CG Report - 04/09/2008 (Plain Text Version)

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Bob Peterson, CGR, CAPS
Chair
Jeff Hunt, CGR, GMB, CAPS
Vice Chair

In this issue:
CGR Spotlight: Lawrence Murr, CGR, CAPS
Chairman's Letter
2007 Certified Graduate Remodeler of the Year
New Mexico’s Rutherford Is 2008 NAHB Remodelers Chair
NAHBR Awards Season Has Begun!
Three Easy Steps to Go Green Remodeling
Green Remodeling with Donna Shirey, CGR, CAPS
Remodelers Night Out
Top 10 Energy-Efficient Remodeling Projects
Maximizing Referrals in Any Market
Home Technology: What, How & Why
Online Speaker Directory
Spring Board Meetings 2008
Retuning Needed to Diversify Into Remodeling
May is Remodeling Month
Building for Boomers & Beyond Symposium Coming to New Orleans May 19-21
Upcoming Class Schedule for CGR's
Thank You to Our Strategic Partners
CGR Board of Governors

Retuning Needed to Diversify Into Remodeling

Michael Strong
CGR, CMB, CAPS
Custom home builders have the skill set to branch out into remodeling, right? Well, maybe not so fast.

Yes, many of the technical skills required for home building translate well into remodeling. But most builders will have to fine tune their business skills, the way they communicate with customers and perhaps rethink their project team if they want to successfully augment their custom home building business with remodeling work.

Successful remodeler Michael Strong, CGR, CAPS, vice president of the Houston-based design/build remodeling firm Brothers Strong, offers several pointers on how builders can diversify into remodeling:

Re-Establish Company Credentials

Strong said builders need to re-establish their credentials with their customers because their company will be serving customers in a different role — as a remodeler, not a builder. Telling prospects about successes and the company’s reputation is a good place to start, he added.

One way to add to a company’s credentials and build a stronger reputation in the remodeling arena is to earn the remodeling-based credentials and certifications recommended by NAHB ― such as Certified Aging-in-Place Specialist (CAPS) and Certified Graduate Remodeler (CGR).

“If you’re going to go up against a remodeler, get certified or get someone on your team certified,” Strong advised.

Earning and touting these types of certifications will help builders who are new to remodeling set themselves apart from their remodeling competition and protect their remodeling investment, especially in states where contractors are not required to be licensed.

Show Off the Remodeling Team

With credentials, honors and community involvement established, it’s time to show off the remodeling team.

The builder’s customers are already familiar with his capable and dependable administrative and production staffs, and it’s a plus that they don’t have to get to know another staff now that it’s time to remodel. They already know they’re in good hands.

“You have to let people know who you are,” said Strong. “Let them get to know you as a person by getting to know your team.”

If the production manager is certified, play up this aspect to remodeling customers, Strong said. Likewise, let customers know that your company works with specialized trade contractors who understand the intricacies of remodeling.

Set New Expectations

Setting new expectations for clients is a vital part of re-establishing credentials, so explain to customers the differences between remodeling and home building.

In particular, let customers know that:

Remodeling may take longer than they think it will take.
Because the crew will be working on their home while they are living in it, there will be more disruption to their lives than having a home built. They may even have to move out for an extended period of time during large, intricate projects.
There is more danger in remodeling because the home is open and exposed. Clients should be forewarned about inconveniences and potential problems beforehand so they won’t crop up mid-stream as unpleasant surprises. And unexpected dust, noise and a kitchen or bathroom temporarily out of commission can be very unpleasant surprises.

“When you tell clients is as important as what you tell them,” said Strong.

He advises builders to take potential remodeling clients to the brink of refusing to undertake the project, and then pull them back by reassuring them that your company will be with them every step of the way through the project.

Build a New Trade Contractor Team

If you work with trades who have done remodeling before, that’s a plus.

If not, you may need to find new trade contractors who specialize in remodeling. Read “Finding Skilled Labor,” an article in the resources section of the NAHB Web site, for pointers.

Once a new trade contractor team is established, you probably have to change the way you work with these contractors. For example:

There Are Differences in Job Site Etiquette

Remodeling trade contractors spend countless hours in close contact with the client’s family. They serve as an extension of your company, even though they aren’t actually on your payroll, so it’s extremely important that they have the following qualities:

Honesty
Integrity
Diplomacy
Cleanliness
A good attitude
A sense of humor
Courteousness
A professional appearance

Take the time to do background and security checks, in addition to checking references, to make sure that you select the best trades in your market.

