Toolbox April/May 2021

TOOLBOX

THE #1 COMMUNITY OF SUCCESSFUL CONTRACTORS

CCN

APRIL/MAY 2021

INSIDE THIS ISSUE

FROM THE PRESIDENT

Our Wake Up Call The crisis exposed vulnerabilities in our businesses that can be remedied.

Away 3 Throw The Clichés When Hiring For Sales

4 Built To Scale

Meet CCN’s new Director of Marketing and Sales, Craig Leary

SWOT Paid Off 6 How We didn’t let Covid paralyze our business but viewed it as a strategic opportunity.

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SCOTT SIEGAL

lot of people in our industry were blindsided when the pandemic shutdown happened early last year. Suddenly there were no sales, and without sales, no money coming in, either from deposits or from collections on finished jobs. The revenue spigot shut off. How would they pay bills or staff? How long would it go on?

Fortunately, the government stepped in with the Payroll Protection Program (PPP) that helped millions of small businesses sustain operations. But payroll is only one part of overhead. All those other expenses remained. The problem for owners afraid they may not be able to meet the financial obligations of their companies is always a simple one: there’s not enough cash.

Sixty Days of Uncertainty I learned a long time ago that the one mistake you can’t overcome in any business is not having enough cash. You can overcome a bad hire, or screwing up a roof, or ordering windows in the wrong size. Cash shortfall? You’re out of luck. So if you don’t have a lot, or any, and you’re not sure when you’re going to be allowed to re-open, that can cause panic. Many contractors did not have the cash, and resorted to radical cuts. What do you do when there’s a threat to your business of this magnitude and you’re short of operating funds? You tighten your belt. You go through the financials and figure out what’s essential and what isn’t. You look at personnel. And you channel your energy, attention and time, as owner, into whatever part of that business most demands it.

Fortunately, we in construction were lucky. In most states, ours was an essential business, and most of us were able to keep the operation running, or quickly start back up after a month or two.

How Much You Need

In, Cash Out 9 Cash Remodeling financial expert

Melanie Hodgdon explains good cash flow policy.

One lesson was the need for cash reserves to offset the sudden, sustained plunge in sales. This is why understanding your numbers is so important. Many contractors know what it costs to install a square of roofing or siding. They know their direct costs, but frequently lose sight of their overhead expense, the costs that are there every month whether you install a job or not. Knowing that number is key to setting up a system of cash reserves that will sustain your business when liabilities suddenly outweigh assets.

My rule of thumb is to have anywhere from six to 12 months of overhead expense banked. Knowing it’s there gives me the peace of mind to be able to make decisions rationally, rather than emotionally. It also gives me flexibility and options. It’s like having a big stack in poker, where you’ve got the leeway to take advantage of opportunities. continued on page 2

CO N T R AC T O R S . N E T

continued from page 1

TOOLBOX THE #1 COMMUNIT Y OF SUCCESSFUL CONTRACTORS

MISSION STATEMENT To enhance the professionalism, performance and perception of the construction industry. We promote ethics, education, leadership and innovation, so that the construction industry and the community achieve mutual benefit.

CORPORATE HEADQUARTERS 6476 Sligo Mill Road Takoma Park, MD 20912 301.891.0999 800.396.1510 866.250.3270 fax www.contractors.net STAFF Scott Siegal, President scott@contractors.net John Martindale, Principal johnm@contractors.net Catherine Honigsberg, GM catherine@contractors.net Anthoy Brooks, Director of Sales anthony@contractors.net

Building that cash reserve means simply putting the money away. Sometimes doing that requires discipline. Say you’ve got an extra 100K this month. You could buy a new truck, take the money as salary, or bonus employees. Why not put some percentage of it, or all of it, aside for future use?

Building reserves can also be a matter of committing a certain percentage of net profit to savings every month.

How big you want that reserve to be depends on how risk-averse you are.

Thinking Long Term Cash flow is critical to all this because to grow capital you have to balance revenue against operational expense. Most contractors look at P&L statements and other reports at least monthly. What’s more important in getting your company to the place you want to take it is that that cash flow correlates with the overall plan you have for your business. That’s particularly critical because for many of us this is a seasonal business. For instance, our company, Maggio Roofing, in the Washington, DC, area, typically takes a hit in February. You can’t install a roof when it’s raining, or if there’s snow on it. Our sales drop but ratchet back up in April and May. Our plan anticipates lower February sales, based on history. If they’re way off, we may need to take some action.

Healthy cash flow and maintaining sufficient cash reserves are two parts of a whole.

Sindy Wohl, Director of VIP sindy@contractors.net Denise Metheny, Accounting denise@contractors.net Troy Timmer, CCN Business Consultant troy@contractors.net Craig Leary, Director of Marketing & Sales craig@contractors.net Daniel Murgo, Events Manager danny@contractors.net Carla Sarabia, IT Manager carla@contractors.net Julie Casey, Member Services jcasey@contractors.net Toolbox is a publication of the Certified Contractors Network.

