Tell me about your book and who it’s written for.

“I started my real estate career in 1987 with CB Richard Ellis Commercial Real Estate. They taught a very specialized system to brokers. The system was based on product and geographic specialization. The system worked in every market. In 2000 I started investing in Real Estate and added a design/build business. I got into decorative concrete and coatings as an inexpensive curb appeal solution to rehabbing properties. I found that most contractors just took business where they got it, with no business plan. The book is written for any trade within Real Estate. I use Case Studies in The Guide of decorative concrete applicators, but it’s written for every contractor. I’m considering writing a version for Real Estate brokers.”

How did you gather your research?

“What inspired me to finally write The Guide was a marketing project (I’ve evolved to the Internet as well) I did for a company with a new coating. They developed a product for resurfacing concrete. Excellent product for floors over 1,500 square feet. The product is a one-day application, which is fine for small floors. They based their business on the one-day application. Problem is, small floors lose money. They never did the financial analysis to determine profitability. I realized they were doomed to failure because they were targeting the wrong market. Once I saw this I realized that the market needs The Guide.

“Here’s a company with a superior product and tremendous knowledge. They have exactly what it takes to be extremely successful, but they are targeting the wrong market. This is why I wrote The Guide. 99% of all contractors have the ability to be financially successful but don’t know how to go about it. The 99% of contractors who break even or fail have just as much talent as the successful 1% and work just as hard breaking even as the 1% who succeed.”

Tell me about the system for success that you describe in The Guide.

“The system is based on being the expert in a market. Let’s say a contractor identifies 75 Grocery anchored shopping centers. Now there are a few different kinds of shopping centers. I’m choosing Grocery anchored for a reason. Every successful investor specializes. So when it comes to Grocery anchored centers, there might be only 15-20 owners of the 75 targeted properties.

There is a good chance that the same property managers run the properties, the same architects, electricians, plumbers and frequently tenants. Many of the tenants are frequently local instead of national, so it’s easy to get to the owner. Now if a contractor stays focused and turns away all business other than the 75 properties, they will capture a large market share. They become much more efficient, they don’t have to travel far, they will control their expenses and manage their books easier because they have a specialized business.

Consider that 75 Grocery anchored centers have 20 tenants minimum per center, that’s 1,500 stores. 7% annual vacancy yields 100 new stores every year. You can see the program can work for architects, general contractors, flooring applicators, electricians. That’s how a contractor controls business. Another basic is that ‘people do business with those they like and trust.’
By specializing, contractors can charge a premium and still get the business because they have developed a relationship. Without a targeted plan every project is like the first. This strategy applies to every trade and market.

Specialization is a science and an art. It’s not hard when you know how but you have to know the process. It starts with the economics of a trade or specialty, then the target market like Grocery anchored centers or office buildings or single family homes. Learning to use the proper marketing tools properly, like newsletters, blogs, and websites to pre-sell services. Presentation packages, contracts, communication logs. They all work as one. This is how a quality profitable business is built. I might point out that this is how a contractor brands their business and gets lots of Word Of Mouth Business. Word of Mouth will lead to other like kind business.

But it is work.

While the article in Money Magazine is geared toward homeowners, there are some important lessons for contractors as well. Mainly getting to know the homeowner in today’s market. Even those with the means to put on a new roof or expand the master bedroom are thinking twice about it. For a few reasons:

• the return on investment is at a low point in the current housing market
• the future is incredibly uncertain

Fortunately, however, there are more reasons why homeowners who can, should remodel:

• material costs are falling fast (especially for oil-based products such as vinyl, asphalt)
• smaller, necessary “fix-ups” still need to be done
• increased competition means lower prices, more concessions
• putting money into the home now, while costs are low, will help the home maintain its value

Still, it’s a very touchy game on all sides. Contractors desperately need work, homeowners still need or want upgrades, but the housing market is not finished declining. It is therefore very important that homeowners understand which projects will have the best return on their investment and will likely be meticulous about choosing a project and a contractor, as the Money article itself encourages.

As a contractor, being able to understand and answer homeowner concerns regarding payback, efficiency, and long-term benefits may just be the key to getting hired. The majority of homeowners will be fully aware of their newfound power to persuade. Instead of coming into the conversation resisting this fact — with a salesman’s attitude so to speak — come in understanding it. Show the homeowner that you can save them money, perhaps by encouraging the use of current low-cost materials. Even if your bid is a bit higher than the next guy, if you’re confident, honest, and able to ensure their satisfaction, well that’s a foot in the door right there.

It will also be important to be clear and concise with your bid. Homeowners will want itemized bids and proof of licenses, insurance, and other documents. Interviews will be longer and more detail oriented. Having answers to these questions is vital. Also, if a homeowner is NOT asking these sort of questions, you can volunteer the information and encourage them to be aware of suspiciously low and vague bids from other contractors.

You must also be ready to offer a price break. In a survey, 70% of contractors said they would offer at least a 10% discount on work. The remaining 30% went even further.

These are tough times for the economy and subsequently complex times for bidding remodeling work. Doing the homework is as important as ever. There is a different brand of homeowner now, different from even a year ago. That is how volatile the market is right now. But so far as it goes, remodeling contractors are sitting relatively well right now, if certain forecasters are right. It is a surprisingly good time to remodel. But the ball is in the homeowner’s court and developing trust and a good rapport is as important as ever.

Well, you have two options right now. You can either sit there and wait out the storm and possibly go under as many of your competitors are, or take advantage of a slower time to revamp your business.

I spoke with a few construction companies recently. Operating in California, they are struggling with the new laws that require all plans to be inspected by an architect. One family company decided to send one of the younger brothers to college to become an architect. Another company is using this time to branch out and to explore new avenues. They invested in heavy equipment and training for some crew members so that they can now offer excavation services. One older construction owner made the decision to take this opportunity to scale back his operation and pursue a lifelong dream to build custom furniture and cabinetry. He enrolled in the appropriate classes to learn the trade, and is now happily remodeling his shop to accommodate his new direction.

The point is, don’t just sit there. Use this slower pace to do the things that you’ve been too busy to address in years past. As a friend who was dying from cancer said of his enthusiastic outlook, “surround yourself with those you love and always have something to look forward to.” This economic storm will end, and a bright future will emerge. Those who will survive and prosper will be the companies that take the appropriate action now.