Business Disaster

spdsqr

We are a remodeling company in its 4th year. I have been in the business in one form or the other since 1993.

About a year ago, we found that we were in debt and not making much profit. I had 2 employees. I did not know what to do next so we sought the advice of a business coach.

The coach told me to:

1. stop working on jobs
2. sell more
3. use more subcontractors

So I went and sold a bunch of work. Unfortunately I was unable to find subcontractors that could produce the work. I stuck to the idea that I could just teach my guys to do the work. We wound up with 6 guys, basically three crews of two handling jobs like decks, additions, and smaller work (under 10k). We went to a Lead Carpenter system where the lead would manage the job from start to finish and be responsible for dealing with any subs, dealing with the customer, and making sure the project came in at or under the labor budget. Our estimating program provides a time factor for every job component. The idea seemed like a good one, but then a job scheduled for 700 man hours took 1700, one that had 80 man hours took 240, and so on.

Lessons learned, I increased the labor on jobs. It did not help. They just took even longer.

I had to really start holding people's feet to the fire and made them accountable. One lead quit. I found that the other just did not have the stuff, so I sent him on his way. One still remains with me and we lost two carpenters who quit becuase they saw that there were problems here. I let another one go due to incompetence.

So now it is me and one lead. We are in debt up to our eyeballs. I can get the work signed up, but now we have this huge debtload and punchlists from hell on open jobs started by the morons I had working for me.

We are in a severe pickle. Our net loss for this year is 14% and vendors are looking for their money.

I am looking for advice on how to kick and scratch my way out of this.

My main thought is that we were taking too much work that was out of our league. We are carpenters. My skill set includes framing and trim. We were taking jobs that involved soup to nuts construction and doing it all in house. I believe that is the biggest mistake.

Now I am trying to slim down the type of work we do and this will help.

Has anyone else been here? Is there hope?

mahlere

there is always hope...

the unfortunate part is that you found a bad business coach...he basically had you put a 2nd story addition on a house with a crumbling foundation...

take you and the lead you still have...bust your ass to get work finished and fixed...claw your way out of debt...then rebuild your foundation.

or file bancruptcy and tell everyone to pound salt.

but without a financial backbone, you can't possibly get out of debt by growing the company.

good luck.

dougchips

3. If you have a set price with sub-contractors then it does not matter how many hours they take to complete THEIR task. Did they agree on a price before the start of the job? Did they run into work that should of been billed to the client?

2. Selling more is foolish if you are selling at a loss.

1. Stop working all together if you are selling at a loss!

More later...

__________________
To get the best replacement windows, or sun rooms contact the replacement windows experts at FHI Vinyl Window Company.

spdsqr

I totally agree. The problem was that we I was selling the wrong type of work. I could not find subcontractors to perform that work for us. I now have a couple, which should help.

For example, a 525 sf addition. We subcontracted the foundation, electric, and plumbing. Everything else we did ourselves including frame, roofing, siding, drywall, painting, trim, flooring, and so on. That job took WAY too long. My actual labor time on this job may have been about 5%. The rest was left up to my lead (with 20+ yrs experience) and from 1 to 4 carpenters as he stated he needed them. The frame took 3 weeks. This should have been my slap in the face. I though "ok, so he's not a framer. I can teach him". The same thing happened with every other phase from start to finish. Should I have subcontracted more of the work? Maybe, but I did not have any subs to trust to this type of work. I probably should have turned down that job or worked it to completion myself. I might have then been better off to sell the work that I knew (for sure) that that lead could handle with some competence.

spdsqr

I heard somewhere that "Hope is not a strategy".

dougchips

I would of been nervous after day #4.

I would call your suppliers and let them know whats going on--might want to sugar coat it a little --"I took on a few jobs at the same time and lost my shirt and shoes on all of them, I will pay you back....."

Stick to smaller jobs for a while.

Don't take depsoits to pay off your suppliers, pay them out of your profit on the new jobs.

Dump that computer program.

Check the employment history of any new staff.

Take care of you punch list and make the clients happy so they will not burn your name. You should be honest with them about what happened. "my staff went sour on me and your job is a reflection of their bad work, I will correct all issues in a timely manner and make it my mission to make you happy."

Honesty is the key.

__________________
To get the best replacement windows, or sun rooms contact the replacement windows experts at FHI Vinyl Window Company.

Mike Finley

Time to fire everybody, change the phone number, start selling jobs for as much money as you can and go do them yourself. Buy a case of Ramon noodles & a moped with a big basket for your tools. Start digging yourself out of the hole, you might see some day light it sounds like maybe in October.

Keep doing this until you can save up some money in a bank account, then start again and grow

S L O W L Y

mahlere

Doug and Finley....

thank you for restating my post

PressurePros

Its all been said and you made the greatest point of all... stick with your core compentency.

__________________
Ken Fenner
Pressure Washing PA
Roof Cleaning Services PA

AtlanticWBConst

I have seen this before and commented on this pathetic relying completely on computer programs to tell you everything.

They do work, but you have to use your Noggin to adjust incidentals, as well as other factors.

My condolences on your predicament.

