Perseverance Keeps Leaders on Track

Remodeling, like any business, has its ups and downs. Most remodelers would acknowledge recent history has been one of the downs. Those who talked to Qualified Remodeler are among a select group of survivors and innovators who have always persisted through difficult times.

In part, they've survived by fine-tuning their sales and marketing or by changing their mix of products and services to meet customer demand or maybe being in the right place. None of them pretend there is a magic bullet or a single solution that works for everyone. They just know what has worked for them.

Normandy Builders in Hinsdale, Ill., reports that business is up significantly year-to-date. Andy Wells, vice president and general manager, attributes that to improved market conditions and more effort on his company's part. ";It feels like the consumer has loosened up a little bit," he says. ";I think people may feel a little better about job security, which I think was a lingering doubt for a lot of people."

Things may not be returning entirely to pre-recession norms, however. ";There are a couple of big things we've noticed," Wells says. ";One is definitely the mix of jobs has turned to fewer additions and to more remodeling. We are still doing add-ons, but there are a lot more inquiries for kitchen or bath remodeling. I think that's a result of people feeling that they can't sell their homes, so if they're going to stay they want to make it how they want it.

";Financing has become very difficult, partly because of low appraisals. People are spending their own money, so they're being much more sensitive to the dollars they're spending. It's coming out of their pockets vs. out of home equity."

Home equity will return, Wells says, as soon as the foreclosures and short sales are done and the demand for homes starts to rise again. ";How long that will take, nobody knows," he adds.

Normandy has turned to a grassroots marketing and advertising campaign to deal with a difficult market. ";We're going out to meet the public, whether it is home shows or seminars in our showroom or in alliance with partners. We're not just showing them an advertisement and hoping they'll be interested in us."

Competitive changes

Another change that some remodelers have noticed is a change in competition. ";There is a great deal of low-end competition from people who are just jumping into the remodeling market and probably don't have a real strong handle on their costs or about what's necessary to provide for customer satisfaction," says Neil Harvey, president, residential division, Francis Harvey & Sons Inc., Worcester, Mass.

";That said, we're fortunate in that almost 70 percent or our business is repeat or referral, so that has helped protect us when there is the lure of low cost; people still recognize value," he says.

Consumers aren't wondering as much where the bottom is, Harvey remarks. ";People recognize that there seems to be a floor under us. There is jitteriness, but people who are employed realize their life is continuing on. They may be more cautious about how involved they get, but they are moving forward. There is a whole lot of remodeling happening."

Jobs are smaller

Jobs, however, are getting a little smaller and more conservative. ";Some of the bells and whistles are missing now," Harvey says. ";We're seeing less of the big ticket jobs, although they seem to be coming back a little."

Homeowners are coming to realize that bigger is not always better. ";They value intelligent design and realize that quality can have a greater payback than big," he says.

Coping with a tough economy has been at the top of the list of things that every remodeler has had to deal with. ";I think whenever you run into the headwind of a difficult economy you need to make sure that you execute as well as possible in all areas related to your sales and marketing," Harvey says. ";We've reacted to market conditions and reduced our labor costs as well," he adds.

";We've tried to do our best to keep the people who have been loyal to us. The primary focus has been to keep everybody working that we can in order to maintain the continuity of the team we'll need as business continues up the other side of the curve," he says.

Focus on large-scale projects

Despite the economy, BOWA of McLean, Va., has refocused its efforts on design/build construction of large scale additions and renovations, says Josh Baker, the company's president.

In fact, the company announced its new identity - BOWA - earlier this year, replacing BOWA Builders as the company's business name. The new identity and focus comes in part in reaction to feedback from customers who said the company was ";so much more than a builder," according to a news release issued at the time.

Not that BOWA hasn't noticed changes in the market. ";People are becoming more conservative; there is less whimsy in the design and more focus on functionality and return on investment," Baker says.

It's of note that a recent survey by the National Association of the Remodeling Industry (NARI) fount that 56 percent of homeowners cited functionality as their main concern when it came to their homes.

Asked if the new sensibility is permanent, Baker ventures that it is, at least for the foreseeable future. ";There probably were some excesses, and I think people are feeling more comfortable living a little closer to their means and making more sustainable investments in their homes," he says.

Homeowners still wary

Many remodelers are reluctant to say the market has turned a corner and is heading up just yet. Homeowners are still unsure and tentative. ";We're seeing consumers that are really nervous about entering into any kind of agreement. The three-bid scenario is back with a vengeance and a lot of times it's four to six bids - and this is for anything from handyman work to everything above that," says Brad Millspaugh, co-owner, Strite design + remodel, Inc., in Boise, Idaho.

Millspaugh characterizes the feeling as one of distrust, not necessarily of the remodeling industry itself but of the economy in general. ";I think it's the way they're approaching everything these days," he says.

";People are definitely shopping remodelers more than we've experienced in the past 15 years. They are comparing and taking their time. No one is in a hurry; it's very deliberate. We really have to be on our toes because the slightest error or misstep will give a potential customer an excuse [to break off negotiations]," Millspaugh explains.

He sees the downward spiral continuing for the near future. ";New home building is dead in the water here. Home prices seem to be stabilizing or bottoming out but there are a lot of foreclosed properties on the market," Millspaugh says.

";Basically, the whole refinance-remodeling market disappeared as home values disappeared. That wasn't a big part of our business, but it was a part of our business. Equity in homes is just gone, so people currently aren't looking at their homes as an investment opportunity. We know that will turn around some time in the future," he says.

";Our market right now is folks who have the liquidity to invest and just really want to stay where they are. They can understand the value of putting dollars into their home on a long-term basis," Millspaugh adds.

Millspaugh says Strite is hanging on, but a lot of professional remodeling companies are struggling. Single operators - those remodelers operating almost on a freelance basis - are having an impact on prices and thus represent increased competition for established firms.

Nevertheless, a turnaround is somewhere on the horizon, probably the first half of 2011, Millspaugh thinks.

";Jobs are smaller, we're charging less, and consequently, were making less," he says. ";Material prices have stabilized in recent months, however."

Like other remodelers, Strite is doing fewer additions and more interior upgrades and reconfigurations these days, mostly kitchens and baths.

Homeowners are taking advantage of energy upgrade tax credits and programs offered by utilities that offer rebates of energy upgrades. That's generating a little bit of activity for specialty contractors, Millspaugh says.

Corner turned in Pennsylvania

Adam Kaliner, president of Power Windows and Siding, Inc. in Brookhaven, Pa., feels the corner definitely has been turned. ";I think people are tending to feel somewhat more secure, and the housing downturn is actually persuading people to stay in their homes and make improvements as opposed to buying a new home," he says. ";Energy tax credits for energy-efficient improvements have helped as well."

The recession hasn't been without a few bumps, however. ";Our closing percentages have dropped on higher ticket items such as siding; we're having a more difficult time getting customers to agree to invest to that extreme," Kaliner says.

";Financing on some larger projects is obviously more difficult than in previous years, so I'm not sure we've totally turned the corner with regard to that," he explains.

Overall, Kaliner says, ";Power Windows hasn't skipped a beat. We've had greater lead generation and better people on staff to overcome difficulties."

His secret? ";We've just stayed the course, worked harder and smarter, and expanded territory tremendously; we're just trying to gain market share at this point," Kaliner says. ";There are no magic bullets."

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