Toolbox is a member benefit.

Non-members may subscribe for $75 annually. editor: Jim Cory design: Stacy Claywell www.thatdesigngirl.net thank you to our: contributing writers

Healthy cash flow and maintaining sufficient cash reserves are two parts of a whole.

What I see when it comes to cash reserves, though, is that most companies don’t have more than a month or two of cash to ride them though a threat such as the pandemic shutdowns.

Of course no one ever thought we’d get shut down like that, but it happened, and what’s positive about it is that it showed where companies are vulnerable, and where they need to take action. It was a wake-up call for contractors. We in construction got lucky. Unlike the hospitality industry, which was wholly shut down, we were considered essential. It could easily have gone the other way. What if you were closed for six months, or eight months, instead of one or two? Would you have the resources to sustain the business? Because, if nothing else, last year demonstrated that anything is possible.

—Scott Siegal is president of CCN.

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ON SELLING

Throw Away The Clichés When Hiring For Sales A great sales hire takes time and patience, and a willingness to strike quickly.

BY TOM CAPIZZI

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ur “new” salesperson, Matt Collard, has been with Capizzi Home Improvement for a little more than three years. I say new because his time is brief relative to how long salespeople stay at my company. He’s highly successful.

Last year, even with our operation closed for a month, he generated $2,077,000 in home improvement sales.

Matt came to our company from a background in selling for Power Home Remodeling Group, one of the largest home improvement companies in the U.S., where turnover tends to be high.

happening at once. A background check takes 24 hours.

The profile is a two-day turnaround. If you’re quick and efficient, you can have it all done in two or three days.

Forget Cliches

One of the other prevalent clichés about sales hiring in home improvement is that if you hire someone who’s sold for other companies, he or she brings their bad habits along. To that I say anybody with a history of any kind is going to have habits built in, traits that are ingrained. There’s always some learn and unlearn. If an organization only wants to train fresh brains with nothing in their past, someone right out of the gate and not, like Matt, a 20-year veteran, I think of that as limiting.

The training he had with Power was useful, but what was decisive in the hiring process was that he has a strong profile as a dominant. You can hire someone with little or no sales experience if there’s something in the profile that predicts a hunger for success.

The old cliché in recruiting salespeople is: ‘Hire slow, fire fast.’ I don’t subscribe to a thought process that says you should always do such-and-such a thing. That’s a closed way of thinking. Sometimes, when you sense an opportunity in front of you, you hire fast.

In hiring for sales, I look for a certain type, and certain traits.

Some of our salespeople at Capizzi started as installers and switched to sales because they were ambitious. That worked out well.

Matt had a history of successful home improvement sales. He was available and looking. Hire slow? Only if I want someone else to be hiring him. The key to avoiding a miss-hire is creating a strong barrier to entry. The hires you live to regret are the hires where you didn’t take the time to do due diligence and properly evaluate the candidate as a fit for your company.

So we interview the candidate on the phone, to get a sense of how they conduct themselves. That’s followed by an in-person interview of preferably several hours. Generally, people tend to reveal themselves.

If the in-person interview flies, we do a background check.

Then we have the person profiled, using Grant Mazmanian’s Pinnacle Group, to determine if candidate’s personality is right for this organization. This sounds time consuming, but it was all

We’re a small, boutique home improvement business, not a far-flung empire like Power. We need someone who’ll fit, and someone who will last.

Learn and Unlearn

Handling Lead Flow Our most recent hire’s close rate is not anything crazy. He closes 25 percent of appointments, which is excellent. He runs a lot of leads—510 last year—and closes at a high average ticket, because he’s not afraid of price, or to include in the proposal everything that should be there. He’s super fast. If you tell someone it will take a week to get them their deck proposal, that doesn’t make any sense these days. The mindset and expectation of the consumer in everything is immediate.

If Matt meets you at 9AM, you’ll have the proposal by the end of the day.

I don’t like turnover. I have salespeople who’ve been here 25 years, 20 years. That’s my MO, from decades of running this company. I like longevity, continuity and consistency, and I keep orchestrating it.

—Tom Capizzi is the owner and president of Capizzi Home Improvement, in Cotuit, MA, and Marikkol Design & Remodeling, in San Diego.

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Built To Scale Meet CCN’s new Director of Marketing and Sales, Craig Leary

BY JIM CORY

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raig Leary, CCN’s newly hired director of marketing and sales, has played many roles at many organizations. He is, in his words, “the guy who gets stuff done.” More specifically, he “helps companies scale efficiently.”

Scaling, as distinct from growth, happens when a business adds revenue at a greater rate than it takes on costs.

