In a recent survey, Remodeling Reader Panelists were asked to share details on how their companies fared during the turbulent year of 2008. Details and analysis of their responses is shared in the following slides.
In the last 6 months, have each of the following increased, decreased, or stayed the same?
In order to keep work coming in, remodelers employed a range of tactics, the most popular of which included pursuing different types of projects (52%), being less selective about which jobs to take (50%), and subcontracting less work (40%). Almost a third of companies (31%) chose to pursue work outside their usual geographic service area, while a quarter (24%) extended their marketing efforts to more prospects within their existing service area. Cutting prices (22%) and increasing marketing budgets (21%) were also popular options, and 20% of remodelers added new services.
What types of services has your company added?
For the 20% of remodelers who chose to add services, the most popular option was to take on smaller projects. At the other end of the spectrum, 7% of remodelers chose to decrease the services they offered. A full third of those respondents cut upscale projects.
Has your company laid off any employees in the last year?
One statistic that could be considered a bright spot in the survey, is the fact that only a third (31%) of remodelers had to lay off employees due to the struggling economy. Those companies that made layoffs had to let go 3 employees, on average, and the average percentage of workforce laid off was 37.9%. Looking toward 2009, only 11% of respondents expected to have layoffs in the new year, while 21% of companies said they would add staff. The remaining 68% of remodelers expect staffing levels to stay the same.
How have the following employee benefits changed in 2008?
Employee benefits remained mostly unchanged despite economic challenges in 2008. Vacation/holiday pay and cell phone allowances were the most popular benefits offered by employers in 2008. Of the companies who offered vacaion/holiday pay, 87% kept the benefit the same from 2007, with only 8.5% decreasing the benefit. Similarly, 85.5% of companies that offered a cell phone allowance kept the benefit, while 8.6% decreased it. Sick and personal pay, though only offered by 59% of remodelers surveyed, was retained by nearly 90% of those companies, while 8.5% reduced the benefit, and 1.7% offered more sick/personal time. Employee bonuses were more volatile. Nearly half (47%) of companies that offered bonuses in 2008 left the benefit untouched, while 45% decreased bonuses. Only 7% of remodelers increased their employee bonuses in 2008.
How did your company deal with the high cost of gasoline?
Until a dramatic price drop late in the year, most small businesses were on a gas price watch for most of 2008. Building the added cost into markups was a popular way to handle the increased gas prices used by 51%, though an astonishing 57% of companies absorbed at least some of the cost. Editor's Note: Respondents were asked to choose all responses that applied to their situation, so percentages in this slide add up to more than 100.
How much have your materials costs increased in the last 12 months?
Many construction materials' prices rose in 2008 with 72% of remodelers seeing increases of up to 25%. Prices stayed the same or dropped for 12% of remodelers, while 11% saw increases over 25%. The product categories in which remodelers said they saw the biggest increases included gasoline (69%), copper (54%), and roofing (49%). Other categories included steel (25%), concrete (20%), and PVC/vinyl (20%), followed by lumber (13%), drywall (11%), and fasteners (11%). In dealing with price increases, most remodelers (83%) said they added the increased costs into their markups. A third of remodelers (34%) added escalation clauses into their contracts to protect against pricing volatility.
Have new-home builders offering remodeling services negatively affected your business?
With the new-construction market in collapse, homebuilders-turned-remodelers were another business obstacle in 2008. More than a third (38%) of remodelers said their businesses were negatively affected by new-home builders who began offering remodeling services. One respondent said the biggest challenge facing the remodeling industry today is 'enduring the influx of new competition from both the laid-off employees of builders, the builders themselves, and all the other laid-off workers that notoriously pick up a hammer to make ends meet.-
How would you rate the current state of your business?
While 38% of remodelers reported that business was either somewhat or very active at the time of the survey, the remaining 62% were experiencing slowdowns, with 11% of those saying business was at a standstill. The number of companies that reporting performing 10 or fewer projects rose from 25% in 2007 to 31% in 2008. Additionally, the number of companies performing 11 to 25, 26 to 50, or 51 to 75 projects categories dropped 2% to 3% each. The number of companies performing 76 or more projects stayed the same. The average price of a remodeling project in 2008 dropped 11% from 2007 to $57,263. Companies' average gross margins dropped from 26.16% to 25.34% in the same period.