KEEP PRACTICINGWhen Fast Trackers aren't establishing new revenue sources, they're concentrating on improving their business practices. “I still have 75 percent of my staff, and I need to keep them busy,” Cassidy says. “So we're streamlining our systems and procedures.”
For some Fast Trackers, that means back-office improvements. Cassidy Homes is automating its accounts payable process for trade contractors. Triton is slicing cycle times and organizing operations for maximum efficiency. “One of our core values is system solutions and repeatable processes in every phase of building homes,” Bramble explains. “It's served us well. We're becoming more and more efficient.”
Triton certainly is, moving to a 65-day production cycle at its newest developments in Northwest Arkansas (down from Triton's 75-day target) and restructuring processes so that a superintendent can manage three to five communities, rather than just one as in the past.
Such efforts represent smart investments in a company's future, according to Maltzman. “Now that it's slow, you really have to get back to basics. It makes sense to keep personnel on to implement systems so that when the market turns, your systems are tight.”
SURVIVE A LOSING SEASONAh, the upswing. Fast Trackers, regardless of whether they've built a handful of homes or hundreds, are as eager as any other builder for the housing market to rebound.
Unlike their counterparts, though, these Fast Trackers never forgot that housing is a cyclical business, no matter what the big builders say, and they planned accordingly. A housing recession is “always worse than you've ever planned for,” Alloy says. “Fear in planning is good. Fear in planning keeps you alive.”
Alloy has decades of home building experience, but even rookies who have known nothing but the boom say they have done their best to safeguard their firms against a housing bust.
“Raleigh's always been a good market. It hasn't gone up and down as much as the rest of the country. But I said, ‘Hey, we need to have enough money in cash so that if 9/11 happens or there's a housing slump we can stay in business for 12 months,'” remembers John Heidel, president of Homestead Building Co. in Wake Forest, N.C., who formed his company just four years ago, in 2003. (Homestead closed 19 homes for $10 million in revenue in 2006, up from five homes and $1.7 million in 2004.)
Veterans have done the same thing, only in more sophisticated ways, to ensure liquidity at their companies. “In 1991–1995, we realized the first thing that we did not have was money. All the banks had shut down,” remembers Alloy, then in his twenties. Now Stanley Martin's chief executive, he was determined to avoid a replay of that scenario. “During good times, raise as much money as you can,” says Alloy, whose firm obtained $150 million in 10-year bonds and a $150 million syndicated line of credit in recent years. “Now we're in a terrible recession, with millions and millions of dollars at our disposal. It's a comfortable place to be, and it keeps you from making a dumb decision for cash reasons.”
Fast Trackers have relied on simpler tactics as well. Mungo, for example, has opted to limit leverage and build equity in his company instead. “You've heard of OPM? That stands for ‘other people's money,' and when things turn down, those people want that money back.”
That certainly represents a conservative strategy, especially given the ready capital and record-breaking home sales of the recent boom, but that's just fine with Mungo, who plans to manage his company and its growth for years to come. “No one ever went broke preparing for a recession,” the veteran builder points out. “I've worked way too hard to give it all back to my creditors at the first downturn.”
Alison Rice is a freelance writer based in Arlington, Va.