Unlike their single-line counterparts, full-service remodelers have not, historically, had a very easy time duplicating their success by expanding to another location.
“Remodeling is a really difficult model for expansion,” says Alan Lutes, owner of Alpha Remodeling, in Ann Arbor, Mich. Lutes, who received a degree in economics from the University of Michigan, has looked closely at expansion since he opened his doors.
“If you look at what we do, every project is practically a custom project; there are so many variables, and it requires so much knowledge to be good at it, it's hard to reach a point where that knowledge transfer is possible.”
According to Lutes and conventional business wisdom, a company shouldn't expand to a second location unless it has matured to such an extent that it can run without the leadership of the owner.
“The preparations really start with the existing company, in developing a management structure that can operate independently,” Lutes says. “It's always been part of my model that I'd develop systems that could be recreated elsewhere and develop the company to the point of creating a passive income stream.”
As the industry matures, a growing number of companies are reaching the level of development and market saturation at which organic growth becomes increasingly difficult, and expansion is a logical next step. Many, however, are approaching the issue from a different angle than Lutes recommends, looking for growth opportunities rather than a duplicate business.
Linda Gridley's Gridley Co. has built projects in Campbell, Calif., a Silicon Valley town, for 27 years, growing to a healthy $5 million, 30-employee size. Recently, Gridley began an expansion into Santa Cruz, a beachfront community about 30 miles from Campbell.
“We've pretty much saturated [the Silicon Valley] market,” Gridley says. “You stagnate when you've been in a [location] for 20 or 30 years. You can't get new clients when you're doing referrals and don't leave the area.”
Gridley intends to open a showroom in Santa Cruz, allowing her to take advantage of the town's growing market for baby boomers' second and retirement homes and thirtysomethings buying their first houses at the beach.
Gridley plans to rely on technology, including video conferencing and remote building control, to connect the two locations virtually. She acknowledges, however, that the Campbell-Santa Cruz drive is a well-traveled commute over a mountain, and can take as long as two hours when traffic is at its worst; it's a distance that may prove challenging if an emergency demands her presence.
“There's always this risk: How do you provide service to your customers when you have to be there and it takes half a day just to drive there and back to do one little thing?” she says.
