I’ve been in the remodeling business for over 10 years now. About three years ago I started my own company and am doing well for myself. The problem I’m running into and maybe you guys can shed some light in the matter, is this, most of the jobs that I do are small to medium size projects. However lately I’m getting alot of requests for larger jobs i.e. additions, finishing entire basements, complete guts and so on. I’ve always worked alone since I’ve been on my own except for my brother-in-law who helps when hes off, but I’m wondering if you guys had the same fears of expansion or if it just came natural to you? I’ve never really supervised alot of people and haven’t had alot of experience with the tax issues aside from my own. Should my fears keep me from expanding or do I push on to the next level of my career? I’ve always been an honest person and value the relationships I get from the type and size company I am. Does that all get lost with expansion? I certainly would like the chance to do bigger projects and to challenge myself to keep learning while still retaining the morals that got me where I am today. My goal is not to get rich by shafting people. I’d like slow and steady growth and the posssibility that I can take a back seat to some of the projects and others I’d like to be fully involved in. I don’t want to quit working all together but just have more time to relax. Any input is greatly appreciated.
Sincerely,
Mark Barnhart
Barnhart Remodeling LLC
Edited 7/13/2002 5:41:13 PM ET by Barnee
Replies
As you remove yourself from the carpentry aspect of the job and move into management of other peoples time and energy you need to take a close look at yourself. are you happy doing that? would you be happy if the new guy doesn't work out and you need to let him go. Or worse if you become friends with him and his values slowly change. Can you look at someone who is dependant on you for a paycheck and tell him he's fired? Would you be willing to lay off a hard working guy if things slowed down just so your family could eat?
That's some of the tough stuff that comes with employees.
Read "The E-Myth" by Michael Gerber. He discusses some of the same points you raised. He has another one dealing specifically with contractors that I haven't read.
Regarding ALANROBERSON's recommendation of reading
The E-Myth, Absolutely! Although back in February I learned from someone
else on this site that there Gerber had written another version of the book
called The
E-Myth Contractor: Why Most Contractors' Businesses Don't Work and What to Do
About It
View Image
I bought three additional copies of the book this past spring
and gave them to some friends I contract with and when we actually do team up
some projects we will often discuss the kinds of issues it illustrates when
on breaks. I'm actually getting set to make a growth spurt myself so having
those friends as a kind of study group to talk about the book has been a great
help too. I am sure if you read the book and start talking about it here there
are quite a few people who will jump in and help you out (as well as some who
will fight with what the book has to say). Either way it's an important wake-up
call for what we rally have to think about if we are going to run our vocations
like real businesses.
I try and breakdown what you've written and asked here Mark over
the weekend and see if I can't give you some more specific ideas as they relate
to my own experiences and frustrations in growing a business. Keep thinking
though You are certainly asking the right kinds of questions however I think
you'll find the answers are going to be complex and enigmatic at times. No one
said this was going to be easy but preparation and education can certainly help
ease the way.
(It's too bad you didn't post this in the business section, you
might get a better response on the questions there. Next time maybe..)
Profit is like oxygen,
food, water, and blood for the body; they are
not the point of life, but without
them there is no life. —Jim Collins
& Jerry Poras—Built to Last
Okay Mark I read you post over again this morning and as I promised I would
I'll try and give you some more specific resposes to what you wrote and asked.
"I've been in the remodeling business for over 10
years now. About three years ago I started my own company and am doing well
for myself."--That roughly retraces my own life's timeline. I was
twenty-eight when I first went in to business for myself. Times were hot then
just like the last few years were and because of that I was easily making money
(or at least I thought I was). Going along like gangbusters when Black Monday
hit ( the stock market crash of October 19, 1987 ) and by next summer I was
wiped out in debt like I had never in my wildest dreams imagined possible.
Towards the end of July that summer I took a seminar class offered by New England
Builder ( now called Journal of Light Construction) and taught by PROOF
Management Consultants called How to Survive & Prosper In The Contracting
Market-PROOF Cost & Pricing Workshop. While it was too late to save me and
my business at the time taking that class probably saved career.
You say your doing well for yourself. Are you sure? How do you gauge that?
