The old adage that what you don’t know won’t hurt you doesn’t apply when you’re running a business. Businesses cannot operate successfully in a vacuum, and the home building business is no exception. As a home builder, you need to know what’s going on within your own company, in other companies in your area, and in the industry at large. You need to know who today’s (and tomorrow’s) customers are, and what those customers are looking for. You also need to know what you’re spending for land and materials and labor in relation to your competitors. Are the prices of your homes in line with similar ones in your community? Are your employees working as efficiently as possible? What are your cycle times? How much waste is being generated on your jobsites?
From the macro to the micro, from national demographic trends to the minutiae of your company’s day-to-day operations, there are literally thousands of things you need to keep track of and measure. It’s a pretty daunting task, and you may wonder, at times, if it’s even possible.
Some of it you can do easily. You can check out product trends, for instance, by looking at television home shows or by visiting distributor or manufacturer show rooms. You can purchase electronic help, such as back-office software that helps you monitor your purchasing. Or you can hire help, such as a company that will gauge your customer satisfaction by contacting your buyers after move-in and evaluating whether or not you have met their expectations.
You also have us. Our mission at Builder is to be one of the resources you regularly tap for information for your business. Whether you access that information through the articles in the magazine, through the news stories we send out in our newsletters, in the slide shows and webinars we offer online, or at the face-to-face events we sponsor, our purpose and our goal is to provide you with the intel you need to be competitive and successful.
This month’s issue contains some of the data we compile for you. In our annual Local Leaders feature (page 62), we’ve calculated the market share, based on closings, of the top 10 home builders in the country’s 50 largest markets as measured by new-home permits pulled. As you know, market share is an indicator of competitive strength, but it also allows you to accurately assess your company’s performance from year to year.
Using only sales numbers to measure performance does not take into account the market conditions that cause your sales to improve or decline. Those conditions are often beyond your control, so sales alone will not provide you with the information you need to determine whether or not what you’ve been doing has had a hand in improving your business. With market share, it’s relative. You can benchmark your progress compared to other companies that are facing the same challenges and opportunities.
Market share is especially important at this point in home building’s cycle of boom and bust. As an attendee of last month’s Housing Leadership Summit put it, market share is like an investment. When the overall market totals go up, your company’s share is likely to increase proportionally.
Our sister division, Hanley Wood Market Intelligence (HWMI), provides the data for the annual Local Leaders list of markets and rankings. Other data compiled by HWMI is currently available on the Local Market pages on Builder Online (www.builderonline.com/local-markets/).
There, you’ll find our regularly updated Market Health Index, as well as permit, job growth, and population data for your area. The information HWMI gathers promises to become increasingly robust. It will, for example, continue to add more markets to its coverage area each year.
And for analysis of national and local market data, along with additional information and news, check out HWMI’s website, www.housingintelligence.com.