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Cash is King: How to Survive till Next Week
Cash is king. That maxim is easy to say when a builder has cash. What about when cash is low? Many only have income only when they have a house under construction. When cash is short, it’s important to be careful with the cash on hand. To keep the cash flowing, cash needs fall into the following:
By Randy Noel
- Builder’s salary: This, of course, is what the builder pays himself. Keep it as low as possible to sustain his household. This may seem selfish, but a builder must protect his personal assets to remain in business; as soon as they are lost he has no motivation to continue.
- Business staff’s salaries: By this time, only essential employees should be on staff and they should be doing as much work as possible. Without pay, they will leave as soon as possible. They must pay bills and cannot miss a payment.
- Business rent, phones, etc.: As soon as a builder closes his office or disconnects his phone, red flags go up in the building community and material and labor gets hard to find.
- Small sub-contractors paid weekly: Like your employees these contractors cannot afford to miss a week of payment, and they are the most vocal on the job site. They typically are lower priced than large subs.
- Small suppliers paid monthly: Local suppliers that have investments in inventory and offices and cannot wait for payment. They will cut a builder off quickly since they have little room for non-payments.
- Large sub-contractors paid monthly: These contractors are more likely to have reserves that will allow forbearance than smaller businesses. However they will not let you get passed the lien period. These are usually plumbers, HVAC, electricians, etc.
- Large suppliers paid monthly: These are usually national suppliers with reserves that may be able to stretch terms but not past lien periods.
- Property taxes: Property taxes on inventory. This takes time in most states to seize property for non-payment and allow redemption although builder will have to pay penalties and interest. It’s important to talk to legal council on this topic.
- Community Fees: These are fees like homeowner association fees. Like property taxes normally non-payment may be made up at the sale with penalties and interest, but seizing property is a long process.
- Maintenance on your inventory: Grass cutting, utility bills, cleaning, etc. In order to sell the inventory the builder needs to keep it in good appearance; but it falls lower on the list than expenses such as employees.
- Interest on inventory: Lenders collect monthly interest on loans and do not begin to workout forbearance until a builder is behind on interest payments. Most loans have equity positions at 80% on loans thus placing the lender in a favorable position in the inventory.
The order of paying out of a limited cash flow will vary between builders and at some point the builder simply puts out the largest fires that will consume him the quickest. Being on the back end of a failed company and looking back, the moral process is the above order particularly since banks are now getting billions from the government. The immediate goal is to appear normal for as long as possible. As soon as the community feels the builder is in trouble and the rumors begin, labor and suppliers begin to speed up collections or refuse to work or ship. Then the builder is finished.
Below are several other ways to limit and slow the cash flow out of the business.
First, seek extended terms with major suppliers. They may allow 45 day terms but rarely will go past your state’s lien period provision if it has one. Next, when signing personal guarantees, limit them to one year. This will require the supplier to annually seek the builder for renewal allowing the builder to keep on top the amount of personal guarantees in his market.
Always sign every delivery, purchase agreement, listing agreement, tax report, everything as the corporation by or as the corporation’s employee. This will keep the builder from being personally liable for anything. Next, stop handing out checks at the office and either deliver them to the job site or mail them. Once this policy is used, begin to place everyone on a week from invoice to payment schedule.
This allows more time to evaluate invoices and slows the flow of cash out the door. Never pay for incomplete work. Now is not the time to extend credit to sub-contractors. Negotiate prices before work begins. Understand the sub-contractors are hurting too and will try to make up for lack of work by raising their prices.
Never write checks without the money in the bank. Bounced checks are like a cancer to a homebuilder. Once they begin, the rumors begin if a homebuilder has the reputation for not being able to pay his bills, he will begin to lose credit with the lender and a death spiral begins. It is better to not issue the check for incomplete or substandard work, than release a check and have it bounce.
Finally, look at the list and prioritize it to whom gets paid first. When I did this for my father’s company, I always paid from the least able to withstand the financial crunch to the ones most likely to withstand the crunch. When you’re in survival mode, hard decisions need to be made. Run the business and continue to remember it is a business, everyone else still believes this.
Randy Noel, of Reve, Inc. in New Orleans is a builder and member of the Business Management and Information Technology Committee at NAHB.
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NAHB TeleConference: Housing Tax Credit
 On Monday, March 16 at 2 p.m. Eastern, NAHB will host a timely teleconference on how to use the $8,000 tax credit to sell new homes. The program will feature details about the tax credit program and tips from leading marketing specialists.
To register, go to http://services.choruscall.com/diamondpass/registration.
And for those who cannot join the call, an audio file of the call will be available on NAHB.org just a few hours after the call is completed at www.nahb.org/teleconference.
Featured Speakers:
- Jerry Howard, NAHB's President and CEO
- Rob Dietz, NAHB's Director of Tax Issues
- Gaye Orr, MIRM, CMP, of Coldwell Banker Advantage News Homes in Raleigh, N.C.
- Residential Development Strategist Dan Levitan, MIRM, CMP, of Levitan and Associates in Fort Lauderdale, Fla.
