2008: The Year of Profitability

Transcription

1 2008: The Year of Profitability International Builders Conference Orlando, FL Featuring Bonnie Alfriend, FELLOW, MIRM Charles Graham, FELLOW, MIRM Daniel Levitan, FELLOW, MIRM 1

2 Bonnie Alfriend, FELLOW, MIRM Bonnie Alfriend, FELLOW, MIRM, is President of Alfriend Sales & Marketing Solutions, training and consulting company serving builders and developers with profit driving sales and marketing strategies. She is past president of The Institute of Residential Marketing. A former homebuilder, she is best selling author of Secrets of The Superstars and New Home Sales Management. Bonnie is the recipient of NAHB/NSMC Trina Ripley, Excellence In Education Award and the National Association of Home Builders Bill Molster Award. Bonnie is principle instructor for all IRM courses. She is a lead author on Effective Marketing on a Shoestring Budget (EMSB), Certified New Homes Sales Professional (CSP) and Multicultural Selling. Alfriend Sales & Marketing, 2984 Cormorant Road, Pebble Beach, CA 93953, , Balfriend@aol.com Charles G. Graham, AIA, AIA, LAI, FELLOW MIRM As the principal of Newton Graham Consultants, Chuck directs all feasibility and marketing assignments as well as general management consulting in the areas of strategy development, organizational structuring, control systems and financial management. He is past Chairman of the NAHB National Sales and Marketing Council, and Past President of The Institute of Residential Marketing. Chuck is the principal author and a national instructor for the Institute s required course Marketing Strategies Budgets and Plans. He is the recipient of the NAHB Trina Ripley Excellence in Education Award and co-author of From Plan to Profit, published by the Home Builder Press of NAHB. Charles Graham Consultants, 4425 Randolph Road, Charlotte, NC 28211, , Cgraham6@bellsouth.net Daniel Levitan, FELLOW, MIRM Daniel Levitan is President of Levitan & Associates, a Florida-based strategic consulting firm serving builders, developers and lenders nationwide. He is acknowledged as one of the country s preeminent strategists for residential development providing feasibility analysis, valuation determination, community positioning and optimization studies, marketing strategies and ongoing implementation assistance for properties throughout the United States, Canada and the Caribbean. Levitan has numerous professional designations and has served as multi-term trustee and President of the Institute of Residential Marketing and in 2008 will chair the NSMC. Dan has been recognized for excellence with the John P. Hall Award, The Institute of Residential Marketing s Excellence In Education Award and the NAHB s Bill Molster Award. Levitan and Associates, P.O. Box 16022, Ft. Lauderdale, FL 33318, , dlevitan@bellsouth.net 2

3 1. Financial: How Money is Made in Homebuilding The first key to profitability in homebuilding is to truly understand how one actually makes money in this industry. Attempt to create a company worth twice its imputed book value. This could require 35% before tax return on capital. Likely to be produced with 11% EBIT margin and 3.2 sales/capital ratio..11 X 3.2 =.35 National home building market is down 35% from its peak Making no changes in your fixed costs or balance sheet you are producing a 3% EBIT margin and a 2 time sales/capital turns. Current results would be a 6% before tax return on total capital Now it is particularly important to protect the margin as well as considering asset liquidation. 2. Find The Facts Before Taking Action How well do you master the 5 basics Elements of Marketing - Place, Product, Price, Promotion and People? Perform a thorough market study Primary markets: Determine current and future status of employment growth Jobs simulate population growth and household formations Secondary markets: Check the economic and market conditions of the buyers primary housing markets. Confirm continuing migration patterns Examine permits and housing starts 3

4 Investigate land acquisitions and zoning Conduct a complete competitive study including both new and resale markets Determine what is selling, what is not and why! Determine trends in population growth and household formations Total growth What segments will increase What segments will decrease Why the change Assessing The Market Review conclusions of market study with all members of the team for their critique and concurrence. Update study quarterly to stay current with market. Your profitability in 2008 depends upon it. 3. Take A Good Look At Yourself Identify your concept and philosophy. Do others see you the way you see yourself? Do all your decisions stay true to your core values, and your concept? o Mission o Consistency o Adaptability o Flexibility o Internal Focus o External Focus Do your employees reflect the company vision and brand when dealing with customers? What is your Unique Selling Proposition (USP)? What differentiates you from all other builders? You must provide at least one major reason to choose your home over that of another builder. Do you have a superior position in any specific market segment? Go Rich in Your Niche 4

