The Most Dangerous Thing you Face as a Remodeling Business Owner; PowerTipsTV Throw-Back

As we get into a new year and shed the end-of-year and holiday chaos, we wanted to throw it back to a PowerTipsTV Episode dealing with a hidden danger that so many remodelers ignore until it sneaks up on them. Don’t miss this one!

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As a remodeling business owner there’s a danger lurking out there that often gets dismissed or ignored until it’s too late… Know what it is?

Well doctors often call it “the silent killer” and it’s just that.. it festers and hides and sneaks up on you… It’s STRESS!

As a business owner you’re more at risk than most because of the inherent stress that comes with owning a business (payroll, finances, HR, etc.) and as a REMODELER you have to pile on the added stress of working under deadlines, pressure from clients, problems on jobsites… and the list goes on..

Feel It? Just hearing this list can raise your blood pressure, right?

Check out the stats from WedMD:

  • 75% – 90% of all doctor’s office visits are for stress-related ailments and complaints.
  • Stress can lead to problems such as headaches, high blood pressure, heart problems, diabetes, skin conditions, asthma, arthritis, depression, anxiety and more.
  • The Occupational Safety and Health Administration (OSHA) declared stress a known & recognized hazard of the workplace;
  • Stress costs business in the U.S. more than $300 billion annually.

What about you? What are some ways you reduce and fight stress in your life?

Please share your experience in the comments below.

How to Properly Calculate a Change Order

Change orders are tough. It’s hard to get everyone on board, and challenging to get paid the amount you really need to for the business. It would be nice if there weren’t any, but the nature of remodeling means they’re a necessity on most projects. But you could be losing money in a way you’re not aware of.

Probably everyone knows the basics — anything that’s not covered in the contract scope or plans should get written up. Figure out your costs and mark them up. Be sure the mark up is the same as the contract. Add days for the work to be done. Add up the original contract cost and the change orders for a new contract price.Get a signature before starting the work. Don’t lower the price when the client ask why it’s so high, and always collect the money before the work is done.

You’re Missing the Disruption Days

What’s often missing in the calculation is the cost of what I call “Disruption Days.” These are the days not associated with any labor costs, but which will hit the job because of the disruption the change order causes. This is especially critical now — everyone is busy and we can’t just reschedule trades or material deliveries for the lost time of the labor. The job could slow down by week for one day of changes.

Try thinking in terms of overhead per day, per job. If overhead in a company is $500,000 in real dollars for the year with four jobs going at a time, then overhead per day per job is $500.  

So, for every day of a job you’re spending $500 of overhead. When you calculate a change order price, the days included in the labor numbers get an overhead amount attached to them automatically, but the Disruption Days do not.

Stop Losing Money

If that overhead money is not recouped another way, your company loses.  To add insult to injury, by extending the job extra days not associated with labor costs and revenue, we end up pushing the start of other projects out and losing the “opportunity profit” of another job. So some consideration must be given to adding this extra overhead into the sale price of a change order.

For example, let’s use that same company. They project $2 million in revenue for the year, making the overhead 25% of revenue. Assume there are 250 working days in the year, which means they need to produce $8,000 per day to hit the revenue target. If a few jobs extend past the completion dates, and the extension is not compensated by labor being marked up, the company won’t be able to produce the desired $2 million.

Depending on a number of factors, it’s $8,000 per day. Assume this happens to the tune of 30 days — or $240,000 worth of work — that can’t be produced. That leaves them at $1,760,000 for the year. The 28.4% overhead is robbing net profit of roughly 3.4%

Some of you are thinking “I just can’t add $500 per day extra to every change order!”  You’re probably right. But the costs are real. So calculate your overhead per day per job. Write down on each change order the number of Disruption Days. See if you can add that money back in. If not, add something for those lost days. If nothing else, you’ll be aware of what each change really costs you.

[Podcast] Episode 18: Adapt or Become Irrelevant with Mark Richardson

In Episode 18, Victoria and Mark Harari welcome author and industry adviser Mark Richardson and talk more about the changes that have impacted the remodeling industry and how companies today need to either adapt or risk becoming irrelevant.

Mark Richardson is the Former President and Co-Chairman of Case Design/Remodeling, a Senior Fellow at Harvard and the author of 4 books; 30 DAY Remodeling Business Fitness, How Fit Is Your Business?, Fit to Grow and Control Your Day; 7 Steps to Time Mastery. Mark is also the host of the Remodeling Mastery Podcast.

The hosts explore Mark’s background and the various ways he has been involved in the remodeling industry. From pioneering the Design + Build concept from the early days with Case, to the challenges and obstacles they were able to overcome when growing their business.