It results when a business is organized systematically at every level. Leary’s experience in this is extensive. He’s held executive jobs at some of the biggest home improvement players, including Thompson Creek and West Shore. He’s worked for consultants, including Dave Yoho Associates, the largest in the industry. He’s operated an independent consulting company, and still does.

And he’s run—is running—his own home improvement operation, called Home Remodeling Pros of Central PA, which specializes in Kitchen & Bath and Basement remodels. Home Pros went from a half million to $5 million in sales under his management.

Building Systems

Leary is not so much a marketing whiz, sales guru or production savant as a fixer and inventor.

His purpose is to build scalable and repeatable systems and processes throughout an organization.

Part of his mission at CCN is to add new members, a strategy he sees as threefold. “In the near term, we want to reengage past members who’ve left and let them know what we’re up to,” he says.

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“ We also want to teach existing members, who know what we do and value it, to create referrals. And we want to increase our overall digital marketing footprint in the industry.

But the first thing is to focus on those who know CCN and recognize the brand, and show them the consistent, improved, expanded content and training we’re doing.”

Peers Helping Peers The other part of his mission is to work with existing CCN members.

CCN’s members tend to be mid-sized companies under $10 million in sales but there is “absolutely one commonality” with big players such as West Shore and Thompson Creek, he says, which is “building the right processes and procedures for growth” by creating scalable, repeatable processes. At the time he joined it as sales and marketing director, Thompson Creek was “stuck” at sales of $50 million. Five years later, building on the systems he helped create, the company was generating $95 million in window sales.

To make that happen for CCN members he will “create a customer journey value stream,” based on whatever data a company has. One definition of value stream is “the entire collection of activities necessary to produce a product or service.”

So how do you do it?

“We look at the data,” Leary says, “and act on the order of magnitude,” meaning the biggest sieves through which profits drain get his immediate attention. He focuses on the three biggest problems, figures out solutions, then it’s on the next three. An example would be the client convinced it had to have more leads. Data showed big lead flow in but “an extremely low contact rate,” Leary says, and “an extremely low set rate.” Discarding all those leads made for a very high sit rate of homeowners inclined to buy. That satisfied the salespeople, but reduced overall sales opportunities. “In other words, they were over-qualifying the leads,” Leary says.

“We put together a plan for three or four adjustments” so that more leads were contacted and more contacts became appointments.

Great Time To Re-Load One area in high demand has been figuring out how companies can reconfigure their sales process to satisfy homeowners. Some companies migrated to Zoom but many are at the point where they “want to get back in the car” and many homeowners are at a point where they “just want to look you in the eye.”

The likely result, long-term, he says, is that “the days of one system” of “trying to fit everything into our sales cycle” for selling home improvement are gone, and companies will need to be able to meet customers on whatever ground suits them, digital, in-person, or some hybrid.

Still, he says, the aftermath of Covid offers “tremendous opportunities” for companies to “grab market share and improve internal resources.”

MEMBER NEWS

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n January, the Better Business Bureau of Western Pennsylvania honored long-time CCN member Energy Swing Windows, located just outside Pittsburgh, in Monroeville, with its fourth Torch Award. In a highly competitive market that includes Window World, Window Nation, RBA, West Shore and other major window purveyors,

BBB Head on Energy Swing Windows: Delivers ‘Not Just Great Products, But A Great Experience.’

REPEAT AND REFERRAL LEADS ARE THE GRAIL OF HOME IMPROVEMENT MARKETING, SINCE THEY CLOSE AT FAR HIGHER RATES AND CARRY A PRICE TAG HIGHER THAN A COMPANY’S AVERAGE TICKET.

Energy Swing, which manufactures its own high quality products, has pursued a strategy of generating the preponderance of its new business from the recommendations, and repeat contracts, of past customers. Roughly two out of every three new contracts are generated from previous customer activity, whether that’s additional work, or a new customer captured via the company’s sophisticated referral reward program.

Repeat and referral leads are the grail of home improvement marketing, since they close at far higher rates and carry a price tag higher than a company’s average ticket.

Right Things Right Though Energy Swing and its owner/ president Steve Rennekamp have long been known as advocates of ethical business practices, the company recently pulled what it does together into a system it calls “Right Things Right.” That is, installing quality product, in a manner that reminds customers that care and consideration for their home, health and peace of mind are not necessarily always part of the home improvement experience. If anything, remodelers or home improvement companies often top the list of Consumer Complaints.

While many construction companies endeavor to operate in an ethical fashion, if only to counter that negative stereotype, few have systematized their expectations and behaviors the way Energy Swing has done, as the BBB of Western PA’s president, Warren King, noted.

