ARTICLES

Warning: if you’re not interested in growing your business—while earning very healthy profits—then do not read this column.

 With America’s average housing stock approaching 30-years-old and new construction running at breakneck speeds, the need for reliable contractors is at an all-time high. But today’s dynamic construction climate has produced a dearth of qualified, reliable contractors.

Builders and homeowners are feeling the negative impact. They are having a difficult time finding installers that will provide them with the services they need. Couple that with the higher levels of service quality that customers have come to demand today, and the market has created real opportunities for businesses that can fill this need. Today’s customers simply want better services and business solutions, and are attracted to businesses that give them what they want.

Today’s homeowners are looking for professionals to take care of their home improvement needs. Not only are they pressed for time, but they also lack the skills and tools to do most jobs themselves. Of the $150 billion spent annually on home improvements, approximately 80 percent is spent in the "pro installed" segment, while only about 20 percent is DIY. This opens a tremendous market for the aggressive building material dealer to provide a much-needed service.

Of the 800,000 remodeling establishments nationwide, fully 70 percent are self-employed individuals and just 30 percent are businesses with payrolls, according to Harvard University’s Joint Center for Housing Studies. In addition, home improvement repair/remodeling contractors historically have had a significant number of complaints with the Better Business Bureau nationwide and have a failure rate of approximately 50 percent per year, with 95 percent going out of business within five years. Factors such as the ease of entry into the remodeling business; the lack of any regulatory or effective licensing controls; and its volatile nature all combine to increase the homeowners’ risk. In addition, the older, more established remodeling companies typically market their services to the higher-end customer who is looking at more extensive remodeling projects. These contractors normally don’t serve the customer who needs the core projects and products that make up most installed programs that service homeowners.

Builders need access to product, distribution and reliable installation in order to function successfully. Most builders don’t have a problem acquiring product in today’s hyper-competitive market. Distribution isn’t a major issue, either. However, because of the shortage of qualified subcontractors, last year most builders had to delay starting construction projects, and over 80 percent experienced completion delays. And with builders relying on subcontractors in greater numbers today than in the past, they are faced with a real challenge: finding reliable installers.

New construction offers many lucrative opportunities for dealers willing to offer installation services. Driven by a labor shortage that just won’t go away as well as more demanding schedules of their own, an increasing number of builders are seeking suppliers that offer their products installed. Most welcome suppliers that bundle multiple product installations and offer a single-source solution for their subcontracting needs. It eliminates the need to juggle multiple subcontractors. It also saves them time and reduces callbacks and warranty issues. Installed sales programs typically help the builder close the house sooner, saving him money. Builders frequently look beyond a dealer’s core product and make purchase decisions based on relationships that provide meaningful business solutions. A single-source installation service is fast becoming the solution builders need.

Do market dynamics suggest that independents will have to offer installation services to stay competitive? Many indications say yes. The facts are that eight of the industry’s top ten retailers and more than half of the top 100 now offer some form of installed sales. The reason is that homeowners and builders alike are asking building material retailers to offer installation services. Dealers that have implemented an aggressive installed program are enjoying increases in business, higher margins and an increase in customer loyalty. They are on the leading edge of the customer- service wave that will sweep the industry in the coming years. Customer expectations guarantee a ready market for installation services. And customer demand will drive it.

In the coming months, we will explore many of the core issues involved in implementing or developing a successful installed-sales program.

Some of those issues are: single-source solutions for builders, home improvement services, supplier support, business systems and structure, competition with your contractor customer, computer and software tools, insurance issues, human resource and training, value-added selling, scope of projects, how to find and keep reliable installers and more. We will also provide you with several operational snapshots of successful installed programs from around the country.