It's tough out there.
While it's true that remodeling is in better shape than the new-home market and that the slowdown has hit some areas and some companies harder than others, there's no denying that these are difficult times for remodeling contractors. The downturn knows no prejudice, either; companies of all sizes and business models, doing all types of work are affected. Even remodelers who have been around long enough to have survived difficult post-9/11 conditions in 2001 or the economic recession in the early 1990s report that they're having trouble finding work.
SELECT WITH CARE His reasoning is rather straightforward. By taking on unfamiliar projects — smaller jobs if you're a design/build company accustomed to whole-house remodels; siding or window replacement when your specialty is kitchens and baths — you risk making mistakes. And, Toker points out, “You can't afford mistakes in a slow market.”
Instead, Toker says, focus on your core competencies. “It is there that you are most fluent, most efficient, and least likely to make mistakes.” In turn, you're more likely to have satisfied clients. “In a tough market, you need every advantage you can get, and a happy client is the best advantage of them all,” he adds.
However, if — and this is a very important “if” — your company has experience doing projects that took a backburner during the boom of the last five years, now might be a good time to consider taking some of those jobs. In a nod to the trend of homeowners looking to cut back the size of their remodeling projects, Mark IV Builders, in Bethesda, Md., is letting customers know that it's back in the small-project business. “Sure, I'd rather do a $400,000 addition,” Andy Hannan, production manager of the 20-year-old company, says. “But when it's not there, you run whatever you can.”
Just over an hour north from Mark IV Builders, Wheatley Associates has opened a “Home Services” division that handles the smallest of projects — replacing doorknobs, for example — on a time-and-material basis. “We do virtually everything for our clients, anyway,” says Michael Bishop, vice president and director of production at the Monkton, Md., company. “But we had the feeling that they wouldn't call us for the smaller stuff. We're encouraging them to do that.”
That's in contrast to the past, when Wheatley Associates would refer to other companies new customers who called to have only small work done. (The company would complete smaller jobs for homeowners with whom it had a preexisting relationship.) “We do a lot of high-end stuff,” Bishop says, “but that's settled down quite a bit these days.”
The procedures for the small-projects division differ substantially from the company's systems for its design/build work. To eliminate the overhead cost of the time it takes to go through a formal sales process, Wheatley Associates' lead carpenters contact the customers directly to make an appointment. Armed with a one-page contract the company developed specifically for this purpose, the leads drive to the home, get the contract signed, and complete the work. The company charges a flat rate for leaving the office that covers the first two hours of the project, and then an hourly rate (slightly lower than what they typically charge for a lead's time) after that.
The leads also arrive with a checklist of things to keep an eye out for. “Once we get there, we look around the house to see what else needs to be done,” Bishop says.
Whatever you do, don't sacrifice your margins. You need your profit for any surprise expenses that may pop up. “If the client isn't hiring you on your terms, you shouldn't do that job,” Toker says.