“It seems basic enough, but in today’s world when change seems to be the only constant, standards are critical for advancing trust in the marketplace and ensuring both

integrity and performance,” King said, in presenting the award at a small, private ceremony limited in attendance due to Covid restrictions. “Doing the ‘Right Things Right’ is ingrained in Energy Swing Windows’ culture and values. You have the perspective of doing your daily work as if the end result is being delivered into your own home.” He called the company “totally different from any other replacement specialty company in Western Pennsylvania.”

Labor of Love Entering the BBB Torch award competition is no small undertaking. Multiple Energy Swing team members were involved over the course of several months assembling the application. The multiple forms and supporting materials such as surveys stacked up at least an inch high, and were enclosed in a binder.

Applicants could accumulate as many as 180 points in satisfying the BBB’s criteria for excellence in business ethics. The college professors judging the awards on behalf of the BBB—all teachers of business ethics— awarded Energy Swing 170 points. Warren, in his speech, noted that that point total this year “is the highest score given by the judges” to any company. One judge, Professor James Weber, Director of Duquesne’s Institute for Ethics in Business, pointed out that Energy Swing “embraces ethical business practices in every aspect of their business dealings and interactions. Grounded in a strong ethical culture manifested by its owner, each employee advances this vision with each potential and actual customer.”

Lasting Trust Before last year, Energy Swing was awarded the Torch award in 2008, 2012, and in 2016.

(Companies are only eligible to win every four years.) Winning the award not once, but four times, is almost unheard of.

“To deliver value to the customer, we strive to develop internal processes that deliver quality to each other at every phase of the business,” Rennekamp notes. “We work hard to develop a culture that delivers on its commitments, not in words, but in actions that are reinforced every day. We look very hard to find team members who are ingrained with the same mindset and are individuals driven to support and contribute to it.”

Energy Swing will now move on to participate in the competition for the International Torch Award for Business Ethics.

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BY BRYAN MILLER

How SWOT Paid Off We didn’t let Covid paralyze our business but viewed it as a strategic opportunity.

W Bryan Miller and John Gwaltney, of Outback Deck, in Atlanta

hen the Covid pandemic hit Atlanta, it was unlike anything anyone ever imagined might happen. But our company already had a name, or at least a category, for it. It was a threat.

For several years we’ve been using the strategic planning technique SWOT, an acronym for Strengths, Weaknesses, Opportunities (or, sometimes, Obstacles) and Threats. SWOT enables managers to minimize long-term risks. Our leadership team holds SWOT meetings weekly, monthly and quarterly.

Since it had no recent precedent, a pandemic was not among the specific risks we weighed. We had, though, performed a threat analysis. We discussed how to prepare for and manage a threat, whatever form it might take. Our discussions equipped the management group here with the mindset that says “major stuff” could hit the company and send it sideways. If so, how would we respond?

Skeleton Crew

" For several years we’ve been using the strategic planning technique SWOT, an acronym for Strengths, Weaknesses, Opportunities (or, sometimes, Obstacles) and Threats."

In Atlanta, where our business is building decks and outdoor living spaces, construction firms were not required to shut down because of the pandemic.

A global pandemic certainly fit the SWOT definition of threat. A threat is aimed at the life of the business. Since our business is seasonal, a threat might be lower-thanaverage temperatures or rain (or a pandemic!), for a protracted period. One or two bad months can turn an organization sideways. Opportunities, in SWOT thinking, are something different. If a check bounces or a customer can’t get financing, those are opportunities to exhibit our values as a company.

The pandemic immediately presented us with a set of circumstances that could bring the company down, or shut off revenue for who knows how long, meanwhile leaving us with overhead expense and a potentially dangerous cash flow imbalance. But because of SWOT discussions, a plan was in place along with the mindset necessary to execute it. Many of those we compete with had no such plan, and froze or went out of business when the pandemic hit.

Taking The Initiative So we looked at the individual challenges—meeting with customers, keeping crews and admin safe—and one-by-one created new processes.

While most of our admin employees worked from home, we kept our building open, staffed with a skeleton crew.

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“AS LEADERS, WE NEED TO LOOK FORWARD AND SEE WHAT’S COMING TOWARD US AND HAVE AN ACTIONABLE PLAN. REGULAR SWOT ANALYSIS INVOLVING OUR TEAMS IS MUCH LIKE THE PRACTICE PROFESSIONAL ATHLETES UNDERTAKE SO THEY CAN PERFORM AT THEIR PEAK ON THE FIELD.” That was the beginning. Within 25 days we’d completely converted to Zoom meetings, both for selling and internal staff.

Working with a third-party group we use to advise us on OSHA health and safety requirements, we set out to ensure that our building, our offices, and our vehicles were completely safe to work in. We contacted the company that cleans our offices weekly and explained that, in addition, we needed them to do deep cleaning, every Sunday.

Within 90 days we organized the schedule in an odd/even system with sales people and managers coming in one day, production team leaders coming in on separate days. We implemented a safety protocol in the field that involved masking, frequent hand washing, and sanitizing of equipment and surfaces.

