Many homeowners who received remodeling bids a year ago are finding that the same project today would cost thousands less.

Take for example Michael Perkocha and Tina Stott from Oakland, who just purchased a bungalow for $630,000. Last year they were getting quotes in the $250,000 range and decided to postpone remodeling because they couldn’t afford it. This January they got quotes ranging from $102,000 to $170,000 and ended up going with a contractor whose bid was $129,000. That’s a $121,000 savings!

Such deep discounts allowed them to upgrade their flooring from laminate to oak and upgrade their countertops from Formica to granite. They’re also able to add crown moldings and energy efficient windows.

Besides saving a huge chunk of money, the work is almost complete at three months, opposed to the six months they had figured on, and they’re under budget. These are huge marketing points for contractors: big savings, ahead of schedule, and under budget.

At the beginning of the year, Jack Schocker decided it was time to remodel his vacation condo in Sarasota Florida. He got estimates for replacing a couple cabinets in the kitchen that were damaged by water from the condo next door. After talking with one of the contractors he realized that for less than $30,000, he could completely redo the kitchen and remodel two bathrooms. He and his wife were going to redo everything anyway in a few years down the road. So, even though they hadn’t planned on a total redo so soon, with prices so low they decided to take advantage of the times and do the big remodel.

The word is getting around and making homeowners think, labor costs are down by 10 to 20 percent, prices for materials like lumber, steel, and copper are down, contractors are readily available, and the job gets done faster…hmm, maybe remodeling now would be a smart investment.

Homeowners who are remodeling this year are able to spend less, get a higher level of quality, and enjoy their new remodel much more quickly, and this is what contractors need to get across to homeowners. If you’re bidding a small job like Jack Schoker’s replacement cabinets in Sarasota, it pays off to mention that you can completely redo their kitchen at XYZ dollars.

Resource:

http://www.nytimes.com/2009/04/23/garden/23renovation.html?pagewanted=3&_r=4&emc=eta1

1. Advertisements. If the money is there, then advertisements are an excellent way to get the word out, but recessions are more about intimacy and word of mouth. Many homeowners want to remodel but are tentative about spending the money. In such cases, a handshake and some expert conversation are more likely to yield trust and a contract than the flash and flare of an advert. Start with recent or other past clients. Maintaining a relationship with one client often extends to others by association. Then, when cutting down your advertising budget, test out which outlets work best for you before deciding what to slash off the budget.
2. That Extra Truck or Trailer. There’s no need to go out and pawn tools, but that other heavy duty truck you bought during the boom that costs $500 per month could probably go. A contractor needs his truck, but two? The same goes for trailers and other superfluous equipment. It’s all part of trimming the fat and balancing a budget.
3. Office Space. It’s probably getting hard on a lot of contractors to pay for separate office space. As much as we all hate to see empty buildings lining city streets, is an office really necessary for your company? Perhaps it is, but many contractors could just as easily handle paperwork at home, especially since most meetings are held on job sites anyway.
4. The Warehouse. If you can do without an office to answer phones, can you go without a storage facility? If you (or your employees) have some extra time, it may be worthwhile to re-inventory all the extra material from jobs past, old tools, equipment, etc. that is collecting dust. You may even find a way to eliminate a costly bill, or at least downsize to a smaller unit. If your storage is your backyard, then consider it yard work.
5. Extra Help. It is hard to lay off employees, especially those that have been long-standing and loyal. I personally have been blessed in the past by contractors who did anything they could to keep me off the unemployment rolls. Still, even without laying anyone off, there are things many contractors can do without hiring anybody new. Take, for instance, answering your own phone or doing more of the leg- and paperwork. It’s not always easy, but if it were they wouldn’t call these hard times.

There’s a first time for everything, and this isn’t it.

It is important to remember, no matter how bad a recession gets, that this is not the first go round. Veteran contractors — those who’ve been at it for 20-30 years — have been through times like this. And they’ve stuck it out. It is the reason they call it “building” years in the business. We cannot always coast as we did before the housing bubble popped, but it is important to stay active regardless of the market.

The building never stops, but if there is a shortage of homes to build then it is time to work on building the business. Most longtime remodeling contractors will tell you that a big portion of their client list and their friend list is interchangeable. Lean times are great for building a relationship, building trust with clients.

The first contractor I ever worked for had no sign on the side of his trailer. No T-shirts. No advertisements in the newspaper. The only place he’d ever placed an ad was in his church bulletin. He believed firmly in word of mouth and building a rapport with homeowners. He will drive (and has driven — I was there) 25 miles to fix a screen door. He loved and trusted his craftsmanship and let it carry him through tough times. Even after 30-plus years as a contractor, and despite one of the worst economic crises ever to face our country, he still works.

