Happy New Year! Four years and counting, the depression that has gripped this industry will more than likely continue through 2012 and beyond. I think of myself as an optimist; I don’t think one can be in any business unless they are optimistic, but I believe 2012 will be a difficult year for many.
When this recession began, I looked at it as the natural event the marketplace uses to shed itself of excesses. The economy was full-steam ahead and prices got out of hand. People who got into this business had no business doing so. Customers were happy that someone showed up to look at their projects, and many of us were cherry-picking work. Recessions in the past had a cleansing effect, much like pruning a tree to allow for new growth. This time is different. That is why I used the dreaded word “depression” to describe what we are dealing with. Merriam-Webster’s defines depression as “a period of low general economic activity marked especially by rising levels of unemployment.”
During the Great Depression people stood on street corners, selling apples, pencils, whatever, to earn a buck. Today, those desperate to support themselves are attracted to remodeling for the very same reasons. We’ve all seen the Chucks in a truck or someone’s laid-off brother-in-law selling themselves as remodelers. Let’s not forget the single-trade subs, who were once framing contractors, for example, eating off our plate. Add to this the ever-increasing competition from home builders who think they can remodel and the big-box stores and product manufacturers who are selling directly to the public. They are no longer satisfied with the profits generated from selling materials; they want the installation profits, as well.
In addition, remodelers are willing to run to the bottom when it comes to bidding jobs. Unlike accountants, auto mechanics, doctors, lawyers, plumbers and other professionals, remodeling is the only profession that historically has competitively worked to reduce its earnings. Rather than selling value and quality, we tend to sell price. The Internet hasn’t helped. Customers now tell us what the materials cost and, in some cases, want to supply the materials, further cutting into our profit margins.
It is in consideration of all these things that I am less than optimistic about the New Year. Granted, some of these things have always had a presence in our business. Now there is just more of them, coupled with over-regulation by the EPA (RRP) and OSHA, a resetting of house values and a dysfunctional government.
I will not sugarcoat the realities we all face: Many of us will not survive. Period. Going forward, here are some things that may help save your business and our industry:
- • Streamline your operations now. Evaluate every aspect of your business, make cuts or consolidations—essentially, trim the fat.
- • Have all your insurance policies evaluated for adequate coverage and premiums. Insurance companies count on you to avoid shopping around for price. You may be surprised at the savings if you haven’t done this in awhile.
- • Get bids from several suppliers. A few bucks saved on materials here and there can add up to significant revenue by the end of the year.
- • Learn to say “No!” This is crucial. Some jobs are not worth doing. Don’t waste your time and resources chasing an unprofitable or aggravating job. You are entitled to a profit.
- • Think long and hard before exposing yourself, your company or employees to dangerous conditions, such as lead paint. The potential of litigation in the future and inherent cost will never be offset by whatever profits you might realize today.
- • Stop supporting your competitors. Don’t buy from material retailers or wholesalers who pretend to be remodelers.
- • Never install the customer’s materials. How can you warrant something you did not furnish, and why would you relinquish those markups?
- • Stop wasting marketing dollars chasing nonexistent leads instead of focusing on existing or former clients.
I hope my dire prediction for 2012 is incorrect, and I wish you all much success, as well as a prosperous and healthy New Year.