Big Does Not Mean Better

They say variety is the spice of life. I think it is also the spice of the remodeling industry. As you examine the 2007 Top 500, the differences between remodeling companies will jump off of the page far more frequently than the similarities. The remodeling industry is full of very successful yet very different companies. Our list of the largest firms is a telling reflection of the remodeling industry in all of its multifaceted vibrancy.

On this list you will see exterior contracting firms that can scale up very quickly in several markets at once. I am thinking specifically of a company like Alpine Exteriors, which has gone from zero to $10 million in six years by operating in several states. But also on this list you will see a good many large, local full-service and design-build firms.

These firms tend to grow over time. Scaling up for growth in firms that tend to do larger, more complex projects requires time — time to build rock-solid systems and processes that can be repeated, time to find ways to attract and retain the right managers, and time to build a base of clients that can provide a reliable stream of business. The Case family of companies comes to mind as an example of this type of firm.

Another observation you may make as you read this year’s Top 500 list, is that some firms tend to stay in the same dollar-volume range, year after year. There are a number of companies that fall into this category. Many of these are strong local design-build and full-service remodelers whose owners have made a conscious decision to stay at a set level of business activity. Instead of growing for growth’s sake, owners and managers at these firms have stayed pat. The reasoning for this is sound. With all of the moving parts and complexities of running remodeling projects, the opportunity for achieving greater levels of profitability can often be found by improving systems and processes. By looking inward for improvement, firms with revenues above $2 million can stay within that range year after year and still increase their net profits. Getting bigger does not always mean getting more profitable.

Another observation: There seem to be commonly experienced revenue plateaus in remodeling, beyond which, a conscious decision and strategy for growth must be made. You will see many companies at the $1.5 million to $2 million level for several years in a row. Others have moved up to the $3 million level and stay put. A smaller group of firms has pushed further up the mountain to the $4.5 million to $6 million range. The Top 500 is an exciting benchmark of success, but big revenue does not mean better company. Within the list there are 500 very unique stories to be told, 500 individual visions of how best to serve their markets, 500 ways to succeed in remodeling. And no one way is better than the other.