I am now 66 years old. It seems like a strange statement to write here. Where did that time go? I have a grown son and my spouse and I are now empty nesters. It is just us now, but we do get to enjoy some delightful visits from my son when he can get away from his own business to join us. Does that sound familiar to you?

We will all be addressing a similar outcome as we age into our later years. This will also affect our busines lives. All business owners will exit their businesses, either by choice or as circumstances dictate (e.g., death, incapacity). Ideally, we want to exit on our terms:

• Leaving our businesses in the hands of successors that we have chosen
• For the money we need and want
• On a date we pick

In the public presentations that I get to do at trade shows and association meetings, I get to see an aging population where half of the attendees either have white hair or no hair (and I’m in that latter half)! We are an aging industry population, and I am guessing that you see the same thing in your own industry meetings. Is there a viable transition plan that we can implement moving forward?

In construction, we create building plans that map-out a vision that we construct for our clientele. We amend that plan as needed during construction because things do change during the construction process. We adapt to those changes and we keep moving. It’s part of the business model. Question – can we adapt a similar approach and do the same thing with our remodeling business?

There are 3 Universal Goals in any Successful Business Transition:

1. Financial: after you leave the business, how much money do you want annually for the rest of your life and your spouse’s life?
2. Departure Date: when do you want to leave your business? And what does “leave” mean?
3. Successor: whom do you want to be the new owner of your company?

Universal Goal 1: Getting what you want.

While we view financial security as a requirement for a successful exit, a second, related financial goal is the amount of annual income you want which will allow you to enjoy the post-exit lifestyle you envision. This second financial goal may be discretionary, but for many owners, it is important enough that they will postpone their exits until they can achieve it. As is true of all decisions in planning for the future of your ownership, the choice is yours.

In previous posts, I have already recommended that you work with a financial planner to determine what your financial goal is. I will continue to argue for the benefits of working with best-in-class advisors from several disciplines. But to quantify what it will take to live your dream, I repeat: rely on an experienced financial planner to establish your financial security wants and your financial security needs. As your planning moves forward, they can also help you bridge any gaps by providing investment advice.

Universal Goal 2: Leaving when you want

Establishing a specific departure date gives you and your advisors a time frame to plan and take the action necessary to prepare your business for your exit. This does not mean you must exit on the first day you choose. Just like amending a construction plan, you may decide to stay in the business longer than anticipated by choice. The choice is yours, but only if your business is ready for you to exit it.

Universal Goal 3: Transferring ownership to whomever you want

The third and last universal goal that I ask owners to establish at the outset of the exit and transition planning process relates to a successor. Whom do you want to succeed you: a child, a partner, or a third party? Which type of successor will best help you reach your goals?

At the outset of this planning process, you may not have a successor preference. You can postpone that decision until after you quantify your asset gap and begin to bridge it.

Modifying Your Goals:

When owners work with advisors to plan their exits, they think more deeply and clearly about what they ultimately want to accomplish for themselves, their families, and their businesses. It is not unusual for owners, as they gain clarity, to modify their goals. Making changes early in the process is more time and cost-efficient than changing course once a plan is finalized and implementation is underway.

Values-Based Goals:

The three universal exit goals are common to all owners. These may be the only goals you seek in exiting your business, but many owners have additional goals based on sentiment, attitudes, or feelings.

Values-based goals tend to be non-monetary. They also tend to be less tangible and more heartfelt. But they are no less important to owners than the goals we can measure objectively.

The following list of common values-based goals is by no means exclusive or all encompassing. You may wish to add your own:

• Family Harmony
• Owner Legacy
• Acknowledging Employees
• Taking the Business to the Next Level
• Minimizing Taxes
• Maintaining Culture
• Community Involvement
• Quality Retirement
• Charitable Impulses

To uncover your values-based goals, ask yourself the following:

• What is my vision for my company without me?
• What is my vision for myself without my company?
• Are my values-based goals important to either vision?

A great question you may wish to ponder is, “what are the likely consequences to others of transferring my ownership as I intend?” Discussing this topic with your spouse, children, advisors, or perhaps an owner who has already exited can provide insights into what will happen to your business, and to you after you leave. As your business has been your focus for so many years, where will you turn that focus after departing your business? What lies ahead?

Conclusion:

Setting goals is the most important step you can take in the entire exit planning process. I believe it is the most important action you will take in the rest of your business-owning career.

Once you set your goals and quantify your existing resources, you complete the first phase of the exit planning process. At that point, you will know how close you are to attaining your goals, how far you must go, and how long it might be before you cross the finish line.

Takeaways:

• You must set concrete goals. Unless you do, you will float aimlessly along instead of pulling with all your strength and cunning toward your desired destination
• Goals drive action. Coordinated, focused action requires specific goals
• Financial independence is the acid test of all successful exit plans. Unless your plan delivers financial security, it’s not a successful exit
• Base your three universal goals on facts, not assumptions
• Business exits take time. To determine how long it will take you to exit, you must start with a clear understanding of where you want to end up. The sooner you start to plan your exit, the more time and options you have to harmonize goals, avoid obstacles, minimize risk, maintain control, and increase business value

You do not need to reinvent the wheel. You may not know how to create a successful exit plan based on what you want to accomplish, but I do. If you would like to do a free exit assessment to get a better picture of your present position, contact me at david@remodelforce.com. A simple 30-minute assessment will tell you a lot!

The post Creating the Plan to Eventually Depart Your Business appeared first on Remodel Force™.

If we follow the advice from the book The 7 Habits of Highly Effective People by Stephen Covey, we want to implement Habit 2: Begin with the End in Mind! We can follow that recommendation due to another meaningful quote from Steven Covey “your most important work is always ahead of you, never behind you!”

Even if you are 40 years old and plan to work another 15 to 20 years, build your business with the end in mind! Plan for healthy and profitable growth, but also plan for the unplanned. Address the future of your business in good times but also address what will happen in case you are critically injured or die tomorrow. This is referred to as business continuity planning. Plan to do both. Let us begin to address the potential business exit timeline with the possible time frames that come with each milestone below:

Your Exit Timeline

If forced by circumstances beyond your control, you could likely exit your business within a year. Some business owners are here today and – literally – gone tomorrow, but usually not by their own choice. But leaving in style – with adequate cash and having achieved whatever other goals you have set— that takes time, far more than most owners expect.

So, you can leave whenever you choose if you are willing to settle for a less-than-ideal payday, or you can leave in style. The questions is: “do you want to control your own exit, or will it just be something that ‘happens’ to you?”  Most owners prefer to control their own destiny but may not have an idea when to get started. Let us look at some tasks common to all exits, and how long they take to complete.

Design and Create Your Exit Plan:

Timeframe: 90 days to one year

While it is possible to create an exit plan in as few as 90 days, most plans require almost a year to create. Most owners need time to ponder and weigh alternative paths, and to think through the many issues that arise when they move through a comprehensive exit planning process for the first time.

Close the Gap:

Timeframe: depends on amount of growth in value needed, but often five to ten years

There is likely a gap between the value you want to receive for your ownership interest and the value you are likely to receive if you transfer the business today. Many owners are in denial when it comes to objectively quantifying the size of the value gap, and exactly how they are going to close it within their planned departure timeframe. The surest way to create sustainable growth is to create a written growth plan for your business with deadlines and accountability as part of your overall exit plan. There are a variety of ways to integrate growth plan development and implementation into your daily/monthly/yearly business management activities.

Tax Planning and Implementation:

Timeframe:  three to ten years

Part of reaping full value for your company involves minimizing taxes. Keep in mind that one of the headwinds you may face is increased tax on income and capital gains. Fortunately, planning can not only manage taxation upon the transfer of ownership interest, it may help save taxes on an ongoing, annual basis.

The Ownership Transfer Transaction:

Timeframe: one to ten years 

It is possible to transfer your entire ownership by simply transferring all your ownership in exchange for a promissory note right now in one grand transaction, with a big celebration that follows. This is a form of financial suicide. What will you do if the note payments stop coming and you have been absent from the business for a couple of years already? A methodical, possibly incremental approach to preparing the business, preparing yourself and preparing the next owner (especially if he/she is a child or employee) for a successful future tends to create a better outcome for all involved. Take the preparation and execution of the ownership transfer in whatever size bites you can manage, whether that is attaching one area per month or per year – you know your business well enough to know how quickly the recommended action items in your exit plan can be completed.

Conclusion:

Think about your exit as a process, not an event. Everything you have done in your life that was significant took time and multiple steps or stages. Your exit plan is no different. Your exit planning timeline is your bridge to the future that you envision for yourself, your business, and your family. Take control of your future and begin creating your timeline today.

For a free PDF on The Five Critical Elements of a Successful Exit Plan, contact me at david@remodelforce.com.  I will forward that PDF report to you.

The post Creating the Perfect Business Exit Timeline! appeared first on Remodel Force™.

Now, successful owners are usually optimistic people, somewhat averse to dwelling on the more unpleasant aspects of business. Contemplating one’s demise certainly qualifies as an unpleasant aspect.

Sorry for the somber tone here, but you as a business owner must address the future of your business in case you are critically injured or die tomorrow. This is referred to as business continuity planning. Business continuity planning is the roadmap to address a variety of transfer events and consequences that can impact the business for the remaining (or new) owner when the original owner leaves.

