The indirect costs associated with turnover are especially painful to the smallest remodeling companies. First, multiple-hat-wearing owners will have to take charge of the entire hiring process. And the smaller a field crew is to begin with, the more severe the blow to capacity when an employee leaves. For example, if a crew of three is reduced to two in the middle of a job, that lost carpenter can represent more than a third of the crew’s output if he’s a lead or an especially productive worker.
Sometimes, too, an employee’s value can’t be measured.
“I have a guy who has the best attitude in the world,” says Criner, the Virginia remodeler. “I want him around even if we’re not making money, because he motivates everyone else.”
BENEFITS OUT OF REACH? As costs continue to rise, paying for benefits, health insurance in particular, is increasingly difficult. Though costs are rising everywhere, remodelers in and around large cities and metropolitan areas had until recently enjoyed a strong market to help offset the growing expense. Many smaller-market contractors face different pressures.
A recent REMODELING survey found that nearly half of the responding companies don’t offer health insurance; most work in smaller markets.
Ken Jones is a full-service contractor in Rochester, N.Y., with six full-time employees. He says that while he pays top-of-the-market wages, he can’t afford to offer benefits beyond a week’s paid vacation and seven paid federal holidays. Jones estimates that even at a group rate, he’d be spending thousands of dollars a month, an additional outlay he says he simply can’t afford. The trouble, Jones says, is that while Rochester’s economy is flat, there are contractors everywhere, many of whom are uninsured and who undercut insured remodelers on price.
“In a competitive marketplace where there’s no regulation of our competition, just being fully insured is enough of a cost that it makes us uncompetitive,” Jones says. “In my heart, I’d love to give these guys everything, but it’s just not affordable.”
Raising prices isn’t an option because the local economy isn’t growing.
“I’ve been in business for 30 years, I’ve never been to court, [or] been called by the Better Business Bureau,” Jones says. “It’s been proven for 30 years that we do a great job. But when you’re in there at $30,000 and your competition’s in there at $15,000 or $20,000, at some point people stop caring about how good a job you’re going to do.”
Local suppliers and “big box” retailers who have gained market share through installed sales are creating similar pressure, says Thomas Auten, a Southern California remodeler.