Cash Flow

Lately, with a combination of today's market and other factors; we are starting to see some builders get in real financial trouble. Seems like in the last month I have heard of a real prominent builder who may pack it in, others who have huge settlements with vendors we use and still more who are just scaling-back with personnell. A lot of these builders are good builders and I wish them the very best, but I can see how these guys get in trouble. When you own a contracting business, a huge amount of cash flows through your business on a weekly basis. It doesn't matter how big you are because it is all relative to how many people and projects you have going. The trickiest part for a builder sometimes is to identify which money is his, and which money is their customers. I know it sounds crazy, but the banks fund on a percentage of completion which means that it doesn't match up dollar for dollar with your expenditures. What can happen is you all of a sudden have a padded bank account as a builder, and you begin to think that you somehow ended up with more money than you thought you would originally on a job. That is not the case. You have to be disciplined and almost put the excess cash to the side, because like many things in life- there will always be a day of reckoning.

Open House

Hey, haven't chatted in a while, sorry about that. One of the reasons is we had an open house that took a tremendous amount of energy the past month. It was a huge success in terms of attendance and interest, and I think it will pay dividends down the road. There were actually two different projects going on- the first was to finish the house, and the second was to simultaneously prepare for a massive gathering and party. I really tip my hat to realtors who do this sort of thing often because it is definitely not easy. We had the event catered, we had door prizes and parting gifts; it was really cool. Thanks to the whole Mattern & FitzGerald team for putting this together. I wanted to leave you with a couple of photos from the event so you could get a feel for it. Enjoy and Merry Christmas!

What You Need

There's a few shows that I like to watch on TV every now and again. My son and I love to watch college football together and my wife and I like to pick a series and watch it like Lost, 24 or Heroes. I'm always scanning CNBC though, because I like to keep up with the nation's business news and watch interviews with CEO's of other companies. There is a show I watched the other day on CNBC called Your Business and this show is driven to help small businesses like ours by offering tips and advice. They were interviewing an up and comer in the fine ceramics business in New York and profiled this guy as he went through his story of starting with nothing and working his way up to having his ceramics displayed in the Museum of Metropolitan Art next to other world-renowned designers. So in a relatively short amount of time, this guy who operates out of a small warehouse is being mentioned and featured in one of the world's most renowned centers for art- truly amazing. They had a panel of consultants listening and watching his interview, and they asked them after the fact why each of them thought he had been such a success. They all had different points but the one that stood out to me the most was this; so many times in life we tell people what we do for a living, but this guy went around to everyone he knew and told them what he needed. There's a huge difference in my opinion. If you think about it, we are not specific enough with most people or maybe even feel a little uncomfortable reaching out to others to ask for their help. So next time you're out and about and find yourself in a conversation about your business, tell that person what you need- you never know who they might now that can help you.

Selecting a Roof

One of the things we really think about when first planning a home is what kind of roof we are going to put on. Most of the time, our roof selections are driven by budget, but sometimes we splurge and spend a little extra if we want to make a statement about our product verses the competition. There are a lot of different options when it comes to roofing, but the three most common that I am going to talk about are composition shingle, metal and tile.

As a rough rule of thumb, a compostion shingle roof costs today approximately $2.50/sf of living space. You have different amounts of years such as 30 or 40 year roofs that rise in costs as you increase lifespan. One cool thing to do is if you have a chosen composition shingle as your product for your home, investigate the different textures. For example, you can use the high-definition product like this:









Or you can go with a European look that we've done before with something like this:








The next option on the price scale is a metal or standing seam roof. These roofs run approximately $4.40/sf for painted metal in a variety of colors and are light weight with long life-spans. The neat thing about these roofs as you can see by the picture below is that the metal is fabricated on top of the roof decking by laying approximately 2 foot wide sections of metal side-by-side and then crimping the seams together which make it virtually impenetrateable by water that is coming straight down.



The more pricey option is the tile roof. The tile roof is running approximatley $5.40/sf for us
right now for the material. The other thing to consider is that because it is so heavy, you actually have to beef-up your lumber package on the roof to support it, so that adds to the cost as well. You can choose some different materials such as clay or concrete, and you can also choose solid colors or what they call blends which are different percentage mixtures of colors that look cool.

So no matter what your budget, don't just take your roof for granted. It really makes your home personal and can add a lot to it's overall curb appeal. Make sure you explore your options because they are continually coming up with different ways to capture certain looks.

Cabinets

I had a great meeting with Robert Gary, the owner of River City Cabinets this week. Cabinets are huge in a house. I didn't realize how big they were early on when I first started learning how to build but trust me- people love their cabinets. They are a significant expense for a home but they can really turn into an art form and make a huge first impression. In my experience; the 3 major areas of the home that you should really focus your cabinet attention on are the kitchen, master bath and powder bath cabinets. Designers will tell you that the kitchen and master bath "sell" the home. The powder bath is big because it is where the majority of your guests will visit when they come over. Robert taught me some cool things this week about the placement of capitals, corbels and rosettes on cabinetry. So I want to show you some pictures of what we talked about:

These are called capitals. Since these run about $75/each and up, we are going to use them in high visual impact areas. We chose the vent hood area above the cooktop. They will be stain grade with glazing to enhance the definition.





