Larger Companies Build Business With Larger Projects, More Sophisticated Marketing

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Remodeling is an industry dominated by small companies. Depending what source you listen to, there are somewhere between 500,000 and 1 million “remodelers” in

the country, but the vast majority have revenues below $500,000 a year and no employees. So what separates the large companies from the small?

In our annual Business Results survey, we found that the biggest differences occur in project size and marketing methods. We examined companies and divided them into four categories, based on 2008 remodeling revenue: Less than $500,000; $500,000 to $1 million; $1 million to $3 million; and more than $3 million.

Larger companies = larger projects

The starkest difference was in average project size. Companies with less than $500,000 in 2008 revenue had an average job of only $5,248, compared with $18,512 for companies at $500,000 to $1 million, $22,225 for companies from $1 million to $3 million and $77,687 for companies more than $3 million.

The project mix explains much of this difference. Kitchens were the top remodeling project for every company size, but after that there were some significant differences. Most notably, the smallest companies (less than $500,000) generated 10 percent of their revenue from home repair or handyman projects, which carried an average price tag of only $1,938. No other group of companies generated more than 5 percent of their revenues from home repairs.

For all but that smallest group, whole house remodels were a major source of revenue. Companies less than $500,000 only generated 7 percent of business from whole-house remodels, with an average price tag of $92,500. Whole-house remodels accounted for more than 15 percent of business for other firms. Those projects were also larger, with an average job price of more than $170,000.

Finally, companies above $1 million in revenue found a lot of business from building custom homes: 11 percent for companies from $1 million to $3 million and 21 percent for those with revenues of more than $3 million. The average company in those groups builds three custom homes a year with an average price of nearly $600,000.

Different approaches to marketing

Regardless of company size, the average firm spends between 1 and 2 percent on marketing. But the smallest companies were much more likely to report spending nothing on marketing — about half of companies with less than $1 million in 2008 revenue compared with a third of companies above $1 million.

That said, the biggest differences in marketing were how they spent the money. The largest companies spent their marketing dollars on more methods and were more likely to spend on sophisticated methods that take more time and money. (See chart) For example, they are much more likely to use the Web to market. More than 70 percent of companies with revenues more than $1 million have Web sites, compared with less than half of those with revenues less than $1 million. A quarter of the larger group use e-mail marketing compared with only 10 percent of smaller firms.

Depending on average revenues, companies find different marketing methods 
to be successful. The first column for each company size indicates what percent 
of firms use that marketing method; the second shows what percent ranked that
method as one of their two most effective methods.