Delores Davis
CG&S Design Build, Austin, Texas
After 54 years, this family business has name recognition in the community and a good reputation. Still, getting and keeping clients and making a profit are an ongoing challenge.
Marketing: 1.4%
“Marketing is an investment not an expense, and we have a strong commitment to it,” general manager Delores Davis says. CG&S spends a “good deal” to stay in touch with clients through a newsletter, a blog, warranty letters, and its website. CG&S has also found success with its Tour of Homes and its postcards, and makes sure that all its marketing pieces work together. A full-time social media manager “checks the [Internet] pulse,” Davis says.
CG&S saved some money by pulling two high-end magazine ads after Davis recognized that people were focusing on smaller projects, not luxury items. They also put more marketing attention on remodeling interiors instead of doing additions.
Leads: 20 to 25 per month
Leads have been pretty consistent over the past three years. About half come from referrals or repeat clients. “We follow the life of the lead from how we got it to if we won or lost it or it’s still open and how long it stays open,” Davis says.
She doesn’t track cost per lead, but knows which marketing tactics are working by tracking where the leads are coming from.
CG&S does 75 to 80 jobs each year, mostly kitchens and master bath renovations. Jobs are smaller — usually in the $50,000 to $100,000 range — but there are more of them. Volume has been flat since 2008, but in this economy, Davis considers flat “a success.”
Insurance: 2% CG&S has all the required insurances and pays 100% of employees’ health premiums. “As we grew we realized that when you provide a good working environment and good benefits, people come and they stay,” Davis says. “I don’t know how health care laws will change, but I feel like we’re ahead of the curve. It won’t make us crazy in two years.”
Technology: 0.5%
Employees have cell phones and computers, and CG&S has upgraded all field employees to smartphones.
Office: 0.85%
Davis’ parents ran CG&S from their home; that’s where the business remains today. Family members own the home and CG&S rents it. “We’ve been pretty conscious about using all our resources wisely,” Davis says. That includes things like recycling, reusing copier paper, and not buying bottled water.
Warranty work: 0.07%
CG&S uses its warranty program for marketing. “It gives us an opportunity to get in front of [clients].”
2% to 5%: General rule-of-thumb for marketing as a percentage of your total volume, says Victoria Downing, owner of Remodelers Advantage and a REMODELING contributor.
Kathy Spears
Ken Spears Construction, Dekalb, Ill.
Keeping close to budget has been the salvation of this family-owned business, says treasurer Kathy Spears. KSC laid off five people in the past couple of years and owner Ken Spears added production management duties to his sales duties. Kathy believes the company will remain lean and expects the general economy to be “pretty much the same for the next five years. That’s what we’re budgeting for. We’re hunkering down for a long siege.”
Marketing: 5%
During the slowdown, KSC increased its marketing budget from 2% to 5%. KSC, too, has focused its marketing dollars. Of the company’s $100,000 marketing budget, $11,000 is spent on sponsorship of a nearby university’s athletic programs. KSC advertises on the Jumbotron during football games and on banners during basketball games, as well as sponsoring the “Coaches’ Corner” TV show.
Leads: 47 per month
Kathy tracks leads using a Microsoft Excel spreadsheet. From July 1 to the end of October KSC budgeted for 256 leads but had just 188. “We’re not seeing the leads we want, but we’ve bettered our closing ratio goal of 30% — hitting 34%,” she says.
Recently, KSC did old-fashioned neighborhood canvassing to bring in leads. Sending letters, knocking on doors, and leaving door hangers resulted in six jobs that generated $200,000 in work.
Although Kathy is uncertain about her cost per lead, she knows that her best lead source is word of mouth. And although KSC has spent money optimizing its website, Kathy feels they haven’t had good success with it.
Insurance: 2.2%
KSC provides health insurance as well as disability, vision, dental, and life insurance, for which it pays $350 per month per employee — about $42,000 a year.
Technology: 0.27%
All employees have cell phones and salespeople and designers use laptops on client calls. In the office, clients can view a 3-D Chief Architect rendering of their project on a large plasma TV.
Office: 1.75%
KSC leases space in an office building and stores equipment at a facility it owns.
“Our utilities and rent have pretty much stayed the same; the landlord is glad to have [the space] rented,” Kathy says.
Warranty work: n/a
Production crew timesheets don’t distinguish hours spent on warranty work, so it appears above the line with direct costs. But Kathy says she thinks they should start tracking it as a marketing expense in overhead
25%: This is a good benchmark for overhead if you’re a fairly well-established company agree Victoria Downing and Judith Miller. But it can’t really be used as a standard. Each company owner has a certain figure in mind for what he or she needs to live on, then they add in the off ice overhead and that becomes the gross dollars needed. “A lot of this conversation has to do with what you’ve weathered the past three or four years, where you anticipate the next two years going, and how much money you need to fill the gap or maintain equilibrium,” Miller says.
See It Clearly
Theses figures, drawn from 92 Remodelers Advantage Roundtable companies with revenues of at least $1 million, can help other remodeling company owners develop goals. Company rankings are based on each owner’s total compensation including salary, dividends, and draws, plus net profit before bonuses. This number is expressed as a percentage of annual revenue.
Bigger isn’t always better: Some business owners can achieve a higher percentage of compensation at a lower volume. On the downside, this measurement as a percentage often shows large companies in a less-than-favorable light. “Benchmarking is the only way to demonstrate what is really possible,” Victoria Downing says. “It removes excuses and puts facts in front of each business owner. They can’t rebut statements about the results that are possible with their own company. It points out that the systems that we promote do work if used.”