Strong real estate markets are a godsend for builders, at least in the short-term. Unfortunately, they can cause many construction companies to grow a little too comfortable. The old cliché about nothing being constant except change can be frustratingly accurate, especially in the residential construction industry. Make sure you are prepared for inevitable market shifts with these smart strategies.
Keep raising the bar. Companies achieve long-term success when they constantly look for ways to enhance the way they do business. Even if you are raking in dollars, you may still have room for improvement. Make sure you are always evaluating your approach and honestly assess whether you could increase sales and generate more revenue. It’s important to be as prolific as possible during hot markets, so you will have plenty of resources to survive and thrive during inevitable down times.
Understand what you are doing. Most residential construction people will tell you they are in the real estate business. In reality, they are in the retail business. Embrace this reality by making sure you prioritize the customer experience. Make sure your operational outlook centers on customer convenience and keep your hours flexible so you can catch every potential opportunity. When the market is hot, buyers are under extreme pressure to purchase a home before interest rates go up, home prices increase or they lose the property to someone else. Unfortunately, when interest rates rise, a lot of buyers will be sent to the sidelines. That said, there will still be plenty of people who qualify for mortgages. Those people will buy from you if you make investing in a new home a seamless, convenient experience.
Refine your professionalism. When the market is flourishing, it’s easy for builders to rest on their laurels and overlook all the little things that separate true professionals from the pack. Whether it’s unprofessional dress, dirty job sites, poor interpersonal communication skills or an overall lack of product knowledge, make sure you clean up any disordered aspects of your business before they get exposed during a market correction.
Perfect your marketing. It’s much easier to fund aggressive marketing and advertising campaigns when sales are great. When the market weakens, and things get competitive, however, you could go broke trying to outspend other residential construction companies. Now is the time to refine your marketing strategies, so you get optimal returns for your promotional dollar. When markets correct, you will need to outsmart rather than outspend your competition.
Since you can’t improve what you can’t measure, it’s important to cultivate a deep understanding of key business data. Make sure you create and constantly update a competitive market analysis, while tracking conversion rates by community, salesperson and online sales. Calculate the amount of “closed transactions” you need each year to reach your break-even point. Then, review sales every week to identify and correct shortfalls. You should also establish monthly profit goals to ensure your sales people stay sharp when markets are hot, cold or somewhere in between.
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