Sunday, March 26, 2017

Stop Being Price Shopped

It’s a fact, if someone else can offer a home that’s virtually the same as yours, then you’re going to be price shopped.

Nobody wants to pay $2 for a pound of apples when they can get it for $1.

And nobody wants to pay $20,000 for the same car they can get for $17,000.

And nobody wants to pay $400,000 for the same house they can get for $375,000.

So if there are other builders offering a similar product or service to you, watch out…
You’ve entered the “Commodity Zone!”

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There’s no sense whining about it, price shopping is in your future and there’s nothing you can do about it. Your homes have become a commodity just like toilet paper or bread.

So how does a modular home builder escape the ‘Commodity Zone?’

You may know the popular expression, “If we do what we’ve always done, we’ll get what we’ve always had.” What we’ve always done is wait until the manure hits the fan — and then start crisis managing.

Builders are no different than any other type of business owner. You obtain a comfort level for your business and begin either matching what other builders are doing or sit by and watch your competition begin to match you.

When you start getting price shopped, it should be your wake up call that something is amiss with your business. You need to improve something about what you are currently doing that is inviting these price shoppers.

Sorry to tell you this, but in order to get out of the Commodity Zone, you have to change and change is never easy.

Which would you rather be?

The builder that sells a commoditised home where there is no way to differentiate you from others except on price?

Or

The builder sitting at the top of the proverbial mountain. The builder that selects his clients carefully, builds a home that deflects price comparisons and who commands an absolute premium for his homes and gets it?

A lot of builders tend to look at getting more leads as the best way to get new business when price shopping begins. The more leads you get, the better chances of making a sale. That has been the mantra of sales and marketing experts for decades. Get more leads, make sales.

With more leads. most modular home builders make the mistake of qualifying 'in'. Looking for reasons why someone would be a good fit. The smart ones actually qualify out – as fast as possible, leaving them time to work with good prospects.

In other words, you want to get rid of a bad fit as fast as possible, so you don’t waste time with them. This allows you to spend more time with people who are in your target market and are likely to want your product or service.

You don’t need a big batch of new leads, many of whom could be price shoppers. What you really need is a small set of highly qualified leads that really, really, want one of your homes and are prepared to pay for it. The first cull is getting rid of the 80% of those non-starter price shopper leads.

You want a small number of good quality prospects to deal with – new home buyers who understand the real value you offer and trust you to deliver it.

In short, it’s all about positioning and value, not price.
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You want to have people ascend from base camp, up the mountain, most falling by the wayside, till the select few reach you. These are the committed ones. They’ll take your advice, give you no trouble and be a joy to deal with.

It’s all a matter of choice. Be the commodity or be the Guru. You can’t be both.

A good example of positioning yourself to be the Guru is Harris Woodward, owner of Finish Werks in Savage, MD. He removed himself and his company from the Commodity Zone by embracing energy savings for his homebuyers and building only High Performance homes. He is considered to be the Guru of High Performance Modular Housing by many in the industry and uses this technical advantage.

Price shoppers can’t compare his homes with any other builder’s offerings and that is just fine with him. He owns his market.

Now take a hard, cold look at your leads. How many of them are price shopping you? You have one of two choices to make, undercut your competitor, get the sale and lose some or most of your profit or set yourself apart from the crowd and offer something that can’t be price shopped and make more money. Choose soon.

Friday, March 24, 2017

MHBA and Modcoach Host Our First Event in Massachusetts

MHBA is pleased to announce our first event with Modcoach on May 17th in Springfield, MA.  

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Your seat awaits

This is going to be a crucial meeting if you do business in New York, Massachusetts,  and / or Connecticut.

We have invited Joseph Hill, R.A., the Assistant Director for Energy Services for New York State Department of State Division of Building Standards and Codes and his team from NYDOS to participate in a town hall style meeting. (He has to get state approval for out of state travel but indicated they would be there).  How can we improve the approval process in NY? Can we use foam only adhesive assemblies?  These are just two items on the agenda for NYDOS.   

Rob Anderson, Codes Chief in Massachusetts also plans on participating.  This event is the day after the May 16th BBRS Board meeting to finalize the 9th Edition of the Codes. Will we be required to install sprinkler systems in MA?  Will the industry get a new director or have to deal with 15 regional reviewing authorities?  

MHBA also reached out to Commissioner Redekker of the CT DOT and invited him to attend.  While it is uncertain if any representative from CTDOT will attend, our transportation bill sponsor, Senator Paul Formica, is interested in coming.

