Let me begin by saying I do not have a crystal ball, nor am I a psychic. I do, however, have a unique perspective. This perspective is based on my experience growing a large remodeling organization, my involvement with businesses in the U.S. and Canada, and my work as a Fellow with Harvard’s Remodeling Futures group, as well as my conversations with friends who are involved in multi-billion-dollar businesses that support the remodeling industry. This perspective allows me to look at the industry through a different lens than most that are out there making it happen in remodeling.
So what do I see in the tea leaves? How are the stars and planets aligned for the future of remodeling? The best way to understand this complex dynamic, which is driven by multiple and diverse factors, is to see these elements like pieces to a jigsaw puzzle. These puzzle pieces all have their own shape, but placed together, they tell the real story. Let me breakout some of the pieces for you. It is up to you to assemble them and view the completed puzzle through your world.
The Industry Numbers
The nice thing about numbers is that they don’t lie. They can be spun, but they are very black-and-white. The remodeling industry numbers are very strong: remodeling in the U.S. generates about $300 billion annually, which is more than commercial construction, public works projects and retail clothing sales combined. Several years ago, remodeling was the red-headed stepchild to new construction and now it is the parent, accounting for more than 60 percent of the total spent. When the basic numbers are strong, that bodes well for the industry.
The Homeowner Today
The homeowner today needs the professional remodeler more than ever. They are stressed out, they have no time, and even fewer remodeling skills than ever before. In a recent three-year period, there were more home improvement products developed than in the preceding 100 years. This proliferation of new products is often overwhelming and confusing for homeowners. Again, this bodes well for the remodeling professional who can cut through the confusion and help them be confident in their selections.
While it remains tough to borrow with the credit restrictions, interest rates are at historic lows. While a project may cost more than it did 10 years ago, with the financing available today, the payments are often lower. Also, interest rates can only go up, which can create a sense of urgency for clients to act sooner.
A friend of mine tells every prospective client “you cannot let your house die.” Houses are dynamic, not static; they require regular attention. Many homes have been neglected, with owners putting projects off during the recession. Pent-up demand will not only come from client anxiousness to move out, but also from the patient itself, showing wear and tear, in effect saying, “I am sick. Help me.”
High Homeownership Rates
Your clients own rather than rent; therefore, an indicator to watch is homeownership. A few years ago these rates reached about 67 percent, but recent economic challenges have seen the rate slip to around 65 percent. Logic would dictate that this rate will rise or fall with the economy or demographics. This, however, may not be true. Rachael Drew, a Harvard researcher, has been studying this subject from an attitudinal perspective. While in years past, people wanted to own because of the investment returns, now the No. 1 reason is to “control their lifestyle.”
Remodeling has low barriers to entry. Most remodeling entrepreneurs got into the business because of a passion for the sticks-and-bricks, or a desire to help others through their skills. Today however, 80 percent of one’s success is about business acumen. Good remodelers understand the numbers, team building and how to manage client expectations. For those who are committed to growing a healthy business rather than just a pretty project, you are positioned very well and the future is bright for you.
Next to technology, cultivating strategic alliances — along with a strategic alliance mindset — will revolutionize this industry. There are many strategic alliances that are making remodeling their No. 1 priority. When you declare anything a high priority, you invest time, resources, and money into it. Again, this is very positive for the remodeling industry.
So as I began, I do not have a crystal ball and I am not a psychic, but I presented all of these factors (just as you see them above) at an industry presentation at the National Remodeling Show in September 2004. In conclusion, while the waters have been a little stormy, the fundamentals are strong and the stars and planets are the same. PR
Mark Richardson, CR, is a member of the NAHB Remodeling Hall of Fame and a Fellow at Harvard University’s Joint Center for Housing Studies. Richardson is the author of the best-selling book, “How Fit is Your Business,” and a forthcoming book, “Business Themes to Live By,” to be published this year.