23 data to include in the business plan of your home renovation company

This article was written by our expert who is surveying the industry and constantly updating the business plan for a home renovation company.

Our business plan for a home renovation company will help you build a profitable project

Ever wondered what the ideal project cost percentage should be to ensure your home renovation company remains profitable?

Or how many projects need to be completed each month to meet your revenue goals?

And do you know the optimal labor-to-materials cost ratio for a successful renovation project?

These aren’t just nice-to-know numbers; they’re the metrics that can make or break your business.

If you’re putting together a business plan, investors and banks will scrutinize these numbers to gauge your strategy and potential for success.

In this article, we’ll cover 23 essential data points every home renovation business plan needs to demonstrate you're prepared and ready to thrive.

A successful home renovation project should allocate 10-15% of the home's value for a complete remodel to ensure quality and return on investment

A lot of florist shops might not seem related to home renovation, but just like arranging flowers, a successful home renovation requires a balanced approach to budgeting.

Allocating 10-15% of the home's value for a complete remodel is a guideline that helps ensure both quality and return on investment. This range allows homeowners to invest in high-quality materials and skilled labor, which are crucial for a renovation that stands the test of time.

However, this percentage can vary depending on the specific needs and goals of the renovation project.

For instance, a historic home might require a higher budget to preserve its unique features, while a newer home might need less investment to achieve a modern look. Additionally, the local real estate market can influence how much you should spend; in a high-demand area, a larger investment might yield a better return, whereas in a less competitive market, a more conservative budget could be wiser.

Contractor labor costs typically account for 20-30% of the total renovation budget

Insiders often say that contractor labor costs typically account for 20-30% of the total renovation budget because labor is a significant component of any renovation project.

These costs include not just the wages of the workers but also insurance, benefits, and other overheads that contractors need to cover. Additionally, the complexity and scope of the project can influence labor costs, as more intricate work requires skilled labor and potentially more time.

In some cases, the percentage can vary depending on the type of renovation being undertaken.

For instance, a simple cosmetic update might have a lower labor cost percentage compared to a full-scale kitchen remodel, which involves plumbing, electrical, and structural changes. Ultimately, the specific needs and challenges of each project will dictate how much of the budget is allocated to labor.

Expect a contingency fund of 10-20% of the total budget to cover unexpected expenses

Most people overlook the fact that unexpected expenses are almost inevitable in home renovation projects.

These projects often involve uncovering hidden issues, like structural damage or outdated wiring, which can significantly increase costs. Additionally, fluctuating prices for materials and labor can also lead to unforeseen expenses.

To manage these uncertainties, a contingency fund of 10-20% of the total budget is recommended.

The exact percentage can vary depending on the scope and complexity of the renovation. For instance, older homes might require a larger contingency due to the likelihood of unforeseen complications, while newer homes might need less. By planning for these potential surprises, homeowners can avoid financial stress and ensure their project stays on track.

Permits and inspections can add 1-3% to the overall project cost, depending on local regulations

It's worth knowing that permits and inspections can add 1-3% to the overall project cost for a home renovation company due to the need to comply with local regulations.

These costs can vary significantly depending on the complexity of the project and the specific requirements of the local jurisdiction. For instance, a simple renovation might only require a basic permit, while a more extensive remodel could necessitate multiple permits and inspections, each adding to the cost.

Additionally, some areas have stricter building codes and more frequent inspection requirements, which can further increase expenses.

In contrast, regions with less stringent regulations might see lower costs associated with permits and inspections. Ultimately, understanding the specific requirements of your area is crucial to accurately estimating these additional costs in your renovation budget.

High-quality kitchen remodels can yield a 60-80% return on investment upon resale

Maybe you knew it already, but high-quality kitchen remodels can yield a 60-80% return on investment upon resale because they significantly enhance the overall appeal and functionality of a home.

When potential buyers walk into a home, the kitchen is often a focal point, and a well-designed, modern kitchen can make a lasting impression. This is why investing in high-quality materials and appliances can lead to a higher perceived value, making it easier to recoup a substantial portion of the renovation costs.

However, the actual return on investment can vary depending on factors such as the local real estate market and the specific tastes of potential buyers.

For instance, in a competitive housing market, a luxurious kitchen might attract more buyers and lead to a quicker sale, thus maximizing the return. On the other hand, in a less active market, even a high-end kitchen might not yield as high a return if the overall demand is low or if the style doesn't align with local preferences.

