Contractors are always scrambling for work and looking for the next job. Since the 2007 recession many contractors have looked to diversification as a way to triumph over a slowing economy. But diversity is not always your friend. New types of work also require new craft skills, newfangled estimating techniques, patience and dedication to a new process. So what’s right for you?
First, take a hard look at yourself and your company and determine your core competencies. Core competencies are what your company does really well. Stepping outside of those strengths makes for even greater challenges and decreases the odds for success. Forgive me for stereotyping folks, but when writing an article it can be a quick way to help readers grasp the point. Each and every one of us has certain strengths and weaknesses. This is also true of companies. Here are some common competencies of roofing companies:
• Sales vs. Technical. Are you a sales organization or a technical organization? Yeah, yeah, I know you have to be both, but in reality you will have stronger tendencies in one area over the other. A residential roofer that subs out work and has a commissioned sales team has a different culture than a commercial contractor that excels at technical roofing systems and utilizes estimators. If you are a residential roofer who uses subs and heavily commissioned sales reps, you may want to stay away from extremely technical jobs. The technical commercial contractor may suffer when competing on less technical work where their expertise is not an advantage. Know your culture and be realistic about your strengths.
• Inside vs. Outside. Outside the building versus inside the building scopes of work should also be a competency qualifier. Interior jobs in an occupied home or commercial building require an elevated level of customer service and employees. Potential theft, breakage, home or workplace disruption and a host of other pitfalls come into play. Suddenly not doing background checks on employees and hiring a convicted rapist can have a horrendous outcome. Inside work is also subject to a higher level of esthetic scrutiny. Customers can simply walk over and look at the job, where roof inspection access is more difficult.
• Roofing vs. Remodeling. Remodeling and trade complexity also impact competencies. Moving into remodeling has bankrupted numerous contractors. This can be a particular problem with residential roofers. The desire to do inside work on a rainy or winter day and maintain consistent work flow can drive contractors to make decisions that are not in their best interest. Remodeling is a difficult business. Estimating is tedious and very time consuming. Sometimes you can visit and sell a simple roof in the less than an hour. Estimating complicated remodeling projects may take 20 hours or more. This is obviously going to impact the number of things that can go wrong as well as how many jobs you can sell. Contractors can easily be sucked into the “I can do everything” trap. A simple deck, siding, or window replacement job leads to the customer asking if you can tear out and remodel a kitchen. And you may be able to do this on a limited scale, but to move heavily into this direction is going to take a different type of crew, supervisor and company.
• New Construction vs. Roof Replacement. Moving from new construction to roof replacement can also be a challenging transition. Both segments demand a different emphasis of service. New construction roof schedules are always demanding. The general contractor needs and wants the roof NOW, so the building can be enclosed for the interior trades to move forward. The problem is schedules never hold true and suddenly you have a bunch of jobs to perform at once. Re-roofing requires a different type of customer service and sensitivity to the specific needs. If a property manager has a renter screaming about a roof leak, you must have the repair and service ability to respond to that need. If not, you can lose a customer that took years to develop. Cash flow and your financial capabilities also play a role in the diversity decision. Residential reroof contractors get paid at the end of the job. New construction, commercial and insurance contractors are not so lucky. Many residential re-roof contractors lack the capital required to fund 30-90 day accounts receivable.
Some simple questions to ask when looking at diversification are:
• How much time do I have to commit to this?
• Who is doing this type of work now?
• How will the sales and estimating effort differ?
• How will my organization have to be structured differently?
• Realistically, how much volume can I expect to generate with my current capacity?
• Where will my business suffer when our attention is put into this area?
• What are the key differences in this type of work versus what I am doing now?
• How much cash is it going to require and do I have the capital to support it?
• What is my current craft and technical capacity in this area?
• How hard will it be to find and train people to do this kind of work?
So what does all this mean? First, understand there is no “no brainer” form of diversity. If there was, someone else would be doing it. Diversity takes strategic planning and organizational development. This requires time and money. So shooting from the hip and hoping this new type of work is going to save you rarely works. That is why roofing contractors must fix what is wrong with their current business before looking to a new area to miraculously save them.
Don’t get me wrong — taking risk and being an entrepreneur has both financial and psychological rewards. Just be realistic about the process, plan your expansion and totally commit to the changes.