Reader Panel: The Changing Face of the Remodeling Industry

Remodelers weigh in on business changes they've made in response to economic conditions.

Recently, Remodeling took an in-depth look at the changing face of the industry and how the economy had impacted remodeling businesses. The following Remodeling Reader Panel survey results shed additional light on how the industry has changed, how remodelers are adapting to those changes, and what we can look forward to in the future. For more information on the Reader Panel and how to join, click here.

According to Reader Panelists, average project sizes seem to be falling. While 20% of respondents report that, in their best year in business, their average job size was between $50,000 and $100,000, just under 14% of repsondents had average project sizes in that range in 2009. Additionally, nearly two-thirds of respondents (63%) said their average job sizes were $25,000 or less in 2009. Only 31% reported having average jobs in that range during their best year in business.

Despite smaller project sizes and concerns about a tight credit market, remodelers don't seem concerned about their clients' abilities to pay. Only a third (34.7%) of Readerr Panel respondents said they are screening prospective clients more carefully during these tighter times. Furthermore, remodelers are leaving payment for remodeling jobs in the hands of the homeowners, and homeowners don't seem to expect payment information to come from their contractors. The vast majority of Reader Panelists, 89.2%, said less than 10% of their clients have asked about financing options in the past 12 months. This is little changed from the period between 2000 and 2008 when 86% of remodelers said less than 10% of their clients asked about financing. Indeed, only 6.6% of remodelers told Remodeling that they even offer financing options, though 21.6% said they have offered financing in some situations. Nearly 72% of remodelers report they have never offered financing. Of the small number of remodelers who do offer financing, just over one-third (36.4%) have been doing so for more than 5 years, while 27.3% have been offering financing for 2 to 5 years, and another third (36.3%) have offered it for two years or less. In most cases, these companies are offering a range of financing options, the most popular being credit through programs such as GE Money, as reported by 64% of Reader Panelists. More than half (55%) offer financing through notes or loans carried by banks, and 45% will personally refer clients to a local bank for financing. Just 1% of respondents said theyll finance projects through thier own company.

In addition to (or perhaps because of) shrinking jobs sizes, remodeling companies' staffing numbers are contracting as well. Whereas nearly half of Reader Panel respondents (47.6%) said they had 1 to 3 field employees three years ago, 82.2% report that they currently have 1 to 3 employees - an increase of 72%. Additionally, the number of companies that report having 4 to 7 employees three years ago (32%) was cut by nearly two thirds. Only 12% of remodelers now say they have 4 to 7 employees. Further analysis of the data shows that, of remodelers who said they had 4 to 7 employees three years ago, 84.3% now have 1 to 3. Larger companies are also contracting. One-third (33.3%) of companies that had 16 or more employees three years ago now have only 1 to 3, and one-sixth (16.7%) have 4 to 7. Additionaly, of companies with 11 to 15 employees three years ago, 50% now have 4 to 7 employees, and 33.3% have 1 to 3.

Office staffing levels have not seen as much contraction as their field staff counterparts. While 86.8% of Reader Panelists reported having 1 to 3 office staff mmbers three years ago, an even 90% report staffing to be at that level in 2009. The biggest changes seem to come from the largest companies. Of respondents that reported having 16 or more office staff members three years ago, two-thirds said they had 11 to 15 office employees in 2009. All of the companies reporting having 11 to 15 office employees three years ago now report having 8 to 10 staff members, and nearly half (47%) of remodelers that said they had 4 to 7 office staff members three years ago now have 1 to 3. Designers will be pleased to hear that less than 10% of remodeling firms said they sacrificed design staff to reduce overhead in over the same time period.

Even as some remodelers have reduced staffing levels, Reader Panel respondents seem to be managing redistributed workloads well. More than half of remodelers (52.2%) said their production management responsibilities have not changed over the last three years, while 9.2% say their production management responsibilities have increased by 10% or less, and 14% say that portion of their work has increased by only 11 to 25%. Two out of every 25 remodelers (8%) say their production management workload has doubled.

Overall, nearly half of remodelers (47.8%) say they didn't lay off any employees during the recession. Of those that did, nearly half (48.2%) let only 1 or 2 employees go, while just over a third (36.5%) laid off 3 to 5 employees. Ten percent of remodelers said they had to lay off 6 to 10 employees, and 4.7% reduced staff by 11 or more employees.

More than a third of companies that implemented layoffs (36.4%) plan to hire back some or all of their laid-off workers, while 43.5% plan to move forward with their smaller staffs. At the time of the survey, 20% of comapnies were unsure as to how they would proceed.

Smaller field staffing levels opened the door for some remodelers to create more relationships with trade contractors. Nearly 1 in 5 Reader Panelists (19.6%) said they used more subcontractors during the recession than they did three years ago, and 84% of those respondents plan to continue using more trade contractors even as the economy picks up. Some remodelers also found that working closely with trade partners can translate to money-saving relationships. Nearly half (46.6%) of remodelers said they asked trade partners to lower their rates in order for the contractor (and by extension the subcontractor) to win jobs. Of those who asked for rate reductions, a whopping 97.3% said their subcontractors honored the requests, proving that it never hurts to ask.

The amounts of requested subcontractor price decreases were split across the board. About 6.6% of remodelers asked for and received a decrease of just 1% to 3%, while most (36.8%) asked for 4% to 5% reductions, and another third (34.2%) asked trade contractors to lower prices by 7% to 10%. A surprising 22.4% of remodelers asked for more than 10% reductions - and many received them.

In-depth analysis of the data shows that all of the remodelers who asked trade contractors to lower prices by 3% or less received the reductions. Of contractors that asked for 4% to 5% rate reductions, more than three-quarters (77.8%) got what they asked for, while the rest (22.2%) received a 1% to 3% decrease. Bolder remodelers that asked for 7% to 10% price drops still did well, with 47.2% receiving the full discount, and 50% receiving 4% to 5% decreases. Even contractors that asked to have prices lowered by 10% or more were given the thumbs up. Nearly two-thirds (62.5%) received the full discount they requested, while the remainder were evenly split between 7% to 10% discounts and 4% to 5% discounts.

According to survey results, trade contractors aren't the only ones willing to negotiate prices. While half of Reader Panelists (48.7%) say some of their local suppliers have gone out of business amid the recession, more than a quarter (27.6%) add that suppliers are offering more sales, discounts, or services to help them retain business. Beyond simply doing business as usual, the economy has had other impacts on suppliers and lumberyards, such as reducing in-stock SKUs or lowering the frequency of product deliveries. More than one third of remodelers (37.4%) report noticing shortages and delays in product availability from suppliers. Further analysis of the survey data shows that windows, doors, and cabinets are among the products most impacted by delays or stocking issues.

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