Monday, January 21, 2019

7 Mistakes to Avoid for the Custom New Home Builder

New custom home builders are a brave lot. With margins being tightened and increased pressure from your customer to build the perfect home and the usual cyclical housing downturn staring us in the face, you cannot afford to make many mistakes and continue to stay in business.


Even simple mistakes can mean the difference between your being successful and being broke.

Success and failure are both in the palm of your hand

Here is a list of seven common pitfalls that you should avoid:


1. New home builders tend to undercharge for their homes.

There are two main reasons for this. First you don’t know how to correctly set an effective price for your homes and secondly, you think that you have to give the lowest price to get the homeowner to sign on the dotted line.

If home builders were selling a staple that everyone needed on a regular basis, it would be very easy to find a fair price for your product. But you don’t. For many of your potential buyers, this will be the only house they will ever build and you think that if you don’t give them the lowest price, you will lose the sale.

If this is how you operate, it’s time to sit down with your accountant or a consultant and work on implementing a well thought out pricing system. If you lose a couple homes because the buyer won’t pay for your home, be thankful. If they can’t afford one of your homes in the first place can you imagine the struggle getting your money will be and your profit is always in the last draw!

2. Builders tend to concentrate too much on sales.

Most modular home builders are sole proprietors and tend to gauge success by the number of homes sold. You tend to think the more sales you make, the bigger and better your business will be.

That can prove to be so Wrong….. While having a lot of homes to build is usually a good thing, using the number of homes as your yardstick to measure success will get you in trouble. Too many homes in the pipeline without spending the time to plan for that many will put you on the path to failure. You will overpromise and underdeliver. Add in under-pricing your homes and soon you will be one of those builders that go out of business leaving folks with deposits gone and no house to show for it.

3. Forgetting taxes can spell disaster

You have to pay your taxes. There is no way around it. One of the toughest challenges you’ll face is getting a draw from the bank and just having enough money left over to meet your personal and business expenses.

If you do this through the entire draw schedule, you will be faced with taxes to pay and no money left over to pay them. You need to include your taxes in the price of the house. If you aren't sure how to calculate what to add to the house price, contact your accountant.

4. No business plan.

You’ve heard the old saying, “If you fail to plan, you plan to fail.”

Home builders are notorious for not having a business plan. It would seem absurd to even consider starting to build a new home without a set of floor plans and a schedule, so why don't you have a good set of “floor plans” for running your business?

It can be as simple as planning out your next 3 months. What do you want to accomplish? How are you going to do it? How do you measure if you are on track? These are not hard questions. During the first month, start planning for the second three months. Eventually you will start to see the advantages of having a business plan.

5. You don’t know how to hire or keep good employees.

Many small home builders with one or more employees do not have a clue how to effectively manage or train them. You hire whoever comes in the front door looking for a job you need filled and send them into the field to represent you and your business.

Now that our industry as well as just about every other is experiencing an acute labor shortage and the increased risk of drug addiction it simply reinforces the need to check out the job applicant very carefully.

Your employees, whether you only have one or a staff of them, are your business’ most valuable asset. It has been proven that they can make or break you business. You need to think real hard about the position you need filled and if the person you’re looking to hire is that person. It is better for your business to not hire just to fill a slot.

But if you find a good employee, you must have a system in place to show them that their efforts are noticed and rewarded.

6. You fail to provide outstanding customer service.

This would seem to be a no-brainer as every builder strives to provide good customer service. It’s expected but if you fail to deliver, the homeowner will not only yell at you, they will tell every one of their social media circles, Angie’s list and some have even created blogs to tell anyone reading to stay the hell away from you.

If on the other hand, you provide outstanding customer service, the customer tends to only tell a couple of people but don’t be fooled by that, those comments are called referrals and that’s what you need to keep your business healthy and profitable.

Bad publicity is NOT good publicity for new home builders.

7. You don’t develop new home building skills.

If you try to do business like you did last year, your business will slip away. There are just too many things to learn! HERS Ratings, Energy Star, Green Building and new codes requirements are just the tip of the iceberg.

You also have to learn more about management, business strategies, organizing and other things too numerous to mention about the nuts and bolts of home building.
If you aren’t constantly learning, you will fall behind and soon the other builders will be building homes for your prospects. Modcoach and team will be introducing new programs to help keep you up to date on new methods and products for your homes as well as a new learning platform to help keep you successful. It’s going to be a great year and you don’t want to miss it.

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