Whatever It Takes

Qualified Remodeler’s Top 500 list, now in its 33rd year, represents some of the top firms in the industry. It also acts as a kind of barometer of industry leaders—an indicator, though perhaps not a leading indicator. The Top 500 average remodeling revenue in 2009, for example, was $8.4 million. For 2010, the figure rose marginally to $8.8 million, paralleling the modest gains shown by other industry sources.

Put another way, total revenue for all of the Top 500 firms was $4.2 billion in 2009, climbing to $4.4 billion last year. More interesting, the total range from 2004 to 2010 hasn’t varied outside of the $4 million range.

The Top 500 remodelers, it appears, were not immune to the vicissitudes of the economy but fared better than many. The significant gain in average and total revenue between 2003 and 2004 never entirely evaporated. Average revenue in 2003 was $7.1 million and total revenue was $3.5 billion; the numbers of the Top 500 never dropped below the 2003 level in the ensuing seven years.

Qualified Remodeler asked a sampling of those on this year’s list to share their reactions to what have been challenging times for many remodelers. Some of their responses follow.

Q: Has the remodeling business changed dramatically during the past several years, or do you believe this is just one more cycle in the series of booms and downturns that characterized recent decades? What’s in store for the future?

This is yet another pendulum swing in our recurring economic pattern but it is a deeper recession than normal, to be sure. This recession was exacerbated by flawed mortgage regulation policy.

The future will provide opportunity by correcting and replacing an aging inventory of existing houses, correcting the many subtle errors our industry has made as a result of misunderstanding rapidly changing building technology. The green revolution (sustainability) is substantially a correction of flawed practices that have created structures that trap moisture and can adversely affect occupant health. Sustainable building practices will require an enormous retraining of our construction workforce to properly assemble—not merely install—the valuable building products and technologies manufacturers are supplying.
—Mosby Building Arts

I believe customers have become more conservative in spending their money. Our responses and closing rates have held up pretty well, but our average sale is down. It is evident consumers are much more likely to pay by cash or same-as-cash financing options, only purchasing products they could write a check for if they needed to. Many customers are now out of the market entirely because banks will no longer finance substandard credit.
—Statewide Remodeling

We’ve definitely seen changes in the industry throughout the past several years. Our Silicon Valley local economy has had its share of ups and downs. Although it doesn’t feel like a boom period, it feels fairly stable at the moment. That said, this recession and recovery feels like it has taken much longer than in the past. It serves as a reminder that you can never take the future for granted. Being prepared with a strong “war chest” of cash and a commitment to market aggressively to ride out even the nastiest downturn has to be standard practice for us.
—Harrell Remodeling

I don’t feel that our business model has changed. Our clients still want a professional level of performance. We tightened our belts in 2009 and 2010, including letting go staff that was underperforming in key positions. We worked through the slowest part of the market with the reduced staff and then rehired strong players during the past 12 months. Refilling the empty seats with strong players has made us a stronger team.
—Boardwalk Builders Inc.

I don’t see a dramatic change in the product that remodelers offer, but marketing and business strategy is continuing to evolve as a result of the recent economic trauma.
—Dave Fox Design Build Remodelers

Although the remodeling business hasn’t drastically changed, the landscape has. Because of the economy, homeowners have changed their personal behavior. They are not as likely to purchase new homes because of the decline in resale value of their existing homes. Therefore, most homeowners have decided to upgrade their domicile instead. This has resulted in additional opportunities for companies like ours that focus on exterior home improvements. The government energy tax credit has also stimulated sales.
—Power Home Remodeling Group

The remodeling business has shrunk because of homeowners’ pull back as they wait to see what is in economic store for them. We will slowly crawl out of the economic downturn with a few dips and plateaus along the way.
—Landis Construction Corp.

Q: Some remodelers have thrived and even grown in what has endlessly been called “difficult” economic times. What’s different about these remodelers who have succeeded, apparently against the odds?

Some remodelers have begun to appeal to homeowners’ expectations that something “more” needs to happen when buying home improvements. Consumers are developing a subtle yet deep mistrust of simple fixes, such as installing new siding over old siding, covering up old dirty surfaces without fixing the underlying problem that caused the dirty surface.
—Mosby Building Arts

In our case, we have diversified our product line, realigned job duties to help cut overhead, increased training for our sales staff and increased our Internet marketing activities.
—Statewide Remodeling

