In-house Financing
Despite Custom Design & Construction’s $4 million volume, owner Bill Simone says that you don’t have to be a giant company to offer financing. Simone has been in business for 26 years and says, “The very first job I sold was a small remodeling project for $17,000, and we financed it for [the client.]”
Simone and his two other co-owners began the El Segundo, Calif., company with some working capital. “As our volume picked up, we put our personal cash and company cash back into the business,” Simone says. The first year they financed two or three projects; now it’s not unusual for CD&C to carry an $800,000 whole-house remodeling project.
CD&C carries all the paper in-house and doesn’t use banks or other lenders. Simone appraises the property and determines the value being added to the home. To determine the interest rate, he looks at credit — most of CD&C’s clients are higher-end, have good credit, and are not credit abusers — and how much of their own cash clients put into the project. Rates are competitive, he says, between 4% and 9%. The interest is deductible for most clients since it’s mortgage interest. Simone admits that “some have gone bad over the years but usually because of a catastrophic event like a death in the family or job loss.”
Before the recent recession, Custom Design & Construction financed close to 75% of its projects. After the real estate bubble burst, Simone says that people were less interested in taking advantage of financing. “They were scared. Easy money was the cause of all the problems. Financing dropped by half. Now we’re doing about 25% financing, but it’s picking up again.”
Simone advertises the financing as “affordable in-house financing” and discusses it with clients as the company gets into the design phase of a project. Financing has become a good revenue stream for CD&C. “It [will be] a nice retirement also,” Simone says.
PACKAGE DEAL
Throughout the downturn, Dave Van Houten, owner of HWC-Home Works, in Wyoming, Mich., noticed that many consumers were focusing on needs-based projects rather than wants. “Last year we sold more baths than kitchens,” he says.
About five years ago he created a “bath in a box” that costs $6,995 for the standard package, which includes all electrical and plumbing fixtures, vanity, flooring, hardware, and trim.
Four crews each complete one “bath in a box” in five days. Van Houten created a Microsoft Excel spreadsheet that makes the packages easy to order.
What he learned was that the package was merely a starting point for most clients, many of whom wanted to customize. “People would walk in the showroom and they’re nervous and they want to remodel the bathroom but they don’t know the costs,” Van Houten says. “By offering the standards, we’re able to give them a price, and they can relax. [Either it’s] what they want to spend or it opens the door to conversations.”
Brian Altmann, owner of DBS Remodel, in Poughkeepsie, N.Y., had the same reaction when his company began offering a package called Advantage Bath. “Most jobs ended up being custom,” he says. But an additional frustration leads to a word of caution from Altmann.
He priced Advantage Bath to reach a market segment he thought was underserved — consumers with $10,000 to $20,000 to spend. But as he got further into it, Altmann realized that it wasn’t a good fit for his company. Those prospects turned out to be people on tight budgets who might move in a few years. “We like a more sophisticated buyer who is educated,” Altmann says. “They’re not typically the ones going after that type of bath.”
Altmann had spent a good amount of time preparing for Advantage Bath — working closely with his lead carpenter to determine labor hours, visiting a supply house for selections, getting items photographed, meeting with sales to crunch numbers to meet margins. “It took a lot of time to do and I don’t regret it,” Altmann says, “since it’s still a viable starting point and it does bring in leads we might otherwise not have been interested in.”
Seminars Sell
Northern Virginia’s Sun Design didn’t hold seminars until 2008; now it does 10 a year. “We sign between one and five design agreements from each seminar,” says Bob Gallagher, president of the 46-person design/build company.
To promote the seminars, Sun Design sends 5,000 postcards and e-blasts to past clients and to its prospecting database, which includes people who have responded to an invitation to a past open house or seminar. “One small key to success,” Gallagher says is that “we’ve doubled our efforts by [also including] the cards with our jobsite mailings. Now it gives people an outlet to come to see us without having to set up an appointment early in their decision-making process.”
Seminars focus on topics such as color trends, kitchen and bath design, or 10 things to avoid when hiring a remodeler. Each seminar usually draws 25 to 50 people. The topic doesn’t determine a seminar’s success, but some topics are more popular than others — particularly popular is the seminar in which Sun Design asks guests to bring a photo and the company’s designers draw remodeling possibilities.
Sun Design employees emcee the seminars, which are scripted and typically include a PowerPoint presentation created by the marketing team. The sales staff and some designers also attend. “We’ve been doing this for years. Everyone has a job — a tent out front, balloons, touching up the office,” says Gallagher, who devotes about $4,500 to each seminar, including the postcard mailings and two ads in the local paper.
The whole point of the seminar, he says, is “to get in front of people, to meet and talk. … It’s all designed to bring comfort to people, get them to respond, get active, and to [let us] see who’s really interested.” But, he notes, seminars are just one piece of a bigger pie. In fact, he adds, “I’m not sure that seminars by themselves without more of the pie would be as tasty.”
— Stacey Freed, senior editor, REMODELING.