Keep Profits Up With Rising Costs
As Home Improvement Costs Go Up Plan Ahead to Stay Profitable
The post pandemic home improvement and remodeling demand is still on a roll. The remodeling market is predicted to keep going up but not as the rate we experienced during the pandemic. Rising costs of labor and goods is driving up the cost for the business owner and for the homeowner.
Home Improvement Moving Ahead
The stay-at-home lifestyle resulted in a boom in work for home improvement professionals. Recent rising interest rates have stopped people from moving and made home improvements the long-term plan.
Large scale projects stay leading the home improvement industry. Homeowners want to upgrade. Seniors are aging in place. Families are expanding their kitchens, transforming bathrooms into spas, and expanding living space outdoors with outdoor kitchens, in-law suites and ADU’s.
How to Combat Inflation
Contractors continue to be challenged with rising materials costs, delayed materials, and labor shortages. In turn to be profitable, home improvement businesses need to increase their prices to cover paying more for materials and labor. Economist Misha Fisher advises contractors to raise their prices. “If I were a remodeler today, I would remember one key principle above any of the other details—if you don’t get the price right, you lose profit.” Fisher explains, “Escalator clauses in your contracts are an important way to protect against it.”
Now is the time to book and complete as much business as possible to be profitable. Contractors need to pad for inflation, the rising cost-of-doing business and delayed job completion dates. Time is money and not being able to finish projects due to material and labor shortages eats away at profits.
Book Projects
Inflation is real and needs to be considered and watched carefully. Book projects into 2024 with contracts with room to accommodate increased costs. The rise in costs and materials isn’t deterring homeowners. According to a Harvard University study, in 2021, 24.5 million homeowners completed at least one home improvement project — up from 22.2 million in 2019.
As a result of the labor and supply shortages, homeowners are accustomed to waiting 3 – 9 months for their projects to commence. The Associated Builders and Contractors reports the construction industry will need half a million more workers in 2023.
Staying at home has resulted in more home enhancement plans. Home professionals should continue to ride the wave and stay profitable with cost planning.
Sources: CBSNews, Bureau of Labor Statistics, Harvard University Improving America’s Housing 2023 study, The Associated Builders and Contractors
By Kathy Latus