Years ago, I suggested that bursting through the $500,000 to $750,000 volume range was one of the most difficult periods for company owners. I called that middle ground Never Never Land. If you were trapped there, you'd never grow.
But back then, companies doing more than $1 million were few and far between. Until the past six years, if you reported above $800,000 in volume, you were in the remodeling elite. Fifteen years ago, if you were doing $1 million, you might have 15 field guys. For many, up to a certain volume, you could sell and produce your entire volume without instituting systems. You might have had a carpenter or two, and a part-time office employee, but the owner did all the selling, prepared contracts, and kept schedules in his head.
Goodbye, Never Never Land These days, it's different. And, I have to say, Never Never Land has gone away.
Many remodeling companies have grown rapidly in the past 10 years. More plan the same.
A 1996 survey of the top 1,000 remodeling companies listed them at $3 million or more. And my guess is that today, those recording volumes of $1 million or more number between 8,000 and 13,000. So today's remodelers are growing rapidly.
Contractors over $1 million all learned the hard way how to make the jump. Now there are enough owners who can offer guidance to others making that same move.
These days, with job sizes larger, technology better, lead carpenters managing $300,000 in work, and owners more sophisticated about growth, I see people barreling through that barrier after their third $300,000 job. The quality and size of construction projects is incredible now. People are moving up and aren't turning back, particularly in design/build.
Yes, there are still complexities of growth — proper staffing, increased liabilities, constantly changing duties for owners —but because of higher volumes and better margins, owners aren't penalized as much for mistakes.
People aren't even thinking about Never Never Land. More companies are raising markup to 67% (40% margin) to survive, are computerizing, and are developing standard procedures.
Little Guys Won't Make It Sure, there are still a lot of small guys who won't make it —they're just not charging margins they need to survive and grow. In the future, these guys will be forced to work with larger operators. If the bigger guys want second locations, these guys will be in the running. But they won't make it on their own.
So now the question is: Do you want to be pulled through $1 million or not? If you say no, odds are you'll be running jobs and letting a bigger guy do the paperwork. More of you will be working for The Home Depot or Lowe's, with your own company, if you want. The little guy in remodeling will become obsolete, or he'll focus on one thing: windows, doors, or some other specialty. Still, we need those guys.
I see remodeling contractors, like large home builders now, subcontracting every part of their jobs, with the exception of the customer relationship. There will be lead carpenters, but they'll oversee construction in groups of six jobs. With few exceptions, they won't work with their hands. A better name will be “production superintendent.”
Harvard University's Joint Center for Housing Studies states there are 172,000 remodeling contractors with payrolls and 200,000 to 300,000 working alone, often without a license. I can say with certainty: No more than 20,000 are making a good living and running successful companies. The rest are barely making it and don't understand why.
If you're a small- to medium-sized company, now is the time to look at options and perhaps team with a company that wants to expand. Today, you're either small and smart or you've already blown through the $1 million mark. There's no in between. — Walt Stoeppelwerth is a publisher of management and estimating information for professional remodelers. 800.638.8292; email@example.com; www.hometechonline.com.