[Podcast] Episode 17: Building a Sustainable Family Business with Wayne Rivers

According to the U.S. Bureau of the Census, roughly 90% of U.S. businesses are family-owned and the Remodeling industry is well represented by closely-held firms, typically started by a founder and then handed down through multiple generations.

Family-owned businesses often run into obstacles and challenges, usually driven by “soft issues” such as communication, emotions, past conflicts, bringing spouses into the business, etc. However, what many of these struggling firms lack is a common vision or mission from a business perspective.

In Episode 17, Victoria and Mark welcome Wayne Rivers, President of The Family Business Institute, to the show to discuss more about his unique approach in working with these types of businesses.

Wayne’s approach is very different and he talks about his tried and proven, step-by-step strategic planning method for maximizing BOTH the success of a business AND their family harmony.

Wayne is a well-known thought-leader, speaker and author on the subject of family-owned businesses; his latest book is Our Family Business Crisis: and How It Made Us Stronger. Wayne is a Wall Street Journal Expert Panelist and has appeared on the Today Show, CNN, MSNBC, CNBC and the Retirement Living Network.

Victoria, Mark and Wayne discuss the Institute’s unique way of working with their clients; topics include:

  • Identifying reasons why family-owned business struggle
  • Transitioning from one generation to the next
  • The importance of the founder establishing vision early and often
  • The dangers of working AT the business instead of working ON the business
  • “The Magic Bullet” – Business planning methodology and subsequent positive side-effects
  • Going in through the “business door” vs. “family door” when dealing with conflict
  • Dealing with and resolving “soft issues” families face when working together
  • Describing a few steps in the Institute’s 10 step process of working with businesses
  • And more…

A great episode regardless of whether your company is family-owned or not. Many of the concepts discussed about business planning methodology will apply to any business, regardless of ownership structure.
 

Click Here to Listen to Episode 17 >>

We loved having Wayne as a guest… and we’re even more excited to have him as a featured speaker at the 2018 Remodelers Summit in New Orleans in September.

If you are interested in working with Wayne, his Information is below:

Wayne Rivers
President, Co-Founder
The Family Business Institute
4050 Wake Forest Rd, Ste 110
Raleigh, NC 27609
877-326-2493
Website: www.FamilyBusinessInstitute.com

[Podcast] Episode 8: Zero Punch List Production with Tim Faller

If you are going to have a podcast about the remodeling industry, it’s a no-brainer to have Tim Faller on your guest list, and I suspect he will be a frequent contributor to PowerTips Unscripted.

For the past 17 years, Tim has worked with remodeling companies, large and small, to help improve profits by creating smooth, efficient production systems. As a Senior Consultant and “Master of Production” for Remodelers Advantage, Tim’s field and business ownership experience is vital to his additional role as facilitator for Owner and Production Manager Roundtables Groups.

In Episode 8 Victoria and Mark welcome Tim Faller to the show as he covers a topic that he has been working on for the past 5-6 years as he tours the US & Canada, providing on-site production consulting – “Zero Punch List Production.”

Tim provides a great overview of the zero punch list strategy and describes in detail how he has seen companies successfully implement this process. According Tim, all-too-often remodelers put the onus or responsibility of completing a punch list on the client, thereby creating the perception that the job is being presented as incomplete.

As they explore the zero punch list theory and strategy, Victoria, Mark and Tim discuss:

  • Steps to successfully implement this within an organization
  • How this effects sales process, contracts, payment draws, etc.
  • Production Techniques & Checklists
  • How to handle Backorders
  • How to handle the final walk-through
  • Getting rid of Head Trash

Click Here to Listen to Episode 8

…And a Big Announcement!

As they wrapped up Episode 8, Tim made an announcement that you won’t want to miss… Listen today!

[Podcast] Episode 2: Building an Effective Emergency Succession Plan with Philip Anderson

In our second episode of PowerTips Unscripted, Victoria and Mark spend some time with Philip Anderson, a long-time Remodelers Advantage member and well-respected industry leader.

Philip Anderson is the President of HDR Remodeling, a successful Design + Build firm that he founded over 30 years ago in the Berkeley / Oakland / East Bay Area in California.

The topic of this episode is Emergency Succession Planning, or how to plan ahead in the instance of a short or long-term absence of the business owner or key personnel. Philip discusses how his firm was able to build an effect succession plan, not only for the long-term once he retires, but in the case of a sudden departure from the business.

Unfortunately, Philip’s plan was put to the test when he suffered a stroke a few months later and his business was able to continue during his extended leave.

Some great advice shared by Philip:

  • Don’t limit the plans to just the owner, include key personnel in sales, production, finance, etc.
  • Develop separate plans for short-term, intermediate and long-term or permanent absences.
  • Develop Standard Operating Procedures (SOPs) for each position so those stepping up have some direction and documentation to follow.