I can’t speak for other remodelers, but even though we were hit hard and had to make dramatic cuts, I think there were a few things that worked in our favor. We have an amazing team-oriented culture that was willing to adapt and do more with less. We were willing to use our savings to keep our strong core of employee owners on staff, even though for a time the revenues wouldn’t support it. That decision turned out to be the right thing as that core team was together and ready to make the most of business opportunities once they finally returned. We also diversified, creating some new offerings and expanding on some that were already in place, such as small projects and service work. Another decision that paid off was relentless and very creative marketing. We just kept looking for ways to invest and maximize our presence as the market was shrinking, which not only brought us more business in the moment, but also put us in a strong position when things picked up.
—Harrell Remodeling

Those who succeed are those who are capable of being flexible and adjusting business strategy quickly to move with the market. We can no longer do the things that have always worked for us in the past.
—Dave Fox Design Build Remodelers

The greatest thing about the remodeling industry is that it rewards those who are constantly working at improving. The industry is more about attitude than anything else. If you believe you can and work like you know you can, you will succeed even in tough economic times like these.
—Pacific Coast Home Solutions

A willingness to over deliver on service, installation and overall customer relations is key to success. At the end of the day, regardless of the economic climate, it comes down to happy customers who then become advocates for the brand. In an industry often stained by unethical business practices and disrespect for the homeowner, quality products and remarkable service is what makes successful companies thrive.
—Power Home Remodeling Group

Q: What is the one most significant change in the market and/or how you do business?

Training and performance testing will be significant changes. Education of remodeling consumers and the remodeling workforce will be required for our home improvements to be reliably installed. Home-performance testing and energy audits will become central to our data collection that will guide remodeling and repair design, as well as improve the quality control of home improvements. “Prove it” is quickly becoming the new accountability, whether in energy claims for windows, energy efficiency or moisture management.
—Mosby Building Arts

Unlike all of the recessions I have seen in the past 40 years, where money for improvements may have been costly but still available to those with lower credit scores, today loans are only available to those with good to excellent credit.
—Statewide Remodeling

Clients are more conservative than in the past. When property values seemed to only be going up, it was easier for clients to justify investing in their homes because often the investment seemed to pay for itself with a commensurate increase in property value. Now, depending on the property and when they bought, some clients can’t justify that investment. That challenges us to find the clients who also value their quality of life and who are vested in their current home and plan to stay in it long enough to see it appreciate once again, as it undoubtedly will.
—Harrell Remodeling

Getting customers approved for financing is tougher than it was before the financial crisis. Other than that, the business is the exact same predictable business as it was from 1999-2007. If you work hard at creating opportunities for your sales reps, you will succeed.
—Pacific Coast Home Solutions

Remodeling consumers are expecting more for their money, and they’re expecting bargains.
—Dave Fox Design Build Remodelers

Sales and marketing have changed. Because so many people do their shopping and/or research online, SEO is critical for your website. You need to be found.
—Landis Construction Corp.

Q: In response to changing conditions, have you done something in your business, good or bad, that you thought you would never do?

I am pleased with our unforeseen ability to test and report promptly the effectiveness of our energy improvements and quality construction methods to our clients, mainly with blower doors. This is offering a way to prove quality and to differentiate ourselves.
—Mosby Building Arts

We started doing service work for new clients. In the past, that service was reserved only for established clients.
—Harrell Remodeling

We have been aggressively opening new satellite offices throughout the South and Northeast. We opened three new satellite offices in 2011, in addition to the three offices opened in 2009-10.
—Power Home Remodeling Group

Q: How is your business different than it was several years ago?

We diversified into other products that now represent about one-third of our volume.
—Statewide Remodeling

The single biggest difference is the positive mental attitude (PMA) that employees have or don’t have. The 6 o’clock news has nothing to do with our industry if you have the right PMA. Combating the negative media in the hearts and minds of people is the biggest hurdle today. All you have to do is believe in your system and others will follow.
—Pacific Coast Home Solutions

We are much more frugal and do more with fewer people.
—Dave Fox Design Build Remodelers

We have added installation and new product lines, such as roofing, which have allowed us to keep all aspects of exterior home renovation under one roof, so to speak. We also have continued to hire incredibly talented individuals who have allowed us to expand our minds and long-term objectives in ways we never thought possible.
—Power Home Remodeling Group

Every sale is harder with more bidding and value engineering. We are leaner and more organized with only the best employees left.
—Landis Construction Corp.

Q: Do you believe changes that have occurred are permanent or just part of a cycle the industry has seen before and will see again?

I wouldn’t be surprised if we never get back to the boom periods of the past but things will undoubtedly improve. We want to be one of the companies that is ready to make the most of it while preparing for the inevitable downturn that will follow. It will always be a cycle; it just might not swing as high or as low as it has in recent years.
—Harrell Remodeling

Although we would all love the economy to come back strong, regardless of its performance, we don’t believe we will change our business model because it is built on customer advocacy and talent acquisition—and always will be.
—Power Home Remodeling Group

 

 

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