Problem I: Loss of Continuity of Business Ownership

Sole-Owner Company:

Continuity of business ownership is the critical issue in solely owned companies. In fact, there is no continuity unless sole owners take steps now to create a future ownership group or groom a successor.

Multi-Owner Company:

Continuity of ownership is not an issue when a buy-sell (or business-continuity) agreement, funded by life insurance or disability buyout insurance, has been implemented. The problem is that most owners and their advisors fail to keep their buy-sell agreements up to date and, as a result, those agreements often can create more problems than they resolve.

Solutions to Problem I

Sole-Owner Company:

You can implement a plan to allow the business to continue after you are gone. If there is no co-owner, you must provide for the business’ continuity by securing the continued services of your most important employees. Do everything you can to prevent your employees from leaving, because they are indispensable to the business’s continued existence. Secure their continuation by compensating them at a substantially increased level (usually 50–100% more than they ordinarily receive). This is accomplished using a documented Stay Bonus.

A Stay Bonus is a written, funded plan that provides monthly or quarterly bonuses, usually over a 12- to 18-month time frame, for employees who remain with the company during its transition from your ownership to new ownership. (This applies whether the business is transferred to a third party, employees, or family members.) The Stay Bonus provides a cash incentive for your important employees (perhaps 20–50% of the total workforce) to stay.

Typically, the Stay Bonus is funded with life insurance in an amount sufficient to pay the bonuses over the specified time-period. The plan is communicated to the important employees when it is created so that they know a plan exists and, consequently, that thought and planning (and money to pay salaries) will ensure the continuation of the business. At the very minimum, you must communicate, in writing, your wishes as to what should be done with the business upon your death or permanent incapacity:

• Designate key employees or others who can be given responsibility to continue and supervise business operations, make financial decisions, and oversee internal administration.
• Name these individuals today through a business-continuity form (I have examples of this form so if you would like a copy, please contact me).
• Name advisors and others, who should be consulted in the ownership transfer process. (Again, the idea is to put these names on a business-continuity form).
• If it is your wish that the business be sold, state that intention. List the names and contacts of businesses that have expressed an interest in acquiring your company or who you think would make an appropriate successor/owner. Do so, in writing, on a business-continuity form. You may wish to indicate your desire that the business be sold to key employees, continued in the family, or liquidated. The choice is yours, but you must make it while you are alive. There is no better time than the present to do so.
• Finally, give the completed business continuity form to the person you trust the most (e.g., spouse, child) and copies to your advisors.

Multi-Owner Company:

From a continuity standpoint, the nicest thing about having multiple owners is that the business will continue if one of the owners dies, provided measures are taken—usually in the form of an up-to-date, adequately funded buy-sell agreement—to allow the remaining owners to acquire the deceased’s interest in the business. However, chances are that your buy-sell agreement has not recently been reviewed, does not reflect current business value, and does not completely address the following possible transfer events:

• Death
• Disability
• Retirement
• Transfer to a third party
• Termination of employment
• Business dispute among owners
• Involuntary transfer due to bankruptcy or divorce

As may be apparent, the biggest risk to the continuation of co-owned businesses is not the death or disability of one of the owners. The biggest risk is that the abovementioned events are considered once and then memorialized in an agreement. All further thought and action on the subject are then shelved, along with the agreement. Do not allow that agreement to be shelved! Make sure that your buy-sell agreement is current and up to date.

Problem II: Loss of Key Talent (i.e., You)

Sole-Owner Company:

Your death likely has the same impact on your business as does the loss of any key person. Your talents; experience; and relationships with customers, employees, and vendors may be quite difficult to replace. Without planning, few businesses have the financial resources or successive management to weather this storm.

Multi-Owner Company:

Multi-owner companies seemingly avoid many of the problems endemic to single-owner companies. However, as it relates to the loss of key talent, this is only true if surviving owners can readily compensate for your loss. To the company, your death is the same as the loss of a key employee. If the remaining owners do not have your experience or specific talents, the business suffers as sorely as if it had been solely owned. Unless there is a key employee (co-owner or not) to fill the void, the business is wounded—perhaps mortally—upon the death of a co-owner who fulfilled the following roles:

• Marketing guru on whom the other owners were dependent to provide new clients
• Hub of most of the industry, customer, or other key relationships
• Overseer of the company’s operations

Solutions to Problem II

Sole-Owner and Multi-Owner Companies:

In a solely owned business, the key employee is almost always the owner. Usually, it is the owner’s entrepreneurial drive, experience, and dedication that stimulate the business. Losing its key employee, you, is a blow from which many businesses do not recover. If your business is a mirror image of you, it is unlikely that any amount of key employee life insurance or other source of cash will suffice. You must create value (within the company and distinct from you) in the form of successive management capable of filling the void left by your unexpected departure.

In a co-owned business, the loss of an owner is not as drastic, provided your co-owner can carry on without you. If your co-owner cannot replace you, you must train employees to perform the same or parts of the same role as you. You must take the same step if you desire to sell the business for top dollar during your lifetime. In either scenario, the underlying need is the same: capable employees must be able to assume the responsibility of running the business. In a lifetime transfer, if the owner is ready to leave the business but the business cannot thrive or at least survive without him or her, the owner is forced to continue operating the business until successive management is located and trained.

However, when an owner dies, the absence of successive management is more devastating because the owner is not available to do anything. The best hope is to provide the company with adequate cash, in the form of life insurance proceeds, so that the business can survive until replacement management is located and trained. That cash is also used to produce a cash-based incentive plan designed to motivate and retain the new management.

In a co-owned business, the loss of an owner can severely strain the business, but the remaining owner can, especially with sufficient life insurance proceeds find and train replacement management and provide that replacement management with a significant cash-incentive plan.

As you well know, finding and training your replacement can take years. Thus, you must prepare your company for an ownership transition starting today. Remember, at some point, you will not be in your business. I hope your absence will be due to a sale to an outsider or perhaps to the key employees you have brought into the company. However, your exit may be due to death or disability. No matter the cause, your business will survive and thrive only if you have found, trained, and motivated your replacement before you leave the business.

Realistically, the continuity of a business is reliant on a transition of ownership from you to equally capable individuals of an operationally and financially sound company. In the situations we have discussed, primarily the death of an owner, life insurance can instantly provide significant financial strength. However, the business also requires talented and motivated key-successor management, and for that, there are no quick fixes. The benefit of starting to search for that key-successor management today is that you will be building value within the company that will be converted to cash when you leave it.

Problem III: Loss of Employees and Customers

The death of an unprepared owner ignites a cascading series of events for the business. Chief among these are the departures of employees and customers. The loss of employees is followed immediately by defaults under contracts. Because of the inability to perform promised work, customers inevitably leave.

Usually, employees leave because they fear that the business will not survive, thus jeopardizing their salaries and future employment. Additionally, when the owner’s leadership role is hastily transferred to anyone other than a recognized successor, employees and customers grow uneasy. With uneasiness comes migration to new employment and other vendors. These financial and personal concerns must be quickly quelled by implementing a preconceived, funded continuity plan.

Sole-Owner Company:

A common and natural consequence of an owner’s death is the speedy departure of employees and customers unless an existing continuation plan is immediately implemented. Employees must know that a plan that guarantees their compensation and clearly names your successor exists. With these assurances, most employees and customers will stay with the company. Without such a plan, the key and non-key employees will wonder where their next paychecks will come from. Typically, they leave for greener and more secure pastures.

When the workforce leaves, contracts cannot be completed, and work is unperformed. Resulting losses can require payment by the deceased-owner’s estate.

Multi-Owner Company:

Companies with multiple owners must cope with the normal lifetime retirement of their owners. In most cases, retirement imposes a significant cash drain on a company. In a death scenario, the surviving owners must be capable of keeping both the employees and the customers. Simply having a successive owner is not sufficient. These successors must be able to maintain cash flow and the confidence of the business’ employees and customers. Confidence is best gained by having a written, well-capitalized continuity plan.

Solutions to Problem III

Sole-Owner Company In a solely owned business, financial and personal concerns about succession are handled through the following:

• A written Stay Bonus Plan (described earlier), funded by life insurance and communicated to employees when it is prepared
• A succession-of-management plan, which you prepare now, that names the person to take charge
• Your decisions—made today or as soon as possible—regarding the sale, continuation, or liquidation of the business in the event of your demise.

Multi-Owner Company

In a multi-owner company, loss of employees and customers does not usually present a problem because of the presence of other owners.

Conclusion:

Business-continuity issues can be divided into two camps: those that occur while the owner is alive and those that arise upon the owner’s death or disability. This article reviews the latter. In the case of transfers during an owner’s lifetime, you have the luxury of time to find and train your replacement. This is not so in the case of death. Your company must have ongoing management and adequate cash (almost always subsidized by insurance on your life) to survive the following:

• Loss of key talent (i.e., you)
• Loss of employees and customers
• Company’s loss of financial resources
• Loss of continuity of business ownership

In the short run, money is required to do the following:

• Trigger a buyout
• Provide capitalization
• Provide cash incentives to entice your employees to stay
• Replace the loss of business value that you brought to the company. The management team must be capable and motivated to grow the company and incentivized to stay long after your demise

In the end, a successful business is one that you can either sell for top dollar and exit in style or one that can survive your exit in style. A failure to plan for business continuity can irreparably damage your business’ sale value and prevent you from exiting in style.

if you have any questions or would like to receive a sample business-continuity form, please contact me at david@remodelforce.com.

