Remodeling Industry: Facts, Figures and Speculation
Last summer financial markets were hit hard. The "subprime mortgage crisis," according to some pundits, swallowed entire towns of people and is the reason why the U.S. might be headed toward a recession. In the remodeling sector, according to a recent study, statistics are showing a downward trend for the value of remodeling projects recouped by homeowners -- currently around 70%, down from 80%.
Combine this trend with a downward trend in home values that might be causing homeowners to keep equity in their homes and not cash it out for remodeling projects and, the picture for remodeling businesses might not seem too rosy. However, we don't profess to believe everything we read, and we don't necessarily subscribe to the belief that we are in a recession. So, where does that leave the remodeling industry?
There is opportunity in the Remodeling Industry
Let's put our understanding of where the remodeling industry is headed into perspective. In last month's BBI, we reported:
"The most recent release of the Leading Indicator of Remodeling Activity (LIRA) projects a modest decline in remodeling spending by homeowners over the next 9 months. Total spending is projected to be $175.6 billion dollars on an annual basis by the third quarter, only 2.6% lower than the rate in the third quarter of 2007. If accurate, total remodeling spending in the quarter will be the fifth highest on record."
Now, this is some great news.
So, for remodelers, this should mean a great opportunity to maintain current business levels. Yes, a slight decline in spending is predicted and, with some good business decisions you can minimize even this impact.
Now's the time to act
How can you minimize the effect of even a slight decline in consumer’s spending on remodeling?
Now's the time advertise, promote, and ring your bell!
Maybe you see fewer of your competitors advertising or promoting their services and think that you should scale back, too. If your business is at comparable levels to last year, don't scale back on your marketing. Now is the time to actually step up the efforts, if you can. And, it doesn't necessarily mean that you need to spend more money.
- Negotiate with your advertising sources.
Try to get more ads for less money.
- Put your sales people on the phone.
Have them call previous customers or anyone who contacted you during the past year for a quote. Find out where their project(s) stand and if you can revisit the project together.
- Revisit your marketing plan.
Too often we just participate in the same marketing activities year after year. Would you be better off transferring some of your advertising dollars to online marketing? Should you be sending out a postcard mailing to past customers versus running an ad in a local newspaper?
In previous Building Business Ideas Newsletters we covered marketing for your business in more detail. See "Develop a Winning Marketing Plan" and "How to Make Direct Mail Work for You."
Get online and get technical
People are busier than ever these days -- and more "tech savvy." If you or your sales people are not using technical tools such as email to communicate with your clients and prospects, you are missing the proverbial boat. Your sales people should each have their own email address. You should send quotes electronically. Responsiveness is key these days and, email is a great way to improve yours.
Our January 2008 Building Business Ideas on "3 Ways to Use Email to Keep Business Coming" offers some great tips on how to do just this.
Staff appropriately
Staffing is key for many remodelers. Skilled workers who are good team players help to make your business profitable. Look at your current team and staff and keep only those "A" team members. And, keep them busy. If your schedule is light and your staff can do the work you would otherwise subcontract -- keep it "in house" and have your own staff do the work.
And, thoughts on the future
Last year we predicted that the remodeling industry would see consolidation and specialization and, we believe that to the greater extent, this prediction has rung true. However, a recent study conducted by the Joint Center for Housing Studies, helps us to qualify this prediction as we look towards 2008.
Larger, general and specialty trade remodelers will be more likely to continue to operate on their own. By their very definition, they offer either a broad set of services or very special services, that can either accommodate a broader spectrum of opportunities or will be in continual demand.
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