Little Consolidation Seen in Remodeling Industry
The remodeling industry has seen little consolidation, according to panel members at the recent Remodeling Futures meeting of the Joint Center for Housing at Harvard University. Remodeling Futures was held earlier this year in Cambridge, Mass.
According to findings presented by the panel, the top 500 contractors in 2004 provided 3.9% of all remodeling jobs as compared with 3.7% in 2001. These low percentages with little change indicated a continued fragmentation of the industry, the panel reported.
In addition, the panel reported that more than 800,000 people in the U.S. ― most of them self-employed contractors — provide remodeling services. Approximately 170,000 firms that provide remodeling services have payrolls, but only 62,000 of those firms are general remodeling contractors. More than 100,000 are specialty firms.
Mark Richardson, CEO of Case® Design/Remodeling in Washington, D.C., and a member of the NAHB Remodelors™ Council, said that it was relatively easy to get started in the remodeling industry, but that many newcomers had difficulty succeeding. He said that the businesses of about 60% of self-employed contractors fail within the first five years. Richardson also noted that while nine in 10 remodelers are honest and hardworking, many are not savvy in their business practices.
Bill Owens, CGR, CAPS, of Owens Construction in Powell, Ohio, and a former chairman of the council, said that more than 80% of remodeling industry contractors were small firms making less than $500,000 in sales. The remaining 20% were either medium-sized firms making $500,000-$2.5 million in sales or large firms making $2.5 million or more.
Owens said that many in the industry purposely keep their sales below $500,000 in order to stay “lean and mean” so that they can easily manage their volume and profits. He said that once a business exceeds $1.5 million in sales, it needs to implement strong business systems to help manage the volume. If not, the business risks failure.
Follow the Trail to Success
“The Paper Trail: Systems and Forms for a Well-Run Remodeling Company,” available through BuilderBooks.com, examines the six crucial systems that remodelers need to improve their businesses. From sales and marketing to financial management, “The Paper Trail” encourages readers to rethink their own business processes and systems and includes over 200 pages of forms, formats, checklists and other documents that make these systems work. To view or purchase this publication, click here, or call 223-2665.
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