From chippy to business builder

Making the transition from builder to business owner required a major shift in mindset for Reon Paterson; and now his North Shore Smith & Sons franchise is going gangbusters.

 

This is a good time to be building or renovating homes. In an industry notorious for its dramatic cyclic nature of highs and lows, it seems that in 2014 we’re entering a period of strong and sustained growth – fuelled by the Christchurch rebuild and buoyant Auckland property market. And for smart players, the opportunities are everywhere.

 

Reon Paterson is one of those smart players. A born and bred Te Kuiti boy, he spent the first four years of his working career as a builder’s apprentice before answering the call of the ‘Big OE’ and spending the next five years learning the ways of the building renovation industry in London.

Arriving back in New Zealand in 2004, in time to catch the pre-GFC building boom, he revelled in the abundance of work, started his own business and got busy building ‘spec’ houses.

In 2008, the Smith & Sons Renovations and Extensions franchise was started up by two qualified builders, an accountant and a marketing consultant from the Sunshine Coast in Queensland, who had seen the lack of professionalism and customer service in the home renovation industry. They also had connections with home building company GJ Gardiner. 

 

Within four years, the franchise had more than 50 offices on both sides of the Tasman. Success was especially evident in New Zealand, which boasted some 30 offices.

Reon was instantly attracted by the franchise business model, and by Smith & Son’s market reputation through its GJ Gardiner heritage. “The biggest plus is being part of a large network of builders who are all facing the same issues,” he explains. “There are now 70 franchisees in Australasia and you get to know a lot of them. 

“I like chatting honestly about all of the things that we face as it really gives you confidence as you move forward. Also the support we get from our master franchisor is very good.”

 

Reon purchased the Takapuna Smith & Sons franchise on Auckland’s North Shore in 2011 and business has quickly ramped up. As a one-man band in 2010 his turnover had been around $600,000. But in his first year with the Smith & Sons franchise sales hit $1 million and in the following year that figure had doubled. Today he has a team of 12 full-time ‘chippys’ plus a quantity surveyor, project manager and admin person.

Putting down the hammer and tools and focusing on business management wasn’t without its challenges for Reon. “Easily the biggest challenge was letting go of specific roles and trusting that the people I was bringing on board could do them well,” he says, “which they most certainly could. 

“It was especially hard to let go of project management and not be involved in day-to-day on-site management,” he says. “I also had to learn that investment comes before return – that is, you need to make brave decisions at times and trust that you’re doing the right thing; even when the cash to do things might not be sitting there ready and waiting.”

 

Reon says, while there is plenty of work on, the new regulatory environment in this country’s building industry makes it hard work. 

“Since the leaky homes debacle there have been a lot of changes to the code and to the Building Act.  Long term I think the changes, such as requiring builders to be licensed, are a good thing. But it places huge pressure on building firms to keep up with all the red tape and the goal posts are constantly being moved.”

The renovation game comes with its own unique set of challenges too. People are still living in the house as alterations are being done, which means there’s always potential for ‘grumpiness’, says Reon. “Budgets can quickly shift, mum and dad can disagree on things, there’s dust and mess, time-frames can stretch out; that’s just the way it is.

“It’s best just to acknowledge that these things happen so we can get better at dealing with it.

“Our aim is to start with a happy client and leave with a happy client.”

 

Reon is particularly appreciative of the support he gets from the Auckland master franchisor. He says, like many builders, his weakness was mainly centred around admin and financial management. Now he’s confident enough to engage the numbers. “This franchise has taken me from builder to businessman,” he says.

The plan is to go hard for five years and have his franchise ready for sale. “I’ve got two and a half years to go to reach that goal and so far things are tracking well. Whether or not I sell is another story; I just want to make sure we are a well-oiled, profitable unit,” he says.

“The great thing about owning a franchise business is the strength of its brand and the system – it means you own a tangible asset. When you’re a builder on your own there are no tangible assets to sell apart from your vehicle and tools.”

Reon is proud of the fact that his business won the Smith & Sons Auckland Franchise of the Year Award two years running, as well as the 2013 International Franchise of the Year Award.

 

“Considering the competition, this is a massive confidence booster and validation that we’re doing things and seeing things right,” he says.

Of course the nature of the industry means that it hasn’t all been plain sailing. Reon says he’s had his fair share of sleepless nights over cashflow and business decisions. Managing clients through the renovation process can be stressful too as expectations often don’t match up with reality, but Reon says communication is the key and they have a simple three-step process that means the builder is involved from day one and costs are kept to a minimum.

Homeowners don’t have to do a thing as Smith & Sons project manage the whole renovation or extension, including concept drawings.

 

Reon’s days are now taken up managing enquiries and sales, and the market has never been busier. Driving growth is the ongoing trend away from DIY in this country as homeowners face increasing time restrictions and more stringent compliance requirements. Jobs range from large commercial fit-outs to kids playgrounds, but the biggest percentage of work involves leaky homes – New Zealand’s $6 billion problem, which Reon reckons is actually a $20 billion problem. “About the same size as the Christchurch rebuild”.  

His advice to any other builders looking to mirror his franchise footsteps is to get over the fear of initially not understanding the financial aspect. Feel the fear but do it anyway, and eventually you’ll push through and get it, he says.

“And maintain a positive attitude at all time. It’s not always easy, but in my view it’s critical.”