Many builders and remodelers say that this recession is different, and it may well prove to be, but there is one similarity among recessions; there will be a recovery, which can mean opportunity if one is prepared to take advantage of it.

Some of the core problems will remain—lack of financing, poor buyer credit, excess inventory and sales of existing homes through foreclosure—and these will affect this industry for the foreseeable future.

To capitalize on the recovery, start by looking at what you have done as the recession got worse.

First, you streamlined your operations and the eliminated personnel. You evaluated your product and its costs. Some may have even diversified into associated businesses such as remodeling, commercial work, energy-efficient retrofits and weatherization.

It is important now to spend some time and evaluate what you did, its success, or lack of, and how to use that knowledge and experience to prepare for the future.

Streamline operations

As businesses downsize they often look at automate some of their processes. Automation can have a long-lasting, positive impact if done correctly. If done incorrectly, automating procedures merely allow for the same mistake to be made faster and more frequently; often going unnoticed. Therefore, it is imperative that whatever is being automated be fully understood prior to implementation. A successful system is to delegate the routine and repetitive tasks, thus freeing individuals to do what they do best—solve problems, work with clients and provide exemplary service.

Three systems that are often overlooked but can have a profound effect are:

• Estimating—Often builders fail to recognize the best part of an estimating system is the job cost system. What benefit is an automated estimating system if it is not routinely checked against actual costs? Failure to check variances on each project will only allow the same mistakes to become part of every job moving forward. The estimate needs to mirror the job cost system and vice-versa. Then it needs to be checked at the close of each job for accuracy to the estimate.
• Purchase Orders—To many, this is unnecessary paperwork. A successful purchase order system goes beyond merely ordering materials and work. The purchase order validates the estimate. All materials and work should come directly from the estimate and extra materials or work orders should be flagged as a variance. Reviewing the variance purchase orders on a regular basis can illuminate errors in estimates and change orders. Purchase orders serve an additional purpose in that they can automate the record keeping. Those assigned from the estimate with the proper job cost code are assured that they will be accounted for properly. Someone else can match invoices to the proper purchase order and no longer will your valuable time be consumed cost coding invoices at the end of the month; you will only see the few that need your direct attention.
• Scheduling—Too often builders and remodelers fall into the trap of thinking if they just had one more job at one time, they can become more profitable. In reality, that causes inefficiency, lost time (profits), and poor customer relationships. The goal should be to do more jobs over a given period of time by increasing the speed, or velocity, of your projects. A well-thought-out schedule that is monitored consistently and has the buy-in of your team will increase that velocity, and in the process deliver increased profits and increased customer satisfaction.

Now is the time to look at each of these three systems and make sure that they are implemented for the maximum benefit.  Deployment of each of these alone will increase your efficiency and deployed together will assure you that as work increases, it will be completed efficiently, profitably, and with increased customer satisfaction.

Your Business Practices

• Hiring—Deploying efficient systems will provide a certain level of security as the work load increases but at some point employees will need to be added also. Now is a great opportunity to find experienced key personnel. This is a once in a business cycle opportunity to find the best individual for your company. Many people have been laid off and are looking for work but your search should start with a careful evaluation of where you need help.

Ask yourself these questions:

• What do you do best?
• What do you dislike to do most?
• Where can you reap the most benefits of added personnel?

Remember that the goal is to increase efficiency first, and simply adding people may not serve that purpose. Careful, written job descriptions and responsibilities will help find the perfect fit. Understanding your systems and how your processes work will help define those jobs and responsibilities.

Product evaluation—When the market is good it seems that whatever we build or remodel is a success, but when the market tanks it’s quite the opposite. There are plenty of success stories from the last couple of years of builders and remodelers who found the right blend between their product and consumer satisfaction. Building what you know will sell, not what you think will sell. To know, you must identify what you do best, where the consumer demand is, and how you can satisfy that demand.

It stands to reason that what you do best will provide the most success. Knowing where you excel is critical to selling yourself. Market research, either through a consultant or your own study, will then illustrate how you can fit into what is selling. The goal is find your niche, and then exploit it.

