Whether it’s a minor bookkeeping error or an ill-advised partnership, rookie remodelers tend to face common pitfalls — some with the potential to break their business. Consider the top five mistakes rookie remodelers make to ensure you avoid them:
1. Underbidding on contracts
Many new remodeling contractors learn the bidding process as they go. But this can be devastating to the bottom line. Unless you factor in variables such as hidden structural damage, a fickle customer and material price fluctuations, underbidding could cost you money. It might force you to cut corners and use subpar materials to preserve your profit margin, which can cause unprofessional results and damage your reputation.
“It’s better not to have any job than to underbid and take a loss,” says Alex Shekhtman, vice president of A&A Design Build Remodeling Inc. in Washington, D.C. He recalls once adding trim to a home when he discovered the wood was rotting underneath, which changed the scope of the project. He now begins each bidding process with a thorough site inspection and a detailed consultation with the client or contractor. If numerous repairs are expected, his company uses time and materials pricing.
An educated bid that outlines every aspect of the job will keep you from biting off more than you can chew or diving in unprepared. In addition to charging for inspections, mark up bids 20 to 30 percent to cover travel time, unexpected changes and business expenses. Estimating software can help by providing cost estimates for labor and materials, and factoring in geographic pricing trends.
2. Not Vetting Workers and Subs
Beginners can be too trusting and overlook the importance of hiring the right people. When a job went awry, Kate Wiegand, a Raleigh, N.C.-based interior designer, says an unscrupulous contractor cost her company thousands of dollars in materials and additional labor, in addition to the five extra weeks she spent rectifying the project. “Vet all contractors, subcontractors and anyone you introduce to the job site,” she says. “They are your responsibility, and they could [compromise] your reputation and livelihood.”
Here are some tips on hiring subcontractors.
Wiegand says her contractor — whom she found in a magazine ad and checked out with the Better Business Bureau (BBB) — disregarded orders, tore open a wall prematurely and ruined the client’s cabinets, carpet and hardwood floor. Had she done more digging, she would have discovered he had a criminal record and numerous complaints filed against his business. He also had operated under numerous company names, all with horrible business ratings. Now she thoroughly researches prospective contractors, contacting the BBB by phone and paying for background reports.
3. Approving Payment Prematurely
Naturally, rookie remodelers are less experienced when it comes to executing construction contracts. This can lead to understandable mistakes, like bowing to pressure from a sub who requests early payment.
Even with good workers, mistakes can be easy to overlook. That’s why you should never approve or issue payment until you’ve thoroughly inspected the site and have signed off on every aspect of the job. To avoid surprises, periodically review the construction plan and schedule during the project, and conduct an inspection after each subcontractor finishes a job.
4. Not Listening to Clients
Accustomed to calling the shots, even experienced contractors can be deaf to their clients’ needs. “Contractors listen, but they don’t hear,” Shekhtman says. With 20 years in the business, he encourages his clients to voice their opinions.
Ask your clients why they’re doing the project. They might need more storage space, think their fridge is inconveniently located or want their kitchen to also function as an entertaining hub. By truly listening, you’re more likely to produce the results the client wants.
In addition, the remodeling process can throw a home into chaos. Prepare clients by communicating the process with them beforehand. Consider holding pre-workday meetings with clients to introduce them to workers and supervisors, so they know whom to contact should questions arise.
5. Not Joining Industry Groups
If you dropped out of trade associations due to the recession, it’s time to reactivate those memberships. New remodelers think they can do it all on their own, Shekhtman says. “But when people don’t join [industry groups], they’re missing out on networking with peers who can share their experiences.”
Whether you network through a local builders or remodelers association, a national organization like the National Association of the Remodeling Industry (NARI) or by creating your own informal network of associates, peer relationships are essential to building a successful business. In addition to generating job leads, trade organizations offer educational programs in accounting, sales and marketing.
As you build your resume, talk to other contractors to find out what has worked for them. Even well-intended errors can have serious effects on new remodelers’ futures.