Improving Your Business
Is Our Business

Regardless of your political beliefs, there is a health care bill which has just passed through Congress that will have an unbelievable impact on our industry. Section 9006 of the new health care bill has a provision requiring every business, charity and even state and local governments to file a 1099 tax form listing every purchase of goods or services or accumulated purchases which exceed $600.

In past years, this requirement was strictly limited to payment for services. This is not the case anymore. Now, if your phone bill is greater than $600, or your purchases at Home Depot or a similar store exceed $600, your business is required to file a 1099 tax form.

It is unthinkable the amount of paperwork that this will create for manufacturers, distributors, service providers and retailers within this industry (not to mention the IRS).  As such, you can count on a massive increase in the number of IRS agents and supporting staff which will be hired to respond to this requirement.

Furthermore, the added costs to most businesses will be tremendous. Estimates of up to $23,000 annually have been calculated.

Senator Mike Johanns (R-Neb.) has written an amendment to repeal section 9006.  It is suggested that concerned business people write their senators asking for support of this repeal.

There is also an alternative amendment submitted by Senator Bill Nelson (D-Florida), which would exempt businesses with 25 or fewer employees for compliance with this section.  However, with the current movement to reclassify independent contractor status, a majority of the companies in the home improvement business who are affected by section 9006 will not find much relief in Senator Nelson’s amendment.

Again – we urge you to become familiar with this provision and write to your senator asking for support of Senator Johanns’ amendment. Forward this to any of your suppliers and other companies similar to yours.

For more information on how this legislation will affect your business, don’t forget to attend the home improvement profitability summit in Baltimore, where our team of experts will give you the latest legal news regarding our industry.

This is not an easy question to answer, particularly when our economy is so turbulent. However, contrary to popular belief, the economy is not the biggest factor in the decline of entrepreneurial selling organizations.

It is extremely complicated for most business owners to make the transition from an environment where they are at the heart of everything that goes on within the company to one where there are multiple levels of organizational structure.

Within the home improvement industry, this becomes even more complex as many companies that are looking to grow consist of no more than a few employees, and the principal owner of the business may be responsible for the majority of the “selling” that takes place.

As you are looking to take that next step to grow your business, keep these points in mind:

Hiring the right people and avoiding the wrong ones is the first step you need to take before you can undertake significant growth

As I stated in the last blog posting, “Turnover is the death knell of any small to moderately sized selling organization.” You need to decide what positions are most critical that you hire for first. Do not make the mistake of attempting to grow your business by hiring extra sales personnel, a canvassing crew and a marketing manager all at once.

Once you determine what position(s) you want to start out with, you need to invest the time and resources in hiring the right people. I have yet to meet a manager who was perfect at pinpointing the right person for every job. This is why we recommend the use of tests and behavioral profiles during the process. The test determines whether the individual can do the job that they will be assigned to (i.e. if they have the skill sets). The profile will determine whether the individual’s behavior matches the job. Behavior is neither right nor wrong, it just is, and we have identified specific behavioral types that fit best in certain job roles.

Stop thinking like a salesman

Easier said than done right? In all likelihood, if you are reading this blog entry, then you have been a salesperson (or someone in a selling role) for most of your professional life. The problem is that when you make the transition from a “salesperson” to a business owner you need to change the way you think. It takes a different mindset to manage sales than it does to manage people and you will frequently find yourself struggling to relate to your employees if you do not abandon some of the behavioral traits that made you a sales superstar.

Plan more structure

Some of your employees may like structure, others may hate it, but the truth of the matter is that all of them need it.

Without clearly defined boundaries and goals in place, there is too much freelancing and your employees will have a tendency to abandon reason in the face of personal priorities.

Furthermore, there needs to be organizational checks on this structure or it will be changed and altered within weeks of their training.

System selling

A common question we get when conducting a client observation is: “How many steps do you recommend in your sales system?” My response is that the steps aren’t as important as “sticking to the system”.

Too many people get hung up on a number, when that is not the key in closing a prospect. The key is a scripted sales methodology that you are comfortable with and becomes part of the organizational philosophy.

Structured price (formula – application)

I recently covered this is another blog posting. Too many companies arrive at a price based on what their competition is doing, what will give them a “competitive advantage”, or some other arbitrary number.

The fact is that in order to achieve a healthy profit margin, there is a formula we developed that is foolproof. No matter your product/service, by sticking to the numbers you will assure that you don’t miscalculate your profitability.

Log and track every lead

Yes – it is important to qualify your leads, but it is also a huge mistake to not log and track every single lead that comes into your business (by any form of communication).