This is called a corbel. We are putting these under the kitchen base sink cabinet to box the granite out and give the sink area added definition. We will also use them under the island countertop overhang for barstool seating. These will also be stained with glazing to enhance definition.

This is called a rosette. This is going to be placed on the upper cabinets on the four corners of the built-in study. In between the four corners we will have fluting.

So there is a lot to think about and we didn't even talk about crown moulding. Make sure you get with an expert, and make sure you weigh all your options when designing cabinets. There are a lot of cool ways to make them stand out without going over the top.

Spec Homes

Jason and I like to have a certain amount of specs going each year. A spec or speculative home is one that is built and financed without a buyer on the back end. The speculative part is that you feel you have a product that people want and you are willing to bet a large loan on it. Builders can get in trouble if they lever themselves up too much, and this is an area that almost everyone cautions you on. Most of my conversations with people who I meet for the first time go like this.......Oh, you're a builder? How many specs you got going right now? After a while, it's almost like it's a bad word or something. Now keep in mind, this is not an endorsement to build a spec, but if you do you may want to consider a few things:
First, make sure you study the market well. Make sure you know everything about the neighborhood you are building in, the ammenities people are looking for in terms of finish-out and how long things are lasting on the market.
Second, get a lot of eyeballs looking at your plan. People love to look at floor plans. Use this opportunity to have folks give you feedback and punch holes in the plan. You'll be amazed at what you pick up. Usually, we have anywhere from 4-10 different people look at each plan we are getting ready to build. It is not uncommon for us to revise plans several times until we get it right.
Third, don't come in on the high end of the market comps for the neighborhood. Real estate is like a pyramid, there are more people at the bottom of the pyramid (where there is a lot of space) that can afford homes than at the top, and it is no different in a neighborhood.
Lastly, stick to a budget. I was at an awards ceremony where a prominent builder won an award for a spec home design and got this huge trophy. Well I know for a fact that builder didn't make much in the transaction because the budget was not respected. You have to respect the budget. Don't get me wrong, we fall short too sometimes but we are always conscious of it. Think about it, you are investing 8-12 months of your time and a lot of money into a project so you may as well make the best of it.
Spec homes can be a great process for a variety of different reasons, and we always incorporate them into our strategy. Use caution and follow some of the basics above when considering whether or not you want to do one.

Expectations

I'm a huge fan of the dry erase board. I've got one right next to my desk. Whenever my kids come to the office to visit, they love to scribble on it. I do too. Every week I use it for one purpose. I like to write down the things that went wrong during the week. This week, I had a long list. When I finally got close to leaving this Friday evening I stepped back, looked at it and realized that so many of the issues revolved around managing people's expectations. In construction especially, you can let people down if you over promise and under deliver. It can be a promise about anything really; timelines, money, meetings, commitments or whatever. I thought to myself tonight that I am going to try to do a better job of managing people's expectations in the future better by reviewing our processes on delivery and using historical data to help lessen that probability in the future. I was quick to apologize in those instances this week, but after a while people grow tired of that and want you to do what you say you are going to do. If we want to have a business that is going to be consistent, scaleable, service and relationship-oriented, and priced fairly- we have to manage expectations accordingly.

The Real Estate Market

Seems like at least once a week for the last few months, (especially from parents and in-laws) I get asked the question How's the real estate market? I haven't heard good things. Well, I haven't heard good things either. It seems like every other day, the business section has some sort of headline talking about the declining market. I'll tell you what I think. About this time last year, the real estate inventory level for housing supply locally was about 4-1/2 months. Currently, it is hovering around 5.2 months. It is definitely increasing which is an adverse sign but San Antonio seems to be much different than the coasts, the midwest and the northeast. We don't rise and fall as meteorically as they do, and our local economy is still somewhat robust. Does that mean we keep plowing ahead, aggressively firing-up homes and using capital to grow?; absolutely not. Our mission right now is to conserve cash to weather the next 18 months while choosing projects that make sense both for us and our clients. My humble opinion is that our market will remain somewhat flat which means that we will need to focus our attention on our systems and cost-efficiencies so that we can provide for a better customer experience than our competition.

The Beginning

In 2002 I decided to make a career change. I had been in the telcommunications field for a long time and experienced a company and industry that went on a rocket-ride until the end when the bottom fell out. Luckilly, I have an awesome wife and she allowed me to pursue my dream of renovating houses. Up untill that time, all I had done was renovate one home, but I had definitely caught the bug. After a few years into it and many projects later, I had met an awesome guy named Jason Mattern through Church who was a fellow Aggie and in my Bible study. We decided to do a new home project together to see how things would go and the short of it is it turned-out great. We collectively decided to drop what we were doing and go into business together full time. I have been thanking my lucky stars ever since.