Understand the selling price comfort level of your target consumer. Start with the target selling price, take out your desired margin, and you will be left with your costs to deliver that project. Too often builders start with the product cost, then add markup, only to find out that it is priced out of their target market. Then to move it they have to cut their margin, since the costs have become fixed.

Diversification—For many in the past few years, diversification meant doing anything to create cash flow. Now is the time to evaluate those moves also.

Ask these questions:

• As things improve and work becomes more plentiful will those diversified services provide the necessary profit?
• Are they now an integral part of your business or will they become a distraction as your core business improves?
• Do they drain from your core business?

The answers to those questions should help you decide where to keep your focus. Remember, the goal, as workflow improves, is to accomplish it more efficiently and at a greater profit. As things improve it will require additional focus to work efficiently, to maintain the streamlined systems, and to build customer satisfaction. That will require additional energy that should not be diluted by products or operations that do not support those goals.

Finally, take a moment to pat yourself on the back. You have survived a very tough economic period. Don’t dwell on the failures as anything other than learning experiences. Congratulations, you are almost there and with some business examination you can assure success as the building industry improves.

John Barrows is president of J. Barrows Inc., a company that has provided construction services, general contracting, construction management and consultation services for over 30 years. Barrows is a nationally recognized author and speaker on topics including green building, construction, production management, and business management. In addition to presenting his own seminars, he has worked with the NAHB to develop and teach some of their designation courses. He holds the designations of Certified Graduate Builder, Graduate Master Builder and Certified Green Professional.

Builders now have an opportunity to see how their business stacks up against the competition with NAHB's Cost of Doing Business Study, 2010 Edition.

Available from BuilderBooks.com, this one-of-a-kind resource gives home builders a rare glimpse at other builders’ financial information by providing data about profitability, cost of sales and expenses from hundreds of home builders across the country.

The Cost of Doing Business Study discusses financial performance according to builder type and size, as well as industry-wide averages using the following key indicators:

• Gross margin
•  Net profit
• Cost of goods sold
• Financial ratios (current ratio, debt-to-equity ratio, and more)

This unique resource contains a wealth of data, analysis and guidance to help builders boost profitability, increase efficiency, set realistic budget targets and improve upon their business practices. It also includes more than 25 proven cost-cutting, profit-raising ideas that builders can apply to their businesses.

For more information or to order the "Cost of Doing Business Study," click here, or call 800-223-2665. 

The guides offer members tips on technology, business planning, how to ensure the financial health of their businesses and more.

Produced by NAHB's Business Management and Information Technology Committee and found in the business management resources section of the NAHB Web site, the new 2010 Biztools builder business guides include:

• “Business Management for Home Builders: Poising for Recovery as the Market Turns”
• “Financial Management for Home Builders: Measuring Key Metrics to Plan Your Path”
• “Information Technology for Home Builders: Using Technology to Better Market Your Business”

All three concise guides ― which include lists of other valuable NAHB Biztools resources ― are written by experts in the field and can be downloaded by members for free at www.nahb.org/bbg.

Free Earlier Edition Biztools Business Guides Also Available

The 2006, 2007, 2008 and 2009 Biztools builder business guides are all available free to NAHB members and can be downloaded from the NAHB Web site in a PDF format only.

To view or download these guides, click here.

“Social Media for Home Builders: It’s Easier Than You Think!” is a new resource that teaches builders and residential construction professionals how to use social media tools such as Facebook,  Twitter, and YouTube to increase their visibility and improve their sales results.

Available at BuilderBooks.com, “Social Media for Home Builders: It’s Easier Than You Think!,” demonstrates how builders and developers are effectively using two-way communication via the Internet and social media outlets to attract consumers, follow up on leads, and improve customer service.

This is the only book that speaks specifically to the needs of the real estate industry and teaches home builders how to build a social media presence.

Author Carol Flammer outlines how to engage consumers through social media. She demonstrates the power of social media through case studies and online outlets created specifically for the home building industry. She will help readers understand social media and create a strategic plan for using it to attract new home buyers.

Readers learn how to use social media sites to:

• Build a brand
• Engage new and existing consumers
• Manage online reputation
• Increase Web site traffic
• Perform social media optimization
• Sell more homes

For more information or to order “Social Media for Home Builders,” click here, or call 800-223-2665.

