While the initial entry barriers for home building are low, the barriers to scalable production-style building are high.
Most think of home building as an industry with low barriers to entry. Since many states lack formal licensing requirements and builders typically subcontract construction activities, almost anyone can establish a new home building business throughout much of the country. And while this ease of access makes our industry an attractive business opportunity, it does not paint the full picture of how difficult it can be to become dominant in the marketplace. Many builders hit a wall at some point, where they plateau in terms of growth opportunities. While the initial entry barriers are low, the barriers to scalable production-style building are high. Here are five of those “brick walls,” and how builders can break through them.
Finding the Mass Market
A custom builder may be on top of the latest high-end design trends, but how large of a market is there in times like these where attainability is a challenge? A builder specializing in value product may have great insights into what it takes to turn a renter into a homeowner, but will that builder have the insights to pivot to another niche when needed? It’s hard to imagine one builder or one company cornering the market on consumer preference, so it’s beneficial for anyone in the industry to join a peer group, invest in advisory services or even leverage the knowledge of a franchise brand. This means no one is “on an island” when it comes to bringing the best product to market.
Product – Money Pit or Honey Hole?
Developing a portfolio of popular home designs takes an enormous amount of trial and error, expense and time. Even when done correctly, not every plan will prove fruitful. And even when a builder identifies a handful of designs that work well in a given market, the next challenge comes in determining how to allow for buyer personalization that keeps cycle time manageable, is repeatable and maintains predictable costs. Limit the buyer too much, and they will buy somewhere else to get what they want. Open the floodgates of customization, and buyers will become overwhelmed with “decision overload” and lack confidence in buying. Licensing designs alone can help, though follow-up support is limited in terms of specifications, code adaptations and personalization options.
Growing Your Trade Base
One consistent challenge I hear from prospective builders is obtaining and retaining the right trade partners in their markets. The nationals have teams of procurement professionals that solve this, but that is not a feasible approach for most. In many markets, only a handful of trade partners can handle high volume, so identifying and procuring their services is essential in building scale. Having spent time with both a large builder and a custom builder, I know firsthand how differently those conversations go when you’re calling on behalf of a large organization instead of a boutique one.
Since the Great Recession, it has become difficult for builders to rely on developers for home site opportunities. In order to achieve and sustain growth, builders must emulate the nationals by identifying parcels, entitling them and completing the development. However, a full-time expert in this field is often out of the question for a local builder, making it tough to keep the upcoming land pipeline stocked while simultaneously navigating the many local nuances of zoning and development.
Defining Your Sales Process
Nothing happens until a sale is made. This may be a tired adage, but the nation’s leading builders have taken it to heart. Is your sales process defined, or does each sale happen differently? Have you been able to move beyond chasing contracts in favor of a defined process that targets pre-sold contracts prior to construction? Your largest competitors can say “yes” to both, and it’s possible to replicate those efforts in your business.
Breaking Through the Walls
Though not easy, builders can break through the high barriers to dominance in the home building industry and shorten the growth and learning curves. Epcon Franchising offers a unique opportunity for home builders to join a national franchise network that provides guidance and support in breaking through these walls. Epcon Franchise Builders have access to 80+ other home builders in their shoes, extensive market research, time-tested product designs that continually evolve and strengthen, a large catalog of National Account Partners, simplified development and construction processes, shared marketing and sales resources and direct consulting access from experts across the industry.
If this sounds interesting to you, I’d encourage you to reach out to our business development team to learn more and ask questions about how you can take your home building business to the next level, break through the barriers holding you back from growth and ensure your company weathers any economic cycle that comes our way.