What type of contractor should you hire for your next remodeling project? This may not be a question that you even thought needed to be asked, but believe me, it does. Remodeling contractors come in many shapes and styles and unless you know what they are, you will be rolling the dice on who you end up with and ultimately the quality of your remodeling experience and the final product.
I have written about what I call “The contractor life cycle” before and basically, this is the evolutionary path that all contractors follow. The question then becomes where each contractor or company is, within the contractor life cycle when you cross paths with them. In other words, do you want Chuck and his truck or Chuck and Associates? Each end of the spectrum and all the ones in between, have their distinct advantages and disadvantages. Let’s walk through each one.
Level 1. Chuck and his truck….w/ a stack of business cards.
Yearly gross revenue- less than $100k
Specialty: handyman jobs, rot repair, decks, sub contract work and anything he can get his hands on.
This was me 17 years ago when I pulled up to Medway MA, a small suburb outside of Boston, in my Dodge truck and cargo trailer filled with my all my worldly possessions and a brand new baby and mortgage. I hit the pavement and went into business as a carpenter. I was the entire show. I had no employees, no license and probably no insurance (I honestly don’t remember) I did it all and it was that way for many years. My pricing was on the cheap end, as I had no idea about profit or margin or overhead or anything and as long as I made enough to pay the bills and put food on the proverbial table, I was happy. To put it bluntly, I was a crap shoot. I think back to my early years and I was basically learning as I went. It was daily on the job training as I tackled new projects for the first time. Most of them went good and I delivered a successful product to my clients, even if I had never done it before, whether it was a set of oak built ins, a custom mahogany deck or even wiring a finished basement, (no permit of course) I figured it out and got it done. There were of course a few stumbles along the way, as I got involved with projects that put me over my head, such as the slate patio, the bookcase door or the concrete resurfacing job (omg, what a nightmare) These were all par for the course, but as I slowly gained more and more experience as a seasoned carpenter and contractor, those types of fumbles became less and less. I honestly feel that my customers got a tremendous amount of value from me at that time. For whatever I may have lacked in experience, I made up for in contentious attention to detail as well as bargain pricing.
Level 2. Chuck has license and a couple guys.
Yearly gross revenue- $100k-$250k
Specialty: window replacement, finished basements, small bathrooms
After slogging along for several years, some guys realize that the next level involves 2 things: First, you need a builders license to do any real projects of significance and second, you need some help. When Chuck finally gets to this level there is quite a learning curve as he tries to learn the fine art of being a boss and managing larger jobs that will also have subcontractors involved. Level 2 Chuck is still a good deal, as his overhead is minimal and he barely marks up the labor of his guys, his subs and his materials, so his prices are fairly low compared to other contractors. The problem, is that Level 2 Chuck is still inexperienced when it comes to large scale remodeling. He is eventually going to figure it out and get it done, but does he have what it takes to be a good remodeler? This is the testing ground for most contractors and in my experience, many of them flame out at this level. Becoming proficient at managing a crew and running medium to large remodeling jobs, is not easy and many contractors that may be good at carpentry or other technical work, are typically lacking when it comes to the various aspects of running a successful business.
Level 3. Chuck has an office
Yearly gross revenue- $250k- $1 mil
Specialty: Additions, kitchens and bathrooms
After being in business for 10 years, (and I use the words “in business” with a grain of salt as the “business” IS Chuck) Chuck has matured quite a bit and has some good jobs under his belt and is gradually taking on bigger and better ones. He may have moved out of his basement and rented an office and maybe even hired an administrative assistant to start handling his paperwork. Chuck has started to understand the business side of remodeling now and is pricing his jobs more accurately to reflect his real profit and overhead needs. Chuck may or may not still be wearing the tool belt and doing the actual work. Most likely he is doing a little of both management and carpentry. Maybe he just does the finish work or cabinetry, but he hasn’t quite hung up the belt.
Regardless of whether or not Level 3 Chuck is wearing the belt or not, he has a good handle on remodeling and has good systems in place for estimating and management. Chuck is also still very hungry. He is early enough in his lifecycle where projects are new and fresh and keep him challenged and on his toes and what he lacks in experience, he makes up for with energy and enthusiasm.
Level 4. Chuck has a real business
Yearly gross revenue- $1mil – $2mil
Specialty: Larger additions, kitchen and bathrooms, large scale remodels, new houses
Very few contractors make it to this stage. I refer to this as the real business stage, where the business, although maybe still very dependent on Chuck, can operate without him. In other words, his company has the people and processes in place, where things can function without him. Depending on Chucks aptitude and similar to Level 3, he may or may not still be wearing the belt. This also will depend on Chucks age. If he is still in his 40’s then he is still in his prime regarding his physical skills. The business can support several jobs at once and has a broad range of capabilities. The business may offer design and consulting services and has the ability to service a wide variety of clientele and jobs. Regarding pricing, Chuck and his company are now at the top end of pricing. He has an average overhead to support with, staff, equipment and profit. Level 4 Chuck does not need your job, but rather can be a little more selective in the jobs he takes on. He brings many years of experience and numerous satisfied clients to the table that make him a real player in the remodeling game.
Level 5. Chuck the enterprise
Yearly gross revenue- $2 mil plus
Specialty: High end, custom building and remodeling
Less than 1% of contractors will ever make it to this stage. Theses are the guys that you know on the street, the big players, the heavy hitters in your area. They do the big jobs and charge big fees. They work with the top designers and architects and bring a full service suite of services to the table. You will get exactly what you want from Level 5 Chuck, but you will pay through the nose. His markup is a minimum of 50% and as high as 100%. His subs and vendors charge premium prices and that is of course passed on to you. (Think, This Old House) This Chuck is best for the high net worth clients, that want a premium experience and a company that will handle everything, with white glove attention.
Now you can see the different levels of Chuck and his place in The Contractor Life cycle, you can make a better decision on the best “Chuck” for your next project. Each one has distinct advantages and disadvantages, but understanding what you are getting, will give you the best chance, for a successful remodel.