McCadden: Should You Adjust or Pivot to New Realities?

authors Shawn McCadden | December 3, 2021

New realities are being thrown at remodelers at a pace and volume I’ve not previously seen. As individual realities, the challenges are not uncommon. We’ve seen them before. What is different is that so many challenges are rearing their heads all at the same time.

Most of the challenges remodelers faced over the past 20 or 30 years have been short lived. Some challenges went away and, if they didn’t, remodelers invented or copied ways to adjust and move on. This article is a warning. My gut feel is that things are going to be challenging for an extended period of time, and if you don’t properly assess how these changes will affect your business, you may be out of business before too long.

Shawn McCadden, CR

Rather than assuming you can just adjust, I believe you’ll need to pivot dramatically. You might need a new way of thinking about the business of remodeling. There are three big-picture considerations that I will address in this article. Within each one are additional details to consider and critical decisions to be made.

Finding and Keeping Good Employees

This one is not new, but the problem has gotten worse. It will become a critical test of your business’ survival if you don’t take it as serious as a heart attack. First, consider the age of your skilled field staff.

How many years do they still have left in them? Are they already slowing down and even wearing out as they get closer to typical retirement age? Have you already found and started training their eventual replacements? If you don’t create your own next generation of skilled staff, you and several other businesses in your local market will all be competing for the few left to hire.

If you are working towards creating your own future workforce, be sure to protect your investment. As you train them, you also need to invest in ways to keep them happy, well paid and motivated to stay with your business. If you don’t give them great reasons to stay, all the time and money that you invest in training might just get packed up and leave. They might get lured away by another remodeler or even an employer from a different industry.

Choose Vendors Wisely

The old days of buying from the cheapest vendor are gone. The cheap guys are the cheapest for a reason, and usually it’s because they reduce their costs by reducing your service and support. It will be critical to find and develop relationships with vendors with a deep knowledge of their products as well as their manufacturers and distributors.

Despite supply-chain challenges, the right vendors will know the products they can reliably secure for you. It may not always be exactly what your customers would prefer, but if they are willing to be flexible, you will be more likely to keep your staff productive and on budget.

Today, we are witnessing barren shelves in grocery stores. This is because of shipping and transportation challenges and because consumers are stocking up. Remodelers might be wise to do the same. Stock up on the general everyday supplies your business needs for the type of work you plan to sell. If you’re working with the right vendors, they should be able to tell you which common items are expected to become in short supply so you can stock up.

Additionally, seek premium vendors offering an account rep who knows what he or she is doing. Choose wisely and invest in a relationship with the right vendor and rep, so your investment will not vaporize because of turnover. To find out if your rep is a dedicated company employee, take them to lunch and ask how they like working for the vendor and if they have sound reasons to stay.

Rethink What You Sell

As certain products become scarce, you will need to be strategic about which project types you plan to sell, how you will sell them and how you will be sure to have what you need when you need it. Pre-staging projects with the needed materials will help protect your business as well as your customers. If you plan to do this, get clients’ money upfront so you can order and secure the materials well before you start.

To help weather potential challenges, consider selling some job types you can use as fillers while you are waiting on products for other projects. One example might be labor-intensive repair work, but it must be priced to make up for the lack of typical gross profit earned on materials and subs.

Don’t Guess at Strategy

If you don’t know how to properly markup what you sell, it could cost you a lot of money and delay your eventual retirement. Many years back, a contractor I know had a great team of carpenters and decided to sell his labor to other contractors as a way to eliminate working directly for consumers. At first it was so easy and stress free. He was about nine months into it when he realized he was only earning gross profit on his labor—none on materials and subs.

The short-sighted strategy wiped out his reserve funds because his labor cost was typically only about one third of his cost of goods sold when he did full-service remodeling. That meant he was short about two-thirds of his needed gross profit because with his new strategy he was only marking up the labor and his markup was way too low.

If you don’t know or understand how to calculate your required markup, get the help you need. Remember, trying to adjust using guesses and hope can ruin your business. Make the pivot and invest in the help and support your business needs to thrive during these unprecedented times. QR

Shawn McCadden is a speaker, business trainer, columnist and award-winning remodeler with more than 35 years of experience. He can be reached at shawnmccadden.com.

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