Industry Research
2019 Was a Strong Year for Remodeling and Design Firms
Revenues were up, but growth slowed from 2018 and costs rose, the 2020 U.S. Houzz State of the Industry report reveals
Business was good for the residential remodeling and design industries last year, with revenues up for the majority of firms, new research from Houzz reveals. More than half of companies across the sectors Houzz tracks — including architects, general contractors and landscape firms — report that revenue met or exceeded expectations. Despite this good news, revenue growth slowed in 2019.
The 2020 U.S. Houzz State of the Industry study includes responses from more than 3,000 firms in the home renovation and design industries. Read on to see how business went in 2019 for your fellow professionals.
The 2020 U.S. Houzz State of the Industry study includes responses from more than 3,000 firms in the home renovation and design industries. Read on to see how business went in 2019 for your fellow professionals.
Revenues Grew in 2019 but at a Slower Rate Than in 2018
The majority of firms across industry sectors report that revenue increased in 2019. And more than half of companies report that 2019 revenue met or exceeded their expectations (52% to 68% across industry groups).
That said, all seven industry groups experienced a slowdown in average annual revenue growth. In fact, annual revenue growth rates in 2019 were the lowest they’ve been in six years. They ranged from 3.1% to 6.1% in 2019, compared with 5.6% to 8.2% in 2018.
Growth in revenue slowed notably for architects, general contractors, design-build firms and outdoor specialty companies. Also, fewer firms grew significantly (by 15% or more) in 2019 compared with 2018.
Small companies reported low 2019 growth rates compared with large companies. For example, among architects, companies with no employees reported revenue growth of 1.5%, compared with 4.3% for companies with one to four employees. Similarly, design-build companies with no employees grew 2%, compared with 8.5% for companies with one to four employees.
Revenue losses were also more widespread (experienced by 18% to 25% of firms in the seven industry groups) in 2019 compared with 2018 (16% to 21%).
More than one-third of firms report that revenue growth in 2019 missed their expectations (32% to 48%), which is in line with the sentiment a year ago.
The majority of firms across industry sectors report that revenue increased in 2019. And more than half of companies report that 2019 revenue met or exceeded their expectations (52% to 68% across industry groups).
That said, all seven industry groups experienced a slowdown in average annual revenue growth. In fact, annual revenue growth rates in 2019 were the lowest they’ve been in six years. They ranged from 3.1% to 6.1% in 2019, compared with 5.6% to 8.2% in 2018.
Growth in revenue slowed notably for architects, general contractors, design-build firms and outdoor specialty companies. Also, fewer firms grew significantly (by 15% or more) in 2019 compared with 2018.
Small companies reported low 2019 growth rates compared with large companies. For example, among architects, companies with no employees reported revenue growth of 1.5%, compared with 4.3% for companies with one to four employees. Similarly, design-build companies with no employees grew 2%, compared with 8.5% for companies with one to four employees.
Revenue losses were also more widespread (experienced by 18% to 25% of firms in the seven industry groups) in 2019 compared with 2018 (16% to 21%).
More than one-third of firms report that revenue growth in 2019 missed their expectations (32% to 48%), which is in line with the sentiment a year ago.
Profit Rose for Many Firms
More than half of interior design firms (51%) and landscaping and outdoor specialty firms (55%) report that profits increased in 2019 compared with the prior year. Profit is the money left over after the company covers the cost of doing business, such as labor, material and overhead costs.
Among the remaining sectors, between 40% and 50% of firms report profit increases in 2019: architects (41%); general contractors, remodelers and builders (44%); design-build firms (46%); building and renovation specialty firms (49%) and decorating specialty firms (48%).
It’s worth mentioning that a greater share of firms report revenue increases than report profit increases for 2019. This means that while sales grew for many firms, profits did not keep up. With the cost of doing business rising (see next chart), this isn’t surprising. We’ve seen this trend now for five years.
More than half of interior design firms (51%) and landscaping and outdoor specialty firms (55%) report that profits increased in 2019 compared with the prior year. Profit is the money left over after the company covers the cost of doing business, such as labor, material and overhead costs.
Among the remaining sectors, between 40% and 50% of firms report profit increases in 2019: architects (41%); general contractors, remodelers and builders (44%); design-build firms (46%); building and renovation specialty firms (49%) and decorating specialty firms (48%).
It’s worth mentioning that a greater share of firms report revenue increases than report profit increases for 2019. This means that while sales grew for many firms, profits did not keep up. With the cost of doing business rising (see next chart), this isn’t surprising. We’ve seen this trend now for five years.
Business Costs Rose in 2019
Rising business costs continue to affect firms across the industry. More than half of firms across the seven industry groups report increased business costs for 2019. General contractors, design-build firms, building and renovation specialty firms, and landscaping and outdoor specialty businesses report the most widespread cost increases (73% to 78%). And a large share of architects (58%), interior designers (55%) and specialty decorating firms (58%) also report increases.
For the construction and design firms, the top driver of increased business costs was the rising cost of products and materials. For architects it was employee wages and benefits.
Rising business costs continue to affect firms across the industry. More than half of firms across the seven industry groups report increased business costs for 2019. General contractors, design-build firms, building and renovation specialty firms, and landscaping and outdoor specialty businesses report the most widespread cost increases (73% to 78%). And a large share of architects (58%), interior designers (55%) and specialty decorating firms (58%) also report increases.
For the construction and design firms, the top driver of increased business costs was the rising cost of products and materials. For architects it was employee wages and benefits.
