The types of remodeling jobs consumers are pursuing have shifted unquestionably — from discretionary upgrades to more practical maintenance-related jobs, from high-dollar projects to modest rehabs — and, as they always have, remodelers have responded in a variety of ways.
Most have made little change in their business plans (50 percent), while others acknowledge they’ve made an internal change in focus on the types of jobs they’re doing. Of those who noted significant changes in services offered, two-thirds said the change was simply one of emphasis; another 20 percent formed a new division within their company. Ten percent reported investing in a franchise or dealership.
Respondents who took steps to either branch out or specialize were evenly split as to whether their action was a growth opportunity or a survival tactic.
With the size of projects shrinking, a number of remodelers have sought to turn that trend to their advantage by taking on — and actively seeking — “handyman” jobs. In brighter economic times, many contractors had neither the time or interest in these small jobs except perhaps as a means of maintaining contact with their customer base or cultivating new clients.
Those motives are still valid, but some remodelers caution that the work can be labor intensive and profits may be elusive. Steve Gray of Steve Gray Renovations, a full-service remodeler in Indianapolis, would beg to differ. He formed a separate division within his company to actively pursue handyman work and is pleased with the results.
“We started the handyman division officially in 2009,” he says, “because we listened to our customers; the clients we worked with were looking for highly qualified people to take care of the small things.
“When you do a lot of highend remodeling, it’s easy to fall into the trap of thinking this project is way too small. We only do the big things,” Gray says.
The division has been profitable, he says, and has been helpful in keeping his firm visible. “It really helped us dramatically in the first four months of last year when it was pretty slow. We were still continually on the road with our vehicles, and we were seen as that ‘go-to’ company. People didn’t know if we were doing a $2,000 handyman project or a major renovation. It helped keep us in the forethought of people who were thinking of doing a renovation down the road. That’s been a really good thing for us,” Gray reports.
One of the elements that may have contributed to the success of the handyman division, Gray feels, is that it targets a higher-end client base, the same type of clientele the company seeks for its upper-end home renovations. “At the end of the day it wasn’t so much about price as finding someone they trusted who would do high-quality work,” he comments.
“Our clients were willing to pay; they knew they were getting a fair deal from us. We had built this relationship with them long before the handyman division was rolled out,” he adds.
“We looked at it as a way of saying we want to be the total resource for anybody with a home, and we knew that we couldn’t complete that without having a handyman division. We didn’t want to get the reputation for only doing expensive work,” he says.
Gray has taken care to adjust his margins on handyman work so that the jobs remain profitable, noting that not having an accurate handle on their costs is what gets remodelers into trouble even in good times. “If you’re going to do a handyman division, you’d better know the costs and the margins,” he says.
He cautions against taking a job out of desperation and low-balling it. “I would sooner do nothing than do a project knowing I’m losing money before it even starts. There’s no need for that,” he says.
Gray’s handyman division is built on existing strengths, he notes. “We’ve always been really good with our costs, and we have great rapport with all our vendors and contractors. We know pretty much to a T what something should cost,” he says.
His advice for anyone who wants to venture out with a new arm or division, especially a handyman division, is “you need to be really great with numbers and know exactly what your time frame is, because it doesn’t take long to start losing money in a situation like that. Organization and communication go right to the front,” he comments.
Geoff Martin, president of Cedar Mill Group Inc. in Webster, N.H., has taken a different tack, in some ways narrowing his focus. He used to have a handyman division, but he eliminated it a couple of years ago. “It was getting more and more difficult to maintain profitability,” he says.
Martin, like a lot of remodelers, has reassessed his business plan and rebranded his company. Unlike some, however, he saw the need to do so several years ago, an insight he credits to a large extent to his participation in a remodelers’ roundtable organization, a peer group program that brings business owners together to explore common problems and concerns.
In addition to realizing that the remodeling industry was about to undergo significant change, Martin recognized that he could no longer rely on repeat and referral business exclusively.
“I really had to become more knowledgeable and proficient in marketing, and I had to take out some head trash and that revolved around the whole design/build model. I was doing more and more design and more and more estimating for nothing,” he said.
The Cedar Mill Group is now exclusively a design/build firm, and “I do not do any estimates for free,” Martin says.
In effect the company has rebranded itself. “We don’t even get inquiries for the smaller projects. A small project for us now is $10,000, and our average job size has more than tripled. That’s a huge plus in our world. Managing 20 projects over the course of the year rather than managing 70 is a huge benefit,” Martin says.
While he anticipated change and the need to alter direction, Martin didn’t chart a course for the unknown. “We identified what we do best and what we like to do, and we just have gone out there and talked to people about that,” he says.
In fact, talking to people — and keeping visible — has been a key ingredient in Martin’s success. Last year he volunteered his company to be the general contractor in the renovation of a boys’ and girls’ club building. The group’s facility had been condemned and was about to close when a group of citizens found a house in foreclosure and raised the funds to purchase it.
“We just went in and coordinated the trades and the volunteers so they would have a teen center when school started in the fall,” Martin says. He’s also chairman of the advisory board of the local Salvation Army group and has participated in two major building campaigns in recent years.
Another thing Martin has done is to join a Business Networking International (BNI) group in his area, a move he said he initially resisted until he learned more about the organization. He says membership has proved to be a really good source of quality referrals, stressing referrals as opposed to leads.