Also, in addition to other advice already offered:

Get out there and get working on site yourself.
Bite the bullet and start doing your paper work at night. Price jobs on weekends - until you get things under control.

(Worse case scenrio: restructure, by taking out a personal loan to pay off all business debt. Then start conducting business WITHOUT your coach....Wack away at that debt by controlling you overhead and expenses with a real business plan)

Just so you know: I watched your exact same situation happen to a guy this past year. His business no longer exists. Last I knew he was taking deposits on low ball bids and using the money to pay past debts.....

__________________
- Build Well -

Stone Mountain

Been there, done that. More than once. The worst mistake you can do is to sell cheap, using the deposits to keep rolling. It's just like a Ponzi scheme. All you need is one little crisis or mistake on a job and you are toast.
Cut back on overhead, do as much as you can yourself, speak to all your debtors and arrange better terms, look around for someone competent (there are plenty of good men who don't want to be in business for themselves, but they want a good buck: you just have to find them).
Make yourself a plan and get to it. Doesn't help things by staring at your navel.

__________________
Residential Deck Specialist: Vist our Website
www.fenceanddeck.ca

Geminijoe

Like stated before lower your OVERHEAD, overhead is the bigesst company killer, and commonly one that is over looked.

when you talk to your vendors to set up terms, state you will keep your current purchasing current and pay off the old balances in a timly manner, dont let them talk you into making a promise you cant keep. come up with a comfortable monthly #. also ask if they will suspend the finance charges on the old stuff.

be carefull if you make a promise and payment schedual and dont live up to it they will come after you hard!

Joe.

tinner666

Been there, done that. I got my venders to work with me. I had to include them on all new contracts while paying down the old. I went lean and mean. I didn't spend a dime I didn't need to spend. I also concentrated on FAST turn-over jobs. Stuff that I could roll over in 3 days or less. The fast turnover thing kept money coming in every few days. I crawled out in a few months. Yeah, I worked weekends too.

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Frank Slate Roof Repairs, Richmond, Va.

dirt diggler

wait ...

you PAID to hear someone tell you "stop working on jobs ... sell more ... use more subs"

WTF???



you've been in business since 1993 (14 years) ... yet you're running it like someone who just started out

what gives???


DID YOU NOT see this coming?? at all????? cmon man



DO NOT take a personal loan. You will make things worse. Go get a job and work to pay your debts off

or else you'll just fall into a trap of lowballin for deposits.

Tom M

You were told to do what everyone says you should do then exactly the problems that would happen are what you feared did happen. This is exactly why so many guys keep it small and safe. I have a friend who was breaking into the plumbing business, he would take pay checks every week and buy equipment and trucks all while not paying his supplier because he wasnt making a profit. He thought it will come in time so he ran the bill up to 40k on a reg monthly nut while going further in the hole. I personaly wouldnt be able to sleep. But plumbing is a service business and emergency calls or a boiler (fast money any time any day or night) He worked it out and now has 10 trucks with licensed guys doing jobs. You cant do this with carpenters, the skills are too random and unregulated. We need licenses to create a skill level till then its free lance competion so lower your overhead.

woodmagman

You stated that your lead hand took longer then you planned to frame a project.
If we could only have the perfect team of tradesman we would be able to live up to the standards we set for our employees.
We have who we have.....your scheduling and costs need to be based on real time, not what you think it should be. The people we hire sometime surprise us. Sometimes they are good and sometimes they are bad. When a tradesman goes into buisness, he will calculate what it would take him to do the job, not what it would take for an employee to do it.. get that right before you start signing contracts and you will have a bidding stratagy.
I find it crazy that a buisness coach gave you a mandate without a plan of attack. You should go back and read your coaches buisness plan. Sometimes you need to read the instuctions before you open the packages up.....

POOLMANinCT

very good woodmag

__________________
......Less with the jaw & More with the paw.....

spdsqr

This is the scenario I see for myself. I'm glad to know someone else did it and it worked.

What lessons did you really learn? What do you do different now?

woodmagman

hey spdsqur...That is buisness. There are always little things that go south while everything else is going north. It is when they become big things you find out what you are made of.
My guys can make me money, but they can spend it just as fast....We can blame them because it is this, that and the other thing. But it boils down to how you are going to make it work.
As far as lessons....it is your problem not your employees problem. You need to know their limitations. If your crew is to many men with to many limitations you screwed up and need to regroup. If you need to let some of them go and train the ones worth training do it and do it now.
And a lesson you will never learn....you will never be able to hire yourself so get over it and hire someone better...work ethic is a god sent, skill is learned.

dirt diggler

not to speak for the gentleman (tinner??) who you're asking - but I had a similar situation and got out of it in the same manner


what lessons did I learn??


STAY IN YOUR BOX


I took a job not too long ago that was juuuuust a little bit out of the norm for me. I was the highest bid - but even that was not high enough because it was so out of my box that I would have been better off subbing it out to the next highest bidder.

Stay in your box.

Realize your limits - and concentrate on finding jobs within those limits.

NOTE: I am not saying do not ever challenge yourself. But wait until you have a substantial amount of fluid/profitable jobs before taking too many chances.

remember - you only make money when things go right. It IS cheaper to stay home sometimes