The Best of Both Worlds

        By:  Janice Costa

In a time when google is the ultimate information resource, “friends” are a commodity found on Facebook and everything from phones to refrigerators are “smart,” it’s easy to assume the whole word has gone to the technophiles. And, indeed, technology continues to have a growing impact on everything from the way information is accessed and how products are ordered to how the industry markets kitchens and baths to consumers.

Yet most kitchen and bath dealers prefer to take a middle ground approach that blends elements of high-tech communication with the human touch – balancing magazines and newspapers with Web sites and online videos, trade shows and live conferences with Webinars and online interactive training courses, and e-Newsletters with good old fashioned word of mouth.

In the age of modern technology, kitchen and bath pros have decided that they want the best of both worlds – so that they can access what they need, when they need it and in the format they need it in – whether that’s “live,” online or some combination of the two.

That’s according to a recent KBDN survey that polled more than 540 kitchen and bath dealers and designers about their technology habits and preferred sources for gathering information.

Multiple Information Sources

In a tight economy, information becomes a more valuable resource than ever. So it’s no surprise that kitchen and bath professionals are tapping into multiple information sources to stay abreast of the latest news, products, trends and more.

While online research is popular for its speed, ease of use and 24/7 accessibility, respondents who were polled about where they get their kitchen and bath industry information and news actually cited industry trade magazines as their number one information resource, with 92% of those surveyed citing this as a key source for industry news and information (see Graph 1).

The second most popular information source, not surprisingly, was manufacturer Web sites. As one dealer noted, “The market is still changing fast enough that you need to constantly stay on top of specs, and most manufacturer Web sites are very good about keeping this info up to the minute.”

After manufacturer Web sites, consumer magazines (50.8%) and industry conferences/trade shows (43.4%) were cited as top sources for industry info, followed by e-newsletters (41.4%), magazine Web sites (40.1%) and word of mouth (34.1%).

Webinars were cited by 27.6% of respondents, TV was cited by 19.9% of those polled, live seminars won 19.3% of respondents’ votes and blogs were named by 16% of dealers and designers surveyed.

Twitter was seen as the weakest source of information by those polled, with only 4.3% viewing it as a credible source of industry news or information.

Using the 'Net

The Internet provides both myriad opportunities for seeking out knowledge and numerous platforms for accessing that knowledge. However, not all of those platforms resonate with kitchen and bath professionals. For instance, while 71.3% use the Internet to research product info and literature and 68.9% use it to read news stories, a mere 3.5% of those polled download apps and only 3.3% seek out company social media sites (see Graph 2). Likewise, online opinion forums, which were all the rage a few years ago, seem to be falling by the wayside, with only 1.1% of those polled saying they use the Internet to post on these online forums.

More than one third (38.1%) go online to watch videos, 13.3% sign up for alerts or newsletters, 11.8% purchase products online and 10.9% sign up for Webinars and read blogs, respectively.

Social media is one of the most popular places kitchen and bath dealers and designers use to interact online. However, there does seem to be a bit of a schism here, with dealers and designers either loving social media sites or hating them. In fact, while nearly half of those surveyed say they use social media at least several times a week (and more than one third say they’re on daily), another quarter of those polled say they never use social media (see Graph 3).
“It’s a huge time suck,” explains one such kitchen dealer, who says she sees friends and colleagues losing hours a day to the social media world, without any tangible gain in business to show for it. “It’s easy to get caught up in the whole social media thing, because everyone’s doing it, but in a tight economy, you have to look at what’s going to generate revenue and what’s just a waste of time. I haven’t seen any real evidence that social media brings in clients or generates profits,” she says.
However, another survey respondent had a very different take: “Today, more than ever, it’s all about being out there and making connections. Potential clients can go to my Facebook page and not only learn about my business, but also see designs in progress, read client comments and feel like they’re getting to know me and my business. It creates a comfort level that gives me an edge, which is important when everyone is out getting multiple bids before choosing a designer.”
While not as popular as social media, online videos seem to be gaining traction with kitchen and bath professionals, with 44% of those surveyed saying they watch online videos at least several times a month (see Graph 4). Another 30% say they watch these videos a few times a year, while only a small percentage (6.6%) say they never watch them.
Likewise, Webinars are making slow inroads into the kitchen and bath industry, as greater time constraints and reduced travel budgets have encouraged kitchen and bath dealers and designers to consider educational options that don’t require expensive travel.
That said, according to those polled, Webinars are still something that dealers and designers participate in sparingly, with 42.2% of those polled saying they attend Webinars only several times a year (see Graph 5). By contrast, only 21.6% say they participate in Webinars once a month or more, while 25% never attend Webinars.
But this trend may well grow due to its convenience and time-saving aspects. As one designer states, “Being able to squeeze in some extra training in an hour while I’m eating my lunch is very helpful. Continuing education is important to me, but time is tight, so this gives me the best of both worlds.”