These discussions will make up the morning sessions from about 9:30-noon, with other speakers rounding out the agenda.

Limited space and limited sponsorship opportunities  

(email Dave@modularhousing.com for sponsorship info).


Details:

MHBA & Modcoach
Modular Home Summit
9:00 – 3:00 Wednesday May 17, 2017
LaQuinta Inn & Suites
100 Congress Street, Springfield, MA
$99/person for MHBA members; $149/person for non-members

Register on our site here:  http://www.modularhousing.com/Events_Calendar.aspx
(non-members will need to site register first)

If you have any issues registering, email amanda@modularhousing.com

Proper Change Orders Can Help Keep Modular Home Builders Out of Court

What are you talking about? There are no changes allowed after the contract is signed and the house is ordered from the modular home factory.

Well, as a matter of fact, there are at least 150 chances and maybe more for a change order after the contract is signed and money has changed hands. 150 days is about the average number of days from submitting your signed contract to your factory and your customer taking the keys to their new home.


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Hopefully none of you will ever see that many on one job but Murphy’s Law is always lurking at the dawn of each new day.

Most contracts to build a modular home require that all changes or authorizations for extras be put in writing, generally before the work is performed. In real life, though, the pace of work out in the field is often so fast and furious that, in the interest of completing the project, change orders are approved verbally, with the understanding that someone will put them in writing when time permits.




Even such mundane things like carpet color choices and paint should have at the minimum an email exchange. The key word here is “exchange.” Make sure you always get a reply from your customer to anything that affects your building of their home, both before it is ordered, after the contract has been sent to the factory and after the house has been delivered and set.

One reason for contention is that unforeseen difficulties, changes the plans that your customer made verbally with you but you never passed onto the factory or even scheduling hassles can send your buyer spiraling off in a new direction.

In addition, plans and/or specifications are notorious for leaving the details up to the builder and their subs. What looks to the subcontractor like a deviation from or addition to the scope of the work you both signed 2 months ago, to you may appear to be a case of the tradesman failing to read the plans.

Important Note: change orders don’t always involve just you and your buyer. Change orders can happen when any subcontractor or factory is involved.

A subcontractor in this situation faces a difficult choice: to risk not getting paid for failure to get the change in writing, or to get called on the carpet for not completing work that you believe was included in the bid. You are on shifting sands. The project could be delayed if the subcontractor refuses to complete work without a change order, or you could end up paying double for some work.

As you may have learned the hard way, change orders written after the fact – or not at all – can lead to major disputes, and both sides can lose big money on change orders that lack proper documentation. When the change order is between you and your home buyer and it is not completed as specified, the courts will in most cases side with buyer.

Generally speaking, many factors can raise the need for change orders, including:
  • haste or inadequate planning in preparing the initial contract;
  • a poorly defined scope of work;
  • compressed project schedules;
  • unrealistic cost constraints;
  • time and material changes; and
  • owner-directed acceleration.

One of the causes of change order conflict is that it isn’t easy for most of you and your subs to say “no” when directed to modify work in the field. As a result, both of you respond to verbal instruction, thus taking a big risk as to whose side a court will take if the owner decides not to pay.

Fortunately, change order pitfalls can be avoided with precise planning and adherence to sound business practices.

Putting the change order in writing benefits all parties, because proving oral change orders is often difficult. While there may not be time to sit down and draft a written document when change order work is required immediately, major changes to the contract should always be authorized in writing before the work is done.

The risk of payment disputes is too great to proceed on an oral change order alone.

When the change order is between you and your sub, a written change order is absolutely essential if the contract price, when modified, is $500 or more.

Here are some other proven, practical methods of avoiding conflicts over change orders and other documentation:
  • Conduct an in-house peer review of working drawings, specifications and other key documents.
  • Scrutinize drawings closely from project concept to the final stage and invite outside review.
  • Keep communications open with ongoing, on-site project meetings.
  • Review time tables several times during the life of a project.
  • Create and use functional checklists.
  • Have a strict company policy, that no one but you can waive, requiring that directives be in writing before any work will be done that is over and above or different from what is called for in the contract.
Here are some other suggestions:

If you, the builder, are ordering a subcontractor to do additional work you should tell the subcontractor whether the work is within or beyond the scope of the contract. Likewise, your subcontractor should make plain their position that new work will require a change order before new work is performed.

