Home remodeling and remodeling projects have experienced significant growth in recent years, with the trend continuing into 2024. In 2021, 84% of homeowners planned to undertake a home improvement project. This momentum has persisted, with the home improvement market projected to reach approximately $642.3 billion by 2028.
Outdoor spaces remain popular, especially as homeowners seek functional areas for post-pandemic entertaining. Additionally, the rise in remote work has increased the demand for dedicated home office spaces. However, the industry faces challenges such as high remodeling costs, elevated interest rates, and fluctuating home sales, which may impact homeowners’ readiness to invest in large-scale projects.
1. Protect Your Cash Flow
When remodeling jobs are flooding in, it’s easy to assume that success is guaranteed. However, rapid growth introduces significant risks, especially for remodeling businesses. Taking on more projects means increased upfront costs for materials, labor, and mobilization. If payments from clients are delayed, your business could quickly find itself struggling to stay afloat.
Cash flow issues are the leading cause of failure for construction companies. As you scale and take on more clients for your remodeling business, it’s crucial to monitor your financial statements regularly and identify any potential gaps in your cash flow forecast. Staying proactive can help you avoid financial pitfalls and maintain stability during periods of growth.
Pro Tip: Carefully structure your “draw schedule” to make sure cash flow stays ahead of project costs. This starts with a significant deposit to get the job started and for initial material orders. The schedule should then be based on set dates or phases of the project. If it is based on phases, the draw should be at the start of a phase, not its completion. And if you are doing time & material jobs that get billed after the costs are incurred, the deposit for the project should be even more.
2. Secure Your Payment Rights
As your business pipeline grows, so does the risk of delayed or defaulted payments. Larger and more numerous jobs mean higher costs and a single payment delay can disrupt cash flow across all your ongoing projects. While trust in your clients is important, protecting your right to payment is critical.
A mechanics lien is one of the most powerful tools in your payment protection arsenal. This legal claim ensures you have leverage if a customer refuses or delays payment. Filing a mechanics lien can restrict the property owner from selling or refinancing their property until your payment is resolved, offering you a layer of financial security.
Pro Tip: Even when business is booming, don’t overlook lien rights. Establish a clear process for lien filings, ensuring you meet all legal deadlines and requirements in your state. This proactive approach can help you avoid cash flow issues and maintain stability during growth.
3. Set Clear Payment Expectations and Build Trust
Homeowners often underestimate the true cost of remodeling, influenced by unrealistic portrayals on home improvement shows. For example, a bathroom remodel might be depicted as costing $15,000 on TV, while in reality, the average homeowner might spend closer to $50,000 to achieve similar results.
To avoid misunderstandings, establish clear and transparent payment expectations upfront. Use simple, non-technical language in contracts, and include visuals like charts or graphs to illustrate costs. Break down all associated expenses so clients fully understand their financial commitment.
Equally important is addressing potential conflicts early. Explain the steps you’ll take if a payment issue arises, such as filing a lien. While this might seem intimidating to mention, being upfront can build trust. Homeowners appreciate transparency and are often wary of contractors who might spring surprises later. Let them know that responsible contractors safeguard their work, but you’re providing the courtesy of clarity in advance.
Communication is the key. Setting honest expectations fosters smoother communication, reduces disputes, and strengthens the trust necessary for a successful remodeling project. Any changes along the way should be communicated clearly and as soon as information is available.
4. Streamline Operations with Automation
Incorporating advanced technology into your home remodeling business can significantly enhance efficiency and productivity. Automation tools streamline routine tasks, such as payroll, invoicing, and scheduling, allowing your team to focus on high-priority projects.
One key area to modernize is payroll management. Transitioning to cloud-based payroll systems can save time, reduce errors, and make the process more accessible for remote teams. Additionally, automating field time tracking eliminates the need for duplicate data entry, ensuring accuracy while freeing up valuable resources.
To stay ahead, consider investing in the following software solutions designed for construction and remodeling businesses:
- JobTread: Comprehensive project management software for remodelers.
- QuickBooks: Accounting software that will integrate with project management software.
- Gusto: App for handling payroll that produces payroll, handles payroll tax reporting, makes payroll tax payments and integrates with accounting software.
