Monday, April 15, 2013

Modular Home Builders Need to be Brutally Honest

Being a modular home builder is hard work. It seems like the only time you come up for air is, well, never!

That can be a real problem for a builder. There is relentless pressure to close the next sale, keeping the books in the black and constantly putting out fires can be harmful to the business. Being driven and ambitious are admirable but you have to hit the pause button once in a while and take stock of your life and your business.

The perfect time for this is when you hand over the keys to a new home owner. Take a day off and reflect on how you did on the project. Take a couple of days with the family. It doesn’t mean you’re putting the brakes on your business; look at it as half time in football or between innings in baseball.

One of the most crucial aspects of improving your profitability and keeping your business on track is taking the time to evaluate it.

Here are some tips for an “after closing” review”:

Walk through each house sale from ‘top-to-bottom’
Be brutally honest. Most builders are sole proprietors and we all have a tough time reviewing our own performance. Enlist a spouse or maybe one of your employees but you need to do this for every house. Call it a debriefing.
Answers to these questions will show you the weak areas that need improving and also what you did right. How did you acquire the client? How was the quote and order process with the factory? How was the flow from first meeting to final walk through with the client?  How did my subs and employees perform? Did you meet your timeline?

Call on outside eyes
Go over the books on each house with your accountant. You might think that you had it priced right but with Obamacare beginning to hit home this year, new tax codes and other things that are coming soon, getting the accountant to go over each home is critical.
Talk to you banker. If things are getting tight, talking to the person that knows how money flows is a good thing. It good to have the banker on your side.

Call your customers
During the first year, call every one of your home buyers at least every 90 days. Calling them will tell them you are concerned about their home and ask if there are any items that need your attention. Cracked drywall at the 90 day mark is less of a problem than to wait until the year is almost up and find that the owner has been stewing about those cracks all year. Remember, you want to be invited over for a bar-b-que, not to be bar-b-qued!

Walk it off
If you’ve done your review after each home and found that you didn’t make as much profit as you projected or even lost money, you’ve go to walk it off. If you have other homes in the pipeline, use the information you gleaned from the last home and adjust accordingly. If the next house is already under contract or actually being built, use that information to tweak the process in order to improve your chances of making the profit you need.
If you have prospective home buyers that haven’t signed, make those changes now. I talked with several modular factory owners the past few weeks and they are expecting up to a 17% increase in costs this year. Knowing your exact costs and profit from your last home is the basis for your new pricing.

Don’t just sit around looking at the four walls in your office and reading Facebook. Get up and do something but make sure you know what you have done before you start looking for that next new home buyer.

1 comment:

Dan Hobbs said...

Good post regarding the need for brutal honesty. Jefferson, upon establishing the University of Virginia, said,"For here we are not afraid to follow truth wherever it may lead, nor to tolerate any error so long as reason is left free to combat it."
Good advice for all of us.