Monday, September 5, 2016

13 Mistakes a Modular Home Builder Should Never Make

Many new home builders attend seminars, buy How-To books, watch webinars and listen to TED Talks to learn how to improve their business. Heck, even my Modular Boot Camps, Round Tables and Builder Breakfast are all aimed at improving your business.

However if a modular home builder doesn’t correct the following mistakes, all the time spent improving your business could simply be a waste. You need to make sure you are not making these profit sucking mistakes and if you are, Stop Doing It and begin looking for ways to correct them and watch your bottom line at least stabilize and hopefully improve.

1. No Purchase Order system in place. No Purchase Order system means no agreement of trade cost or specific house information in advance. Not having one in place usually leads to work either not being completed in a timely manner or some portion of the work not being completed at all. Don’t blame the Subcontractor, blame yourself.

2. Not being ready for subcontractors. If your jobs aren't ready for the trades, you're setting yourself up for a big problem. Even though a lot of the work is done in the factory and even though you may have your own finish crew, what happens if your electrician, plumber, HVAC, etc is delayed because you weren’t ready for them? Nothing, that’s what. You are at their mercy and if they had to move on to another job while waiting for yours, it could set back your completion date by weeks. Don’t blame the Subcontractor, blame yourself.




3. Paying your subcontractors too early. Pay them too early and you may not get them back to finish the job. As a GC you’ve had subs ask you for an advance or even the total when they are half way through your job. You’re a good guy and do it telling them they have to get the work done ASAP. That may or may not happen. Don’t blame the Subcontractor, blame yourself.

4. Beating up your subs to rebid and cut costs. What part of the job don’t you want done properly? A low bid from a sub because you beat them up will almost always mean corners are cut and in many instances, things are not done at all. It would be better to negotiate a fair price, keep them happy, pay them promptly when the job is finished and you will have a sub that will go the extra mile for you.

5. Keeping a trade on too long. Familiarity doesn’t breed contempt in the building industry, it breeds a lackadaisical attitude by both sides of the builder/trade relationship. Bid every job even with your established subs and trades. This is not disrespectful, it’s simply good business. If one of your subs objects to bidding each job, this could be an indication that are making more than a fair profit off your jobs and are afraid a new sub’s bid will expose it. Food for thought.

6. Lack of Systems and Procedures. This is your business, not your foreman’s, not your supplier’s and definitely not your subs. If not already in place, you need begin to create standard operating procedures for your company. If your systems aren't documented, they don't exist. If you don’t have them already, call your fellow modular home builders that buy from your factory, contact a professional experienced in preparing them or simply sit down with your team over pizza and beer and hammer it out. Anything is better than nothing.

7. Forgetting who owns your business. Maybe you do have policies and procedures in place but what happens when they are not followed? Do you have the required HR warning procedures in place to fire someone that continually breaks the rules you set up for your business. Do you ever check to see that your procedures are followed? Don’t forget who owns your business.

8. No marketing, sales or business plan. No matter how many times some builders hear me say that these are a ‘must’ for the success of their business, they simply think it takes too much time and effort to do and besides, they have been doing business for years and years and they know absolutely everything they need to know. There will never be another 2008 housing crash. Time to head to the bomb shelters. These plans help guide your decisions and actions and should be reviewed and updated at least annually and should be used, not just put on a shelf or given to lenders.

9. Keeping your employees out of the loop. Nothing will tire your staff quicker than a lack of communication. Keep the lines of communication open both to and from the management level. You'd be surprised how responsive your employees will be if you keep them in the loop. Provide clear direction and they'll be yours forever. Even if you are a one person builder that subs everything out, you’ve got to keep these people in the loop or your business will be in the poop.

10, Not Pricing your homes for the market. Your market will set the price of your homes, not your cost. For example, after doing research you find that other builders are selling a 2,400 sq ft home for $300,000 excluding land costs and you are trying to sell yours for $350,000 based on your costs, you may have a problem. The local market will set the sales price of your homes, not the cost of the goods used. Direct construction costs, not profits, are the only variable in the pricing formula. Time to rethink your position in the market.

11. You can’t control your home buyers. We’ve all the customer that wants what they want when they want if even if it means changing their minds after the house has hit the production line at your factory. It’s time you take control of the process by setting time frames, offering guidance and packing selections, thereby lessening the confusion for your customer. There is a premium to be paid if you just want red M&M’s. This is your business and you have to help your customers in a very business-like way. Stop your groveling.

12. You don’t have a flexible build schedule. Most builders use some type of build schedule. Everything from customers meetings to quotes from the factory and your subs to inspections. What most of you don’t have is any flexibility built into it. When there is a setback such as a delay at the factory, rain for a solid week, unexpected snow or even your delivery being pushed back a week, many of you throw your hands up and think it is the end of the world. It really is if you haven’t built some flex time into your build schedule and shared with your customer all the things that could go wrong when building a modular home. Keep your customer in the loop and they will work with you. Don’t and the surprises never stop coming for them.

13. You don’t inspect your jobsites enough. Are you conducting critical point inspections? You should be. Don’t just leave it up to your foreman to do it. It’s your business. Decide what is critical that you personally should be inspecting on every house. Don’t just show up with donuts and coffee. Show up with a checklist and go over the results with the people responsible. Do this before customer walks. You are the one the customer will blame for poor quality workmanship.

Even if you are only guilty of one of these mistakes, that is one too many. Remember, this is your business so start correcting your mistakes.

1 comment:

Anonymous said...

Being a modular home builder is more than just knowing which piece goes where. I've made my share of these mistakes and learned some valuable lessons. Thanks Coach for another great article.