Contractors and Remodelers: Decide Your Niche and Then Go Get It!
Choosing a niche for your remodeling business should be done with care and can include much more than most remodelers might realize. When I ask remodelers what their niche is, most cite just one characteristic, typically a work type, such as windows, kitchens or historical renovations. Rather, I suggest remodelers consider many characteristics when establishing a niche.
The idea is to assemble the ideal niche or niches for your business. To do this at my own business I used the five “W’s”; who, what, when, where and why to help me. By thinking back about past clients and their projects, I filtered out and then assembled the characteristic that consistently lead us to successful and profitable projects with customer we enjoyed working with.
Looking back our ideal customer was a middle aged middle market married couple, both working with either very young or high school age children. These people worked hard to earn their money and therefore respected the fact that my employees and I also worked hard to earn our money. They looked at my employees as partners in the project, not nail bangers. Due to the age of their children, they had little time to do their own work, they didn’t want to move or change school systems, and they typically needed more space at their homes. Unlike wealthier clients I had worked for, these clients would say; “I know I will owe you the next payment on Monday, but I won’t be here. Can I pay you today”? I never had to use my line of credit to finance their projects because waiting for a stock dividend delayed progress payment.
These clients needed additions to their homes, but we didn’t want just an addition. We wanted an addition with a kitchen and/or a bathroom. We came to find that simple family room or bedroom additions came with too much competition from laid off framers or inexperienced low price remodelers. If the project included a kitchen and or a bathroom, most low price completion lacked the skills to design and build the project. We also found that these projects, because of the baths and kitchens, were material and sub contractor intensive. We found it easier to mark up and manage more materials and subs, rather than more labor. We also found they brought in more gross profit in less time than labor intensive projects.
We purposely timed our marketing for addition work relative to the New England weather realities as well as the typical lead time required to sell, design and permit additions. The idea was to get foundations in the ground and shells constructed before the weather made it impossible or impractical to work in the cold. Using similar tactics, we marketed in advance for Kitchens, baths, attics and basement remodels to fill the cold months. We marketed these projects to the same client type. The attics and basements typically included bathrooms.
As the business grew and competition increased within our market, we decided to expand our footprint. Through experience and detailed job costing we came to see that commuting more than 30 minutes from our office typically lead to increased costs, compromised supervision on projects, a dip in client satisfaction and therefore a dip in referrals. We also found it ideal to work on homes built in the 60’s or later. These homes were built with standard lumber sizes, drywall rather than horse hair plaster, PVC drain lines rather than cast iron, copper water supplies and poured concrete foundations. These homes were easier to work on, they made it easier to anticipate and estimate costs and they were typically one of many similar homes within concentrated subdivisions. By marketing to target home owners in target neighborhoods within 30 minutes of our office, we attracted addition projects in high exposure locations, leading to more work and more referrals in those same areas.
To me the why was the easy part. The why’s were all the benefits my business came to enjoy as a result of defining our ideal niches, the biggest being improved profitability. If you concentrate your efforts in a defined area, you and your team naturally become better and more competent at what you do, leading to improved efficiency across your business. We realized efficiency in our marketing efforts because we knew who and what to market for and how to get their attention. Estimating and sales also became simplified because projects and clients were very similar. It was easier to find and train good employees and subs because the work types were fairly consistent and the clients were almost always a pleasure to work with. Because we could successfully deliver the right projects to the right people we enjoyed a steady flow of high quality referrals. Because, because, because…
Just like the Dating Game?
Think of defining your niche as being similar to defining your ideal spouse or partner. If you date enough people you will eventually recognize the qualities that come together to define a good fit, someone you want to live with for a long time. If you have been in business for a few years and think back on all of the clients you have dated, I bet you can filter out the ones worth marrying your business up with.
If you would like to attend a workshop offering the insight and information you need to develop a marketing strategy and the tactics needed to redirect the future of your business check out Workshop #2 of 6 titled: "Choosing and Targeting the Right Customers and Project Types for Your Business" of this Contractor Success Program that starts on January 22, 2013.