Dear PowerTip Subscribers,

As long-time consultants to the remodeling industry, we regularly hear from hundreds of remodeling company owners across North America. Many of these business owners are increasingly concerned with the drop in business and their ability to survive the downturn. We are listening and are here to help. Below are a few survival tactics from several of our team members that may make a difference. If you need additional input or want to have a one-on-one session with one of our expert consultants, give us a call today. We're ready to help.

If you'd like to be featured in a Remodelers Advantage PowerTip -- if you have a tactic or technique for increasing sales, lowering overhead, maintaining your margins, or growing your business -- we want to hear from you. Just drop a note at Info@RemodelersAdvantage.com and we'll contact you.

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Weathering the Storm... Tip 1

From Jim Strite
Strite Design + Remodel, Inc.
Remodelers Advantage Roundtables Facilitator

Now is the time to believe in the numbers.

1. It starts with the number of leads. Look at the percentage drop in your leads. Hopefully you have at least two years of lead information so you can compare this year's total leads-to-date to the average of your last two years. The percentage that your leads are down gives you a good indication of the reduction of number of jobs that you should expect to sell this year, assuming that you have a relatively consistent close ratio.
2. Multiply the number-of-jobs-you-expect-to-sell by your average job size in dollars to give you an estimated total dollar volume for the year.
3. Re-build your budget to this new dollar volume.  As you are in the process of building the new budget, you may see the need to cut overhead. . .  and possibly staff.
4. Use a spreadsheet to build a forecast for the gross profit that you will produce from each job. Divide that GP into dollars to be produced each month for the length of the job. Add up all of the projected GP for a total.
5. Subtract your projected overhead from your estimated GP. Hopefully this will leave a positive number. Then subtract those additional expenses not listed on your P & L that are on your balance sheet, such as office improvements.
6. Next, list those projects that are in design or that are in the proposal stage that have a 90% chance of turning into a job. Follow the steps in #4 & #5 above. This forecast will show if you will generate sufficient revenue to cover your future expenses. If not, more adjustments are required to maintain or increase margin and decrease overhead. (Steps #4 - #6 analysis provided by Jeb Breithaupt of JEB Design/Build, LLC).
7. Don't shy away from communicating the facts to your team. They already know the situation and, if they don't, they will make up their own answers which could be worse than the real story.
8. Ask each of your team members to write down any ideas they may have to increase sales and cut costs. Never judge their ideas because some ideas that may be simple in the mind of the author may be a brilliant idea to the reader. Give your team a couple of days to come up with ideas before submitting.
9. Hold a company meeting after reviewing and deciding on which ideas to implement. Share with them how appreciative you are for their ideas.
10. Start a discussion on ideas that need further input. Be sure to place emphasis on solutions.

We shared items 1 - 4 above, followed by 5 - 6 with our team. We were elated with the results. Like many other owner(s) we did not want to cut benefits or let people go. However, the team took some pressure off us through their recommendations, such as going to a 32 hour work week, not taking this year's wage increases, turning in their car wash credit card and washing their trucks themselves. Others volunteered to work less than 32 hours a week.

Readers:  If you’re not sure that you know your numbers well enough to make the best decisions for your company, contact Remodelers Advantage. We’re developing some low-cost programs to help you review your numbers and make the right choices for the future. Call today so you have time to take action.  Call us at 301-490-5620 x105 for more information or email Info@RemodelersAdvantage.com.

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Weathering the Storm... Tip 2

From Dave Bryan
Blackdog Builders, Inc.
Remodelers Advantage Roundtables Facilitator

Here are some thoughts on action items that can make a difference.

