Thompson Homes wants customers to live happily ever after. By Debra Gordon

Matt Thompson may use fairy tales to market his company to customers, but he--and his parents, John and Karen, who started Thompson Homes more than 30 years ago--knows there's no magic formula to success.

Instead, the builder's approach represents a blending of old with new, combining an old-fashioned focus on quality and reputation with a 21st-century emphasis on systems, software, and marketing. It has turned Thompson Homes into one of the most sought-after builders in the high-end, semicustom Philadelphia/Wilmington, Del., housing market and a "hands-down winner" in the 2003 America's Best Builder competition, according to the judges.

"We've done it by establishing this long-term relationship with the customer by listening to them and creating and delivering what they want," says Matt Thompson, the firm's president. "We create the home of their dreams, and we never say no."

He means it. Customers have the option of changing nearly anything they want (for a price, of course) at nearly any time during the construction process.

ABB: Intro
Sattler Homes
Thompson Homes
Don Simon Homes
Pardee Homes
Wayne Homes

That philosophy, and the additional revenue it generates, has resulted in net margins significantly higher than the home building industry average of 8 percent, as well as a growth spurt that took the company from six employees and less than $7 million in sales in 1996 to 22 employees and $30 million in 2002.

All in the family
Although Matt, 32, is now president of the company his parents began three decades ago, his inclusion in the family business wasn't guaranteed.

Before Matt or his sister (Tracey, 34) could join the company, John believed "they should go out and work and earn a living and find out what it's like to earn a paycheck on their own without being under the wing of their parents."

Things changed in 1996. With the company experiencing growing pains, John approached Matt, then a Wall Street trader. "If you're thinking of coming into the business," he told his son over dinner, "now would be a good time."

"Go for it," Matt's boss told him. "You can always come back to Wall Street, but you can't always have your own business."

Tech talk
Upgrading Thompson Homes' computer systems was one of Matt's first assignments. Used to Wall Street, with seven terminals perched on his desk, Matt was shocked to find that the company's "network" consisted of two aging personal computers still running DOS. "There's this thing called Windows," Matt told his father. "And no, it's not something you put into houses."

Photo: Michael Spain-Smith for Michael David Studio

Matt Thompson (left), president; Karen and John Thompson, founders Within two years, the company had its own network, accessible from any construction trailer on any job. Today, the builder uses integrated business management software to track every job seamlessly, from estimating through construction and accounting to the end of warranty. Thompson Homes uses technology in the front office as well. It recently added a selections-software package at its Rehoboth Beach, Del., townhome community, offering buyers an automated, prepriced electronic catalog of every option and upgrade the company offers. The result? Upgrades-and-options revenue jumped $275,000 even while the selections process shrank to fewer than 30 days.

Outside expertise

Thompson maintains high margins on that revenue by keeping overhead low and selectively contracting with outside vendors.

For marketing, the custom builder relies on Prudential, Fox and Roach, which not only lends Thompson the cachet of one of the largest Realtors in the area (including Prudential's huge footprint in the real estate sections of local newspapers) but also allows the builder to benefit from Prudential's knowledge of community trends. These outside sales agents work both sides of the deal, helping clients sell their existing house and buy a new Thompson home. The outside sales agent also serves as the buyers' primary contact person throughout construction, freeing Thompson's site superintendents to focus on construction and ensure quality.

To get the best, Thompson treats vendors as well as it treats its customers. It pays subcontractors within days, an ironclad policy since the company opened its doors. "We have clients to satisfy and time frames and schedules to meet," says John, "and we just look at prompt payment as one of the ways we can get to the finish line on time."

The quick payment policy guarantees Thompson the top trade talent, thus ensuring quality and prompt attention for customers. It also pays off in lower costs for those "never-say-no" special changes, John says, which pleases customers by providing competitive pricing for their custom requests. One indication of the commitment Thompson gets from its trades: All signed on for the Rehoboth project, a two-hour drive from their primary market.

Thompson gets the same loyalty from its employees, with a waiting list of superintendents from other builders who want to join the company when an opening arises.

Sharing the risk
As a small builder surrounded by goliaths, Thompson perfected the joint-venture partnership, joining with builders on land development to bring large projects to market without risking the entire company. "We don't have deep pockets like the national builders do," says John, "so it's quite common for builders in our area to get together with one or two other builders and do a project." Sharing the risk also frees capital for investment in other communities at different price ranges.

Thompson pioneered this joint-venture program in 1998, when it joined with fellow semicustom builder Megill Homes on a 136-acre development outside of Wilmington. The two companies designed six models (building and furnishing two), jointly set the premiums, and used the same sales force.

