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The Contractor Coaching Partnership Blog

What volume of business does a contractor need to be successful?

Posted by Mark Paskell on Thu, Jan 29, 2015 @ 09:21 PM

What amount of profitable sales volume does a  remodeler or contractor need to be successful? This question has been on my mind lately as I am getting a lot of calls for coaching from remodelers who are producing $500 to $600 grand in business. They tell me they have reached a plateau. 

The number one challenge that these contractors share is that they do not have enough time to handle the various tasks the business requires. It seems that they all are wearing too many hats and there is not enough time in the week to manage and grow the business. They lament that they do not have adequate time to get back to leads, do their estimates, work on business planning or spend time with the family.

So at what volume does a remodeler have enough revenue to run a business effectively?

Recently my business associate Shawn McCadden has been writing blogs about building a million dollar remodeling business. Based upon what I have learned in my career and the costs of running a successful remodeling business in the current market I conclude that the number should be somewhere near a million in profitable sales. This allows one to hire key personnel to share the burden of running the business effectively.

I have met a few guys working by themselves with no employees knocking down 500-600 k and they tell me (when they are being frank) they are working well over 70 hours per week and they are running out of steam.

I suspect that when we are young we have may have the energy to burn the candle at both ends of the day. But as we get older, the body breaks down, we have less energy, we get married and have kids and things change.

So some thoughts on what you need to have in place to have a successful business and have a life.

The million dollar remodeling business structure;

Million dollars in sales at a minimum of 8-10% net profit and owner salary of $100,000.

   ***Owner who runs the company and is the production manager or sales person, not both.

   Company with owner production manager will need one full time sale person. Or company with with owner sales person will need one full time production manager.

Note; behavioral assessments have shown that one person who is the owner, is challenged to effectively handle sales and production full time. When one is faced with a production problem and has a sales appointment to prepare for or run, the production problem often takes precedence. Sales takes a back seat. This causes a loss in sales effectiveness and some consumers may not wait for you to get back to them.

  ***One full time office manager who handles the books, office administration and marketing. Included in this role is handling all paperwork required for compliance with regulatory agencies.

   ***Two or more lead carpenters.

   ***One full time laborer/apprentice

The above is a minimum structure. To work the owner must develop systems and train personnel on the systems. Training requires that money and time is invested to train the team. Sink or swim training will fail and cause employees to leave you.

The systems must be developed and put in writing and enforced with firewalls.

The required items with the systems are;

  • Business Plan that includes a budget, sales projections, overhead costs and markup. You must know your numbers!
  • Marketing Plan that includes the target client, project, geographic area and identifies the amount of money you will invest in marketing.
  • A sales process that is in set stone and the sales personnel are professionally sales trained. Winging it will cause loss of profit and reputation.
  • A estimating process that produces accurate fixed pricing.
  • A production process such as the Lead Carpenter Program with the required paperwork system to track job details and progress.
  • An accounting process such as QuickBooks and a tracking process to job cost all projects.
  • Tracking systems for leads and progress toward your goals.
  • A website that produces leads that match the target market
  • Online presence 
In my Cradle to Grave system I teach the 4 legged chair business model. The four legs are Marketing, Sales, Production and Administration. The goal is to develop a play book that will systemize the business and allow the company to scale. There is too much work for one person to do running a successful concern.
A few years back craftsman with a good following and word of mouth business prospects found a way to make ends meet. Those days are disappearing. The craftsman owner now needs to think seriously about learning successful business methods to excel in the day of the new consumer.
In March, Shawn McCadden and I will be starting our Construction Business Owner Education and Peer Group sessions. With the recent forecast that remodeling will have its best year ever in 2015 it is a perfect time to jump on board and align your business for success.

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