My first column ran in the first issue of Remodeling World back in May of 1985 (the name was shortened to REMODELING with the third issue). For that first column, I decided to put together five points — “hard facts,” as the editors called them — that I thought summed up the state of the remodeling industry at the time. Do they still ring true 20 years later? Here's a version of that original list:
- Only 5% of remodelers run their businesses; the other 95% let their businesses run them. Today, the percentages have improved, but for a large number of remodelers the basic problem remains. The gap seems to be widening, too. Today, companies that have adopted sound business practices and that are using technology are pulling ahead of the pack.
- A 50% markup (33% margin) is the minimum needed to succeed. I would bump markup to 67% today. As the remodeling business has grown more complex, overhead is higher —just look at insurance costs. A solid margin also ensures a fair profit to balance increased risks.
- Remodeling must be sold on the basis of something other than price. Underpricing is still a major cause of failure among start-up remodeling companies, and the growth of big home improvement retailers has added to the pricing pressure. Still, companies that have created value around their expertise have had success attracting customers willing to pay not just for the final product but for all the services required before, during, and after construction.
- Discipline is critical to success. More and more remodelers are adopting standard procedures for every aspect of their businesses.
- Remodeling is a team effort. The best remodelers understand the importance of building a team that includes employees and subcontractors. This is more important than ever today, as remodelers struggle to find skilled labor and look for ways to retain key employees. —Walt Stoeppelwerth is a publisher of management and estimating information for professional remodelers. 800.638.8292; [email protected]; www.hometechonline.com.
