Big Builder '08 came to a close with more than 1,000 ideas being drawn from a collaborative effort of professionals in the home building industry?from builders and vendors to financial analysts and architects, all with the notion of identifying the most vital opportunity areas where the industry needs to adapt to significantly improve profitability.
Conference attendees began their morning Nov. 4 at the Gaylord National Harbor in Washington, D.C., with a general session lead by Jerry Shrair, founder of Boiling Point, a consulting firm that helps businesses develop their brands, who stated that builders need to be "intelligent, flexible, and able to adapt."
"The solutions of this business happen on a macro level, here," Shrair said. "But, they also have to happen on a project level."
From the general session, five silos were introduced in the fields of purchasing, operations, sales and marketing, finance, and land and design. Attendees broke into these silos, first identifying key opportunity areas where the industry needed improvement. They then filtered down that list to three key opportunities and began generating actionable initiatives for each that would improve profitability using established benchmarks: that the initiative couldn't degrade the company's brand value proposition, that the initiative had to have quantifiable results, and that the initiative had to show results in 2009.
After the groups collaborated by bouncing ideas off each other and coming to a consensus, they brought their ideas back to present to all attendees.
Here is a blueprint more than 250 industry professionals feel would lift the industry into profitable margins in each of the five silos:
- Collaborate top to bottom by having cost transparency, supply technology, and total cost ownership. The best way to achieve this would be through a trade-based summit.
- Turn toward value engineering by "turning the pyramid upside down" and letting the consumer drive the process in order to identify what they want and supply it to them, which will in turn improve the company's brand. Re-engineering floor plans to remove costs and meet consumer preferences was the proposed initiative to address this opportunity.
- Reduce total construction cycle time by working with the different trades to minimize their downtime.
- Employ people with the necessary skill sets and professionalism by providing metrics and incentives, as well as by reassessing and realigning compensation on cost reduction and profitability.
Sales and Marketing
- Lead management needs to have a defined strategy and process in place for each customer touch point throughout the home buying process, from first contact through to closing.
- Market expenditures need to be checked, making sure a company is getting the proper return on its investment, which also includes determining a source, setting goals for 2009, and then developing a plan.
- The right people and the right processes are needed, which can be achieved through training using a systematic process that is ongoing and business-oriented with managers on site and offering mentoring to staff.
- Ensure effective communication and the creation of engagement throughout the company, with vendors, and with customers. This would be accomplished by realigning operations as the business' centrailized hub, establishing project ownership, setting clear expectations, and creating incentives that drive true engagement.
- Integrate information systems that will bring every aspect of building together--whether it be through bi-weekly company meetings or pre-construction meetings with all vendors involved. Part of this would involve measuring and evaluating existing systems in order to identify problem areas, which would be monitored on a "dashboard" to ensure that they are addressed and improved by the company.
- Put contingency plans in place to enable the company to restructure both up and down. To do so, the company must first identify triggers so management will know when to react. Equally important is the identification and preservation of the company's core values. Bringing employees into the process to identify goals across both a divison and cross-discipline level will build an engaged culture, thus creating a happier, more productive employee base.
Land and Design
- Re-boot by looking at current product lines and increasing densities so the homes are affordable but still give buyers what they want, which needs to be determined through active market research.
- Restructure financials by talking with landowners, lenders, and investors, moving from negative profits to increased profits that will get the product to move, thus generating more cash flow.
- Reload by getting new land buys through deals that are out there to be had, mainly from lenders who are holding land they don't want on their balance sheets.
- Be asset-lite by attracting joint venture equity at realistic prices and have an effective balance sheet. If the company is heavy on land, sell it to be as lean as possible and move into optioned contracts.
- Operational excellence needs to be achieved by managing business in a way that will attract capital. This can be done through trust and openness, and building lender and equity capital relationships.
- The name of the game remains, "Cash is king." Increased cash on hand can be achieved by managing the business on a day-to-day basis: sell land, trigger loss, and take advantage of every tax break you can.