Thursday, April 12, 2012

Why Modular Home Builders Fail

Modular home builders don't fail for a lack of great construction skills, they fail for a lack of good business skills!

Here are some of the areas that they need to put in more effort if they are going to succeed in the current market.

New home builders are usually skilled tradesman but poor business people. Therefore the technical side of their trade is known very well but the business-side-of-the-business is lacking the same expertise.

They have pride in their work and company. This can sometimes be a problem because they can't see the trees through the forest and can be very defensive of his business success (or) lack thereof. Their trade is more important than understanding the profitability.

Most are not interested in paperwork other than plans and blueprints.
No modular home builder wants to become an accountant or financial analyst.  Just as their trade requires the right tools to get the job done, the financial side also has tool sets that simplify the job of making the correct financial decisions.

A lot of builders don’t really understand the cost of doing business. There are many hidden costs of doing business and if not know or taught how to calculate the contractor will always wonder were the money is going.

The vast majority of modular home builders have never had to be too concerned with marketing and it shows.   This shows in their websites, the lack of social media interactions and understanding the latest ways the new home buyer finds a builder.

Hands-On builders would rather work than manage. There is nothing wrong with working but if they don't manage their business no-one else will. Monies will always just change hands.  A builder must acknowledge when they need help in managing all the aspects that they find either boring or confusing.

Almost every builder I know enjoys the "game" of taking chances.  A roller-coaster comes to mind. Always up and down. They usually manages the business from their checkbook. If there is money in the account it's up. If there is little or no money in the checkbook it's down.

They maintain a lot of detailed information about the business in their head.  If the contractor has a family the business will have trouble continuing in their absence. The business can be a "house of cards" because if you took the owner out if the business the business would be non-existent.

Here is one of the most important reasons that builders go out of business.  They "know" the exact status of each job accurately, except for profitability. The most famous phrase is "I know I lost money on that job but made money on these two". Profitability should always be the first item of expense there is no reason to do a job that can't make you a profit unless the business owner is tracking their break-even point and seeking super penetration.

The modular home builder wants no part of the regimentation of systems.  They are "shoebox bookkeepers."  The contractor must want to change.  There are many ways to extract more profitability from each job. If the owner wants no part of the day-to-day systems they must at least be able to follow them if they appoint someone else to design the systems.

1 comment:

Home builders in Pittsburgh said...

Business Skills are not as visible as we see it. It lies in how the brilliant minds sail through the business world.