Just as important is what you are using to track your leads. Without a strong system in place to manage, organize and follow up with your prospects, you are increasing your administrative time and costs exponentially.

Delegate, delegate, delegate

Staying involved in all facets of the business is critical for all business owners, but just as important is delegation.

As your business grows, so should the number of tasks that you assign to other employees.

What? You say that you don’t have faith in them? Go back to step 1 and get your hiring system up to speed to make sure that you have a team in place that you can count on to do the tasks that you simply don’t have time to do anymore.

Before you lay too much blame on the economy and the government (I’m not saying they aren’t responsible), you need to examine your internal processes, because unless you are sticking to these guidelines you are setting yourself up for failure.

What are the key factors affecting the home improvement industry? From our experience, what our clients present as their primary problem(s) typically end up being far different from what they actually are.

Here are some of the notable issues that our clients reported that they are facing:

• Leads are down, but the “cost per lead” is up
• The demand on one’s time seems overwhelming
• Interested parties are harder to get together (leading to one-leggers)
• Keeping up with home improvement regulations is difficult
• Hard to find workers without “baggage”
• Higher turnover in sales force
• Customers seem to complain more than ever

This is a wide array of issues that paints a picture far worse than what may actually be occurring. After conducting a client observation, we typically find that:

• Selling methods are incongruent with the customer’s decision making process
• Improper training is taking place, stemming from a lack of coaching
• Salespeople are being hired with the wrong criteria
• Business owners spend their time managing instead of leading
• Improper compensation methods are in place

So what are the keys to improvement? Here are just a few that we stress our clients to abide by:

• For every ¼ HOUR spent in planning – 1 hour is saved in operations
• Find the right people and systems to improve the bottom line
• Balance the amount of time spent on calculating the cost of your home improvement leads, the type of products/services being offered, the potential profitability of each, maintaining cash flow, and lowering the turnaround time of production. Putting these things in the order of importance is key for the company to prosper.
• Remember the 4 P’s: Pricing – People – Products – Production

Contrary to what you might hear or believe, these elements do not change depending upon what geographical market you operate in or what products/services you offer. There is a proven formula for success within the home improvement industry, and by following specific guidelines you increase the likelihood that your company will flourish for years to come.

Continuing on with the summary from the Home Improvement Economic Summit in Indianapolis, Paul Toub reviewed the amended Toxic Substances Control Act (TSCA) and its impact on the remodeling industry.

As Marketing Director of Anthony Home Improvements, Inc. and Housecrafters (installers for 58 of The Home Depot stores), his understanding of TSCA and Lead Safe Work Practices is unmatched within the industry. As a result he was an integral force behind the foundation of Kachina Contractor Solutions, which assists remodelers in conforming to these ever changing laws.

Some of the highlights from his presentation included:

• The April 2008 amendment to the Act and the impact that it has had on the industry
• A sample of an old Lead Safe Work Practices pamphlet versus the new one highlighting the differences of what is required
• Examples of penalties which have occurred over the last year to companies that did not conform to these standards (violations ranging up to $37,500 per day)
• The types of work that are covered under the act
• The possible exclusions under the act (which should not be relied upon)
• A revision to the act which will occur in April of 2010, making the guidelines much more stringent for remodelers. The only exclusions will be for newer construction homes and lead-free certified job-sites. While at the moment there is a provision in place for owners to “opt-out”, The Sierra Club is pressuring the EPA to eliminate this option.
• The EPA-certification process and how to become a certified renovator

The primary take away from this segment was that there is a huge degree of uncertainty in regards to how these laws will be interpreted in 2010 so you should do everything in your power to err on the side of caution.

Keep in mind that you can contact us at (703) 591-2490 with any questions – - and if you have not already ordered it, we are offering the recording from our first summit on our website.

As many of you within the industry are already well aware, the stiff lead paint regulations have had a tremendous impact on the way that businesses our run.

While we at Dave Yoho Associates certainly are outraged by the negligent practices that have caused illnesses and deaths as a result of lead paint infractions, it is our view that the government is taking extreme precautions that are making it difficult for “the 99% of home improvement contractors who run their business by the letter of the law”.

Now, there are rumblings of stronger regulations and fiercer penalties being proposed by Congress.

At our next Home Improvement Economic Summit renowned industry legal expert D.S. Berenson will present pertinent issues that you as an owner of a successful home improvement company need to be aware of as we move towards 2010.

Also, one of our business partners, Kachina Contractor Solutions, is on top of all the latest developments that our occurring and we advise you to contact them should you have any further questions.