Phone Plans

While technology is always growing by leaps and bounds, smart phones in particular are in high demand. And dealers and designers are no exception here, with many jumping on the smart phone bandwagon. In fact, some 22.7% said they currently use an Android-based smart phone, 20.6% said they use an iPhone, 16.6% use a Blackberry and 5.3% use some other smart phone.
But not everyone is fully on board with this trend; more than one third of those polled said they’re still using a basic mobile phone. However, a good number of these said they hoped to upgrade in 2012.
Despite the growing interest in smart phones, the majority of respondents said they don’t use most of the functions on their smart phones, primarily using them to talk, text, send emails and take photos. Only 5.9% said they download business-related apps, 3.2% watch industry-related videos, 1.5% read blogs, and 0.5% attend Webinars with their smart phones.
When asked about their phone purchasing plans for 2012, 16% said they will purchase an iPhone, 7.7% said they will buy an Android-based model and 2.8% planned to purchase a Blackberry (see Graph 6).

When it comes to iPads or tablets, only 12.8% said they currently have one, but nearly one third said they expect to purchase one in 2012, suggesting that tablets will increasingly become a part of doing business in the kitchen and bath industry in the coming year.
While many respondents expressed a desire to upgrade everything from laptops to cell phones in 2012, the economy continues to impact the industry; 38.7%of those polled said they will not be making any technology related purchases in 2012.

Reform and Remodeling

Regulatory reform and tax reform are hot topics in Washington. Regulatory reform legislation is pending in the House and Senate that would strengthen small business’s ability to influence agency decisions. Small businesses need regulatory reform because they spend 36 percent more per employee to comply with federal mandates than their larger business competitors. The U.S. Small Business Administration estimates compliance with federal regulations costs small businesses $10,585 per employee every year. And the most recent estimates show regulatory compliance costs rose faster than the cost of medical care.

The remodeling industry has experienced its share of aggressive regulation, and these regulations have become a heavier burden as the U.S. economy struggles. Although the industry was successful this past summer in persuading EPA not to pile on additional requirements for the LRRP rule, it still seems as though there is an avalanche of federal mandates crushing small businesses in America.

hrough industry research conducted this summer by NARI, EPA officials learned an underground economy exists. Homeowners were choosing contractors who were not RRP-certified to save money. Those poor choices increase the likelihood of more children being exposed to lead. NARI’s survey also revealed some homeowners decided to take on some or all of the work themselves to save money. We all know that presents a host of other problems.

NARI is encouraged because EPA examined the survey results, met with NARI officials and listened to the stories remodelers told about their LRRP challenges prior to making a decision about whether to add requirements to LRRP. EPA announced its decision on July 15 to not add more LRRP requirements. We know EPA based its decision, in part, on NARI data showing how added costs would result in more uncertified contractors getting jobs that would otherwise go to EPA-certified remodelers.

Tax reform is also a hot topic, especially with GOP presidential candidates and Congress’s super committee. When tax reform comes up, small businesses get frustrated because lowering individual rates is rarely discussed.

Politicians sometimes talk about tax reform and how they can help small business. However, tweaking corporate rates does not directly help most small firms. More than 75 percent of small businesses file taxes on business income at individual rates, and the vast majority of remodeling businesses are small businesses.

Individual rates are significant to small-business owners because it is common for an owner to structure his or her business as a pass-through. A recent survey revealed that 85 percent of NARI members are taxed at individual rates with the highest percentage (52 percent) filing as S Corps. From a taxation standpoint, the pass-through model is wise for the typical small business to avoid paying tax twice—first at the corporate level and then on wages, or business-investment returns.

 

Sucess With Subcontractors

Success With Subcontractors

Communication is key

By: Tim Faller

Tim Faller

Credit: Sharpe + Harrell Photography

Many remodelers are turning to subcontractors during this tough time because they provide fixed costs, but it takes communication to make the relationship succeed. Having recently worked for a kitchen and bath company, I have a few tips from the sub’s perspective.

