Currently there is a debate among remodeling industry gurus concerning if and when real consolidation will take place. Those who don't see a trend toward consolidation argue that the industry is still too fragmented. They point out that, according to 2002 U.S. Census figures, the top 500 companies represent less than 5% of total remodeling revenues (compare that with the 51.5% of total revenues taken in by the top 50 building material dealers in 2002).

Rather than argue with the data, however, I think it's helpful to think about what consolidation would mean to the industry and why it might be beneficial. Here are three reasons I think consolidation is not only inevitable, but desirable.

Strength in numbers. Legitimate remodeling contractors face increasing complexity at every turn, from the growing number of products about which they need to stay informed, to more onerous regulatory processes, to the challenges of recruiting and keeping qualified personnel. A single individual running her own company might as well be stranded by herself on an island; she simply can't get her arms around all of these complexities without burning out. To the extent that consolidation means becoming part of a larger pool of resources, it rescues the individual remodeler from her isolation and makes her better able to handle the increasing demands of the marketplace.

Homeowner expectations. Today's homeowners are better informed and more risk-averse. Already there are magazines and television shows designed to expose the homeowner to new products, and some focus not only on how the work is done but also address the risk associated with who does the work. The net effect is an overall rise in homeowner expectations. Their tolerance for blown budgets, bungled schedules, and botched craftsmanship is rapidly waning, and companies that can't measure up will soon be out of business. Consolidation offers an opportunity for homeowners to choose from a small number of proven brands, much the way they currently choose to patronize food, retail, or real estate chains.

Strategic alliances. Rather than deal with every plumber in the phone book, most remodelers narrow the list to a proven few. They do the same with electricians, painters, and every other subtrade because it's much easier to deal with a few well-known entities than many unknown ones.

The same is true for industry manufacturers and suppliers. Many of the biggest players on the supply side have made it a business priority to deal only with the biggest new-home builders, not only because they control a large percentage of total industry expenditures for building products and materials, but because they are easy to identify and there are a relatively small number of them. From the builders' point of view, the result is better pricing, more timely delivery, value-added services, and better marketing programs, to name a few of the benefits.

As this trend crosses over into remodeling — and we're already beginning to see similar partnerships developing among national and large regional remodeling groups — smaller companies will find it increasingly difficult to compete. Small companies will continue to have access to the products and materials, but it will not be an equal playing field.

Today, there is very little if any data supporting the idea of a trend toward consolidation in the remodeling industry. But I believe that the reasons just outlined exert increasing pressure in that direction, and that it won't be too long before the data bears me out.

If that's the case, it's important for remodeling company owners to think about how a trend toward consolidation will affect them not just next year but during the next five years. Whatever you decide, planning for all the options will ensure that you and your organization are aggressively and constantly improving. — Mark Richardson is president of Case Design/Remodeling and Case Handyman Services, Bethesda, Md. He was named a Maryland Ernst & Young Entrepreneur of the Year for 2006.