It’s fair to say that home builders are more worried about cash flow and cost efficiencies today than ever before. It’s a necessity. After all, that botched foundation pour, costly callback, or unchecked billing error could mean the difference between making or breaking a wafer-thin margin.
Which makes it all the more mystifying that so many builders continue to leave money on the table, or—as some expert observers and peers will tell you—commit the operational equivalent of throwing a pile of cash into a dumpster and setting it ablaze. Even in the most brutal of economic conditions, capital is being squandered in some amazing and clueless ways.
So, if your ultimate goal is to bury your business, forgo all of your worldly possessions, and live in a yurt on the edge of eastern nowhere, then by all means, go ahead and do what many builders have been doing for years. Sticking to the status quo could be your ticket out.
But if you’re looking to shore up your bottom line, run a tighter ship, and maintain the time-honored American tradition of turning a profit, then read these tips as a cautionary tale. And, if you have cautionary tales of your own to tell, pass them on. Submit a comment at www.builderonline.com/tradesecrets.
Then, make a new plan, Stan. Hop on the bus, Gus. Drop off the key, Lee. And get yourself free.—J. Sullivan
1 | Compete with the public builders on price.
Profit? How passé! Over their past two fiscal years, the top 15 public builders lost an aggregate $12.8 billion on revenue that plummeted by nearly 40 percent to $24.7 billion. But that hasn’t stopped them from buying more land, building more houses, and slashing prices to goose sales. Thanks to the federal government’s net-operating-loss handout, the publics can worry less about making money awhile longer. With the playing field this lopsided, smaller builders must approach customers from different angles, such as design and location. Keep in mind, too, that some publics are already targeting two fertile areas by focusing on scaled-down and energy-efficient homes.—J. Caulfield
2 | Get into an arms race with gables and façade details.
If you’re looking to outshine the competition with curb appeal, think about paint colors first. “Remember that color is the least expensive material with which to create the most impact,” says architect Aram Bassenian, “as opposed to junking up the elevations with extra ornamentation that costs more and doesn’t necessarily work.”—J.S.
3 | Switch subs and suppliers for the lowest bid.
Do you like it when home buyers shop around for the lowest price, regardless of quality or service? Work with your top subs and suppliers to negotiate better (yet still fair) prices that help keep everyone working above the break-even line. Let them know you aren’t shopping their bids, and they might sharpen their pencils in return for your loyalty and steady work.—R. Binsacca
4 | Overlook lot orientation.
For expediency’s sake, builders most often orient their lots based on the street grid. But the truth is that the single biggest move you can make toward energy efficiency is to orient your house for maximum benefit based on the sun and the breeze. Taking advantage of prevailing breezes promotes natural cooling, helps to cut down on heat gain, reduces the work on mechanical systems, and helps save energy. And site orientation “has a crucial role in future performance of the building and enjoyment of occupants,” the Austin Energy Green Building program says in its Sustainability Source Book.—N. F. Maynard
5 | Expand without reconnaissance.
It ducked The Great Depression II, but the housing industry is still marching through The Great Evacuation, with builders exiting markets that looked promising only a few years ago. (Woodside Homes’ decision to leave Washington, D.C., and four markets in Florida, only six years after entering them, is a recent example of this.) Much of the mistimed growth that buried numerous builders over the past five years occurred without much thought given to necessity. If you can’t answer the question “why,” objectively and quantitatively, from the vantage of customers in the market you covet, stay home.—J.C.
6 | Estimate lazily.
The average lumber takeoff for a 2,500-square-foot house is about $15,000, and 15 percent of that (or $2,250) is commonly added as a “waste factor” built in to accommodate miscuts and shorts caused by vague (or nonexistent) framing layouts and poor site supervision. Tighten your estimating with better framing details and work with your lumber dealer to optimize your frame packages to reduce your waste factor to 5 percent or less. Apply the same discipline to sheathing, drywall, interior trim, and siding to reduce the “lazy tax” of those hard costs, too.—R.B.
7 | Market houses as you always have.
Builders finally realized that customers don’t shop the real estate sections of their Sunday newspapers. But Denver-area marketing consultant Lance Jackson thinks many builders still drink the Kool-Aid about houses selling themselves, so they’re clueless about whether their ads are positioned on the right media platform(s). The goal, says Jackson, should be to engage buyers by cultivating an identifiable brand in a sea of anonymity. Internet outreach should inspire action, not just browsing. And your May-December romance with Facebook and Twitter won’t last if the sparks those social media ignite aren’t fanned by live salespeople who listen and follow up.—J.C.
8 | Overbuild your structural frame. A quarter-century of real-world research proves that you use more sticks than you need to build a high-quality house. So unless you can truly afford to spend 30 percent more for lumber you don’t need (an amount that Utah builder Guy Haskell, for one, saves by advanced framing), plus the dump fees from the excess waste you’ll create by not value-engineering your structural frame, take a look at using 2x6s at 24 inches on-center, among other optimum value-engineering practices, and then fill those wider and deeper framing cavities with insulation to boost your home’s thermal values, to boot.—R.B.
9 | Tear down and trash it all.
If you’re razing an old structure and building new, think creatively before you haul everything off to the landfill. That pile of debris could contain a trove of vintage items that could give your next project some character—such as antique balustrades, fireplace mantels, wood beams, transoms, and light fixtures. “Think of it as a pile of money and not a pile of waste,” says building scientist Mark LaLiberte.—J.S.
10 | Reduce your sales office hours.
Builders forgot how to sell. They allowed their field salespeople to become order takers when there were plenty of orders to take and left them stranded when market conditions tanked. At that point, a huge disconnect occurred: Some builders started receiving customers “by appointment only,” thereby eliminating any possibility of spontaneity or persuasion; other builders employed “human directionals” to drum up warm bodies. When customers want to shop is unpredictable even in the best of circumstances. Yet many builders’ sales offices are still dark two or three days a week and rarely stay open past 6 p.m.—J.C.