The following was a panel discussion, in preparation for the International Builders’ Show 2019, with Epcon Franchise Builders Justin Bauer and Glenna Wilson.
With us today are Justin Bauer, president and managing partner at Midwest Development Partners in Ankeny, Iowa, as well as Glenna Wilson Owner of Charis Homes ‑‑ which is a zero energy ready custom home‑builder ‑‑ located in North Canton, Ohio. Thank you both for joining us.
Starting off, I was hoping that you might be able to describe the current home building climate in your local market and how you both diversified your businesses to stand apart from the competition.
Glenna Wilson: Basically, what’s happened in our local market is cost of goods and cost of trade have gone up and more and more production builders have entered our market. They went away after the downturn. From 2008 to 2012, there was little or no activity.
We’re seeing a lot of production builders come in from the pulses to the Ryan Schumacher Homes, which is a regional production. You just can’t compete. We can’t compete with price per square foot. I don’t know why we always price houses per square foot when we don’t buy a car by the pound.
Is this what consumers are used to hearing from the production voters? For me, it was always constantly developing custom floor plans that were not exactly the same thing we built before. It was always a long turnaround time of estimating then and trying to be competitive. Then I thought there in my work and I saw need that was not being met was 55+.
Unfortunately, our houses were right about a half a million, $500,000. I thought a lot of consumers, especially baby boomers that were wanting to be more in that $350,000 to $400,000 range. We just couldn’t get there. Then I found Epcon.
Rob: Glenna, could you describe your business and your history in home building?
Glenna: I’ve been building houses since 1999. I worked for another builder, and then went off on my own. Todd and I became partners in 2003. I have a son that’s an engineer, and he moved to Pennsylvania. Pennsylvania, of course, is way ahead of Ohio on building codes. He said, “Mom, you’ve got to see this foundation that they’re putting in Pennsylvania.”
It was insulated concrete forms, which is ICF for short. Also, they were certifying their houses as ENERGY STAR.
It’s 2003, he convinced me to look at some VCR tapes one Sunday afternoon after church. I realized like, “Oh, my goodness. This is the future.” I started down that path of certifying our houses as ENERGY STAR and developed it into the Zero Energy Ready category. We did some other programs, Building America, which is a higher standard than ENERGY STAR. Then it prepared us to go into Zero Energy Ready.
Typically, we were building between 14 and 17 houses. Then a couple of years ago, we jumped up to 25, 26 houses. It was total chaos as far as a custom builder. I thought we were prepared. I thought we had the right team members.
We had an in‑house plan designer. Basically, all I had was a bigger payroll and really wasn’t creating more profit to our bottom line. Actually, I was considering like, “Do I even want to do this anymore?”
In the meantime, my daughter moved to South Carolina in the Charlotte area. I’d always get my car and go out to job sites. I came across an Epcon community. I’m like, “Wow, this is different.” It was in one of the models. I was listening to some Northerners talk about moving down to the South, about your product, and how they loved the floorplans.
I just stood in another room and listened to them for 10, 15 minutes. I’m like, “Wow, this is really a unique concept.” Didn’t really look into it any further. Then the next time I went down, my daughter had a baby so I was down there 12 days.
I was bored again. I went out to the grocery store and found a publication, a real estate publication, and I learned more about Epcon. Back to Charis, Charis Homes is a very custom niche builder that builds high‑performance homes.
We’re part of an elite group with the Department of Energy. We meet twice a year for boot camps. Only about one percent of the builders build to this high performance. Our homes average around 64 to 71 percent more energy efficient than the code‑built home in Ohio.
Our houses use very little energy. I always tell everybody they sip energy instead of gulp. They are comfortable. That’s one of the attractions. They’re quiet. There’s less allergens. They also do a program called Indoor airPLUS which is through the EPA who received a leadership award in October last year.
Only eight builders in the country got this designation which was great. It was birthed by me because of my grandson that has a lot of allergies. I built them a house four years ago. I did all the research for years on how to make this a healthier energy‑efficient home.
Rob: That’s great. How many homes have you and Todd built over the course of your careers?
Glenna: From 2003, probably over…I haven’t counted lately…but 220, 250 maybe.
Rob: What are your plans starting off building with Epcon?
Glenna: We just secured 10 lots. We’re going to do a small mini‑community. We got verification from a developer to birth a community of 120 subflats that will be done over phases. He is securing the land now. We don’t anticipate opening that until the summer of 2020.
