There are four ways remodeling projects get designed. In the first scenario, the homeowner hires an architect. The architect completes a design and supervises bidding out the job. The low-bidding contractor is usually awarded the project and the architect's pay -- 5% to 7% of the price of the job -- doesn't include job supervision. The second scenario involves the design/build contractor with an architect on staff. The contractor sells his company's ability to design and build the project in its entirety. The cost of the design is usually 4% to 5% of the estimated price.
A third approach has the remodeling contractor subbing out design to an architect for a fee of 4% to 6%. The fee is either part of the estimate or invoiced separately to the architect.
Lastly, many contractors -- or their most technologically astute employees -- design in-house, usually using a CAD program.
What a CAD
In the past 20 years, remodeling contractors catering to the high end have moved away from the architect-designed concept to a design/build approach. Design/build contractors have the ability to provide customers with services other contractors can't provide, such as redrawing the design if that's what's required to come in under budget. They have learned that their ability to meet prospective customers' design needs and stay within budget is critical to success.
The ability to take an existing project and change it quickly is the reason CAD programs have been so popular. I know several companies that file every project they design, whether they get the job or not. When a prospective customer asks for something similar, they call up a past design and adjust it for the new customer. This lets them design and price a project quickly.
As the use of CAD expands, this practice will become even more widespread. Look at new-home building. The top 15 builders now have 28% of the market. Ten years ago, they sold strictly to the middle class and were reluctant to move to the upper end. Today they're building subdivisions of $800,000 homes.
Of course, the buyers of these homes want unique (or almost unique) kitchens and baths. They want home offices and theaters. They want distinct decorative elements. As a result, builders sell the house, then offer options and upsells. They pull this off by adjusting the base product to the buyers' wishes.
There for the taking
For the past 10 years, I've suggested the middle market would be well served with predesigned projects in pullout/put back kitchens and baths, decks, sunrooms, and basement refinishes. Up to this time, most of the predesigned projects in the kitchen and bath segment have usually included a three-level approach for the customer. For example, a 5-by-7-foot bathroom would be presented with good/better/best price points, with five to 10 options on specific products for customers to select.
If the remodelers in this middle market don't seize the opportunity to bring the concept of this type of "adjusted" design/build to prospective customers, it's likely that the installed sales departments of The Home Depot and Lowe's, as well as lumberyards and distributors who sell direct to the consumer, will.
The design/build concept has revolutionized the upper end of the remodeling market, enabling those customers to receive quality design and expert installation at fair prices. Today, technology allows the concept to move into the middle and upper-middle segment of remodeling, as well. There's no question in my mind that the middle and upper-middle markets -- 60%-plus of total customers -- will soon move toward design/build. --Walt Stoeppelwerth is a publisher of management and estimating information for professional remodelers. (800) 638-8292; [email protected]; www.hometechonline.com.