The post Business Continuity Planning – Your Business Can Survive Even if You Do Not appeared first on Remodel Force™.

Let us compare the 2 experiences:

• In elective surgery:
  • There is a big emotional investment
  • Prior to surgery, the outcome is uncertain
  • Patients desperately hope that they pick the right surgeon
  • If a child or family member, expertise, not cost is what is most highly valued

• In custom remodeling:

• • There is a big emotional investment (project imaging – wish list)
  • Prior to remodeling, the outcome is uncertain (potential clients have all heard stories of projects that did not go well)
  • Homeowner desperately hope that they pick the right contractor for their project
  • A contractor’s expertise and experience, over price are what homeowners are paying for to meet their remodeling dreams

Let us review the physical as well as emotional homeowner experience.   In this new Covid-19 working environment, what can we do to manage the homeowner experience to meet and exceed expectations:

Digital differentiation – there is a digital transformation taking place in construction

Contractors will set themselves apart by how they adopt and use technology:

• Website: dynamic, engaging, interactive
• Cloud Based Construction Project Management Systems:
  • Co-Constuct
  • BuilderTrend
  • ProCore
  • UDA Construction Online

Video Conferencing, Messaging, Screen Share and Chat:

• Zoom/GoToMeeting
• Loom/Glide (video e-mail and text software)

Remote Viewing and Design Tools:

• 3D Model virtual walk-throughs
• 360 Cameras
• Matterport

Onsite worksite considerations (following CDC recommendations):

• High-efficiency particulate air (HEPA) filters
• Dust walls to seal the work areas
• Hand wash stations
• Hygienic wipes
• Face masks

Following the worksite recommendations above protect by homeowner and employees.   This is what good contractors do.   Homeowners will pay more for this kind of expertise!

Now, let us address the emotional side of the homeowner experience:</

Homeowners, before any major remodeling project, are scared.   They are filled with fears-usually unwarranted, frequently emotional, and sometimes irrational.   There are many reasons that they feel the way they do, but 5 major reasons are reviewed below:

1. Crooks: Homeowners are afraid they will hire an unreputable company:

Almost every homeowner begins the remodeling process with some baggage.   If you watch television, read the newspaper, or listen to the radio, you will inevitably read or hear stories about unscrupulous building contractors.   In these stories, some unsuspecting homeowner was taken advantage of that cost them thousands of dollars.   Many homeowners do not trust building contractors.   They are afraid that they will hire someone that could “rip them off”.

2. Money: Homeowners do not understand the real cost of remodeling.   They are afraid of the “hidden” costs:

Most homeowners do not understand how difficult it is, and how expensive it is to remodel an older home.   Most homeowners underestimate the true cost of remodeling.   It is a difficult and expensive process to integrate the “new” with the old.   This process is made even more difficult because of the uncertainties that arise during the remodeling process.   Dry rot, termite damage, bad electrical wiring, and insufficient load bearing capacity are problems that are frequently exposed once a project has begun.   Whether planned for or not, these problems must all be fixed.

3. Disappointment: After extended design time, and a lot of money, homeowners can fear that “It’s not what I wanted!”:

In working with hundreds of homeowners over the years, I’ve made a very important discovery – homeowners can work with a set of plans for months, but with 90% of the homeowners I worked with, they did not fully understand what their project would look like until the walls started going up.   The two-dimensional reality presented on building plans is not-enough for most homeowners to truly visualize what their project will look like when it is done.   Most homeowners fear, that after spending all that time and money in the planning process that they may not get what they wanted.

4. Disruption: Homeowners are afraid of the disruption that remodeling brings:

Remodeling is a tremendously disruptive process.   A homeowner can be without a kitchen for weeks, or longer.   They can be without a bathroom for weeks, or longer.   A major remodeling project can disrupt just about every routine a family may follow.   It is also a very invasive process.   A psychiatrist I know, who himself went through a major renovation on his own home, said it was one of the most difficult times in his marriage.

5. Control: Homeowners fear losing control of both their home and finances during the remodeling process.

Due to all the factors I have reviewed above, many homeowners express the fear that once their home remodeling project begins, that all of the unknowns involved leave them with a feeling of “being out of control.”  This is a very fearful time for many people.   Their home is usually one of their biggest investments, and they are spending a lot of money.   They want guarantees.   Home remodeling involves unknowns.   Remodeling contractors cannot always provide the kinds of guarantees that homeowners want.   They must trust their contractor.

There are some things a good remodeling contractor can do to help a homeowner through this process:

1. It is a process, not a product: A good remodeler understands they are not just selling a product-they are also selling an experience.   The best ones understand they must manage the process, as well as manage the project.   Homeowners need to be guided through their remodeling experience every step of the way.   They need to trust that their contractor will always be there for them, no matter what.
2. The 4 elements of trust:  Homeowners desperately want to trust their remodeling contractor.   If a contractor understands the 4 elements of trust, and practices them honestly, most major problems will be avoided.   The 4 elements of trust are:

• Consistency: Remodeling contractors need to set, and follow, consistent routines.
• Honesty: Tell homeowners what is going to happen each week and acknowledge mistakes.
• Promise Keeping: Contractors must keep their word.   They must fulfill on the promises they make.
• Reassurance: Good remodeling contractors reassure homeowners on a regular basis.   Homeowners want to know their contractor will be there for them every step of the way.

3. Homeowners are emotional: Experienced contractors realize a major remodeling project is an emotional time for homeowners.   Good remodelers expect this.   They gear their efforts towards reducing homeowner fears and dealing with the inevitable upsets.   Emotional homeowners are not the exception-they are the rule.   It comes with the territory.

David Lupberger is the author of the book Managing the Emotional Homeowner.   For a free digital copy of his book, contact him at David@RemodelForce.com.   He will forward a copy of the book along with the Homeowner Emotional Roller Coaster.

The post Dealing with Homeowner Fears – Creating an Exceptional Homeowner Experience appeared first on Remodel Force™.

For every business owner, determining how to increase transferable value is the business owner’s job. However, once owners and their advisors determine which of the appropriate value drivers must be strengthened, everyone in the company should be involved. By definition, business owners cannot do it alone. If they could, they would not be creating transferable value, because once they departed, the value drivers would disappear.

If you wonder whether installing systems in these (and all) areas of your company is worth your time or effort, let us look at systems from the perspective of a potential buyer. If a buyer compares your company to another, which company will he or she pay more for?

Your Company which is run by an owner who:

• Has creatively and effectively built the business with intuition and intelligence; and
• Will be gone once the buyer takes the reins.

Or:

Another company which relies on systems that:

• Are written and communicated clearly
• Are adhered to by all employees
• Produce consistent results
• Will be in place long after the owner leaves

As you can see, systemizing internal operations are a critical Value Driver. In the context of transferable value, operating systems are the established and documented standard business procedures that demonstrate to potential buyers that a business can maintain its profitability after an owner leaves it in the buyer’s hands.

The Value of Documented Operating Systems

The theme of Michael Gerber’s best-selling business book for entrepreneurs, The E-Myth Revisited, is, “Let systems run the business and people run the systems. People come and go but the systems remain constant.” This advice is as true for smaller businesses as it is for larger enterprises.

Having great processes means customers, vendors, and employees enjoy the same experience each time they interact with a company. It also means that the data surrounding each interaction can be measured, interpreted, and mined. Using that information, next-level management teams continually modify and improve those experiences.

If your objective is to sell your company at some point, you would be well-served by building reliable systems that can sustain the growth of your business. Before we get started on discussing this important value driver, here are a few quick definitions:

• Systems refer to a group of related processes
• Processes have purposes and functions of their own and are components of a system. Taken independently, a process alone cannot do the work of a system
• Procedures are the approved way we do things and often include a sequence of steps
• Steps are the actions we take to get something done

That was a mouthful! A solid management team is one of the first important value drivers to focus on when you are preparing for a potential business exit. In addition to building a strong management team, it is important to build reliable operating systems that can sustain the growth of the business. The second value driver then is the development and documentation of business systems that either generate recurring revenue from an established and growing customer base or create financial efficiencies.

Look at your business from a buyer’s perspective. Would you buy your business? If you leave shortly after a sale, what remains? If the answer is top management and highly efficient business systems, you can be more confident that you will have a strong legacy and be able to get full value for your business.

The documentation of company systems and their related processes and procedures is important to ensuring that quality and consistency can be maintained after the sale. They also signal to a potential buyer that elements critical to the successful transition of a business are in place. Some examples of items worthy of documentation are:

• Financial control systems and accounting policies.
• Policies to ensure compliance with legal and regulatory matters, especially those related to employer/employee relationships and safety.
• Data management and information systems that tie the company together.

Again, put yourself in the shoes of a would-be buyer. Buyers want assurance that the business can continue to move forward under new ownership and that operations will not break down when the former management leaves. This assurance can be obtained when there are documented systems in place that enable the potential buyer to repeat the actions of the former owner to generate income and grow the business.