In the meantime, we want to get our feet wet with the smaller 10‑‑unit community. Recently, I just came across another piece of property that we could probably do 29 lots. The streets aren’t in but all the utilities are there so I’m pursuing that. It may happen sooner.
Rob: Switching over to you Justin, can you go through your background a bit and talk about how you diversified your business with Epcon model.
Justin Bauer: My history is I worked for a larger builder from 2001 to 2008 and decided to go on my own. Since I’ve been on my own, I’ve built about 35 custom homes. Since then, I’ve got 77 Epcon homes sold. We completed about 55 of those, I think.
I was making a good living at building custom homes but the Epcon model has opened up a lot more market share. The 10,000 per day that retired at 65 that opened up the market. I’m selling 30 houses a year, and I’m seeing 40 this year. Before when I was doing custom homes, six to seven.
Glenna made an interesting…she put it well…is you couldn’t figure out why everyone measures price per square foot. You don’t buy a car measured on a pound. That’s a great comment. It’s very frustrating as far as realtors get, especially in our area.
It’s always about the price per square foot. Well, building custom houses, I can build a house for…it used to be you’ll be able to build a house for $40 a square foot, but I’ve built a house for $300 a square foot before. Price per square foot is a wide, wide range.
If you were going to compare a car per pound, price per pound, well you buy a Jaguar versus a Kia, price per pound, why would I even try to compare that? We do it in housing, which is…I agree with you, it’s frustrating.
Glenna: It is. If you build a quality custom house, I just can’t, I won’t do it. My dad always told me that you never have to apologize for quality.
Justin: That’s right.
Glenna: Donors cut corners.
Justin: I agree. A lot of people don’t see those corners that are cut. They don’t fully understand it. They don’t see the stuff that gets cut. Around here, yeah, you can cut corners on the construction part of it, but they’re going to put granite in it so it looks great.
Rob: In regards to scalability, does the diversification of your business help to establish success in your businesses?
Glenna: I really can’t address that now. It will probably in a year, but I already see that my mindset has been changed. Justin said you only have so much time. Custom homebuilding takes a lot of time. You can spend three to six months sometimes with a customer. Then you build their house in another six months. You’re with them two years.
Epcon’s done a lot of the hard work for us ahead of time with the plans, and the marketing. There’s a lot of things. Like Justin said, you only have so much time. You don’t want to spend your whole life working. You want to spend it with your kids, or my kids, my grandchildren, and make the most wealth you can, and deliver a good product.
I feel that this is the best venue for me for the next five, six, seven years, or however long I choose to work.
I think I can make a big bang because it’s a large market. It’s growing all the time. I’m one of those baby boomers. We’ve worked hard all our life. We want a nice product, but we want a carefree living because we’re living longer, and we want to spend time with our family.
Rob: Yeah, that’s very relatable and well‑said. I appreciate that. Everyone has motivations. You’re both at different points in your careers with Epcon. How have you both been growing into the future?
Justin: When I was doing custom houses, I was building five, six, seven a year, which was total, probably about three to four million dollars in product. Now, if we hit this year, I think we can hit 40, with an average of 400, or would be at 16 million. I’m at 12 to 16 million now. It’s been great.
Glenna: That’s exciting, to hear that. The other thing that happens in the custom world is you don’t own land, so therefore you have to build houses wherever the customer either owns the lot or find them a lot.
A lot of times, it’s on a battered site. Like this year, we’ve had the worst time just getting jobs started because of septic and numerous things. I guarantee, if I probably wouldn’t have found Epcon, I probably would be early retiree.
Justin: To that point, on the land side of it, they’re exactly right. We’re not building as custom builder. I was only making money off of the building side of it.
Now, with Epcon’s formula, I’m actually making money off the land side, I’m making money off the building side. I would say something that’s hidden in there is I make way more off of the upgrade part of the building.
We make 20 percent on average on our upgrades. Whereas, when you’re doing a custom house, you get to do that end, you’ve drawn a plan, you priced it out, and now they’re wanting this and this and that.
They’re just penny pinching, beating you to try to include this and this and this. Wherein with the Epcon model, our upgrades, they’re already pre‑priced out. They’re priced out, and either they want them or they don’t.
When you already have it on a sheet priced out ahead of time, either they choose to have it or they don’t. We average from our base pricing to what they end up building was or building for.
We have about $75,000 to $80,000 in upgrades, which then we make a higher percentage off of. That’s something hidden in that thing. Then we also make money off the sale side. Rather than having realtors, per the Epcon model, we have our own salespeople.
