Full-service remodeling contractors do it all. They accept a broad range of jobs, typically within a local area. Among the 99 full-service remodelers ranked on the 2022 Top 500, most fit this description, with one difference: They have become bigger than most of their peers. They’ve overcome the inherent complexities of managing large jobs to consistently earn profits that, in turn, enable them to add overhead and grow.
In analyzing the five segment groups among the Top 500 this year, the most surprising data to emerge shows that full-service remodelers are the most bullish in their revenue forecasts for the current year. As a group, they are forecasting a growth in revenues of 24.6 percent over 2021. Kitchen and bath firms are not far behind. They are forecasting a 24.3 percent increase in revenue followed by design-build, 16 percent; home improvement, 12.2 percent; and insurance restoration, 2.8 percent.
The reason for the unexpectedly strong outlook might lie in the organizational nature of the sector. Full-service remodelers tend to have a large staff of carpenters and project managers. One theory is they’ve been more fleet-of-foot and thus better able to turn jobs quickly, particularly as the wave of demand grew in 2020 and 2021. And because they’re less dependent on trade contractors to keep projects moving to completion, full-service remodelers can fill any scheduling gaps with handyman work and small projects for past clients.
Despite their relative advantage with more field staff, full-service remodelers were just like all other sectors of the remodeling industry in identifying “hiring and retaining staff’ as their top challenge last year. In speaking with some of them, supply chain issues were perhaps their more persistent issue. Unlike specialty and single-line contractors, a typical full-service project requires a broader range of products, finishes and building materials.
Even firms with good relationships with suppliers were forced to pause projects while waiting for appliances or windows, says Aaron Enfinger, CR, chief operations officer for The Cleary Company, ranked No. 221 on the list. Last year the firm billed $9.2 million in revenue on 113 jobs. The company, led by CEO George Cleary, is forecasting $11.6 million for 2022.
Enfinger, who recently became an officer of the National Association of the Remodeling Industry, says the company employs a number of tactics to alleviate the shortage of certain products and supplies. First, they order products like windows and cabinets as soon as possible and schedule their projects to coincide with those product arrival dates. Second, when a particular fixture is on backorder, they reselect a replacement that is on hand even if it costs more. When product substitutions cost more, the company presents a change order to the client. Third, they’ve centralized ordering to a single individual in the company, who is responsible for tracking and navigating the current environment of product availability. Lastly, the company has focused on enhanced communication with clients on issues relating to supply issues and milestone dates.
“First and foremost, we set client expectations as best as we can,” Enfinger notes. “For example, when we are communicating milestone dates, we do so with the info we have received from our trade partners and vendors but caution against trusting the dates too much. We remind our clients that our ability to schedule the project hinges upon our partners’ abilities to schedule themselves—that some are better at this than others. Also, vendors as subject to the manufacturer’s ability to navigate today’s logistical environment.”
The very largest full-service contractors can come up from the traditional ranks. A good example is Case Design Remodeling (no. 47) in Washington, D.C., and SilverLining Inc. (no. 34) in New York City. But the very largest full-service firms come from the specialty or replacement contractors who diversify their product offering over time. Power Home Remodeling (no. 6), Dreamstyle Remodeling (no. 13) and Alure Home Improvements (no. 62) are good examples of this type of full-service remodeler. They break the mold in several ways. First, they serve multiple markets areas covering large regions. Second, they are organized around lead-generation and in-home sales. The merger mania among home improvement firms has only crossed over into the full-service ranks with this latter type of firm. Alure and Dreamstyle were acquired by Audax Private Equity on Jan. 1, 2022, and now operate under the Renovo Home Partners umbrella.
Some traditional full-service firms would like to have access to the kind of capital available from private equity, says Bill Owens, CGR, of Owens Construction in Worthington, Ohio. But the complexity of running profitable full-service firms has so far kept investors on the sidelines. That may change over time as traditional firms use technology to scale up and grow.
Heart of the Market
General contractors engaged in residential remodeling activity are usually led by an individual who “has seen it all” when it comes to overcoming difficult construction situations. During demolition they’re the ones who discover the unexpected section of dry rot or who flag longstanding water-intrusion problems. They’re the ones who stop the project and give the client the bad news. It is said that doctors must have a good bedside manner; the same goes for full-service remodelers.
At the same time, remodeling general contractors resist specialization. They service the homes of past and future clients with whatever work may be required. A typical full-service remodeler is staffed up with carpenters and helpers who know how to get many types of jobs done.
They are equipped to handle small time and materials handyman types of problems for past clients. Handyman work represents 3.5 percent of the jobs undertaken by full-service remodelers on the 2022 Top 500.
They must also be prepared to take on complex, multi-stage, whole-house remodels—getting bids, sourcing a broad spectrum of products and materials and producing accurate quotes, all while keeping the project on budget and on schedule. Whole-house remodels were the No. 1 job type completed by full-service remodelers on the 2022 Top 500, representing on average 17.1 percent of their work.
The principal of a general contracting firm is a renaissance man or woman who collectively in thousands of small firms around the country represent an estimated 50 percent of all the $400 billion annually spent on residential repairs and remodeling. Along with general contractors who provide design services (design-build firms), full-service remodelers represent the heart of the professional remodeling market.
The 99 full-service firms on the 2022 Top 500 are also among the most successful when it comes to growing and profiting. On top of being able to manage complex building projects and keep clients happy, they must also understand how to properly manage overhead and job costs to maintain margins. Well-managed full-service remodeling firms will achieve 9 to 12 percent net profit each year. QR