The recession was not an easy time for most people, but it was especially hard for you in the building and remodeling industries. Survival during that time is something to be proud of, and there were lessons to be learned. Three remodelers share their stories from the recession and the keys to their survival then that continue to benefit them today.
T.A. Todd Construction Inc.
Tim Todd, owner of T.A. Todd Construction in Georgetown, Texas, built his first house when he was in grade school. With the help of his brother, a tree house complete with frame, deck, porch, walls and a roof was built over the course of a summer. While Todd and his brother had to tear the tree house down in the end, his next efforts in the building industry when he was in college developed into a career as a contractor and builder.
Todd and two of his brothers opened a concrete contracting firm in Austin in 1981, but the real estate and construction markets in central Texas crashed in 1985 with the savings and loan crisis. The company closed its doors in 1987 being owed hundreds of thousands of dollars and ongoing lawsuits in hopes of collecting the money. In the aftermath, Todd and his family moved to Georgetown, Texas.
“I formed a one man building and contracting company with an emphasis on remodeling, and over the years I became known locally as a reliable, quality minded, general remodeling contractor,” Todd says. “Making money wasn’t really the object; earning a living and getting my three children through school was, so if work was slow, and it was a few times during the 1990’s, I would hire out to a larger builder.”
Todd went back to school in the late 1990’s to earn a business degree, explaining “I was a good contractor, but not a very good businessman.” The decision was made in 2005 to incorporate to grow the business. The company’s income increased for the next four years, eventually grossing more than a million per year. The staff also grew from three people to eight with a field superintendent and two lead carpenters.
“We maintained an office, developed systems without our office managed by an office administrator, maintained memberships in the NAHB and NARI, and I became certified as a NARI CR and CKBR,” Todd says. “By the end of 2009, that all came to a screeching halt. The phone stopped ringing, jobs under contract were scaled back or put on hold and our income stream nearly dried up. I had invested the last 10 years into making my company into a viable remodeling company and even though I was devasted I wasn’t ready to give up.”
Hard choices were made: the entire staff was let go; the office was closed; memberships in the NAHB and NARI lapsed; and trucks, trailers and equipment were sold to satisfy creditors. Todd set up shop for himself in a 400 sq. ft. room off the back of a detached garage at his home. He finished a large project that had been under contract himself, and enough other work came in to keep him and his company afloat. Maintaining a website, Todd believes, has helped his work increase for the past two years. He also credits “repeat clients, good references and word-of-mouth” with helping. A part-time office assistant answers phones and keeps the books, and Todd mostly uses sub-contractors if he needs assistance.
“Ironically enough, when we were growing like crazy [before 2009], we were not profitable,” Todd says. “Now, I am more focused on profits as opposed to volume.”
Michael Fischer Builders and DreamMaker Bath and Kitchen of the Greater Lansing Area
Mike Fischer was looking to expand his construction company, Michael Fischer Builders, in 2005 by adding interior work to his offerings. He became part of the DreamMaker Bath and Kitchen franchise and immediately had access to assembled systems and vendor relationships as he went about expanding his business.
Fischer further looked to expand when he bought and remodeled a 150-year-old building in Lansing, Mich., to create a kitchen and bathroom showroom. With a plan to use the space to educate customers about different styles, options and price points, the remodel was completed in 2008. The opening of the showroom should have been great for business, but instead Fischer witnessed customers canceling remodeling plans to the tune of approximately $500,000 worth of projects as the recession hit the economy.
“I worked hard to keep my core team together. I tapped my personal credit line while concentrating on tightening up on operations and finding ways to pay bills using much tighter cash flow,” Fischer explains. “I also took some painful steps, such as suspending the company’s retirement program for a few years, in addition to working with vendors and insurers to find ways to save money.”
Working with DreamMaker’s coaches during the recession helped him improve his profit margins on profits. Fischer also credits the group of fellow franchisees he joined for helping him tighten his operations. The evaluation of his business by other franchisees helped him realize he should take better advantage of his staff.
“The process of weathering the recession forced new responsibilities onto my staff, and they have really shined. It allowed them to demonstrate skills and responsibilities that, in turn, have boosted their confidence and productivity,” Fischer says. “It now takes half as many people to generate the same amount of revenue we were seeing before the economic slump. Today the business generates nearly a million dollars a year in revenue, and we have doubled our profit margin over the past three years.”
The showroom has also helped contribute to revenues as it has opened up a new avenue for sales. The sales process gives customers a place to explore options for their remodels, by touching and seeing available options.
Newday Development, Inc.
Sherman Oaks, Calif.
Louis Krokover, president of Newday Development in Sherman Oaks, Calif., can pinpoint the day that his company began its “fall from grace and off the high cliff,” as he describes it. January 6, 2009, Krokover lost his mother, who was also his business partner. “Market conditions were falling apart, clients pulled back on their contracts, and we had to fight each and every minute of the day,” he remembers. “So we just had to ride the wave as best we could and hope for the best until we could find a solution that we felt would and could work.”
In late 2010, Krokover enacted a plan to reinvent his company rather than work against its competition. The company began implementing “open book/cost plus,” which works with competitors’ bids and shows prospective clients a different level of knowledge and professionalism. This plan involves doing homework to submit a proposed base line cost submitted against submitted plans. These numbers become the company’s high numbers, allowing the final number to be, hopefully, reduced with suppliers and subcontractors to save the client money.
“We further reduced our overheard and profit margins to reflect this working team effort with our clients, and by doing this they agree to pay us promptly upon receiving an invoice,” Krokover says. “By doing this, we no longer carry the project, which is the largest cost of doing business.”
Krokover points to 2012 as when he believed this new direction had turned things around for his company. He also credits marketing that Newday Development is an award-winning firm as helping separate them from the competition. Giving back to the city and local communities through working with the city councils and planning departments on a volunteer basis also helped put the company name in front of the general public.
“We have become very stable with this new direction, but we have also learned that we can never get too comfortable, like in the past. We continue to grow and learn every day from every project,” he says. “The more we can save our clients, the more they love us, but more importantly they feel better with knowledge that they are more hands-on in working as a team with us.”