Philip does a great job with the “Lightning Round” and “Five Words of Wisdom” segments. Some great advice shared by one of our industry’s finest. Enjoy!

Click Here to check out Episode 2 and download a copy of Philip’s ESP Document.

How To Fire an Employee “The Right Way”

Letting an employee go is one of the most unpleasant parts of owning or managing a business.

We all want our employees to be fantastic in their jobs… to be so wonderful that we never have to think about firing someone. But that’s not the real world, now is it?

In today’s episode we’re going to talk about how to fire someone the right way and give you a few tips and some advice to keep in mind.

Do you handle terminations differently? Is there something you do that helps things end on a positive note for both parties?

Please share your experience in the comments below. And, if you haven’t subscribed to PowerTips yet, please do so by visiting our YouTube Channel.

Crack That WIP – 8 Dangerous Data Entry Errors That You May be Making

During the recent Remodelers Summit in Minneapolis I gave two presentations on the finer points of WIP – or more specifically what I’ve noticed over years of studying the nuances of this incredibly vital and complicated tool. The majority of the information is relatively straightforward – but a few problems recur in many RA Member’s WIP.

And most people don’t even know their WIP is wrong! IF the WIP is wrong the journal entry is wrong, the profit/loss and the balance sheet are wrong. WRONG WRONG WRONG!

Here’s the test: complete the Margin Variability Chart (Download Here if you don’t have it) which compares gross profit margin month to month over the space of the fiscal year. Below is what it should look like: gross margin month to month within 2% points, plus or minus, from the budgeted yellow line.

However below is what it often looks like – the technical term is “all OVER the place!”

Your question might well be: why does it matter if your gross margin varies month to month if the year to date is close to the annual budget? In the case in the image above, it is – 29% average over 8 months.

It matters for two important reasons: significant fluctuations indicate a ‘systemic’ problem with the WIP process AND it makes your monthly budget reporting useless. Have you ever looked at the budget to actual report for a given month, known something was really off and put it aside perhaps never to use this important tool again?

[notification style=”success” font_size=”14px” closeable=”true”] Do you want to learn more about this? Judith is one of our key speakers at the Master Your Remodeling Business Workshop coming up in January! CLICK HERE for more information. [/notification]

So, let’s figure out why the WIP might be incorrect: after more than 30 years of using the WIP calculation and really digging into it the last 15, here are 8 errors in data entry that occur over and over again.

In order of most dangerous:

  1. Inaccurate cost to complete – this calculation sets up the over/under billing journal entry which flows to the profit/loss and balance sheet. If this number is wrong the journal entry is wrong as well as the financial statements.
    • Do a detailed line by line review of all larger jobs at 40/60/80% complete;
      • Before 40% you probably don’t know how the job will turn out; after 80% there’s probably little you can do to change the outcome.
      • Bring the job lead together with the job cost accountant so both know the costs included to the end of the month compared to % complete by site visit.
      • Enter internal change orders when you know you’ll either save money or spend more money on a line item but can’t bill the client.
  2. Actual labor rate not used in estimate – if the labor rate includes ‘hidden gross margin’ making the estimated labor rate higher than actual the % complete calculation for the job is incorrect making the earned revenue incorrect.
    • Complete the labor burden calculator ((on the RA website) for each field employee and compare to actual costs for that employee.
    • Update payroll calculations to bring the costs close (again within 2% +/-) on the job.
    • Review estimated vs. actual labor HOURS as well as dollars.
  3. Not tying WIP spreadsheet into accounting data – because the WIP journal entry changes the accounting reports it is essential that the data used to produce the WIP spreadsheet has a one to one correlation.
    • Set up a Memorized Report in your accounting for the jobs on WIP and enter the Actual Costs and Invoiced to Date on the Spreadsheet in exactly the same amounts.
    • Proof the TOTALS from the report to the spreadsheet. They should be identical.
  4. Incorrect prior year end WIP – if WIP is wrong at the end of the prior year the reversal into the New Year produces an incorrect starting line against which to calculate on-going monthly revenue.
    • Make SURE your WIP for year end is correct – if it’s not the entire new year will be incorrect to the degree of the year end reversal.
  5. Jobs costs or client invoices entered AFTER WIP is complete (or in progress) – if you follow the rules in #3 above you can always go back to any month to be sure amounts continue to be identical from the accounting report to the WIP spreadsheet.
    • Don’t enter, or allow anyone else to enter, any job related costs or income BACKWARDS to the month for which WIP has been completed.
    • Set up a closing date password when developing the Memorized Report to be used for the WIP spreadsheet and don’t allow anyone else to enter backwards without your knowledge.
  6. Change orders not correct – the original contract and original budget amounts on the WIP spreadsheet are straightforward: both come from the signed contract and never change over the course of the job. However the final/revised contract and budget are changed by Change Orders.
    • Enter change orders with to both the contract price and the budget.
    • Proof the gross margin for change orders to be sure it makes sense.
  7. Changed formula cells – many people use the same WIP worksheet over and over and sometimes enter ‘zero’ in a formula field or over-write the formula …. Thereby potentially causing significant errors in calculations.
    • Begin each year with a new WIP workbook for the year – download it from the RA website.
    • Enter the December WIP information from the prior year, update each tab for current months in the New Year.
    • Review the totals formulas monthly to be sure the formulas are correct.
  8. Keeping 100% complete jobs on the WIP – many RA members keep their completed jobs on WIP: this skews the ability to see the FINAL gross profit on WIP separate from the FINAL gross profit on completed jobs.
    • When a job is 100% complete it has been:
      • Income billed to the client 100% – regardless of when paid.
      • Expenses entered to the job 100% – regardless of when paid.
      • There is no over/under billing.
    • Leave it on for one more month after the following conditions have been met to be sure you’ve captured all costs.
    • Then move the completed job off the WIP to the Completed Jobs tab on the spreadsheet and post any subsequent expenses to Warranty.