Martin’s networking extends to his local home builders and remodelers association. Sitting by the phone and waiting for it to ring is not an option for him.
“I think there are a lot of guys who are doing things but they’re doing them in a disconnected fashion. They’re doing some of the old school stuff, which is sending out postcards and doing an e-newsletter, but you have to go belly-to-belly and face-to-face. You just have to be a professional visitor and see people’s reactions and hear the inflection in their voices. That’s one thing that I concentrate on in a huge manner,” he says.
Some remodelers, however, give a whole new meaning to the concept of branching out. R. Lynn Motheral of Austin Design/Build Inc. in N. Richland Hills, Texas, says he’s bringing in extra cash as an expert witness in construction litigation.
That litigation could well increase in the future. The much-criticized Texas Residential Construction Commission, created to resolve disputes outside of courts, has been “sunsetted” after a bill to restructure it failed to gain consensus in the state legislature.
Motheral got into the expert witness business by accident when he did a report for a builder friend who got “crossways” with a client. His report explained in understandable language that what the builder did was not necessarily wrong and that the client was just being “particular.” The builder’s lawyer was impressed and asked if Motheral he would like to provide similar services on other cases. Over time he’s developed a referral base among attorneys.
Motheral has become involved in doing forensic work for homeowners. For example, he’s worked on waterproofing and water intrusion issues using infrared cameras and consulting with an engineering firm as necessary. “We determine what the problem is and the repair costs,” he says.
A plumbing leak, for example, could be the result of movement in the foundation related to poor soil conditions common in Texas, Motheral notes, and that can be a factor in assessing repair costs and damages. It’s his job to find and document the causes.
In addition, Motheral has taken conciliation training and is a state-accredited mediator.
He adds that there are several other contractors of his acquaintance who provide expert testimony, and they sometimes end up on opposite sides of the courtroom.
Branching out isn’t just a current phenomenon. In fact, it’s something remodelers have been doing for a long time and for a variety of reasons.
Murphy Bros. Designers and Remodelers in Minneapolis, for example, has operated a painting and prefinishing division for years. Murphy Bros. Paint and Fine Finishes has its own staff and general manager. It does traditional on-site exterior and interior painting as well as prefinishing work on cabinets, millwork, doors and windows.
Murphy Bros. Designers and Remodelers president John Murphy says he doesn’t really manage it except in terms of the big picture numbers.
Murphy relates that the division was formed at a time when he was having a hard time finding a good painting contractor. He found a good technician who also was good at estimating and managing personnel but wasn’t particularly interested in the mundane business aspects of the operation. Today, the division has five painters and occupies space in the building owned by Murphy Bros. Designers and Remodelers. The division devotes approximately 30 percent of its time to work related to Murphy Bros. remodeling projects and 70 percent to work for outside clients.
The success of such a division hinges on finding the right person with the right talents, personality and aptitude to run the division, Murphy says.
The painting division, he adds, is a good ambassador for the design/build side of the business.
Franchises and dealerships for the most part tend to be narrow in focus. Perhaps because they require an initial cash investment and a long-term commitment some established remodelers are dissuaded from following that route.
That’s not to say they can’t afford an excellent starting place for some business people or even a long-term income producer for the right person.
Marvin Morrison of Outdoor Structures in San Carlos, Calif., is no longer a franchisee, but that’s where he got his start. “It was a good learning experience and relatively inexpensive to get into,” he says.
Part of the appeal was that Morrison was not a licensed contractor when he signed on, and the franchisor promised to connect him with a responsible managing officer (RMO) who was. Not satisfied with the franchisor’s RMO, Morrison found his own sponsor and obtained his own license within two years.
However, the franchisor did provide business and marketing training as well as design software and drafting services. The emphasis was on the business side of the franchise, and Morrison relates that he initially struggled to find reliable people to produce the job.
In fact, many of Morrison’s fellow franchisees did not have construction backgrounds. “The system was to hire someone within the construction field to be your project manager or lead carpenter and rely on that person to get things built the way they should be built,” he says.
Perhaps the most valuable part of owning a franchise, and the thing Morrison misses the most, was the support system. “They would have yearly meetings, and it was a great time to sit down and talk with some of the other franchisees about their business, about how things were going, and pick their brains about things they felt worked and didn’t work,” he says.
Morrison is happy that he started out in a specialized field and intends to stick to that specialty rather than branching out. His work includes projects such as decks, pergolas, gazebos and fences — essentially enlarging people’s outdoor living spaces. He’s looked into expanding into other outdoor projects such as stone pavers or even landscaping, but “that’s really not what I’m into; I enjoy the deck part of it,” he says. “This is what I really enjoy and this is where I want to spend my time.”
Whether to stay focused on a specialty, refine that specialty or branch out in a new direction depends on individual factors and preferences. Most remodelers, however, appear to be doing what they’ve always done — and that’s adapting to changing conditions in individual ways best suited to their specific situations.
Areas into which remodelers have branched out
Survey respondents report branching out into a variety of areas, some traditional and some fairly new. Following are a few of those reported:
- Aging in place
- Annual contract home maintenance
- Contract management
- Duct testing and duct sealing
- Energy consulting
- Expert witness, construction litigation
- Federal government work
- Glass replacement and remediation
- Green and energy related upgrades
- Gutter protection
- Ice melting
- Mold remediation
- Power washing and roof cleaning
- Generator sales/service
- Solar electric systems