What does "doing well for yourself" mean to you and how would someone
with twenty or thirty years of experience interpret your position. I thought
I was doing great I was sure I was doing great and all the while I was killing
myself by not really thoroughly understanding the principles of MARKUP.
First and foremost before you have any real serious thoughts about expansion
in this volatile market you need to be 1000% sure you understand MARKUP. You
need to understand Labor Burden as part of markup and the costs that are inherent
in running your vocation as a business that are part of Overhead & Profit.
Younger guys tend to sometimes lump the two together in thinking of Overhead
and that can lead to some tragic mistakes.
Where are you at in understanding all of that? While we've brought up The
E-Myth Contractor Have you also read any of the following books:
& Profit: A Contractor's Guide
by Michael C. StoneBusiness for Contractors: A Guide to Money and the Law
by Jim Kramonbuilders and remodelers describing the techniques that have worked for them
( you can get it from JLC-Online)
Builders Guide to Running a Successful Construction Compan
y by David GerstelRemodeler's Guide To Making & Managing Money: A Common Sense Approach
To Optimizing Compensation & Profit
- by Linda W. Case"The problem I'm running into and maybe you guys
can shed some light in the matter, is this, most of the jobs that I do are small
to medium size projects. However lately I'm getting alot of requests for larger
jobs i.e. additions, finishing entire basements, complete guts and so on."--
I think the real question here is what are the small to medium jobs that you
are doing now? Are they small to medium additions, basements, and guts? If so
making the transition to larger projects while difficult is not as difficult
as if you were making the transition from lets say specialty trade to general
contracting. Are you just changing the scope of your project size or are you
changing the whole way you'll have to handle the project differently. Have you
ever dealt with sub-contracting before? Do you have a management system in place
for doing that? Do you have a pricing system in place for estimating the work
being done by your sub-trades? When you say"
"I've always worked alone since I've been on my
own except for my brother-in-law who helps when hes off, but I'm wondering if
you guys had the same fears of expansion or if it just came natural to you?
"--
That tells me you don't have a management system in place and that's a good
thing to be scared about. You had better develop on. At least it shows you are
thinking about it. Do you have any experience organizing and supervising work
being performed by others? If you are talking about the GC route there are a
bunch of smart GCs here that I am sure can help you spot the potential pitfalls
and quagmires
"I've never really supervised alot of people and
haven't had alot of experience with the tax issues aside from my own."-- Tax
issues and understanding labor burden can sink you if you ignore it or make
a mistake but that only one part of the scope of dealing with others as I've
just hinted at but you had better make sure you get that part right. You might
want to check out the article on the JLC site entitled Calculating
Labor Costs by Shawn McCadden that covers how to figure labor burden.
"Should my fears keep me from expanding or do I
push on to the next level of my career?"-- Nah, Feel the fear and
do it anyway. That's what make life exciting but don't be dumb and naive about
it like I was. You have a chance to educate yourself like I never did. Don't
waste it.
"I've always been an honest person and value the
relationships I get from the type and size company I am. Does that all get lost
with expansion?"-- No it shouldn't. Why would you think it would?
Do you have some bad experience from your past that might lead you to think
that?
"I certainly would like the chance to do bigger
projects and to challenge myself to keep learning while still retaining the
morals that got me where I am today."-- That's what really attracted
me back then although I now do smaller projects. I once built houses now I only
really build parts of them but the parts I choose to build now are in many ways
more challenging sometimes than building a whole house. I'm not so sure
challenge is and exclusive property and domain of a projects size although
size can certainly dictate complexity at times.
"My goal is not to get rich by shafting people."--
Yeah but don't be stupid like I was giving it away for free or undervalued to
customers. If you talking about potentially shafting your future employees for
sure don't make that mistake. You wont get to far if you do.
"I'd like slow and steady growth and the posssibility
that I can take a back seat to some of the projects and others I'd like
to be fully involved in."-- That's really a very healthy smart perspective
on your saying that helps convince me that you might just make it along in your
vision of growth. But don't forget that. Slow and steady growth will allow you
some latitude and breathing room for the multitude of mistakes you are sure
to make along the way.
Were you thinking of partnering with some other contractors to create in a
sense a larger but virtual company that can handle these larger projects you
are looking at and maybe help you spread out you own risk too?
