10 Ways Builders Mess Up Their Business

Courtesy of Building with an Attitude by Al Trellis

1. Poor pricing decisions-price too high and the product sits, price too low and you go broke.
2. Building a ho-hum house.
3. Building in the wrong location-bad neighborhood or bad lot.
4. Overbuilding for the market-putting too much into a home that you can't recoup expenses.
5. Unrealistic expectations-clients need to understand there is no such thing as a perfect house.
6. Poor sub supervision
7. Sloppy cost control-some builders don't know if they've made money until the house is complete.
8. Inaccurate estimating.
9. Selling features, not benefits-people don't care about features, they want to know what it will do for them.
10. Makeshift marketing-good marketing creates awareness and value perception.

Flash Value

Heard an interesting tip about a former builder who experienced much success in the San Antonio region. The builder was Fox & Jacobs who eventually sold to KB Homes. He experienced so much success because of his self-coined term flash value. He would basically strip down his homes to the bare essence in the planning stage. He would include the basics like roof, foundation, electrical, drywall, plumbing, HVAC, etc. Then he would take the remaining finish-out items and work formulas to derive a quotient that he would call flash value and it worked like this. Let's say that crown moulding costs $2.50 per linear foot to install and paint. Now let's say that the general public liked crown molding so much they would pay $4.00 per linear foot for the end product. He would take $4.00, divide by $2.50 and arrive at a flash quotient of 1.6. Let's now say that hollow-core doors cost $135 and solid-core doors cost $175 each. If people generally didn't care and were willing to pay a max of $175 per door but their major concern was the rest of the home; then he would assign a flash quotient of 1.3 to the hollow core and 1 to the solid core. He would continue to do this for all finish-out type items in the house and develop a stack ranking of the best-returns of investment for the money and for the same price would continually modify and improve his products. His success speaks for itself and he was able to deliver a better product than his competition in the field. No matter the business, this is a simple and effective way to not only deliver what your customers want, but do it better than anyone else.