What Kind of Remodeling Company Do You Have?

The other night, John and I watched 2 different shows on The Learning Channel. The first was called Property Ladder and centered around a couple (not in the industry) buying a home to fix up and flip. The second was Flip This House which involved professional house flippers – those who buy a house for a low price, fix it up and then sell it for a profit. Both of the shows provide a professional designer to help with the remodel and planning. Have you seen these shows? These are “professionals” who do this for a living. Well, some are professionals. And some, shall we say, think they are professionals. You see, they fall into that trap—it’s so easy. Anyone can do it. It’s just fixing up a house. And then we put it on the market and the buyers run to buy it! How could we go wrong.

After watching the 3 episodes, it struck me that this was a perfect analogy for our remodeling businesses. Let me explain.

You see, in the first episode a newly married (although older couple) decided to buy a home, fix it up and sell it. You see, people in their area were doing it and making money. How hard could it be? Did I mention that neither one had owned a home before? Did I mention that neither one was in the home improvement business? Did I mention that neither one was handy? But how hard could it be? Oh, and they are environmentally conscious and wanted to do a “green” remodel so they could show everyone that it could be done.

They bought an abandoned home. He was a mortgage broker so he got a “good deal”. They set their financial budget (although right from the start John and I looked at each other and said “no way!”) and their time budget. Once the time budget is set, they have to stick to it, no matter what.

The show followed the couple through the trials and tribulations of remodeling the home. They hired his brother, who was currently out of work as a carpenter, and his 17 year old son to help. After just 2 days, the son refused to come back! The out-of-work carpenter brother made mistake after mistake. For example, he measured all of the windows and doors wrong so that modifications had to be made to every unit before installation. He did not properly prepare the wall covering so that several walls had to be stripped and re-done. What a mess! And what a waste of time and money. Did I mention that the brother continued to be paid his daily rate? The couple moaned and groaned but, in the end, never fired the brother. He was called back to work two weeks before the project finished and he left them high and dry! Does any of this sound familiar to you?

The second show, Flip This House, was about a gentlemen who was an electrical inspector for the City of Los Angeles. He had flipped houses in the past. He had a team of contractors and a real estate agent. He had a plan, a budget, and knew what he was doing. He bought a house that had been in the process of being flipped but the previous owner ran out of money part way into the remodel. The house was left with gaping holes on the outside to fix a soggy foundation and lots of interior work.

The electrical inspector made it clear that this was something he enjoyed doing. It was fun. He liked the idea of creating a beautiful home out of nothing. And he went to the effort to make sure that the home was beautiful. He put in materials that he liked and that he would have in his own home. The remodel progressed on schedule with a few minor challenges.

The third show, another Flip This House episode, followed another gentleman who flipped houses for a living. He brought his team with him – a lead carpenter and a real estate agent. They went through each room creating a plan and a budget. The process was very methodical. Some might say boring. But one could tell that he had done this before.

The remodel went along smoothly until the professional flipper overrode the designer’s choice of kitchen cabinetry. The designer was upset because she saw the vision for the home. The flipper said that he knew his market (after all he had done this many times before) and he knew what his market would want in a kitchen and he chose what they would want. In the end, the kitchen looked great although not quite as showy as it would have been if the first choice of cabinets had been used. But it was also clear who was in charge of this project and who made the final decisions.

OK, now for the reveal. How did they fare? After all, the idea here is to make money. Right? And isn’t that the idea in our own businesses?

The first couple, the ones who thought it would be easy, who had no experience, who hired the brother who made mistakes, and who wanted to create a green remodel on a Home Depot budget, actually made a profit. Well, on paper they did. A little more about that later.
The electrical inspector finished the house slightly over budget but because the remodel was fairly high end, the house sat on the market for more than a year before it sold. The result was that he broke even on his project. He was satisfied because he enjoyed the process of the flip.
The professional flipper came in under budget and finished his remodel exactly on time. There were no issues because the flipper made decisions based on his extensive knowledge of remodeling a home and the market he was in. His house, which was quite lovely, sold almost immediately and he walked away with a handsome profit, just like he anticipated. One of the selling points of the home was the kitchen!

Do you see yourself and your remodeling company in any of this? The inexperienced couple bumbling through a remodel and making money despite themselves. The electrical inspector who was in it for fun and made no money? Or the professional who made the decisions based on his experience and knew his market and came out with a nice profit in the end?

Oh, and about that first couple. The show said that they came in over budget and, even though the house stood on the market for so long, made a profit. But, looking at the remodel and the progress, it seemed a little far fetched. The kitchen and two bathrooms were finished in the last week. And the house was staged for the open house. Where did the money come from to finish the project so quickly (without a contractor) and to buy all of the furniture that was in the house for the open house? I’m thinking that it wasn’t accounted for in the budget. So perhaps the first couple thought they made money but actually didn’t.

And do we all do that sometimes, too?