By Julie Gehrke
AS a young girl, I remember waking up at a friend’s slumber party, and her mom announcing that she was taking us to McDonald’s for breakfast. What a novel idea! The year was 1977, and McDonald’s had just launched their full breakfast menu in the United States. Ten years later, one-fourth of all breakfasts were eaten at McDonald’s.
You can’t ask for a better diversification success story than that. America was ready for a quick, convenient breakfast. In 1977, 49% of married women with chil¬dren under 18 were employed, growing to 67% by 2002 — no more time for bacon and pancakes in the morning.
When it comes to painting contractors looking to diversify as a strategy for success, the options available to them are as wide ranging as the choices on a color deck. So what are the magic components for knowing when or how to diversify? Are they, (a) right time in the market, (b) company size, or (c) blind luck?
I interviewed two painting contractors who have achieved success in the diversification to find the answer.
Nick Sabelhaus, owner of Sabelhaus West, a painting contractor in Silverdale, Washington has had outstanding success with market diversification. Sabelhaus gives the impression that he did it all through method (c) blind luck. Or as he likes to put it, “I’ve been blessed.” But according to Melinda Kinsley, executive assistant at Sabelhaus West, “Nick is very humble. He has a charisma that attracts an A-team.”
Twenty-one years ago, after a three-year stint in college that he found to be boring, Sabelhaus started his painting business. The first five years were a struggle. Sabelhaus began, as many contractors do, in the residential market doing repaints and new construction. He didn’t advertise, but grew by word of mouth and a little advice he received from a veteran in the business, “Stop at every stick you see going in the air and ask if they need a painter.” Sabelhaus took this advice literally. “I stopped at every fence, backyard shed and house I saw going up.”
That simple strategy led to his first large commercial project. One day he saw a theater complex going up. He noticed the workers started drinking beer around 4:00 in the afternoon. He bought a 12 pack and stopped by to talk to the project manager. In the end, the general contractor gave him a shot at the work. They painted the theater complex 15 years ago and have never looked back. According to Sabelhaus, “The job was a very public job, and it lead to more commercial referrals and a good relationship with that general contractor.”
Sabelhaus isn’t afraid to ask for expert advice from his peers or to say to his potential customer, “Yes, I can do it if you will pay for my training in this area as part of the deal.” Having this can-do attitude has created a residential, commercial and industrial business for Sabelhaus. And if that’s not enough, Sabelhaus says, “We are currently working to find our niche markets by working with chemists and engineers on developing a unique line of products that will use our field of experience to enhance the product design and application process.
Heading East to the other coast, a mere 2,900 miles from the Sabelhaus operation, Joe and Cherrie Bowen own Bowen Painting and Remodeling of Crofton, Maryland, which they started in 1993. The son of a painting contractor, Bowen began his business doing what he already knew how to do well: real estate turns and repairs on rental property, both residential and commercial. Eight years ago, Bowen began hitting the residential market, doing paint and drywall repairs, ceramic tile and floors. The company does not build additions, but serves as the general contractor for remodeling existing spaces including kitchens, bathrooms and basements. Bowen Painting and Remodeling had 1.8 million dollars in revenue last year and plans on 2.2 to 2.5 million dol¬lars this year.
The Bowens own two additional companies as part of their diversification strategy. “We had a hard time getting over the million dollar annual revenue mark,” Bowen says. Then three years ago they moved to a new shop, large enough to have a showroom for their remodeling customers. Things really started to take off. In March 2006, they opened a 1, 500 sq. ft. showroom across the street from their shop, showcasing 10 complete bathrooms. They named this company “Bathrebuilders”. Between Bowen Painting and Remodeling and Bathrebuilders, they average about five bathroom sales a week. Bowen says, “Our focus is to sell as many bathrooms as possible. People have at least two in every house.”
Bowen adds, “With so much foot traffic in the bath showrooms, people started asking if they could buy just the tile. After turning a few customers away, we decided to open a tile store which we named ‘Ceramic Tile Shoppe’.” But the Bowens are not finished yet. They hope to begin franchising Bathrebuilders by the fall of 2008. They plan to open and operate two more locations in Maryland and franchise others.
One appealing aspect that diversification seems to help with is the natural seasonal downturns in the painting business. In May 2006, the Sabelhaus team, with the help of their marketing analyst, Steve Bentley, created a plan to stay busy over the past winter when things naturally slow down. Bentley, who came from corporate America, seemed to have just the right remedy for Sabelhaus. He said, “You don’t plan for a slow down in your business just because the holidays are coming. You think of something else that you can use your expertise to do.”
So they pulled out a calendar and mapped out when people have money for projects and when they don’t. For example, they set out to find what the fire department’s fiscal year was and when they have money for projects. They called hospitals to find out when the census is low, a good time for painting. They researched when factories close for the holidays and when the federal government disburses money from its budget. The result was the busiest winter they have ever had.
Sabelhaus West is a stone’s throw from Puget Sound and the Bangor Naval Submarine Base. Sabelhaus says that, “Just when I thought we had tapped out what could be painted in this area, I hired a captain in the Navy Reserves to help in marketing. He showed us where we were missing the boat – surface ships have a huge budget. We already did the naval buildings, but never thought about the surface ships. We just finished work on the USS Stennis, a naval aircraft carrier.”
What advice do these successful contractors have for others wanting to diversify? Well first, a little advertisement is in order. Bowen says painting contractors are the perfect match for a Bathrebuilders franchise, because bath remodeling is busy when painting is not. He explains, “I spend a lot of time finding good people. I need to keep them busy.”
Beyond that, Bowen advises, “Most people fail to prepare. They dive in. The more you prepare, the more you will get out of it.” Certainly diversifying your business o r offering a new product does not always produce success. In the 1990’s, McDonald’s introduced several menu items; including fried chicken, pasta, fajitas, and pizza. All failed. In his early days, Sabelhaus formed a partnership in the fiberglass business that didn’t pan out. “It divided my mind fiberglass versus coatings.”
In the end, both contractors have found a way to take what they already know how to do well and see where else it can take them. Coming from different genres of the painting trade and living on opposite coasts, there are com¬mon threads between them when it came to their strategies for diversification. First, they have the desire to keep good employees busy and to build an organization that would last far into the future. Second, their involvement in their trade organizations like the PDCA and peer consulting groups gave their businesses a boost.
Bowen says, “My dad taught me the trade, so he gave me the tools in a sense, but PDCA gave me the vehicle. With those two, I’m set up to win.”
Sources:
1. In 1987 one-fourth of all breakfasts were eaten at McDonald’s. http://www.answers. com/topic/mcdonald-s
2. In 1977, 49% of the spouses of married men with children under 18 at home were employed, compared to 67% in 2002 ://wfnetwork.bc.edu/pdfs/womenwork.pdf