An ever-so-slight uptick in the economy

Hanley Wood Market Intelligence’s Key Indicator Alert is out for the week and there is definitely some interesting data to be explored.

GDP decreased again for another quarter but at a rate less than last quarter. Businesses have slowed production so that they won’t be inundated with unwanted and unsaleable inventory. That makes perfect sense.

But personal consumption has actually risen slightly in the first quarter. Could we possibly be seeing the beginning of increasing demand? If so, economic growth may not be far behind.

New home prices are at their lowest point since December of 2003 and interest rates are the lowest in 39 years. What’s needed now is consumer confidence to ignite home buying. Of note is that existing home prices have risen slightly for the second month in a row while inventories of existing homes continue to work themselves down.

Unemployment, although still high, also increased by less than the previous week.

And the big news – the consumer confidence index is up.

All of this data may be telling us that the downslide is slowing and the bottom is near. Don’t get too excited yet, though. We’ve got a long way to go.

Good business is built on strong foundations

A strong successful business is built on a strong foundation.

Think about our industry. Whether it’s a one-story ranch or a 100 story skyscraper, the foundation must go in first and it must be built to last.

If the foundation is off just a bit or there is a small crack, there will be problems with the building. But start with a strong foundation, and the structure can last for years.

Build your business on a strong foundation and it will serve you well for years to come.

A small business' unique position

As a small business owner, you are in a uniquely powerful situation. You have the ability to implement an idea very quickly. In most cases you are the board of directors, owner, and manager all rolled into one. You make the decisions while larger companies must run those new ideas through the proper channels.

Immediate action can help you turn your company quickly in the proper direction.

A common factor for success

Can you guess what the one common factor in successful people might be?

If you guessed education or experience or money, you’d be wrong.

Give up?

The one common factor among successful people is speed of implementation.

When successful people get an idea, they begin working on it! They don’t run it by their spouse or friends or co-workers. They don’t think about it and mull it over for a couple of weeks.

They begin working on it – immediately.

Needed boost for the remodeling and home improvement industry

OK remodeling and home improvement company owners. Our stimulus package has arrived!

The federal government just gave the remodeling and home improvement industry a huge boost in the form of modifications to the energy efficient improvements credit.

For 2009 and 2010 homeowners can receive a tax credit of 30% of the cost of specific energy efficient products added to the home up to a lifetime cap of $1500. Those products include electric heat pumps, central air, water heaters, gas furnaces, exterior windows, doors and skylights, just to name a few.

Check out this article in Nation’s Building News or the Congressional Record for the actual bill.

Past studies have shown that existing homes, especially those built more than 20 years ago, are responsible for a large amount of our nation’s energy consumption. Retrofitting these existing homes with energy-efficient features is more effective in reducing energy consumption than making changes to new housing energy efficiency requirements.

The bill is very specific about what products qualify for the tax credit. For example, not all Energy Star rated replacement windows qualify. Qualified windows will also need to meet an additional requirement that the window is equal to or below a U factor of 0.30 and SHGC of 0.30.

So study up on which of your products qualify. Contact your suppliers and manufacturers to get factual, precise information. Get some marketing together and get it out there to your past customers and targeted new customers. And get back to selling.

History guides us in the remodeling industry

The other day, I stumbled upon some old Census Bureau statistics that may give us a little hope for our industry.

The Expenditures for Residential Improvements and Repairs statistics for 1966 to 2007 shed some interesting information. The report measured Total Expenditures, Maintenance and Repairs Expenditures, and Improvements Expenditures which up until 2004 was broken down between Improvements, Additions & Alterations, and Major Replacements. Starting in 2004, the Census Bureau dropped Additions & Alterations and Major Replacements from the Improvements category.

In the 60’s, both the Maintenance and Repair category and the Improvements category remained relatively unchanged and were both pretty modest.

In the early 70’s, improvements began to pick up, followed by Maintenance and Repairs in the late 70’s. That makes sense as all of those new additions and improvements now needed some attention to keep them well-maintained.

Along came the early 80’s, a recession hit and Improvements went down. But Maintenance and Repairs went up! The recession officially ended in November of 1982 and by the late 1980’s both Improvements and Maintenance and Repairs exploded.

That puts us into the early 90’s and our economy again suffered a recession from July 1990 to March 1991. Not surprisingly, Improvements again went down while Maintenance and Repairs increased in 1991 and decreased in 1992. But beginning in 1993, Improvements began their ascent while Maintenance and Repairs remained pretty steady through the rest of the 1990’s.

