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With 2023 wrapping up, what's in store for the new year? We asked some of the top industry experts for their thoughts and advice on tackling new home building in 2024. In an always-changing industry, getting the foundational elements in your business right is essential. The new year is a perfect opportunity to set and achieve new goals. Here are some tips to get off to a great start in 2024:
Dennis Steigerwalt, Housing Innovation Alliance
Opportunity, Risk and Resilience
The economic landscape has undergone rapid changes. It started with the market frenzy driven by historically low-interest rates, then shifted briefly to a more balanced pace as we sought to regain lost efficiencies from over-stretched operating systems. As we navigate the choppy waters of higher-for-longer interest rates, inflation, and employment instability, we should reflect on our journey, our team, and the technology we’ll use to move forward.
In doing so, we must create the space to think differently and consider a new approach to the risk versus opportunity assessment that is always present in our business. While curiosity levels in new technologies and the value they may provide for our business continue to increase, adoption rates are not keeping pace.
A shift in perspective and habits is needed. There is an opportunity to focus on dedicating resources to R&D, evaluating internal and external partnerships, getting creative with incentive structures, and leveraging resources available from the government and universities to take more, measured risks. We need to thread the needle to make the most of our resources. Now is the time to invest in innovation, perform better, build better, and ultimately foster a more resilient business.
Paul Cardis, ON3
Go Beyond Surveys In 2024!
Most home builders today are engaged in rote multiple-choice surveys of their customers’ home-buying experiences that are incredibly boring and meaningless to customers. I should know because I sold my survey business over five years ago, and I am shocked at how behind the home building industry still is in this area. Going forward into 2024, every builder must rethink their customer survey strategy and look for modern customer feedback technologies that are easy to use, relevant to both customer and builder and frankly provide savings over current systems.
Your team must focus on the customer experience as rising interest rates drive a more discriminating buyer. Future sales will depend on improving your understanding of the customer to drive quality and realize higher referral business. If your surveys are off, so will your sales, not to mention your reputation in the marketplace, which can be sullied instantly with today's social media. Rethink your current survey programs, research what is out there, and sharpen your customer experience (CX) strategy.
Erica Lockwood, Joseph Chris Partners
Break Through The Glass Ceilings That Limit Your Potential
You might wonder how to advance your career and break through the glass ceilings limiting your potential. You are not alone. Many people in your field face the same challenges and frustrations. But there is hope. Here are some tips to help you grow and succeed in your profession.
Matt Collins, The Mainspring Group
The Best Work Arises From A Place Of Equilibrium
The best work arises from a place of equilibrium. Cultivate an environment where team members are encouraged to find a healthy blend of professional drive and personal fulfillment. This approach leads to innovation and efficiency that are both sustainable and humane.
Moreover, approach each project with a sense of connection and compassion. The structures you create are more than buildings; they are future homes filled with dreams and memories. Inspire your team to see beyond blueprints and timelines to the real human impact of their work. Such a perspective not only enriches the lives of those who will inhabit these spaces but also brings a more profound sense of satisfaction and purpose to the daily.
Tim Bailey, Avid Ratings
Technology: Nail It, Then Scale It
According to research by Accenture, “84% of C-suite executives believe they need to use artificial intelligence (AI) to achieve their growth objectives. However, 76% acknowledge struggling with scaling AI across their business.”
The global artificial intelligence market size is expected to have a compound annual growth rate of 19%, taking it to nearly $2 trillion by 2030. In a world where technology is evolving exponentially, AI’s not just in the spotlight; it’s the broader technology landscape. In this context, having a well-defined “technology strategy” is paramount to businesses of all sizes.
A technology strategy is a plan that aligns technology use with your broader business goals. At the most basic level, it should outline how technology will support your overall business strategy for the next 3 to 5 years in terms of:
Technology touches every business area, including the people, processes, and products. Technological innovations can lower costs, improve efficiencies, and boost productivity, and a well-crafted technology strategy provides a blueprint to help a business nail it and then scale it.
Joshua McMahon, MCM Consulting LLC
Know Where You Stand And Where You’re Going
The home building sector will continue to face headwinds in 2024. If hiring internal and external staff wasn’t hard enough, we will now face a slowdown in sales that will add to our struggles in the coming year.
For all of you who invested in your processes and systems, you are likely ready for the current market conditions. If you didn’t reset your operations, now is the time to set the stage for what will come. Review each function of your business and ensure you have KPIs for each and that the metric you track is focused on throughput. Now is not the time to “assume” you have a handle on the business. You need to “know” where you stand and where you are going.
The key to success will be efficiency in everything your team does. Trade partners are still limited, and they will be selective with whom they partner to get through the downturn in the market. Ensure your job is ready. Every segment of your business should be aligned so your customers feel confident with their buying decisions, and it is reinforced with each step.
Ensure each function of your company understands the expected deliverable before passing the work package to the next team on the production line. If you want to be the builder of choice, you must work to stand out from the other builders in your market.
