I've heard it said, "Craftsmanship is a valuable commodity, but it does not guarantee success in business." Craftsmen who have been in business for a while will recognize the truth in this statement immediately. Those considering taking the plunge into self-employment often overlook the warnings of seasoned veterans; running a business is not the same as plying your craft, mostly because dealing with clients (who talk back) is different than dealing with inanimate building materials.
This may be something you're already familiar with. Perhaps you have managed a successful transition from employee to business owner. And now, you are considering expanding into other markets to supplement your bottom line.
Diversifying can help your business if executed properly. Just don't forget that the principles of first entering a business venture apply to diversification. Research into the market base/ need and analysis of your ability to adequately provide services cannot be overlooked. Don't let arrogance cloud your judgment. Just because you have been successful in one market segment does not guarantee the same result in another. Many large corporations have fallen because they believed their dominance in one area made them a shoo-in for any new venture. This failure can occur even when entering similar or seemingly easy markets.
The remodeling market
The fact that you are reading this publication suggests you are most likely somehow involved in the custom woodworking industry. Perhaps your primary business thrust is fabricating custom products in the shop. During slow times you take on the occasional remodeling project. This could be something as simple as a fence or deck. Realizing how easy the work is in comparison to shop work, you're contemplating taking on more complex jobs such as a kitchen remodel or even an addition. After all, you have proven successful in one aspect of your business so this seems like a natural way to fill in the gaps of sporadic shop work, or expand the arm of your business.
Back when I was in school, we were required to participate in an intensive week-long seminar on general contracting. This was in addition to the four-year course study on construction management. The school had arranged for industry experts to take us through the entire mundane process of a general contractor's responsibilities. After sitting through hours of liability and more liability instruction, I later discovered it was basically a scare tactic to make us question our professional goals. Well, it worked. I finished the week-long onslaught vowing never to become a general contractor. The main reason? Liability, of course.
That was many years ago. I eventually overcame my fears of becoming a general contractor, but never the fears of liability. I'm grateful for the scare tactic because it instilled in me a healthy respect for preparation.
Remodeling is different in many ways from shop work. One of the most significant differences is a lack of a controlled environment. Unlike working in the private confines of your shop, remodeling puts you on a stage. Your every move will be scrutinized. If you're remodeling a residence, you are working in an individual's private space. And it won't only be the client who is watching. In this age of "media-ized experts," neighbors and friends of your client will point out how they think things should be done.
The quality of work you are doing is not the only concern; how you go about that work is also under scrutiny. Simple things like personal hygiene/dress, hours of work and even the details of how you actually fabricate and construct will all come into play. In other words, it's not just about the finished product, it's the complete package. Keeping people happy throughout the entire process becomes equally if not more important than the product itself.
How can this be, you ask? Look at professional sports. Many of the games' greatest players have never coached and some of the greatest coaches never had great success as a player. If you're accustomed to building things in the shop, you are often a team player in the larger scope of a project. I know we all like to think every job is centered on our skill, but the truth is that it rarely is. Once you enter into the remodeling field as more than a subcontractor you have become a coach. You don't have to know how to do everything well, but you do need to know how to find and manage those who do.
Arming yourself with the best tools for the job is something every craftsman knows. I once bought an import saw just to save money. Its inaccuracy cost me hours of frustration. The result? That poor saw's life was cut short when it "accidentally" fell off my truck. Don't sell yourself short when laying the groundwork in diversification. The idea is to avoid having to jettison the venture for lack of preparation.
Let's look at some of the tools you will need to best prepare you for the remodeling sector.
The construction industry differs from the manufacturing sector. Not only will you need a business license, but often a specific contractor's license. This is something you'll have to check with your local government on. Each state has different requirements. Some want nothing more than insurance, allowing anyone to enter the field, while others require specific experience and successful testing, which limits the number of applicants. Significant fines can be imposed if these rules are ignored.
Something else you need to discipline yourself on: do not do tasks you are not qualified to perform. Just because you can do something does not mean you should. For instance, if you understand the basics of electrical systems, don't do the rewiring on a kitchen remodel; subcontract it. Trades like electrical require additional experience and knowledge. I guarantee you won't know all the nuances of electrical codes unless you have received specific training. The liability is just too great to take on aspects of a job you're not qualified to do. You are not paying for the work to be done, your client is. So find someone who can do it properly.
One temptation that must be avoided is ignoring permits for a job. Local jurisdictions will certainly frown upon this practice. Unfortunately it is practiced quite a bit. Finding out what jobs require permits should be the first thing you do. This way you'll always know what's expected.
Permits can add a lot of time and hassle to a job, but they are necessary in order to minimize your liability. And remember to charge accordingly. This would include not only the cost of the permit, but the extra engineering, preparation and the actual time to procure the permit. Remember, you are not the one who should be paying for this extra inconvenience; it's all part of a job's cost.
Most likely you are already familiar with the importance of having a good contract. However, using a format designed for your current work type may not be adequate for remodeling projects.
I use two basic contracts. One is geared for my custom woodwork. It is simple and concise and covers issues directly related to shop work and installation. My remodeling contract is much different in scope. It not only has to cover the traditional boilerplate issues of payment and work performed, but also addresses such issues as homeowner responsibilities during the course of the project.
Because there are many more things that can go wrong in a remodel (you'll often be responsible for more process types and various sub-trades), your contract needs to make an attempt at addressing those issues as well. Since you can never address every issue that comes up, be sure to include an exclusion such as, "Excludes anything not specifically listed in the above inclusions."