But wait, around 2003, Maintenance and Repairs again began to rise, due in part to (once again) work needed on all of those Improvements that had been built in the previous decade.

Unfortunately, the Census Bureau no longer keeps statistics on Maintenance and Repair so we can’t track that information after 2007, but if history were to be our guide, Maintenance and Repair would rise as Improvements fall during our current recession.

Does that give you some hints as to the type of work to be going after right now?

Looking for some good news in recent remodeling data

The Joint Center for Housing Studies released their Leading Indicator of Remodeling Activity in January and, not surprisingly, the news wasn’t good. The Indicator points to a decline in remodeling activity through the third quarter of 2009.

But if we dig deep, we may find some positives. Prior to 2008, the LIRA was based on numbers from the US Census Bureau that included Maintenance and Repairs expenditures along with improvements such as additions and alterations. But the Census Bureau discontinued the Maintenance and Repairs Statistics which also meant that the Center for Housing had to re-benchmark their Indicator.

Looking at the Expenditures for Residential Improvements and Repairs by Property Type between 2003 and 2007 provided by the Census Bureau, it’s interesting to see that Maintenance and Repairs held steady or continued to increase over that 4 year period.

Unfortunately, the Census Bureau no longer tracks this information. If they did, I think they could find that Maintenance and Repairs continue to hold pretty steady. Why? Because people take care of their homes. The home is an investment and if a homeowner wants to get the money out of the home, it needs to be in good shape and well maintained. Sure, we all see homes that are in disrepair every day, but these are not the people we are looking for as our customers.

Here’s what you can do today. Travel through your target area. Make note of the subdivisions and areas where the homes are well-maintained. Get back to your office and devise a way to reach those homeowners.

On The Level Consulting Offers BASICS Business Coaching for your Remodeling or Home Improvement Business

OK, I'll admit right now that this is a shameless plug. This blog is all about our new BASICS Business Coaching for small home improvement and remodeling businesses. If you don't want to read it or you are not interested, you can stop reading right now. Check back with us on Wednesday for another (non-commercial) blog post.

I know from experience that being the owner of a remodeling or home improvement company can be really overwhelming. I wear many hats in my remodeling company's business - marketer, bookkeeper, supervisor, dish washer, file clerk, errand runner, admin assistant. John has even more roles with sales and production.

And I know how easy it is to get caught up in all the day-to-day challenges of running a business. Sometimes you can't see the solutions that are right in front of you. There's just too much going on.

But I also know from experience that you don't have to face these challenges alone. Years ago, I hired a business coach and it was the best money we ever spent! The coaching helped us get clear on what we wanted and how to go about getting it. And, yes, even coaches get coached. I remember our coach back then telling me about his business coach.

Because that coaching was so powerful and so life-changing for us, we know that it can be for others, too.

That's why we created BASICS. That stands for Business, Advertising and Sales Individual Coaching Sessions.

This is not general business advice. This is coaching specifically for the remodeling and home improvement industry. You know that there are lots of little peculiarities in our business. You really need someone who is familiar with this industry.

If you would like to find out more information about BASICS coaching, just click here and sign up for one free coaching session.

And if you've read this far, thanks for doing so.

Should you use a square foot price to estimate remodeling?

NO!!!!

Did I say that loud enough?

The answer is a resounding no.

Square foot pricing cannot take into account all of the variables of remodeling. Product selection, current condition of the project, jobsite access are only a few.

Do yourself a favor. After looking at the job site, prepare a detailed estimate based on the work that will have to be done for this particular job. Include labor and materials. Apply your mark-up. Stick by your estimate.

Happy Selling!
John

Don't do business without a contract

I hope you have a legal contract that you use for all of your remodeling and home improvement work.

If you don’t, put down your tools and go right to your attorney’s office to get one. Otherwise you may end up there for not using a contract.

A contract protects not only the homeowner but you in case something goes wrong. It sets forth the full specifications of the job as well as what is expected from each party.

And if there is a change to the initial contract, make sure that you do an addendum. This can be a change order or additional work authorization or whatever you want to call it. But you have changed the initial contract and that, too, needs to be in writing, signed by both parties.

Are you selling every estimate you give?

If you are, then I bet your prices are too low.

You may be thinking: What? Too low? But I’m selling. I’m a great salesperson. My closing rate is 100%!

If your closing rate is 100%, you are not selling. You are taking orders. Try raising your prices, just a little at first, and see what happens. Your profit margins will be higher. Your cash flow will be better. And your closing rate will not be 100%. That’s ok, though. You are learning how to sell.

