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Remodeling Show 2015: How to Build a Sustainable Business

The Remodeling Show, an annual trade-only construction event that exposes remodelers, deck builders and other industry professionals to products and services from hundreds of manufacturers, concluded this past week at Navy Pier in Chicago.

The exhibit hall featured live installation clinics, interactive workshops and instructional product demonstrations, allowing industry professionals to forge new relationships with manufacturers while also honing their craft. 

But the educational conferences offered show attendees an opportunity to advance their business through improved understanding and better management.

Laying groundwork for success

Most remodeling businesses evolved over time and, as a result, lack the systems required for sustainable growth. The company expands faster than its business systems can handle and increasingly runs the risk of failing permanently. But the right structure can promote planned growth and create more potential for profit.

Often a business will grow quickly into the unknown, become overwhelmed and start to lose money, said Shawn McCadden, an industry consultant and founder of Remodel My Business. The company then shrinks back to its comfort level—a transformation McCadden dubs the “Reverse Puffer Fish Theory” because a puffer fish grows in size when frightened. 

McCadden recommends that entrepreneurs think strategically about their business first and understand why they will take a certain action before they actually do it. Then they can begin to think about their company tactically, but they must be sure that the tactics ultimately support their business strategy. In essence, McCadden advises owners to act big from the beginning, charge now what they will need in the future to cover overhead costs, and reserve any excess funds to finance growth. 

Entrepreneurs must also understand the tools they need to succeed when their business starts out will vary from the abilities they need once the company becomes established, McCadden said. A system centered on production managers, for example, might suit a remodeling business initially; but as the company grows, the production system should focus on lead carpenters in order to develop management skills, encourage mentorship and provide growth opportunities.

Managing growth through phases

Plateaus can occur at each stage in the development of a construction business because maintaining steady growth remains impossible. Many companies, in fact, encounter the problem of doubling their job volume but earning only half as much, said Leslie Shiner, owner and principal of The ShinerGroup.

Small businesses typically go through five stages of growth: existence, survival, success, takeoff and resource maturity. In the survival stage, owners start to develop systems but struggle with understanding the relationship of revenue to expenses. Once a company reaches the success stage, however, owners must begin to hire managers with an eye toward the future instead of current conditions.

Business grows significantly in the takeoff stage, but the major concerns have to do with delegation, cash flow and planning. This becomes the pivotal point in a company, Shiner said, because entrepreneurs must find a way to break through to the next level of growth or fall back to the previous stage.

Resource maturity describes a business in which the profit is based on process and not on people. In other words, the company instituted detailed operational and strategic planning and manages through delegation, with full accountability. The business may still fall back to the prior stage, though, if the owners cannot delegate successfully, keep up the volume or fail to understand costs, and the company subsequently grows too fast.

Business owners must examine their own growth plateau, Shiner said, and look at their financial statements over the years to determine which costs fluctuate with volume and which costs do not change. That way, entrepreneurs can create a breakeven analysis to answer questions such as, “What sales volume do I need to cover my fixed costs?”

Getting the best out of people

A shortage of construction workers has forced many business owners to reevaluate the way they manage their personnel. Employers should be able to acknowledge different personality types and know how to motivate each of them, in addition to bridging the generation gaps that exist among today’s workforce.

Recognizing the differences between leadership and management can help entrepreneurs comprehend the qualities of an effective business owner and align their company to have more success, said Kristy Wolfe, temporary assistant professor in the department of civil engineering and construction at Bradley University.

Leaders influence a group of people toward a common goal, whereas managers are put in charge of a certain group of tasks. Management essentially comes down to the act or skill of controlling assets and making decisions about a business, department, sports team or a similar organization, Wolfe said.

When dealing with difficult employees, managers must remember to understand the rules and regulations, listen to their needs, provide feedback, outline repercussions for actions, stay consistent and document everything. The biggest challenge, however, will be finding quality people in the future by educating parents and counselors about the trades and changing the negative perception of these careers, Wolfe said.

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Be sure to join the Lowe’s ProServices LinkedIn Group to read additional content and interact with other Construction/Trade and MRO professionals.

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