By Judy Miller from www.remodeling.hw.net
Last week I asked 12 successful remodelers to define “the new normal” – what did they expect the economy to look like over the next 3 years. Here are some of the more salient comments:
- Sustainability – Both from the perspective of the company as well as the buildings. We want to build projects that last, that protect the environment. We want to build our companies in the same fashion.
- Smaller confines – We’ll work in smaller areas, see fewer large projects. No one will build McMansions over the next 3 years – at least no one in our target market.
- Smaller job size – Not only will we work in smaller areas, the job sizes will be tightly controlled.
- Diversification across job scopes – We’ll do many more different types of jobs than we’ve done in the past. We won’t be able to rely on just ”whole house renovations.”
- Greater education on value – Clients must be educated to understand why we charge what we do. The value in hiring our company has to become crystal clear, both for the clients as well as our employees.
- Flat consumer confidence – Until and unless the economy shows clear and strong signs of strength, consumer confidence will remain flat.
- Short attention span – Consumers are less patient, they come to us with an idea in their minds that they want to see built sooner rather than later.
- Generational differences –Younger clients want instant gratification. They’re not as interested in building a long-term relationship with us; loyalty is not a prime consideration for them.
- Increase in “production oriented” remodeling – Concepts such as ”1-week bath” and ”1-month kitchen” require standardized systems more typical of production builders rather than the customized remodeling that we’re used to doing.
- Energy efficiency – This will be a slow sell, but will build in importance over the next 3 to 5 years.
- Change in buying patterns – Greater reliance on social networking; online pricing will change the sales process.
- Activating un-used spaces instead of adding on – Room configurations will change and un-used or under-used spaces will be adapted to better use.
One respondent said “the American buying public has a very short attention span. Once we’ve relaxed into the ‘new normal,’ things will go back to where they were. Everybody wants luxury.” I’m sad to say it sounds like he might be right: I read recently that given $10,000 to spend, no strings attached, 62% of American consumers would choose to upgrade their countertops rather than increase their energy efficiency – even as winter approaches.
That’s not what I’m betting on though. I think the new normal looks like this:
- Less access to credit means fewer high-end jobs and less money spent on unnecessary upgrades.
- Fewer clients (and less money) in the high-end target market mean smaller market share in dollars.
- Therefore, many remodelers who relied on that target demographic will have to find other ways to meet their targeted sales volume.
- Therefore, smaller job size, greater job scope diversity, more emphasis on necessities rather than luxuries.
- More home-owner involvement in some parts of the project, such as painting.
In sum, I see a sea change coming that will appear as a tsunami to those who aren’t prepared. Now is a great time to move to higher ground – however you define that within your company – and continue to sharpen your saw by ensuring that the following systems produce predictable, desired results:
- Marketing throws off good leads in your target market, even after re-defining that market;
- Sales effectively sells those leads at a pre-planned gross margin;
Production profitably produces on-time and on-budget – no slippage;
- Administration maintains smooth and timely communication throughout various departments;
- Finance protects cash flow, produces complete and accurate reports in timely fashion and projects future results well.
- Leadership and ownership equally value customer and employee satisfaction – holding the team accountable to agreed-upon goals and maintaining clear vision of where the company is heading.
Last, but certainly not least, one respondent emphasized that everyone, owners and employees alike, want to be involved in something bigger than themselves – they want to build a cathedral, not just lay stone, hang trusses, install cabinets, or process accounts payable.
Build a vision for the ”new normal” for your company that moves the company forward, meets a real need in your community, and provides a sense of great accomplishment – then the new normal will be just right for you!