NAHB President and CEO Jerry Howard will provide an overview of the recently enacted federal stimulus package and its housing-related provisions. Rob Dietz, NAHB’s director of tax issues, will explain the $8,000 tax credit in detail, including eligibility requirements, how to claim the tax credit and how the new tax credit differs from the credit offered in 2008.
Joining Howard and Dietz on the call will be marketing experts Gaye Orr, MIRM, CMP, and Dan Levitan, MIRM, CMP.
Orr is President of the Institute of Residential Marketing and a past chair of NAHB’s National Sales and Marketing Council (NSMC). She is Vice President of Coldwell Banker Advantage New Homes in Raleigh, N.C.
“The economic downturn is forcing all of us in the housing industry to work harder and smarter,” Orr said. “The winners will be those who learn to do more with less. That’s why everybody is trying to figure out how the stimulus package can be used to sell homes. And that’s what this teleconference is all about.”
Levitan is a residential development strategist and founder of Levitan and Associates in Fort Lauderdale, Fla. He is a past president of Institute of Residential Marketing and was inducted as the first Fellow of the Institute.
“We’re pushing the tax credit very hard,” Levitan said. “So much can be done with electronic and web-based communication.”
Please Note: The Conference ID number is used for registration. You will receive a unique pin number for the audio conference. Don't forget to write down the pin you're assigned since you will need it to join the call.
For further information, please contact Blake Smith or Paul Lopez at 800-368-5242, ext. 8254.
Click to register for the NAHB conference call
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NAHB Provides One-Stop Stimulus and Tax Credit Information
 NAHB has created a Web page at www.nahb.org/2009stimulus with links to everything association members need to know about the $787 billion economic stimulus package that was signed into law in February.
NAHB members are encouraged to use the site to find information and resources on what is in the stimulus package, what it means to their customers and their business, how to promote the $8,000 tax credit to first-time home buyers, and how to take advantage of the many provisions that benefit the housing industry.
“The $8,000 tax credit for first time buyers can be used to help buyers sell their homes,” said builder Randy Noel. “Advertise $8000 credit, talk to banks and housing finance agencies to monetize the tax credit.”
All of the promotional resources to help builders market the home buyer tax credit feature NAHB’s consumer Web site www.federalhousingtaxcredit.com. The site has attracted nearly 1 million visitors in just the last five weeks. The site’s explanation of the tax credit eligibility requirements, comprehensive Q&A and links to homeownership resources are helping potential home buyers understand the advantages of buying a home today.
“Target home market to below $250,000 earners, such as qualifying earners below $250,000 and build to that market,” said Noel.
Analysts at NAHB anticipate that the tax credit will result in about 160,000 additional home sales in 2009.
“There are many opportunities here especially in the energy conversation and green arenas,” said John Barrows, builder and owner of John Barrows Inc.
NAHB has also updated the popular consumer brochure, “Opportunity Knocks for Home Buyers,” which provides real examples of typical tax savings through the first five years of homeownership, explains the power of leveraging and provides other compelling and accurate information to consumers who are considering whether to purchase a home.
HBAs and members are encouraged to print this resource and distribute it in sales offices, at home shows and anywhere they have a consumer audience. Download the brochure PDF at: www.nahb.org/opportunitybrochure.
For more information on these resources, e-mail NAHB Public Affairs, or call Gwyn Donohue at 800-368-5242 x8447.
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Some Markets Still Viable Says Builder, Hanley Wood
Recently, a builder collaborating with Hanley Wood, developed a measurement of the best and worst markets now, and on the horizon. As the markets nationwide are hurting, the research done for this project has shown that some markets have outperformed expectations and may continue to do so.
Seventy five regions were analyzed for the study and were ranked on population trends and job growth; as well as average home prices and builder permit rates. The best markets had a few things in common, “Most of them are great places to live, either close to the ocean, mountains, or major universities. Most of them didn’t have a huge run-up in prices during the boom and aren’t experiencing rampant deflation during the bust.”
To read the full article and see the healthiest markets go to:
http://www.builderonline.com/local-markets/the-healthiest-housing-markets-for-2009.aspx
See the followup articles by clicking below:
http://www.builderonline.com/local-markets/the-weakest-housing-markets-for-2009.aspx
http://www.builderonline.com/local-markets/the-2009-local-market-health-index.aspx
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Free Industry Webinar on Business Strategy Seminar - April 7
The Custom Electronic Design & Installation Association (CEDIA), founding sponsor of NAHB’s Home Technology Alliance, will offer a free webinar on developing business strategies and strategic planning. The session will be held Tuesday, April 7 from 12:00-1:00 p.m. EST.
The webinar will provide step-by-step guidelines on how to efficiently implement a strategic business plan with an efficient One-Page Strategic Plan.
The program includes:
- An introduction to the One-Page Strategic Plan
- Keys to aligning company’s team around a common purpose
- An interactive session on how to incorporate strategic planning in business
To register, click here.
For more information, e-mail Casey Keller, CEDIA director of curriculum and learning, or call 317-328-4336.
