A close-up look at how a business owner learned the art of growing his remodeling business.
Paul Eldrenkamp held all the equity and got all the profits, but his business owned him anyway. Sound familiar?
Some might see it as evidence of neurosis that Paul Eldrenkamp came to the first meeting of his peer-consulting group in 1989 half expecting to get his ego stroked. He had founded Byggmeister Associates, a home-remodeling company in Newton, Mass., six years before. Sales during the current fiscal year were up 25%, closing in on half a million dollars, yet Byggmeister was not a gold mine. Eldrenkamp would pay himself $27,149 that year, leaving net profits of $270.
Eldrenkamp wasn't complaining. He got his rewards elsewhere -- from being his own boss, from doing challenging work with his own hands (Byggmeister means "master builder" in Swedish), from providing a living for six loyal employees, and from pleasing his roster of devoted clients, who loved him so much they called him Saint Paul.
On the other hand, Byggmeister's founder was working 60-hour weeks. Tired as he was at the end of the day, he was having trouble sleeping through the night. He and his wife, Anne Bark, had recently had their first child. Anne's job as a consultant with Arthur Andersen gave them an income, but now that they had a child, Eldrenkamp found himself thinking about obligations he had beyond those to his employees, his clients, and his craft. He was making less money than some of the people working for him. One of the questions that kept him awake at night was "Am I providing better service to my clients than I am to my family?" He became preoccupied with "the vague idea that something was wrong."
The group met at a Howard Johnson's hotel in Boston, not far from Eldrenkamp's home. As host of the meeting -- run by Business Networks, an organization of industry-specific networking groups that offer support, guidance, and constructive criticism to business owners (see "The 5% Difference," below) -- Eldrenkamp was in the hot seat. His inquisitors, all remodelers like himself but in other geographic markets, had studied Byggmeister's books. They had visited Eldrenkamp's home office. They had talked to his clients, his subcontractors, and his employees. Then they rendered their honest opinions.
"This is ridiculous," Eldrenkamp remembers hearing. "What are you doing to yourself? You've got all these people working for you, and you don't make any effort to make sure they're as productive as possible. You hire people because you like them, and you don't hold them to any standards of accountability. You have no idea what your numbers are. You have no idea what you really need to charge your customers. You're running on cash flow and using customer deposits to pay off past jobs. It's gotta stop."
Eldrenkamp sat there and took the blows, each one right on the mark. "What really hit me was how totally unsustainable our efforts had been," he says now. "Here was an endeavor that I was so close to, that I had spent so much of my adult life on, and that I was doing so miserably at. We were going to go under if I didn't take some action."
Eldrenkamp took sustained action over the next six years, with remarkable effect. Since 1989 Byggmeister's sales have risen by 200%; profits, by 48,000%. Eldrenkamp now takes home double his old salary, and with his draw on earnings makes what he calls a "professional living." He sleeps better at night, works fewer hours, and spends more time with his kids -- Kristina, 7, and Erika, 3 -- than most fathers do.
Some things haven't changed. Byggmeister still has devoted clients and loyal employees (lead carpenters Peter Monius and Dick Galyon have been with Byggmeister 7 and 10 years, respectively), and Eldrenkamp is no less committed to his work. But his job description has changed, and that's the key.
Carpenters speak of putting down the tools. Occasional jobs aside, Eldrenkamp put his down some time ago, the better to apply himself to his new job. "There's as much artistry involved in building a business as there is in building a cabinet or a house," he says now. Business management had always been a mysterious concept to him, and overwhelming. Now he sees it, in carpenter's terms, as a "sophisticated, intricate power tool." Tool in hand, Eldrenkamp today is an entrepreneur who owns his business -- no longer one whose business owns him.
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What does it mean to own your business? It's not just equity. Look at why people choose the entrepreneurial life in the first place. Every year Inc. asks the owners of the fastest-growing private companies in America, "What was the most important reason for starting your own business?" In 1995, a typical year, only 2% chose "layoff from former job." Another 9% checked "to make money." But if it's not the money, what is it?
Nearly half of those surveyed said that what drove them to start businesses of their own, above all else, was the desire either to "control your life" (31%) or "to be your own boss" (18%). Together those basic wants speak to a powerful myth about entrepreneurship: that owning your own business is synonymous with being in control -- of your career, your life, everything.
Too often, of course, it's just the opposite. The business takes over, leaving the entrepreneur at the mercy of his or her creation, like young Frankenstein and his monster. If "Who's in control?" is the test of true ownership, then entrepreneurs like Eldrenkamp are in the minority. Few would-be owners really command a thorough knowledge of how their business makes money; a clear understanding of their unique role in the process; an appreciation of the contributions made by others; and a conviction that business management is a discipline like any other -- something you can get better at.