There are several business systems, which, once in place, enhance business value whether you plan to sell your business now or decide to keep it. These systems include:

• Effective marketing practices with metrics that can be measured
• Effective customer qualifying processes – only working with qualified clients
• A documented sales process that guides potential clients through their sales experience
• A documented sale to production handoff
• Daily production management systems so that clients enjoy the same experience every time
• A documented close-out and warranty process
• Processes on converting every past client into a client for life

There is a lot of content here. If you would like assistance with generating documented company operating systems, please contact me. I have a business manual with 21 construction-specific job descriptions that will facilitate this process for you: David@RemodelForce.com.

The post Building Company Value – Documented Operating Systems appeared first on Remodel Force™.

Owners can remove themselves from daily operations with some foresight and planning with their eventual exit in mind. This does not happen by chance – it happens when a strategic plan is implemented in a thoughtful and deliberate fashion.

What does this look like?  I have included a short outline of this process below:

• The Exit Planning Roadmap:
  • Set goals/timeline
  • Quantify resources
  • Grow transferable value/minimize risk/taxes
  • Reviewing a potential sale to:
    • Children
    • To a 3^rd party
    • To co-owners/key employees
  • Business continuity/estate planning
• Three universal goals:
  • How much money do you want when you leave your business?
  • To whom do you want to transfer the business?
  • When do you want to exit?

You must begin planning and executing a strategy to accomplish your exit goals well before you are ready to leave. Otherwise, it is highly unlikely that the business will be ready for transfer when you are ready to transfer it.

Here are the outcomes that every business owner strives for exiting their business:

• Having the financial security
• Ensuring that their chosen successor(s) are in place when they leave
• Beginning their purposeful new life

Design and Create Your Exit Plan:

Most Plans require almost a year to create. Most owners need time to ponder and weigh alternative paths and to think through the many issues that arise when they move through this exit planning process.

Close the Value Gap

There is likely a gap between the value (money) you need to receive for your ownership interest and the value you are likely to receive if you transfer the business today. The time it takes to close that value gap depends on the following:

• By how much does the business need to grow?
• What is a realistic growth rate for your business in today’s economy?
• What is the estimated growth rate of your non-business investment assets?

The time required to close the value gap is the wildcard in estimating when you will be able to leave your business. The surest way to create sustainable growth is to create a written growth plan that includes deadlines and accountability as part of your overall Exit Plan.

I find that most owners are in denial when it comes to objectively quantifying the size of their value gaps and determining exactly how they are going to close them within their planned departure time frames. The reason behind the denial of what is generally a large gap is that most owners have no plan to close it other than “work harder.” Owners frequently do not know how to build value consistently at the pace necessary to achieve financial independence.

Tax planning and implementation

Part of reaping full value for your company involves minimizing taxes. Fortunately, planning can legally minimize (or even eliminate) taxation upon the transfer of ownership interest and save on taxes annually. Of course, the IRS does not make this easy. Regardless, if you leave tax planning until you are ready to exit, the IRS wins.

Transferring Your Business to Children or Employees

It is possible to transfer your entire ownership to a child or employee by simply transferring ownership in exchange for a promissory note. However, this can be a form of financial suicide. If you wish to transfer ownership to children or management while achieving your financial and other objectives, you need time to do the following:

• Grow business value and cash flow. As growth occurs, you benefit from increasing distributions of excess business income and can invest the net proceeds in non-business investments.
• Develop the incoming owner’s management and ownership skills.
• Begin a methodical transfer of small amounts of non-voting ownership to children or key employees based on their achievement of pre-set performance standards. During this time, you retain full control of the business until your children or management can pay cash—enough to ensure your financial security—for your ownership interest.
• Ultimately transfer the balance of your ownership interest for cash after your children or key employees have acquired sufficient equity to borrow money to pay for your remaining ownership interest.

Or Selling Your Business to an Outside Third Party

Assuming your transaction advisor determines that you are likely to receive the money you want from the sale of your business, your last step before beginning the sale process is to engage in pre-sale planning. This involves having your advisors review the structure and operations of your company to discover and properly bury any “skeletons” that might stall or halt the sale process.

A few examples of skeletons are potential lawsuits, disgruntled minority owners, and any accounting discrepancies. These skeletons can derail the sale process in its tracks.

An adage of deal attorneys is that “time kills deals.” You do not want correctable problems to cause delays and the pre-sale planning process helps prevent this. Pre-sale planning takes but a few months, but correcting problems that are discovered can take several more months. Once remediation is completed, the sale process begins and is usually complete within a year. Obviously, if your transaction advisor has good reason to believe that your business cannot be sold for the price you need, you will need more time to accomplish all of the actions necessary to close the value gap.

Conclusion

I am confident in saying that almost all owners today are ready to exit their businesses long before their businesses are ready to be exited. If the time before the business can be successfully transferred drags out for years after owners feel ready to exit, those owners face burnout and frustration, and lose interest in the business, making it even hard to build its value.

The pie-chart below reviews the key considerations in any business transfer. If you would like to review  a free exit planning assessment to identify your company exit priorities, e-mail me at David@RemodelForce.com.  The evaluation takes less than 30 minutes to complete!

The post Planning a Strategic Business Exit – What Is Involved? appeared first on Remodel Force™.

Determining how to increase transferable value is the business owner’s job. However, once owners and their advisors determine which of the appropriate value drivers (listed below) must be strengthened, everyone in the company should be involved. By definition, business owners cannot do it alone. If they could, they would not be creating transferable value, because once they departed, the value drivers would disappear.

As you read through the following list, remember that it contains only “generic” value drivers. Depending on what your company does, you may have other factors that create and increase transferable value. Additionally, there’s no particular order to this list, except for the importance of the management team: It is management that creates, manages, and grows these essential business characteristics which is why establishing a “best-in-class management team” is always the most important factor of creating transferable value.

Common Value Drivers:

• A stable, motivated management team that stays after the owner leaves
• Operating systems that improve the sustainability of cash flows
• A solid, diversified customer base
• Recurring revenue
• Sustainable revenue, resistant to “commoditization”
• A competitive advantage
• A documented and proven growth strategy
• Financial foresight and controls
• Good and improving cash flow
• Scalability.

Let’s look at each of these Value Drivers in a bit more detail.

• A stable, motivated management team that stays after the business owner leaves. If you plan to take any exit path other than liquidation, capable management is indispensable. Having best-in-class management is the surest way to become a best-in-class company. Capable management is what buyers buy when owners sell their businesses, so establishing the best possible management team will make it more likely for you to receive the best possible price for your business.
• Operating systems that improve the sustainability of cash flows. The establishment and documentation of standard procedures and systems demonstrate to a buyer that the business can maintain profitability after the sale.
• A solid, diversified customer base. Buyers typically look for a customer base in which no single client accounts for more than 10% of total sales. A diversified customer base helps insulate a company against the loss of any single customer.
• Recurring revenue. As a buyer, wouldn’t you want to acquire a business that prints money with the push of a button? Recurring revenue is that button that buyers look for in purchasing a business. Without recurring revenue, you may struggle to find a buyer who is willing to pay top dollar for your business.
• Sustainable revenue. Buyers look for revenue streams that continue despite fluctuations in the economy. They also prefer those that are resistant to “commoditization,” which is when a company, product, or good loses its distinctive attribute forcing that company, product, or good to compete based on price alone, which leads to slimmer margins.
• A competitive advantage. To paraphrase Michael Porter of Harvard Business School, competitive advantage is a product or service that a company offers that, over time, performs either better or more cheaply than its competitors. Your company’s competitive advantage is the reason your customers buy from you instead of your competitors. Thus, having a strong competitive advantage can differentiate you from the rest of the pack, and if that differentiation is positive, buyers will be more likely to pay top dollar for it.
• A documented and proven growth strategy. Even if you expect to retire tomorrow, it makes sense to have a written plan describing future growth and how that growth will be achieved based on industry dynamics; increased demand for the company’s products; new product lines; market plans; expansion through augmenting territory, product lines and so on. This detailed growth plan, effectively communicated, will help attract buyers. Buyers will give credence to your current growth plan if previous plans have achieved their goals.
• Financial foresight and controls. Effective financial controls protect company assets and support the claim that a company is consistently profitable.
• Good and improving cash flow. Ultimately, all value drivers contribute to stable and predictable cash flow. You can begin increasing cash flow today by simply focusing on ways to operate your business more efficiently by increasing productivity and decreasing costs.
• Scalability. Could your company improve its profit margin if it increased its revenue? Considering value-added services or even creating a mobile app can contribute to the company’s scalability.
Creating a plan to increase transferable value in your company is the business owner’s job. No one else cares nearly as much as you do, and no one else will reap as great a reward for making sure that your company has the most transferable value it can. However, executing the strategy to increase value is everyone’s job. If you don’t already have top managers and skilled advisors ready and willing to provide ideas and implement value drivers, I suggest that you recruit them. Today. Good employees want to work with a growing and successful company. They want to be part of something like this!

The post Creating Company Value Drivers appeared first on Remodel Force™.

One of the most important elements of a successful business exit or transition is the creation of transferable value. No matter what an owner sees for the future of their business, transferable value can be the common denominator that makes every goal more achievable.

What is Transferable Value

Transferable value, for a closely held business is most simply what a business is worth to someone else without its original owner. Transferable value should not be confused with profit. Just because your company brings in thousands of dollars of profit each year does not necessarily mean it has transferable value. True transferable value in a business is determined not by how well you run the business, but by how well the business runs without you.

