It will be a long time before anyone forgets the business-cycle trough of a few years ago. It was long enough and deep enough to leave a mark. That’s why so many remodelers are enjoying this current gradual, sustained lift in the economy. By contrast, a sharp upturn would, frankly, be unwelcome.
It is already difficult to attract good new employees and trade contractors. (See the Top Challenges chart on p. 25.) And a sharp upturn would also exacerbate a growing concern about higher prices for building materials. Gradual economic growth is good and offers the opportunity for dynamic growth in many cases. That is why this jumbo jet comprised of 500 remodeling companies — the Top 500 — is feeling so bullish. They have just cleared the runway and (knock on wood) are heading for a comfortable cruising altitude.
The gradual upturn has given most firms on the Top 500 room to spend more on marketing, drive more leads and convert more leads for, in many cases, larger average jobs. The stats bear this out. Year-over-year, firms listed on the 2015 Top 500 grew their dollar volume of remodeling revenue by 12.8 percent (see the chart, at right). Meanwhile, the number of completed jobs grew by 8.3 percent. Revenue outpaced job growth, which translated to bigger jobs and better margins versus the same jobs from the year prior. These are the headlines. But the story of the Top 500 list is best told through the individual stories of remodelers serving vastly different segments and geographies.
Stephen C. Gidley, CGR, CAPS, a member of the advisory board of this magazine did not experience the same type of year that many companies clearly did. A design/remodeling institution in Fairfield County, Conn., Gidley’s firm, ranked No. 418, went from $2.6 million in revenue to $2.1 million in consecutive years. The revenue drop experienced while serving the gilded communities of Stamford and New Canaan seem highly incongruous with a strong stock market and high home values. But according to Gidley, his clientele is subject to a distinctly more global view. Slowdowns in China and Europe have the financial community on edge. Hiring on Wall Street has slowed dramatically, and the backlog of unsold homes in Stamford sat at 350 this July where the normal level is 275. There is a 13-month supply on the market.
On top of it all, a change of presidency coming in 2016 also has a stultifying effect on his clients. Gidley says his 40-plus years’ experience tells him the phone will ring again this fall and to an even greater extent in the spring. Remodeling, he says, will only achieve full recovery in his region after next year’s presidential election.
“The Dow is working to people’s benefit; that is where they put all of their money. So the pendulum swings in that direction. And they have done well in this market,” Gidley explains. “People have plenty of money. It is not like the wealth has left the area. But they are sitting on the sidelines waiting for real estate to rebound. People are depriving themselves now, but they can’t do that forever.”
A second company, serving the exterior replacement and home improvement market, is having a distinctly different experience in Florida, where it set up shop in 2009. Earl Rahn and Daniel Ochstein for many years were executives with Champion Window Mfg. & Supply Co., No. 5 on the 2015 Top 500 until it was purchased by a private equity firm. After post-acquisition tenures with Champion, the partners were bound by a two-year noncompete in states with Champion locations. They decided to move to relatively virgin territory for replacement windows, Tampa, where they launched NewSouth Window and a separate manufacturing business, DOERS Window Mfg. Today, NewSouth Window is No. 47 on the Top 500 with revenues of $23.1 million on 2,155 jobs. The firm now has 125 employees and is operating in four Florida markets — Orlando, Tampa, Bradenton-Sarasota and West Palm Beach.
“One year from this month, we will open Fort Meyers and Naples in southwest Florida, and two years from now we will go into Fort Lauderdale, which is Broward County,” Rahn says. “Then we will see what happens next. Dan has his eye on southeast Georgia, Jacksonville and Charleston.”
The key for the NewSouth team has been the receptivity of Florida homeowners to the message that new windows are just as important in warm weather climates as they are in cold weather climates. In addition, new codes are driving awareness for the need to switch to high-impact windows.
“In Florida today you have a need for hurricane windows. And then you have the need for energy efficiency,” Ochstein notes. “On July 1, Florida put in effect the model energy code. Those are the two underlying drivers for windows now, so our timing could not have been better.”
The company also has found that a combination of traditional marketing on television, radio and newspapers combined with a robust Web presence has been effective in communicating the company’s message says Amy Rahn, the company’s director of marketing. “The timing was perfect in the fact that energy efficiency was really getting a foothold in the fenestration business here. They were also ready for the factory-direct model.”
Two models — one replacement, the other full-service and design/remodel — in two very different regions show different outcomes. That is the story of this 2015 Top 500 list as it is in most years — big-picture growth with lots of local and segment nuance. The remodeling market is growing and the following list is a composite view of the market.QR