There has been some positive movement in the housing market over the last three months and some are saying we’ve finally hit the bottom of the economic downturn. But most acknowledge that we are not out of the woods. This weak economy still has many remodeling companies with their backs against the wall. Homeowners remain uneasy about taking on major projects due to sliding home values, rising unemployment and stricter lending practices.
This recession has had other impacts. It has created a new paradigm in consumer spending behavior. Price is now a top priority with many consumers and the result is a move away from larger remodeling projects. The shift away from larger projects continues to plague many design-build remodelers, who had come to rely on bigger projects. Many of these remodelers have worked hard to cut costs, farm for new leads and in many places have struggled to simply keep their businesses open this year.
The challenging environment combined with, for many, running a company in survival mode has made it difficult to focus on anything but the very near term — next week and next month. But planning for the fourth quarter and the beginning of 2010 should begin now. Many remodeling firms have plans that outline goals a year, three and five years out, but today it is important to focus on short-term planning. Those long-term plans remain helpful, but their relevance has diminished in light of the dramatic shift in market conditions. Due to the current unrest in the economy, I recommend that my clients plan in one-, three- and six-month cycles. This short-term planning approach helps them set goals that can be measured and tested much more quickly. As a result, they have the ability to adjust or shift to market trends that help them stay in the game.
With summer coming to a close, now is a great time to set aside a couple of days to re-evaluate your company’s situation to determine how you can alter, modify, or shift some existing products or services to make your company more attractive to potential remodeling customers over the next three to six months. Think outside the box. Ask yourself and your team if there is a part of your business that can become a niche product or service. What client ‘need’ has been created by the downturn, but is not currently being addressed by you or your competitors? How can you meet a need that is currently not being met, or, even better, how can you create a need? Now is the time to remember the well-known Albert Einstein quote: “Insanity is doing the same thing over and over again and expecting different results.” If you are not planning or taking actions to adjust to the current market, you may be putting your company at risk. A shift in a new direction does not have to be costly, but failing to shift could be.
Since we are all in uncharted territory, it is important to understand how consumer thinking has changed due to the recession. To get started you will need good, local information about your potential customers. In most cases, many of your potential customers are past or current clients. Consider the idea of surveying all of your active and inactive prospects as well as your past clients as a means to take the pulse of the buyers in your market. It is a new world out there today, and a great way to get a feel for what buyers are thinking is to conduct a poll.
Here is a line of questioning that you might want to use:
- What remodeling and home improvement projects are attractive to buyers today and why?
- What do buyers feel is important today? Is it a greener, more energy-efficient home, creating more comfort, or an adaptable accessible home?
- When are they willing to move forward with their project? If they are not committing within the next three or six months, what is keeping them from moving forward?
- Price being a top priority today, what concessions are buyers willing to make to realize the project for the budget they have in mind? Are they willing to take on some of the demo work, protection or clean up to realize their project?
All of this information is a key to formulating your plan for a new direction. Next, conduct a SWOT analysis to determine current strengths and weaknesses that may have an effect on the changes you are planning to make. SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. It is a simple way to evaluate your current situation and to give weight to your priorities.
What do you do well that can easily transition into this new niche? How can these strengths help you leverage a competitive advantage over the next six months and in the coming year? What other factors outside of the economy are contributing to your losing business? Is it a weak marketing plan? Do you require more sales training? Has reducing staff affected our ability to respond effectively to our clients? These weaknesses must be fixed if your new plan is going to be effective. In developing your plan, make sure you also gauge what the competition is selling. This is particularly important if you have lost market share to a competitor.
Armed with this information, shape or develop your unique selling proposition or USP. Your new service or niche should be one that resonates with your buyers and generates the profits your business requires to grow. Maybe you elect to integrate a tiered pricing system (good, better, best) that aligns particular products, materials, level of customer service and quality with the buyer’s budget. Alternatively, you may choose to create a series of bathroom renovation packages that do not require design, eliminates the homeowner selection process, and gives you the ability to sell at a competitive price while yielding strong profit margins.
Here’s an example of an idea that may work today. Let’s say that your company decides to take advantage in the strong and growing interest in green remodeling and to devote much of its focus to producing green kitchen projects.
Upon determining your new direction, lay out a strategy for the next six months that quickly begins to generate leads and builds awareness about the new you. Develop a new marketing and sales strategy that will support your new plan. Make sure your marketing is fresh and stands out from the competition. Stay away from the usual brand-promise messages such as, “we deliver quality craftsmanship, professional service, and a reliable team.” Buyers see these often and come to expect it from everyone. Make a statement that will get the buyer’s attention. Something unique would be “Raleigh’s Only All Green Deck Builder.” The buyers know whom they have to call if they truly want a total “green” deck. Tweak your Web site, newsletters and other marketing materials as needed to convey your new service or product.
Once your plan has been pulled together, establish three to five initiatives for the first month, three-month and six-month cycles. Make sure these initiatives will ensure you reach your desired outcome. If at the end of the first month you have not met your critical numbers, re-assess your initiatives. The key is to test, test, test all the way through the plan. An effective short-term plan will be one that produces the results you set out to achieve and reward you and your team with new clients and exciting projects. By testing new ideas and constantly monitoring the results, you will have the best chance of finding new offerings that will help your firm hit its objectives.