Two-thirds of this year’s Top 500 reported at least some overall gross revenue gain in 2012 — and some reported substantial gains. At the same time, total revenue reported by all remodelers on the list dropped from $7.98 billion in 2011 to $6.76 billion in 2012. The total number of jobs report in 2012, however, increased, suggesting what many remodelers have already said — larger numbers of smaller jobs. Whether the statistics have additional significance is unclear.
Nevertheless, the drop in remodeling revenue as reported by the Top 500 is counter-intuitive in light of reports of recovery in the residential remodeling business. Or perhaps it’s only an anomaly peculiar to the Top 500 sample. Still, one can’t help but remark, the latest revisions to the U.S. Census Bureau’s recent-year estimates of home improvement spending in the C-30 Construction Spending series increased estimates of home improvement spending by 6 percent for 2011 (from $114 billion to $121 billion) and decreased spending over 10 percent for 2012 (from $125 billion to $112 billion).
No Obvious Explanation
“At this time, there is no obvious explanation for why the revisions to the C-30 improvements data were so extreme this year,” says research analyst Abbe Will, of Harvard University’s Joint Center for Housing Studies.
“Typically, these annual revisions are minimal and, in the past, changes were always in the same direction as the original estimates, often revising the whole series downward somewhat. This time, not only was the magnitude of the revisions significantly larger than in recent years, but the direction of the revisions was extremely divergent from what could have been expected based on previous annual revisions,” she continues on the Center’s blog.
That puzzle aside, it is evident that some remodelers have made impressive gains, and, as a group predict 2013 revenues of $10.4 billion, a $3.5 billion increase over 2012. One remodeler, who didn’t make the list, reports revenues for the first half of 2013 equal his revenue for all of 2012, putting him on track for inclusion in next year’s list.
Overall, the picture painted by the Top 500 is one of companies that have been in business for an average of 25 years and have been in the same location for an average of 24 years — in other words, these are stable and established companies which have weathered the economic cycles of remodeling more than once.
What They’re Thinking
As evidenced by comments for random remodelers who are included in this year’s Top 500, much has changed in the remodeling industry, and those who have survived have changed with it. Consumer buying habits which have been altered by the availability of Internet-based information is one change many cite. Another change is a growing awareness of looming labor issues in the industry; an increasing number of remodelers expect to see a shortage of skilled labor in the near future, if they are not already experiencing it.
Following are some of the thoughts shared by this year’s Top 500:
Q: Has the remodeling business changed dramatically over the past several years, or do you feel this is just one more cycle in the series of booms and downturns that characterize the industry? Has the industry changed permanently, at least for the foreseeable future?
I think the industry is the same but consumers have changed with the Internet. Each company must have a strong digital voice and identity online or else others will shape your online identity. — Scott Mosby, Mosby Building Arts, St. Louis, Mo. (No. 85)
Although we believe the past several years to be a cycle in a series of booms and downturns, we believe this downturn was much harsher than any our industry has experienced before and has forced the industry to change and grow for the foreseeable future. — Trent Ketchum, project consultant, Fulford Home Remodeling, Swansea, Ill. (No. 463)
Clients are shopping price more, expecting we should still be happy to have work. — Tom Reilly, Renovations, Your Complete Remodel Resource, Prescott, Ariz. (No. 416)
Q: Some remodelers thrived and even grown in what have been called “difficult” times. What’s different about these remodelers who have succeeded against the odds?
We have consistently grown through the downturn by focusing on "needs" instead of "wants". We have become masters of aging in place and "moisture management," which is the repair and correction of water intrusion. Both of these services are need-based work that are less-discretionary purchases. — Scott Mosby, president, Mosby Building Arts, St. Louis, Mo. (No. 85)
The difference between companies that failed and companies that survived and thrived was found in the ability to adapt and change. We found ourselves completing almost twice the number of jobs for the same dollar volume of sales. This took much adaptation and change in both our sales process and production implementation to make ourselves profitable. — Trent Ketchum, project consultant, Fulford Home Remodeling, Swansea, Ill. (No. 463)
Q: What is the one most significant change in the market and/or how you do business?
We are deeply entrenched in educating and training both consumers and employees about building science and the physics of highly technical systems in homes. Gone are the days of nailing things together because "that's the way we always did it". — Scott Mosby, Mosby Building Arts, St. Louis, Mo. No. 85)
Over the past year the BOWA executive team has spent a significant amount of time revamping our roadmap for future growth. A key component of this plan is hiring several new project leaders over the next few years and empowering them with the tools and proven processes to build a territory. While residential remodeling executives are a natural fit, we have also broadened our search to include those with sales experience in ancillary industries, such as real estate or commercial construction, who we can support with our in-house remodeling expertise and the necessary back-end functions of accounting and marketing. — Joshua Baker, founder, co-chairman, BOWA, McLean, Va. (No. 34)
Todays customer wants to be involved so we involve them and make them our partners. — Peter Ciaraldi, Professional Building Services by PMC, Salem, N.H. (No. 493)
Q: In response to changing conditions, have you done something in your business, good or bad, that you thought you would never do?
Yes, we used to discuss the dream, the uncertainty of the design, and allow scope and budget growth. Now, we identify goals, budgets and specific design options right up front. We then perform within specific ranges according to our up-front agreement. We used to sell uncertainty, and now it's certainty we deliver. — Scott Mosby, Mosby Building Arts, St. Louis, Mo. (No. 85)
Continuing education is critical to differentiating ourselves – we substantially increased the frequency, formalized it and made all technicians take business training. The customer benefits from a more well rounded staff member. — Peter Ciaraldi, Professional Building Services by PMC, Salem, N.H. (No. 493)
Q: What is the No. 1 challenge or issue facing the remodeling industry, (regulation, financing, labor, economics, etc.), and what needs to be done?
I would say the No. 1 issue facing the remodeling industry today is complacency. It is too easy to forget what we all have just gone through and go back to bad-old habits. — Trent Ketchum, project consultant, Fulford Home Remodeling, Swansea, Ill. (No. 463)
The most pressing issue facing remodeling today is the lack of young people entering the industry. Labor shortages are being reported all over the country by my peers. With the rebound in full swing in most areas, remodelers are finding it difficult to find workers. I’m afraid that until we change the perception of a remodeling career, this will continue to haunt us. I, for one, am proud to be a remodeler. — Paul L. Sullivan, CGR, CAPS, CGP, president, The Sullivan Co. Inc., Newton, Mass. (No.397)
Inflation in the cost of materials. Costs have risen significantly over the past 18 months. Also our prospects have unrealistic expectations as to what can be done with their budget so a lot so education has to occur while we're working with them. — Patrick Finn, Patrick A. Finn Ltd., Palatine, Ill. (No. 441)