Congregate & Renovate

Mary Teresa Bitti | August 16, 2011 8:41 AM ET

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Dennis Bryant has been in the renovation business for about 30 years. Most of his projects have focused on residential homes and condos within 10 kilometres of Toronto’s downtown core. “Being a renovation contractor is difficult. Most companies go out of business within five years,” Mr. Bryant says. Bryant Renovations, his company, hit a plateau at about $600,000 in annual sales up until six years ago. That’s when he began working with a business consultant.

“It was at that point I realized the impact a lack of formal business training can have on the development of a business,” he says. “I, like most contractors, am trained in a specific trade. We typically don’t get any training in how to run a business.”

He reached out to business consultant Greg Peterson, of Growth Advisors in Oakville, Ont. Last year, Mr. Bryant had $1.6-million in revenue. “I hope to be able to double that figure because now I have the infrastructure in place to scale it up. I’ve taken on an administrative assistant and salesperson and there is more division of labour among people on job sites. It’s quite exciting.”

About 70% of Mr. Peterson’s clients are renovation contractors. Last fall, he and his partner and fellow coach Michael Draper spent a day brainstorming, discerning the common problems their clients were facing and identifying the barriers that kept them from breaking through to the next level of growth.

They presented the business model for Renovantage to their clients last October: It brings renovation contractors together to share costs and access to high design functions to help differentiate them in what is a highly fragmented market space with little in the way of brand recognition.

“We are doing things individual contractors cannot do on their own. As a result they stay small,” Mr. Peterson says. “There have been small segments that have consolidated. Mr. Handyman franchises, for example, deal with small renovation projects under $5,000. But nobody has consolidated the offerings of the general contractor.”

Canadians spend about $34-billion on home renovations each year – $11-billion of that in the Greater Toronto Area alone, according to Canada Mortgage and Housing Corp. “At the same time, we don’t know of a single contractor that has one-tenth of 1% market share, Mr. Peterson says.

“No one does more than $10-million in sales. We don’t know of more than a handful of companies that do more than $4-million. The industry is fragmented. There is no trusted brand and for the most part the contractors do the same thing. There is no differentiation so they have to compete on price.”

During their brainstorming session, Mr. Peterson and Mr. Draper outlined consumers’ biggest concerns in hiring contractors. “They want to work with someone they can trust. They want the project done on time and on budget with no surprises. That became the foundation for the service offering we put together,” Mr. Peterson says.

Contractors looking to join Renoantage must be able to demontrate sales of $500,000 in the past three years and agree to a thirdparty criminal check, driver’s licence check and credit check for the owner and company. They are also required to provide a complete customer list for the past 12 months outlining the size and scope of the jobs. Mr. Peterson and Mr. Draper decide which of those clients to call for a reference check. This is then followed by an interview about the business and how it operates.

Once contractors meet all these requirements they must also have $2-million of liability insurance, ascribe to a code of ethics and conduct and provide a $25,000 letter of credit which acts as a performance bond. Common practice in commercial construction, this letter of credit gives residential customers a level of protection that simply has not existed in this space.

“If there is a problem with the project, consumers or contractors can initiate mediation with licensed engineers and architects,” says Mr. Peterson. “If mediation doesn’t work, within 10 days they can go to binding arbitration and we can bring in another contractor to finish the job because of the letter of credit. It’s a No Risk Renos performance guarantee.”

For the contractors, Renovantage promises to help differentiate them in the space and hopefully close more sales profitably. They will be able to offer a comprehensive service including an online design consultation process with licensed professionals at a fraction of market cost. For example, a whole house can be designed for $2,500. Once the design is finalized, homeowners can shop for finishes at Renovantage’s 15,000 square-foot decor centre scheduled to open in July.

“Contractors also have access to Right Price Renovations, one of the top estimating software packages in North America to ensure accurate estimates. The detailed scope of work and specifications upfront means contractors can keep on schedule and there aren’t as many mistakes,” says Mr. Peterson.

Take all of that and bundle it with a comprehensive marketing program and lead generation system to grow their business to next level as well as three coaching sessions a month designed to help them take what they learn and systemize the business. “Our goal is to get each of our contractors to a minimum of $2.5-million in sales. By our analysis that is the level they need to get to in order to bring in sales people and fulltime administrative help so the owner can run the business in stead of doing all the work.”

Since launching in the GTA in January, 14 general contractors and six sub trades have joined Renovantage. They pay a flat monthly fee for the services outlined.

“Our goal is to sign on 100 general contractors and 200 sub trades in the next 18 to 24 months,” says Mr. Peterson. “At that point, we would have a $2.5-million advertising budget and Renovantage will be the brand name in the renovation industry. The plan is to take the concept national but not until we get at least 50 contractors on board and perfect the system here. Already, most of our contractors received a year’s worth of leads in the first three months. It’s looking pretty good.”