Mark talks more about how he and his firm were able to learn from others and from experience and how Case’s founder, Fred Case, created an environment where team members were free to test and try things to improve the business. “Most successful people are students of success,” said Richardson, and went on to explain and encourage today’s remodeler to “put in the time to learn, read, observe, think, etc.”

Victoria, Mark and Mark dig more into some of the different ways the industry has changed over the past several years, including:

  • Time; from the time needed to adapt and change to the response time now expected and demanded by clients
  • How technology is now an integral part of doing business vs. being optional in the past
  • The level of transparency now faced by businesses, where the client’s knowledge and cost of products may outpace your own and they have full access to your past performance, reviews on your business, etc.
  • How clients perceive or envision a project and how you sell or get them to commit
  • How companies can learn and know which ways to adapt themselves

Click Here to Listen to Episode 18 >>

 

How have you adapted or changed your business?

We would love to hear some constructive feedback on ways you have adapted your business to meet the changes in our industry. Use the comments section below to share your experiences.
 

We love the feedback we have received so far!

As always, if you have a topic that you would like us to cover or know of an industry contact, author or thought-leader that you think others would like to hear from, let us know.

If you’re enjoying our PowerTips Unscripted podcast, please spread the word and post reviews on iTunes and Stitcher.

 
 

QuickBooks ONLINE – Not Ready For Prime Time

In this week’s edition of PowerTips, our resident QuickBooks and job cost accounting experts, Judith Miller and Jackie Shaw, provide feedback and advice when considering QuickBooks Online (QBO) for your remodeling business.

Judith Miller’s perspective:

Over the past 18 months more and more Remodelers and R/A members have asked me about QBO; some already use it and hesitate to make the move to the QB Desktop version (QBD), which makes perfect sense. It’s in the cloud, people in different locations can access it without a dedicated server. It looks like it costs less (see Jackie’s analysis on QBO costs below). What’s NOT to like?

Others have recently been persuaded into moving from the Desktop version to QBO by QuickBooks support personnel who offer an update to QBO called “Projects” which promises “An Easy Way to Track Your Projects.” Unfortunately, even this new update doesn’t provide useful reporting.

Over the past six months I’ve worked with a handful of R/A members digging into QBO to test it for the most important functions of job costing. Note: click images below for a larger version.

Reports

The ability to get an estimated vs. actual job cost report showing BOTH anticipated hard costs AND marked up sales price: here’s what it looks like from my desktop version in collapsed version just showing estimated hard costs compared to actual. This is one of the two most useful reports for production management. When expanded you can drill down to the labor / material / trade contractor / other cost types to see the detail of both estimate and actual costs.

 

Some Options Not Available

In QBO the ability to add BOTH the estimated cost and the marked up sales price is NOT available according to the most recent update information. Here’s the print screen from the Projects section of the program:

 

Not able to apply Labor Burden

QuickBooks Online doesn’t apply labor burden to the jobs (this image from a March 2017 blog post)

Not on the horizon

Job Costing doesn’t appear to be high on the Intuit priority list (from their Support website)

With the above reasons in mind, I can not recommend the online version of QuickBooks (QBO) at the current time. Sorry, but the DESKTOP version does really good job costing and applies fully burdened labor to items/divisions of work by hours. In my opinion, choose the DESKTOP version and save yourself the pain of “work-arounds.”

 

Jackie Shaw’s Perspective:

Here are my top 5 reasons NOT to use QuickBooks Online (QBO) in order of importance:

1. Intuit does rolling updates without notice or explanation

Recently, the SOP that I created for a client to enter budgets, QBO’s way of tracking estimates, “broke” after an update. At first she thought it was a glitch because QBO has plenty of those.

When I talked to Pro Advisor support and found out it was an update change I told them they just made it even harder for our R/A Members to use QBO.

2. Did I mention QBO is glitchy?

Your bookkeeper may be entering updating on a form and it does not actually change after saving. Or it looks like the change was not made on the report until the user logs out and log back in. QBO will freeze and slow down to a crawl when your internet connection is fine.

This means less efficient bookkeeping and very frustrated bookkeepers.

3. The reporting capabilities are poor and you cannot create custom reports

Talk about a bummer! You get all your data organized in a database and then you can only create maybe 50% of the reports you can create in QuickBooks Desktop (QBD).

4. The payroll product for QBO should not be used.

QBO payroll add-on creates the expense and liability accounts the app will use. Users have NO ability to change the mapping. This means your bookkeeper has to recode payroll expenses to do job costing and divide wages by department.