Rising above the bottom line.

Most successful remodeling contractors have learned that their bottom line is not the bottom line. In other words, they never take on more work than they can do well, and they see less work as more time to hone their skills. And over the many years of thick and thin, they’ve managed to become masters at their trade, steady and prepared for downturns because they’ve seen them before (we all have or we all will), and believe in high quality at a fair price.

This may sound like common sense, but many contractors panic during difficult times. Perhaps forced to compete heavily for work, they become obsessed with the bottom line. They begin offering the lowest prices thinking that quantity is more important than quality. One of two things usually happens: One, they cannot do the work for the price stated, losing out on profit and ultimately their business. Or two, they are forced to provide lower-quality work, which results in more callbacks and repairs, which often results in lost profit and endangered or extinct business.

The long haul.

Many young contractors are struggling right now but, as the late Douglas Adams wrote on his Hitchhikers Guide to the Galaxy, “Don’t Panic.” Only each contractor knows what is truly best for their own business, and sometimes it is smart to cut losses, but there are advantages to building years in the business. From diverse and sharpened skills to community involvement, a long life as a contractor can be very rewarding. Just remember that this is construction and you must love to construct, as any old timer will gladly tell any one of us, possibly for a long time.

This may be one of the scariest New Years on record for business owners. The downward trend in housing and retail continues and even the President admits that it will likely get worse before getting any better. While times aren’t looking too dark for remodeling contractors, it may be time to cinch the proverbial belt a bit.

That may translate into a reassessment of company goals. Setting goals is essential to a successful business, especially in the hardest of times. Simply set feasible goals.

If your goal is to top last year’s sales or profits, you must ask yourself if that really is the wisest goal in the midst of an economic slump that has spread well beyond the housing industry alone. Instead, calculate what money you need to make, what items you can do without or must have, and a few reasonable perks you want to give yourself or your employees. Then figure out how you go about getting those things, whether it be a dollar amount or a certain number of contracts or whatever. But make this your goal and then head out there to achieve it.

Consider gathering your employees for a company meeting. Lay out the goals in front of them. Create an incentive that goes something like this: If we can reach this level, we all get this bonus. If we reach this different level, we all get this. And so on. Hard times are good times for pooling resources. And remember that just as sure as you want to make money, your employees want to keep their jobs.

Just as important as setting goals are the means by which you achieve them. Taking small steps such as getting to know clients and your community can make a big difference. Homeowners will be on the lookout for contractors overselling their projects; perhaps now is the time for a more straightforward approach. The free-for-alls of yesteryear may be gone, but homeowners still want to remodel, we just have to convince them it’s worth their while.

Whether the goal is to make record profits or just to break even, every contractor is going to have to work hard to do it. But it’s a new year and a new administration (which could mean any number of things for small businesses) and traditionally a time for optimism and looking forward. This year is no different in that regard.

Despite the crippling cold coursing through the country right now, summer and the remodeling season will be here before we know it.

They surmised the following reasons for this unexpected behavior.

It is difficult for homeowners to sell their homes.

They realize this, and are looking for improvements that will make their homes more appealing and competitive with other homes on the market.

When unable to sell their homes, some people opt to improve the one they have to better accommodate their family.

If more space is needed, they add an addition, or they try to improve the areas that made them try to sell in the first place.

There are a growing number of homeowners preparing their homes for retirement and their later years.

This trend is called “Aging in Place,” and entails revamping the house to accommodate their changing lives. Whether it is wider doorways, more conveniences or walk-in showers, they are doing their best to plan ahead.

The article also touched briefly on the growing number of homeowners converting to a greener lifestyle. They are looking for ways to make their homes more energy efficient with alternative energy, along with more eco-friendly materials throughout the home.

One point the article didn’t mention is that with the slower construction industry, contractors have more time and more competitive rates. How do you compare?

Well, you have two options right now. You can either sit there and wait out the storm and possibly go under as many of your competitors are, or take advantage of a slower time to revamp your business.

I spoke with a few construction companies recently. Operating in California, they are struggling with the new laws that require all plans to be inspected by an architect. One family company decided to send one of the younger brothers to college to become an architect. Another company is using this time to branch out and to explore new avenues. They invested in heavy equipment and training for some crew members so that they can now offer excavation services. One older construction owner made the decision to take this opportunity to scale back his operation and pursue a lifelong dream to build custom furniture and cabinetry. He enrolled in the appropriate classes to learn the trade, and is now happily remodeling his shop to accommodate his new direction.

