Business of Building e-Source - 02/13/2003 (Plain Text Version)

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Heads Up: Staying Afloat in Big-Market Competition

Small-volume builders needn’t get lost in the crowd when they compete with large-volume builders. The trick is learning from the big guys, and then using that knowledge to differentiate your company and retain market share. Here are some proven strategies from an educational session presented by Patrick O’Toole, senior editor of Professional Builder magazine and builders Tim Hernandez and Mick Galatio at last month’s International Builders’ Show in Las Vegas.

Use local knowledge. Small-volume builders have a better understanding of market and sub-market nuances. A niche to large production builder is a business opportunity for a small-volume builder. “[We] understand why it’s better to be on one side of the highway than the other or why it’s better to be near a certain school system,” says Hernandez, who used to work for Pulte Homes. He’s now vice president of New Urban Communities, a Delray Beach, Fla.-based home builder that focuses on small infill sites.
Control land. The big guys do, and you should also. “This is how you manage your destiny,” says Hernandez. “If you don’t control land, you won’t have a future because you’ll constantly be scrambling to keep your business afloat.” There are many ways to finance good deals, but controlling land is key.
Be nimble. Take advantage of your company’s size and move quickly when buying land. “We’ve been able to purchase land that some of the big builders didn’t look at or weren’t quick enough to buy because they had to get approval from their boards,” says Galatio, owner and president of Desert Wind Homes, which builds semi-custom homes in Las Vegas.
Keep overhead low. This allows small-volume builders to pick and choose high-margin opportunities since they don’t have to “feed big machines,” like large-volume builders do. Making sure you don’t grow too fast is one way to keep overhead in check. Tying spending to your business plan is another.
Build relationships with several bankers. You need financing flexibility. “Banks can be fickle,” says Hernandez. “They may decide they don’t want to do infill anymore or they don’t want to lend to home builders.” Shop your projects to various lenders from time to time. You get better rates when they compete for your business.
Offer one-of-a-kind options. It’s the little things—and options—that buyers remember as part of the personalized experience of working with a small-volume builder. “So many home buyers put in doggie doors after they move in, but it’s a lot of work,” says Galatio. “We offer a doggie door on our option sheet.” The company promotes it by asking buyers what size door they want for their dog.
Do joint ventures. Successful small-volume builders often spread their risks and enhance land-buying leverage by finding project partners or selling surplus lots.

The International Builders' Show--the largest annual construction industry show in the world--invites you to run a smoother operation, nudge the competition aside, and go for the growth you're aiming for. Click the following link for information on next year’s Show in Las Vegas: The 2004 International Builders' Show.

In addition, check out the myriad resources available from NAHB’s Business Management Department for new ways to run your business better and more profitably. They’re located online at NAHB.net: Business Management.

Code Body Merger is Good News for Builders

History was made at the International Builders’ Show on January 21 when the country’s top three building code organizations merged into a single entity called the International Code Council (ICC) during an official signing ceremony.

The ICC’s International Building Code and its subset, the International Residential Code, standardize construction compliance across the country. Now builders can breathe easier knowing they’ll have fewer code sets to answer to. They’ll save money on buying code books. And, depending on state adoption, there will be just one clearinghouse for building code interpretation.

The ICC’s founding organizations, which had operated under the BOCA, ICBO, and SBCCI names, were once competing entities. In 1994 they founded the ICC to develop a single coordinated set of national building codes that would eliminate the challenges and costs of maintaining different rules to govern construction in each region of the country.

“Long ago, NAHB recognized the need for a simple, user-friendly, stand-alone code that included housing affordability as a major component,” said NAHB President C. Kent Conine at a press conference immediately following the merger. “Today’s historic event brings us one giant step closer to achieving this goal.”

For more information about the merger, e-mail Ed Sutton or call him at 800-368-5242 x8564. [return to top]

Business Opportunities from NAHB’s Councils

Explore the Seniors Housing Market

Register now for the 2003 Seniors Housing Symposium and learn more about the future of the burgeoning 50+ housing market. Join industry leaders at this year’s event, Building for Boomers & Beyond: Emerging Trends, Evolving Markets, to be held April 28-30 at the Renaissance Esmeralda Resort & Spa in Indian Wells/Palm Springs, Calif.

Considered the nation’s premier educational and networking event dedicated to the 50+ housing market, the Symposium will feature 19 educational sessions, an exhibit hall with the latest products and services, a tour of the area’s top communities, and much more. Brand-new features include plan evaluations by design experts, ad reviews by marketing pros, an in-depth look at rental housing for seniors, and behind-the-scenes information on the development of a seniors housing project.

For more information about the Symposium, click here. To receive a Symposium brochure or to register, contact NAHB’s University of Housing at 800-368-5242 x 8338, or registrar@nahb.com. For information about NAHB’s Senior’s Housing Council, click here: www.build4boomers.org.

Show Off Your Best Commercial Project

You’ll gain valuable marketing exposure if your commercial project wins top honors in the 2004 Awards of Excellence sponsored by NAHB’s National Commercial Builders Council (NCBC). Winning projects in several categories will be announced and displayed at the 60th International Builders’ Show in Las Vegas and may be featured in future issues of Commercial Builder, NCBC’s quarterly magazine.

The program recognizes achievements in the national commercial building industry for design (remodeling and new construction), market appeal, energy efficiency, challenges faced during building, and overall project success. The Awards of Excellence are open to all U.S. builders, architects, designers, engineers, contractors, developers, and building owners. The entry deadline is July 25, 2003.

For a copy of the entry brochure, contact NAHB’s National Commercial Builders Council at 800-368-5242 x8455. For information about NCBC, click here: NCBC. [return to top]

Builder Bright Ideas

Try these tips from the 2002 Custom Builder Symposium to boost your business:

Need a practical way to determine how you should spend your time and talents? Figure out your personal hourly rate. So said Dennis Dixon, an Arizona builder who presented a session on “Evaluating Your Profitability.” Let’s say you pay yourself $150,000 a year. Based on 256 working days per year and a hard-working nine hours a day, you’re making $65 per hour. The next time you’re tempted to pick up a hammer, pick up a calculator instead. Ask yourself if the work you are about to do is worth that $65 an hour.
Even techies need paper sometimes. As the lead training designer for the Palm Pilot operating system, Pat Henrickson literally wrote the book on boosting efficiency with hand-held devices. Yet she advised builders to carry a plain old spiral notebook at all times. Keep it in your briefcase, in your truck, and even at your bedside to jot down spur-of-the-moment ideas, inspirations, and inquiries. Not everything needs to go into your PDA.

Do you have a great builder tip to share? E-mail it to us at jtunick@nahb.com.

The NAHB Custom Builder Symposium is a two-day program full of education and networking opportunities designed exclusively for custom builders by custom builders.
The 2003 Symposium will take place November 14 – 16 at Disney’s Contemporary Resort at Walt Disney World in Orlando. For registration information, call NAHB toll-free at 800-368-5242 and ask to learn more about the NAHB Custom Builder Symposium. [return to top]

Member Advantage: NOVA Provides Discounts for Credit Card Transactions

NAHB members with credit card processing needs can take advantage of a special program that offers discounts on rates, services, and fees associated with electronic payment processing. NOVA delivers with speed, reliability, and flexibility—and with transaction discount rates as low as 1.64%.

For more information, call toll-free 800-420-8147.

To order online and for details on more than a dozen other money-saving Member Advantage discount programs click here, or send a blank e-mail to membersavings@nahb.com.

Go to www.nahb.org to explore the numerous advantages associated with membership in your local, state, and national home builders association. [return to top]