I strongly suggest Remodelers and R/A members have payroll processed by a local bookkeeper so you can have easy face-to-face support as needed. Your bookkeeper will still need to enter all the payroll job costs in QBO. For example, I provide my clients with a tailored excel worksheet to make the process easier.

5. It is more expensive

Most Remodeling companies need the version that costs $600/year. QuickBooks Desktop Premier 2018 2-User is currently $550. You can use the QBD version for three years before you have to renew. You pay for QBO annually.

Result: QBD $550 for 3 years, QBO $1800 for three years. What could your business do with an extra $1,300?

Tip: If you are using QBO, you can have your subscription added to an accountants wholesale license. Jackie’s company offers wholesale pricing so her clients save 50%. Result is $550/3 years vs. $900/3 years; great savings but still more than QBD.

One final tip: Look into Right Networks for multi-user mode QBD hosting in the cloud if you want access from anywhere. If users only need to access QBD in single user mode look into QBox. This is a great product similar to Drop Box, created specifically for QBD, and a great set up for collaboration between remote users.

My Summary

I do not suggest QBO because users never know when their process documentation will become obsolete, users are crippled by the lack of reporting and working in the cloud can be a real pain.

QBO normally starts crashing and slows down to a crawl after I work for more than 1.5 hours. What does that mean to your office staff who are working full-time?

IF you insist on using QBO you should have no more than 3 employees in the field (third party payroll entries are a pain), do not plan on field staff growth and use an app that only interfaces with QBO.

 

What is your experience?

Anyone out there run into similar issues running QBO? Have you discovered work-arounds? Would love to hear some feeback on this.

Thank you to our Associates, and R/A Facilitators, Judith Miller and Jackie Shaw for their help with this important product review and update. Here are their e-mail addresses if you have questions or would like to work with either Judith (jfmiller@remodelservices.com) or Jackie (jackie@gojackieshaw.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!

Tim Faller’s 4 Ways to Improve Your Production Meetings

Is this the scenario for your production meetings? People file into the room in about the same order each week. They sit in the same chairs or lean against the wall in the same place. They sit quietly while you “discuss” information that you think they will appreciate.

Then you discuss each job and what is going on there. When you are done, you respectfully ask if there are any questions and you get a silence. Then everyone hurries out to do the things they love to do.

Sound familiar? It doesn’t have to be that way!

There are four things you can do to make production meetings better for everyone. For those of you that only have a meeting twice monthly or once per month, you may want to consider holding meetings more often, but these 4 tips still apply.

1. Use the time to say thank you or send out praise.

This is a universal truth, people respond to praise better than anything else. So just in case you haven’t thought about this, going through every job is probably not about praise but about fear for your team. Fear of being off budget, fear of being off schedule, fear of having to justify how the job is going.

So, save the project reviews for your weekly meetings with the on-site manager and use the production meeting to let someone share how they solved a problem that others may face in the future. Also, take time during the week to “catch someone doing good” then bring that up. Learn about the accomplishments of your team in their personal lives and mentions those.

2. Use the meetings to solve problems and develop the team.

Successful remodeling companies create an environment where employees feel that they are on a team that communicates openly and works together. So, discuss what problems the team faces. Be sure you listen and hear what the production team shares. Make a list. Then start working on the solutions as a group.

One company I worked with recently in Seattle has done a great job with this, however to get people talking, it took handing out a couple of gift cards to a local coffee shop. Once the team saw that the general manager was serious about making progress they have chipped in and have really been contributing. Rumor has it that no one is late for a meeting anymore.

3. Focus on forecasting rather than regrets.

One of the major challenges for all remodeling companies is getting job managers to look forward. So instead of having job managers coming to a meeting to talk about what has happened on past projects, have them come and share what is going to happen going forward.

This creates the chance for everyone to get an idea of what others are doing and collaborate on personnel, if needed. It also “forces” them to look ahead and be prepared instead of getting hung up on what has happened in the past.

4. Shake things up

As with almost anything in life, variety is the key. Do not do the same thing week after week. Mix it up. You should always be praising someone. But beyond that, use some meetings for systems building and problem solving. Use some for simply having a good time. Use some for forecasting and letting people share the good that is going on with their jobs.

For example, you can create a pattern by having the forecasting meeting on the second Wednesday of each month and the systems meeting on the third. But even with that mix it up, don’t run the forecasting meeting the same way each time.

Summary

With just a little bit of creativity and planning your meetings can be effective and helpful. What about you? Are your production meetings effective? What are some ways that you have made them stronger? We would love to hear how your team has improved your production meetings in the comments section below.

