SIC to NAICS: Stand Up and Be Counted

Finally, the Federal government has officially recognized the remodeling industry as a service-based business that is identifiably separate from home building. The new North American Industry Code Standard (NAICS) has replaced the old Standard Industry Code (SIC). The North American Free Trade Agreement (NAFTA) includes the new codes for identifying industries in Canada, Mexico and the United States. Now who would have ever thought that the NAFTA treaty would affect your business of remodeling? The new NAICS system officially takes effect in 2002, but, you may now use your remodeling NAICS number on any Federal document. That new number is 236118.

How did something like this occur and what does it mean to the industry of remodeling? In my personal opinion and I was there when it happened, most of the credit is due to the Harvard University Joint Housing Center. The coalition began with the National Association of Home Builders/Remodelors Council and Dr. Kermit Baker of the Joint Housing Center four years ago as a fact-gathering project called Remodeling Futures. One of the first issues this group dealt with was the size of the industry. Two years ago, Harvard released their preliminary numbers, and they did not agree with the Census Bureau. Every number they were reporting was much larger than the Census Bureau had ever reported. Did they pay attention. Now Census has a seat at this group to understand our industry better.

The major change for the remodeling contractor is that we have become a separate, identifiable, industry. In about three years, we will have more information at the national level than ever imaginable. What does that mean to you and your business?

That depends upon you. Below you will find my thoughts put into letter form.

First let me state that the industry, being as unidentifiable as we have been over the last millennium, has absolutely no comparative numbers to judge the strength of our business, how many of us are out there, our duration and what we really do. Through the new NAICS code number, this information will start being gathered by the Census Bureau. In the meantime, we can do something to speed up the process. Send the letter below to every banker and lending institution you can. The letter will explain further.

The Letter:

Today's Date

Dear Mr. Banker,

My name is ______________________ and I am a professional remodeling contractor. I have been in business since ______________.

One of the things my business needs is comparative financial ratios. I have looked for them in many places and except for one magazine article; I can find nothing to tell me how my business is doing or how I compare to other remodelers. I understand there is a data gathering company called Robert Morris Associates that produces a large book that carries different industry ratios. When I called to find out if I could see what the ratios were for a remodeling company, I was told they do not have any. They have many other aspects of the building industry listed, but none for remodeling.

The National Association of Home Builders/Remodelors Council, I understand, has written a letter to RMA asking them to include remodeling contractor ratios. They responded that the banks and lending institutions have to request that they gather the data necessary to produce ratios.

That is why I am writing this letter to you. Please, could you ask your bank (or lending institution) to send a letter to RMA, requesting they begin reporting the financial ratios for the remodeling industry?

Since the new NAICS code has gone into effect from the Census Bureau, I believe that the task of identifying the industry and gathering the data will be more effective than it ever would have in the past.

I would be more than happy to assist any way I can. Thank you very much for your time and I look forward to your response.

Your Name
Your Company

Click Here for a Microsoft Word version of this letter.

Michael Carden is an owner of MUI Corporation, Birmingham, AL and former chairman of the Remodelor''s Council. Please email him with any comments or questions regarding his column.