Remodelers typically expect the first quarter of the year to be slow before business picks up and builds toward their annual revenue goals. In 2020, however, they had to confront the COVID-19 pandemic, which paused or even shut down their operations just as they were emerging from the first quarter. Instead of ramping up, many of them worried about possibly going out of business.
“We essentially had two first quarters in one year,” explains Noah France, president of Chermak Construction in Edmonds, Washington. “Every year, most companies in a competitive industry are investing and assuming they’re going to have a successful year [during] the first quarter. You anticipate you’re going to have three more quarters where the bulk of your revenue is going to be generated. We were down about $2 million last year, which wasn’t uncommon [in the industry].”
Chermak survived because of the tenacity of its team and the willingness to approach everything safely, he adds. The company focused on the needs of clients—80 percent of whom occupy their homes while work is being done—and what it could provide them. If a client wanted to continue a project, Chermak carried on with the job. Otherwise, the company would pause for a brief time.
For a couple of months, Alure Home Improvements in Plainview, New York, was allowed to send out only one-person crews, which hindered its ability to work, says Sal Ferro, president and CEO. The company sought to streamline operations in a way that would protect the organization for the long haul, while he tried to ensure the COVID-19 pandemic did not put it out of business.
“I didn’t know what was coming up on the horizon, so my job was to say, ‘OK, let’s make sure we’re in a position that if this is a 15- or 18-month shutdown, we can weather the storm,’” Ferro notes. “And we’re in good shape because the government did a wonderful job in working with everybody with programs to ensure that people got the support they needed to get through this.”
Lakeside Design & Renovation planned to emerge from the first quarter with enough momentum to carry it through the rest of the year. But the company paused production for a month to protect its backlog and see what would happen with sales. The organization paid its staff the full 30 days not to work, and subsequently the company posted its best sales month to that point in July 2020.
“We went from wondering, Can we hold on? What is the world going to look like? And what’s our industry going to look like? to being shot out of a cannon,” says Kyle Guemmer, general manager. “In the middle of May is when we started to see an absolutely huge increase in sales.” Lakeside had aimed for $12 million in revenue last year but generated more than $15 million.
The company built its reputation on exteriors and even brought James Hardie fiber cement siding to the St. Louis market in 2000. Clients continued to ask about other kinds of projects, though, so the remodeler changed its name from Lakeside Exteriors to Lakeside Design & Renovation two years ago and began marketing and staffing the organization to be a more design-build approach.
“We had already started to market and build our company from a design perspective [before the COVID-19 pandemic] with in-house interior designers, architects, salespeople and crews to be able to do full-scale design-build projects—interiors, kitchens, bathrooms and basements,” says Guemmer, who notes Lakeside doubled its staff from 60 to 120 employees in just over one year.
The company has been fortunate to acquire talent via Indeed, Craigslist and LinkedIn but learned its share of lessons as well, he adds. After dropping from $33 million in revenue for 2019 to $28 million in 2020, Alure could sell more than $40 million this year if the labor market had more to offer, Ferro explains. “Our backlog is building strongly, but now we’ve almost got to slow down.
“What we’re working on right now is, how do we ramp up production to match sales?” he notes. “We’re continuing to grow, but we’re struggling to find people. Everyone’s in the same situation [though]. When you’re trying to find [employees], you’ve got to be aggressive and competitive, but you’d better be careful and not overpay for somebody who hasn’t proven themselves.”
Labor shortages have complicated other areas of the remodeling industry, including permitting and product supply chains. “Permitting departments are reactionary, so when they get a certain level of demand, that’s when they start to hire more staff, as opposed to anticipating it,” France says. “We work in different cities; depending on the city we’re working in, it can go anywhere from four weeks to almost six or eight months for permitting to get the project ready to start.”
Chermak has taken on more light commercial jobs—tenant improvements and restaurant spaces, for example—and continues to grow in that department, he adds. “There’s a void left by the very big commercial contractors—between them and the residential contractors—and we’ve been able in our local market to meet some of that demand,” France notes. “But most of those clients come to us because we’ve done their personal residence, or they’re a referral from a residential client.”
Regardless of the project type, remodelers must wait longer for products to be delivered as many manufacturers struggle to keep up with heightened demand created by the COVID-19 pandemic. The longer lead times have increased prices, as well as project timelines, requiring companies to be diligent in helping clients understand their more expensive job may not start for a few months.
“Everybody’s experiencing it, so we’ve just tried to be honest and overcommunicate, particularly with new sales, of what the timelines are,” says Guemmer, who notes Lakeside is six months out. “While that’s not ideal for customers, they’re not really hearing anything different from anybody else. It hasn’t been a huge prevention to sales—at this point—like it might have been in the past.” QR