• Provide complete paperwork. Since subcontractors typically will not take responsibility for jobsite decisions, your paperwork must be complete and include plans and a full scope of work. If you don’t provide product/design decisions before the job begins, the sub will end up spending site time that he did not include in the original estimate, resulting in frustration and change orders.
• Define the sub’s responsibilities. This is not about the scope of work but about other related activities such as when and how subs should communicate with the client, who writes up change orders, how you expect subs to leave the jobsite at the end of the day, and so on. A subcontractor job description will help prevent miscommunication.
• Set the payment schedule. Money is at the root of many arguments. Whether you pay by draws or at the end of a completed job, set expectations. Also include how and when you will pay for extra work.
• Focus on customer service. A single subcontractor can create a happy client or can ruin your referrals. Explain to the sub that quality work, being on time, cleaning up, and communicating affect your ability to sell jobs and, in turn, give the sub work.

—Tim Faller is president of Field Training Services and author of The Lead Carpenter Handbook. leadcarpenter.com

The Advocate

Working with adjusters on insurance restoration projects

By: Stacey Freed

“Most people don’t go through this [kind of thing] in their lives, and when they do it’s extremely challenging for them. Keeping calm and being an advocate has led to our success.” —BRYAN HENSON

Credit: Kyle T. Webster

Hurricanes, fires, flooding — every day brings reports of catastrophe. Even if you don’t run a disaster restoration company, you’ve likely heard from clients or their referrals when trouble strikes. While this brings in additional work, for many general contractors it also sends up red flags about working with adjusters.

But the relationship with an insurance company need not be contentious, says Bryan Henson, general manager at Allen Associates, in Santa Barbara, Calif., a remodeling company that also works on wildfire-damaged homes.

Success lies in helping the adjuster do his job and advocating for your client. Henson and John Albritton, an independent claims adjuster who works for insurance companies such as All State, Met Life, and Farmers, offer these tips.

Justify pricing: Don’t just hand the adjuster lump-sum pricing. Offer a detailed scope of work with line items. If possible, use Exactimate, the estimating software most adjusters use.

Build a good case: Document everything with notes and photos. Occasionally an adjuster leaves midproject and you start over with another adjuster. Your notes will keep the process moving. Also, adjusters only do a visual inspection. If there’s water behind the drywall, the adjuster won’t necessarily know that, and he isn’t allowed to do “destructive testing” to find out.

Know your labor costs: Use subs and suppliers who give realistic numbers. This way you can show the insurance company that yes, in your area a plumber, for example, does cost “x” amount.

Know your materials: There are at least five types of drywall in your adjuster’s software. Since he can only do a visual inspection, the more specific you can be, the better for your client.

Be patient: Sometimes the adjuster will cut a check in the home­owner’s driveway, but it’s usually a longer process. He will do due diligence, which might include sending a carpet or wall sample to a lab or sending roofing specs to a satellite imaging company.

Bone up on policies: Adjusters can only replace like for like, so the insurer won’t pay for granite, for example, if the client had Formica. Also, insurance policies pay on coverages; e.g., the house may be covered but not the fence or detached garage, or the house may be covered for replacement costs, with other items covered for cash value.

Actions Speak Loudest

Though Allen Associates is a full-service remodeler, Henson says it always has one or two insurance jobs going. The company doesn’t seek out the work, but after a series of wildfires a few years ago, staff volunteered to help homeowners, which built trust. In addition, the fire-safe homes the company had built survived the fires and owner Dennis Allen gave seminars on next steps after a disaster. “We acted only as a resource” and didn’t actively promote the company, Henson says, and the firm’s reputation grew.

—Stacey Freed, senior editor, REMODELING.

Contractor or Employee?

For the IRS, all workers are not created equal

By: Mark A. Newman

Credit: Tom Deja

The federal government has definite rules when it comes to classifying independent contractors and employees. Essentially, if the person acts like and is treated like an employee then, according to the federal government, that person is an employee.
Worst-case scenario: A contract worker is no longer needed, he files for unemployment benefits, your company gets investigated by the Department of Labor, and you end up having to pay back-taxes, Medicare and Social Security contributions, workers’ comp, and even back wages and any applicable overtime payments.

Paper Trail

This nightmare can be avoided by having the proper documentation on hand. Every non-employee who works for you should get a Form 1099-MISC for payments of $600 or more in a given year, and all independent contractors should get W-9 and I-9 (proof of citizenship) forms.

Act of Congress

The Payroll Fraud Prevention Act is currently in Congress and aims to prevent employers from cheating full-time employees out of benefits and avoiding paying payroll and other taxes by simply classifying them as independent contractors.