Efficient Scheduling Is Critical

Remodeling projects generally have much more truncated schedules than new-home building. This necessitates scheduling trades tightly and sequentially — the work of one trade depends upon another.

Sticking to the schedule is important, no matter what type of construction job it is.

But this is especially crucial in remodeling because clients experience any schedule disruptions first-hand. And they will tell their friends and neighbors about any bad experiences.

To get trades to buy into a production schedule, ask for their input when developing it. Communication is key with the trades ― and with the customer.

“Your trade contractor must be in touch with your office if they are running late so you can let the customer know,” said Strong.

You Must Set the Trade Contractor Up Onsite

Because every remodeling project is different, the trades must be given specific work orders, drawings and instructions.

“You can’t just tell your trade contractors what to do,” says Strong. “They need a written scope of work.”

Also, be sure to bring the trades onsite to see the house beforehand and to introduce them to the client. “Make sure the client knows who’s in their home,” says Strong.

While onsite with the trade contractor, show him where to park and where to store tools and materials.

Remodeling Trades Are Much More Price-Sensitive

“You can’t get the price breaks that you do on new construction because the jobs are smaller,” says Strong.

Other issues remodeling trade contractors face that affect pricing include:

Crews are less efficient. “Because they’re in your clients’ home nearly every day, they often end up bringing in the mail, help chase down the dog that ran off, etc.,” Strong points out.
Work hours are shorter because the family lives in the home.
Site access is more limited.
Quality standards are different because what you build on the remodeling project must dovetail with the existing structure — and that involves painstaking work.

“I recommend that you don’t put ‘match existing’ in your contract,” Strong advises. “Every client wants it, but don’t go there. Instead, specify exactly what you will do.”

Pricing Differences

Remodeling projects cost more to build than new construction, as well. So you must price jobs accordingly to cover your overhead as well as the direct expenses — which often involve extra time, labor and other costs — associated with this type of work.

For example:

Shrubs, fences, pools, play equipment and the like all limit site access. “It all gets in the way, you’ve got to work around it,” says Strong.
Most of the heavy work — like excavation, carting concrete and moving materials and debris — often must be done by hand. With remodeling, sometimes there is no room to bring in a backhoe, concrete truck or Bobcat.
Homes must be protected when they are opened up. This necessitates buying plenty of tarps to protect the client’s home from the elements.
You may need to install temporary beam and posts to support floors.
Merging what’s built during a remodeling project with the existing structure requires custom craftsmanship — and lots of small details clients often don’t consider beforehand.
“When people want to move a sink from one wall to another, they forget that all the plumbing must go with it,” Strong says.
Utility lines often need to be rerouted. “I recommend that you state in your contract that the cost to reroute utility lines is not included in the project price,” says Strong. “You don’t know what you’ll find underground.”
Only rarely can two trades work at the same time on a remodeling project. “When the tile is being set in the kitchen, no one else can work in the kitchen,” Strong points out.
Don’t forget to budget for dust control, furniture moving and clean-up.

Mark-Up Is Completely Different

The mark-up on remodeling jobs is typically one-and-a-half times (or about 50%) of the job cost. This excludes appliances and fixtures, on which it is hard to make a profit.

The mark-up includes production management, design fees, permits and everything else. That leaves a gross profit of 33% to cover overhead costs of 25% to 30%.

“If you still build new homes, then leverage your relationships with vendors and suppliers because remodelers can’t,” Strong says.

Working With Remodeling Clients

To remodeling clients, the project is their home, not a work site. Win their trust by demonstrating that you know the difference.

Let clients know that:

Your company puts its clients’ safety first.
Some dirt and dust is inherent in all remodeling projects, but your company does its best to maintain the cleanliness of its clients’ homes.
Your field crews and trade contractors are forbidden from using alcohol, tobacco and illegal substances on the job site ― or showing up drunk or high ― and from bringing firearms to the site.
Your company adheres strictly to a production schedule, just as it did when you first built their home.

Ramp Up Communication

Many consumers are apprehensive about remodeling because they can’t read building plans, they’ll be spending lots of money and their lives and home will be disrupted.

The most effective way to ease their apprehension is to communicate with them on a regular basis and keep them informed of the projects’ details and progress.