Builders rely on a host of vendors to efficiently and profitably run their businesses. To stand out and be more than just another service provider, builders who choose and partner with the right company note the difference.

NAHB’s Technology & Business Management Solutions Directory (TSD) can give your company an edge with more visibility. The TSD creates a bridge between vendors and builders with technology and business solutions in the middle. The directory offers:

• Placement in front of more than 150,000 NAHB members
• Public accessibility for increased leads and sales possibilities
• One-stop shopping for builders seeking technology and business management solutions

Who should be listed? If your company offers any of the following services and/or products:

• Marketing and sales management consulting
• Accounting/financial planning services and software and systems
• Architectural design software/systems; CAD software/systems
• IT consultants/training
• Sales automation/marketing software/systems

But this isn’t all. The TSD offers listing services for numerous other vendor types.

Getting listed is easy and free of charge for NAHB members.* Listing options allow you to showcase your company’s products and services, contact information, Web site and logo.

Give yourself and your company the boost it needs. Go to Technology Solutions Directory today and find out how NAHB can help your business expand.

For more information about the Technology Solutions Directory, e-mail Agustín Cruz  or call at 800-368-5242 x8472.

*NAHB members can select a standard directory listing free of charge. Enhanced listings are available for a fee. See Technology Solutions Directory for more information.

The economic realities for builders and the boomer generation and beyond have created a brand new world in today’s 50+ marketplace. Lifestyle remains paramount, but it now means something completely different – smaller spaces, smaller places and a fresh approach to amenities. Buyers also are looking for great product – at a great value. Meanwhile, the 50+ market is becoming more segmented than ever before. 

The next webinar in the 50+ Housing Council 2010 series is The Changing Face of 50+ Community and Home Design, and a group of expert panelists will explain this market’s new landscape to the participants.  It’s brought to you by the NAHB 50+ Housing Council, Wells Fargo Home Mortgage and the Home Fire Sprinkler Coalition, and will take place on Wednesday, April 28, from 2:00 – 3:00 p.m. EDT.

Click here to register now! It’s fast, free and easy!

Find out from leading architects and designers about the new look of 50+ community and home design, emerging consumer preferences, and strategies to capture this key market segment.

Panelists include Bill Kreager, FAIA, of Mithun, Bill Warwick, CAASH, of BartonPartners, and Mary DeWalt, MIRM, CMP, of Mary DeWalt Design Group.

The panelists will:

• Explain how the economy and housing industry conditions have altered the 50+ marketplace, both in terms of product offerings and consumer demand;
• Identify the latest trends in 50+ community design and amenities by examining nationally recognized projects across the country through AIA-member analysis;
• Identify emerging trends in unit and interior design for 50+ communities, with an emphasis on designing smaller, more efficient spaces;
• Describe cost-effective techniques for improving the overall design of 50+ communities;
• Analyze shifts in consumer preferences in buying behaviors and the ways this affects design.   

Webinar registrants will receive one hour of continuing education credit for all NAHB professional designations, including the Certified Active Adult Specialist in Housing (CAASH). The webinar also has been approved for continuing education credit from The American Institute of Architects (AIA).

The webinar is FREE to NAHB 50+ Housing Council and NAHB Multifamily Council members, $69 for NAHB members and $100 for non-Members. For more information on webinars or council membership, e-mail  Jeff Jenkins or call him at 800-368-5242 x8292.

Tougher market conditions and tighter budgets have forced many companies to get innovative in order to do more with less. Now, as the industry slowly begins to return to health, these same innovations can help position builders, not just for survival, but for rapid growth as markets rebound.

The marketing landscape has changed dramatically in recent years. Traditional marketing channels, such as print advertising, have been supplanted by a range of different online marketing outlets — from social media to pay-per-click ads. Many companies have struggled to keep up with these changes.

Even those who have moved more of their marketing efforts online may not be taking full advantage of the opportunities to reduce costs and track performance, increasing — and monitoring — the return on investment (ROI) of their efforts.

Furthermore, taking advantage of the full potential of online channels and enabling technologies is not just about marketing online, it’s also about leveraging electronic tools to streamline the generation and management of both online and offline leads.

