What did Eldrenkamp learn? How did he learn it? Let's see.
* * *
The night after his vivisection, Eldrenkamp stayed home alone with his computer, crunching numbers. The first question he asked himself: "How much income do I need to meet payroll?"
New England's booming economy had been good to Byggmeister, but business was slowing down. Eldrenkamp had managed to ignore the warning signs, thanks to the elixir of customer deposits, but it was getting hard to keep everybody busy. Two members of his staff might be expendable, but he had never laid anybody off before; the idea was loathsome. What would it take to keep everybody working, he wondered?
The answer had been there in the numbers all along; he'd just never bothered to look for it. To generate $750,000 in revenues in the coming year, he would need $2 million in leads. No way.
Recognizing the need to act was one thing; following through was another. Eldrenkamp struggled. To lay people off "would be a confession of failure," he believed. "Failure to hire properly, failure to generate enough work, failure to plan ahead." But the more he thought about it, the more he recognized his reluctance to be "just a refusal to be frank with myself." He knew what had to be done and who had to do it. To pretend otherwise would be to put himself, his family, and his remaining employees at risk.
"This sounds heartless," Eldrenkamp says, "but the overwhelming sense of liberation, the weight off my shoulders, is still vivid. I realized how much it was hurting the business to keep them on, and how much it was hurting me. I also realized that they're capable people, they're going to find work somewhere else, and everyone will be better off for it. I was doing no one a favor by hanging on to them."
What he had realized was that if you take care of the business, the business will take care of you, your family, and your employees. Eldrenkamp was on his way to owning his business.
* * *
Learning the discipline of management
The carpenter-turned-businessman wasn't going to reverse Byggmeister's fortunes without a struggle. The company was in deep trouble -- just how deep, Eldrenkamp was only beginning to grasp. To see the problems clearly, he first had to learn the language of business.
Eldrenkamp's confusion over fundamental issues is evident (in retrospect) in the way he used to bid on jobs, an activity he called "playing with the numbers." Total estimated hours times $5 gave him a number he called "gross profit," which was supposed to cover his overhead. By adding estimated labor and materials costs to gross profit and multiplying by 1.1, he arrived at his bid.
Because he never analyzed completed jobs to check his assumptions, Eldrenkamp's time estimates were no better than guesses. The allowance for overhead, also a guess, was "woefully inadequate," he says. To assume that the 1.1 multiplier gave him a 10% profit was simply wrong. "It was the difference between markup and margin that I didn't understand," he says now.
Consequently, Eldrenkamp would go into negotiations toting a bid derived from "emotions, feelings, even my own sense of self-worth." He couldn't defend it because he couldn't explain it -- not even to himself, much less to the client. So he'd cut the price if he had to get the job, and profits suffered. Of the two dozen projects Byggmeister undertook each year, Eldrenkamp admits, he has "no idea" how many were profitable -- "by today's standards, probably none." No wonder clients called him Saint Paul.
These days Eldrenkamp is intensely aware of profits. Like all members of Business Networks, his goal is "10 plus 10" -- meaning that 10% of sales should be personal compensation and 10%, net profit. To get there, he knows he needs a gross margin of at least 30% -- more on labor-intensive jobs that would otherwise generate less profit than he thinks his employees' time is worth. His slippage rate (the difference between estimated and actual production costs), once as high as 100% on small jobs, has all but disappeared, thanks to a computerized database of task-completion times. Detailed forms he developed himself help him track jobs in progress and spot overruns early, before margins disappear. He holds regular meetings to go over Byggmeister's books with his employees. And last fall he bought PowerBooks for both of his lead carpenters, the better to gather data from the field and keep everybody in the loop.
Eldrenkamp largely taught himself those management skills. He is smart, broadly curious, and inclined toward numbers. On the bookshelf in his living room, alongside works by Greek philosophers, medieval historians, and obscure Swedish novelists, are several volumes by Bill James, who raised the statistical analysis of baseball to a new level. Eldrenkamp is a self-described "propeller head." He bought his first computer -- an Apple Mac SE -- in 1989 and has hardly looked up from the screen since. If the birth of his first child helped him step back from his business, the computer allowed him to see what was going on inside it. The process of entering data, trying out various accounting programs (he settled on BestWare's MYOB), encountering gaps in his knowledge, and endeavoring to fill them has taught him that business, like carpentry, is a craft with a language he can learn and relationships he can puzzle out. Business, he's decided, is "endlessly fascinating."
* * *
Discovering the owner's role
Learning the numbers taught Eldrenkamp how to construct smarter bids. It didn't make him a better salesman. That was another leap altogether. He came to realize that he simply wasn't comfortable selling, not as he understood the role of a salesperson. A Methodist minister's son, born and raised in rural Iowa, Eldrenkamp at 14 won a paperboy's scholarship from the Des Moines Register to attend an elite Eastern boarding school. He went on to Harvard and graduated after seven blissful years -- not all of them spent in academic pursuits -- with a degree in medieval history. He thought about becoming a college professor or a minister, but nothing matched the pleasure or fulfillment he found in carpentry -- in building things, that is, and in pleasing clients with the results. The selling, he despised.
