Saturday, August 12, 2017

6 Ways a Home Builder Can Go Broke in a Great Sales Year

Most custom modular home builders in the US sell between 8 to 15 new homes a year. What happens when a year like this one comes along where some builders are seeing double the amount of business?




Good things can happen but hiding behind those rays of sunshine can be a couple of dark business threatening clouds.

Here are 6 clouds that could sink your business in a good year.


1. Cash Flow. New home builders work on a strange income system involving customer deposits and a series of draws from customers or lenders. With increased business comes a need for more attention to this income stream. Just because you are owed a draw doesn’t mean it will come in a timely manner. Being busy with a lot of new work can take your attention off sending for your draws and can lead to a vendors and subs not being paid on time. Cash flow is the lifeblood of your business.

2.  Failure to Implement New Systems. It’s unlikely that you have had a chance (or the need) to implement any of those fancy-sounding operational acronyms that essentially mean running your business as smoothly and as efficiently as possible. Now it’s time to acquire some of those procedures because in the old days, doing things slowly didn’t matter.

3.  Customer Service and After Sale Repair Failures. This is where your popularity becomes a double-edged sword. On the one hand, high demand creates a buzz, further driving demand. The flip-side is that keeping up with that demand is difficult, especially when facing rapid growth. Finding good service techs that can repair problems after the sale is getting tougher every day.

4.  Success Spending. It’s tempting to see the orders come in as a sign that it’s time to spend. It’s true that growth requires adding team members and infrastructure, but don’t take it as a license to go on a spend-a-thon. You really don’t need a new Ford 350 or that Bobcat you’ve had on your wish list for years.



5.  Poor Communications. “What we have here is a failure to communicate” has never been more evident than when business grows rapidly. You still need to answer your customer’s texts and calls, request plans, quotes and revisions from the modular factory, schedule subcontractors and inspections, direct your employees and make sure you pass all local code inspections. Plus there are those pesky meetings with potential new home buyers and you will also need to set aside some time for advertising, social media and marketing.

6.  Time to be the Boss. A lot modular home builders came into the business from the trenches of site building and have done quite well building a small number of new homes each year. Doubling that business in one year can mean you won’t be able to “make sawdust” again. Growth means stepping back from the day-to-day operations into a leadership role

Simon and Garfunkel summed it up best when they sang “Slow down, you move too fast. You got to make the morning last”. Take time to enjoy your increased sales and make plans on how to maintain your new found business.

1 comment:

Josh Margulies said...

They will be good problems to have when I have them again.