After more than two decades spent building and remodeling homes in California’s Bay Area and Houston, Texas, contractors like Luis Gonzalez are considering hanging up their hard hat. The sad part about the situation is that it’s not because the industry is slowing down. In fact, it’s quite the opposite, with positive growth in the remodeling market for 14 consecutive financial quarters, the home renovation industry’s new marketing and technology requirements are what’s forcing Luis, and a number of renovation professionals like him, to make a choice – adapt and learn, or explore other career avenues.
“I don’t have the skills to market myself and my margin does not allow me to hire someone and spend money on that yearly,” Luis said. “During the last three years I started to get smaller projects, and I became more of a subcontractor than a general contractor”
The home renovation industry is changing – especially in the world of contractors. The onset of online review sites came with a new set of necessary skills. Instead of simply needing to be good at their craft and gain referrals from former clients, they had to start thinking about building websites, online review sites, social media, and gaining visibility through listings services. These things aren’t nice-to-haves, they’re necessities. Fieldlens, a mobile construction communication platform geared toward contractors, wrote, “Today, in order to remain competitive, a presence on the Internet is a must. No longer can even companies with solid reputations rely on word of mouth or print promotion.”
In a 2015 Business 2 Community article featuring data sourced by Invesp, it was revealed that 90% of consumers read online reviews and 88% of them trust the online reviews as much as personal recommendations. Customers are likely to spend 31% more on businesses with excellent reviews. Numerous companies offer online visibility and/or marketing services to home renovation professionals – typically, at a cost, especially if contractors want to rank at the top of listings. This has been a hot topic in many online forums and article comment sections, with contractors citing price tags in the hundreds of dollars and mixed opinions on how much this method of marketing is worth it.
A 2014 survey found that good reviews and an online presence ranked as the no. 1 priority for homeowners looking to make a renovation hiring decision, whereas the importance of being the lowest-cost option was the least important factor.
That’s not to say that, when it comes to home renovation, homeowners are going with a money-is-no-object approach. Homeowners creating renovation cost estimates with Kukun’s online tools have consistently selected the mid-level finish option for their projects over the least- and most-expensive options.
This leaves contractors in a bit of a conundrum – by paying to be visible online and well-marketed, their rates are going to have to go up. The other option is to spend time learning about, creating, and maintaining their own online presence, and time is also money. Keeping up with the times while also keeping rates reasonable enough to be appealing to new clients is a difficult balance.
“I’d like to get the opportunity to help build great homes for people. I don’t want to be a subcontractor, I want to do what I’m good at – building a great home with a reasonable margin for me and a great price for my client,” Luis told me. “If I spend money on selling myself, I will have to pass it to my customer. In the past, my previous clients were my best source of work – they recommended me.”
Add the need for contractors to be tech-savvy with a construction labor force that has seen fewer younger workers in recent years, and you’ve got an even bigger struggle. According to the Joint Center for Housing Studies of Harvard University(JCHS), “From 2002 to 2013, the share of the construction workforce aged 55 and over increased from under 9 percent to almost 16 percent, and the share of the workforce under age 35 declined from 44 percent to less than 35 percent.” Those who did not grow up in the land of online reviews and modern marketing tactics have to master these things to stay competitive and gain new clients.
What does all of this really mean?
The rise of online review sites and consumers’ tendencies toward online research prior to making a hiring or purchasing decision has changed a number of industries – we live in a time when a one-star difference in a Yelp rating can affect a restaurant’s bottom line between 5 and 9 percent. Perhaps the home renovation industry is simply part of this paradigm shift. Some talented contractors who can’t make the marketing and technology jumps will be weeded out, as in every other affected industry. That may not seem like a big deal, but in an industry that JCHS already notes is thinning and in need of skilled laborers, this can be problematic.
The matter also lies with consumers. How much are potential renovators willing to pay in order to get the top-listed contractor on Angie’s List, and how much of that expenditure is helping cover the professional’s marketing expenses? JCHS notes, “The massive decline in, and aging of, the construction industry labor force following the Great Recession have raised alarms about potential shortages of both skilled and unskilled workers as the market recovers.” With skilled professionals leaving this already-shrinking workforce due to the changing technological landscape and already-thinning numbers, there is theoretically enough work for every skilled industry laborer. Perhaps the necessary change lies in how consumers source and hire renovation professionals, and finding better options for them to gain visibility.