Real Issues. Real Answers. The installed sales option

Selling products is one thing. Selling them and installing them is another thing altogether. Whether you’re installing for homeowners, or providing installation services for builders or remodelers, the additional revenues and higher margins are attractive, but are they worth the increased liability and potential conflicts with pro customers? That’s the question…here are some answers.

This month’s timeless question came from a dealer in West Virginia who wrote: “We are seriously considering installed sales. We looked at it many years ago, then backed off for a variety of reasons. The main reason we are look- ing at it now is since the recession, many of our contractor customers either retired or moved away. Our homeowner customers are searching for qualified remodeling crews. What are the pitfalls to learn about and avoid? Any advice?” As we do each month, we built a brief survey around that question, and sent it to readers who’ve opted in to receive our email communications. A big thank you to the nearly 200 readers who took time to weigh in and share their insights.

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Question 1
First, we wanted to get a feel for how many of our readers offer installed sales, so we asked, “Does your company currently sell any products installed?” As Graph A shows, a majority of readers do sell installed—with 59% saying yes, compared with 41% who don’t.

Question 2

Second, of those who do offer installed sales, we wanted to learn to which customers they offer this service. As Graph B shows, builders are the most common customer type, at 78%, followed closely by homeowners at 73%, with remodelers trailing at 55%. The high builder number, and relatively high remodeler number, speak to the short- age of labor that plagues the residential construction industry.

Question 3
Next, we asked what products these respondents sell installed. As Graph C shows, cabinets and countertops for kitchens and baths, doors, and windows are the top three categories that readers sell installed, with insulation, flooring and trusses/roof systems rounding out the top six.

Several readers commented, “We install everything we sell,” making clear that installed sales is a service category that dealers can take as far as they choose (and as far as their market will support).

 

Question 4
“We are seriously considering installed sales. We looked at it many years ago, then backed off for a variety of reasons. The main reason we are looking at it now is since the recession, many of our contractor customers either retired or moved away. Our homeowner customers are searching for qualified remodeling crews. What are the pitfalls to learn about and avoid? Any advice?”

Readers’ responses
“Utilizing your remaining contractors to provide the installs is a good way to maintain relationships and keep your remaining contractors in business.

However, be sure to have a good understanding with them as to who is the lead on the job, insurance

requirements, and when and how they will be paid. Be sure they know you expect to make money on the deal as well.”

“We are not doing installed now, but I would look at offering installed sales with a good management and oversight fee. Remember, it is a business within itself. Charge accordingly.”

“Exactly what I am thinking.”

“Do a thorough market analysis. Some installed products have low barriers to entry and it is easy for Chuck and a Truck to start installing with very low overhead, which will affect your ability to get the margins needed.”

“Depending on your market, keeping a crew, and keeping them busy can be difficult and expensive. We outsource our counter top installation (granite, quartz, etc.). We’ve tried framing, insulation, and finish carpentry, but the top installers are often offered more money, and during down times, it’s hard to keep them busy. In your case, you might want to see if any of your retired contractors want to pick up an occasional side job. It’s really all about people. Find the right guy(s) and you can have a successful program.”

“Too much risk. Stay clear of installed sales.”

“Don’t bite the hand that feeds you.”

“Always attempt to keep your builders happy and be upfront. If they’re your biggest customers, they need to take priority. No elephants in the room.”

“When doing installed sales for homeowners, the keys are safety first, be neat and courteous, and show up on time!”

“Installed sales is a big question. The answer depends on your market. There are different categories and scopes of work. It will take extensive research or hiring an expert.”

“The biggest pitfall may be alienating your remaining contractor accounts. They may view your decision to get into installed sales as direct competition. You could lose some of your loyal accounts.”

“One lesson we’ve learned is to pay your installation staff piece rate, not an hourly wage, when they are installing the products.”

“Either get in it or get out. It is a separate business. We typically act as a subcontractor to our builder customers. For us, commercial is our sweet spot. Make sure you have a dedicated person to run this business. Be in it to make money, not sell more material.”

“Homeowners have typically presented huge challenges for us in the past. Some include: limited hours and access to the worksite, little knowledge of construction techniques and schedules, significant change orders due to changing requirements, etc. The home-fix-it television shows have made it worse by editing out the ‘real’ work and making repair and remodel look easy.”

“Almost exactly why we returned to the service/sales opportunity, and we’ve been glad we’ve taken the plunge again.”

“Getting and keeping good employees. Recruit your existing customers as your subs.”

“If subcontractors are used, finding those with workers comp and liability insurance is difficult. This resulted in increased liability to my company and more accounting. I’ve done it, no thanks.”

“We have had good success with installed cabinet sales by partnering with some of our good contractor customers. It allows us to offer simplicity of a project as a value differential for homeowners. With builder customers, it allows us to have control over the install process. With that said, we have not offered framing/siding/windows installed due to liability issues.”

“Installed sales to homeowners can be very profitable, but it can also be challenging to get started effectively. If your market has a sufficient need for it, I would recommend hiring an installation manager with a proven track record with remodeling and installation of the products you wish to sell, and a full-time installation support person to aid in coordination with the sales staff and the manager in the field. I would also suggest having several installation subcontractors, to allow greater flexibility in your scheduling. It is also wise to invest in them to be trained and certified by the product manufacturers, to ensure that the installs are being done correctly, to ensure that there are no questions about warranty coverage in case of product failure. After all, as dealers, we know that improper installation is the cause of most product failures. Also keep in mind that getting the install through a dealer can be a big selling point, in that contractor businesses have a much shorter lifespan on average than that of a retail business. Will Joe’s Construction still be in business 5-10 years from now?”