The Internal Revenue Service has a list of Common Law Rules to determine whether or not a worker is in fact a company man or a ramblin’ man.
1. Behavioral: Do you control or have the right to control what the worker does and how the worker does his or her job?
2. Financial: Do you control the business aspects of the worker’s job — reimburse expenses, provide tools/supplies, etc.?
3. Relationship: Do you have a written contract or give the worker any benefits (insurance, vacation pay)? Will the relationship continue? Does the worker perform an essential duty at your business?
Granted, satisfying these rules alone doesn’t determine whether a worker is an independent contractor or an employee. E.g., it’s doubtful there’s an independent contractor on any jobsite who wouldn’t fail the first “behavioral” rule. After all, what employer doesn’t control what a worker does and how he does it? That’s called managing.
Although you need to have the paperwork to prove a worker’s status, sometimes that isn’t enough. Basically, don’t treat all your workers as equal. E.g., don’t give the contract worker a company email address, business cards, or a company truck or pay him out of payroll or provide tools or supplies. Benefits are forbidden, as is reimbursing expenses incurred on the job. There’s more, but you get the idea.
Remember, when dealing with workers, Uncle Sam is watching!

Evaluating New Lighting Technologies

Checks & Balances

From: Remodeling magazine November 2011

By: Mark A. Newman

 

When you’re on a job that requires extensive electrical rewiring, you call a certified electrician, right? And when you have to redirect a labyrinth of pipes for a client’s master bath you get a skilled plumber involved, no?

Credit: Jack Hornady

So why are you still at the office late the night before payday getting your employees’ paychecks ready? You’re a remodeler. Do you really need that headache?

According to financial management consultant and REMODELING columnist Judith Miller, owner of J. Miller & Co., in Seattle, outsourcing payroll can provide numerous advantages to a remodeling company, among them, the assured accuracy of individual paychecks and accurate reporting of quarterly and year-end taxes, as well as taking a potentially expensive burden off an overworked employee.

“But if the company uses in-house labor on its jobs, it is essential, for good job costing, to mimic the payroll information from the payroll service in the in-house accounting/job cost system,” Miller says. “Setup can be a chore, but once accomplished provides good accountability on the all-important job costs.”

Is Outsourcing Payroll Right for You?

Don Darragh, vice president of Energy Swing Windows, in Murrysville, Pa., says that outsourcing this function is the smart thing to do because it lets you work on your business rather than in your business. “If you run your business by the numbers and not from your toolbelt, the benefit of using a payroll service far outweighs the cost, without a doubt,” he says.

Numbers

3 reasons why I don’t outsource payroll
1. Too expensive
2. My staff is too small
3. I like having control over the process
6 reasons why I do outsource payroll
1. One less thing I have to worry about
2. Best way to avoid Internal Revenue Service fines and fees for filing errors
3. I can spend more time doing actual remodeling/contracting work
4. Quick turnaround time
5. If there is an error, the payroll company takes responsibility for it
6. No time to DIY

While Darragh is an outspoken advocate of outsourcing payroll, that wasn’t always the case. “I fought it,” he now admits. “I did not want to let that go. I thought that there’s nobody who knows my company as well as I do and someone else will just mess it up. That’s when I was young and stupid.”

His mind changed when he got so busy working in the business that he simply didn’t have time to concern himself with payroll. “Selling for me was most important. I either had to find a person to be a salesman or find someone to do payroll. And it was easier to find somebody to do payroll than to train someone to sell.”

According to Ken Darrow, senior marketing manager at Intuit’s Employee Management Solutions division, outsourcing payroll is the right choice if you have any employees who require a W-2. “[Payroll] becomes a multi-hour process as soon as you have your first employee,” he says. “What a remodeler will find is you will want to spend your time doing things that are constructive and that are growing your business and that help accomplish your main business goals. If you’re spending hours doing payroll, then you’re basically spinning your wheels. You’re doing something that other people can help you do much more effectively at a pretty nominal fee.” Intuit is not only the maker of QuickBooks Payroll, but is also a payroll provider with more than 1 million small-business customers.

Sal Hazday, division vice president of strategy and business development at ADP Small Business Services, stresses that outsourcing payroll can also allow any small-business owner to gain tighter control of one’s business. “You can improve the management of your cash flow, improve the management of your people, and minimize risk, which all combines to enable you to focus on what’s important, like growing and running your business and not dealing with all those other things,” he says. “People who are more growth-oriented than strictly cost-conscious outsource things that are less mission-critical to how they’re growing their business.”