Keep thinking and keep asking questions and listen to what everyone has to
say. I sure still do.
Profit is like oxygen,
food, water, and blood for the body; they are
not the point of life, but without
them there is no life. —Jim Collins
& Jerry Poras—Built to Last
Once again some great advice Jerrald. I appreciate all of the book references you made. Guess another run to Barnes and Noble or does Taunton publish all that you mentioned?Tamara
Thanks Tamara. Smart Business for Contractors and The Builders Guide to Running
a Successful Construction Company are Taunton books and are listed under Professional
Books here on this site.
Profit is like oxygen,
food, water, and blood for the body; they are
not the point of life, but without
them there is no life. —Jim Collins
& Jerry Poras—Built to Last
Thank you for replying to my post. I should have probably taken your advice and put the post into the business category, but if I get many more insightful responses such as yours I'll probable have the whole fear licked.
To answer a few of your questions I'll start by telling you that I'm now 26 years old and started my own business with the same fears that I am having today regarding the expansion. I don't think so much that I lack the practical experience to handle the tasks but as I stated it's more the supervision and the fact that I may or may not have a few guys with families relying on me to keep their paychecks coming.
I started out working with my dad when I was 13, granted how much can you learn at that age, but I listened to what he taught and had a sincere interest and love for the work. He used to do roofing, siding,decks and everything in between. He was a hard worker at the GM plant but did alot of work on the side. So I used to tag along to help him in any capacity that I could.learning alot along the way.
To give you some examples of the jobs i've done in the past, first project while on my own legally was a bathroom remodel. It was pretty small just replacing the cabinets and fixtures, painting and countertops in two bathrooms. Another was oak wainscoting in a basement 60l.f as well as another bathroom remodel, this one was much larger though, it involved tearing down and expanding the room from 9x12 to 9x 20. I installed custom tile a custom tub as well as Installing a 6'x4' all glass block shower completely from scratch. That was probably my best work to date. I couldn't have been more satisfied and neither could the homeowner, as well as painting doctors offices,suspended ceilings,decks and other smaller scale projects.
The only reason that I tend to think that some of the relationships will be more of a business nature and less of a personal nature are from talking with some other contractors(probably the wrong ones to be asking) and reading a few books. I dont know and have been trying to find seminars and classes regarding these issues or even a contractors association that could help ease my fears by talking to others about these things. Maybe you know of some means to help me?
Once again I would like to thank you for responding, the information you've given me is greatly appreciated. I only wish that there were more people like you that would let me pick their brains, because you really know you stuff!
p.s. I do own Gerstel's Guide to running a successful constuction company and have already ordered the E-Myth and I am gining to stop by Borders tommorrow to check the other titles.
I have a few sugestions from my own experience, before you jump off the bridge, make sure the waters deep, (be patient and wait for an excellent client). Identify your limitations and determine if they may result in chaos. If your good at smaller projects you can turn a large project into a succesion of small projects, (i mentally do this). If you have to schedule future jobs, make sure there easy and relaxing, (there's nothing like looking forward to a couple of bookcases after three months of mess and one day of perfection. Anyway, goodluck!, sounds like your using an appropriate amount of caution
"Before you jump off the bridge, make sure the
waters deep"
HT, what a great aphorism! I've saved that one in the quotation database I keep.
The rest of your advice is great too. Good job.
Profit is like oxygen,
food, water, and blood for the body; they are
not the point of life, but without
them there is no life. —Jim Collins
& Jerry Poras—Built to Last
Mark- "I don't think so much that I lack the practical
experience to handle the tasks but as I stated it's more the supervision"
--Yeah, that can take time to develop and experience although there are other
indicators of an aptitude predilection towards good management skills. And management
and it's close cousin leadership can be both taught and learned.
"...and the fact that I may or may not have a few
guys with families relying on me to keep their paychecks coming."--
That's one of the scariest things as well as one of the koolest when you pull
it off. Nothing like giving an individual a check and a handshake for a job
well done. But it's healthy to always keep that fear somewhere inside you. You
don't have to ever show it. Ya just have to know it's there.