“Don’t compete with your customers!”

“You have to run it as a separate division of the company. You will likely have some of your customers stop doing business with you. We have always been framing contractors who also own a lumberyard. We try to sub out some of our work to our customers when they are slow. We also try to stay away from our lumberyard customers’ customers. There is a fine-line in making it work, but it can work.”

“Better to work with contracting partners and not employ your own installation staff.”

“We are in the middle of a lawsuit where we did the framing installation. We are being sued for $1.7 million.”

“My previous company had the same issue, we purchased a management software package, met with many of our customers, and offered them an opportunity to get paid for labor without needing to bid jobs and pay for material up front. We paid them once the job was complete, and after determining that there were no issues or punch list. The margins were great. The pitfall is that anything that goes wrong can hurt your reputation. Also, you need to be vigilant with installers regarding proper insurance. Had a couple of instances of contractor customers not being happy doing installs but were able to iron out the problems.”

“Provide it as an add-on to customers, but make sure to not compete with your core customer group.”

“Make sure you have tight reign on the manager and the crew. Both scheduling and quality of install.”

“From our experience, the three key issues are: insurance of workers; workers compensation liability; and completion of work satisfaction.”

“We went through the same thing a few years ago. Best advice is to make sure each of your customers knows you will hire them ‘right now’ to install for you. That seemed to take the ‘you’re taking work from me’ off the table.”

“I ran an install program for windows and doors for an independent lumberyard in upstate N.Y. The concept seems like a natural fit for building suppliers. To keep this short, my advice is if you are going to get involved in an installation program and make it work, go all in or not at all. We worked with several of our contractor clients and used them for installations and most did very well for us. However, they have their own schedules to keep and scheduling directly with a subcontractor may very well not work for the end-user. I have talked with a few retailers that have successful install programs, and the key seems to be keeping it in-house, maintaining total control of your installation teams. Most of these companies form a separate division for installed sales and run it as its own entity. Our problem in the Northeast is keeping guys working for 12 months a year. Many customers are very skeptical about having their windows replaced in the winter months. So to keep these guys busy, you may need to diversify the services you offer, thus becoming competition for your own remodeling contractors. It can be very touchy depending on your demographics. Do your research and see who you are competing with. Some of the larger window manufacturers have great programs in place, and they spend a ton of money on advertising which they tend to flood the market with.”

“It’s a great opportunity to get better margins. To avoid competition with our customers, we’ve targeted areas that our local labor force either can’t do, or does not want to do.”

“It will take some growing pains. Hire the best installers you can and train them on your method of installing. Have clear contracts on what work is being done.”

“Team up with one of the almost retired contractors to be an install team leader and find a hungry crew.”

“When we started small after and during the recession, we had customers getting mad because we used them as trades and finally went big and went after hotels and nursing homes.”

“We are running into the same deal. The issue is that we tried installed sales in the recession and it seemed like our customers who we hired to do the installs often worked against us. It wasn’t an easy partnership and it should have been. Our processes were very good. It seemed like a structure issue for our subs. We did windows and doors in the recession for roughly six months. We did cabinet design and install for seven or eight years. We got out of that at the end of 2017 due to lack of qualified candidates for design. Installed sales worked great for that product category.”

“Lots of competition. Manpower shortage.”

“Just because you are successful selling building materials doesn’t mean that you can install them successfully. They are two different businesses. Hire people who know the construction business.”

“We had our foot in the door with a few local installers in town (windows and doors mostly). After a few successful installs, an issue arose with an unsatisfied homeowner. Make sure you’ve got a binding contract between you and your installer to protect your business should you experience a similar situation.”

“It is much easier to provide installation services through new construction. You never know what you’re going to run into with a remodel. If you happen to have flooring specialists as well as plumbers and electricians on staff to handle the incidentals that crop up in a remodel, then pursue the homeowner business and try to structure the sale to be able to cover these incidentals as they occur.”

“Set up a program with just a few qualified contractor/installers that you know and trust to do the right work.”

“In addition to the fine-line of taking builders’ work away from them, the insurance and liability would be an expense. However, it would be a surefire way to move product. I would vote ‘yes’ if you are having trouble finding a good contractor base.”

“Any service you can provide your customer base will help boost sales and you can control how products are installed. You do have to walk a thin line with contractors you sell to, as you don’t want to compete with them.”

“You need a good, reliable group of installers to pull from to avoid long backlogs.”

“Homeowners require considerable ‘hand-holding’ during the install process, so you must price your jobs accordingly. Installing directly for builders tends to be a much smoother process for us.”

“The hardest part is finding qualified, reliable installers. Weekly pay and competitive rates can help secure better ones. Service calls after installs are also an issue. Getting installers to go back to correct errors is always a hassle (since they’d rather be installing and earning money). Insurance can be an issue, too.”

“It has to be a production-incentive pay scheme for it to work. More installs means more money for the installers. For this scenario, they need to be your employees.”

“I would be careful about alienating your builders if you are a pro dealer- type yard. If you do start the program, the first key is your leader of the program. Then identifying the proper installers or subs would be your second key. After this, proper job costing and cost-analysis is paramount.”

“You need clear, detailed contracts with a complete scope of work. If you are concerned about contractor customers seeing you as a competitor, you can invite them to work as subs. Change orders are critical to maintaining profitability.”

“We don’t do installation for homeowners, as that is a whole different arena than doing it for builders.”

Hundreds of readers share their insights for this every-issue feature. Have a Real Issue? Contact Rick@LBMJournal.com.

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