Managing Business Risk to Embrace Risk
What’s hiding behind the drywall? Is it structurally sound? How much will it really cost?
There's a risk behind these questions we commonly face as remodelers. But we’re up for the challenge, do our homework, and plan accordingly. The best remodelers manage risk in order to correctly embrace it. That’s our product.
On the actual business side, risk looks different. Risk is necessary for growth, yet our risk tolerance is often low and we face the risk vs reward conundrum.
Risk is everywhere in business ownership, but several factors ensure you reap the reward from these risks.
Risk: Hiring
Remodelers and entrepreneurs are a bit like superheroes: When things are calm, you look like an average citizen. But when things go off the rails, you put on your cape and do it all to save the day. But the problem is that you can’t do it all yourself, but delegating may feel risky.
In a quest to scale your business from a one-person show to a full-fledged remodeling business, you'll inevitably have to delegate. If delegating scares you, manage the risk by remembering that knowledge is power.
Don't let fear paralyze you. Instead, arm yourself with information to ensure this person is the correct fit. Curate the correct interview questions, consider inviting them in for a job shadow day to evaluate their skills in action, and develop a list of values you uphold as a company to judge a potential employee against.
And embrace a culture of learning and collaboration. Set the tone for your culture and vision, and identifying the right hire will be easier.
Related Reading: 3 Reasons You Struggle with Hiring; The Best Formation: Hiring Best Practices; 4 Keys to Home Improvement Hiring
Risk: Growing
I would challenge you that growing too slowly can be just as risky as not growing. Missed opportunities are a hidden cost. It’s your highest and best use as a business owner to identify or create new opportunities for your business and your team members.
Developing the right systems, processes, organizational structure, and long-term planning are critical to help you identify and assess risk—especially with growth.
A great tool for this is EOS (the Entrepreneurial Operating System) Think of it as a trusty utility belt, equipped with everything you need to tackle risk head-on. From strategic planning to accountability charts, EOS will help you and your team make better decisions.
Related Reading: Avoiding Growing Pains in Your Business; Keys to Growing Profitably as a Remodeler; Understanding the Owner’s Role in a Growing Remodeling Company
Risk: Clients
We often underestimate how risky it is to engage with the wrong clients. To manage this risk, you need to ensure that your clients are the right fit for your business and vice versa using a thorough qualification process.
Don't be afraid to ask the tough questions and part ways with a client early on if you are not in alignment regarding, values, expectations, budget, and so on. Taking on projects with the wrong clients can be debilitating to your team culture and can be a financial disaster. This is a risk you don’t want to take on.
Related Reading: 5 Client Red Flags to Watch; 4 Qualifying Questions For When Clients Come Calling
Risk: Pricing Incorrectly
You must be a good steward of your clients' money. Say it louder for the folks in the back! You need to set up your business, and each and every project budget, for financial success. “I can’t charge that much in my market” is one of the riskiest things you can say.
This is a business and it must be profitable to succeed. You must know your numbers or get someone on your team who does to ensure you are charging enough, have manageable overhead, and a healthy profit for your individual business. Numbers don’t lie.
Related Reading: Estimating Three Ways; Remodeling Pricing: From Opaque to Clear; Know Your Numbers
Risk: Running an Unprotected Business
And finally, a word of caution: don't take your construction agreements for granted, don't skip out on hiring legal counsel, and don't skimp on insurance. These are not just suggestions; they're critical components to running a thriving remodeling business that can properly assess and manage risk.
You may try to avoid risk altogether but it may be better to embrace it, understand it, and manage it. There are times when we need to take risks and times when we need to avoid them.
