Epcon Experts Series With Paul Hanson: Business Leadership and Ownership

 

Paul Hanson, president of Epcon Franchising, discusses businesses leadership and ownership, construction, purchasing, building and scaling a business, and more in this episode of the Epcon Experts Podcast.

“Local builders feel like they’re on an island. They don’t want to talk to their competitors in their market because they’re their competitors. They don’t know who to turn to. We have the opportunity since we have so many builders nationwide, they can network, they can collaborate.

They’re all doing the same thing. They don’t have to feel like they’re on an island. They can learn from each other and get some insights into what they should be seeing in their market based on what somebody in an adjacent market is seeing.”

Host: Well, hello. Today, we’re joined by Paul Hanson, president of Epcon Franchising. Thank you for joining us, Paul.

Paul Hanson: Thank you.

Host: We always like to start out with a basic question. It’s from your perspective, what are the most important traits that are necessary for an Epcon franchise builder? What are the things that you’ve seen that helps people stand out?

Paul: Obviously, first of all, a lot of drive and desire to grow, but more important than even that is the ability and discipline to follow a process. That requires then a third element of humility because you have to acknowledge that you don’t know everything.

We deal with a lot of experienced builders that come in but haven’t done what we do, haven’t built a business to the level that we have in terms of volume.

For them to come in and be successful and follow that process and grow like they want to, they do need to have some humility and know that the leaders at our company and the people on the support team know more than they do about building our homes, and then following that process and seeing the success that comes from it.

Host: Humility is an interesting word. It’s not one that you often think about when you’re talking about running a business. You made a key point. It’s not that we know more about home building. It’s that we know more about home building for our homes.

Paul: That’s right. We’ve done that for over three decades now. When we talk to somebody that has never…Maybe, they’ve dabbled in it a little bit but has never focused on that.

Then, it’s essential that they acknowledge that, yes, they can put a house together. They can build a beautiful custom home. They’ve never developed an entire community that is going to be so popular with these buyers and is going to lead to the level of pre‑sale contracts that we tend to get in both good times and bad times.

Host: Paul, I was wondering if you could talk a little bit about your professional background and your current role at Epcon.

Paul: My background, I was with a National Builder for 12 years. I started at the very bottom of that totem pole. I was a laborer basically and then worked my way up to project manager. Later, I had the opportunity to get into a purchasing role as a purchasing manager in the Columbus region for that company.

Then moved to Florida where I oversaw a construction team on the West Coast of Florida. That company was great for me because it taught me a lot of discipline and appreciation for systems and processes. That company knew who they were through and through.

It bled through into everything that they did and all the people that they hired. They’re very consistent, very disciplined in what they did. I’ve taken that with me now to this role where I see all the things that make us as good as we are and what we do.

Know that it’s really important to follow that market to market, that, yes, there’s nuances in every single one, but it’s really important that the core of who we are doesn’t change and what we do and how we service our buyers, and the type of experience we give them doesn’t change from market to market.

As far as my role right now, I’m leading the franchising company. I assemble a team that is responsive to our franchise builders. I spend a lot of time listening to those builders, making sure that if there’s gaps in the services that we provide, we address that.

Motivating that team, directing them as I hear things, “OK, this builder is struggling with this, so I need you. Your background is in sales,” say, “I’d like you to go out and work with them.”

Just listening to them, supporting them as much as possible and being responsive, and bringing the services, and the systems and processes that they need to their markets.

Host: That’s great. You’ve got a variety of experiences in the home building industry and seeing it from a lot of different directions. Is that the case?

Paul: Yeah, I’ve had that benefit at that large company. I saw construction. I saw purchasing. I spent a little bit of time in sales, checking a training box there. I got enough of that to be dangerous with it and know that I didn’t want to do it long‑term.

That’s given me the opportunity to work well with the franchise builders that we have because nobody wants to hear somebody say, “I know what you’re going through. I know what it’s like.”

Unless you’ve actually gone through what they’re going through and know what it’s like to be doing what they’re doing. Having built so many homes myself, having negotiated with vendors in good times and bad, I can look at all the builders and say, “I know what you’re struggling with today. I’ve been there. Here’s how I handled it. Here’s how I think we can address it in today’s climate.”

Host: It gives you a level of credibility when you’re having those conversations. You can look them right in the eye and say, “Yes, I’ve been there. I’ve done that. I understand what you’re going through.”

