Photo Credit: Blogging Jupino

The housing market has somewhat leveled off in 2009, even posting a few months of modest increases. Yet any prediction of a significant rise seems hardly in the cards at this point.  Although positive change may come up in those cards eventually. Certainly it will be some time before we can see if new tax credits for home buyers and energy efficient upgrades, among other things, have some influence on the numbers. But as of yet, the industry still moves ahead cautiously.

The remodeling industry, however, tends to garner a more uplifting forecast, although a full recovery to the highs of the past decade have essentially been thrown off the table. Still, The Remodeling Market in Transition, a new report by the Joint Center for Housing Studies (JCHS) of Harvard University, foresees opportunity in the remodeling market; following a significant “correction” in the industry.

The Harvard study points to several reasons why they expect a bright future for remodeling. Among them:

• Energy efficiency will be reason number one why homeowners choose to remodel and upgrade their home’s infrastructure. In addition to tax incentives, more homeowners are noting the long term savings involved in energy efficient upgrades.
• Foreclosed homes may become an unexpected ally to remodelers. As the housing market slowly recovers, these foreclosed homes will provide opportunities for remodeling as banks and new owners renovate and repair.
• Renting is on the rise as homeownership declines. The number of renters is up 3 million and, considering the large number of under-maintained rental properties, that could open up a sizable and long overlooked sector of the remodeling industry.

Photo Credit: Bloomberg.com

So even though remodeling and housing are inextricably linked in a fundamental way, it would appear that as the market recovers, remodelers will get the first opportunities to get back to work. But if there is a lesson in these and other predictions, it is that contractors who understand energy efficient upgrades will have a noted advantage over the competition.

Green design, green materials, green building practices. These are the likely future of remodeling and the housing industry by and large. Indeed, it looks like a green future for remodelers.

So we have a market that encourages remodeling, however hesitant consumers are to spend, and an Internet that is fast becoming a home improvement tool in its own right. This combination has spawned a major rise in online referral services. These companies, such as CalFinder, offer homeowners an online resource on a smorgasbord of home improvement topics and an easy-to-use link to contractors in a given area. You, the contractor, pay to have these homeowners connected to your company, in the form of their contact information.

Working with these Internet leads can be a bit tricky, requiring more work on your part than traditional leads. As Dave Lupberger pointed out in a related post for Qualified Remodeler, an Internet lead will likely fall short, in terms of information provided, when compared with traditional referrals. Unless you work with a service like CalFinder that pre-qualifies every lead, you generally won’t have a personal view of the homeowner, you won’t know how serious they are, you won’t know their budget situation, and you won’t know when they want to start.

What you will have is their contact information, which is something to work with. Homeowners are generally serious about wanting to remodel, but they may be very hesitant, given today’s economy, to jump right in. Therefore Internet leads may require a little work on your part, some more aggressive marketing. Lupberger put it very nicely when he stressed the importance of developing “a good marketing pipeline.”

You note and keep track of homeowners, Internet-lead or not, that have expressed interest in your services in the past. You then be sure to make regular contact (every few months at least) with these prospects, by way of marketing tools like company newsletters, new project notifications, open houses, and more. The idea is to engrain your company’s name and services into the minds of these homeowners, so that when they are ready to remodel, it is your name that will first come to mind, and your phone that will ring.

Of course when you get a homeowner’s contact information, do not simply send them your next quarterly newsletter. Be sure to make contact with them, offer free estimates and start building a professional relationship with them. Online referrals allow you to specify the region or areas which your company services.

You know the neighborhoods and relative income levels of your best past clients. You can use this a priori knowledge, combined with a lead’s contact information, as clues to who your best prospects are likely to be. But in this day and age it is unwise to ignore any lead, especially as personal referrals give way to Internet leads as a major marketing source. Develop your pipeline and work to expand it; these are the benefits of Internet leads and your task at hand.

Tell me about your book and who it’s written for.

“I started my real estate career in 1987 with CB Richard Ellis Commercial Real Estate. They taught a very specialized system to brokers. The system was based on product and geographic specialization. The system worked in every market. In 2000 I started investing in Real Estate and added a design/build business. I got into decorative concrete and coatings as an inexpensive curb appeal solution to rehabbing properties. I found that most contractors just took business where they got it, with no business plan. The book is written for any trade within Real Estate. I use Case Studies in The Guide of decorative concrete applicators, but it’s written for every contractor. I’m considering writing a version for Real Estate brokers.”

How did you gather your research?

“What inspired me to finally write The Guide was a marketing project (I’ve evolved to the Internet as well) I did for a company with a new coating. They developed a product for resurfacing concrete. Excellent product for floors over 1,500 square feet. The product is a one-day application, which is fine for small floors. They based their business on the one-day application. Problem is, small floors lose money. They never did the financial analysis to determine profitability. I realized they were doomed to failure because they were targeting the wrong market. Once I saw this I realized that the market needs The Guide.

“Here’s a company with a superior product and tremendous knowledge. They have exactly what it takes to be extremely successful, but they are targeting the wrong market. This is why I wrote The Guide. 99% of all contractors have the ability to be financially successful but don’t know how to go about it. The 99% of contractors who break even or fail have just as much talent as the successful 1% and work just as hard breaking even as the 1% who succeed.”

Tell me about the system for success that you describe in The Guide.

“The system is based on being the expert in a market. Let’s say a contractor identifies 75 Grocery anchored shopping centers. Now there are a few different kinds of shopping centers. I’m choosing Grocery anchored for a reason. Every successful investor specializes. So when it comes to Grocery anchored centers, there might be only 15-20 owners of the 75 targeted properties.

There is a good chance that the same property managers run the properties, the same architects, electricians, plumbers and frequently tenants. Many of the tenants are frequently local instead of national, so it’s easy to get to the owner. Now if a contractor stays focused and turns away all business other than the 75 properties, they will capture a large market share. They become much more efficient, they don’t have to travel far, they will control their expenses and manage their books easier because they have a specialized business.

Consider that 75 Grocery anchored centers have 20 tenants minimum per center, that’s 1,500 stores. 7% annual vacancy yields 100 new stores every year. You can see the program can work for architects, general contractors, flooring applicators, electricians. That’s how a contractor controls business. Another basic is that ‘people do business with those they like and trust.’
By specializing, contractors can charge a premium and still get the business because they have developed a relationship. Without a targeted plan every project is like the first. This strategy applies to every trade and market.

Specialization is a science and an art. It’s not hard when you know how but you have to know the process. It starts with the economics of a trade or specialty, then the target market like Grocery anchored centers or office buildings or single family homes. Learning to use the proper marketing tools properly, like newsletters, blogs, and websites to pre-sell services. Presentation packages, contracts, communication logs. They all work as one. This is how a quality profitable business is built. I might point out that this is how a contractor brands their business and gets lots of Word Of Mouth Business. Word of Mouth will lead to other like kind business.