It is not surprising, then, that there has been a recent surge of interest among home builders in marketing automation.

Marketing Automation in Broad Brush

Basically, marketing automation is all about doing more with less — conducting more marketing campaigns, reaching more prospects and collecting more leads while minimizing costs.

To accomplish that, marketing automation encompasses a variety of different kinds of technology solutions all designed to facilitate the planning, execution, management and tracking of marketing activities — from traditional print advertising to direct mail, e-mail, sales events and promotions.

For example, marketing automation can encompass event management solutions, e-mail and direct-mail applications, planning tools, marketing-analysis programs and more.

Ultimately, marketing automation is about incorporating a new set of tools to sell more homes faster — at a lower cost of sale.

Take Advantage of an Inexpensive Channel

Good marketing automation systems help builders and marketers manage and analyze the totality of their marketing initiatives, whether these include advertisements in print newspapers, glossy brochures sent by mail or in-person sales center events.

But one of the greatest advantages of automated marketing systems is that they enable builders to maximize the potential of the lowest-cost marketing channel — the Internet.

The Internet rapidly skyrocketed in its importance to the industry in just a few short years to the point where home builders today aren’t just using the Internet for marketing because it’s cost-effective, they’re using it because the Internet is where the home buyers are.

Studies conducted for NAHB’s Institute of Residential Marketing found that, not only did Internet-using consumers value online resources highly in their home buying search, they found them the most useful, most important resources they were most likely to use in future home searches.

When considered along with statistics from a study by the National Association of Realtors® indicating that 77% of home buyers use the Web when looking for a home, the picture is clear — builders who neglect or insufficiently utilize online channels are passing up an obvious and relatively inexpensive approach for reaching the majority of potential buyers in their market.

Nor is this push toward greater use of online channels driven purely by consumers; builders have reported that their best-quality leads find them on the Web.

Reaching More Home Buyers and Learning More About Them

The linchpin of marketing automation is e-mail marketing — a communication channel that allows builders to reach almost limitless numbers of potential customers without increasing costs.

With automated marketing systems, builders can create compelling, rich-media e-mail communications and customize them to reflect the recipient’s name, location and interests. Plus, with a small investment in creating content tailored to specific preferences and conditions, home builders can design highly personalized campaigns that really connect with the buyer, increasing e-mail open rates and sales conversions.

This can be accomplished by installing simple forms on the builder’s Web site or on kiosks at sales centers that allow for fast, easy collection of initial information about interested home buyers. Follow-up e-mails to the prospects who fill out the forms provide a perfect opportunity to gather further qualifying information in exchange for incentives and marketing collateral.

By using each touch-point as a chance to collect more detailed information about leads, home builders can avoid overwhelming prospective home buyers with a barrage of intrusive questions all at once — while also slowly building an ongoing relationship and valuable two-way exchange.

As builders learn more about buyer preferences and interests, they can use this information in tandem with marketing automation technology to further personalize communications.

For example, if a prospect has young children, the system can send useful information about the quality of neighborhood schools. Or, if a prospect is an avid golfer, the system can automatically send tantalizing descriptions of area golf courses.

As more in-depth information about prospects is gathered, increasingly sophisticated database segmentation can be performed, allowing for precise targeting of marketing initiatives.

Managing Leads More Effectively

During the housing boom, few builders complained about ineffectiveness of their marketing efforts. Instead, most builders were overwhelmed by a massive influx of leads from the Web and other sources, to the point where they had had trouble effectively assembling, assessing and managing the leads.

In a hot market, builders may be able to get away with ineffective lead management, but in cooler times, mishandled leads can translate directly into lost sales. The fact is that, whatever the market condition, builders need reliable systems to help them prioritize and manage their leads.

The secret to cementing marketing’s importance in home sales is to create a fluid process that integrates marketing directly with the sales team. Builders can close the loop between marketing and sales — and ensure consistent lead follow-up — by implementing marketing automation systems that include robust lead management functionality.

With marketing automation systems, home builders can define criteria, such as readiness to buy and financial preparedness, that can be used to automatically qualify and classify leads as they come in. If further information is required to qualify the lead, follow-up e-mails can be automatically triggered to complete the lead classification.