The point is, don’t just sit there. Use this slower pace to do the things that you’ve been too busy to address in years past. As a friend who was dying from cancer said of his enthusiastic outlook, “surround yourself with those you love and always have something to look forward to.” This economic storm will end, and a bright future will emerge. Those who will survive and prosper will be the companies that take the appropriate action now.

Here are some of the suggestions they came up with, along with a few of our own.

1. Know where your money is going, the small stuff really adds-up. If you budget more efficiently, you can potentially cut costs and allow yourself more of a profit.
2. Try your hand at reducing the price of some of the insurance policies you have to carry. Shop around and try to negotiate better prices.
3. Contractors are suffering, but so are suppliers. When they send their sales people out to charm you, see if they are willing to negotiate lower prices.
4. Try to reduce waste by recycling materials and using those small pieces you might normally throw away.
5. Do more of the project yourself instead of subcontracting the work.
6. Workers’ compensation rates vary based upon the work being completed. Consider doing the more expensive jobs yourself, or consider hiring a less expensive subcontractor.
7. Target what projects net you the most profit, and pursue those over others if possible.
8. Discretely look for other jobs while on site, you never know how one job can lead to another.
9. Offer an incentive to your customers for repeat or referral business.
10. Treat your employees well. It costs money to rehire and retrain new employees.

A smart business plan is the key to surviving this economic crisis; take a few minutes when you get the chance to reevaluate your operation and look for ways to adapt to the current conditions.

The optimistic crowd of dealers and manufacturers viewed the slow housing market as an opportunity because homeowners usually hold onto their homes and remodel rather than move into a new one. They also viewed the attendees as more qualified leads vs. tire kickers.

The pessimistic crowd, on the other hand, had a different opinion. Their complaint was about how bad business was and how they’re ‘dying’ out there. They saw the thin turnout of attendees as further confirmation that everybody in the remodeling industry is doomed.

There were many manufacturers, noticeably in the vinyl replacement window category, that passed on this years Baltimore show.

By contrast, Vytex Windows featured a large display that focused on all its color choices and decorative glass capabilities. The manufacturer’s Chuck Scalzott commented on how “having a full line of options is proving very helpful to his company in this market.”

Mark Knorr, service representative with Lincoln Windows, commented “the show definitely still has value for us” and added “the remodeling market is as strong as ever thanks to the slow construction market.”

Even in this slow economy many exhibitors expressed confidence that the remodeling market still offers plenty of opportunities.

Link: http://newsmanager.commpartners.com/ngaweekly/issues/2008-09-17/2.html

The key is to keep realistic expectations and stay on budget. This way, even if you open a second business in a location that’s hard hit, you can look ahead toward promising future prospects. Think about it. If you can succeed in these conditions, you’ll be in a great position once business picks up.

There are several reasons why starting up in a struggling economy is easier than doing so when the economy is booming. Here’s food for thought.

It’s a Good Time to Build Relationships

High-quality trade contractors are looking for work. You can build relationships now with the best and the brightest, who might have been harder to find before. In fact, having quality employees throughout your business structure is critical to both your second business succeeding and your first remaining secure. A good question to ask is whether you have enough trained, qualified employees to keep both businesses running. After all, you can’t be in both places at once.

One way to staff the new business is to hire from within. This will guarantee that your employees stay within your company’s framework. Acquiring an existing company is another option, and you’ll likely have the option of hiring previous employees to come on board. Some owners would rather buy an existing business because it comes with the benefits of an existing clientele and showroom.

You’ve Maximized Growth Possibilities at Your First Location

If a company wants to grow, expansion is sometimes necessary. Now that your company is meeting goals in one market, it can expand by supplying goods or services to another.

Perhaps you want your first business to work across a larger geographical region. One obstacle to succeeding across a long reach is that people like doing business with local companies. A new business will help you meet that demand.

Before you Pack, Do Your Research

As you look into potential areas for expansion, don’t forget to do your homework. Does demand exist for what you do, and at the price you want? Look into real estate values in the area, the age of homes, and the type of construction that thrives there. For instance, a high-end construction company may look to move in an area where homes are priced in the $1 million range. Also, how much does your competition charge in this market? Will you be competitive? All of these factors will play a large role in a successful expansion. Money is obviously the common denominator, so make sure you have enough. Your second business should have the capacity to run on its own, without relying on the first location to pay for it.