Five Reasons Why You’re Bleeding Money

"Hey, while you're here, can you just…"

As a professional remodeler, you've undoubtedly heard that phrase (and others like it) a million times before from clients as you're hard at work remodeling their homes.

Whether it's a kitchen remodel, a new bathroom, or a basement you've you're working on, homeowners often think that just because "you're already there," it's okay to keep interrupting you to do little tasks on the side - without any consequence to the actual job you're there to perform.

Because, after all, from their perspective, you're already in their house, and you've got the tools with you to do the job. So why not just do it?

Because that's not what they hired you to do. And because your time is valuable.

Whenever you step away from the original project you were hired for in order to install a light fixture they picked up at Home Depot, fix a leaky faucet, or stop a door from squeaking, you're spending time doing something you aren't being paid for.

You're not earning money for that task - and it's taking you away from a task that does generate revenue.

And in the long run, that's going to cost you plenty.

Extra Tasks Eat Profits

Being profitable as a remodeler means ensuring that all your work is revenue-generating and that you aren't leaving money on the table by doing unpaid work just because a client asks. No matter how small the ask is (looking at you, Home Depot light fixture.)

If you're constantly saying yes to those "oh while you're here, can you just..." requests, or if you're not properly charging for the time you spend researching and pricing out changes that clients make mid-construction, it's time to take a hard look at how those tasks are impacting your profitability, and put systems into place to stop that money from bleeding out of your business.

5 Things You Can Do Now to Stop Bleeding Money

You got into this business to be profitable, and that means taking control of your financial numbers and ensuring that each project you choose keeps money flowing into the business - not out of it.

These are the five most common - and easiest ways a remodeler can change their processes, so they don't bleed money out of their business:

#1 - Start charging for your time to price out "extras"

The Problem:

Whenever a client asks you how much it would cost to add another electrical outlet or change the vanity they chose for the bathroom, you need to spend time researching and pricing it out. And more often than not, the client ends up not choosing to move forward with that request. That's billable time you've spent on a task that you aren't being paid for - and should be.

How to do it:

Add a clause into your contract that provides you with an administrative fee (something like $100, $150, $200) to price out any change requests. This will help you recoup payment for the time you spend pricing out something that a client doesn't select.

#2 - Stop doing the "While You're Here…" tasks

The Problem:

It takes time and money to complete every task - even the "this should only take a few minutes" ones. The difference between those tasks and the ones you've been hired to do is that they aren't accounted for in the price you're charging your clients. Time spent doing tasks outside of your original SOW is billable time you could be charging another client.

How to do it:

When your client asks you for additional work, treat it as additional work. Keep a running list of all the extra tasks they ask for and then price it out for them. This way, you achieve two things: 

1) You manage your time more efficiently by bulking those tasks together

2) You get compensated for that work.

#3 - Adjust your pricing for increases in costs

The Problem:

Material prices fluctuate constantly, and the price you quoted a client for tiles, soft lumber, or even paint might change dramatically during the period between estimating and when construction begins. That's a cost you shouldn't have to absorb but should be passing along to your client (in the form of a change order).

How to do it:

Put an Escalation Clause in your contract. I've said it before, and I'll say it until I'm blue in the face. An escalation clause covers the increases above X% to handle crazy market conditions, just like those we've seen during the pandemic.

#4 - Stop competing on price

The Problem:

Being a successful remodeler means taking the right jobs - and ensuring you're charging clients enough to be profitable and cover the unforeseen issues that always arise on a job site. When we compete on price, we stop charging based on our years of experience and start charging just to "win the job." But by doing that, you're losing out on the ability to charge what the job is worth.

How to do it:

Many businesses won't make it to their 10-year anniversary. In order for you to get there, you need to Know Your Numbers and be battle-ready to present clients with the price you need to charge to be profitable.

#5 - Don't allow clients to purchase materials

The Problem:

There are so many reasons why clients shouldn't be purchasing materials, like not being able to control the quality or be able to warranty them. Still, the biggest one by far is the lost profit on materials you didn't purchase. When a client says they want to buy the tiles, flooring, or fixtures, you still have to spend time overseeing and managing those materials, but without being able to charge a mark-up on them to cover that time.

How to do it:

Update your contract to reflect that you purchase all materials and supply all the trade partners for your projects. Then ensure you have that conversation with prospective clients early and often in the sales process, so they are 100% clear about it.

You're In Control

In order to be profitable, you need to be in control of the entire project. That means not putting yourself in situations where you're doing unpaid work, like overseeing and managing materials that your client bought instead of you, or doing extra random tasks just because you're already there. Or undercutting your own pricing just to "get the job."

We all have the same 2000 working hours each year, and it's up to you to ensure those hours are as profitable as possible.

That means answering the "while you're here" questions with "yes, and here's the cost for that."