With the economy in a tailspin, the construction industry faces what may be the worst business environment since the Great Depression. For this story, we spoke with several builders and remodelers from around the country, most of them JLC readers and some of them contributors. These company owners represent a variety of business types and sizes, and they are responding to their local market conditions in various ways — some sticking to their game plans, others making major adjustments.
Here’s what they told us.
Since Andy DiGiammo went into business in the late 1980s, his Massachusetts design-build firm has grown far beyond its beginnings as a solo architect practice with a single home-building crew. Besides large custom homes and major remodels, the company now does multifamily and commercial work.
Presently, says DiGiammo, he has nowhere near his usual backlog of residential work: “I still have more residential construction going on than I can easily keep up with — but it’s all work that came out of relationships I’ve been nurturing through the design process for a year.” And compared with years past, he has very little design work on the drawing board. “It’s not a good sign for a year from now,” he says. “Usually my problem this time of year is three or four customers telling me I better be ready to go in the spring, and me wondering how I’m going to get them all started. This year I have nobody bugging me — except my commercial customers.” The financial crisis is affecting even high-end customers who were untroubled by past slowdowns. “For the first time,” says DiGiammo, “I’m worried about the upper-end residential clients — people I’ve worked for since the beginning of my career. It’s the first time I’ve ever seen them shaken, or not confident. That’s what’s different.”
Against this background, DiGiammo’s decision to diversify has proved its worth: The commercial side of the business is thriving. His current project is a hospital remodel. “I set up the commercial division a couple of years ago, with a foreman who does nothing but commercial work,” he says. “What’s nice is the residential and commercial sides feed each other: The commercial carpenters work on residential projects and the residential guys on commercial projects when either side needs a hand. It’s worked well.” Sales also benefit: “I’ve gone to look at work on someone’s house, and they tell me about this business they own and what they need for that, and it flips into a great commercial project. Or vice versa: We’ll start on a commercial project and then one day the client will say, ‘Oh, by the way, I was thinking about finally building my dream home.’”
Looking ahead, DiGiammo strikes an upbeat note. “In these slow times, if you can keep your business together and your workers employed, you can come out of it stronger. Your employees realize what they have. Your subs aren’t busy, and you develop good relationships with them. They’re grateful to be busy. You have their full attention. And you’re getting things done, and a lot of the stresses from crazy times go away. So you do what you have to do to get work, and if you can remain busy in these hard times, it can actually be a great time for you. Bad times can be good.”
Keeping in Touch With Past Clients
In Yorktown, Va., a historic village in the southeastern part of the state, Robert Criner is definitely feeling the slowdown. His long-time rule, he says, is to “have a marketing plan in place that puts your name and face and voice in front of your past clients at least four times a year. We have kept on doing that. But even so, frankly, the phone isn’t ringing as often as it used to.”
Loyalty to past clients brings a certain amount of diversification in the jobs the company takes on, Criner notes. “We don’t attract just the kitchens and baths and additions, which are the most profitable for us. That’s because our past clients all realize that it doesn’t matter what they need done on their house — if they’re one of my clients, we’re going to take care of it for them.” But in this cooling market, he says, he is consciously searching for even more ways to branch out. “I looked at a job yesterday that we normally wouldn’t do — replace the floor joists in a house. I’m thinking, ‘If I price it so it’s profitable, why wouldn’t I do it?’ Because, at this point, I want to make sure that my guys are busy. Whereas, two years ago, had I sent them under the house for two or three jobs in a row, they would have bolted.”
When it comes to staffing, Criner argues, a slowdown offers an opportunity: “It’s an optimum time to streamline your business. I’m still accepting applications, because even though you may be comfortable with the people you have, now is the time that you may have real talent knocking at your door. And if you do need to clean house — if you have people that aren’t as good as you’d like — they can probably be replaced now with people that meet your needs.”
At the same time, Criner says, he wants to protect his workforce. “We are trying to keep our prices up, so that we can continue to pay well, give bonuses, and take company trips. And I believe all that falls on the owner and the salesperson. It’s up to them to be the rainmakers, and make sure that they have a backlog. And that’s much easier to do if you’ve been doing the right marketing all along. If you’re starting now — if you’re saying, ‘Oh my gosh, I should start marketing’ — it’s already too late.”
Rarco Contracting, Alexandria, Va.
Design-build residential remodeling
$3 million annual sales; 21 employees; 15 years in business