Result? We did not lose a single hammer-swinging day.

In sales, we initially organized Zoom presentations but realized we had to get back in front of customers. With in-home services, you need to get a “Yes” from that prospect, and the way you do it is face-to-face, on the porch or on the deck, safely and distanced.

Risks And Solutions The key that enabled this was leadership. We’ve put leadership at the center of our company culture. In our weekly, monthly, and quarterly meetings and one-on-ones, we sat down as a leadership team to formulate approaches to opportunities and threats. We talked about not just potential risks, but potential solutions. One thing we do in those meetings is construct a matrix we call the Sweet Spot Analysis where we take a potential threat and put it at the top of the list and from there go down and generate ‘What If’ scenarios for managing that.

We divide these scenarios into two types, or boxes. There’s the Low Hanging Fruit box, and the Home Run box. The Low Hanging Fruit indicates situations where a solution is easy and can be rapidly implemented. A Home Run determines whether that “what if” would be a slam-dunk in solving the threat.

We would then implement the solutions that met both criteria, across the entire organization. We wanted team leaders involved, and we wanted to get that information to our customers, both internal and external.

Survive Vs. Thrive Neither John Gwaltney nor I had doubts about company survival. We just needed to find a path through, based on the character and values of our company. Don’t get me wrong. It was not without its hurdles. Our SWOT strategic approach, the systems we developed as a result of knowing and using SWOT, and PPP financial aid, saved us in 2020. But once we realized the scope of the threat—the sudden, dramatic drop in revenue and cash flow—we fell back on our company mantra: we are here to serve people, both inside and outside the organization, and to do so while maintaining profitability and a consistent cash flow. So, we had to figure out a solution. The fact that we were used to proactively looking at and planning for potential

threats paved the way for the team to respond, and to keep our company healthy and successful.

Our team leaders, including the guys in the field, had a steely focus on figuring this out. But it was exhausting. By fall everybody was stressed out and ready to “tap out.” They had worked their butts off. So, starting already in June, John and I, along with our leaders, began looking for some way to acknowledge the team’s performance and efforts. We figured that we would give people an extra block of time off, paid, over and above vacation earned. We took it to sales and production managers to get their input, and then ran it past the financial guys. Because of the way the end-of-year holidays fell in 2020, we decided to close our offices from just before Christmas to right after the New Year, and paid our people for all those days.

We explained what we were doing to our installers, our teams, sales and admin staff. Everybody was excited!

Core Values The kind of organization you create attracts the kind of people who’d want to work in that environment. For that reason, our team took our situation seriously. It not only kept us open, but safely. Because of the precautions we took, the six people in our organization who got Covid contracted it from circumstances outside the company. We gave all of them paid time off to recover.

As leaders, we need to look forward and see what’s coming toward us and have an actionable plan. Regular SWOT analysis involving our teams is much like the practice professional athletes undertake so they can perform at their peak on the field. If prospects wouldn’t meet with us, or customers feared having a crew of installers at the house, if our leads dropped and our production began backing up, the organization didn’t freeze. The most rewarding thing is, if you engage your team in participating, so it’s not just the owner(s) trying to figure all this out but everybody integral to running the business, then you’re not carrying the burden alone and the results are far greater for the organization.

We, as business owners, can either be dominated by fear or be empowered by strategic best practices. Strategic means building consensus within the leadership group so everyone knows where we need to go. Implementing depends on having a set of systems and processes that can be executed effectively, by all team members, so you can get there. In this case, that’s marketing and sales staying on course by bringing in new opportunities, production closing out projects to bring in much needed revenue, and finance managing overhead and expenses so our company could maintain cash flow and profitability. Our sales in 2020 were a little over $6.2 million, just a bit ahead of what they were in 2019. Currently, we have a three-and-a-half-month backlog. When the business was threatened, we’d prepared ourselves fiscally and with systems and processes to keep it going. That was the difference between just staying alive vs. thriving.

—Bryan Miller is the founder of CCN member Outback Deck, an Atlanta-area deck and outdoor living company.

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ON MANAGING

Should WFH Be Your Company’s New Model?

Working from home was something futurists once talked about. Then the pandemic arrived.

BY JIM CORY

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f your admin employees are working from home (WFH) because of the pandemic, will that be permanent?

Many business owners are asking themselves this question.

Before the pandemic, working from home was something like a privilege, granted to employees known to be productive and responsible or, maybe, in cases of family emergency.

But by last June, virtually overnight, some 42 percent of U.S. workers were homebound and working, according to Stanford U. economist Nicholas Bloom, as opposed to 26 percent working on the business premises, and other 33 percent not working at all.