Business owners are not always aware that transferable value is more than a formula involving multiples of earnings or some calculation of discounted future cash flows. To get a more accurate representation of the current state of your company’s transferable value, you can start by asking yourself the following questions:

• If you permanently leave your business today, would it continue with minimal disruption to its cash flow?
• Who will be responsible for running the business without you—and with minimal disruption to cash flow?

Value Drivers

One way to start to build transferable value is to evaluate your company value drivers. Installing and enhancing value drivers can help create a company that can be transferred to someone else (whether that’s the next generation of family members or an outside third-party buyer)—without the owner—with minimal disruption to its cash flow. Some examples of value-drivers that you may need to focus on are:

• Next-Level Management
• Operating Systems Demonstrated to Increase the Sustainability of Cash Flows
• Diversified Customer Base
• Proven Growth Strategy
• Recurring Revenue That Is Sustainable and Resistant to Commoditization
• Good and Improving Cash Flow
• Demonstrated Scalability
• Competitive Advantage
• Financial Foresight and Controls
One might measure the effectiveness of value-drivers in two ways:

• Their positive contribution to cash flow
• Their ability to continue to contribute to cash flow under new ownership

Simply, a company with strong value drivers will be worth more than a company with weak or non-existent value drivers.

Build Transferable Value with Your Management Team

Building a management team that you can confidently leave your company with can be challenging. You may want to create a loyal “next-level” management team that will not only maintain the value of your business but is just as motivated as you are to grow the business to new heights. Understanding where your company may have weaknesses is an important step in knowing the type of person you will need to attract to help fill the gaps. It is worth it to ask yourself whether you are focusing on attracting people with the skills sets the company needs to accomplish growth independently from the efforts and resources of the current owners. Establishing this highly qualified team long before you are thinking you will transfer the company can give them the time and space to prove their ability to perform.

Attracting the right team is the first step. Retaining the team long after your departure is the real task. To hold onto these vital team members, they may require more money or some percent of ownership as a condition of employment. Creating an effective incentive plan that fits the needs of your team is the best way to ensure your management team stays in place and continues to increase business value after your departure. Simply, plan your future with the end in mind!

The post Creating Company Transferable Value appeared first on Remodel Force™.

The Internet is changing the marketing landscape. Print advertising is slowly diminishing as more and more print advertisers migrate to online advertising. To understand how to do this successfully, you need to understand the distinctions of the Internet shopper.

They have specific characteristics, and understanding these characteristics will facilitate your online success.

In this program you will discover:

• Generating Leads Online – a new marketing frontier
• The parts of an effective online marketing strategy
• SEO – search engine optimization (How it works)
• SEM – search engine marketing, and how it works (How it works)
• Building a brand – how to develop Leads Online
• How to use specific tools to turn online leads into your customers

[iframe http://davidlupbergervideoblog.s3.amazonaws.com/OnlineLeadGeneration/index.html 620px 540px]

The post How To Generate Leads Online appeared first on Remodel Force™.

Homeowners always have work that needs to be done on their home. Even in a down economy. The Home Asset Management Plan shows professionals how to build and leverage relationships with past clients by offering an annual home inventory. It’s an optimal construction marketing system.

Increase sales by learning how to identifying potential problem areas, and providing homeowners with a “homeowner notebook” with findings, recommendations, and estimates to assist homeowners with managing their largest asset. Work is identified and “booked” as much as 12 to 24 months in advance.

The benefits of this business model are numerous:

• Is recession proof – even in a bad economy, homeowners still need help
• Is proactive, not reactive – don’t wait for customers to call – call them and generate work orders!
• Provides ongoing cash flow – generating work orders even in a down economy
• Allows you to build life-long relationships with your customers by becoming their “contractor and adviser for life”
• Builds long-term company equity

Downloads for this “Home Asset Management Plan” Presentation

Sample Marketing Letter – PDF or Word DOC
Section 1 Understanding the Model – PDF or Word DOC
Webinar Presentation Slide Show Handout – PDF
[iframe http://davidlupbergervideoblog.s3.amazonaws.com/TheHomeAssetManagementProgram/index.html 620px 540px]

Video Transcription

Hello, and welcome to how to implement a recession-proof construction marketing system. My name is David Lupberger, and I’m your host today. I’ve actually been in the remodeling industry for over 20 years as a design/build remodeling contractor, and as a provider of educational products and services to the construction industry. I’ve spoken at numerous trade shows including the Remodeling Show and many of the JLC Live Conferences. And I continue to work with remodeling contractors and remodeling associations around the country, working with contractors to adapt to this new economy.

I’m the author of a book called Managing the Emotional Homeowner, a professional development series called The Remodeler’s Turnkey Program, and a program we’re going to talk about today called The Home Asset Management Plan. Thanks for giving me sometime today to review what’s happened over the last 3 to 4 years and how you can adapt to it. We’re going briefly review the condition of the construction industry and where the opportunity is in today’s market.

I want to introduce a recession-proof business concept not only to book work now, but actually book work 12, 24, even 36months in advance. I want to review the steps to get started and some shortcuts on how to do this quickly. And because for so many people funds are limited, I want to show you how to test and self-fund this so that this concept is self-supporting.

Let’s get started. In the present economy, there is a national unemployment rate of just under 9percent. This has been a very, very severe downturn. When it comes to construction, the rate is 22.5percent, almost two and a-half times the national average. Why, because homeowners are scared. We’ve seen a huge reduction in real estate values around the country, and due to these reductions in value, homeowners are postponing the projects that they’ve been thinking about.

There’s a great deal of uncertainty not only about the economy. In addition, homeowners are very worried about their own jobs and places of employment. Due to all this uncertainty, people are afraid. They’re fearful to put money into a larger project in their house, because they don’t look at their home as an ironclad investment anymore and this has had a very direct effect on the construction industry.

And let me run some questions by you and I think you’ll agree:

Have You Experienced…

• Less work than 3 years ago?
• Smaller project size?
• Homeowners speaking with 5, 6, or 7 contractors?
• Demanding additional concessions and price reductions?
• A lower closing ratio?
• Have you laid someone off?
• Are you working harder due to layoffs and a smaller staff
• Are you working harder now, and making less money?

Many contractors are going through a severe cash flow crunch. They’re concerned about meeting payroll, and for many of the contractors that I know, their employees are like family. I know contractors who will get their employees paid first before paying themselves. Due to this, some contractors have been delayed or are delinquent on their own mortgage payments.

I got a call about a month ago – and you know this serious – the contractor told me that he was not paying his IRS withholding payments because he didn’t have the money. All of this uncertainty has an effect on you, your health, your marriage, your family. It’s a direct effect and it takes the fun out of what you’re doing. It takes the life and vitality out of your workday life.

Well, let me give you a little more background on who I am. I mentioned I’m a former design/build remodeling contractor. I actually worked in Arlington, Virginia, right across the Potomac River from Washington DC. During that time, a number of us founded – a group of four of us started a company called The Remodelers’ Guild. The purpose of the Remodeler’s Guild was to show contractors how to make their company a salable asset. Things did not unfold as we would have liked and the whole concept fell apart. It didn’t work for a variety of reasons.

There was one part of The Remodelers’ Guild that contractors liked. It was called the Home Life Plan. The Home Life Plan involved going to past customer and for those that were open to it, providing an annual home inventory which included doing an exterior and interior inventory of the home and putting together a scheduled follow-up plan which involved adding any and all projects that might take place over a three-to-five-year period. Contractors liked this. It provided recurring revenue, and a predictable cash flow, creating financial stability within the companies that implemented this idea.

In this economy, with the downturn we’re going through, this concept has more value than ever before. So what I’m going review today is a proactive customer management strategy. Number one, it’s recession proof. Why? Because everyone owns a home and, virtually every one of those homes needs some kind of work. Number two, this concept

is proactive, not reactive. Most people in construction have what I call a reactive business model. That is, the homeowner calls, we come. And we do our best to market our services so that they think about us when they decide to move forward.

The concept I’m going introduce is proactive. And what I mean by that is we call, we set up the homeowner inventory, we define the projects that are being done and we put together the schedule. It’s a proactive business strategy. It provides ongoing cash flow and allows us to uniquely shift the relationship with each one of our customers to become their contractor for life. Not only that, but it builds long-term company equity. Let’s take another look at what’s going on again in the housing industry.

If we look at it from a glass-half-empty perspective, we’re going through a harsh economic downturn; homes are going down in value. In fact, if you’ve been following the news, it’s estimated that 20 to 25percent of the homes in the country have mortgages than the value in the home, meaning there is no equity. Now, homeowners, you’re not going put anything into a home that has no equity. And so due to this, and because of the perception that homes have lost value, homeowners are encountering a very rough real estate market. They can’t sell their homes.

Things are very sluggish in all parts of the country. And due to all this, homeowners are concerned about investing in their home. And all this has had a dramatic effect on the construction industry. Let’s shift our perspective here just a little bit. All these same people who can’t sell their homes still own their homes. And every single one of these homes have ongoing service and repair items. If homeowners are looking to stay in that home for the next five to ten years, are there improvements that make financial sense. And as you, as a remodeling and construction professional, can you assist them with that home assessment.

Let me give you an example. I had the opportunity to attend a sales call with a very successful remodeler in Long Beach, California. The homeowner was evaluating whether to do over $200,000.00 worth of work to his home. During the course of the sales call, he let us know that the home had actually lost $300,000.00 in equity. He had estimated that since 2008 that his home had gone down in value by $300,000.00. And here he was speaking to us about investing another $200,000.00 or more into his home.