5 Have you strayed beyond your capabilities trying to please too great a market segment? Can you deliver on a cost effective basis what the customer wants? Company Mission: Unify The Team Check and recheck your performance How do buyers see you? How do they grade you? Use exit surveys and customer satisfaction surveys. Make sure your special differences are relevant to and recognized by the customer. Understand your customer s expectations and deliver what they expect. Zero Defect Homes are the minimal acceptable standard today. Make sure your entire team believes in your mission and vision and complies through their performance and action. 4. Evaluate, Train, Retrain, Coach and Motivate Sales Staff: Sales Training Is A Must Fact: You will not make the cut in 2008 if you do not have Great salespeople. Fact: It takes a commitment of time and money to reintroduce selling skills to the team. Immediate: Check them out with shopping reports. Evaluate strong points and weak points. Decide who must stay and who must go. This market will not wait on the slow ones. There are ready, willing and able sales pros looking for a home. Fact: There will not be enough traffic walking in your door to make your goals in Fact: No one is a born salesperson. Selling is a trained and developed skill. Provide regular training, coaching, and motivational meetings for your team. Place great emphasis on Negotiating and Closing Skills. Teach networking and prospecting activities. Hold the sales team accountable for 1/3 of their leads. Take advantage of IRM Classes World Class Sales Team Training and career development is the greatest motivator. Join them for competitive evaluations. 5

6 Have monthly or quarterly company-wide team meetings. Reexamine your commission structure. In a slow market you cannot expect them to survive on reduced or delayed income. Implement new incentive programs during down time to keep sales team motivated, clothed and fed. Examples: bonus programs, draws, interim salaries, co-op upgrade income, etc. 5. Evaluate and Tune-Up Your Place Do you have a land bank of undesirable land? Is your G & A totally out of control? Is your cash flow insufficient to support advertising and promotion needed? Now is the time to evaluate each site from scratch. Have your expansions jeopardized your own sales. Is it time to close communities that are not operating at a profit? Tune-Up Your Place Consider outsourcing sales and marketing near the end of the community. Analyze the impact on profitability and cash flow of deep discounts to close out jobs. Investigate terminating land options and phased takedowns or renegotiating with owner to become a joint venture partner. For your profitable jobs determine the sales pace you need to operate effectively and the cost to reach that goal. Determine ways to enhance the perception and awareness of the locations you have. Partner with local businesses and organizations or other builders to promote the area. Physically enhance your locations. Tune-Up the streetscape, accelerate amenities and solve existing negative issues Make sure your entryway creates a positive, exciting first impression. Check out your signage for consistency and attractiveness. 6. Evaluate and Tune-Up Your Product Take a good look at your product based on competition and its own merit. What can you do to make it different and better? Are your exterior architectural designs as good and they should be? Have you removed your slow sellers from your product offering? It is best not to offer too many choices. A confused mind says No. 6

7 Have you provided a full range of products to satisfy the target market reality to size, design, style and features? Have you created the 2008 product line? Otherwise you will only compete with your own resales. Remember New Sells and Better Sells. Check out the convention floor for the latest and greatest materials for surfaces, hardware, kitchens, etc. 7. Evaluate and Tune-Up Your Price Do you provide a proper pricing spread between the base models including options to satisfy your target market? Pricing Strategies should be based on reason with a plan. VIP - pre opening Pre Models Grand Opening Phase 1, 2, 3 Grand Finale Initial pricing to generate immediate sales and create credibility, ongoing pricing with staged opportunistic increases solidifies existing sales and creates urgency. Closeout pricing with special incentives when needed to complete the job in a timely manner. Balance your inventory Review and adjust pricing spread between models and home site types. Increase price of the stronger sellers while adding extra value to the slower sellers. Never lower the prices. Be careful - don t be greedy. That got us in trouble last time. 8. Evaluate and Tune-Up Your Promotion There are always target market groups for each community and each home. First identify those markets by demographic and psychographic factors. Analyze your promotional tactics to reach your buyers with emotionally relevant messages to generate a visit. Now is the time to spend more time, more energy and more money on advertising and promotion - not less! Balance your media mix. Adjust your advertising budget and sales process to reflect the information age. Today 70% of homebuyers visited you first on the Internet, and prequalified themselves before visiting your sales office. Internet leads are return visitors. 7

8 Do you have a well-crafted and professionally implemented public relations campaign? Promote your on-site activities such as grand openings, grand finales, introducing new plans, design shows, etc. Incentives: Best not to advertise them - one shoe does not fit all, however in a buyers market, give your sales staff a negotiating allowance to use at point of sales to close the deal. 9. Evaluate and Tune-Up Your People Beyond your customers and your sales staff the other people involved in your operation need to be effectively working toward your goals. Team building: Internal External Giant Step toward excellent operational efficiency Internal quality management produces strong customer service and happy purchases. Do you have a written corporate strategy? Do you have a written development and marketing strategy for each community? Does each member of your team (internal and external) understand and agree to the strategy? Does each player know how important they are to the team and the success of all? Does everyone understand that waste alone can account for an unprofitable year? Do you personally visit each member, each site, and send letters of appreciation for their contribution? Fact: People work harder for appreciation than they do for money The Year of Profitability Notes: 8

9 Bonnie Alfriend, FELLOW, MIRM Chuck Graham, FELLOW, MIRM Daniel Levitan, FELLOW, MIRM Our adversities make us strong. Our victories make us wise. Our actions make us proud. 9