Big remodelers' profit margins in 2015 had not only recovered from the Great Recession but even beat where they were in 2003, a new survey released today by NAHB Remodelers indicates.
The gross profit margin of the 141 remodeling companies taking part in the poll stood at 28.9% in their 2015 fiscal years. That's up from the 26.8% reported for 2011, the last time NAHB did this survey, and even up from the 28.4% margin reported in a similar survey in 2003.
Equally important, the average net profit for 2015's respondents hit 5.3%, a marked gain from the 2011 group's 3.0% net profit and the 2003 crowd's 4.2%.
Self-described general remodelers who took part in the survey reported an average gross margin of 28.8%, up from 22.2% in 2011. Average net profit was even better: 6.3% in 2015 vs. 1.8% in 2011. For design-build firms, the story was slightly different: average gross margin slipped to 28.6% in 2015 from 31.0% four years earler, but profit climbed to 5.2% from 3.9%.
The average firm taking the survey reported revenue of $1,782,000 in 2015. That's more than twice the $700,000 average size for all remodeling firms that federal censuses indicate, according to findings by the Joint Center for Housing Studies at Harvard University. Thus, the 2017 Remodelers Cost of Doing Business Survey can be taken more as a profile of the healthiest remodelers rather than of the industry as a whole. And even within this rarified group there were sharp differences between the top and bottom 25% of respondents in areas such as gross profit margin (35.8% for the top quarter, 23.1% for the bottom quarter) and net profit (16.8% profit for the best quartile vs. a 9.9% loss for the bottom quartile).
NAHB credited improved operating efficiencies for the recovery since 2011. “Remodelers were forced to adopt new strategies to survive the downturn, and keeping those business models in place as the market grows has helped improve their margins,” said 2016 NAHB Remodelers Chair Tim Shigley, a remodeler from Wichita, Kan.
NAHB noted in its news report accompanying the survey's release that the association believes remodeling expenditures over the new few years will continue to grow, but at a more gradual pace.
An ebook version of report is available from the NAHB Bookstore.