2022 marked the end of a year fraught with massive supply chain disruptions, wild weather, cautious consumers and burnt out builders. Fortunately, the homebuilding community stayed strong and have seen an increase in their salaries as a result of their ability to plan ahead.
How can homebuilders drive their businesses forward?
As we embark on 2023, what can homebuilders do to remain drive their business forward?
Create a Business Plan
With the start of the new year, builders should ensure that they have a business plan in place. The basics should include goals around leads such as the number they need in order to fill their sales funnels, meet their quotas and ultimately fill their projects for the next 12 months.
Builders should prepare their business plans knowing that it may take multiple revisions to get to the right net profit, revenue and client count to enable the business to reach its goals. Questions builders can ask themselves when preparing their plans include:
- What is my net profit goal?
- How will I support my business with marketing?
- What are my employee incentives?
Bearing these in mind, builders can better set themselves up for success. We recommend revisiting your business plan quarterly to optimize based on the quarter’s performance.
Get Expert Support
It’s vital to review your business plan and goals with an expert in the construction industry. They are able to help check your key performance indicators and conversion rates to determine if they are realistic. A SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis is a great way to plan ahead and mitigate risk. Experts can see past your blind spots and help you create realistic plans and processes that you might otherwise overlook.
Ramp Up Content Marketing
One of the many tools available to builders is content marketing. Builders are more accustomed to field work, however, content marketing can keep the trains running. Creating a content plan allows you to engage with more educated leads that will be interested in what you have to offer. It will also help you generate consistent leads to fuel your business.
Document Your Sales Process
Most builders surprisingly do not have a documented sales process in place which can be harmful in the long run. A documentable sales process enables you to produce repeatable results over time and track what is working. Builders who have a documented sales process in place typically achieve a gross profit margin of 25%. These processes provide the proper checks and balances for builders to achieve industry standards and ultimately thrive.
Double Up Your Pipeline
To ensure success, builders must not rely on six ‘definites’ to sign contracts and should always be looking to double up on the number of leads that will help drive the bottomline. We are also seeing a cautious consumer market delaying signing contracts because they don’t know who to trust, which means there are significant layoffs from those companies.
Builders’ sales funnels can be easily hit by prospects who change their mind or cannot get financing for the job. When thinking about the prospect pipeline, builders should also ensure they have factored in the proper lead time given the industry disruptions including shipping delays, cost of materials and labor shortages. In 2023, experts in the building industry are anticipating similar market conditions to what we have seen in years prior.
But there is data to support the ways in which builders can still be successful. In the last year, despite obstacles in the homebuilding industry, 57.7% of builders delivered homes on time.
This is largely due to the fact that the successful builders utilized tools at their disposal such as project management software, sales and marketing, and the ability to react more quickly to changing market conditions. While the large companies signed up three to four times the number of contracts they would normally sign during the calendar year 2020-2021, smaller operators reduced their risk by limiting the amount of contracts they committed to.
As a result, they worked on profitable contracts during 2022 while their larger counterparts had a backlog of loss-making contracts. And if builders set up the proper processes and plans for business, they are able to weather any storm. Ensuring a smart business plan, consulting with the experts, developing a content marketing strategy, documenting your sales process and developing your leads pipeline, builders can set themselves up for success.
Russ Stephens is the co-founder of APB. The Association of Professional Builders (APB) is a leading business coaching service for custom home builders, with members in the United States, Canada, Australia and New Zealand.