Contractors often tend to be on the move, with an ever-changing roster of employees, and a business that grows and shrinks as the economy fluctuates. “Those things that are viewed as complexities to your business are actually good for outsourcing because you don’t have to worry about all those dynamics as they change over time,” Hazday says. “Generally speaking, it won’t be an HR payroll specialist in-house [taking care of payroll], it’s going to be an office manager or the owner. And it’s not what they’re trained to do, which can be a problem.”

The Buck Stops Here

No matter how good your bookkeeper is, taxes can be a whole new world of red tape nightmares. While taxes are why many business owners opt for an outside payroll solution, there are other considerations, according to REMODELING contributor Richard Feeley of Feeley Mediation and Business Law, in Marietta, Ga. “Before hiring an outside service, make sure it has security measures in place to protect both you and your employees’ confidential information,” he cautions. “In addition, if you are hiring them to handle all of your payroll functions, the provider will be responsible for submitting payment of your federal and state payroll taxes and for filing your federal and state tax reports.”
The provider also has the responsibility to meet filing deadlines, which, if missed or if the forms are filed incorrectly, can result in an often hefty fine. “You must make sure that the contract you sign for services states that the service provider will be responsible for any penalties and/or other consequences that could arise from the obligations it agrees to perform for you.”

Don’t Mess With Taxes

Credit: Jack Hornady

According to Rob Myers, president of Myers & Co. Construction, in Akron, Ohio, outsourcing his company’s payroll was the best thing he has ever done, much for the same reasons that Darragh states. Filing the tax forms is an even bigger benefit because Myers has to file in each of the small towns the company works in, an “amazingly burdensome issue,” he says. When it was time to choose his payroll service, it all came down to reputation and cost. “The service has to be there in case of any mixup or questioning by the government,” Myers says.

Mark Gentry, owner of Mark Gentry Remodeling, in Sacramento, Calif., opted to outsource his company’s payroll after trial and error. Essentially, he tried and erred and that was all it took for him to realize that this was something he definitely should not be doing. “The first — and last — time I tried to do payroll myself I got an IRS penalty for not doing it right,” Gentry says, adding that he asked his bank for advice and the bank recommended a service provider. That provider, the remodeler says, has “handled my payroll and I’ve never had another penalty.”

Contribution Checkup

A payroll services company can also make sure you have paid the appropriate Social Security and Medicare contributions, according to Darrow. “One guy was taking out the right amount of money from all of his employees’ paychecks but didn’t do anything with it,” Darrow says. “He knew that money had to come out but he neglected to send it to the government.”

When Karen Sorrell, president of Simply Stone, in Finksburg, Md., had a run-in with the IRS, she delegated. “I passed it on to my payroll company,” she says, adding that her contract with the payroll service states that it is the provider’s responsibility to rectify any tax issues that come up due to miscalculations or timing errors. “It’s just one more thing I don’t have to deal with. I outsource to have one less monkey on my back!” Sorrell says.

Finding a Good Fit

Credit: Jack Hornady

ADP’s Sal Hazday and Intuit’s Ken Darrow, who is the author of Payroll for Dummies, share their thoughts with REMODELING on finding the right payroll company.

There are typically two options you can choose: one will be a desktop software version where you control the input of the data from pay period to pay period (think QuickBooks) and the other is where it is all done out-of-house by a payroll services provider. If there are any changes to be made, you call or email those changes to the payroll service and it makes them for you.

Whether you start with your bank, your accountant, or comb through your Rolodex for your fellow remodelers’ numbers, it never hurts to find out what payroll companies they use. Hazday says that starting on the Web is the logical way to begin your research but also make a point of reaching out to your fellow remodelers for stories “from the trenches.”

Regardless of whether you want to completely outsource payroll or keep part of the function in-house, there are a variety of options available. The best thing to do would be to simply compare and contrast what the different service providers have to offer.

Smaller, often more local, providers can offer simple services at a relatively minimal cost. National providers have a variety of options, many of which you may not need, but are available just in case — i.e., human resources services, 401(k) administration, and so on.

Many companies will let you do a limited trial run that will give you a feel for how the service works. You can get a firsthand look at what will be required on your part, how the software works, how much customer support you’ll get, and so forth. The more comfortable you are with the service before you commit, the better off you’ll be.

—Mark A. Newman, senior editor, REMODELING.