Once the leads are classified, they can be immediately funneled into an appropriate chain of activity — with hot leads assigned directly to the appropriate home sales consultants according to territory, specialization or other parameters the builder establishes, and longer-term leads assigned to automated communications based on their particular classification and attributes.

This process ensures the most efficient use of every sales consultant’s time, while also guaranteeing that, rather than ignoring cooler leads, builders can nurture them by placing them on an appropriate path of communication until they are ready to make a purchase.

With marketing automation, the often labor-intensive and error-prone steps of lead qualification, distribution and nurturing is now a thing of the past as it makes way for work-free, automated processes that advance consistency and free up your sales consultants’ time to focus on the best leads.

Measuring Marketing Success

An essential part of closing the loop between marketing and sales is to be able to accurately track the results of marketing initiatives. Marketing automation systems typically allow builders to track a range of useful metrics about campaigns — open rates, response rates, sales conversions and more.

Sophisticated systems not only enable builders to track projected and actual campaign costs, but also to assign a persistent lead source designation to an individual, allowing builders to reliably trace customers back to marketing activities and to track the lifetime revenues associated with them. This provides the information required to accurately report on success rates and ROI.

There’s No Time Like the Present

Marketers generally don’t begin to think seriously about ROI and efficiency until budgets are slashed. Marketing automation can be invaluable to help marketers do more with less when times are tough.

But as markets pick up, marketing automation tools are indispensable in helping builders manage volume, streamline operations and measure performance, alleviating a lot of manual processes and freeing marketers to think more creatively.

Strategic-thinking builders invest in solutions that will help them realize immediate returns while also equipping them to more effectively deal with future market changes — whether good or bad.

As builders consider areas for greater efficiency and cost-cutting and look to market smarter, marketing automation and lead management systems offer an attractive area for exploration.

Steve Lewkowitz is the professional services director at CDC Software, providers of Pivotal CRM for home building and real estate. For more information, e-mail Lewkowitz, or call him at 732-297-4060.

This article was first published in one of NAHB’s Biztools three builder business guides, a compilation of articles gathered under three themes — business management, financial management and information technology published every year and free to members. To download the guides, visit www.nahb.org/bbg.

The 2010 Spring Board of Directors and Legislative Conference will be held April 18—23 in Washington, D.C. at the Marriott Wardman Park Hotel.

Members of the Business Management and Information Technology Committee should go to www.nahb.org/bmitmaterials to download meeting materials. No meeting material will be available onsite; attendees must print out all information or download to their personal computers.

BMIT committee members are encouraged to attend the joint meeting as well as the committee meeting.

Tuesday, April 20

Joint Business Management Committees

10:00 am—12:00 noon

Wilson C, Mezzanine Level

Thursday, April 22

Business Management & Information Technology Committee

10:30 am—1:00 pm

Lincoln 4, Exhibition Level

If you have any questions, e-mail Agustín Cruz, excutive director, Business Management, or call at 800-368-5242, x8472.

The 2010 Spring Board of Directors and Legislative Conference will be held April 18—23 in Washington, D.C. at the Marriott Wardman Park Hotel.

Members of the Single Family Small Volume Committee should go to www.nahb.org/sfsvmaterials to download meeting materials.   No meeting material will be available onsite; attendees must print out all information or download to their personal computers.

SFSV committee members are encouraged to attend the joint meeting as well as the committee meeting.

Tuesday, April 20

Joint Business Management Committees

10:00 am—12:00 noon

Wilson C, Mezzanine Level

 

CGB Board of Governors

3:00 pm—5:00 pm 

Wilson C, Mezzanine Level

Thursday, April 22

Single Family Small Volume Committee 

7:30 am—10:00 am

Lincoln 4, Exhibition Level

If you have any questions, e-mail Joshua Nester, communications manager, Business Management or call 800-368-5242 x8461.

The 2010 Spring Board of Directors and Legislative Conference will be held April 18—23 in Washington, D.C. at the Marriott Wardman Park Hotel.

Members of the Single Family Production Builders Committee should go to www.nahb.org/sfpbmaterials to download meeting materials.   No meeting material will be available onsite; attendees must print out all information or download to their personal computers.