Bathroom renovations often provide a 70-75% return on investment, making them a smart upgrade

Believe it or not, bathroom renovations often yield a 70-75% return on investment, making them a savvy choice for homeowners.

This is because bathrooms are one of the most frequently used spaces in a home, and potential buyers place a high value on updated, functional, and aesthetically pleasing bathrooms. A well-executed bathroom renovation can significantly enhance the overall appeal of a property, making it more attractive to buyers.

However, the return on investment can vary depending on factors such as the quality of materials used and the scope of the renovation.

For instance, a minor upgrade with new fixtures and a fresh coat of paint might yield a different return compared to a complete overhaul with high-end finishes. Additionally, the local real estate market and the home's location can also influence the potential return, as some areas may have a higher demand for updated bathrooms than others.

Material costs should be estimated at 40-50% of the total budget, with allowances for premium finishes

Experts say that material costs should typically account for 40-50% of a home renovation budget, with room for premium finishes.

This range allows for a balance between quality and cost, ensuring that the project remains financially viable while still achieving the desired aesthetic. The inclusion of premium finishes can significantly impact the budget, as these materials often come with a higher price tag.

However, the percentage allocated to materials can vary depending on the scope and scale of the renovation project.

For instance, a kitchen remodel might require a higher percentage for materials due to the need for high-quality cabinetry and appliances, whereas a simple bathroom update might not. Additionally, the choice of materials, such as opting for custom versus standard options, can further influence the overall budget allocation.

Project timelines can extend by 20-30% due to unforeseen delays, so plan accordingly

Few florist shops' timelines are as unpredictable as those of a home renovation company.

In home renovations, unexpected structural issues like hidden water damage or faulty wiring can arise, causing significant delays. Additionally, material shortages or delivery delays can further extend project timelines, as contractors wait for essential supplies to arrive.

Weather conditions can also play a role, especially if the renovation involves exterior work, as rain or snow can halt progress.

Each project is unique, and the extent of potential delays can vary based on the scope and complexity of the renovation. For instance, a simple kitchen update might face fewer delays compared to a full home remodel, which involves multiple trades and permits.

Custom cabinetry can take 6-8 weeks to fabricate and should be ordered early in the project

Please, include that in your business plan.

Custom cabinetry can take 6-8 weeks to fabricate because it involves a detailed process of design, material selection, and skilled craftsmanship.

Each piece is tailored to fit specific dimensions and styles, which requires precise measurements and planning. This level of customization means that the cabinets are not mass-produced, but rather crafted to meet the unique needs of the project.

Ordering cabinetry early in the renovation project is crucial to avoid delays, as the fabrication timeline can impact the overall schedule.

However, the time frame can vary depending on factors such as the complexity of the design, availability of materials, and the workload of the cabinetry maker. For instance, a simple design with readily available materials might be completed faster, while a more intricate design with rare materials could take longer.

Structural changes, like removing load-bearing walls, can add 10-15% to the renovation cost

A precious insight for you, structural changes, such as removing load-bearing walls, can significantly increase renovation costs by 10-15%.

This is because these walls are crucial to the integrity of the building, and removing them requires careful planning and execution. The process often involves hiring structural engineers to ensure that the building remains safe and stable, which adds to the overall expense.

Additionally, the removal of load-bearing walls typically necessitates the installation of supportive beams or other reinforcements, which can be costly.

The extent of the cost increase can vary depending on factors such as the size of the wall being removed and the complexity of the structural changes required. In some cases, if the wall is part of a larger renovation project, the costs might be more manageable, but unexpected challenges can still arise, leading to further expenses.

Expect to spend 5-10% of the budget on design fees for architects or interior designers

This is insider knowledge here, but you can generally expect to spend about 5-10% of your renovation budget on design fees for architects or interior designers.

These professionals bring a wealth of expertise and creativity to your project, ensuring that your space is both functional and aesthetically pleasing. Their fees reflect the value they add, from conceptualizing the design to overseeing its execution.

However, the percentage can vary depending on the complexity and scale of the project.

For instance, a simple kitchen remodel might require less design input than a complete home overhaul, which could push the percentage higher. Additionally, if you're working with a high-end designer or seeking a customized design, you might find yourself at the upper end of that range.

