First Quarter Prices Released

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On 1/2/2009 we uploaded the most recent pricing data. All subscribers should have received an email from RemodelMAX notifying them of this. Some of the pricing trends that RemodelMAX chose to highlight are as follows:

WOOD PRICES FALL BUT ROOFING PRICES GO THROUGH THE ROOF!

  • Roofing prices have gone through the roof, increasing 25%-30% in many areas.
  • Gypsum wallboard prices remain low and stable.
  • Dimensional lumber prices have declined slighty.
  • Plywood prices have dropped as much as 15%-20% in some areas.

Here are some other relevant articles:

PRICING ADJUSTMENT

Q+A: Do you raise or lower prices or bids based on economic conditions?

Remodeling magazine December 2008
By: Nina Patel

Traci Knapp
Nobile Construction
Branford, Conn.
Big50 2005

We have not done any across-the-board cuts or raises. We base any changes on supply and demand and make adjustments on a case-by-case basis. Right now we are busy overall, and this time of year is busy for us, so we are not backing off our prices.

However, to secure a project to fill our schedule for February or March, we might provide a lower number. I think part of it is mental. If your pipeline is full and you have a solid schedule, you feel more secure in asking for more money.

If you are not busy, it’s a whole other mindset. If we weren’t busy, we might consider going lower. However, you have to remember that if you sell one job at a lower markup, you may fill a slot for a project where you could have gotten the full markup.

Randy Ruzanski
Distinctive Home Renovations
Elk Grove Village, Ill.
Big50 2000

We never had to change our margins or pricing. We either got the jobs or we didn’t. However, if I have to negotiate, I will. But I will work to protect our margin during the negotiations. The purpose of being in business is to make money. It does not make sense to do a job where you are not making money.

John Newmyer
Newmyer Distinctive Remodeling
Walled Lake, Mich.
Big50 1992

I will not change my margins. If you do that, you end up not being able to pay your bills or your vendors. You must maintain your margin. Especially in today’s market where you can’t make it up in volume.

However, we have noticed that our bids are lower because they reflect the fact that material and labor prices are coming down by about 30%. Subcontractors are working for less and we sub practically everything.

I recently worked on a bid that a year ago would have cost $165 to $180 per square foot, but now costs $120 per square foot.

Anthony Cucciniello
4V Corp.
Bronx, N.Y.
Big50 2006

I’m getting more small jobs in this economy. My prices are up on these under-$100,000 jobs because, though they are smaller, I have the same overhead. I have lowered my prices on larger jobs, those $250,000 and up, because there is more competition for these jobs. But I will only lower my price by a maximum of 3% because the company still has to survive and sustain itself.

I find a lot of new-home builders trying to get into the remodeling business. Their prices are so low, I’m not sure how they can do the job. Some are pricing 30% below my bids there is going to be a problem with that job.

Gary Naugle Sr.
Gary Naugle Co.
Columbia, Mo.
Big50 1990

We recently raised prices across the board. We knew our prices were too low because our margin dropped. I have a new price book now. I expect that, with the adjustment, margins will be back to what they should be. However, I believe you can’t raise or lower prices based on the economy or you’ll go out of business.

Surviving the Fall

Remodeling magazine December 2008
By: Leah Thayer

In the short time between August, when this survey was in the field, and early November, when we conducted phone interviews, many remodelers have had little choice but to scale back on pay, if only (they hope) temporarily.

“Until 60 days ago, everything was OK,” said a Connecticut remodeler who works primarily on second homes. “But when Wall Street crashes, our clients crawl under a rock.”

This remodeler hasn’t cut staff yet. “But they’ve been forewarned,” he said. He anticipates layoffs if he doesn’t sign contracts soon.

A few strategies being used to avoid those painful cuts:

Pay freezes and/or cuts, with the biggest paychecks bearing the brunt. One owner slashed his pay by 80%; another cut all executive pay by 30%. Others are asking trade contractors to accept small rate cuts (e.g., $5 less per hour) and to guarantee estimates.

