With the housing market recovering slowly, the prospects for dealer-run installed sales (IS) programs that offer labor and materials to production builders remain bleak. "The market [for installed sales] is still kicking, but you really have to seek out opportunities," says Mike Butts, Stock Building Supply's new director of installed sales, a longtime IS consultant and a ProSales columnist. Those opportunities include, but aren't limited to, larger-scale remodeling projects, historic renovations, and commercial tenant and multifamily housing improvements.

And don't forget programs that are applying federal stimulus dollars or other earmarked funds to home energy-efficiency upgrades–namely windows and insulation–many of which are just coming online at the state and local level. Those IS opportunities can help hedge against the downturn in big builder-focused categories that have been among the hardest hit by the recession, including turnkey framing, openings, and claddings.

By whatever means, Butts advises dealers to not only maintain their pro-focused installed service operations in those hard-hit categories but to set the jigs to fire them up quickly when the housing economy comes back. "If you already have an IS operation in place, keep it viable and market it to your builders," he says, as well as leverage compatible opportunities that are available until new-home demand returns. "If you don't have it, there's no better time to set it up."

Butts predicts new home construction will return with higher demand for installed services offered by dealers than even the boom times of a few years ago. "Statistically, builders have cut staff to the bone, and they'll turn to suppliers who can sell, furnish, and install for them," he says. "The dealers who are ready will get that business out of the gate."

Dealers appear to be following that advice. According to a ProSales survey of 308 dealer readers nationwide conducted in December, half the group (and 61% of the largest organizations) offer installed sales services. More significantly, 87.9% expect greater demand for those programs as the economy recovers, specifically in windows (by far the most popular choice) and doors, insulation, and siding.
Getting Ready. Installed sales, especially as a start-up division and among certain categories, can require a heavy investment of time and money.

To make ready for the recovery, Butts advises dealers to get all the pieces in place for when demand returns, even if they don't yet spend the money. "Do the legwork now to identify and research potential targets, talk it up with your builders, line up subs and in-house supervisors, and establish an organizational structure," he says. "When the market comes back, it'll just be a matter of pulling the trigger."

Dealers looking to streamline their IS investment can also look to technology. Progressive Solutions of Richmond, British Columbia, offers a module within its supply chain-specific business software that is focused on installed sales operations. "That segment is very different in terms of sales, revenues, and expenses from the rest of the dealer's business," says Russ Maximuik, manager of the company's Business Development Group.

The module is geared to help dealers manage IS as a separate profit center within part of their overall business operations (as opposed to one-off services). "You need the people, the systems, and the procedures in place," to optimize the software, says Maximuik. "The module makes sure the operation is running at peak efficiency and profitability."

Similarly, manufacturers recognize the long-term potential of installed sales for their dealer networks and are gearing up to help them succeed. One example is the NextPhase Site Solutions from iLevel by Weyerhaeuser of Federal Way, Wash. The system combines the company's lumber and wood products and proprietary software to streamline lumber sales and, by extension, turnkey framing services.

"It comes down to controlling what happens to the dealer's materials once they get to the job site," says Bill Parsons, who leads the company's efforts. "NextPhase has built-in checks and balances to catch and fix mistakes, mitigate misuse of the material, and lower the risk of wasted materials costs and production delays," which are only enhanced when a dealer takes control of the installation, as well, he says.

Going Vertical. Jim Green, vice president of Lumber One in Cold Spring, Minn., has been able to keep his installed sales operations above water by seeking out opportunities that leverage the existing skills of his in-house crews and occasional subs. "We're not as busy as we want to be, but we're optimistic," he says.

Having focused its installed sales operation for the past 25 years on framing and carpentry, weatherization and insulation, siding, and roofing, Lumber One was primed to diversify when new construction went south. Those additions include historic renovation, foreclosure clean-ups, and apartment rehabs.

In addition, Green became a Certified Aging-in-Place Specialist (CAPS) and a Certified Green Professional through NAHB's University of Housing. This has given Lumber One a leg-up within niche areas less affected by the recession. Green credits the CAPS designation for winning an $850,000 remodel job.

Earlier this year, Green also engaged Lumber One's installed sales operation into Minnesota's Project ReEnergize program, in which the state allocated $2.5 million in federal stimulus dollars to provide rebates to homeowners for energy efficiency upgrades like high-performance window replacements. The money and the program lasted about a month, providing Lumber One and others with a brief revenue boost.

Windows may be one of those IS categories that surge when the market returns. In addition to being inherently problematic for framing carpenters to master (they work on speed, not precision), building code expert Julie Ruth has witnessed greater scrutiny being applied to window installation by building inspectors enforcing the International Residential Code (IRC). "We always see an increase in the enforcement of a code requirement the longer it is in the code," she says. The window install rules have been in the IRC since 2003.

A new stipulation in the 2009 edition regarding the proper application of flexible flashing around openings may spur enforcement–and opportunity–as well. "That will require a higher level of skill and time than most framers are willing to do," says Butts. A focus on openings may well lead to related install opportunities including housewrap, siding, roofing, and gutters.

–Rich Binsacca is a contributing editor to ProSales.