SFPB committee members are encouraged to attend the joint meeting as well as the committee meeting.

Tuesday, April 20

Joint Business Management Committees

10:00 am—12:00 noon

Wilson C, Mezzanine Level

Thursday, April 22

Production Builders Committee 

1:30 pm—4:00 pm     

Lincoln 4, Exhibition Level

If you have any questions, e-mail Joshua Nester, communications manager, Business Management or call 800-368-5242 x8461.

The 2010 Spring Board of Directors and Legislative Conference will be held April 18—23 in Washington, D.C. at the Marriott Wardman Park Hotel.

Members of the Custom Builders Committee should go to www.nahb.org/custommaterials to download meeting materials.   No meeting material will be available onsite; attendees must print out all information or download to their personal computers.

Custom committee members are encouraged to attend the joint meeting as well as the committee meeting.

Tuesday, April 20

Home Technology Alliance

7:30 am—9:30 am

Wilson C, Mezzanine Level

 

Joint Business Management Committees

10:00 am—12:00 noon

Wilson C, Mezzanine Level

 

Custom Builder & Design Subcommittee

12:30 pm—2:30 pm 

Wilson C, Mezzanine Level

Thursday, April 22

Custom Home Builders Committee

1:30 pm—4:00 pm 

Wilson A, Mezzanine Level

If you have any questions, e-mail Marcia Childs, Business Management or call 800-368-5242 x8388.

Prospective home buyers need to understand what makes you better than and different from other builders. When they ask, “Why should I build with you?” you and your staff need to be ready to provide the correct 10-second answer.

If you can’t answer quickly, or if your answer is, “We deliver a good value” or “We have a great reputation,” then you missed your opportunity to stand above the rest.

Successful builders are able to convey what differentiates them from their competition in all their initial customer contacts. This includes their marketing materials, phone calls and face-to-face meetings.

With all these contacts, you should be providing your prospective home buyers with tangible evidence of why building with you will be better suited to meet their needs.

Following are five important ways to differentiate your business:

1. Clearly communicate what kind of builder you are.
   Custom home builders should clearly specify whether they offer floor plan options, clients bring their own floor plans or the buyer and builder work on blueprints together.
   
   Prospects need to understand your selection process ― whether it is simplified to options, customizable to the home buyer wishes or a combination of recommended options and custom features.
   
   Also, prospects need to know if they will be primarily dealing with you, the owner or specialized staff members.
   
   
2. Build unique homes.
   Prospects want a builder who builds the home they envision. If someone wants a rustic or log home, then they will pick a builder who specializes in that style of home. Ensure that your prospects know your specialty, whether it is cottage, stone modern or any other type.
   
   
3. Provide evidence of an enjoyable home buyer experience.
   Claiming a great experience is not enough. You need to provide real proof. Offer literature or documentation that clearly explains home buyer involvement and your construction process. Clearly show home buyers how they will be making selections — whether it is with a designer, at a design center or online.
   
   
4. Provide proof of being on time and within budget.
   Being on time and within budget is extremely important to your home buyers.
   
   The first step to assuring them that this is how you will build their home is to create a process of communicating this information to them at pre-defined times throughout the building process.
   
   The second step is to outline how you will keep them informed. For example, providing schedule and budget information every Monday via e-mail or online will set you above others your prospect may consider.
   
   
5. Provide additional, value-added resources.
   Beyond just building a home, there are services you can provide that help your home buyers. For example, include a Realtor® listing of their prior home, purchase their prior home if it isn't sold within six months or supply a relocation package.
   
   Assisting home buyers with financing is another great service that can be as simple as working closely with a mortgage professional, or more detailed like providing in-house financing plans.

Being like everybody else is crowded. Set yourself apart to succeed.

Andy Elsbury is the founder of Indianapolis-based SelectionWare, which provides consulting services and solutions for home builders to improve the building process. For more information, e-mail Elsbury, call him at 866-585-9222, or visit the SelectionWare Web site at www.SelectionWare.com.

This is our first issue of the revamped Business of Building e Source. Did you enjoy it? How can we do better.

E mail us at bobeditor@nahb.org.