ORLANDO, FLA. - Builders often look to diversify their business to insure that in tough times, they and their companies will survive. But if a builder does not have enough capital to finance a new venture, it could lead to their demise, said Mike Weiss, of WeissRCMI, based in Carmel, Ind., a builder who has diversified his business across many lines.
Weiss, speaking at the International Builders' Show Thursday in Orlando, told a group of builders to be imaginative. There are countless opportunities for them to diversify their operations to include businesses from cabinetry distribution, to finishing homes for other builders, to kitchen remodeling, and even casualty repair.
"Keep your morals tight, but your thinking loose," Weiss said.
Weiss defined diversification as doing something that is related, but is a different line of business. It would be like a builder getting into the window supply business, he said.
But the current market may not be the best one to try breaking away from your core business, even if that business is off substantially -- especially if a builder is considering remodeling as a new business.
"Remodeling is not counter-cyclical to home building, though the press and general public think so," Weiss said. Remodeling and home building follow each other like dolphins swimming through the water, with slight lags, but generally moving together, he said.
Getting into remodeling now, and going up against experienced and well-known competitors, would be a bad idea, Weiss said. Most likely the only business a builder delving into remodeling could get right now, without the proper reputation and experience, would be customers looking to get work done on the cheap, and that would just be scavenging, "and it's anything but profitable," Weiss said.
Remodeling opportunities Weiss talked about included:
Install work for Lowe's or The Home Depot
Subcontracting to builders or general contractors for specific work on houses
Home additions, such as kitchens
Roofing, siding, window work
But there is more than remodeling, such as property management, commercial development, and even public works. Diversification and planning for it now, evaluating what business would make sense for your company, is something a builder should do. Do market research, and find out what business is viable in your area.