Spot bonuses. To soften the economic blows, one company gives occasional “kickers” of $100 to $500 for exceptional performance. Another doubled some employees’ vacation time, unofficially.

Shifting health insurance. Bulwarks against rising premiums include paring back from family plans to employee-only plans, and changing from “Cadillac” PPO plans to cheaper HMOs and health savings accounts.

Some employers have suspended matching employees’ 401(k) contributions.

Other strategies: repackaging pay to be more incentive-based, longer hours, and broader work responsibilities. “Your job descriptions are over,” one remodeler told his staff.

Can’t avoid layoffs? Cut the “C-players” first those who produce less and/or need more supervision. It’s not all nickel-and-diming. “I’m keeping my highest-paid employees who … don’t need to be babysat,” said one remodeler.

And when there’s nothing else to cut, there’s the cushion. Or there should be. “Banked money is going to be key for a lot of people,” one remodeler noted.

Make Change a Priority Now

Today’s economic climate demands new ways of going to market.

Remodeling magazine December 2008
By: Mark Richardson

No one will argue that the country is experiencing an economic crisis. But the bad news itself is less important than how you react to it.

Try this exercise: Write down a few words or phrases that describe today’s business environment, your company’s positioning, and how you feel about both. Now ask others on your team to do the same, then

compare lists. You will discover that some people are fearful and reluctant to stray too far outside their comfort zone, while others (maybe most) want to do something but are confused about what to do and who should do it.

A third response comes from those who are more energized than ever. I include myself in this group because I believe that opportunities are on the rise at the same time that the risks are greater than ever.

REMEMBERING WHEN

I haven’t seen this dichotomy for many years, but it is by no means unfamiliar. Those with some gray hair will remember the “stagflation” of the early ’80s, when interest rates climbed to 15% or more, and remodeling was just beginning to gain respectability as a professional activity. At Case in 1981, our annual business was about $500,000, but we saw the opportunity in design/build, which was still an untested way to take remodeling services to market. It took some time, but as a direct result of our acting on that opportunity, by 1988 total revenue had grown to $8 million.

Similarly, the early ’90s were a time when home values in many areas of the country went from double-digit appreciation to double-digit depreciation. During this period at Case, our design/build business dropped from $8 million in 1988 to $4 million in 1991. But again, we saw an opportunity to diversify. We launched the handyman division, which ultimately gave us the engine to grow to nearly $100 million today.

HOMEOWNERS STILL NEED HELP

The economic circumstances are different today, but times of great crisis also present great opportunities. Homeowners need you more than ever. They are stressed out, lacking the time or skills to tackle projects themselves. Product proliferation, regulatory issues, and fast-changing design trends have made remodeling a complex and confusing proposition. But remodeling is still attractive even to homeowners who are trying to break the spending habit they developed in boom times.

For one thing, the simple house of the past is now very complex, both in design and in required maintenance (compare a modern home with those from developments built in the 1960s and you’ll see the difference).

Plus, although the recent stock market fluctuation has affected the ability to borrow money, it has also created a huge lack of confidence among homeowners about planting their money in the stock market.

A home is still the biggest investment most people ever make, and they want to protect it, position it, and enjoy it. If you embrace the changing business environment with a sense of urgency, you can see positive results today and prepare for explosive growth and increased market share in the future.

CHANGE NOW

The flip side to this story is the risky nature of this environment. If you cannot change, you will probably not make it. Many remodeling experts and industry gurus are singing the same song today that they did five years ago, but the old recipes don’t work now. Change is incompatible with dogmatic and rigid thinking. Change requires new ways of marketing and selling. One of the best times to institute change and get a healthy buy-in from your team is in markets like the one we are in today.

It’s time to make change a priority and give it a sense of urgency. I believe that now is an ideal time to embrace new opportunities, see unprecedented growth, and position your company for the future. The risks of standing still and not changing are greater than ever.

Mark Richardson is president of Case Design/Remodel and author of the book How Fit Is Your Business? A Complete Checkup and Prescription for Better Business Health.

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