How about looking for a mentor? Do you know of any local GC or trade contractors
who have businesses you admire. It wouldn't hurt to approach one of them out
of the blue to ask them outright if they could help mentor you. Write 'em a
good letter. I know a lot of older guys that would be honored by such an approach.
I've got a fellow who I do a lot of work for here who I look at as one of my
mentors.
"To give you some examples of the jobs i've done
in the past..."--From the stuff you've mentioned it sounds like
you might want to go the GC route? Or maybe Kitchen & Bath remodeling? An
Interior Finishing Contrator? If you can at least pick a direction you would
like to head in that will make it easier and clearer to you as you move along.
In other words you need some kind of plan. You wouldn't build a house without
a plan and neither should you build a business without one too.
However I am reminded of something Dwight Eisenhower once said "In preparing
for battle I have always found that plans are useless, but planning is indispensable."
The plan you will eventually change or possibly even throw out but the act and
process of planning will prepare you for so much of the unexpected stuff that
will happen to you.
Think about how you will write "change orders" for your business
plan.
And thinking of business plan this past winter I discovered a new book on business
planning that I been using as I been getting set to re-boot and accelerate my
business that I've found very useful. Checkout The
Successful Business Organizer by Rhonda Abrams ( she also has written The
Successful Business Plan: Secrets and Strategies but I have no personal
experience with that book...yet). It's a bunch or worksheets checklists and
calendars to set up to help you out asking you a lot of the questions you'll
need to be able to answer. You might also want to check out some of her checklists
online by registering on her web site at RhondaOnline.com.
The only reason that I tend to think that some of the
relationships will be more of a business nature and less of a personal nature
are from talking with some other contractors(probably the wrong ones to be asking)
and reading a few books. What books are those Mark? Relationships will
be more of a business nature for sure but that doesn't have to make them inhuman.
...I dont know and have been trying to find seminars
and classes regarding these issues or even a contractors association that could
help ease my fears by talking to others about these things. Where are
you located? Maybe someone here online is located near you and help point you
in the right direction. ...you know of some means to help
me? Well we're doing our best to get started on that. I think you'll
do all right. You started out asking a lot of good questions already and you
idea about running down a local trade association sounds smart too.
p.s. I do own Gerstel's Guide to running a successful
constuction company That's a great start and a great reference to have.
When you read this stuff do you highlight and write you own notes in the margins?
I do I think that really helps years later when you think you remember something
about something but you just can't put you finger on what t was. You crack open
the book you think it was in an low and behold there are you highlights and
note and it all comes back to you. and have already ordered
the E-Myth I think there are a bunch contractors online here and on JLC
that have recently picked the new version of the book up so there could be some
lively discussion of it in the near future.
Just thinking again too about both what I just said about notating and highlighting
books and what you expressed as a concern about the changing of relationships
when you go in to business for real. Max DePree of Herman Miller Furniture wrote
two books on Leadership. Leadership
Is an Art and Leadership
Jazz. They are two of my favorite books on humanist management and they
are both on tape so I still listen to them a couple of time a year even though
I read them them almost eight years ago now. In the introduction to his book
Leadership Is An Art, Max DePree says:
I love that quote...
Profit is like oxygen,
food, water, and blood for the body; they are
not the point of life, but without
them there is no life. —Jim Collins
& Jerry Poras—Built to Last
Mark- another approach that has worked well for me is networking with other contractors. We now have 6 that are small operations all individually licensed and insured. Small jobs are great but when any one of us gets a big one on the days requiring multiple people we pull together those who are available. Granted this may cost premium $ but removes the hassels of layoffs,workers comp etc... And we are all highly motivated people to get the job done right. I've had over 60 employees at one time and hated my job of babysitting them. I'll never ever go back, that's not what I wanted to do.
Mark I just posted this link in the Pricing
for ‘perceived value’ discussion because of somethiing I
read in it that was realative to that topic but I thought I come back and post
the link here too because this Inc Magazine (online) article had so much about
this guys personal discovery and humanity in it that I thought, given what you
expressed your own concerns about growth were, you would really find it helpful
and useful.
20 years makes for a long article (20 pages) but I thinkit's really worth the
reading time.Shawmut Design and Construction is a now a $325 million per year
builder-remodeler-contractor!
"Architecture is the
handwriting of Man." - Bernard
Maybeck.