Strictly speaking, employers can require employees to come to work—on the premises—during the Covid pandemic, provided the workplace is safe. So if your business is classified as essential, and open, it’s up to you to decide whether or not employees can work from home.

A Trade Off Technology, of course, enabled this. Before the pandemic, few had ever heard of Zoom, the San Jose-based video communications company. At this point, just about everyone’s been “on Zoom.” But for some companies, the pandemic demonstrated that WFH is not just an arrangement resorted to on the spur-of-the-moment, but a practical way to organize the office long term. Many business owners, and managers, are already saying they prefer the WFH model for several reasons. Topping the list is cost. If you lease your premises, why pay for what you’re not using? Add to that reduced outlay for office supplies, fewer sick days taken and the likelihood that employees will put in more hours at home than they would in the office. A working paper published by the National Bureau of Economic Research, based on data collected from 21,000 companies in 16 large metro areas worldwide before and after lockdowns, showed the average workday from home to be about 49 minutes longer.

Of course, some of that might be spent taking care of kids or walking the dog. Even so, many employees, for the moment, prefer it. A big reason is the time saved—27 minutes, on a one-way commute, according to the Census Bureau in 2018—

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in getting to and from work. Another, harder to quantify, is independence. When you’re working at home, no one’s looking over your shoulder.

Setting The Tone Remotely If you’re managing employees who aren’t in the office, your first concern is that they produce. Productivity standards, and regular check-ins, can keep that in hand. For instance if whoever’s answering your central phone line is responsible for transforming incoming calls into sales appointments, the number of leads set will speak for itself.

So far, so good, but the disadvantage is that if you, the owner, are not in the office, you’ve forfeited the ability to set the tone within your company by your presence and behavior. How do you create and sustain morale via Zoom? Where does that go long term?

Similarly employees have to deal with the fact that at home there are more distractions, fewer opportunities to collaborate and zero opportunities to socialize. And what about the work/ life thing? The need to separate one from the other was forgotten when the WFH solution, suddenly necessary, became viable. But in time at least some people—my guess is the majority—will want to go home at the end of the day, rather than stay home at the end of the day.

Hybrid Office Models Vaccination numbers indicate the end of the pandemic will happen at some point later this year. So, if you’ve moved to the WFH model, will you move back? What’s the plan?

Global Workplace Analytics says, “our best estimate is that we will see 25-30 percent of the workforce working at home on a multiple-days-a-week basis by the end of 2021.” They cite costsaving opportunities and “reduced fear about work-from-home among managers and executives.”

That “reduced fear” is a revelation. It says managers discovered employees were more responsible, and dedicated, than they’d thought. It leaves you, the business owner, to weigh options, including some hybrid. Whatever you do, getting employee buy-in before the move, rather than after the fact, would smooth that transition.

Cash In, Cash Out

Remodeling financial expert Melanie Hodgdon explains good cash flow policy.

Toolbox: Do contractors typically understand their cash flow situation?

Melanie Hodgdon: No. Few seem to invest the time and effort to do projections. They focus on dollars coming in rather than the ratio of dollars-in to dollars-out. Also, most concentrate on their P&L rather than on their balance sheet. The P&L is useful but it fails to give a clear picture of key indicators such as the ratio of current assets—cash and accounts receivable—to current liabilities. A company with healthy cash flow should have $1.25 or more in current assets for every $1.00 of current liabilities.

Toolbox: Last year a lot of home improvement businesses in the U.S. had to close for a while and generated no sales. How would a company handle that from a cash flow standpoint?

Melanie Hodgdon: If there are expenses but no incoming dollars, a company must rely on certain strategies. First, research all possible sources of funding, particularly the PPP and similar loan forgiveness programs. Second, look at anything you can cut back on. Janitorial services? Landscape services? Can you remove insurance from any unused production vehicles? Long term, be sure you qualify for a line of credit when the good times are rolling and you are a solid credit risk. Also, set aside a certain percentage of profit each year for “rainy day” funds, possibly in a money market or CD.

Toolbox: What’s a good way for owners to build those cash reserves?

Melanie Hodgdon: Good, healthy business practices. It starts with a targeted pricing system based on hard numbers from overhead and achieved historical margins. So, price right. Be sure to set up payment schedules that ensure you’re always paying for production costs using customer dollars. Employ BEBO (bill early, bill often). That means you should be invoicing and demanding payment frequently and at the strategically “right” time, and delaying bill payment until the latest possible moment. And take all the early payment discounts you can get.

They’re more valuable than many people realize.

Toolbox: Normally businesses have cash flow issues because of low-profit margins, problems invoicing and collecting payments, or over-investing in inventory or capacity. How was the pandemic shutdown situation different?

Melanie Hodgdon: If a company has slipshod practices in place—such as not invoicing promptly—then when even the potential for a steady income stream is disrupted, all hell breaks loose. Poor practices can be camouflaged during “normal” times. Once the income stream is cut down or off completely, all the flaws show up and are exaggerated.

