Rick Edwards has so many samples in the trunk of his Mercedes that he has taken to stashing them in the back seat. He has sample kits for awnings, basement finishing, replacement windows, garage organization, and sunrooms. “The other day I sold a basement” — his first — “for $37,000,” he says. The homeowner, an engineer, had already seen four other companies and was ready to bag the whole basement idea when Edwards showed up to tell him that though he didn't know that much about basements, he was certain he had the best product on the market. He walked away with a deposit check.

Edwards has been in the home improvement industry for a long time but, as of last fall, it had been five years since he actually sold a job. He didn't need to. His company, Custom Patio Rooms, manufactured sunrooms and distributed its custom product through a network of 12 dealership showrooms in Ohio, Pennsylvania, and western New York.

As recently as 2005, Edwards would have described the business he founded in 1983 as “bullet-proof.”

Then the sunroom market began to soften and the banks that offered the kind of secured lending needed to finance large-ticket items began to back away. Last winter, facing a plunge in sales — the company, which once fielded 45 sales reps, now runs eight — Edwards radically restructured “from the top down.” He added new products, changed the name (“Custom Patio Rooms and More”), hired a crew of tried-and-true salespeople and started running leads himself. Right now, he says, “I'm the marketing manager and the sales manager”. He is also his own top salesperson. By mid-July Edwards had sold $600,000 worth of projects for the year. “Everybody knows that businesses go through cycles,” he says.

FLATLINING

Owners and managers at many of the companies in the Replacement 100 [PDF], our list of the top home improvement operations in the U.S., based on volume, have found themselves facing similar challenges, though none perhaps as extreme. Some project declining sales this year. Many foresee small increases. Few are bold enough to proclaim that this will be a year of double-digit growth.

“Our business has flatlined in 2008 compared to 2007,” reports Larry Judson, founder, president, and CEO of K-Designers, the nation's largest siding installer and fifth-largest home improvement company, headquartered just outside Sacramento, Calif. “We have to work a little harder at it,” he says. K-Designers, which celebrates its 30th anniversary this year, has also added to its menu, which currently has 28 products and services, including entry doors, garage organizing, and spray-on siding.

What kind of year companies expect has everything to do with where they are, geographically, and what they sell.

“For the last 30 years, we've enjoyed the luxury of being a 100% window company,” says Nick Cogliani, owner and president of Newpro, in Boston. Now Newpro offers vinyl siding and basement finishing as well. “We're a true home improvement company,” Cogliani says.

Many companies with big-ticket projects have hurried to add products that cost less and move fast or which can be readily marketed to a database of past customers. No question, it's the larger-ticket products, catering to discretionary dollars and luxury appetites, which are more difficult to sell. “We benchmark all our products separately,” says Don Jones, president of Cincinnati-based Champion Window and Patio Room Co., the nation's largest home improvement company, with 70 branches and $344 million in sales. “The only one we've seen slippage on is patio rooms because people can put off that purchase.” That has forced companies to re-examine or re-tool all aspects of their operations. “You have to be sharper,” says Sam Flory, owner of Home Comfort Now, a sunroom company in Hartford, Conn., which has started selling TEMO's basement finishing system.

With stocks off and dwindling 401(k) plans serving to remind people of the fact; with houses worth 16% less than they were a year ago; and with several of the country's largest banks taking big write-downs on subprime mortgage losses, the retail home improvement business has gotten tougher. And it's not that things are bad, it's that they could become bad that holds homeowners back. “I think people are afraid to spend money right now because they don't know what will happen,” says Chris Cardillo, president of Castle Windows, in Mount Laurel, N.J., who is planning for a modest sales increase in 2008. “It's harder to get an appointment, and our marketing costs go up because it takes more advertising to get the appointment.”

See the REPLACEMENT 100 [PDF] as it appeared in the magazine.