Be specific. To avoid misunderstandings, change orders should spell out in detail the additional work that is requested or necessary, and they should be signed and dated by both parties. They should always include whatever drawings, specifications, cost estimates, new deadlines and payment terms are necessary to complete the additional work.

Don’t agree to open-ended change orders. Also known as “time and materials agreements,” these can blow up your budget and strain builder/sub relationships since they allow the contractor to charge for work as it proceeds and materials and supplies as they are needed.

Instead, you are wise to ask for a fixed sum agreement that obligates the contractor to perform work for an agreed upon sum. The contractor must absorb costs if they are greater than estimated or, conversely, can make a greater profit if costs are less than budgeted.

Confirm conversations with a letter or email immediately. If you have to see a lawyer, you will be able to explain what happened with more than “he said and I said.”

Most modular home builders and subcontractors have high standards for integrity and quality. Unfortunately, faulty documentation creates an environment of unnecessary finger pointing and charges of dishonesty.

In the home building business, the day of the handshake deal has passed; more than ever before, ensuring prompt and proper payment requires strict procedures and clear documentation.

And here is a word of advice I learned from experience. Before having your customer sign a change order for more than $500, have them pay you half at the time of signing. If they don't have half the money then, they definitely won't have any of the money at closing.

Thursday, March 23, 2017

Which Spouse Makes the New Home Buying Decision?

I’ve been married 47 years and life with Peg has taught me a few life lessons about what 'we' buy, especially when it comes to building a new home and what 'we' want in it.

Talking with other husbands over the years has confirmed what I have always suspected that if your wife doesn’t sign off mentally about which builder to use, what the design should be and what options are needed, she will be a thorn in the builder’s side both during construction and after move in.

Should husbands defer and give the final decision of which home builder to use to build their new home?

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Absolutely. As a husband, I’ve never once regretted letting my wife have her way or over-ride me on decisions related to house, home or kids. I also pick up my laundry, try to remember to put down the toilet seat, say “yes” when I know it’s the only practical answer and keep my mouth shut when no upside utterance exists.

Luckily I’m not forced to go to flower shows or walk the dog in the early morning hours, but do any of those other things make me less of a man? No.

A house is a home. Family completes the home, whether “family” is a freshly married couple without kids, or aging baby boomers like Peg and I. Most of my men friends are like me. We’re simple creatures. I can function in just about any living space. I could live in a garage and be happy. But no matter where I live, life is much better when my wife is completely happy. Much of her happiness is derived from our living circumstances, our home.

But none of this matters. It’s not a battle I choose the wage. If my wife wants to build ‘her’ house with a particular builder, that is OK. When she’s happy, we’re all happy. She knows best. I assess these things with logic. She has the benefit of a Mother’s Heart. Her intuition and instinct trumps my logic. Of this I am certain, and it is without reservation that I defer to her better judgment.

At the risk of sounding sexist, I admit to believing that women have a nesting instinct that men lack. So men, if you and your wife are on the exact same page with regard to which builder to use, price, location, schools and the physical attributes you seek when building your new home, more power to you. But if she has wants and requirements that you don’t understand or agree with, I’m telling you to let her have her way. Just do it. Don’t argue. She knows best. She does.

Advice to Modular Home Builders: It absolutely does not matter if you are a male or female new home builder, if you talk to the husband to the exclusion of the wife at the first meeting, kiss the sale goodbye.

Wednesday, March 22, 2017

Tiny Modular Homes Proposed to Ease Homelessness in Portland

The Portland, Oregon council introduced a pilot program that will put homeless families in little modular homes built in the backyards of willing homeowners.


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In exchange, the homeowners will own the fully plumbed tiny houses after a five-year lease and can rent them out.
The idea will start with just four units but Multnomah County officials hope to expand.

It's believed to be the first project nationally to join homeowners with the homeless.

It's a way for Portland to bridge a gap while affordable housing is constructed in a city where nearly 1,900 people sleep outside each night.

County housing officials say 200 homeowners have signed up to learn more after the pilot was made public.


In a previous article, Irontown Homes is now building IRC tiny houses.

The Strangest Article Ever Written about Modular Housing...EVER!

Over the years I have reprinted articles from newspapers, magazines and websites decrying modular housing but this one has moved to the head of the line and I can’t imagine another one ever taking its place.

This article is from Hammond, LA’s Daily Star of March 22, 2017.

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Modcoach Note: Parts highlighted in RED by me are why I call this the strangest article about modular housing ever!