Paul: I can talk the shop with them.

Host: What then ultimately brought you to Epcon Communities and Epcon Franchising?

Paul: I liked that it was a small company. As good as my experience was at a very big company, I liked the flexibility, the autonomy, the ability to get quick answers on things, make quick decisions that you have in a small company. That was really appealing to me.

I also really liked the laser focus that they have on what they do. Most builders, even the national builder that I was with, tried to build for all different types of demographics.

We had a starter home line. We had a move‑up line. We had a lifestyle line, as we called it. That was our 55‑plus. When you do that, you end up doing all of those different things pretty well but not great.

I looked at Epcon. I looked at their product. I went to some of the franchise sites, even talked to some of the past franchise builders that I knew, got their take on it, and was impressed at how special the product is, the process.

It’s different than how any other builder does this type of home and fell in love with the passion of the owners that they have for it.

In my meetings with them, they talked about how excited they were to take this nationwide with franchising to continue to expand their corporate business as well, so just picked up on a lot of passion with the people and the builders that were in the system.

Host: With previous builder experience in the 55‑plus space versus Epcon, can you talk a little bit about those differences and how this is a little bit different from what you’ve done before?

Paul: At that national builder, actually, one of my first projects as a project manager was what we called our lifestyle line. It was targeted to the 55‑plus. It wasn’t age‑restricted, but all we did is we took plans that we built in all the other projects for other types of buyers and repackaged them.

We focused on the ranch‑style homes but repackaged them, changed the mailboxes, changed the looks of the streets a little bit, changed some of the exteriors, and then we called it 55‑plus. That’s not the right way to do it.

Our product line, our community design, it all starts with what buyers want from the very beginning. You come up with something different, you throw in the community element of it, which we didn’t do.

In my project at that national builder, we didn’t have a clubhouse. There wasn’t the lifestyle. People weren’t out and about like they are in our communities, getting to know each other and spending time at the pool, spending time at the pickleball court.

It’s the difference between starting with the buyer in mind at the very beginning, from design of product and community, versus repackaging something that you do for the mass market and then making a few minor tweaks. The way we do it at Epcon is much better, in my opinion.

Host: It’s about product, it’s about community, and those are two major aspects of what Epcon offers to our franchise builders. It’s also about the people. I was wondering if you could talk a little bit about how you work with the franchise builders around the country. How do you help them in the areas that they need the most?

Paul: That’s one of the things I enjoy most about going out and visiting those builders. I try to get to them once or twice a year. It’s getting more and more difficult as we have so many more builders. Particularly the larger ones doing a lot of volume, it’s really exciting to see what they do for two reasons.

One, I can take things that I’ve seen in other parts of the country and bring it to them to help them improve their businesses. Then I also see things that they’re doing that I like and I start to share those with other builders.

That back and forth and the collaboration is an important part of what I do, facilitating that communication across the network. They do take a lot of that on themselves. They talk to each other regularly. We have meetings that they are able to get together, a national conference where they can network.

Having the in‑between check‑ins where I can think back to, “OK, my visit to Kansas, I saw this. You’re not doing that here. Here’s an opportunity that I think you can add this to this house and get a few extra option dollars out of it.”

Host: I’m sure that’s very helpful to everybody to know what’s happening in other parts of the country, being able to share those best practices not only as an organization but amongst each other.

Paul: I think a lot of local builders feel like they’re on an island. They don’t want to talk to their competitors in their market because they’re their competitors. They don’t know who to turn to.

We have the opportunity since we have so many builders nationwide. They can network. They can collaborate. They’re all doing the same thing. They don’t have to feel like they’re on an island. They can learn from each other and get some insights into what they should be seeing in their market based on what somebody in an adjacent market is seeing.

Host: Well, let’s talk a little bit about that. What are the things you’re hearing from the builders around the country? What are their concerns? What are their challenges?

Paul: We’re talking right now in the summer of 2022. There’s a lot of uncertainty in what’s going to happen with the economy in the next several months. As I said, those builders that feel like they’re on an island, they might feel like they’re flying a little blind right now.

What’s going to happen? Is this going to be a repeat of the last big housing recession or not? Personally, I think the fundamentals tell us it’s not. We’re very supply‑constrained. We don’t have the type of unqualified buyers out there that we had the last time when they were able to get loans.

