Not many in the home building industry are breaking out on their own and starting new businesses during an economic downturn the country has not seen the likes of in decades. But Justin Walton took his layoff from his job as vp of purchasing for Wilshire Homes in Texas as an opportunity to not only run his own business, but to help the industry he has worked in for more than 15 years to save money and to make it through the tough times.
Just 45 days ago, Buildology was born in Conroe, Texas, just north of Houston, financed from the pockets of Walton and partner John Andrews. A purchasing-minded, back-office support services company, Buildology, already has taken on David Powers Homes as a client, finishing off 36 of the company's lots in Houston.
David Powers Homes' situation is a prime example of what Buildology wants to do for the industry. Times got tough for the builder, which recently cut staff to a bare minimum and moved its operations into a model home.
"They lost their ability to supply overhead," Walton said. So in stepped Buildology staff. Having more than 30 vendors and subcontractors partnered with the company, Buildology is providing not only the back-office staffing, but it also is stepping up and supervising the finishing of David Powers' homes.
"Builders are cutting back, and they can't provide this, so I thought of a way to deliver my knowledge to builders but not charge them for it," Walton said. "This gives [the builder] the ability to stay in business, and they won't have to hire more employees once the market comes back. When [the builder] grows their business, they grow our business."
Being able to offer the service free of charge to a builder comes from the dependence Buildology has with its vendor partners. With that side of the industry also being highly affected by the downturn, Walton was able to pen deals with the vendors to have Buildology become the salespeople, as vendors have also had to cut staff. In turn, Buildology receives the sales commission, and vendors agree to a set price for product.
And with vendors capitalizing on the quantity Buildology provides, the vendors get a lower price for the product, which is then reflected on the builders' end. "The goal is to save about $6,000 off the cost of a home," said Walton.
Buildology has had a very positive reception, which was somewhat of a surprise to Walton.
"There was instant buy-in for the idea," said Walton. "I thought it would be forever and a day before I had a client, but here I am 45 days later with 36 lots and potentially 10 more lots on the way within 30 days. I definitely underestimated the demand."
Walton added: "Staying on the purchasing side of things, it was easy to approach vendors, and it was easy for everyone to see the benefit to this, especially during these times."
Not only is Walton and his staff of four taking on builders as clients--with David Powers and Dakota Blue Homes of Houston as the first--but there is also interest coming from banks.
"They are realizing that there is a way to get these bad assets turned around," Walton said, adding that the route of bank clientele is most likely short-term--two or three years. He has already started the bidding process on some bank lots.
The superintendent duties that are being called upon in the bank asset situations are not part of the core business model for Buildology, Walton said, but just a product of the economic times.
While this seemed to be the perfect time for Walton to start Buildology, he sees this model as a permanent change in the industry, with builders outsourcing back-office services, especially in the smaller and custom home builder arenas, so much so that Walton said he expects to have approximately 300 lots on the Buildology roster by the end of the year.