Last week I wrote an article about the various ways we as a sector can beat the coming recession. You can read that again here. We have to face up to a new economic reality. The recession that is coming is likely to be long, deeper than thought and pretty painful for many up and down the country.
That being said, there are always opportunities if you are proactive enough and the same applies to this recession as well.
More than once I have read in various reports and articles this year that the 20% of earners in the UK fund 80% of all home improvement work. Just think about the significance of that for a second. The top fifth wealth bracket in this country funds four-fifths of all home improvement work. That is a very large slice of the pie, underpinned by wealth that is very unlikely to be affected by the coming recession and the various crises that have caused it.
That top tier of client is likely to be much more inclined to purchase higher-end products. The types of homes they live in are likely to be higher in value and prestige. Plain White windows simply won’t cut it. And here lies a very profitable opportunity for the entire industry to take aim at.
If we assume the other 20% of home improvement work is going to be dented by the recession, that means we still have at least 80% of the market to aim for. That’s still a very large chunk of the market to aim for. But we have to go into that part of the market with products that are going to inspire and excite the end user. After adjusting our plans for our own installations business for 2022, I can speak from experience that it is the more luxurious end of the product portfolio that attracts the higher contract values that we are all going to want more of in the coming years.
The premise of higher quality products being more profitable is not a new concept. We have known about it for years. It’s the coming economic problems which have once again put this part of the market back into focus. It is the wealthier demographic that is going to continue to provide opportunities for installers over what is going to be a very hard couple of years.
I can speak from experience. At the end of 2021, we knew that our economic circumstances were changing. We were having regular discussions at our family-run business and understood what was coming. We also understood the changes we had to make to be able to make 2022 a successful year even if in a more general sense things went downhill. That feels like an understatement at the moment with what is going on right now.
We were always considered to be at the higher end of the market in our local area, but we knew that if we were going to make that next step up we were going to have to commit 100% to become a business that was focused much more on the wealthier demographic. We knew that no matter what economic hardships were coming, the bracket of people we wanted to attract would not be deterred. As it was, 2022 has turned out to be a good year for us, with sales of aluminium windows and doors much higher than in 2021. Flush windows have been a very good seller for us, with at least a third of the windows we have fitted being flush casements. We have sold many more bi-folding doors than in previous years, and have now begun to sell the very sexy Spitfire range of aluminium entrance doors. We’re also working more with self-builders and clients taking on larger renovation projects. The common theme with all our clients who land in the product niches I have just described has all wanted our higher-end products. Not a single shiny White window between them.
As a result, our revenues in 2022 are above that of 2021 and we are on track with our three-year growth plan. Margins are healthy as the products we’re selling more of can command it. We have been able to expand our fitting capacity, and we’re building a dedicated Spitfire showroom, as well as a brand new aluminium design centre which will host meetings with clients and architects in the future.
That is not to say this year has been easy. It has not. The types of clients we are picking up require more hand-holding and are certainly more demanding. More hours are required per contract, and specifications can often be changed or ripped up Liz Truss style. But the average contract values are way higher and so warrant the extra effort and attention.
We will always service all demographics and every type of client. But we have to be realistic and understand that there is going to be a section of society that will be deeply affected by the coming recession and so as a business we have to adapt to those changing conditions.
Don’t be scared of change
Our journey I have just described above is a very shortened version of a lot of work we have all put in. It has taken most of this year to do and there is still work to be done. A lot of investment both in time and money has gone into changing our course.
We cannot be scared of change. Installers can be creatures of habit, only sticking to what they know because that’s how things have always been done. That comfy, coasting position could sadly spell the downfall of some who fail to adapt to the conditions around them.
Higher-end products often mean more risk. For example, aluminium windows and doors require more care and attention. The ability to scratch and damage the frames is infinitely higher than PVCu if they are not taken care of properly. A high-end aluminium entrance door could become a very expensive mismeasure if you’re not paying attention on the final survey. Logistical considerations may have to be made when selling new products so that they can fit into your day to day running of your business. But it is worth the risk I can assure you of that.
The fact is if you’re wanting to boost your profit margins over the next few years you are not going to do it in the land of shiny White windows. This is the part of the market which makes by far the least amount of profit, with margins being squeezed badly over the last two years thanks to rampant inflation. If you ask any supplier they will tell you that much more margin is made on coloured and foiled products, as well as aluminium and other sexier products such as aluminium bi-folds and super-slim sliders. Flush windows are also a very good margin-maker.
I know that some installers and indeed fabricators are already being very proactive and diversifying now to ensure that the recession years can actually be very successful ones. If you’re hoping, however, that things will just blow over and that some positive vibes will see you through, I would urge you to rethink. What is coming down the road is going to be serious and painful. There is a way to make the next couple of years a success, with a very large part of the market still on offer to make the most of. But it requires innovation, faith in new ideas and products and a hell of a lot of hard work.
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