Rather than dividing the lots between them, they let the buyer choose and alternated sales. If a buyer wanted Thompson to build the home and it was Megill's turn, the buyer simply had to wait. The two split the lot premiums evenly, with the builder who constructed the home keeping 90 percent of the options-and-upgrades profits. After $65 million in sales, the difference in revenue between each partner is just $5,000.

More recently, the company joined two other builders on a 193-acre site that's approved for townhomes and single-family product. One builder wanted to handle only the townhomes, so Thompson and the other builder are splitting the single-family lots. "We couldn't go out and do a $20-million project on our own," John says.

Details, details, details

The foundation of the builder's business is Thompson's obsession with details. "They have an attention [that's] unusual for small builders," says consultant Al Trellis, of Home Builders Network in Mt. Airy, Md.

One example: The Thompsons changed the drawings for the Rehoboth townhomes seven times. "They spent hours trying different combinations of elevations, garages, and roof lines to find the best possible look out of 30 different combinations," recalls Trellis, who's helped Thompson Homes improve its operations.

Thompson Homes concentrates on luxury custom homes such as this, but it also diversifies its business by building high-end townhomes, production custom homes, and vacation homes. Everyone in the family understands the importance of design, but it's Karen Thompson who obsesses over the design details inside the homes. "She knew stainless steel kitchens were going to be big before anyone else," says Prudential managing partner Judy Leavy.

Thompson Homes also pays attention to homeowner surveys. When one buyer said he didn't realize how many electrical options were available, Matt started having an electrician accompany buyers on pre-drywall walk-throughs, pointing out upgrades such as speaker systems and paddle fans. The move bumped up the average electrical-upgrade revenue about $4,000.

"I think massaging the product 'ad infinitum' is what you have to do," Trellis says. "The successful builders have a bit of the perfectionist in them. Even though they know they're never going to achieve it, that doesn't mean they don't always work toward it."

Dream campaign

For most of Thompson's history, "marketing" consisted of word-of-mouth referrals, but that changed in the mid-1990s when Matt came on board.

From the start, Matt knew he didn't want the "typical" builder ad with a rendering of a house and a price tag. He turned to Northflight Advertising, a firm that specializes in builder marketing, giving it carte blanche to develop a unique campaign. "He really allows us to think outside the box," says Northflight's vice president of operations, Linda Smith.

The result of that freedom is an award-winning campaign built around the dream--or fairy tale--of building your own home. Color ads depict Goldilocks noting that some things (like a Thompson home) feel "just right." A photo of a princess kissing a frog sports the headline: "So ... where are you and Prince Charming going to live?" All end with: "Happily ever after starts here."

"Matt is very good at promotion," says Trellis. The young builder has appeared on the Discovery Channel and HGTV, and in 2001, Philadelphia magazine asked Thompson to build its Design Home 2002. More than 5,000 people toured the $3.1-million home in four weeks, resulting in three additional home sales.

Business transitions
These days, John, 55, and Karen, 53, are spending more time in Florida and less time in the office. But John says they don't feel right walking away completely just yet. Still, the transition is going well, consultant Trellis says. "It starts with John's willingness to let go as Matt has proven himself."

As for Matt, he says his job has been easy compared with what his parents faced 30 years ago. "I came into the business that had already laid the foundation and groundwork for growth. They did the hard work by getting the reputation." Now, his mission is to keep it burnished.

Debra Gordon is a freelance writer and editor based in Nazareth, Pa.

Thompson Homes

West Chester, Pa.

26-100 Units

President: Matt Thompson

Founders: John and Karen Thompson

Vice president of operations: Nick Ceritano

Focus: High-end, semicustom homes in the Philadelphia/Wilmington, Del., market

Employees: 22

Founded: 1975

Web site:

Notable: In 2001, the company participated in a CASA/Youth Advocates "Dreamhouses for Kids" fundraiser in which Thompson and other local builders planned, constructed, and donated children's playhouses for auction, helping to raise more than $30,000 for the group.

Key Cornerstones

For Thompson Homes, customer service and quality come first. This Delaware Valley builder: 

  • Gives clients a choice of weekly or biweekly meetings on site and schedules five milestone walk-throughs during construction. 
  • Upon completion of the home, presents buyers with a comprehensive homeowner's manual that includes maintenance and construction information. 
  • Sends a designer to showrooms with high-end clients.
  •  Has a painter waiting in the garage during the settlement walk-through to fix any problems immediately. Because of this attention to detail, the builder hasn't missed a settlement date in more than 30 years. 
  • Makes its superintendents responsible for all warranty service on the homes they build, ensuring heightened conscientiousness during the construction process. 
  • Schedules the first warranty visit in 90 rather than 30 days, so the customer is unpacked and has used all systems. This also ensures that one season change has occurred, spotlighting weather-related problems. 
  • Completes warranty repairs in one fell swoop, with all trades reporting to the house at the same time.