So during the course of the conversation, one of had to ask, “Help us understand. You’re already looking at a $300,000.00 loss in equity. And, at the same time, you’re looking at investing $200,000.00 or more into your home. Help us understand your thinking here.” Well, what was neat – and this is where I really got some good insight – this person was a financial manager, and he actually worked with high-income individuals in non‑profit associations managing their money.

And because he does quite a bit of work in the stock market, he brought up – “If I have a stock that’s gone down in value and I think it’s going come back,” he said, “I don’t sell it because if I sell it I take a loss on the stock, and I’ve got to make the money back somewhere else.” And he said, “Honestly, I’m looking at my home the same way.” He said, “If I was to sell my home, not only would I take that $300,000.00 loss in equity, due to the market right now, but I’d probably have to discount the house even more to get it sold.”

“Then I’ve got to pay for the cost of moving. And once I buy a new house, I’m probably investing additional money in the new house to get it the way I want it.” So he said, “My total estimate for the cost of selling and moving I anticipate to be between $450,000.00 to $500,000.00. Remember that real estate is unique. When you’ve got certain neighborhoods, they’re not making more of them”. Real estate is unique in this way.

This gentleman lived in a gated community, and he said, “Although I’ve lost $300,000.00 in equity, I think that values are going to come back. It could be five years, it could be seven, it could be ten, but, I think the values are going to eventually come back.” So he said, “I’m willing to invest in my home because, number one, I get to stay in the area that I like. But number two, I can take those $200,000.00 worth of improvements and I can really make this home just the way I want, and can enjoy those improvements for the next five to ten years.” And he said, “I do think I will recoup my investment. I can’t tell you when, but due to the nature of real estate and due to the uniqueness of real estate, I believe I’ll make my money back”.

I share that story with you to ask if you can adopt a similar proactive approach working with the homeowners you know to jointly develop a three-to-five-year plan for their home. Can you create and introduce a continuum of services, moving the clients you work with into a proactive plan to help them identify work in advance as far out as five years.

You can do this by introducing the annual home inventory. And after doing this interior and exterior inventory, you can put put together a documented plan for their. Other industries have done this very successfully. If you’ve ever purchased a new vehicle, there’s a warranty schedule that comes with the car. You bring the car to be serviced every 15 to 30 thousand miles. And the car manufacturer lets you know if you do this well, that the car will not only run better but will last longer.

We visit our dentist once or twice a year for dental cleanings, and what they’re doing is evaluating our teeth and addressing any issues before they become problems. We have an annual physical when we go in and visit our physician. They’re doing the same thing. We do an annual physical to make sure that everything is good, that your body’s functioning correctly and that you’re in good health. We’ll, who’s providing the annual physical for someone’s home?

This is what we’re introducing, the proactive home inventory. We’re going to where the homeowners are. We’re not talking about remodeling projects. We’re saying, “Let’s look at your home. This is probably the biggest asset you have – so let’s put together a plan to not only take care of it, but let’s improve it as part of our documented plan”. The home inventory you will assist you with identifying service, maintenance and repair items.

But let’s augment the plan. Let’s expand the vision. If you do energy audits you know where I’m going with this. If you don’t, then meet an energy auditor and start working with one. Look, 90% of the homes in this country are under-insulated. And through a simple energy audit and then following with additional insulation and air sealing – which is not an expensive upgrade – you can probably reduce the home’s energy consumption by 30 to 40percent. That means reducing their heating and cooling bills by 30 to 40percent. Not only that, but you are making the home more comfortable.

You’ll see home video for insurance purposes. I live in Boulder, Colorado, and last summer there was a fire just above Boulder. They called it the Four-Mile Fire. A hundred and sixty-nine homes were burned in that fire. A previous attendee to this program said, “boy, would a video as part of the inventory make sense for insurance purposes?” If you’re at the house doing this inventory, imagine coming back with a video camera and going room to room with the homeowner, having them talk about what’s in each room, providing them with a video inventory of their home.

When you’re in the house, look at the other working systems. What’s the age of the roof? What’s the condition of the siding, the exterior paint? What’s the age of the furnace and the hot water heater, the appliances? Look, if you’ve got a 20-year roof and the people have been in the home for 15, 16 years, I think it’s good from an advisory point of view to let them know, “You’ve got an expense coning up. In the next two to three years you’ll be replacing your roof, so please begin to budget for that.”

If you’ve got some exterior paint that’s peeling, and I’ve worked with a professional painter where we’ve gone through the exterior of a home and identified areas where the paint was peeling. We went back and spot primed and painted and extended the exterior life of that paint job by another two to three years.

If they’ve been in the home for 12 to 15 years and it’s the original hot water heater, let them know, “This is something you’re going to need to replace so let’s get this done before it leaks and causes a bigger problem.” Now, by initiating this and seeing these people first with the inventory and then coming back to implement the plan – you’re going to be seeing them at least two times a year, perhaps even more.

This will be the very best marketing that you can ever do because you’re engaging your past clients, helping them manage their biggest asset. And I will guarantee you, during the course of these visits, that additional remodeling projects will be introduced. You’re out there one day and the homeowner will come up and say something along the lines of, “You know, we’re not going to be moving in the next three to five years. We’re a little unhappy with the kitchen. Can you set another time when you can come out about what we might do to upgrade the kitchen?”

This is how these conversations will arise, and they’ll arise by virtue of you being there working with them. So the goal of this is to become your homeowner’s home project resource. Look, they’ve got a family doctor; they’ve got a family dentist. You’re going become the family contractor. Regardless of the economy, homeowners always have projects that they need done. And this is not the handyman model, and let me emphasize this. The handyman model is a reactive business model. The homeowner calls and says, “I’ve got a broken passage set. Can you fix it?”

Everyone knows, with small projects, it’s difficult to make that profitable without charging a high hourly fee. And a lot of homeowners push back with that. With the Home Asset Management Plan, we’re doing two things. We’re doing the inventory – we’re not identifying one project; we’re identifying 10 or 12 different projects. And because very few of these things are an emergency, we’re going to bundle these projects and then we’re going schedule a time to come out and do those projects when it works on our schedule. So even if it’s six or eight weeks out before you do it, if your homeowner client knows that this is being done, they’ll be fine because they know – they’ve seen the list; and they’ve signed off on the list.

Number one, when you bundle the projects you now have made this profitable for your company because you’re not going out for half a day; you’re now going out for three, four or five days. So you’ve not only made it profitable, but you’ve actually made it more cost effective for your homeowner client. It works for both of you. This works because you control the scheduling. For example, let’s say you’re going back out to a client’s home four, five, six weeks down the road. One week before you’re going out to do those jobs, call the homeowner, remind them you’re coming, and ask the them if there anything else they need done.

I guarantee you that when they know you’re coming, they’re going to add some additional projects. That’s the honey-do list they’re going to hand to you because they know you’re coming. So I really want to communicate that while small jobs are included in this concept, it’s just part of the total service. So let’s look at a distinction here. A general distinction between a customer and a client is that a customer purchases products, and a client purchases services. The Home Asset Management Plan is really about building up a stable of good clients that are going to provide work 12, 24, 48 months into the future.

Let me give you some examples of people who are doing this very successfully. Dennis Allen of Allen Associates in Santa Barbara was an original member of the Remodeler’s Guild. He actually helped create the Home Life Plan. He introduced the Home Life Plan and this home inventory concept into his company several years ago. It was so successful, he actually had to open up a service division. He calls it the Building Care and Repair Division. The Building Care and Repair Division in his company now does sales volume of around $1.2 million on an annual basis.

His bid-to-sale ratio is 55 to 65percent, so he’s closing on 55 to 65percent of his estimates at a 35percent gross profit. And he’s got a wonderful handoff because when he does a remodeling project, and toward the end of the project, he says to the homeowner, “I want to introduce you to the manager of our Building Care and Repair Division because about three months from now, the Building Care and Repair manager is going to come back to your house, and do a walk-through to review the work that we’ve done to make sure everything’s fine. As long as he’s here, he’s going to go ahead and walk around the other parts of your house, and he’ll let you know if there’s anything else that needs attention.”

There’s a wonderful hand-off from his construction division to the Building Care and Repair division. This whole concept has been so successful that Dennis is now hosting homeowner workshops in Santa Barbara to both past clients and prospective clients. In the workshops, he reviews how to main your home and investment. And, naturally, this acts as an introduction to his Building Care and Repair division.

Louis LaFratta is on the East Coast and is one of the co-owners of Franklin LaFratta Construction in Richmond, Virginia. They were also an original member of the Remodeler’s Guild. They also introduced the Home Life Plan several years ago into their construction company.

Again, because it was so successful, they opened a service division that called FLF Services. He said to me, “I want you to understand, David, that before this, we had just a handful of what he called just-come-and-do-it clients. For example, working with a homeowner getting one home ready for sale, and at the same time, visiting the home they planned to purchase and putting together the project list on the home they’re going to move into. What FLF Services has allowed us to do is build up a much greater number of just-come-and-do-it clients”. You all have a few clients like this. I think most people listening probably have two, three, four, five past clients like this.