I think that as they don’t know where to turn if they’re an independent builder, the fact that they could join a system like ours and have other people to interact with get a sense of what they should be seeing in their market.

I’ll give you as one example, I was recently in North Dakota meeting with that builder. He talked about how land prices had escalated in the last couple of years as we’ve seen everywhere.

As he’s starting to fear that maybe things could be shifting a little bit in the economic climate, he’s not sure that the land sellers have caught onto that potential. He’s worried about overpaying for dirt on his next project.

Well, if he was on his own as a local builder, he wouldn’t be able to know who to turn to, to see if it’s appropriate to pay what he’s paying in his market for dirt.

In our system, he’s able to reach out and talk to other builders in other markets and say, “Hey, based on what you’re paying in 2019, I know it’s different today, but how much of a percentage increase are you paying for dirt right now?

Is what I’m getting quoted for today’s project versus what I paid three years ago for my current project, is that appropriate just on a differential?” It’s going to work.

Host: It’s about some process that many home builders know how to build a home successfully. Now they’re scaling to do a larger development. It’s just they need to scale. They need the processes to go with it.

Would you say that’s something that’s holding a lot of builders back from achieving what they want to personally and professionally?

Paul: Yeah. I think a lack of systems, a lack of discipline in terms of knowing who you want to build for, what you want to build, that is holding a lot of builders back. The national builders, they get a lot of flack from smaller builders because they don’t like them.

Well, they don’t like them because they’re really successful, first of all. They’re really successful because they’re disciplined, and they have processes. They know who they are. They know where they want to be. They know what they want to build, and they follow it.

They’re able to do many more houses with a leaner staff than a typical local builder is able to do. Well, we can teach those local builders how to do the same thing by scaling up from where they are and repeating the same type of business, the same floor plans, same communities, and building it into a much larger business than they have today.

Host: You brought up staff. I think that’s so important for any business, but could you talk a little bit about how important the hiring process is for a builder that wants to grow and scale?

Paul: It’s essential. I’ll say I never see them hire too early. It’s always the opposite. We have a suggested staffing chart in our manual. We reference it regularly at orientation. It’s very important to have the right pieces in place at the right times in the process.

We have a whole chart showing based on where you are and the status of your project. OK, if you’ve gotten the contract, you just obtained zoning approval, it’s time to make this hire. It’s time to start doing this.

It’s essential that a builder, any builder, look at what he or she likes to do, what he or she is good at, and then hire the opposite people, hire to the shortcomings.

I see that a lot. Something that most builders don’t want to do is purchasing. We’re always encouraging our builders, make the purchasing manager that first hire. Find that nerd that wants to get in every detail, the plans, quantify every piece of casing, and then meet with the vendors and negotiate the best price.

You don’t want to do that. You’re more of a visionary, Mr. Builder. You want to be out there talking about the dream, talking sales, interacting with your subcontractors. You don’t want to be working in Excel on a budget for the next job.

Host: Working in Excel all the time. That sounds a great way to run a business. Talk a little bit about your background in construction and purchasing, and how that’s helped you in your current role.

Paul: It’s given me a really good appreciation for what our builders do. I built a little over 300 homes in my career as a project manager.

As I said earlier, I’m able to look at all these builders and say, “Yeah, I’ve experienced that exact situation. When you do it over 300 times, you’re going to hit almost every scenario that can come up in a building process.”

The purchasing experience that I have, that also gives me a bit of an advantage in talking to them. They start to throw their hands up and say, “Well, I can’t get a better price than this.”

Well, what process did you follow to get to the price that you’re at right now? How many people did you talk to? What job sites of your competitors did you go to, to start to look at the trades that they’re using and talk to them? When you got the price back, how did you question it? What process did you go through to validate the increase that they’re now giving you?

A lot of the builders we work with were custom builders in the past. They come from buying large cost plus world where they’re just taking the costs that come in, marking them up, passing it along to the customer. They haven’t had those types of conversations.

I had the benefit and the misery of being in a national builder where all of that was micromanaged from above. If I wanted to increase a price in our computer system, I had to have three different layers of justification, follow a different process for rebidding, and out with other contractors.

That was painful, but it’s been very helpful for me to talk through this process that our builders should be following when they’re dealing with the most important part of the business which, in my opinion, is purchasing.

Host: Let’s talk a little bit about the franchise builders once they get into the system. What do you feel most surprises them when they come in either about running the franchise or about Epcon itself?

