Making Good Lemonade

January 11, 2013by David Lupberger0

Welcome to 2013. The economic downturn is slowly getting better, and many remodeling contractors are beginning to see signs of a recovery. It has been a challenging 4 years. With lower real estate values and all the financial uncertainty, homeowners have been scared, and they have had reason to be:

Lower real estate values

  • There is uncertainty about the economy
  • They don’t view their home as an iron-clad investment anymore
    This has had a direct effect on most building professionals:
  • Most have less work than 4 years ago
  • Project size has diminished
  • Homeowners are now speaking with 5, 6, or even 7 contractors before making a buying decision, and then are demanding additional price concessions
  • A lower closing ratio
  • Company lay-offs

The downturn is real, and has created a new economic order. We can wait for this downturn to improve, or we can become masters of our own fate. Let’s see if we can do just that. Let’s examine this marketplace and begin to take a different stance with all this economic uncertainty. Let’s take back our marketplace, and begin to make a difference with the homeowners we work with.

Here is the good news. We are part of a $300 billion a year industry, with over 110 million existing housing units. With over half of those units constructed over 40 years ago, most require major remodeling/maintenance/repair and an ongoing demand for remodeling. The future, in spite of what you might read, is bright.
There are some principles in the service industry that will assist us in understanding how to shift our business model so that we can take control of our financial future. Begin to think of the professional service people that you work with now:

  • Doctor
  • Dentist
  • Attorney
  • Accountant

These trusted advisors help us manage our physical and financial health. These relationships are not price-driven. They are based on trust, and that trust comes from relationships that develop as they take care of us and our families. Let’s introduce this “trusted advisor” role into the remodeling industry. For example, who is providing homeowners with an annual physical for their home helping them manage their largest asset? Their homes are aging just like we are. Can we become their total home care advisor? Can we assist them with understanding what improvements need to be made on a regular basis, and helping them prioritize those home care needs? Who else is better suited to provide this valuable service?
There is an issue here. We presently develop these trust-based relationships organically as a result of larger projects, but they are not by design. We need to change that. The challenge here is to transition from a project-driven business model (which works in a strong economy) to a relationship-driven business model (which works in any economy).
The biggest shift to this new business model lies with the remodeler/builder themselves:

  • Contractor resistance to smaller projects/handyman work
  • Company success being equated with larger projects
  • Understanding the value proposition of the trusted advisor role

Becoming a trusted advisor to past clients is an easy sales proposition, and homeowners are receptive to the idea. If you understand the true lifetime value of a customer, your transition to the trusted advisor role makes even more sense. Over a 10 to 20 year period, you could well do over $100,000 in work for that client.
Here is a quick review of the relationship-driven business model benefits:

  • Better margins
  • Not price-driven
  • Ongoing company cash flow
  • Lower marketing and sales costs
  • Business model builds company equity – transition strategy

There is a vital remodeling marketplace out there. It didn’t go away, but it has shifted. If homeowners aren’t calling us, it’s time for us to call them. They need our services.
If you would like to find out more about this trusted advisor business model, please contact me at I have a program starting January 23rd that will show you how to implement this “client for life” program and I’m happy to share the details. Please let me know if you would like to know more.