• REDUCE OVERHEAD - Jettison unimportant parts of the business. There are many companies that maintain marginal departments or divisions. Examples are Handyman, Cabinet Shops or in-house subs such as electrical or plumbing. The actual costs of these parts of the business are often not fully appreciated in terms of additional overhead and absorbed inefficiencies. I have also seen more than one owner who has held onto part of a company for more emotional reasons than business reasons. This bad decision making may get covered up with the success of the main business but in tough times I think owners must be willing to look at the scared cows in the business and cut them if necessary.
• MARKET AS MUCH OR MORE THAN IN THE PAST – In our market I have noticed a number of companies just fall off the map in terms of advertising. Companies that would regularly advertise in the same pieces every week are now never seen. This is a common point of discussion but, I have really seen it in practice lately. We have committed to a solid marketing expenditure but we have also changed up our media choices and tried some unconventional ads and tactics and, as a result, we have seen solid lead numbers while other companies in our market are starving.
• WHATEVER IT TAKES – In our company we have made a number of changes from cutting 400K from our overhead to raising our markup to traveling farther for work than we have in the past. We have had to rally the troops to get people on board and behind the changes. This has not been easy but it has been moving us in the right direction. I think everyone understands the marketplace and that can be leveraged to take some pressure off the business. Many companies operate in a vacuum and still provide bonuses and full benefits when the company is struggling to keep its head above water. This is not reasonable and getting buy-in from the team can take pressure off the owner.

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Weathering the Storm... Tip 3

From Paul Winans
Remodelers Advantage Consultant and Facilitator

Fundamentals are more important then ever when business is challenging. Much the way an athlete needs to visualize and practice the same basic moves over and over, a remodeler in a tightening economy must pay attention to the small, repeatable, simple strategies that will ensure his company's survival. Here are some ideas:

• Call 5 past clients a week. Start with the best and work your way through the list. Michael Spreckelmeier, president of Progressive Builders, Inc., Fort Meyers, FL, suggests using FORD:

• Family
• Occupation
• Recreation and
• Dreams

as good talking points with these special people.

• Keep in mind you are selling a relationship, not selling a product. The temptation to be interacting with clients who don't want what you are selling will be great. After going through FORD ask your previous client who else they think might benefit from knowing more about your company? Build you referral tree!
• Do not spend money having your employees work on your home until you have no money left. It is best to be up front with your employees about the upcoming work load and encourage in-company brainstorming about how to deal with it. You will be surprised by what your people suggest.
• Read history. The more you know about economic cycles and their inevitability the more likely you will maintain a positive forward thinking perspective. It also gives you something to discuss with your past clients!

Readers: If you're not sure which way to turn, invest in a few hours with a Remodelers Advantage consultant like Linda Case, Paul Winans, Judith Miller or Jim Strite. They've been through downturns in the past and know the industry like no one else. So if you need help, call us today.

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Weathering the Storm... Tip 4

From Victoria Downing
President
Remodelers Advantage Inc.

One of the biggest mistakes that business owners make is to wait too long to make needed cuts in personnel. One remodeler didn’t want to let anyone go because, if the jobs that he expected to come in actually did, he’d need everyone he had. But guess what?  Those jobs didn’t come in. So, after carrying extra staff for several months, he found he didn’t have the revenue to pay for them. By the time he did lay them off, his debt had grown considerably.

So take a hard look at your budget and decide if you do need to cut. If so, this could be the time to free up the future of someone who hasn’t really taken hold at your company. When you replace the position, you can look for someone who is a better fit.

If you feel you have all “A” players and want to do your best to keep the team intact, look at creative ways to reduce costs like rolling lay offs, or bringing more work in-house so that your team continues to produce revenue or, like Jim Strite says above, reduce hours for everyone.

Whatever you do, don’t stick your head in the sand and hope that it goes away. If your market is affected by the economic storm, take aggressive action now to come out stronger and more profitable when the sun comes out again.

Members, be sure to take advantage of the many benefits that we’re bringing to you. We know that many are hurting for business and we’re doing everything we can to bring you information and resources to help. So listen to the audio's that are posted, read the threads in the forums, listen to the brainstorming teleconferences that are offered, and reach out to your fellow members for support. These are the fantastic benefits of being a part of a community of your peers. We’re all here to help one another.