics
- Ask for help
Tough-Market Tips- Measurement is management. Even when you have the metrics, bad news is hard to come to terms with, so you need enough ways to track performance that you can’t lie to yourself.
- Systematize. When personnel cuts need to be made you’ll be able to prioritize which tasks are nice to have, necessary to have, or need to be shifted to others.
- Market harder and market creatively.
- Budget for profit. Break-even is a loss.
- Business basics are what will get you through.
- Tighten your belt, modify lifestyle, work harder.
- Fire negativity. If someone on staff gets negative or unproductive, they must be let go.
- Exercise and sleep. Keep yourself healthy to better manage stress.
- Spend more on advisers who will hold you accountable and help you improve your numbers.
- Consider radical amputation. Maybe it means shrinking back to just what the owner and two or three key staff members can produce, or doing fewer types of projects and identifying your niche. Diversification is best left to financially strong companies that are looking for strategic growth in new markets.
From Ben Thompson, owner of Thompson Remodeling, located in Grand Rapids, Mich., which is currently facing one of the slowest economies in the nation.