Thursday, March 7, 2019

The Business Side of Modular Home Building

Today there is a shortage of modular home builders coming on to take the place of those that are retiring or simply closing up shop after years in the trade. Even those few brave young builders that are looking into building with modular construction are at a disadvantage.

There is no formal training for ‘new to modular’ builders offered anywhere in our industry. And training for the construction side of the industry is not the only thing missing, so are the basics of actually running your business.

Here are some of the areas that you need to put in more effort into if you are going to succeed in the current market.

New home builders are usually skilled tradesman but poor business people. Therefore the technical side of their trade is known very well but the business-side-of-the-business is lacking the same expertise.

You have pride in your work and company. This can sometimes be a problem because you can't tell the trees from the forest and can be very defensive of your business success (or) lack thereof. Your trade is more important than understanding the profitability.

You are not interested in paperwork other than plans and blueprints. No modular home builder wants to become an accountant or financial analyst. Just as your trade requires the right tools to get the job done, the financial side also has tool sets that simplify the job of making the correct financial decisions.

Many of you don’t really understand the cost of doing business. There are many hidden costs of doing business and if not know or taught how to calculate the contractor will always wonder where the money is going.

The vast majority of modular home builders have never had to be too concerned with marketing and it shows. This shows in your websites, your lack of social media interactions and understanding the latest ways the new home buyer uses to find a builder.

Hands-On builders would rather work than manage. There is nothing wrong with working but if you don't manage your business no-one else will. Monies will always just change hands. You must acknowledge when you need help in managing all the aspects you find either boring or confusing.

Almost every builder I know enjoys the "game" of taking chances. A roller-coaster comes to mind. Always up and down. Many of you manage your business from your checkbook. If there is money in the account your business is looking up. If there is little or no money in the checkbook it's down.

You can maintain a lot of detailed information about the business in your head. If you have a family, the business will have trouble continuing in your absence. The business can be a "house of cards" because taking you out if the business means the business would be non-existent.

Here is one of the biggest reasons builders go out of business. You may "know" the exact status of each job accurately, except for profitability. The most famous phrase is "I know I lost money on that job but made money on these two". Profitability should always be the first item of expense. There is no reason to do a job that can't make you a profit.

Many modular home builders want no part of the regimentation of systems. They are "shoebox bookkeepers." You must want to change. There are many ways to extract more profitability from each job. If you want no part of the day-to-day systems you must at least be able to follow what the person(s) you hire to do those tasks are telling you.

These are the most essential things to address besides how to do the work of building someone’s new home.

1 comment:

Anonymous said...

Sad but true! Many contractors don't know or account for their job costs (both direct and indirect ) for each project operating with a seat of the pants overview. It is critical that you prepare an overall plan 3-5 years out but that you establish a yearly plan to meet that 5 year program and monitor monthly against quarterly goals.