Paul: One of the things that they seem to me most skeptical about, because we talk about it regularly, is how well we’re able to pre‑sell our communities. We have a very refined what we call launch process for those communities, starts with marketing at the very beginning, transitions to sales after the promotion and the list is in place.

One of the things that they find surprising is that we’re actually accurate in what we tell them in the beginning. If they follow this process, they’re going to have a great result before they even have a model in the ground. One of the things that they’re most skeptical about in the beginning becomes something that they’re surprised about in the beginning later on in the process.

Again, since we work with many people that come from a custom building background, they come in with a mindset that they have to say yes to everything that their buyers request. A big surprise, especially for those builders that come from that background is they don’t need to customize to scale and sell a lot of homes. They can actually sell faster.

They can, in most situations, make more money if they just stick with the plans as they’re designed. It’s a much smoother process just allowing people to personalize. I’d say another surprising point comes when they realize they can say no to buyers and they’ll still be happy.

Host: I think the point you made as well is that the mindset of marketing and selling a home, then building it is just different. It’s a 180 flip to what a lot of builders do.

Paul: Yeah, and as of late, since the time of the pandemic, everybody, even D.R. Horton, was only building spec homes and then marketing them for sale when they had the drywall installed. That can work for a small period of time. It’s not a good long‑term strategy.

In the last several months, we’ve seen a lot of that start to shift. Builders have more specs on the ground than they probably are comfortable having. It’s an important call back to what we’ve always done, where traditionally, historically, 90 percent of our sales, franchise and corporate, have been pre‑sold.

There’s really a tremendous amount of benefits there in terms of risk for the builder and how you can pace your sales velocity, too. You can plan well in advance with a backlog like that to keep your trades busy on‑site and efficient.

Host: You talked a lot about custom builders, but there’s a variety of backgrounds that the franchise builders come from. I was wondering if you could talk a little bit about how a builder of any size or any background could really benefit from coming into the Epcon system.

Paul: In addition to those custom builders, we do have a number of regional builders that were already doing pretty substantial volume before they came to us.

What I found interesting in my time at Epcon is those regional builders, when they do come to us, when we get a conversation with them, they often tend to move the fastest through our recruitment process and become franchise builders very quickly because they understand the benefits of adopting something that’s already proven out there.

They have developed various product lines, maybe. They’ve developed their own sites. They know how difficult and time‑consuming that all is. They immediately see the value of joining somebody that is doing something new, to them, but has really refined the process and baked it out really well over a number of years.

It’s a way for them to quickly plug in an additional revenue stream in their business, without affecting the systems and the processes and the land positions for their other business.

That’s the main benefit to the larger builder, speed to market and proven reliability. One of the regional builders that joined us even said, “The fees that you charge, that’s basically just cheap insurance for us making a big mistake in going into this new endeavor.”

Host: What about for a smaller builder? That’s a larger builder. What about a smaller builder?

Paul: For the smaller builder, we talk a lot about simplifying your process, simplifying what you build, and diversifying. If you are a small builder, let’s say a custom builder, just as an example, you’re all in on that type of on‑your‑lot building for the most part. This gives you a chance to simplify.

Now, you can probably build two or three houses the way we build it, with the same amount of staff that it takes you to build one really customized house. You’re able to take control of the land positions. A lot of small builders haven’t done that in the past. They’re just constantly worried about where’s the next job going to be.

The customer has to bring the land to me, I build on their land, and then we go. In our system, you’re able to work with us, develop a site, have control of your lot and inventory for a defined period of time.

Host: If someone’s come in from a building background, they’re getting ready to develop their first Epcon community, start building their first homes, what advice do you give to new franchise builders as they’re just beginning their first project?

Paul: I would encourage them to have that humility that we talked about at the beginning. Trust the process, that’s really the important part. We’ve grown the team in the last few years to add some really great experts on marketing, sales, land, purchasing. I encourage all of our builders to talk to them. We do regular check‑ins with them.

When we look back now on people that signed two, three years ago, we can pretty easily point to the ones that followed the process, listened to the advice that our experts who have tremendous industry experience both inside and outside Epcon.

We can track back to those builders that followed that advice and followed the process. They’ve been the most successful by far in our system. We’ve got a number of stories just from the last few years of people that have come in and done that.

Host: That’s great advice. Appreciate your time today, Paul. Thanks for coming in.

Paul: Thank you.