Monday, May 4, 2015

"Andy Speaks Out!" a New Contributor to the Blog

Modular Home Builder blog is pleased to announce the first of what I know will be many interesting and informative articles from Andy Gianino, owner of the The Home Store and author of the authoritative book on modular housing, The Modular Home, which I’m sure is on many of your desks.

"Andy Speaks Out about....."

An open invitation to modular home builders.
By Andy Gianino

When I started The Home Store 29 years ago I had a dream of creating the best and largest modular home dealership in the country.  Over the years I’ve put a lot of time and money into creating systems that can make this possible.  But although I’ve sold over 1,200 modular homes, I’ve never earned the necessary profits to implement my vision.  


I now accept that I am unable to do this on my own.  I don’t know whether some of you share my vision of a multi-location, modular home company, one that creates a national brand.  But I’m about to find out, since I’m posting this blog to ask whether any of you would like to join with me in creating such a company.  
Last fall at my presentation to the Modular Home Builders Association’s annual summit, I asked four questions about our industry:

  1. Why is our market share not growing?  
  2. Why is factory quality not improving? 
  3. Why does it take so long to order and build a modular home?  
  4. Why do we have so little cost advantage over stick homes?

First let me note that the manufacturers with which I’ve worked – Excel and Manorwood – have already done a lot in regard to the four issues, and they’re planning to do even more in the near future.  But as I said at my presentation, there is still a fundamental problem – namely, the absence of a committed relationship between modular manufacturers and builders.  This independence has meant that neither manufacturers nor builders have sufficient reason to invest in helping the other as much as they could.

I still believe this.  But here’s the problem.  I don’t think we can count on manufacturers to do enough any time soon to improve the situation.  For one thing the severe downturn in residential construction has drained most manufacturers of the cash needed to make the needed investments.  This is also true for most builders, including myself.  Therefore, we can’t expect many manufacturers to take a leadership role with regard to the following:

  • Team up with other manufacturers to advertise our industry

  • Build a strong brand name that helps you sell modular homes

  • Create automated systems to streamline your business transactions as a modular builder

    • These transactions include marketing, lead follow-up, modular pricing, contractor pricing, sales administration, construction project management, warranty service, etc.

    • Integrate  the systems they create for you with the systems they create for themselves
  • Provide complete and detailed instructions for how to set and turnkey your custom designed homes

  • Offer training for your staff and subcontractors

  • Use their production systems to make your button-up process faster and less costly

If we can’t count on getting help from our manufacturers, what can we do?

As individual builders, not much.  And that’s why I want to join forces with other likeminded modular builders to form a new company.  Our industry is ripe for consolidation of modular dealerships.  As long as we remain a fragmented group of relatively small players covering modest geographical areas, we will neither have the market clout with our manufactures nor – and this is critical – the financial resources to truly challenge the stick building world.

As you know, business consolidation of separate companies has happened in many industries.  Waste Management and Auto Nation are two examples of companies that were created out of multiple small players in their industries.  

Typically investors “roll-up” several independent companies into one new entity.  This can take different forms, most involving mergers or acquisitions.  Another strategy for joining companies is to create a franchise system, which preserves independent ownership.  At this point I’m not advocating for a particular strategy.  

Since investment money will be needed regardless of the approach, I’ve contacted Mark Sage of Wyndham Capital.  He’s been helping some modular manufacturers implement their own industry consolidation the last few years.  Mark is optimistic about generating investor interest.  

If there’s a lot of builder interest, more than one new company could be formed, each following its own strategy.  Some will likely coalesce around one manufacturer, while others will work with at least a couple of manufacturers.  

If some of you decide to join me, the investment money will enable us to implement significant improvements in our operations, including marketing, sales, costs, and profits.  We will also enjoy happier homebuyers, employees, and subcontractors – and less stress for ourselves.  And if our company grows as quickly and substantially as I anticipate, we can take our company public.  
Although I don’t know if my offer will interest any of you personally, I’m convinced that a consolidation amongst modular builders is inevitable.  Too many significant advantages are created when several companies join forces.  In addition, I think a builder/dealer consolidation will energize our industry.  
If you would like to learn more about my ideas, please read my complete presentation and join me at Coach’s June Breakfast Meeting.  

In the meantime, email your thoughts and questions to me at andyg@the-homestore.com.  I won’t be able to respond to most of them, but I will post at least one other blog before the Breakfast Meeting responding to your feedback.

3 comments:

Anonymous said...

What about Manufacturer / Builder consolidation? Seems that's how they cracked 3% in Europe. One vertically integrated company. Or at least one vertically integrated contract.

Anonymous said...

If the only thing that comes out of this is a better approach to marketing and an improved factory/builder relationship, then I'm all in.
16 years selling modular housing and I'm actually seeing less help from the factories than when I started.

Anonymous said...

In case you haven't noticed (like the national tract builders) the manufacturers are and have been consolidating plants and locations for the stated purpose of better deliveries and client services. As long as modular is perceived as a niche market serviced by small independent builders (dealers are another issue) or until a manufacturer joins with a builder to create sub-divisions providing a tract home concept with limited customization options I don't see
a change in the market shares. It is far easier for the manufacturers to focus on the commercial multi-family developer builder to gain production output than a group of single builders.