A few weeks back, most of us in the St. Louis remodeling community were surprised to hear a very prominent Remodelor closed their doors. They were a firm that had deep roots in the community and a very fine reputation. Specializing in high end projects, it wasn’t unusual to hear that they had a couple of million dollar projects going at the same time. We will never know the entire story but it is known that they started a commercial remodeling division just prior to the start of the recession and it never truly got off the ground. They also had two of those huge residential remodeling projects go south this year. Then the phone just stopped ringing. With the cash that was never recouped from the commercial division and the loss taken on the big projects, there wasn’t enough new business to generate cash flow. The bank shut down the line of credit and the rest has been tragically well publicized.
From the bad things that happen to ourselves or others, we need to take notice and figure out what lessons we can learn. Unfortunately, it usually takes something terrible to happen before we choose to look within and make some changes. What happened to this remodeling company has been a common occurrence leading up to, and during, this recession. They stepped outside of their expertise at the wrong time and they didn’t adapt their business model to reflect what was happening in today’s economy.
Taking risks is part of any successful business. Expansion and/or diversification are healthy and help make small businesses become big ones. It’s an excellent model for growth in America’s free market system. But, for those that have the courage to take the risk, one must also have the wisdom to know when to pull the plug and accept that the gamble didn’t work. Hope is part of the entrepreneurial spirit but when funds are being drained to keep that hope alive, courage of another sort must come to the surface. The courage to say, “I was wrong, it’s time to stop the bleeding”.
Adaptation is the key to survival in today’s market. What was once a successful business model a few years back might not work in today’s marketplace. Remodeling companies that were set up to do large jobs had plenty of work when the economy was rolling but there are far fewer wealthy homeowners who are willing to spend large amounts of their cash on grandiose remodeling projects. Even those who can afford it are downsizing their desires and focusing on what they need, then want, around their home. Not recognizing this change in attitude and adapting your marketing, sales and production teams to focus on this, could be the difference between success and failure. If you are known throughout your community for your “big expensive jobs” you won’t get the calls for the smaller ones without letting the market know you are the best company for those jobs as well.
Here at RIGGS Company & Design, our average size job in 2006 was somewhere around $200,000. Over the last three years that average has dropped to $60,000.00. The larger jobs in ’06 ran in the $700,000.00 range where as now, our larger jobs run in the $300,000.00 range. We have adapted our systems to fit this change and are servicing each and every client as if they were a “big expensive job”. What wasn’t done until our peer shuttered their door, was re-evaluating our place in the market for 2010. We waited until something really bad happened to look inward and make some changes.
About the time you think you’ve got it figured out, you better look again.