I’m saying we’re picking up about two percent. If you’re paying six percent to realtors on an outside transaction, the way we’re formulated here, we’re picking up an extra two percent would be my breakdown of it, even after paying Epcon the franchise fee.
Those are really three aspects you’re making money on it, rather than one as a custom builder.
Glenna: I was going to say, in the custom world, I had a customer, they’ll meet with my custom cabinet maker and my plumber, and they did numerous upgrades. In my contract, it states with them that they’re not allowed to show the price without our permission, and they showed the price.
I can’t even upcharge the upgrade, one with 12,000 and one with 6,000, that’s $18,000. I lost all the profit on. I’m not happy today.
Justin: Actually, back in my Timberly days, the builder I worked for locally here, I took a lot of good and bad things from that company.
One of the good things I learned early in building products is that, if you send people out to your suppliers, when they go to pick their cabinets, what’s the most important to the cabinet supplier, the cabinets.
They’re always trying to upsell them, specifically on cabinets. Then when you send a plumber, what’s the most important is the plumbing. Then they’re trying to upsell, and ongoing.
When you send them out to your suppliers, they’re always trying to upsell their products because that’s what they make money on, and the only thing they make money on. You’re exactly right, the next thing you know the price gets out of control because everyone else sold them on their specific products. Then the price gets out of control.
Rob: So, talk a bit about saying “no” as a business owner. You both mentioned a few reasons, but is there anything you’d like to add about saying “no”?
Glenna: Of course I haven’t experienced it yet but I have used it already on my customs side. It tells the customers, “That’s not available. Is that something you want to do after you move in?”
I thought I’d try it. You’re welcome to do it, and they’re like, “Oh OK, I don’t really need it.” I’m like, “Oh my goodness, that was easy.”
Was quite easy on you, but I’d like to hear Justin’s side, how that worked for him.
Justin: It’s huge. I’d say something of work in progress even for us. I’ve come packed on, not hard, but their model is not using to outsource sales people. I was told, don’t go trying to hire a realtor as your sales person, so we had trouble finding.
My first sales person I had is my best sales person and he just killed it. My other two sales people that I have, they came from the real estate world, and they don’t say no. They are now, because they’ve learned what is not to say no. They have learnt now, through these products, we can say no. That it’s OK to say no.
What gives you that power to say no is because we do have more demand for our products. They’re not going to buy because we won’t customize this or that. We ended up selling 39 houses this year instead of 40, so be it.
Versus, when you’re doing costing and if you’re only doing five houses in a year, so you know when you’re doing four sales instead of five sales becomes a bigger deal, right? This is something that my sales people have learned, especially this last year, a couple of them. It feels good to be hosting.
Rob: Is there any brand recognition for Epcon in your local community? Are there things that you tell homebuyers to give them confidence in buying with you?
Justin: Yeah, absolutely. That is the safe part of it. There’s not brand recognition in the moment for Epcon. That’s changing. We’ve been here for three years now. People are starting to pick up on it. Even though maybe there’s not brand recognition immediately, by the time they come in and the ones that become serious, it’s this point where they do say yes to building.
It is very beneficial that the part of a company that started in 1986 has over 30 years of experience of learning what plans work, what plans don’t work, tweaking the plans.
One of our biggest feat of all this is the floor plans. The floor plans is this dynamite. I would say there’s no reason to reinvent the wheel. One of the great things is these plans are well‑oiled machine that have been adapted over the last 30 years. We have taken advantage of that.
Rob: I was wondering if you might be able to share some of the stories of the buyers you interact with in your Epcon communities?
Justin: Rob, I don’t think John even told you about this, but I just have quite stories come to here in the last two months. My largest custom house I ever built was a $3 million house out in Glen Oaks, which is an upper‑end golf course on the west side.
I built that house in a 2012, 2013. I build this house for him, old 70 Cole Smead, in December and said, “Hey, I’d like to speak with you.” We became friends after building, I go to sit down with them and into, “Well, I got a business opportunity for you. I want to move it outside into Shadow Creek.” He wants to buy an Epcon share.
Rob: Oh, my.
Justin: He’s moving from an 11,000‑square‑foot house with an indoor pool, $3 million. He’s going to move into Epcon. He told me, “Well, this house is just too big for us.” They have a place in Hawaii. They’re there six months out of the year, and they’re staying there more often.
