Now for what may be the toughest part of your fight in a downward market: Knocking out other small builders on your home turf.

In this arena, your opponents are the guys who also have friends on the local planning boards, are building similar types of homes at similar price points and designs, and may even have been building in your market longer than you have.

In the past, you could beat the other guy on service and quality and develop a business based on referrals, maybe even advertise once in a while. Now, the market is changing, and you have to be in top form. It's time to start looking at target marketing, Web site development, and maybe even taking a chance on some new designs.

Here are some things other small builders do to deflect competition in their local markets.

ROUND 1 Find your niche. Builders don't always know how to define their niche, a tactic that makes it easier to find the right buyers. Executives at Bay Homes in Hilton Head, S.C., home in on more-qualified buyers by spending the winter attending real estate seminars for home buyers in the Northeast. The programs are managed by Realty Presentations, a diversified media company that also manages Web sites such as and publishes Living Southern Style magazine.

The seminars that Bay Homes chooses to attend are in pricier neighborhoods in the New York, New Jersey, and Boston areas, so most of the buyers there fit the demographic that Bay Homes is looking for: professionals or empty-nesters with money.

“The salesperson for Live told me that the seminars help you do very specific target marketing,” says Jody Easton, president of Bay Homes, who adds that they now get “a higher-quality buyer in terms of someone who's really interested in buying.”

Seeking out local home seminars or expos that target the right buyers is a great idea for small builders pressed for time and typically unable to spend too much money on marketing. Traveling to another region may be beyond the reach of many builders, but there are plenty of opportunities closer to home. The school district in Florida's Broward County, for example, holds a home fair for its teachers, providing a perfect opportunity for small builders who focus on affordable and workforce housing to reach those buyers.

ROUND 2 Take design risks. One builder in the Southeast that we talked to says he's been building colonials for years and “doesn't go for that Tuscan stuff.” While it's understandable that he thinks Tuscan has been overdone, it's a mistake to be set in your ways as the market continues to soften. Seek out design ideas from other regions of the country to see if they might attract buyers in your area.

For Atlanta-based Pritchard Brothers, importing the Northern concept of a cellar helped the company solve a thorny construction challenge. Frank Pritchard, who runs the company with his brother Steve, says he builds cellars as an alternative to walk-out basements, a popular feature in the South. Pritchard says that since much of the terrain in Atlanta is rocky and slopes down below grade, he can't always provide a walk-out basement. His buyers like the cellar because it can be turned into a finished basement and air conditioned.

Learn more about markets featured in this article: Orlando, FL, Austin, TX, Atlanta, GA.