Insurance will most likely be required by the local jurisdiction you work in. Even if it were not, it's something you simply cannot do without. Just because you are the best in the area and everyone loves you, things can still go wrong.
Remember, remodeling occurs in a less controlled environment than your shop work. You have to worry about the actions of subcontractors and the homeowners themselves. What do you suppose would happen if the homeowner's child fell of the new deck you were building that didn't have a railing on it yet? Do you suppose a sign, or the yellow tape you put up warning of the danger would protect you from the liability incurred as the result of an accident on your job site?
In addition to insurance, you may be required to post a bond. This ranges from a blanket/general-type bond required for licensing, to job-specific bonding for larger projects. Bonds can protect both the client (from poor workmanship or failure to complete a project) and the contractor himself (ensuring payments from his client). I once worked on a project for another general contractor who didn't pay me because his company filed for bankruptcy. Even though bankruptcy laws protect the filer from their creditors, bond money posted is not considered an asset. Therefore, payment must be made, providing the amount owed is not more than the amount of the bond posted.
Talk to your insurance agent about your plans to get into remodeling. Your liability will be changing as well as your policy. This is a step to take before contracting the first project, not during.
Most custom woodworkers have worked as a subcontractor. You should be pretty familiar with the drill; the general contractor establishes the schedule and you do your best to accommodate. Getting into remodeling as the conductor means you will be establishing the schedule. Perhaps you won't need any subs, but when you do, you need to have a plan on how to best utilize and manage them.
Managing subcontractors takes time. You must charge for your coordination services. The most common way to do this is to charge a percentage of their contract price. This works for most situations, but sometimes you may need to charge a flat management fee. Even the best subcontractors will need your direction. As the saying goes, "Too many cooks in the kitchen spoil the broth."
Every business should receive legal advice to help them better manage their business. Be sure to check with your attorney if you change your business plan. His or her advice can go a long way in helping you avoid pitfalls and the transition to a different market.
If your company is not already incorporated, this may be a good time to consider taking that step. Because remodeling is a high-risk industry, you do not want that liability directly resting on your personal shoulders. Get your attorney's advice. A professional once told me that incorporation is vital for when, not if, you get sued.
This is probably one of the most important things you can develop. Effectively managing people will go a long way when problems arise. If you know you're not good at it, get some help. As a remodeling contractor you will need to know how to motivate subcontractors and manage your clients.
As mentioned above, a good contract will help you establish the parameters your client needs to adhere to. For instance, my contract states homeowners may not discuss project-specific details directly with the subcontractor without my consent. What this does is establishes the ground rule that I am managing their project, not them. If a homeowner tells a subcontractor how to do something, he or she undermines my authority, which can result in other problems down the road. It is imperative that you not only write down and go over the ground rules with your client, but you must be able to manage them after the fact. In other words, you have to be able to effectively and professionally communicate your intentions throughout the entire process.
A big part of managing your client will come through the form of communication. Do not rely on verbal communication alone. Get in the practice of documenting everything. This would include (but is not limited to) contracts, change orders, all product decisions, correspondence and job-site meetings. I use a document notebook that is kept on the job site at all times. Included are permits, product information and a job-site diary. The diary is simply a written record of communication between the client and me. This provides an excellent format for keeping track of what decisions were made, when they were made and by whom. This type of communication will aid you greatly when (not if) problems arise.
Remodeling can be very rewarding work. Coordinating a group to achieve a common goal and manipulating materials into a useful and artistic form is very much like conducting a symphony of beautiful music. But like the conductor who doesn't study the music he's about to manipulate, a poorly prepared remodeler will learn very quickly what a negative review will do to his career. Proper planning and preparation is essential to create a successful niche business. Without good management skills it can become disastrous. Don't become a negative statistic.
Two separate fields
Over the years, I've talked with hundreds of craftsmen who work either in a custom shop, or tradesmen plying their craft out in the field. Speaking in general terms, the shop mindset is typically more detailed because it is in that controlled environment and with tools that are far more accurate. The field mentality is simply to do whatever it takes to get it done. This doesn't mean the work is going to be sloppy, just not always executed with the most "technically correct" approach.
So why should we care about this? You must learn to effectively and efficiently shift gears when transitioning from the shop to the field. There is a learning curve involved in switching your mindset between the two. In addition, when specializing in one specific trade, you become an expert in that field. The more you learn about it, the more you realize there is to know.
Therefore it's easy to develop an attitude that any given job centers on your particular skill. When remodeling, this attitude will lead to failure. Not only are you coordinating several trades, but the egos of those involved; all while attempting to keep the client happy. And again, this is not being accomplished in the private corners of your controlled workshop, but on the stage for both your clients and peers to watch. Failure is immediately apparent and success is much harder to achieve (the stage brings out all the critics). You don't have one specific trade to concentrate your efforts on but several. And you will never have complete control over every aspect.
Consider this: Would you give control of your specialized woodworking skill over to a general contractor, allowing him to tell you how to do your craft? Of course not. Hence, the reason a remodeler must possess the ability to put his own ego on hold (management skills) long enough to stroke the egos of his building team. Education is the key in controlling your exposure to the negative elements.
Minimizing your liability both with your client and the other trades is the only way you'll be able to sleep at night and keep your sanity.
David Getts is the owner of David Getts Designer Builder Inc. in Seattle.