Business Building Ideas from HomeTech

Results from the 2007 HomeTech State of the Remodeling Industry Survey
The results are in. Thank you to everyone who completed this year’s survey on the "state of the remodeling industry." From looking at your responses, one thing has rung loud and clear -- the remodeling industry is its own entity. Although the construction sector is sometimes thought of as a single industry it is actually several different industries that often follow different cycles. Remodeling, in particular, should be recognized as having its own opportunities and challenges that need to be specifically addressed.

Responders to our survey were a little larger and have been in business longer on average than the industry as a whole. Here's the breakdown of responders:

Primarily comprised of businesses with $500,000 or less in annual revenue (62% of businesses) with 83% of businesses having $1,000,000 or less in annual revenue.
An industry with some mature businesses -- 72% of you have been in business for six or more years.
Businesses more focused on residential versus commercial remodeling. Only 37% of you are working in both the residential and commercial remodeling segments (63% of you have 0% commercial business).
Representing businesses across the US and Canada (click here to see the geographic breakdown of survey respondents).

Is the remodeling industry experiencing a slowdown?
We asked you this question and we have to say, we are a little surprised at your response. You''re telling us that while the construction industry (new home building specifically) is experiencing a slowdown, the same does not hold true in the remodeling industry. In fact, 67% percent (2007 Survey Graphics) of you believe that revenue will increase or be comparable to the previous year -- certainly not the doom and gloom picture that is being painted for the construction industry. The makeup of how you are achieving your revenue this year has changed a bit from previous years, but you are still on course for a great fiscal year.

And, your activity measurements support your strong revenue predictions. Only 33% of you have seen a drop off in leads from last year. 66% of you have the same or more leads coming in over last year. (2007 Survey Graphics)

What’s keeping the revenue stream flowing?
We asked what you are doing to make this year’s revenue increase over last year’s and you told us what’s working for you:

You are investing in your business.
Many of you indicated that you hired new employees this year. By hiring estimators and lead carpenters you removed yourself from some of your day-to-day responsibilities allowing you to focus on how you manage and grow your business.
You diversified your business.
Several of you indicated that you have expanded the services your business offers to attract a wider base of customers. For some of you this has meant adding kitchen and bath remodeling services. For others, it has meant offering green remodeling options.
The economy.
Not under your control, but a factor that is affecting many remodelers is "the economy." (Some of you have seen a slowdown as a result of the economic conditions (see below), but many are also attributing growth in your remodeling businesses to "the economy.") With housing prices having escalated over the past 5 years, your customers are investing in their current homes versus moving. You've also expressed that with homes taking longer to sell, many are opting to "spruce up" and are remodeling their homes before putting them on the market in hopes of being able to sell their home more quickly.

But for some remodelers, business isn't booming
33% of you indicated that you expect a decrease in revenue this year over last. And for 21% of you, this decrease will mean 10% or more in lost revenue dollars. (2007 Survey Graphics)

The press has been very vocal about a downturn in the overall economy and in the construction industry. Unfortunately, this "loud voice" is affecting the remodeling industry too. Many of you believe, however, that were it not for the very vocal, very negative press your remodeling businesses would not be so adversely affected.

But whatever "slowdown" there is in the remodeling industry, it seems to be localized. Those of you in Florida and the Michigan area have expressed that your local economies are hurting, and this has affected your remodeling businesses. But those of you in the D.C. area and those of you who remodel for the high-income bracket population find that business is booming.

What is putting downward pressure on your revenue?
There are several reasons why some of you are experiencing a downturn in revenue:

Cheap foreign labor
Many, many of you voiced your opinion on how illegal immigrants and non-licensed labor is negatively affecting your business. With home owners being more price conscious, competitors who hire illegal or non-licensed workers can do so more cheaply. As a result, their estimates are lower than yours and homeowners are responding to the lower bids.

(What can you do about this? Contact your local NARI Chapter -- www.nari.org -- for a list and find out what they are doing with your local legislation about regulations regarding the hiring of illegal immigrants).
A slowdown in the economy
Interest rate fluctuations, the "correction" of property values, the war and unstable lenders have all led to a slowdown in the economy. The slowdown in the economy has affected new home builders and the fallout for remodelers is that these new home builders are now invading the remodeling industry.
Inexperienced estimators
Many of you have expressed how home builders, who are now "invading" the remodeling market, are also not very good at estimating remodeling projects. Home builders are used to estimating new construction projects and that translates to lower estimates on remodeling projects. (The upside is that some of you are actually getting business from homeowners who went with a builder for a remodeling project and botched the job.)
"Large jobs" are lacking
Several of you expressed that in previous years your firms have worked on one or two larger jobs and you needed to hire a lot of sub-contractors to handle this work. This year you don't have these large jobs -- your profit remains intact because you don't have to hire the subs, but overall revenue is less since you are working on a lot more smaller jobs.

Words of wisdom
Regardless of what your revenue predictions are for 2007, you had some great feedback to share with your fellow remodelers:

Be customer focused
Many of you attribute a profitable 2007 to the fact that you get referral business. And several of you commented on what you do to get the referrals. Basically, you need to be customer focused. By being responsive and professional to the people you deal with and doing quality work, your customers have turned in to your biggest advocates recommending you to family, friends and neighbors.

Several of you also mentioned that you receive more referral business the longer you are in business. With over 72% of you being in business 6 or more years, the efforts you put forth to insure referral business will continue to grow exponentially.
Hire skilled labor
For cost reasons you may be tempted to hire sub-par workers but sub-par workers lead to sub-par work, mistakes and eroded profit. Don't be short-sited; invest in the right people and your business will prosper.
Spend time developing accurate estimates
Carefully preparing and presenting thorough estimates provides an overall better experience to your customers. Customers appreciate jobs that are completed close to the estimated price. Presenting inaccurate, low estimates creates expectations that just can’t be met when the actual work is done.