The Most Dangerous Thing you Face as a Remodeling Business Owner

As a remodeling business owner there’s a danger lurking out there that often gets dismissed or ignored until it’s too late… Know what it is?

Well doctors often call it “the silent killer” and it’s just that.. it festers and hides and sneaks up on you… It’s STRESS!

As a business owner you’re more at risk than most because of the inherent stress that comes with owning a business (payroll, finances, HR, etc.)

and as a REMODELER you have to pile on the added stress of working under deadlines, pressure from clients, problems on jobsites.. and the list goes on..

Feel It? Just hearing this list can raise your blood pressure, right?

Check out the stats from WedMD:

  • 75% – 90% of all doctor’s office visits are for stress-related ailments and complaints.
  • Stress can lead to problems such as headaches, high blood pressure, heart problems, diabetes, skin conditions, asthma, arthritis, depression, anxiety and more.
  • The Occupational Safety and Health Administration (OSHA) declared stress a known & recognized hazard of the workplace;
  • Stress costs business in the U.S. more than $300 billion annually.

What about you? What are some ways you reduce and fight stress in your life?

Please share your experience in the comments below.

And, if you haven’t subscribed to PowerTips yet, please hit the button at the end of this video.. right after the bloopers…

Thanks, and I’ll see you next Thursday.

PowerTips TV Throw-back Thursday: “How to Combat the Labor Shortage”

This week’s throw-back episode goes back to 2015, but the topic remains a top discussion point at almost all Roundtables Meetings here at Remodelers Advantage.

According to a recent article in Fortune Magazine, “60% of contractors reported difficulty finding skilled workers in the third quarter of 2017 due to an ongoing skilled labor shortage…” and “Along with the struggle to find qualified workers, 91% of contractors are at least moderately concerned about the skill level of their workforce.”

Throw in a few major hurricanes in the Southern states and the situation only becomes more critical.

Watch this episode and share any ideas or advice you may have used to win this war!

length 3:10 (not including bonus content)

I talk to dozens of remodelers each week and one of the most common concerns I hear these days is, “I’m trying to hire more people and we’re not finding anyone.”

Well, unfortunately, this situation isn’t going away anytime soon. In fact, experts predict that high employment in the construction industry will be around for years, so it’s time to start creating a strategy that will help you keep production going and quality levels high.

I’ve discovered that there are ways to build a workforce that can handle the growing labor demand and in this week’s episode, I’ll share the four main keys to doing it.

What about you?

Do you have any advice for R.A. Nation? Share your knowledge in the comments below!

Labor-Shortage

4 Things You Must Do After Attending an Industry Conference

As we recover and catch-up from Remodeling Excellence Week in Minneapolis we take a closer look at how to handle and digest the great information you gathered as well as how to capture and reach out to your new-found business leads and contacts.

We found a great article from Robert Half International Inc. that gives sound advice on post-conference activities and how best to process this new information before you dive back in to your day-to-day routine, and turned it into an infographic that you can share with your team (PDF).

 

PowerTips TV Throw-back Thursday: “How to Stop Wasting Time on Bad Leads”

Since we wrote about “Mastering the Art of Qualifying Leads” earlier this week, we’re going to stay on topic and throw it all the way back to 2014 as Victoria covers techniques for handling and qualifying leads. Enjoy!

If you are a Remodelers Advantage Member (Roundtables & University), make sure you check out Chip Doyle’s upcoming telecourse, “When The Phone Rings 101: Mastering the Art of Lead Qualification“ which starts up in August.

Do you know how to identify a bad lead? If not then you are losing time. And time is your most precious commodity. I’ve already addressed the problem with “wearing too many hats” in a previous episode. There I discussed how critical it is for you to focus primarily on sales and marketing.

However, that doesn’t mean follow every lead you get. You must still effectively manage your time by doing the right things to move your company forward. And going on these no-hope appointments not only take your focus away from more qualified prospects; they also destroy moral because “you’ve lost another one.”

On this week’s episode I’ll show you how to separate the good from the bad by pre-qualifying the prospect at the very first contact.

How about you?

Do you have any great pre-qualification techniques that I forgot to mention? What has helped you identify the good, the bad and the ugly? Let me know in the comments below!

Free Download: Prospect Initial Call Questionnaire

Free Download Client Questionaire

Victoria recommended that you have a checklist to go through when pre-qualifying leads. More importantly she wanted to give you one that’s ready to use! So here’s the “special document” that Victoria mentions in the video. Enjoy!