High-efficiency HVAC upgrades can reduce energy bills by 20-30% annually

Most of the florist shops' energy bills can be significantly reduced by upgrading to high-efficiency HVAC systems, which can cut costs by 20-30% annually.

These systems are designed to use less energy while maintaining the same level of comfort, which means they are more efficient at heating and cooling your home. By reducing the amount of energy needed, they help lower the overall utility expenses for homeowners.

However, the actual savings can vary depending on factors like the size of the home and the local climate.

For instance, a larger home or one located in a region with extreme temperatures might see greater savings due to the increased demand for heating or cooling. On the other hand, a smaller home or one in a milder climate might not experience as dramatic a reduction in energy bills, but the efficiency improvements will still be beneficial.

Window replacements can improve energy efficiency by 10-15% and enhance curb appeal

Not a very surprising fact, window replacements can boost a home's energy efficiency by 10-15% and enhance its curb appeal.

New windows often come with advanced insulation technology and better sealing, which help to reduce heat loss in the winter and keep the home cooler in the summer. This means that your heating and cooling systems don't have to work as hard, leading to lower energy bills and a more comfortable living environment.

Additionally, modern window designs can significantly improve the aesthetic appeal of a home, making it more attractive to potential buyers.

However, the actual improvement in energy efficiency can vary depending on factors like the age of the home, the climate in which you live, and the type of windows being replaced. For instance, homes in colder climates might see a more significant impact from window replacements than those in milder areas.

Smart home technology installations can increase property value by 3-5%

This valuable insight highlights how integrating smart home technology into renovations can boost a property's market appeal.

Buyers today are increasingly looking for homes that offer modern conveniences and energy efficiency, which smart technology provides. Features like smart thermostats, security systems, and lighting can make a home more attractive, leading to a potential increase in property value by 3-5%.

However, the actual increase in value can vary depending on the specific technologies installed and the overall market demand.

For instance, in tech-savvy areas, buyers might place a higher premium on homes with advanced smart systems, while in other regions, the impact might be less pronounced. Additionally, the quality and integration of the technology play a crucial role; well-installed systems that enhance the home's functionality are more likely to add value than basic or poorly integrated ones.

Flooring upgrades should be budgeted at 10-15% of the total renovation cost

This insight suggests that flooring upgrades should be budgeted at 10-15% of the total renovation cost because flooring is a significant component of a home renovation that impacts both aesthetics and functionality.

Flooring materials and installation can be quite expensive, and allocating this percentage ensures that you can choose quality materials without overspending. Additionally, this budget range allows for flexibility in selecting different types of flooring, such as hardwood, tile, or carpet, which can vary greatly in cost.

However, the percentage can vary depending on the specific needs and priorities of the renovation project.

For instance, if a homeowner is focusing on a high-traffic area like the kitchen or living room, they might allocate a higher percentage to ensure durability and longevity. Conversely, in less frequently used spaces, a lower percentage might suffice, allowing more funds to be directed towards other renovation aspects like kitchen upgrades or bathroom fixtures.

Lighting upgrades can enhance ambiance and functionality, accounting for 5-7% of the budget

This data does not come as a surprise.

Lighting upgrades are a crucial part of home renovations because they can significantly enhance both the ambiance and functionality of a space. By allocating 5-7% of the budget to lighting, homeowners can achieve a balance between practical needs and aesthetic appeal.

However, the percentage of the budget dedicated to lighting can vary depending on the specific needs of the project.

For instance, a kitchen renovation might require more task lighting, while a living room might focus on creating a cozy atmosphere with ambient lighting. Ultimately, the key is to tailor the lighting plan to the unique requirements of each space, ensuring that it complements the overall design and enhances the home's functionality.

Exterior improvements, like siding or roofing, can add 5-10% to the home's value

Yes, exterior improvements like siding or roofing can indeed add 5-10% to a home's value.

These upgrades enhance the curb appeal, making the home more attractive to potential buyers, which can lead to a higher selling price. Additionally, new siding or roofing can improve the energy efficiency of a home, reducing utility costs and increasing overall value.

However, the actual increase in value can vary depending on factors like the quality of materials used and the current condition of the home.

For instance, a home in a neighborhood where most houses have been recently updated might see a greater value increase from these improvements. Conversely, in areas where such upgrades are less common, the impact on value might be less pronounced.