Happy selling!
John

Even if you are the owner, you need to track your hours

The reason? Because if you hired someone to do the same work that you do, you would pay them for it. Right? Which means that you need to provide for this time in your job estimates. You won’t know how much to put in your estimates unless you track your time on a regular basis.

It’s easier than you think. You don’t need to go hog wild with it. Start by breaking down your time in ½ hour increments. Using an Excel spreadsheet, divide each day into Production – on the job time; Superintendent – planning and supervising labor and materials time; Sales – meeting with prospects and preparing estimates time; Office – any administrative time; and Owner – working on your company time.

Enter time each day and total on a regular basis – weekly or monthly.

You may even find that you are spending way too much time working in your business rather than on your business. But that’s the subject for another day.

Market to prospects you want to do business with

I recently read an article about a contractor (I can’t remember his name but lets call him Bill) who was lamenting that he couldn’t compete against a company that employed illegal workers. He gave a specific example of a prospective customer who told him that he knew the other company used illegal workers and he didn’t care. He was willing to accept that for the cost savings.

Bill’s rhetorical question was “How do I sell someone who doesn’t see the value in doing business with me over a company that employs illegal workers?” The short answer is, “You can’t.” And the long answer is “You don’t want to.” Market your business to those customers you want to do business with. Don’t waste your time on those who don’t see or care about your value. It’s futile.

Do you guarantee your work?

We do!

That’s right, we give a 3 year labor warranty on just about all of our remodeling work.

Our state requires us to give a 1 year labor warranty. We decided, though, long ago that if we really wanted to stand out and if we really believed in our work, we would give a longer warranty than was required.

How has this worked for us? Great!

You may think that we are constantly being called to fix things. Nope. Most of the time we do the job right the first time around. But things definitely do happen. And when they do, we immediately make them right again.

I actually like knowing when we have a labor breakdown. That way I can track if we need to change our construction methods, our products or just be a bit more careful. I can also get an idea if an employee or subcontractor is not up to par.

A labor warranty works in another way, too. It gets you back in front of a past customer. And once you fix the issue, you have a happy customer. Many times there is more work just waiting for you.

Happy Selling!
John

Inspect what you expect

According to many experts, in order to get more accomplished in your day, you have to delegate some of your duties. Which ones? According to Brian Tracy, be ready to delegate anything that you possibly can to anyone who can do the task.

Of course, as Brian points out, delegation is not abdication. You must follow up and make sure that your delegated tasks are being completed on time and correctly. Supervise and schedule time to follow up.

Looking for work? Think outside the box

Like this young man in Seattle, Washington. He has developed a unique and low cost way to gather leads for his architecture firm. John Morefield has been laid off twice but he’s not letting that stop him.

What unique ways can you think of to bring in more leads?

Are you trying to sell every job?

You don’t have to sell every job. There are some jobs that just don’t fit your niche. There are some prospective customers you will meet who don’t fit your customer profile. There are some locations that don’t fit your geographic service area. Learn how to say no to the jobs that just don’t fit.

Happy Selling!
John

Gloom or Boom? You Decide

The naysayers, specifically the media, would have you believe that our economy has ground to a halt. Run and hide, Chicken Little. The sky is falling!

If you choose to listen to their messages of gloom, the sky will fall for you. But if, instead, you choose to believe that our economy can and will support your business, well then it’s a whole different ballgame.

The most important thing you can do right now is to be flexible. Be willing to change your business model. Tweak your products so that you offer those that your market wants to buy. Add or subtract services so that you can reach the most consumers. Be willing to do what it takes to survive and thrive.

Take advantage of sales training

Although some manufacturers, like Republic Windows and Doors, are shutting down, others are gearing up for a successful sales season. We recently received an invitation to Home Guard Industries’ Dealer Training and Workshop. Training such as this is geared toward helping us, the home improvement contractor, sell more. Find out what your suppliers are planning this year to help you sell more. If they have no plans, suggest that they provide some training and assistance. After all, it is a direct benefit to them if you sell more.

Happy Selling!
John

Don't Participate

Don’t let this current recession determine your fate! Choose not to participate in the current economic crisis.

Now I’m a sales guy but I know that my company has to keep marketing in order for me to get in front of someone to make a sale. The more people I’m in front of, the more sales I make. It’s a pretty simple formula.

December is turning out to be a pretty good sales month for me in my remodeling company. That’s because I’m not letting the recession or the government or the media tell me what I’m going to do. I’ve got some pretty good leads because my company has been marketing all along. I’m selling and that’s that!