He told me, “I entertain at my house. It’s the mostly political events, things like that.” He goes, “I figure I can reserve the clubhouse and have my events there. I’ve got the pool in the summer, which is about the only time we’re here anyway.” Then he said, “The house itself, we’re looking at the Promenade.” He goes, “This is all I need.”
What a story of a guy who’s lived in a house that’s less than five or six years old. He’s moving from a $3‑million house into an Epcon Center. I think that’s absolutely wild.
Rob: That is amazing.
Justin: By the way, because he learned about the spot so much, he told me, “If you ever need money for projects, I’ve got an investment that’s going to be coming back here shortly. When I get that money, if you need cash to do any of these, we can build them wherever you want to. I’ll help finance you.”
Rob: That’s a good friend to have.
Justin: Yeah. Exactly.
I just thought the story of a guy moving from that type of house into an Epcon unit. On the other end of the spectrum, my business manager, his dad ‑‑ his wife just passed away this last year ‑‑ they lived in a $150,000 house for 40 years.
When she passed away, he just used the HECM program to move into a unit. There’s two of the broadest ends of the spectrum that you can find, and everyone is moving into this Epcon Communities.
Rob: How is it bit different with Epcon versus building custom on your own?
Glenna: Like I said, I’ve been doing this 19 years, and I didn’t come from a building background. I was always an entrepreneur. I was actually in the fashion industry, which was really a lot of fun.
When I went into the building industry, I’m just thinking, “Well, I just don’t have any experience. I would hire experts to come in and help look at our business.” We have spent five years with business coach and thousands of dollars to get better at this.
I would say we’re better as far as we have better systems with the finances and better systems, but it still feels like Groundhog Day in a lot a days. I think that’s just the customer industry. I went to an IBS in probably 2011. We went in a day early. There’s a guy named Al Trellis. I think he’s out of Virginia, and he helps custom home builders.
I went to an all‑day seminar, and he asked everyone in the whole room that was a custom builder to stand up. I didn’t know his personality. His personality is like a military colonel. He looked at everybody. He goes, “You’re all idiots. Sit down.”
At first, I was offended by that, but I’m like, “OK, I’m a leader. Let me hear what he has to say.” He said that custom home building is one of the hardest things to do to make a profit. He talked about a company he took that’s based out of Columbus called Victoria Homes. They were doing about 75 custom homes a year.
The owner, the son, and the father just basically turned the keys over to a brother. He revamped it and made it a semi‑custom home builder with defined prints and things like that. That always resonates with me in custom building.
Justin: As far as Groundhog Day, I don’t feel when I was doing custom that it was…One reason I’m a builder developer is because every day is different. You never know what’s going to come up but my wife knows that I got a lot of evening meetings, this and that.
With the next years we’ve had arguments before that maybe she should have been married to a guy that works in principle financial 8:00 to 5:00 every day because it drives her nuts some days, that I’m gone in the evenings or whenever when duty calls I run.
I don’t know that it was just necessarily Groundhog’s Day and custom builder. What I will say and I use this comment a lot is I’m approaching having built 400 homes. I tell people all the time, every single house we built, even today, even with the Epcon units, every single house we built, we learned something new every single time.
Coming up from building 30 and 40 houses a year allowed learning more in those years than I learned building five houses per year. By being production, I feel we become a better builder, every single house that we complete. Because we learned that this industry is constantly evolving. There’s always new products, their products that they say are better.
I’ve been doing this long enough now that product can come and gone, and they said, we’re going to be great, and they weren’t great. But you have to go through it you learn that what the best way to build houses is and we learn every day by building more. I think we become smarter.
Rob: Glenna, you had mentioned you were moving towards retirement, and joining forces with Epcon would help you make that jump. Are you going to continue to build custom homes as well?
Glenna: I have a business partner, and one of the comments Justin makes his wife all the time says that he’ll just drop, and send a lot of emails. I want him to get away from that at the time. I keep saying to him, I want to do 100 percent, and I don’t want to do any more custom.
He goes, “We got to keep the custom line, five or six a year.” I said, “I don’t think we’re going to want to after a couple years into it.” My goal is 100 percent outcome, and because again, every homeowner is different in every job is different, and you’re right, you learn something new.
One of these other things that I see in custom home building is you become good friends with your attorney a lot of times, and it’s painful, and financially you don’t want to not have good relationships, but things happen, and sometimes it’s not under our control.