Plan for a 5-10% increase in material costs due to market fluctuations or supply chain issues

Did you know that home renovation companies often plan for a 5-10% increase in material costs due to market fluctuations or supply chain issues?

One reason for this is that the cost of raw materials like lumber, steel, and concrete can vary significantly based on global demand and supply. Additionally, unexpected events such as natural disasters or geopolitical tensions can disrupt supply chains, leading to price spikes and delays.

These fluctuations mean that renovation projects can become more expensive than initially estimated, impacting both the company and the client.

However, the extent of these cost increases can vary depending on the specific materials used and the project's location. For instance, a project relying heavily on imported materials might face higher cost increases compared to one using locally sourced products, which might be less affected by international market changes.

DIY projects can save 10-20% on labor costs but may extend the timeline if not managed properly

This data highlights that while DIY projects can indeed save on labor costs, they often come with the trade-off of potentially extending the project timeline.

When homeowners take on renovation tasks themselves, they can cut out the expenses associated with hiring professional labor, which typically accounts for 10-20% of the total cost. However, without the expertise and efficiency of professionals, these projects can take longer to complete, especially if the homeowner is learning as they go.

In some cases, the timeline extension can be significant if the project involves complex tasks that require specialized skills.

For instance, a simple painting job might be manageable and quick for a DIY enthusiast, but a more intricate task like electrical wiring or plumbing could lead to delays if not handled properly. Ultimately, the decision to DIY should consider both the potential cost savings and the homeowner's ability to manage the project efficiently to avoid unnecessary delays.

Ensure a minimum of 1.5-2 square meters of storage space per room for optimal organization

This data point is crucial because having a minimum of 1.5-2 square meters of storage space per room ensures that each area remains clutter-free and organized.

In a home renovation context, this guideline helps homeowners maximize their living space by providing adequate room for storing essential items without overcrowding. It also allows for a more efficient use of space, making it easier to maintain a tidy and functional home.

However, the specific storage needs can vary depending on the purpose of the room.

For instance, a kitchen might require more storage space for appliances and utensils, while a bedroom might need less. Ultimately, the key is to tailor the storage solutions to the unique requirements of each room, ensuring that the space is both practical and aesthetically pleasing.

Regular site visits and communication with contractors can prevent 5-10% of potential project overruns

Actually, regular site visits and communication with contractors can significantly reduce potential project overruns in home renovation projects.

By maintaining a consistent presence, project managers can quickly identify and address unexpected issues that arise, such as material shortages or design discrepancies. This proactive approach allows for immediate adjustments, preventing small problems from escalating into costly delays.

Moreover, frequent communication ensures that all parties are aligned on the project goals and timelines, reducing the risk of misunderstandings that could lead to overruns.

However, the impact of these practices can vary depending on the project's complexity and the contractor's experience. For simpler projects or when working with highly experienced contractors, the potential savings might be closer to the lower end of the 5-10% range, while more complex projects with less experienced teams could see savings at the higher end.

Investing in energy-efficient appliances can qualify for tax credits, reducing costs by 5-10%

It's very common for homeowners to receive tax credits when they invest in energy-efficient appliances during renovations.

These tax credits are designed to encourage the use of eco-friendly technologies, which can help reduce overall energy consumption. By doing so, homeowners can see a reduction in costs by 5-10%, making the initial investment more attractive.

However, the availability and amount of these tax credits can vary based on specific criteria set by local or federal governments.

For instance, the type of appliance, its energy rating, and the location of the property can all influence the eligibility and size of the tax credit. It's essential for homeowners to consult with a tax professional or their renovation company to understand the specific benefits they might qualify for in their unique situation.

Landscaping improvements can boost curb appeal and property value by 5-12%, making them a worthwhile investment.

A lot of homeowners don't realize that landscaping improvements can significantly enhance their property's curb appeal and increase its value by 5-12%.

When potential buyers or appraisers first see a home, the exterior and landscaping are the first things they notice, which sets the tone for their overall impression. A well-maintained and thoughtfully designed landscape can make a home appear more inviting and well-cared-for, which can translate into a higher perceived value.

For a home renovation company, investing in landscaping improvements can be a strategic move to maximize the return on investment for their clients.

However, the impact of landscaping on property value can vary depending on factors such as the neighborhood, the current market conditions, and the quality of the improvements. In upscale neighborhoods, for instance, buyers might expect more elaborate landscaping, while in other areas, simple and clean designs might suffice to boost value.