Toolbox: What tools are most effective in helping an owner or manager understand and manage cash flow needs?

Melanie Hodgdon: Balance sheet. Learn how to interpret your balance sheet, understand some simple ratios such as the current ratio and Debt-to-Equity ratio. Run financial reports on a “trended” basis. In other words, don’t just look at your P&L on a “year-to-date” basis; compare this quarter with last quarter, or the equivalent quarter from last year. It’s not enough to know where you are right now; what’s more important is to identify trends.

Toolbox: What measures or steps would an owner take to manage a future cash flow interruption of this proportion?

Melanie Hogdon: Maintain good general business practices.

Keep an eye on your current ratio, which is the best indicator of cash flow assuming that you are running the books on a true accrual basis. Spread out your required cash outlays such as insurance, loan payment schedules, worker’s comp, liability or truck and credit card payments. Big ticket costs all coming due in the same month puts too big a demand on normal cash flow.

This gives you some control over outgoing money. Be strict about getting paid promptly. Whenever possible and state regulations permit it, be sure you are “cash ahead,” meaning you’ve already collected sufficient cash from your customers to cover upcoming costs, plus the profit required to cover overhead for the same period. Maintaining healthy cash flow isn’t rocket science but it does demand that you pay attention and exercise reasonable control over everything you can.

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Who’s Essential?

An event no one could foresee forced most home improvement companies to pivot. Here’s how two CCN companies responded.

BY JIM CORY

O

n March 4 of last year, reacting to a steadily escalating number of cases of Covid19, along with soaring hospitalizations, California’s governor Gavin Newsom declared a state of emergency. A mandatory statewide stayat-home order was issued on March 19, directing Californians to remain at home unless it was to go to an essential job or shop for essential products or services.

Not surprisingly, California, the country’s most populous state, also leads the nation in the number of confirmed Covid19 cases.

As business owners in many parts of the country were suddenly hit with restrictions that eliminated or seriously reduced sales at their companies, home improvement operators were, like many, forced to improvise ways that might guarantee the short- and long-term survival of their operations.

Want Vs. Need In that they were far more fortunate than owners of restaurants or bars—viewed by health authorities as a prime source of potential transmission—where options were limited to nonexistent. States and even individual municipalities defined “essential business” differently. Generally it comes down to want vs. need. An essential business is one supplying products or services people have to have. Non-essential businesses supply products or services people want, a discretionary choice.

An example might be getting your hair cut. Many states initially required barbershops and beauty parlors to close.

An inconvenience, but not, it turns out, something people absolutely require. On the other hand, closing businesses such as grocery stores, drug stores, convenience stores, shipping services, laundromats, gas stations and banks would’ve stranded many.

In some states, but not all, construction companies were classified as essential. Businesses that fell under that rubric were required to implement social distancing practices. It took a while for health planners in state government to sort all this out. For instance, CCN member Renewal by Andersen of Orange County, CA, initially weighed closing.

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“We were concerned,” says Charlie Gindele, general manager.

“Every day we had phone calls, and people canceling jobs and appointments falling off.” In response to Newsom’s announcement on March 19, Gindele says he was prepared to shut the operation down if he had to, but wasn’t looking forward to sending everyone home for an unforeseeable period of time.

“There’s no place like home, but…” he says.

Gindele consulted RBA corporate in Minnesota, who advised that the window-and-door replacement company met the definition of essential business issued by California. “So we kept working,” Gindele says.

Plummeting revenue was one concern. Another was the potential loss of key personnel. A third had to do with marketing: diminishing leads would reduce future business, and the company’s lead sources skewed toward face-to-face. For instance, 25 percent of RBA/Orange County leads came from canvassing and events such as two big county fairs scheduled for July and September. “So we lost 25 percent of our lead flow overnight,” he says.

Talking Points Like many companies, RBA/Orange County implemented protocols based on CDC guidelines. Every employee’s temperature is checked every morning. Those who will be entering a customer’s home fill out a form saying they feel okay and have no symptoms or fever. The company developed a flyer with talking points about its practices. This was convincing to many, but not all. On the second day of a three-day install in May, RBA/Orange County’s call center forwarded to Gindele a message from the enraged neighbor of a customer currently having windows installed. “’You’re going to kill people putting windows in,’” the man said. Gindele reached out and explained that his company had a letter from Andersen’s legal team defining the business as essential. The response was not accommodating. “You’re not essential to anybody!” Fortunately this was untypical.