BY TORI PAJARES reporter@hammondstar.com | 0 comments

Independence Mayor Angelo Mannino asked the board last month to consider allowing modular homes within the town limits. He said many young couples have asked to live in modular homes in town.

Residents opposed to the idea attended the town council meeting last week to voice their own opinions.

Dale Brouilette, a resident and former council member, put together a presentation for the council. He said he does not consider a modular home to be the same thing as a mobile home.

"Years ago, about 1980, a mobile home weighed about 36,000 pounds. A modular home the same size weighed about 80,000," Brouilette said, citing information he had researched on the topic.

Unlike mobile homes, a modular home maintains its value, can be insured like a regular home and must meet regular home building standards.

Brouillette said Tangipahoa Tax Assessor Junior Matheu and two real state agents told him the addition of a modular home might actually increase property values in some parts of town, but areas with $200,000- $350,000 homes would be negatively impacted.

A 1,200 square-foot modular home costs $80,000, which comes out to $62.60 per square foot. A double-wide with 1,800 square feet would cost $145,000, which is $80.56 per square foot.

"Now you can buy three-fourths of the homes in Independence for $145,000," Brouilette said.

Using First Guaranty Bank Financing as an example, Brouilette said the bank requires these homes must be immobilized on a slab and the property must be owned by the person buying the home. The bank is willing to finance only 75 percent if the home is new, Brouilette said.

Considering the price of the double-wide, this would not be feasible for most individuals.

"The bank would only finance $108,750. You would have to have $36,650 in your pocket, not to mention closing costs," he said. "The idea of you giving a young couple a chance to buy a home, or get in a first-time home, I don't see it. I don't see where you gain."


Two residents agreed the addition of modular homes held no benefit to the town.

Tuesday, March 21, 2017

Four Biggest Profit Mistakes Modular Home Builders Make

For modular home builders, pricing is one of the biggest challenges you face.

Have you ever wondered by 80% of all modular home builders close their doors within 5 years of starting their business?

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Modular home builders live in a lower-margin, highly competitive environment. It makes a builder risk setting prices too high and maybe push potential new home buyers away or risk setting prices too low and you cut profits.

This "pricing paradox" drives most builders to default to ‘beating’ your competitor’s price. However, risk in most cases can be eliminated by getting better information. Generally, the more you know, the less risk you perceive. From that perspective, pricing is all about getting as much information as you can about your market, your customers and your own internal numbers that drive your profit.

There are no secrets in business, there is just information you don't know yet.

When it comes to pricing, here are four things to avoid. If you can avoid these, you'll not only be ahead of your competition, but also you'll be ahead of most other businesses.

There are 4 major components in every modular home that you have to watch carefully.

  1. Design, Sell, Factory, Delivery
  2. Codes, Prep, Foundation, Set
  3. Finish, Landscape, Utilities
  4. Gross and Net Profits

This article will focus on the 4th component, profit. Here are the four mistakes most modular home builders make that go out of business within 5 years:

Pricing too low and undercutting all the time:
For some builders, this isn't a mistake, it's an entire strategy, and it's not a very good one. Going in too low all the time might be great for your top-line revenue number, but it wreaks havoc on your bottom-line profit number--the one you will need to survive. You need to profit and price accordingly. You might not get business out of all of your price-conscious customers, but that's OK. Your competition will--and then they will have to figure out how to profit from the "price shoppers" when there is little or no profit to make.

Not understanding the difference between margin and markup:
Margin is always based on sales price. Markup is always based on cost. I recently talked with a builder who didn't understand the difference and thought a 20% markup on his costs was the same as a 20% margin. When I finished explaining that when his costs are $200,000 and he adds a 20% markup, his selling price is $240,000 but he prices his homes using a 20% margin that same house has a retail of $250,000. After I finished he realized the difference. Don't make the same mistake.
Forgetting to take all costs into account:
In order to price correctly--every cost needs to be identified. Even "little" things like job johnnies, clean up people and even pizza lunches for the set crews can typically add up to 2 percent on every house. Other items, like delivery or shipping costs, can also sneak up on you.

View them as diligently as you would your cost of goods sold as having an impact on your bottom-line.

Finding out what your competition charges and doing the same:

Instead of "following" your competition, do a bit more homework and start to discover and uncover the value you truly offer your customers. Then price for value. That way, you are in an excellent position to defend your price against the competition, with a lengthy list of your own "reasons why" your homes are worth their price.