The goal of The Home Asset Management Plan is to allow you to quadruple that number, or more. I’m going review just how to introduce this model into your business. Louis has said this service element has helped him build and extend their relationships with each one of his clients. Because of this he said, “In both our construction and service divisions, that when a project is done, employees know the relationship is just beginning.” And he continued, “in both the construction and service side, each employee asks the question before they leave, ‘What do I need to do so that homeowners feel comfortable calling us back?’ “And, fundamentally, Louis said, “This service element has created a stronger company culture and has made us more successful as a company.”

Ron Klassen with Wallner Builders in Butler, Wisconsin, recently introduced the Home Asset Management Plan into his company. And he sent me this note, and I am quoting here specifically what he sent me because he asked me to share his experience, “We have explained this concept to some prospective Home Asset Management Plan clients and they were enthused – even the retiree without a lot of income – because they don’t know who to call to address things. They don’t know who to trust when it comes to recommendations and knowing if the work is needed or not.”

This is what we’re introducing here. We’re introducing a trusting, consultative relationship assisting homeowners with managing their biggest asset. Look, they’ve got the family doctor, and a family dentist. Many people probably have a family car mechanic, a person they go to that they trust. You’re going provide the same service for their homes. So, to implement this in your own business, understand the full-service model. Next, pick a select group to test this concept.

I’m going ask you to test this with four or five of your own customers so that they can tell you what they think in their own words. First, create a simple marketing piece. Send that marketing piece to those test clients. In response to the marketing piece, follow-up with a phone call to set an appointment to present the concept and make the sale. Now you see there’s an asterisk next to understand the full-service model in creating a simple marketing piece.

In conjunction with this webinar, you’ll see there’s a couple of downloads for forms you can access as part of this program. You’re welcome to review this with someone in your office. I’m also giving you the downloads which include a review of this full-service model and also a sample marketing piece.

Both of these are in a Microsoft Word format so it can be customized and modified for your own company. So I wanted to give you those two building blocks to help you get started.

As you might imagine, there’s much more detail. But I’m getting this entire webinar done in under an hour, so I am very time-conscious. But I’m going continue to give you as much as I can. Remember, I’ve been focusing on the homeowner part of this in introducing this new concept. There’s another part of this. When you speak with homeowners and you do their home inventories, there’ll be a variety of service requests. You’re also going to introduce this plan to your key trade contractors.

Most of the general contractors I work with have a dedicated group of subs: their electrician, plumber, HVAC contractor, painter and roofer. Depending on what you do, you may have one or two others. So in addition to introducing this concept to your targeted clients, I also want you to have this same conversation with your key trade contractors, letting them know you’ve put together this business concept to proactively generate work with these good past customers.

What’s going to happen is you will be generating additional service requests that will benefit them. You’re going to be creating some electrical, plumbing and HVAC work, and you want them to understand this service-driven concept. And once they understand the concept, make sure they’ve bought in. As you said, “I’ve got these key clients. I want to make sure they’re taken care of.” And guess what. They will benefit because these additional service requests will go directly to them as the service professionals providing those services.

At the conclusion of that overview, then ask them, “Do you have some key clients, your just-come-and-do-it clients who would benefit from this program?” Now, I’ve got to tell you that when I worked with my electrician, plumber, and HVAC contractor, that they also had a number of these just-come-and-do-it clients. So I would make a point of collaboratively reaching out and saying, “I’m introducing this to my good past clients. Would you like to introduce this to three or four of your best past clients, people you work with in a very unique way?” What you’re going do is expand your initial call list from 4 or 5 people to perhaps as many as 15 or 20 of these good past clients by partnering with your trade contractor partners.

And if it’s a referral, your electrician, plumber, HVAC contractor, painter and roofer will be making the introduction explaining the program and opening the door for you to go in and make this sale. So work with your key trade contractors to build a cooperative partnership group. This is a proverbial win-win. The homeowner benefits; the trade contractor benefits, and you’re benefiting because of the work that’s created and the relationships you’re building. So this is something you will want to look at.

Don’t stop with your key trade partners. I am getting calls now and notes from contractors around the country. And what they’ve done is take the Home Asset Management Plan and share it with other home service professionals. With realtors, home energy auditors, architects, and realtors because it gives them a way to engage with their past customers. I got a very successful contractor in Washington DC, who’s in a BNI lead-generation group and they meet, I believe, twice a month. They support each other with generating work for each other.

As this contractor reviewed The Home Asset Management Plan, and the home inspector member in the group came up and said, “I really like this.” He said, “The problem with my business as a home inspector is that people find my website, ask for my services, I deliver the home inspection, and, I never hear from them again.” He said, “This would be a great way for me to go back to these past clients, engage these past clients, and in that engagement remind them that I’m here, remind them that I can help them with friends and family.” Now, this home inspector did not want to be a general contractor, so they created a very unique relationship.

There is now a new link on the home inspector’s website that says, “Beyond Home Inspection.” If people click on that link, it takes them to an overview of The Home Asset Management Plan. Could you do the same thing with interior designers and landscaping professionals? Yes, you absolutely can. There’s a very successful contractor in Virginia, who approached his mortgage broker and his insurance broker.

Another contractor in Wisconsin works in an area where there are a number of people who are over 60 years of age. So in his home inventory, he’s implemented an aging in place checklist, showing people what they can do to their home so that they can stay in the home as they get older. Not only that, but he’s taken it one step further. He’s starting to visit some elder lawyers, people who do elder law. My mother is 87, and I know one of my biggest concerns was making sure that her home was taken care of. He’s introducing The Home Asset Management Plan to elder lawyers, people working with elderly homeowners, letting them know he can help them, and letting the children of these people know that he can assist them with taking care of their parent’s homes. I thought it was a wonderful idea.

I had an accountant attend one of my programs, and she brought up there’s a lot of working women who really need this help. And I want to highlight this. In the April 2011 issue of Qualified Remodeling, these were the first 3 bullet points of the article:

• Nearly 30 million single women own their homes today, and they’re buying them at twice the rate of single men
• More than 57percent of single women are homeowners with no male to rely on for fixing things around the home
• Women spend 50percent more on home improvements than men do

Do you think women would be a good target market? Absolutely, they are.

In Part 2 of the program, I’m going show you how to introduce this to this test group and, secondly, show you how to self-fund the program. We can’t do questions because this program isn’t live. But I do want to do a little infomercial here. Because this program has proved so successful with homeowners, I’ve put together a formatted business system to assist you with this. It’s called – as you might imagine – The Home Asset Management Plan.

Here is what you get with the program:

Complete Setup Guide

• Adding the Model To Your Business
• Determining Your HAMP Clients

Business Strategy Guide

• • Business Development Templates
  • Market Approach Planning Guide
  • Market Strategy Plan
  • Sample Marketing Materials
  • Service Scope Plan
  • Vendor Partnership Guide

Sales Strategy Plan

• 1st Appointment Sample Questions
• 2nd Appointment Sample Questions
• 3rd Appointment Sample Questions
• Closing Strategies Guide

Operation & Production

• Small Projects Division Guidelines
• Systems Management Guidelines
• Scaling BusinessFor Growth Plan
• Scope of Work Review Forms
• Sample tool inventory forms
• Internal Work Processes
• Human Resources Plan
• Sample Job Descriptions
• Sample Ads and Interview Forms
• Recommended Hiring Procedures

Home Inventory Notebook: the Sample Homeowner Notebook is the binder if information thatgoes to your clients. This packageis used toshow prospective clients how the information is compiled:

• Introduction – To the System
• Client Information – Information on the home and the clients
• Observations and Recommendations – After reviewing the property, the contractor compiles a list of observations, recommendations, with estimated costs and contracts for the care and improvement of the property.
• Photos – This section will include photographs of recommended maintenance and repair items
• Project Plan – This is the project schedule for the agreed upon work
• Contracts and Agreements– This section includes all executed contracts for the work to be performed.
• Inventory – This inventory provides the information needed to complete the work scheduled for the first year.
• Communications – All homeowner communication is filed in this section

The Homeowner Notebook has eight sections. Section 1 is client information. Section 2, you’ve done the inventory. You have observations and recommendations. Accompanying that are photos. If you’re identifying some peeling paint, identifying something that’s broken or needs to be replaced, attach a photo so the homeowner can see exactly what you’re talking about. Introduce an actual project schedule on what needs to be done and, on your recommendation, when. You’re going attach estimates and an actual sample of the inventory itself. This is your reference book.

The last section is homeowner communication because you want to make sure you keep track of that paper trail. Do this for your homeowners, do it over time and you will increase the home’s value. You can imagine, five, seven, ten years from now, a buyer coming up to look at this home, and when that homeowner can show them, on an annual basis, what work was done and who did it. The prospective buyer will know that the home was taken care of.

And there’s one other visual I want you to see. We talked aboutjust-come-and-do-it clients. Everybody has a handful of them. Well, I want you to have 50 or 60 of them, and I want you to imagine walking into your office, and looking up at a shelf at the beginning of the year. And on that shelf are 50 or more Homeowner Notebooks where $750,000 to a $1,000,000 dollars of worth of work has already been identified before the year has even started, before any of the remodeling calls have come in. Now you have a sustainable business.

