It's finally happened. The housing crisis has spread to the custom home building business. Not every corner of it, mind you. From what we hear, custom builders who are building for “old money” clients, professional athletes, and movie stars are doing fine. But, really, how many clients like that are there?
If your business is struggling as a result of the downturn, it's time to “find a survival strategy.” That's the advice of Al Trellis. In case you don't know Al, he's a former custom builder, a past columnist for CUSTOM HOME and BUILDER magazines, the president of the consulting firm Home Builders Network, and one of the best educators and thinkers I know in the custom building business. Al speaks and consults with scores of custom and high-end builders each year and always has useful insights into the business. So I recently asked him for his thoughts on the current state of custom building and how builders might navigate these dangerous market conditions.
The first step in dealing with the downturn in business, Al says, is to get real—“Accept that the market will be down for a while.” You either have to right-size your company so that it can live on a smaller piece of the market, he says, or be able to subsidize it until we get through the downturn. Then you have to find ways to protect your share of a smaller market.
“It's time to change your mindset,” he says. Maybe it's time to build a small office building for your own account, do contract work, or offer remodeling services. You could joint venture with someone who sees an opportunity or share space with a business that wants to cut overhead. He suggests you look for the harder road, like infill, where there's less competition. He advises “to get out of your box now.”
What you don't want to do is hunker down. “You have to market better than you ever have. You have to mix and mingle more than ever to get in front of customers.” Go to the country club or get involved in community organizations that draw people who can afford your services. “You have to make people aware of you.”
You'll also need sharpened selling skills. “People tend to go with the wave,” Al says, “and now the wave is to not buy. The economy no longer is making the sale for you.” Before you can make a sale you'll have to overcome the buyers' resistance to buying in the first place as well as their belief that builders are desperate and will build for rock bottom prices. “You can't let them destroy you on price,” he cautions. “You have to make them believe that you are the best guy to give them their dream.”
“This too shall pass,” Al says, but until then the way to survive is to “shut up and keep swimming.”
