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SMALL BUSINESS | Business Make-Over

Remodeling Job

Contractor does all the work himself, leaving the business side to wallow. He needs capital, advertising, a plan and a partner.

April 15, 1998|CYNDIA ZWAHLEN | SPECIAL TO THE TIMES

Alan Underwood struggles with a problem that plagues many entrepreneurs of the one-man-band variety: how to maintain momentum.

A spurt of new business for his Studio City general contracting firm, Underwood Construction, means long hours on the job site while marketing and other new business-development chores go unattended. When business slumps, cash flow ebbs and Underwood doesn't have the resources needed to drum up new remodeling work.

To make marketing matters worse, the job site is something of a refuge for a hands-on person like Underwood, he says. It's an issue he has agonized over for several years.

"I always find myself ending up at the job site more times than I like. That's a weakness for the growth of my company," he said. "It won't grow until I take my tool bags off and concentrate on marketing and business development."

Underwood was spurred to ask for help when preliminary sales figures showed business down 30% at $150,000 last year compared with three years earlier. A year-end flurry of work pushed sales to $250,000, but after 12 years in business, he says, volume should be higher and steadier.

Marketing is the key to his goal of doubling sales to $500,000 this year and ensuring a steady flow of work, Underwood says. He's made some moves on his own but he still feels torn between tending to existing customers and finding time to rustle up new business.

The business could use an organized marketing plan, agreed consultant Harold Hammerman, a retired general contractor and a consultant to the Small Business Administration's SCORE program.

But marketing is not the biggest problem Underwood's company faces, Hammerman said. He is more concerned with the lack of capital.

"This is not a handyman's job. He has to have some capital to sustain himself," the consultant said.

Long-term and working capital are vital to the operation of any business. In Underwood's case, permanent financing, such as a line of credit, would provide the working capital needed to cover the costs of remodeling jobs before payment is received. Long-term capital would pay for advertising, for example, and new or upgraded tools and machinery.

Hammerman estimates the construction company needs $50,000 to $150,000 in capital to operate effectively.

A bank loan or a line of credit are the typical sources of outside capital for a business with a good credit history. Like many small-business owners, though, Underwood has gone through the wringer trying to weather the vagaries of the construction business. His company managed to survive the recession while many competitors failed, but when a couple of customers skipped out on paying--a problem common to all businesses--Underwood Construction's capital and credit took a hit.

A business partner may be the answer, Hammerman says. He suggested Underwood look for a working partner who can put some money into the business, or who has the credit to get a loan. A partner qualified to handle the construction side of the business would leave Underwood free to concentrate on marketing, advertising, sales and overall management, the consultant said.

Would anybody be interested? "I would be if I were a younger man," said Hammerman, president emeritus of the Western Regional Master Builders Assn. Underwood is "talented and he's extremely bright. . . . I was impressed with his knowledge of construction problems and costs."

Another small general contractor might be a business partner candidate, or Underwood might want to hook up with his longtime foreman, Hammerman said. If the foreman owns his own home, he may have access to credit the company needs.

Before he can ask for capital from a potential partner or a bank, Underwood needs to put together a business plan, Hammerman said. The plan will serve as a sales tool for an investor and an operating manual for the company.

First priority: Set a month-by-month budget that includes expected sales and expenses, including marketing costs, Hammerman said. The plan should also clarify the company's target market, including its geographic and demographic reach. It should lay out exactly what type of advertising and marketing the company will do each month and include job descriptions for Underwood and a potential partner.

"It doesn't have to be a book," Hammerman said. "But it should be a description of the business" month-by-month for a year.

Once the business plan is completed and the search for a partner underway, Underwood can begin to implement the low-cost marketing and business development strategies Hammerman recommended.

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