Hitting the Wall: Ready for Never-Never Land?

by Kacey Larsen
Shawn McCadden

Among the most common challenges I hear about from remodelers is the feeling of hitting a wall as they reach a certain volume of produced work. This is particularly true for companies trying to grow. They share their frustrations regarding their inability to keep growing, as well as their struggle to keep up with what is getting done. When this happens the business and the owner have reached Never-Never Land. Learning about it and being able to give it a name was a monumental step for me and my business. I hope sharing the realities of Never-Never Land will be just as beneficial for you and your business.

Defining Never-Never Land

Never-Never Land is a stage in the growth of a business in which the current way of doing business, as well as the resources currently in place, are no longer adequate to allow the business to keep growing. One contractor put it this way: “If I had a person in the office with their own computer to help me keep up, and two more guys with another truck in the field, I could do another $500,000 in volume. But because I don’t already have those people in place, I can’t increase my volume. The Catch 22 is that if I don’t grow my volume, I can’t afford to and/or am not sure that I want to risk putting those people in place.”

When Does It Happen?

Never-Never Land can happen many times as a remodeling business continues to grow. It can happen at about $300,000 as well as $600,000 and also at $1.5 million, and yet again at about $2.5 million. These are all stages of produced volume in which current business systems, resources and staff may have helped you get to where you are, but will not be adequate to help you successfully and profitably break through the current wall you are facing. Keep in mind, the volume levels I shared above are approximate and can vary depending on several factors. The most common factor will be produced margins—a  contractor selling and producing $500,000 at a 33 percent gross margin is actually producing about the same amount of work as a contractor doing $557,000 at a 40 percent gross margin. Both have the same job costs but because one charged more, he or she has more money to help cover overhead and profit requirements

Now That You Know

It’s important to know Never-Never Land happens and is a natural consequence of business growth. By knowing it happens and having a good idea of approximately when it happens as measured by volume, an owner can make informed and educated decisions before growing the business. For example, if you are struggling to complete the volume you have with your current systems, then staff have likely reached their capacity, too. If this is the case at your business, two things come to my mind as a consultant and business coach: The first is you might have grown without being aware of and/or prepared for what you were getting yourself into. As a result, just keeping up with your commitments will compromise your ability to get through Never-Never Land. In this example, you will probably just hover there and continue to feel like you are banging your head against a wall each day. The other is knowing Never-Never Land is a reality. You could either get your business ready before you hit the wall, or you could make a conscious decision to stop growing your business and settle into a sweet spot that is comfortable for your business and you personally.

Moving Forward

When I first learned about Never-Never Land, I quickly changed my business plan. Rather than keep growing the amount of work my company contracted, I decided to raise my prices to the level they would need to be to support the business on the other side of the wall. Doing it this way gave me the confidence that I could sell at the required margin before I had to. And because I hadn’t yet increased my overhead, I was able to save the additional gross profit earned as a reserve fund to help finance my business’ growth when I was ready to cross the wall into a higher volume.

Growing a remodeling business should not be left to chance or assigned to an uninformed business manager. Knowledge is power, if you use it. Ignorance about Never-Never Land can no longer be an excuse for those who have read this column. If you would like to know more about the stages of growth for a remodeling business, what to expect as the growth happens and how to proactively get ready for it, shoot me an email at shawn@shawnmccadden.com. I’ll reply back with an outline offering some detailed information to consider before you decide to grow and before you decide how you will grow. |QR

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