Qualified Remodeler Magazine

AUG 2018

Qualified Remodeler helps independent remodeling firms to survive, become more professional and more profitable by providing must-have business information, namely best business practices, new product information and timely design ideas.

Issue link: https://qualifiedremodeler.epubxp.com/i/1017161

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Page 79 of 91

roofing, windows, bath replacement, HVAC and similar. Successful companies have a max cycle time of five to six weeks. Marketing costs and the advance of partial commissions for the salesperson during this cycle-time may represent 20 percent or more of the back- log revenue. Do the arithmetic with your own backlog. Every $100,000 contains $20,000 to $25,000 of your company's capital. On a larg- er scale, every million dollars in backlog may contain $200,000 to $250,000 of your capital. Often companies unwisely respond with temporary measures. They recruit skilled labor by offering high- er wages/rates to those employed by their competitors. This creates a sad cycle of of their inability to address this crisis. The other possibility is "surviving" as opposed to "thriving" with a profit that is inconsistent with the risk and the effort required to make a small net pre-tax profit. Thus, these com- panies are sacrificing the potential profits to which they are entitled to expand and solidify their business, while creating security for themselves and their families. Most companies didn't plan in advance for the increase in sales. Nor did these companies create and follow a cycle time (the time measured from the day the company received the contract to the job's completion). The backlog of uncompleted work causes a cash drain—products such as ISSUE NO. 1 GREATEST "SKILLED LABOR" SHORTAGE IN THE HISTORY OF THE INDUSTRY! Many companies had a banner year in 2017. The revenue increases are continuing for most companies in 2018. However, business back- logs (uninstalled or unstarted home improve- ment projects) have increased dramatically. The home improvement industry is now facing the greatest shortage of highly skilled labor, ever. The inability to crack the code for labor will limit growth, profit and cash flow. Some companies may not survive as a result 3 Major Issues Facing the Home Improvement Industry By Joe Talmon Photo: © Greg Pickens / Adobe Stock 80 SPECIAL SECTION: HOME IMPROVEMENT PRO | August 2018 QR QualifiedRemodeler.com

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