Intense customer relationships and attention to detail are what connect DSLD Homes and Couture Homes as this year’s America’s Best Builders. Both companies impressed our judges—Steve Brooks of Grand Homes, Vern McKown of Ideal Homes, Redmond Homes founder Carl Riden, and Chuck and Emma Shinn of Shinn Consulting—with their systems and processes, their tough love with trade partners, their community involvement, and their steady revenue and profit gains.
Couture Homes sets the tone for its rich clients.
In mid-December, subcontractors put the finishing touches on an 11,000-square-foot mansion in the Old Palm Golf Club community in Palm Beach Gardens, Fla. For the builder, Jupiter, Fla.–based Couture Homes, this house is the first in its Designer Collection, the result of Couture’s collaboration with international architects and designers to create one-of-a-kind homes, not unlike how fashion designers create clothing that drives trends.
Couture’s principals, Todd Ullom and Gary Hartogh, see their Designer Collection as an extension of their Lifestyle Collection of custom homes. “Our Lifestyle Collection is like walking into a Ferragamo showroom and having something custom made,” explained Ullom, whose career includes management positions with WCI Communities. “Whereas our Designer Collection is like walking into the same store and finding a perfect fit.” What distinguishes the new house in Old Palm is the nexus of art and architecture on its walls, its alfresco living spaces, and its indoor kitchen that features cabinets from the high-end Italian manufacturer Valcucine.
Ullom’s reference to Ferragamo is no accident. Last summer, he and Hartogh met with representatives from Salvatore Ferragamo, the designer and retailer, about cross-branding. On Jan. 17, Ferragamo showed its 2013 resort collection inside Couture’s Designer Collection manse. Ullom noted that many of Ferragamo invitees were new to Couture, so the event might also generate buyer leads.
Luxe Interiors + Design, with which Couture has a marketing agreement, was planning a two-page spread on this fashion show.
Hartogh added that Couture has had “conversations” with Armani and Lamborghini about integrating their brands’ color palettes into a Couture house’s interior design.
Before Couture opened for business in 2008, Ullom estimates that 70 percent of wealthy buyers in southeast Florida purchased a spec home, and many were frustrated over not getting exactly what they wanted.
Ullom had a network of contacts at Old Palm from his days at WCI. Old Palm is where he met Hartogh, who owned a WCI home. At one time Hartogh was a managing director for one of South Africa’s largest master planned community developers and builders.
Couture’s calling card is anticipating what customers want via its Lifestyle Discovery Process, an “ethnographic” questionnaire crafted with assistance from the Minneapolis product design firm Worrell.
The process probes a buyer’s lifestyle, with an eye toward designing a house that meets specific needs, tastes, and activities. Combined with the questionnaire, Couture’s principals and salespeople spend hours, even days, with buyers, observing patterns of their lives to come up with a house that matches them.
Take Edwin and Jo McQuigg, who last summer moved into a 10,500-square-foot Couture house. The McQuiggs have moved 22 times during their marriage and know a thing or two about building new houses. During her first meeting with Hartogh, Jo recalled that she liked the fact that Couture pays its subs on a weekly basis, which in her mind translates into dependability. She also liked that the house would be built “smart”; the McQuigg’s home is certified silver under NAHB’s green building standards.
Ullom and his wife also met with the McQuiggs to discuss their lifestyle; for example, she doesn’t watch much TV, so Ed wanted his own man cave for his 80-inch flatscreen and sports memorabilia. The couple lives with an 11-year-old cat, Max, whose arthritis needed to be accommodated with special resting and eating areas in the kitchen and pantry.
Jo spent “a lot of time” with Couture’s operations manager, Chris DiPiero, refining the architectural and interior design of the house. “We’re still tinkering, but we’ve been very pleased with what we bought.”
Scott Waldman, a managing director with Morgan Stanley, moved into his 7,500-square-foot Couture home Dec. 19, 2011. Waldman’s needs included capacious home office and outdoor living spaces (Waldman does a lot of client entertaining), and three guest suites with their own entrance to the house, as Waldman often has visitors and family members staying with him and his dog, Ace.
“These guys have been great to work with,” said Waldman about Couture’s team and their interaction with his designer.
Bonding With Customers
Couture’s Lifestyle Discovery Process leads to a Constructability Analysis that includes molding a 3D miniature before construction begins. The process and analysis allow Couture to work efficiently: homes that average 8,000 square feet on one acre typically are completed in 153 workdays. Couture also employs a six-step supply-chain model, which includes purchasing products like cabinets and faucets directly from manufacturers to reduce buyers’ costs and increase trade partners’ margins.
A few months after the McQuiggs moved into their home, Couture rebated $2,300 in expenses paid. That impressed Ed, a former marketing executive who focuses on his own investments. “That, to me, showed integrity.”
Ullom and Hartogh prefer to keep construction to 10 homes per year. Couture is developing a seven-lot waterfront enclave called Harbor Place; and is assembling a fund to establish relationships with land banks. The principals also see tear-down and rebuild opportunities in older golf course communities.
