Up Against The Heavy-Weights

Hedgewood takes a creative approach to serving the community. The company provides business cards to teachers at schools serving its developments, and for every home that sells, the company donates a book to the neighborhood school in the buyer's name. “It's a small amount per house for us,” says Sessions, “but it makes a big difference in the long run.”

The company also does “a lot of sponsorships,” Sessions adds, including a handicapped-accessible tree house and a local middle and high school robotics team that wore Hedgewood Homes T-shirts when it competed (and took second place) in Singapore. “Over time, people start associating that you're in places that matter,” she continues, “and that you sincerely care about the community and not just your neighborhood.”

Through a program called Profit Partners, Buena Vista Custom Homes supports a host of local charities year-round. “It wasn't started as a way to get more exposure, but it's worked out that way,” Pollock says. As a result of the consistent support, Buena Vista has been named sponsor of the year by several charities, honors that Pollock neither requested nor anticipated. “If you do it long enough and consistently enough, all those rewards will come,” he notes. “That's what I believe. ... I think it has a little bit to do with why we're successful.”

MAKE NICE: Community involvement can play a huge role in getting a project approved. Nino Homes built this park in Greenfield, Calif., as part of its ongoing commitment to the city. As a result, local officials call owner Mike Nino when they hear about prospective land deals.

Nino is savvy enough to know that his willingness to build city parks that are better than what anyone asked for, or to help build a historical society museum, gives him a leg up on the competition. “I do feel I have a certain responsibility to give back to the city,” he explains, “but part of it is because it's good for me. It's harder for the big guys to do that without looking shallow. I harbor no ill will, but doggone it, where I can beat 'em, I'm gonna.”

It's easy to slack off on training when the market is hot. In a soft market, though, skill sets need to be as sharp as possible. Hedgewood Homes puts an emphasis on sales training because much of what adds value to the company's product, such as its commitment to energy efficiency, green building, and neighborhood design, is subtle. “We do a lot of training on how to demonstrate and sell the differences,” Sessions says. “There is a lot to the story that you can't see ... so our agents need to be able to demonstrate that difference, even down to the very narrow streets to make them pedestrian-friendly. If we weren't prepared to explain the difference, [customers] could leave thinking that was a detriment.”

The team at Chesapeake Development takes advantage of every training opportunity available, Lee says. The partners participate in monthly HBA roundtables and in a buying group to learn about new products, and Lee's wife is taking courses through the NAHB's Institute of Residential Marketing. Plus, they load up on educational sessions at the International Builders' Show and attend continuing education programs to maintain their designation as a Certified Professional Home Builder.

Hiring an outside inspector to check quality at the drywall stage and again before closing has helped Gary & Olsson Properties of Houschton, Ga., train its builders on construction best practices, which has greatly reduced defects and helped cut expenses. “We thought it would cost us money, but our warranty costs went way down,” partner Ken Gary says. “We promoted it to the builders as a training program. We started with 30 to 40 defects per house, and now we're under 10.”

Builders in some markets have been stung by national builders who offer huge discounts, usually just before the end of a quarter to move excess inventory. Small builders shouldn't follow suit, according to industry experts. “I'm not a big believer in discounting,” Elkman says. “I think it destroys the value of the product.”

There is a place for incentives, though, especially in a soft market where customers are on the fence about whether now is a good time to buy a house.

Rockford Homes has been building in the same four, contiguous counties in the Columbus, Ohio, market since 1980. The builder stays away from big discounts because those buyers tend to cancel more often, says vice president of sales and marketing Donald Wick.

In the current market, they are going with incentives the buyers can see and touch, such as a free fireplace, he says, and promote a basic design without a lot of bells and whistles. “In softer markets, people buy more conservative things, so they buy our houses more,” Wick notes. “We've got a conservative design and product. [Buyers] don't want more in times like this, they want safer. They want less, but less that's adequate.”

Ideally, says Lehnert, incentives should add value without adding an equal amount of cost. “If you give someone $5,000 in closing costs, they'll use it all. If you give them $5,000 in design center options, they'll use it, but it costs you 30 percent less,” he notes.

Savvy small builders learn from the competition and adopt what's worthy of emulation. For instance, national builders leverage their size for pricing discounts from suppliers. Now, small builders are forming buying groups to gain the same kind of discounts. Chesapeake Development is part of an Atlanta affiliate of Custom Builders USA. “We brought builders together to negotiate pricing, like a big builder,” Lee explains. “Last year, we would have been the 24th largest builder in the country in terms of revenue. That gives us the ear of local and national vendors.”

Of course, then there are the contrarians who say the notion that local builders can't match the efficiency of national builders is a myth. “That couldn't be further from the truth,” Pollock says. “I've tried to sell property to nationals, and the bureaucratic process isn't worth it. It's very, very frustrating. There are no local decision-makers. There are more layers of business to go through. They're like a big, slow, moving ship. When they get pointed in a direction, they're hard to stop. If they need to change course, that doesn't happen quickly. ... We have a lot more flexibility in any kind of market.”