Case Study: ADR Builders

President: Gary W. Stokes
Location: Timonium, Md.
Years in business: 25
Staff model: 3 office, 9 field
Business model: Residential remodeling only
Average job size: $26,000
2003 volume: $1.67 million

2003 jobs:

2003 warranty costs: 1.43% of sales
Markup target: 65%
Gross profit percentage target: 35-37% of sales
Overhead target: 22.5 to 25.5% of sales
Marketing target: 2% of sales
Net profit/owners' salaries: 16% averaged over the last five years

Margin, markup and cost strategies:
President Gary W. Stokes, pictured, says ADR usually strives for a higher markup and margin on smaller projects. "We go for 40 percent margin on jobs under $10,000; we go to 34 to 35 percent on the great big ones," he says. Though his usual markup is 65 percent, he might go as high as 100 percent on a small job.

Even with material and insurance costs rising, Stokes doesn't cut costs. "Our overhead is pretty fixed. We don't have room," he says. "There's very little that we consider optional." The solution: add markup and improve sales skills. "We'll look at other options," explains Stokes. "If a project costs $200,000 and you want to spend $175,000, we'll suggest changes in the project to lower costs, but we don't cut costs."

Tips for high-performance business results:
1. Focus. "We're very focused on what we do. We don't do a lot of different kinds of work, and we don't work in a very big area," says Stokes. "Since we're doing these kinds of projects over and over, we have a good system and know what's going to happen."

2. Organize. "We're very organized. We have very good record keeping, we're really on top of getting things ordered properly and promptly."

3. Eliminate layers of management. "We have excellent project managers - they're the equivalent of a lead carpenter. We don't need a production manager," says Stokes. "We have no middle management. That keeps costs down."

4. Get third-party input. "The whole support staff that Remodelers Advantage Roundtable have, and the other remodelers you're in the group with and get feedback from, that's been a huge help."

5. Review jobs in progress. "I review jobs biweekly," he says. "What I'm looking for is, here are five jobs in a row where we're under on floor framing or tiles. We have to adjust to reflect that."