NOW, you should have NO trouble smoothing out the gross profit line, month to month, your budget vs. actual reports for the company will be truly useful and YOU’LL BE HAPPY! Right?

6 Things to Keep in Mind When Building Your Slippage Planning Team

We are off to a great start with Slippage Awareness Month… We’ve heard from Tim Faller with his blog post last week and we are looking forward to his Live Webinar, “From Slippage to Grippage: How to Raise Profits Without Raising Prices” on Thursday, June 15th at 11:00am EST.

This week we take a look at creating an internal planning team in order to minimize or eliminate slippage from your process, and ultimately increase your Gross Profit (GP).

Here are 6 things to keep in mind when putting your Slippage Planning Team together:

  1. Get the right people involved: Have a representative from the Sales, Estimating, Production, Fulfillment and Billing departments on your team. In many instances this may be the same person for multiple positions, but it is important to make sure all are represented.
  2. Commitment: Members of the planning team must understand how the plan to minimize and eliminate slippage will affect the company’s bottom line and be committed to the process of identifying and changing existing procedures and policies to be successful.
  3. “We have always done it that way…”: This can be a killer phrase when it comes to looking at ways to avoid slippage and will stop any progress toward positive GP. The goal of this planning group is to come up with new ways to increase profits… Think outside the box, reach out to your Roundtable members for best practices, etc. Make it fun… any person who says that phrasein a meeting  must buy coffee, donuts or lunch for the group…
  4. Creating AND Executing: Do not create this plan if that is all you are trying to achieve; “a plan simply for plans sake”. Understand why your team is taking this on… even if you need to create a mission statement and read it aloud every time you meet. Creating the plan is half the battle; Go execute and achieve greater GP!
  5. Leadership positions: As Tim Faller pointed out last in last week’s blog, having a strong leader in production is essential in discovering where slippage is occurring in the process. This is holds true for other areas in your business as well, as production is only a piece of the puzzle when it comes to slippage. A bi-product of this planning process will be an analysis of leaders within your organization. Are they in the right position? Are they of value? Do they bring suggestions? Are they willing to change?
  6. Attainable & Realistic Goals: Key components to any successful plan are smart goals and objectives. Knowing the end goal is higher GP, what are the steps needed to get there? What is each department responsible for what it comes to eliminating slippage? Sales & Estimating work with quotas every day, what are some targets we can add to their process that will help eliminate slippage? On the production side, keep objectives visible and achievable… As Tim pointed out last week, lumberyard runs are a huge contributor to slippage. What goals or steps can we add in the production process to make that process have less of an impact?

5 Mistakes Most Family Businesses Make

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Are you part of a family business? If so, do you feel everyone in the family is on the same page with business goals or are you frustrated because everyone seems to want different things?

Is the leadership of the business now and into the future clear and spelled out or is it just too difficult to talk about with your family partners?

Well, yesterday, I received a book from my friend and fellow peer group member, Wayne Rivers, Co-Founder and President of The Family Business Institute. Wayne has worked with hundreds of family businesses across the U.S. and in his new book, The Eight Building Blocks for Creating a Sustainable Closely Held Company he shares his list of the top reasons family businesses fail.

I’ll discuss these five reasons with you in today’s episode of PowerTips TV!

What about you?

Have you run into these challenges in your family business? How did you handle it? Please share your stories in the comments below!