Carol Smith, Home Address
Create Trust With Buyers
We're all grappling with over two dozen difficult national and international issues. To create trust with today’s stressed-out consumers, builders can start with a buyer profile form asking about such subjects as career, family, hobbies, pets, food preferences (gluten-free?), and previous home buying experiences; then include consideration of these details in a system of well-planned customer meetings, emails, and phone updates on the status of their new home from start to delivery.
Jane Meagher, Success Strategies
Transform Your Design Collections Or Design Studio Experience Into A Robust Marketing Tool To Sell More Homes
As builders, we are often overly pragmatic when selling, especially today.
It’s obvious that potential homebuying customers are looking for the right floorplan on the right homesite in the right neighborhood at the right initial investment (i.e., base price), so it’s often easy to forget that they are pulled toward all that by their vision of life in that brand new home. And that vision includes the finishes and features they want to surround themselves with, representing who they are or who they want to become in their new life. Remember that people “buy on emotion and justify on facts,” so there’s no downside to adding one more pillar to your list of Unique Reasons to Buy From Us, one that taps into that emotion that can fuel a sale.
Here are a few ways to promote your company’s home design experience and the uniquely personalized home that results from it.
It's been said that emotions drive nearly 90% of our decisions. Set your brand apart and attract more customers aligned and promise by leveraging an underutilized, untapped asset: you! READ THE FULL BLOG
Angela Gardner and Christi Powell, Women Talk Construction
Empowering Women in Residential Construction Through Technology
In an industry traditionally dominated by men, women are making remarkable strides and reshaping the residential construction landscape. As the hosts of Women Talk Construction podcast, we understand the importance of diversity and inclusion in driving innovation and progress. From the data gathered from female leaders and employees through HR initiatives and fostering efficiency in supply chain and operations management.
Empowering employees through Initiatives:
Driving efficiency in supply chain and operations management:
Female leaders in the residential construction industry realize the transformative impact of technology on empowering employees and driving operational efficiency. Through HR initiatives that champion gender equality, provide flexibility, and prioritize training and development, everyone can nurture a diverse and inclusive workforce. By embracing technology-driven solutions in supply chain and operations management can enhance productivity, improve customer satisfaction, and contribute to a sustainable future. Together, we pave the path to a more inclusive and technologically advanced residential construction industry. READ THE FULL BLOG
Ed Hauck, Builder Partnerships
Find Your 2024 Buyer
We have had several years of sales price escalation and cost increases. In that time, it was easy to load up our homes or get careless in our design process. In our defense, we had a lot going on. With high-interest rates, we need to find a way to lower sales prices without lowering profits. We have about eight weeks to retool our product to meet the budgets of our future clients.
Here are five steps to get prospects to become customers:
The market is going into holiday mode already. Builders have about two months to retool and roll out to attract new buyers. Move quickly and target your new teaser price the first week of January.
Scott Duman, ECI
Invest In Technology
Study after study shows that our industry is behind others when technology. Increased efficiency through the use of technology is one of the best ways to deal with many of the challenges we are seeing now: supply chain challenges, labor shortages, cost control, increased competition for fewer buyers, etc.
Investments in technology will not only help builders compete in a slowing market but will also help drive incremental growth when things pick back up. Technology can help you manage your costs better, create better experiences for buyers, drive more profitable sales, and improve processes with your trade partners that increase their efficiency, ultimately benefiting the builder.
Too many builders view technology as an expense, not an investment. The right technology investments have returns far greater than their costs. They create efficiencies across the organization. They make better experiences for customers and vendors. They improve profitability and build scale. Take the time to review your business and invest in technology!
Ed Brady, Home Builders Institute
Promote Careers in Construction
The health of the labor market is key to the outlook for monetary policy, interest rates and housing affordability. In 2024, there will be an upswing in housing production, increasing the demand for construction labor. Skilled construction workers will be needed to reduce the nation's housing deficit during the second part of this decade, a shortfall NAHB estimates of 1.5 million homes. The estimated, required amount of construction worker hiring is approximately 723,000 per year, according to NAHB analysis of BLS data and projections.
As many individuals age out of the construction industry, we need the next generation of workers. The way to solve this crisis is to provide quality training and introduce students at a young age to the possibility of a career in the construction industry. Boosting skills training today will help the industry better serve home buyers and renters now and in the future. There is a lot we can do together including advocate for training by working with local schools to incorporate a workshop-based curriculum into class offerings, create pre-apprenticeship opportunities for young students so they can gain early exposure and experience, or provide financial and in-kind support to schools by donating funds, supplies, resources, and mentoring time in construction-related classwork. READ MORE
Roger Langford, Professional Warranty Service Corporation
Get the Right Risk Solution
Risk management in the residential construction industry has many unique complexities. Understanding potential gaps in insurance coverage protects bottom-line profits and reputational risks. A few examples of these gaps include builder’s risk exclusions, cyber liability, and completed operations coverages.
Getting the right builder’s risk solution is essential. Premiums have been on the rise and, in some instances, difficult to obtain. Specific risks often vary depending on geographic locations. Many policies exclude common exposures, such as water damage. Understanding the intricate details of risk insurance is not just a checklist item but a necessity.
