They do your painting and plumbing and electrical work and masonry, and increasingly, they may do most or all of your carpentry, too. However, your trade contractors are potentially far more than labor sources alone, says industry “coach” Tim Nagle of RemodelBuddy.
“Develop strategic partnerships, and use them really well,” Nagle says. Remodelers whose businesses are strong “establish strong relationships with their trade partners and really get them involved in their business,” he says. “Those that are flying by the seat of their pants and just putting out bids are struggling.”
Marketing: Two-Way Street
Leverage your trade relationships so that they provide a two-way referral stream, Nagle says. Feature trade partners in your Web and other marketing materials, and get them to do the same for your company.
Jointly create content that showcases your teams’ chemistry and expertise. For instance, Nagle uses video to record conversations between remodelers and trade contractors on topical issues, such as “what’s new with HVAC” and “how to install radiant flooring.” Video cameras and editing software are affordable and easy to use, and “it’s great content for the website,” he says.
Outsourcing: proceed with caution
Growing numbers of remodelers who laid off production staff in favor of hiring subcontractors or “independent contractors” as needed are sticking with that model. Benefits include cost control and flexibility.
“When I assemble a bid for window replacement, I know exactly what I’ll pay my installer to put the window in and my painter to finish it,” says Pat Strand of Total Home, an exterior remodeling company in Kansas City, Kan. Employees tend not to be as consistent from job to job, in his experience, “which eats into the projected profit margin.”
Strand strives to use the same contractors repeatedly, for cohesion and continuity, but he points out that they are “companies with distinct taxable entities” and with other clients, and not individuals who are employees in all but name, FICA, workers’ comp, and other fiduciary obligations.
In fact, notes David Roberts of Roberts Architects, in Evanston, Ill., remodelers who hire individuals as “independent contractors” are often violating the law and taking huge liability risks. “The pressure is huge to cut job costs and overhead, so hiring an ‘independent’ with little long-term commitment seems like a quick fix,” he says. Don’t be tempted. “Stay with the team that brought you to the dance, even if the music is changing.”
Discounts: to Ask or Not to Ask
When homeowners pressure prices down, remodelers often turn to their trades to accommodate. A March survey of the REMODELING Reader Panel found that nearly half (46.6%) of remodelers asked trade partners to lower their rates at least 1%, and that nearly a quarter asked for price breaks of more than 10%. Virtually all those requesting a break of 3% or less were told “yes,” and more than three quarters received their requested decrease of 4% to 5%.
“Absolutely” it’s a good time to ask for a discount, says architect Stan Schachne, of Schachne Architects and Builders, in Davie, Fla. In June, he estimated a project that came in 18% below the price for the very same project two years ago.
Not so fast, say others. “I wouldn’t ask for lower prices because I don’t want to receive lesser service or risk them going out of business,” says Greg Antonioli of Out of the Woods Construction & Cabinetry, in Arlington, Mass. “Loyalty is more important” than lower prices. “I can sell the high costs to the client,” he adds. On the other hand, “I need subs to jump when we say so — even at the expense of another GC.”
Then again, if they volunteer it … . “In the last two years, our subs have called us to offer lower prices on the same work,” says Doug Horgan, vice president of best practices at BOWA, in McLean, Va., which specializes in large remodeling and custom home projects. “That has allowed many projects to move forward that were iffy.”
—Leah Thayer, senior editor, REMODELING.