Want to win a copy of Wayne’s book?

Click here to submit a PowerTips episode idea and you could win a copy, plus a Remodelers Advantage Polo!

6 Reasons for Having a Succession Plan

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Have you ever thought about what will happen to your business when you’re ready to retire? Or worse, what if something happened and you weren’t able to work?

The truth is that most remodeling company owners find themselves too absorbed in running the business to work on longer term problems like planning for succession.

And it’s not just lack of time.

After years of building a company, some remodelers are so strongly identified with the business, they simply don’t know what they’ll do if they’re not an essential part of the business.

Well, in today’s episode I’m going to give you six reasons why you need to start thinking about succession planning right away.

You don’t want to miss this one.

What about you?

Do you have a succession plan in place? Do you have any advice to give others? Do you have any questions about setting up your succession plan?? Please share in the comments below!

The Secret to Getting a Great Deal on your Office

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Your office space is one of the longest term overhead expenses you’ll ever take on. You shouldn’t have to go it alone!

In this week’s episode, I’ll share the secret ingredient to not overspending and getting a great deal on your company office.

Are you less than confident that you can negotiate a great deal with a landlord? Well, if that’s the case then this is a must watch episode before you make any office decisions!

What about you?

Please share your thoughts in the comments below!

The 3 Top Accounting Methods and the Lies they Tell

Accounting Lies and how they misrepresentKeeping track of your revenue and expenses can be very time-consuming and even confusing. How can you accurately determine what your budget is, how much your expenses are eating into your profit and how to budget for a future project?

At its core, the biggest problem remodelers face when it comes to understanding how to best manage their money is the answer to one simple question:

When is a sale a sale?

Following are the three most common accounting methods we see remodelers using when they first come to us. They all answer this fundamental question in entirely different ways.

1. THE CASH METHOD

Question: “When is a sale a sale?”

Answer: “When we actually get the money!”

In the cash method, income includes all revenues received, and expense includes all bills paid. So we must have actually collected the money for it to be income, and we must have actually paid the bill for it to be an expense.

This method gives you a good idea of cash flow for the time period. However, this report potentially can be very misleading. Collect a first draw, and it goes to income. But you haven’t earned that money. You haven’t done the work it pays for. You’ve just gotten an advance.

Most entrepreneurs (not just remodelers) use the cash method when they first go into business.  It’s common but it does not give the most accurate picture of the company’s health. If you really want to manage your business effectively, stop using the cash method as fast as you can!

2. THE BILLINGS ACCRUAL METHOD:

Question: “When is a sale a sale?”

Answer: “As soon as we send an invoice!”

In the Billings method, Income includes all billed receivables (money people owe you) and Cost of Goods includes all expenses for which you have been billed. (money you owe someone else).

This method, too, can be a very misleading way to present company operations. One of our business management rules for remodelers is to stay ahead of your client in your billings and collections. This means that you are not acting as the bank for project expenses  … that you have collected money from your client in advance of purchasing for the project.  However, this “staying ahead” means many of your reports would look too rosy while others might look too dire.

For instance, you may have actually completed 30% of a job, yet billed the owner 45%. Because this method recognizes all billed amounts as income, your P & L report will show that 45% as income against only 30% of the job costs. Your next reports, however, will show 55% of the billings against 70% of the job costs. In this circumstance, your P & L’s would at first show your financial position as much rosier than reality. Then later P & L’s would show a poor picture as though your job costs were running very high in comparison to your income. This wild swing in your finanical reports makes it difficult to use them as management tools.  You want to manage with realistic figures.

3. THE COMPLETED JOBS ACCRUAL METHOD:

Question: “When is a sale a sale?”

Answer “Why, it’s not a sale until the job is finished (or substantially finished).”

This method tallies all money coming in for a job and all money paid and billed for the costs on the job but does not show these as income and expense on the P & L until the job is completed. Meanwhile overhead expenses are usually shown as they are expended each month. This is commonly used by new home builders.

Because this method is the slowest to show new dollars in income, it may well be chosen by your accountant to present information for tax purposes since it may defer your income to the next year for tax purposes. Of course, ultimately that income catches up with you in the next year.

If you use this method for your management reports, your profit and loss statement may look too negative. If you are a specialty contractor and your jobs are very short in duration (under a week), you can use this method effectively.

However for full line remodelers, this method is the most misleading.

Do not use the completed jobs method of accounting for your management reports if your jobs are under construction for more than a week or two.

So what is the best accounting method?

As you can see, these three “common” methods all have very misleading characteristics. Because of this, Remodelers Advantage requires our Roundtables™ members to run their day-to-day financials with the Percentage of Completion Method.  This method will give you the most honest and clear picture of where your company stands financially at any point in time.