Cyber risk is an increasing threat that extends beyond the technology sector. Companies involved in construction projects are no exception and should rigorously evaluate their exposure to cyber threats.
Home builders also have long-term statutory obligations after the sale of the home. It’s important to understand completed operation coverage and legal liability.
Choose the right partners specializing in the construction industry and understand these market trends.
Lisa McCarthy, Out of the Box
Put Your Mask on First! Prioritize the Financial Health of Your Business.
At Out of the Box, we have worked with and serviced new business owners for over 30 years. Their most immediate concerns usually are around the cost of our products and services. This is natural when cash flow has yet to be fully established. In fact, 64% of small business owners do their own bookkeeping and 21% admit not knowing enough to confidently perform this function (yikes!). If you take action on just one piece of advice from this list, I beg you to make it this one: don’t let this be you!
As we all know, the success of a business is measured by its profitability. Many factors influence and drive profit, but if you aren’t tracking the basic components timely and accurately - from the beginning, it becomes harder and costlier to course-correct as time goes on. Your financial data should be informing strategic decision-making and, if that data isn’t any good, initiatives designed to pivot your organization will yield weak results, at best.
Put your mask on first. Invest in your accounting tech stack – don’t cut corners. This will save you time and money. Implement internal controls – simple measures can help you avoid fraud, the average cost per case of which is $350,000. Ensure you are working with a seasoned, professional bookkeeper. READ MORE
Bob Cain, ECI
Focus On What You Can Control
In an environment challenged with supply chain reliability, labor and economic conditions such as interest rate locks keeping homeowners in a home, it may feel like there are too many challenges on top of the norm to succeed. However, we live in a data revolution allowing more control over things within reach. Builders have been implementing data-collecting software systems that define workflow and improve communication for years. Systems have helped automate many areas of business management and scalability for home builders while providing key data points to help them thrive while communicating better with stakeholders.
I challenge builders of all types in 2024 to take the next steps in communicating with trade partners using data-driven technology. Achieving this goal will require builders to treat trade partners more like star employees than trades. We need to harness what we have learned, and the benefits achieved from using technology in our building businesses—share and give back to your trade base. We need to go a step above negotiating contracts and enforcing schedule A’s. We need to go beyond training them on a builder portal. We need to help them adopt technology that will allow them to grow their business and scale for the future success of our industry!
Russ Stephens, Association of Professional Builders
Invest In Marketing
With low consumer confidence, record insolvencies in the construction industry, and interest rates at their highest levels in 20 years, it's no surprise that many building companies are tightening their purse strings. But this is exactly when you need to invest in marketing to find the best leads out there.
To reach the industry benchmark of 10% net profit in your building company, you should invest around 3% of your annual revenue in marketing and advertising. This investment generates excess demand that allows you to increase your margins to the extent you can cover a 15% overhead and still make 10%+ net profit from your sales.
That's not theory, by the way. The evidence is all inside the 2023 State of the Residential Construction Industry Report. The builders that invest more money in marketing and advertising not only generate higher gross margins, but they also generate higher net margins!
That means a $5,000,000 building company can spend $150,000 a year on marketing and advertising and still make more net profit than a $10,000,000 building company spending just $100,000 yearly to promote their business.
The numbers don’t lie; you have to spend money to make money, so there is such a massive opportunity right now for builders to invest in marketing. While your competitors reduce their budgets, you’ll be in a race to the top.
Brad Haubert, ECI
Buckle Up! It’s Going To Be A Bit Of A Wild Ride
The higher interest rates are likely to stick around – meaning you need to focus on TWO primary things right now:
This is the time to look at what you are offering – both in terms of the number of floorplans AND in the standard product offerings you are including in each of those plans. It’s time to think outside the box and make choices on what you “think” your buyers need vs. what they are willing to pay more to have.
As for marketing savviness, ensure consistent and repeatable touchpoints with your Prospects. Each touchpoint should be moving them one step closer to making a purchase. At this time – it will be a matter of talking about “monthly payments” more than “interest rates.”
Diane Gilson, Info Plus(+) Accounting® Inc.
The Importance Of A Controller For Growth And Profitability
A controller provides your business with financial oversights and regular review of your current financial information, and help interpret what your numbers mean so that you can make the best short and long-term decisions for your company. They can also spot-check for material surplus, labor inefficiencies, and duplication of efforts so you can identify and reduce waste saving you money.
In addition, a controller can assist with company planning and budgeting so you can create your vision for the future. This collaborative partnership can become a cornerstone for building your financial future and long-term success in the building industry. Engaging with a controller can offer your construction business additional expertise to help you manage the present and strategically plan for a profitable future.
Many construction owners believe controllers are far too costly to hire for their company, but the benefits to your business can't be overlooked. By engaging a “fractional” (part-time) controller you’ll get many of the most critical advantages without taking on the expense of a full-time controller.
If you enjoyed reading this article, check out these other blogs featuring tips for new home builders:
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