One of the most common questions I get today is “What are you seeing out there?” And while it may seem like an ice breaker as benign as “How’s the weather in your area?”, it isn’t. It’s an important question on the minds of many because winds have shifted, people are noticing and they want some validation that they’re not alone.
As business owners, it’s normal to want to have an understanding of what is out there and ahead of us. We want to know so we can make the right decisions.
With that being—and to answer my own question—I’m seeing a lot.
Softening at the Macro Level
At a macro level, we’re seeing a “softening” of the market, but in some of the key areas, especially for remodeling, indicators are positive:
- Higher Interest rates are bad news for new homes and sales of existing homes, but not necessarily for remodeling. Homeowners do not want to lose their existing lower interest mortgage—85% of the homeowners have an existing mortgage under 5%—and therefore are likely to stay in their existing home and really need to remodel.
- The average ticket for most remodelers has remained strong, which is a positive sign for remodeling. In the crash of 2008, this dropped considerably. Today, though, many are seeing spending go up not down.
- The average age of housing stock, now 40 years old, is now prime for remodeling. If homeowners want their older homes to survive, remodeling may quickly become less an option for them than a necessity.
Thirty-five percent of homes in the US were built before 1970, according to a National Association of Home Builders report.
The consumer has changed in the last 12 to 18 months. They’ve become feral (escaped from captivity). A year ago, they were happy to wait in line, empathetic to supply chain issues, willing to accept budget creep. Today travel is your biggest competitor.
The consumer is unpredictable. Many homeowners, according to the stories I’ve heard, “act like they want to remodel” but then cancel or postpone. It can be extremely disruptive. Project timelines can be greatly extended when homeowners revisit and question their decisions. And work-from-home clients, who may be watching over and questioning construction, can make it even tougher to get things accomplished. Controlling this is key.
How Some Residential Contractors Are Succeeding
The better contractors are not just doing fine, many are doing great. There are three differentiators I’ve seen:
- Market to Find the Right People — Finding the right clients is more important than ever, and this takes more than money. It takes time and energy, as well. The better companies are deputizing the team to wear the marketing hats—which I’ve seen spur creativity, help build a healthy culture, and produce serious results.
- A Flexible Sales Process — Adjusting the sales process to respond to the environment is a must—as we’ve discussed in several recent episodes of Remodeling Mastery. Sales training is not just an expense but an investment. The better companies are doing more role plays and introducing more sales tools into the mix.
- Prioritize Operational Excellence — Mistakes are a kiss of death in this environment. You cannot eliminate them completely, but you can reduce them substantially with diligence. You make your money from what you produce, so make sure you are, one, on time, two, on budget, and three, leave your client delighted.
I’m aware this is a simple summary of a very involved process. But simplicity can result in real success today.