The Custom Electronic Design & Installation Association (CEDIA) is an international trade association of companies that specialize in planning and installing electronic systems for the home. These systems include home networking, home automation and communication systems; media rooms, single- or multi-room entertainment systems; and integrated whole-house subsystems providing lighting control, security and HVAC systems.
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Members Can Save Ten Percent on Vacation Rentals Worldwide
 NAHB members can get 10% off the “best available rate" at Endless Vacation Rentals by Wyndham Worldwide, one of the world's largest global marketers of vacation rental properties and part of NAHB’s Member Advantage discount program.
Endless Vacation Rentals represents approximately 60,000 vacation properties worldwide* — ranging from studio and one-bedroom accommodations to multiple-bedroom units throughout the U.S., Canada, Mexico and the Caribbean to villas, apartments, cottages and homes in Italy, France and the United Kingdom.
Available during specified periods, these unique vacation rentals offer more space, flexibility, privacy and “comforts-of-home” conveniences to make vacation stays more enjoyable.
To Register
To use the program, visit www.evrentals.com/nahb, or call 877-670-7088 and give the agent the NAHB discount ID number 20090. The NAHB discount will be applied at the time the reservation is made. The Web site also enables members to review key resort amenities, descriptions and directions.
*Destinations and travel times are subject to availability and confirmed on a first-come, first-served basis. Offers include accommodations only and specifically exclude travel costs and other expenses that may be incurred. Promotional discounts and offers may not apply to all properties. Other restrictions may apply. Offer void where prohibited by law. Additional taxes and conditions may apply. Visit www.EVRentals.com for terms, conditions and additional disclosures.
The inventory is made available by Resort Rental, LLC (operating as Holiday Rentals, LLC in Maryland and Texas) an Indiana-licensed limited liability company.
Other Member Advantage Discounts
For the most up-to-date details on the Member Advantage discount program and all of the participating companies, go to www.nahb.org/MA.
Avoid Visa, MasterCard Processing Increases With Solveras
Even in this economy Visa and MasterCard are implementing processing rate increases this month.
NAHB members and home builders associations can avoid these increases by switching processing providers to NAHB Member Advantage participating company, Solveras Payment Systems by March 30.
By switching by the deadline, Solveras will guarantee 2008 processing rates for one year, and members and HBAs will be able to keep more of their profit on every sale.
For more information, call 800-613-0148, or request request a free analysis online.
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Accomplishments Will Get Your Resume — and You — Noticed
By Alan Kerschen, ConstructionJobs.com
 After reviewing countless resumes during my career as an executive with several environmental firms and executive search firms, I am still amazed that most job seekers fail to create a resume that will actually help them get a job.
If you really want a job in this economy, if you really want to make your resume stand out, you have to focus your resume on what matters — and that’s accomplishments, not a road map of where you’ve been.
Potential employers reviewing resumes typically spend 10 to 15 seconds looking at a resume. That’s all the time and attention you have to stand out from the literally thousands of job seekers competing for the same job.
The best way to get their attention is to put an “Accomplishments” section at the top of your resume and emphasize things that you have done that have:
- Saved the company money
- Made the company money
- Solved problems for the company
Those are the values that company owners and executives value in today’s business environment. Those are the types of accomplishments that will get you noticed — and move your resume to the top of the stack.
There are hundreds and hundreds of candidates who have more than five years of residential or commercial experience building a subdevelopment or schools or strip centers. But only a few have listed at the top of their resume such accomplishments as:
- “I saved the company $500,000 in costs by effectively managing subcontractors.”
- “I made the company more than $300,000 by completing the project 40 days early.”
- “I found a solution to a foundation problem that saved the company two weeks of construction time.”
Facts like these are more important than the road map of your career.
If your resume doesn’t highlight your accomplishments, redo it. Spend some time focusing on what is really important in your job search — so you can create a grab-them-by-the-throat-in-five-seconds resume.
How to Structure Your Resume
Your resume should be a one-to-two page synopsis of your expertise.
- Key Accomplishments: These need to be in the top third of page one.
Your accomplishment should be listed in three to six bullet points; with each point one or two lines long. Remember, your bullet points should be hard-hitting facts of how you saved the company money, made them money or how you solved a problem.
Be prepared to discuss these points in detail when you get a call from an employer because they will want to know more.
- Project Examples: This should be listed next.
This is a list of several projects that you were involved with, their size, when you worked on them and what you did.
- Relevant Experience: List your experience in chronological order, with the most recent experience at the top. Here you can include a brief description of what you did at each job. If you have an extensive work history, you may need to shorten the info for each job to keep your resume within two pages.
- Education: This is where you will want to list your degrees, certifications, licenses, etc. You may or may not want to date items in this section.
- Don’t list references in this resume.
Remember what you want to accomplish with this resume is a phone call so you can expound upon your attributes and why they should hire you. Once they call you and talk to you, you can ask them if they want a more detailed version of your resume and references.
Your resume is only the first step in your job search process, but if you don’t produce a great resume, you may never get to step two.
Alan Kerschen is a sales manager at ConstructionJobs.com, which powers the NAHB Career Center. For more information, e-mail Kerschen, or call him at 828-251-1344 x205.
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