All right, let me quickly review the inventory and simply describe how it works. So what we’ve done in the inventory is identify the rooms all throughout the house and other key working systems. Well, let’s take one section and let’s look at the inspection codes:

• Number one – the item’s operating, does not show excess wear at the time of inspection
• Number two – the items operating, but may need a repair or replacement
• Number three – the item is in need of present repair or replacement

So I took one section of the inventory – the exterior section – and you can see sidewalks. Number three, the item’s in need of present repair or replacement. I’ll make a recommendation. I will attach a picture, so the homeowner knows exactly what I’m referring to. The driveway and drainage are in operating condition. Nothing’s needed. Walls, fences and gates are in need of present repair or replacement. There’ll be a recommendation and a picture the homeowner can see and understand. Retaining walls and patios, nothing needed.

But let’s look at the carport. The item’s operating but may need repair or replacement in the future. They’ll be a recommendation and with that a picture talking about what’s needed and when – it doesn’t need to be done right away. So now what I’m doing is assisting the homeowner with budgeting for this future improvement. This is a quick review. If you purchase the program, you’ll receive the entire program electronically so that you can access it immediately.

Because questions come up, I’ve included an hour of one-on-one consulting, and I encourage anyone who purchases the program to call me with questions that they have. I’ve also included a book of construction-related forms. I do this because every construction project runs more efficiently when there are effective production and administrative forms, so I’ve included that. Again, these are is in a Word format so that you can modify it and customize it easily for your own company, for your own use.

Here’s a sample of the 30-Day Implementation Plan, so you’ll see this is just a one, two and three. I describe action steps, and you’ll see there’s some reading to do. But I tell you what to read in the Instruction Manual. Then I tell you in – under “Who,” who should be reading it. So C stands for contractor, S stands for sales. And there is an orientation board above this where you see who’s involved. And then you’ll see “When” is when do you do this particular activity. And, again, my promise is do this for 30 days on a day-by-day basis. And within 30 days you’ll be making money from The Home Asset Management Plan.

My guarantee allows you to take three months to road test the program. Get it in your office, review it, and make sure it’s something you can use. If not, you have three months to evaluate it. If you’re not happy, just send it back and no questions asked. You’ll get a full refund. Cost of the program, $797.00.

When I’ve introduced this program to people, I’ve had contractors say, “Yeah, I get it, but…” So here are the things I’ve heard:

• People not willing to do this because they’re waiting for the market to come back.

Look, it could be five, seven, or ten years before the market comes back. You can’t rely on an old business model in this marketplace. The economy has changed, and when the economy changes, you must amend your business model to respond to the changes in the economy. This is what The Home Asset Management Plan is about.

I’ve also had people say:

• I don’t want to open a service division.”

In response to this, let me ask you something. When you have a past customer call and they’ve got that broken passage set or a broken window, aren’t you doing this service work already?

In most cases it’s not profitable because it is such a small project. Let’s go ahead and take some of these small projects and turn them into a profitable enterprise. What The Home Asset Management Plan is doing is helping you, proactively, to manage these calls from homeowners and turn small jobs into a profit center for your company. You’re just re-organizing things so that it not only works for you, but it works for the homeowner. Again, you’re helping them manage their biggest asset.

This concept is very straightforward. The purpose of the Home Asset Management Plan is to give you the tools to implement it more quickly. So, getting started, let’s test the concept. Pick five good past customers. You want to target these folks for proof of concept. I’ve given you a sample marketing piece, so you’re going to take that, put your letterhead on it, perhaps customize it in some way, and you’re going send it to these 5 good past customers. Then, within 24 to 48 hours, give them a follow-up call. “Did you receive my mailing?”

When they say “Yes,” tell them you have been introduced to a business concept that you think makes a great deal of sense. Tell them you like to sit with them – and the note you sent you briefly describes what it is. Tell them you would like to sit with them to see they you think it makes as much sense as you do. Then, you’re going set a time to go out and visit with them. You’re going show them the sample Homeowner Notebook. “I’m going to be doing a home inventory, then I’m going to compile that information, put it into this manual which will document what I’ve recommended and what can be done, and then working with you, we’ll collaboratively develop a plan to get these things done.”

Show them the sample inventory and sample homeowner notebook. And when they say, “Yes,” you’re setting a second time then to come out and do the inventory. And once the inventory is complete, sitting with them one more time to review what you’ve put together, to review the outcomes, and then beginning the work. Now, I’ve got to share a story about this. Jeff Hurst of Hurst Total Homes in Centerville, Ohio wanted to do this another way. When I mentioned doing this and visiting five past customers, he said, “David, I’m not going do that, because, if I go on five different sales calls, that’s at least 12 to 15 hours that I’ve spent visiting those five people.”

So I said, “Well, what have you got in mind?” He said, “I’m going to do a focus group. I’m going to invite a small group to my office and, as a group, introduce this concept.” I said, “That’s kind of a neat idea. Will you let me know how it goes?” He said he would.

So several weeks passed and I got a call from Jeff. And he said, “I just did my focus group.” I said, “Terrific. How’d it go?” He started laughing and he said, “I had 31 people attend.” I said, “Jeff, why’d you invite so many?” And he said, “I didn’t think that many would attend.” Now remember, these were good past customers. These were people he had good relationships with.

He had sent out invitations to 35people, but because of his relationships with these folks, 31 out of those 35 attended. At the meeting, he gave them dinner, along with a $25.00 gas cover to pay for their time. He said, “There was a wonderful synergy that took place.” He said, “In reviewing the idea, and going through the concept,” he said, “28 out of the 31 people wanted to be part of his Home Asset Management Plan. He said it was funny because people were coming up toward the end of the meeting, saying, “Who do I write a check to?”

He was not prepared to sell the program that evening and had to say, “I can’t sell you anything tonight. I’m just testing an idea here.” So he said, “It was painful,” but he had to look at them and say, “Ican’t take your check, but I’ll follow up with each one of you.” His point to me was to share that focus groups can work, but he said, “Don’t invite 30 people. That’s too many.” He said, “I’m going be buried doing 28 inventories and putting together all these Notebooks over the course of the next three months.”

But he said, “for people who watch this, invite eight people to 10 people to your meeting. “Make it a more intimate group. Number one, it’s a much better use of your time. And secondly,” he said, “there was just a terrific synergy that took place,” as he introduced the idea. And they began talking about how this could work, and people would add on points of value. So he said, “Very, very effective in that focus group format.” So getting started, remember we’re starting with four or five initial customers, so start small.

This is your beta test, and you’re going let these first four or five people know that this is your beta test, that you’re just implementing this, and you’re going actively ask them for their feedback each step of the way. Ask them, “Is there something we can do better? Is there some way I can add to this to make it more effective?” When you initiate this program with four or five good past clients, these are people who want to see you succeed. So they will actively participate in this process with you.

The good part is if you have a couple of bumps in the road, you can work out the bugs with these initial customers because, again, they know it’s the beta test. It’s not intended to be perfect, and they’re going give you suggestions and ideas every step of the way. And the goal of all this is not only that you have five happy customers at the conclusion of your beta test, but you also have five raving fans. These are the testimonials that you’ll be able to refer to as you introduce the plan to additional clients.

Introduce this in your company and you have a sustainable business model. You’re introducing strategic recommendations that are adding additional projects to your marketing pipeline. Those additional projects are providing ongoing cash flow. And you fundamentally change your relationship with your clients. Again, we’re going from a project-driven business model to a relationship-driven business model. The project-driven business model worked fine when homes were going up in value, and when the economy was strong and money for building projects was available. But when the economy shifted and homes stopped going up in value, these projects dropped off.

We’re moving from a project-driven business model to a relationship-driven business model. And I can’t say that any more clearly than if you manage the relationship, and take care of each client that the projects will follow. You’ll schedule work up to three years in advance. You’ll become a solution provider to each of your customers. Your workplace will be more stable; you’ll build company equity. In this market, helping people manage their biggest asset is one of the best things you can do.

Closing summary:

This concept is recession proof. People always need work done on their homes. It’s proactive – we call; we come. This proactive business approach will identify projects in advance. Imagine starting the year with $750,000.00 worth of work on the books, and to build lifelong relationships with customers that will ensure that your company is strong no matter what the state of the economy. And I mentioned building long-term company equity. Very simply, let’s talk about this for just a minute or two. When companies are sold, they sold for a multiple of net earnings. With the Home Asset Management Plan, you are setting up a recurring revenue model to raise that multiple of earnings. That is an attractive business model for a prospective buyer.

With that increased value, you can transfer it to family, you can sell it to employees, and you can even sell it to an opportunity buyer. Your company has value. So give homeowners what they need by creating a trust-based consultative relationship. Help them manage their largest asset, and gain control at the same time of your financial future. Create recurring revenue, long-term equity and value in your company.

If you decide to purchase The Home Asset Management Plan, you get the Instruction Manual, Homeowner Notebook, the Book of Forms, a digital copy of the program, the 30-Day Implementation Plan and the one-hour consultation coupon: Cost, $797.00.

So if you have any questions whatsoever, please – there’s my e‑mail address: David@davidlupberger.com. My direct number is (303) 442-3702. For more information on this or my other products, go to www.davidlupberger.com.

Before you do anything, take my Understanding the Model document and test the concept with four or five good past customers. Let them tell you what they think.

Look, there’s business waiting for you. So thank you for attending. If you have any questions, or comments, I look forward to hearing from you. Thank you again.

The post Recession Proof Construction Marketing appeared first on Remodel Force™.