But with Epcon, we can have more control with filling the same projects over and over, we can have consistency, we’re going to use some of the same stuff, but we’re going to try some new ones. We’ve already tried one or two of the new ones.
We want to use an Epcon in our custom home building, and it’s been refreshing, because their willingness to help us almost like a think tank philosophy. They’re bringing new products because they know what we have coming up. They’re jumping on board to be more of a team player, it’s a order‑taker.
That’s a long explanation, but I would say my goal is in three years not to be doing any custom.
Rob: Thank you for that.
Justin: Glenna, I can tell you I joined in 2015 and I was still doing customs. The last custom house I did, I completed about 15 months ago, it would’ve been November of ’17. I am in no way, shape, or form even…I’m doing no advertising toward the custom home.
If someone came to me right now, I’m not saying I would say no, but I can tell you I would price that custom home so freaking high that I’m going to make really, really, really good money on it if I’m going to do it.
Otherwise, I’m done. I have one of my business partners on my staff. He’s been on me this last three years. He goes, “You shouldn’t shut your Clarity Construction down. You need to do your custom. I wouldn’t do that.”
I’m like, “You don’t know what you’re talking about. You don’t understand.” I only have so many hours in a day, and I can produce so much more with Epcon products than I can do any custom house I’m ever going to build.
I’m in a business coach group and we have different business owners from different industries and one of the guys in my group was actually a gunsmith. He produces guns, fix guns, this and that. He had a larger company come to him and offer him…they want him to make silencers for these guns. He’s trying to figure out how to do it and if he should do it and this and that.
If broke down, he can make a million dollars which would be about $400,000 profit on 200 hours of work, versus that 200 hours producing 20,000.
Justin: He can make 20 more by making these silencer. If we had to talk through this and get him to that point and everything and then he understood it that, yes, he needs to do this, then I feel like that’s exactly what I’m telling is for me.
I can make, produce so much more profit per hour that I put in to my business, then in the end it’s 20 times what a custom house is. Is it your husband you were talking about that talked about that wants to build or…
Glenna: Yeah, my business partner. He has a wife. My daughter and son‑in‑law are in the business and up until Epcon, I was really trying to talk them out of even pursuing it. They’ve seen the revenue I’ve brought in. It’s just what has happened in my own life, but they don’t remember the 70, 80 hours a week and weekends and holidays I worked for a long time.
I just feel that I was at a point I can do that because I was single and my daughter was 18. She was the last child at home, so I had the availability to pour into my career. Now I have seven grandchildren and so my time’s diverted in a different direction.
My other son is an engineer. I think he wants to come into the business but I deterred him because he’s got four children. He works hard enough. I think with Epcon it can be manageable. It is going to be in our own backyard. I see a future for my family if they want to go down this course with Epcon but I would not want them to be custom builders.
Rob: Use of time for profitability and use of time for family are two really great points. Do you have anything else you would like to add to the conversation here today?
Glenna: I think one of the things that sold me on Epcon ‑‑ because we took a while to make that decision and just jump in it right away…The thing that I liked about Epcon in all the dealings I’ve dealt with people early on, everybody was upfront and honest when I ask a hard question, they didn’t avoid them.
But then, the fact that the two owners, the two people that started the company ‑‑ the one started first and the other one has been there 25 years ‑‑ and I apologize I can’t think of their names, I should know their names but they’re still very involved, very active.
You have your 19 states and you’ve been doing this 35 year, that’s longevity. You’ve made all the mistakes ‑‑ not saying that you won’t make mistakes in the future when you try new things, that’s just part of being in business. But you’ve done it for a long time, you’ve been successful and it was nice to be in a group.
I’ve been involved with local building associations and also passed a president of one, my local builders are not friendly to me. They don’t come along beside me and put their hand on my shoulder and say “Oh, let me help you.” I just feel now I have a friend in the business that can help me. That’s important to me, anyhow.
Justin: That’s actually a really good point. I agree. It’s tough to find a business companion in your local area because it’s competitive.
Glenna: Right. Right.
Justin: You feel like some of the bigger production builders, they have their niche. I find you can talk to them more because they’re not afraid that you’re going to coming in and rain on their turf and this and that. The custom market though, they do. Everyone’s fighting for those custom houses, and you don’t have a friend.
I think it’s been extremely beneficial for me to be involved at Epcon when I come back for the conferences. I can sit here and talk for hours with Rob. I think the same thing with Tim Rini. I feel every minute of conversation is beneficial and makes me better prepared for success and for doing well.
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