By integrating these tools into your business, you can create a more efficient workflow, reduce administrative burdens, and position your company for sustained growth.
5. Promote Your Remodeling Business Effectively
Marketing plays a crucial role in attracting customers and establishing a strong client base, particularly for new remodeling businesses. To stand out in a competitive market, it’s important to use diverse strategies that cater to different types of prospective clients.
Here are some proven methods to generate leads and convert them into paying customers:
- Leverage Social Media
Promote your services on platforms like Instagram, Facebook, and Pinterest, showcasing before-and-after photos of completed projects to engage your audience.
- Invest Wisely in Advertising
Expanding digital and outdoor advertising network based on proven results. Local ads, yard signs, or even partnerships with local newspapers can help boost visibility.
- Support Community Groups
Sponsor events or partner with local organizations in exchange for advertising opportunities, building goodwill, and brand awareness in your community.
Collaborate with Subcontractors
Cross-promote your business with other contractors, such as electricians or plumbers, who work on similar projects to expand your network.
Build an Email List
Make it easy for potential clients to subscribe to your email list by including prominent sign-up forms on your website. Use this list to send:
- Monthly Newsletters: Share updates, industry tips, and project highlights.
- Exclusive Offers: Provide discount coupons to attract new customers.
- Loyalty Rewards: Encourage repeat business through programs like “Refer a friend and get a discount on your next project.
By consistently engaging with your audience and using multiple touchpoints, you can establish your brand, attract a steady stream of clients, and grow your remodeling business effectively.
6. Track Your Assets Effectively
Keeping track of the tools and materials you need for each job is crucial for boosting productivity. Implement a system that allows your on-site team to communicate seamlessly with the warehouse. This efficient communication helps minimize delays in supply delivery, ensuring that projects move forward more quickly and smoothly.
7. Track financial performance
Every homeowner and remodeling project is unique, meaning some jobs may exceed the initial estimate while others may come in under budget. By closely tracking your financial performance over time, you can identify patterns and trends that are within your control.
It is critical to do detailed job costing on each project to determine the profitability of the project and how well you are managing slippage – difference between final profit and budget profit.
Beyond monitoring variances in job costs and labor hours, it’s essential to keep an eye on key performance indicators (KPIs). These KPIs will help you measure how efficiently you’re collecting payments, managing cash flow, and driving profitability. By focusing on these metrics, you can make data-driven decisions to improve your operations.
Additionally, tracking KPIs related to profitability, growth planning, and succession planning is crucial for long-term success. Monitoring profitability helps ensure you’re running a sustainable business, while growth indicators highlight areas where expansion is possible. Succession planning ensures your business has a roadmap for leadership continuity, securing its future even as it evolves.
8. Deliver outstanding customer services
Providing exceptional customer service is one of the most powerful forms of marketing for your business. From the outset, ensure your project management processes are efficient to meet deadlines and keep your clients informed throughout the remodeling.
It’s important to consistently check in with your customers to ensure they’re satisfied with the work. After completing a project, politely ask for an online review by sending a link via email a day or two later. Additionally, encourage happy clients to refer you to friends, family, or neighbors who may need your services. Word-of-mouth referrals are invaluable for building trust and expanding your client base.
9. Partnership with Suppliers and Other Contractors
Forming solid partnerships with suppliers and other contractors can greatly enhance your business. Supplier relationships may offer benefits like discounts, credit, and priority access to materials, helping you save costs and avoid delays.
Collaborating with contractors, such as plumbers, electricians, roofing contractors, and landscapers, can lead to valuable referral exchanges, where they recommend your services to their clients. Additionally, partnering with other remodeling businesses can expand your portfolio, providing access to new markets, diverse expertise, and shared resources that can strengthen your operations.
10. Stay Focused on Your “Destination”
You should set a clear 1-year, 3-year, 5-year, and 10-year goals for the business. That goal should include your desired revenue, net profit, and the staffing you will need to deliver it.
No matter your goal, consistently delivering exceptional work and providing outstanding experiences for your clients will help you build a business that thrives for years to come.
As more homeowners reevaluate their living spaces, remodeling projects are on the rise. Follow these tips to ensure your business stays ahead of the remodeling business boom.
