Frontier Homes, Rank 100
Timing is everything. When Jimmy Previti launched Victorville, Calif.–based Frontier Homes in November 2002, he had only $1.4 million in startup capital, some of which he raised by mortgaging his house. But shrewd land deals in markets that hadn't been overrun by competition allowed Frontier to become a builder to be reckoned with in short order.
“I couldn't have duplicated what happened even if I wanted to,” recalls Previti, 35. Frontier entered Southern California's High Desert area, northeast of Los Angeles, “just ahead” of several other builders, and could purchase land at $5,000 to $10,000 per lot, a bargain at today's prices. And with few big builders operating there at the time, local landowners were not as demanding as they might be today about the financial terms they required for Frontier to take possession of the lots.
Frontier Homes closed 202 homes in 2003, producing revenue of $41 million. Previti plowed his profit back into land and watched Frontier break out in 2004, when revenue grew to $203 million from 731 closings.
Previti and his division president Doug Stewart—both worked at Hovnanian Enterprises' Forecast Homes, which Previti's dad, Jim, co-founded—say they'll spend 2005 upgrading Frontier's operations and resume expansion into adjacent markets in 2006.
Next 100 Portrait
Wonder what the average Next 100 company would look like? During 2004, it would have closed 469 homes for $150 million in gross revenue. Its closings would have grown 12 percent between 2003 and 2004, and its revenue would have jumped a full 22 percent. The revenue growth figure puts it in good company with the average BUILDER 100 company, which grew its top line 28 percent last year, but well behind in absolute terms: The top 100 averaged 4,488 closings and $1.359 billion in revenue.
Land is a pressing issue for everybody, but especially from the perspective of a Next 100 builder competing with national and large regional companies for dirt. But the Next 100 companies' priorities differ slightly from their larger peers: More are concerned with improving construction quality and their access to capital—a continuous search for this group—and fewer count new-market expansion among their top priorities.
Managing land supply
Increasing market share
Improving construction quality
Improving customer service
Improving access to capital
Streamlining the supply chain
Diversifying product offerings
Addressing insurance issues
Expanding into new geographic markets
Revising corporate governance policies
A number of factors conspired to increase cycle time last year. The average time for a Next 100 builder to build a home jumped from 128.65 days in 2003 to 148.81 days in 2004. Builders in Florida reported significant delays due to last fall's four hurricanes, and shortages of cement and roofing tiles set others back throughout the year.
Hubble Homes, ranked 118, is among those who have transitioned to evenflow production. Last June 1, the company began starting three homes a day and intends to ramp up to four a day as of this June 1, says Don Hubble, company president. In addition to setting the company up for a jump in closings of as much as 33 percent this year, Hubble says his subcontractors have responded positively to the move, shaving their prices and cutting the cost to build a home by between 3 percent and 5 percent.