Tariffs Felt by Some Firms
One in three general contracting, architect and design-build firms report a negative impact in 2019 from the tariffs imposed on imported remodeling and building materials. The products most often cited as being affected by the tariffs are cabinets, countertops and tile, and the materials frequently mentioned include (engineered) quartz, steel and wood.
One in three general contracting, architect and design-build firms report a negative impact in 2019 from the tariffs imposed on imported remodeling and building materials. The products most often cited as being affected by the tariffs are cabinets, countertops and tile, and the materials frequently mentioned include (engineered) quartz, steel and wood.
Fewer Projects in 2019
During 2019, a smaller share of companies across the seven industry groups worked on 30 or more projects (17% to 59%) compared with 2018 (26% to 67%). This downshift likely explains at least part of the slowing revenue growth that firms report for 2019 compared with the prior year.
A good share of projects continued to come from online inquiries. This is true especially for firms that did fewer than 10 projects in 2019. For this group, projects that originated as online inquiries account for 56% to 84% of all 2019 projects.
During 2019, a smaller share of companies across the seven industry groups worked on 30 or more projects (17% to 59%) compared with 2018 (26% to 67%). This downshift likely explains at least part of the slowing revenue growth that firms report for 2019 compared with the prior year.
A good share of projects continued to come from online inquiries. This is true especially for firms that did fewer than 10 projects in 2019. For this group, projects that originated as online inquiries account for 56% to 84% of all 2019 projects.
Most Firms Had Annual Sales Below $3 Million
As we know, the residential remodeling and design industries are made up of lots of small businesses and fewer large firms. The majority of respondents report that their annual revenue (sales) was below $3 million in 2019. And more than 70% of architects, interior design firms and decorating specialty firms report that their annual revenue was less than half a million dollars.
Most firms in the industry have four employees or fewer, or are one-person businesses.
As we know, the residential remodeling and design industries are made up of lots of small businesses and fewer large firms. The majority of respondents report that their annual revenue (sales) was below $3 million in 2019. And more than 70% of architects, interior design firms and decorating specialty firms report that their annual revenue was less than half a million dollars.
Most firms in the industry have four employees or fewer, or are one-person businesses.
Profit From a Midsize Project Varied Widely
Revenue and profit from a midsize project can vary widely across firms, and a smaller share of firms had large midsize projects in 2019 than in 2018. For 2019, 53% of general contractors, remodelers and builders, and 53% of design-build firms, report having typical midsize projects with more than $50,000 in total sales each. Two years ago, 58% of general contractors and 61% of design-build firms reported this.
The results are similar for profits. Fifty-two percent of general contractors and 58% of design-build firms report that they had more than $10,000 in profit from a typical midsize project in 2019. The year before, 59% of general contractors and 63% of design-build firms did.
On the design side for 2019, a smaller share (27%) of interior designers say that a typical midsize project generated more than $50,000 in revenue compared with 2018 (36%). And 36% of interior design firms report that a typical midsize project resulted in more than $10,000 in profit, while 40% reported a profit of less than $5,000 for a typical midsize project.
Revenue and profit from a midsize project can vary widely across firms, and a smaller share of firms had large midsize projects in 2019 than in 2018. For 2019, 53% of general contractors, remodelers and builders, and 53% of design-build firms, report having typical midsize projects with more than $50,000 in total sales each. Two years ago, 58% of general contractors and 61% of design-build firms reported this.
The results are similar for profits. Fifty-two percent of general contractors and 58% of design-build firms report that they had more than $10,000 in profit from a typical midsize project in 2019. The year before, 59% of general contractors and 63% of design-build firms did.
On the design side for 2019, a smaller share (27%) of interior designers say that a typical midsize project generated more than $50,000 in revenue compared with 2018 (36%). And 36% of interior design firms report that a typical midsize project resulted in more than $10,000 in profit, while 40% reported a profit of less than $5,000 for a typical midsize project.
Hiring Slowed Somewhat in 2019
Across industry groups, the pace of hiring in 2019 fell compared with 2018. Among general contractors, design-build companies and renovation specialty companies, 25% to 30% of firms hired in 2019, compared with 31% to 38% in 2018. Architects and interior designers hired fewer staff in 2019 (15% each) compared with 2018 (18% to 19%).
Notably, 9% of architecture firms reduced head count in 2019 — the highest share of firms cutting that we’ve seen in six years.
Across industry groups, the pace of hiring in 2019 fell compared with 2018. Among general contractors, design-build companies and renovation specialty companies, 25% to 30% of firms hired in 2019, compared with 31% to 38% in 2018. Architects and interior designers hired fewer staff in 2019 (15% each) compared with 2018 (18% to 19%).
Notably, 9% of architecture firms reduced head count in 2019 — the highest share of firms cutting that we’ve seen in six years.
Download the full study
And to get a sense of how remodeling and design firms expect business to go in 2020, read this story.
More on Houzz
Read more stories for pros
Browse millions of photos for inspiration
Talk with your peers in the Pro-to-Pro discussions
Join the Houzz Trade Program
And to get a sense of how remodeling and design firms expect business to go in 2020, read this story.
More on Houzz
Read more stories for pros
Browse millions of photos for inspiration
Talk with your peers in the Pro-to-Pro discussions
Join the Houzz Trade Program
The next three categories are different types of specialty firms. Building and renovation specialty firms include pros such as carpenters and cabinet installers. Landscaping and outdoor specialty firms include pros such as landscape architects and pavers. Decorating specialty firms include pros such as decorators and providers of window coverings.