Couture has been beta testing licensing of its Lifestyle Discovery Process and Constructability Analysis with Orlando-based Arturo Barcellona Homes, through which it is helping the production builder refine its systems and land acquisition. Couture isn’t promoting licensing yet. But the very notion “helps us understand that everything we do is a process,” Ullom said.
Standardization drives profits and growth for DSLD Homes.
It was pouring rain on a mid-December morning in Baton Rouge, La. But the weather couldn't dampen Saun Sullivan’s spirits. Sullivan is co-owner and CEO of DSLD Homes, one of Louisiana’s largest production builders. His company was on track to exceed 1,100 homes for the year, 60 percent more than in 2011. And few companies can match DSLD’s productivity, as this builder generates more than $1.4 million in revenue per employee annually.
As he drove a reporter around some of DSLD’s communities, sloshing through in-progress jobsites and finished paved and landscaped neighborhoods, Sullivan spoke proudly about his company’s product—mostly single-floor French Colonial-style houses, which range in price from $130,000 to $276,000—and the systems DSLD has in place to expedite everything from land purchasing to construction.
But Sullivan acknowledged that DSLD must get better in areas like sales training and personnel development in order to expand into new markets and states, such as Mobile, Ala., and Jackson, Miss., which are being considered for growth.
“If someone tells you they have this business figured out, they’re lying,” laughed the 39-year-old Sullivan.
Staying the Course
Since launching in 2008, DSLD’s game plan hasn't strayed much from a few basic principles:
• Financial discipline: DSLD, with credit lines from Wells Fargo, Bank of America, and a local lender, maintains a conservative balance sheet. Over the past three years, for example, its debt-to-equity ratio has been under 1.0. “You can’t let growth outpace your capital assets,” said Jeff Purpera, the company’s CFO.
Still, DSLD expects to close 1,500 homes in 2013. Its financial management allows this builder to jump on land acquisition opportunities when other builders have either been selling real estate or sitting on the sidelines. The company controls about 1,500 finished lots, and its purchasing strategy, said Sullivan, is to avoid “marginal” deals, “where everything has to make sense to work.”
The company also tracks its financial performance on a house-by-house basis via reports that are churned out every morning for all variance POs to help production managers identify issues and trends.
• Even-flow scheduling and production: DSLD starts, on average, 30 homes per week, and completes each of them within 43 workdays. Most of what it builds is presold, so DSLD had only 14 spec homes on the market when BUILDER visited in December.
Standardization allows this company to build quickly and control costs. DSLD’s subcontractors are required to follow “Field Guides,” which consultant Ed Caldeira devised to specify how subs should install just about every component that goes into a house’s construction. There are 27 field guides alone for the installation and punch list for cabinets. If a sub makes a compelling argument for installing something differently, “we want any changes to be across the board,” Sullivan said.
Subs buy into DSLD’s regimen because of the steady work this builder can promise them, and because DSLD pays its contractors like clockwork three days after their part of the job is done. (Contractors can’t invoice DSLD and must instead work though its purchase-order system. The builder’s superintendents control these payments.)
DSLD’s next step, Sullivan said, is to develop a series of YouTube videos for products and processes, which eventually might evolve into something owners would pay for to help them maintain their houses.
• Quality control: First-Time Quality reports are another Caldeira creation. Inspection forms are sent to each trade partner on the first Tuesday of every month. Contractors grade, on a scale of 1 to 5, each activity that preceded theirs and how it affected their ability to complete their job. DSLD uses this system to track the trades’ performance on a weekly, monthly, and yearly basis, and has stopped using certain subs based on these evaluations, said land manager Lee Foster.
Once the buyer assumes ownership, DSLD’s six-person warranty team handles defects or other problems. “We accept ‘ownership’ of that house, post sale,” said Sullivan, who looks at his company’s warranty program as part of its marketing.
• Customer service: Two-fifths of DSLD’s sales come from referrals. DSLD’s 30 salespeople are trained—through protocols and procedures established by Forrest Performance Group, a sales consultant—to serve as counselors who help buyers anticipate roadblocks and get through the purchasing process as painlessly as possible.
DSLD touches base with every owner four, eight, and 12 months after closing. The research and management consultant Woodland, O’Brien & Scott also sends every buyer a questionnaire both 45 days and 11 months after closing to gauge customer satisfaction.
Right now, Sullivan says he grades DSLD’s selling efforts a “B.” It’s not that he’s dissatisfied so much as he always sees room for improvement.
While DSLD won’t be making any major changes to its basic house design, it continues to roll out new products, such as its higher-end Artist Series. And where its current color palette is “beige, beige, and beige,” said plans and estimating and purchasing manager Daryn Scott, DSLD grants its architects latitude to develop designs and interior patterns, according to research and development manager Ryan Nash.
In September DSLD hired its first human resources manager, Kristen Hathcox, who came from the medical industry. One of her challenges, she said, has been to “break the habits of everyone doing their own thing” by bringing a measure of continuity to the HR process. So important is personnel development to DSLD Homes’ future success that Sullivan expects much of his time over the next two years will revolve around “growing our people and strengthening our bench.”