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How Renovation and Design Businesses Fared in 2017
The 2018 Houzz State of the Industry report shows that 2017 revenues were up, but costs also rose, cutting into profits
The numbers are in, and 2017 was another strong year for home renovation and decorating firms in the U.S., a new report from Houzz shows. Revenues (total sales) grew for at least three out of five firms across industry sectors, while profits grew for half or more across industry sectors.
And in a reflection of the strong economy, the pace of revenue growth picked up for four industry groups compared to the year before.
Read on for detailed insights about the remodeling industry in 2017 from the 2018 Houzz State of the Industry study, which surveyed nearly 3,400 residential renovation and design firms on Houzz.
And in a reflection of the strong economy, the pace of revenue growth picked up for four industry groups compared to the year before.
Read on for detailed insights about the remodeling industry in 2017 from the 2018 Houzz State of the Industry study, which surveyed nearly 3,400 residential renovation and design firms on Houzz.
Profits were up across industry sectors. About half or more of the firms in every industry segment reported increased total annual profits (net income) for 2017. For instance, 60 percent of landscaping and outdoor specialty firms and 58 percent of interior designers reported increased profits, while 49 percent of architects reported increased profits. Profit is the money left over after paying the costs of doing business, such as for labor, materials and overhead.
A smaller share of firms in every industry group reported profit decreases in 2017 compared with the share that reported profit increases.
A smaller share of firms reported profit increases than the share of firms that reported revenue increases. That means that while revenue grew for many, profits did not keep pace. Given that the costs of doing business have been rising (see next chart), this is not surprising.
A smaller share of firms in every industry group reported profit decreases in 2017 compared with the share that reported profit increases.
A smaller share of firms reported profit increases than the share of firms that reported revenue increases. That means that while revenue grew for many, profits did not keep pace. Given that the costs of doing business have been rising (see next chart), this is not surprising.
Business costs rose across the industry. More than half of the firms in all industry groups reported an increase in business costs for 2017, and the construction sector was broadly affected. Three out of four building-related firms reported that their costs of doing business rose in 2017 compared with the prior year.
Products and materials collectively were the number-one driver for an increase in the cost of doing business for these groups. Subcontractor costs were the number-two driver for general contractors, remodelers and builders and design-build firms.
Products and materials collectively were the number-one driver for an increase in the cost of doing business for these groups. Subcontractor costs were the number-two driver for general contractors, remodelers and builders and design-build firms.
Firms added head count. With their services in demand, about one-third of firms in the construction and outdoor sectors brought on one or more employees in 2017. Fewer architects, interior designers and decorating specialty firms did so, though some of them hired people too.
Cost of a midsize project ranged widely. Roughly half of general contractors (50 percent) and design-build firms (57 percent) reported that a midsize project brought in more than $50,000 in gross revenue, or total sales for that project. Forty-nine percent of general contractors and 52 percent of design-build firms also reported that a midsize project yielded more than $10,000 in gross profit.
A smaller share (30 percent) of interior designers and decorating specialty firms (17 percent) identified a midsize project as generating more than $50,000 in gross revenue. For these firms, projects tend to be smaller in terms of revenue.
A smaller share (30 percent) of interior designers and decorating specialty firms (17 percent) identified a midsize project as generating more than $50,000 in gross revenue. For these firms, projects tend to be smaller in terms of revenue.
An industry of small businesses. The majority of companies on Houzz reported annual gross revenue, or annual sales, below $3 million for 2017. And a large share of architects, interior designers, landscaping and outdoor specialty firms and decorating specialty firms reported an annual gross revenue of less than half a million dollars.
As this chart shows, the majority of firms in each sector have one to four employees. A sizable share of firms have no employees at all, making them one-person businesses.
The 2018 Houzz State of the Industry study surveyed nearly 3,400 residential renovation and design firms on Houzz from November 28, 2017, to January 31, 2018.
Download the full study here
More
Most Renovation and Design Firms Are Bullish on 2018
Find a pro to work with on Houzz
As this chart shows, the majority of firms in each sector have one to four employees. A sizable share of firms have no employees at all, making them one-person businesses.
The 2018 Houzz State of the Industry study surveyed nearly 3,400 residential renovation and design firms on Houzz from November 28, 2017, to January 31, 2018.
Download the full study here
More
Most Renovation and Design Firms Are Bullish on 2018
Find a pro to work with on Houzz
As this chart shows, four groups — architects, design-build firms, landscaping and outdoor specialty firms, and the building and renovation sector that includes general contractors, remodelers and builders — reported an increase in revenue growth during 2017.
This means that the pace of sales growth increased for these four industry sectors. For instance, the average revenue growth rate for architects was 8.3 percent in 2017, a rise from only 6.7 percent in 2016. Firms that focus on residential construction did particularly well in terms of revenue growth.
Furthermore, in every industry group that Houzz tracks, at least three out of five companies reported that revenue, or total sales, increased in 2017 compared with the previous year.
“The good news is that the demand for home remodeling far exceeds the prerecession levels in most parts of the country, driven by aging homes, aging population and recovered home equity,” says Nino Sitchinava, principal economist at Houzz. “Barring devastating shocks to the national or local economies, some of which we did unfortunately see in 2017 with the wildfires in California or the hurricane activity in the South, the favorable market conditions should continue into 2018 in most parts of the country.”