Top: Bill McGowan, owner of BMC Creative Services, who manages the marketing for Save Energy Co. in Marin County, California. Below: Charles Gindele, General Manager of CCN member Renewal by Andersen/Orange County, in Orange County, California

Up the coast, in Marin County, California, immediately north of San Francisco, CCN member Save Energy Co., also specializing in windows and doors, developed a similar health safety protocol along with a standardized email detailing the steps its installers take to ensure homeowner safety. Bill McGowan, principal at BMC Creative Services, the agency that provides advertising and marketing services for Save Energy Co., says the operation shut down for most of March and all of April. On re-opening in early May, Save Energy Co. forwarded its email pictorial showing customers exactly what steps it was taking to ensure they remained safe. For example, Save Energy Co. began erecting barriers of heavy-duty clear plastic around each installation.

“Guys wear masks to and from the job,” McGowan explains. “If you’re in a uniform, you’re in a mask.” In addition, once in the house the company avoids direct contact with customers. This procedure was comprehensive enough, and clear enough, that Diamond Certified, a Bay Area company that directs consumers to top local businesses based on various criteria for excellence, initiated a separate certification for standardized safety protocols. Save Energy Co. was the first local business to display the new safety icon on its website.

Pandemic Marketing Dilemma Still, the March and April shutdown left the company with two months of zero sales. “We were all very, very nervous,” says McGowan. As much as lost revenue, owners feared the loss of its installation workforce, most of whom have been with the company for at least five years, know its methods, its products, its procedures. “We have guys who’ve worked here 22 years, 16 years, 9 years and five years and we would’ve lost them to the Home Depot, or a large construction concern, or they might’ve moved out of the area or back to Mexico,” McGowan says.

“It’s murder trying to find people. So had we lost anybody, it would’ve been a total tragedy.”

Company co-owner John Gorman helped his installers get on unemployment for those two months and “gave each guy a thousand dollars from our Rainy Day Fund,” McGowan says.

That took the form of a “loan,” which, like the PPP loans offered by the federal government, was forgiven when production started back up.

Unlike many companies, which typically cut marketing budgets when revenue drops, Save Energy Co. maintained its ad schedule, with thousands of TV and radio spots. But at a certain point, the company replaced the ads it was running with a “stop gap” ad featuring Gorman explaining that Save Energy was closed down temporarily and why.

“We put John on camera saying we are closed and hope everyone is safe,” McGowan says. “And when we know it’s safe, we’ll reopen, and if you have an open job we are going to get to you. We are all in this together.”

The company reopened on May 6.

AT THAT POINT COMPANY OWNERS JOHN GORMAN AND SISTER-IN-LAW PAT GORMAN AGREED ON A PLAN TO GENERATE 12 MONTHS OF REVENUE IN THE REMAINING 10 OF THEIR FISCAL YEAR, WHICH EXPIRED AT THE END OF FEBRUARY. New Message To do that, Save Energy junked its TV and radio spots and developed a new communications message that centered as much on safety protocols as on the product and service the company offered. It centered on the slogan, ‘We Are Open,’ proudly displayed the Diamond Certified Healthy Safety Qualifications badge and explained that “we are working hard to get caught up, and to take care of customers in the safest way possible,” McGowan says. “We kept the message on Covid and what we were doing to keep people safe. We came up with the slogan: ‘Guarding Your Health, While Transforming Your Home.’”

Save Energy, like other home improvement companies, had noted that many consumers, suddenly working out of their own homes, and unable to return to the office, had recognized a need for home improvement work at the same time that they’d been forced to curtail their spending. That’s when the company put together its email tutorial on safely installing windows in the home.

And to help meet the goal of twelve months revenue in ten, Save Energy Co. made additional investments in marketing during what is typically its slowest time of the year, October, November and December. These, McGowan says, were divided equally between digital and print, including Yelp, Google, and the Marin Independent Journal, a local publication reaching affluent Marin homeowners. The result, McGowan says, was “the best November and December in the company’s” 37-year history, enabling Save Energy Co. to hit its goal of generating twelve months revenue in ten.

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CCN LIVE EVENT CCN LIVE EVENT CCN LIVE EVENT CCN LIVE EVENT

Thriving in changing times SPRING CONFERENCE

SPRING CONFERENCE Thats right, we are back LIVE and IN PERSON! Thriving in Changing Times April 22-25, 2021 Margaritaville Orlando Getting restless? Eager to hear how other contractors have survived and thrived after a year of unprecedented public health crisis?

You’re not alone. With many people now vaccinated, CCN is launching its first live educational event since the Covid19 pandemic forced us to go completely digital a year ago. This three-day series of speakers, discussions and workshops features just what you need to know to keep your company moving toward the financial and market

share goals you’ve set. Speakers and fellow CCN members will be addressing all the big changes that now confront contractors in their markets and offering solutions and suggestions as to how to manage those changes. You won’t want to miss this chance to catch up, hear the news and share your experience in a safe environment.

For more information contact Danny at 800-396-1510 ext. 110 or danny@contractors.net

For a full schedule of 2021 events & more details visit contractors.net