Though there are an increasing number of examples of remodeling firms with regional and national brand names, remodeling is a local business. It always has been, and will likely stay that way for years to come.
This year, for the first time, we have laid the QR Top 500 list against the top 25 metropolitan statistical areas in the United States as viewed by the U.S. Census Bureau. The result is a list of the top two local remodeling firms in the largest metro areas of the United States. Because our goal was to find the top local firms, in a few cases, large regional and national firms were eliminated from consideration. These were companies that derive a substantial portion of their reported revenues from other places.
The 49 firms represented (there was only one firm listed on the 2009 Top 500 from the Riverside-San Bernardino, Calif. MSA) are a composite picture of what it takes to be big in a large to medium-sized city. To succeed in big cities, these remodelers have taken several paths, but, at the end of the day they all have one thing in common. They all market and sell very well. But even for them lead flow has been a concern during 2009. And there have been other challenges as well.
Andy Wells, the president of Normandy Builders in Hinsdale, Ill. and a market leader in the Chicago MSA, says that his firm has done very well selling jobs during the recession. Primarily a design-build firm doing larger projects, the company has held onto an average job size of $120,000. In addition, says Wells, the firm has not had to tweak its gross profit targets to keep business coming in the door. Much to Wells’ consternation though is the overall banking environment. The pendulum, he says, has swung from a period of great leniency to one of great stringency. Consumer confidence at the high end has largely returned, but some of these well heeled buyers are being shut down by their banks even though they have good credit and stable jobs. The culprit: very tough appraisals that are too low to support many jobs.
In Portland, Ore., metro leader Tom Kelly of the Neil Kelly Co. has taken steps to fully take advantage of measureable interest in “all things green” by consumers. Last year the firm instituted a program whereby most designed remodeling projects are given a green audit before final design recommendations are made. A fixture in the Portland market since 1941, the Neil Kelly Co. could have easily rested on a strong base of satisfied referrals for enough new business to get through the recession. This shows another attribute found among the metro leaders: Like the Neill Kelly Co. most have energetically offered new ideas in their markets to counteract the recession. When asked their biggest opportunity this year they responded, “To build market share and brand loyalty in a tough economy.”
Another industry leader, Case Design/Remodeling of Bethesda, Md. and a metro leader for the Washington, D.C., MSA sees its top opportunity as staying on track with its long-term vision for customer satisfaction and overall market leadership. “Our top priority in 2009 is maintaining our long-term vision of achieving excellence at every level. This focus of excellence includes high standards of excellence in design, craftsmanship, communication and overall client experience.” During the current recession, most remodeling companies, including those who are on the Top 500, were able to say that their long-term vision for success was, indeed, their greatest opportunity for 2009. Case Design/Remodeling chairman Mark Richardson says his firm did take tactical steps to improve the firm’s closing ratios at the end of 2008, when it became apparent that a deep recession was in the offing. The firm studied the results of its best salespeople, those who had performed the best during the worst months of 2008 and uncovered an important shift in selling strategy. The Case Design salespeople who had performed the best in 2008 all focused on the needs of the house vs. the wants of the homeowner.
During the go-go days of the mid-2000s, the best salespeople had driven up the price and scale of their projects by painting a vivid picture of remodeling possibilities. Now, with consumers wary of spending their money, the buying triggers have shifted to protecting the house as an asset. According to Richardson, his firm has done well by recognizing this shift and has worked hard to focus on what the house needs.
In the end, all of our 2009 Metro Leaders found ways to grow. For the rest of the industry, there are certainly ideas worth replicating in their example.
Click here to see Top 25 metro areas