Last month, REMODELING featured a story about industry consolidation. For most remodelers, the subject of consolidation is not on the top of the list of issues to ponder. Faced with the challenges of sales, production, finances, and other pressing matters, it's all a small-business owner can do these days to get through the day. Besides, in a nation of about 200,000 remodelers, the top 10 companies have less than a 1% market share — not the kind of numbers that would make you think that consolidation will have a real impact any time soon.
I'm not going to suggest that you change your thinking or alter your day-to-day game plan. But I will suggest that you start to think about — and maybe even position yourself for —what could be very interesting times over the next 3 to 10 years.
But first, let's define consolidation. Most think of consolidation as “roll ups,” one organization buying another to create a larger more powerful company. I don't believe that model is likely to occur in home remodeling, for a couple of reasons. The culture of the remodeling companies is difficult to integrate, but remodeling companies also have unique systems and processes that are nearly impossible to duplicate.
I believe the more likely route for consolidation will be more organic. In one scenario, remodeling company owners simply close their doors and go to work for larger remodeling companies. The most pessimistic view is to look at this as failing remodeling companies joining more successful ones. But I prefer to be less judgmental. Being in the remodeling business has become more complicated, more risky, and more stressful than ever, and to be out on that island by yourself is very scary.
That's why I like to think of this option as remodelers seeking out an opportunity that better leverages their skills. Instead of having to wear all the hats, they will be able to focus on what they have a passion for. If they really love the craft, they may take positions leading production crews. If they are proficient at sales, they might become all-star salespeople. If their skill set is more in project management, then that could be an alternative. Anything is possible once the distraction of the rest of the business is taken away by the larger firm.
A second scenario is consolidation through franchising. Already, franchising is spreading across the United States in the areas of handyman, kitchen and bath, and insurance restoration, and now it is happening in traditional remodeling. Franchising will affect not only existing remodeling companies, but it will introduce home improvement to individuals from outside the industry who want to start a business. Franchising offers the proven systems, marketing, and training that will help grow those businesses in 2 to 4 years to levels that it may have taken them 10 years or more to accomplish on their own.
Franchising is new to remodeling but has been very successful in real estate, which in the 1960s and '70s had many parallel conditions. Back then real estate companies were small independent shops, each with its own way of doing business. Today the majority of real estate transactions are made by a few national companies, like Coldwell Banker, Re/Max, and Century 21. The catalyst of consolidation in real estate was the multiple-listing service; in remodeling, it will be technology that enables fast communication over long distances.
There will always be a place for the boutique practice, so don't change course if you are happy where you are. But I believe the future of our industry will look very different. The biggest question in my mind is not whether remodeling will consolidate, but when. It will almost certainly be sooner than you think. —Mark Richardson is president of Case Design/ Remodeling and Case Handyman Services, Bethesda, Md., and author of 30-Day Remodeling Fitness Program . 301.229.4600; email@example.com.