How Home Builders can Avoid 7 Common Pitfalls

With the dwindling number of modular home builders and the lack of new builders entering the market, there is more need for every builder to be the best they have ever been.

This is especially true if you are building less than 6 new modular homes a year. Encountering problems in any business can be tough but when you’re project can drag out to 6 months or more, the chances of stumbling over a problem increases.

Here is a list of seven common pitfalls that you should avoid:

1. New home builders tend to undercharge for their homes.

There are two main reasons for this. First you don’t know how to correctly set an effective price for your homes and secondly, you think that you have to give the lowest price to get the homeowner to sign on the dotted line.

If home builders were selling a staple that everyone needed on a regular basis, it would be very easy to find a fair price for your product. But you don’t. For many of your potential buyers, this will be the only house they will ever build and you think that if you don’t give them the lowest price, you will lose the sale.

If this is how you operate, it’s time to sit down with a consultant or Franchiser and work on implementing a well thought out pricing system.

2. Builders tend to concentrate too much on sales.

Most modular home builders are sole proprietors and tend to gauge success by the number of homes sold. You tend to think the more sales you make, the bigger and better your business will be.

Wrong….. While having a lot of homes to build is usually a good thing, using the number of homes as your yardstick to measure success will get you in trouble. Too many homes in the pipeline without spending the time to plan for that many will put you on the path to failure.

You will over-promise and under-deliver. Add in under-pricing your homes and soon you will be one of those builders that go out of business leaving folks with lost deposits and no house to show for it.

3. Forgetting taxes can spell disaster

You have to pay your taxes. There is no way around it. One of the toughest challenges you’ll face is getting a draw from the bank and just having enough money left over to meet your personal and business expenses.

If you do this through the entire draw schedule, you will be faced with taxes to pay and no money left over to pay them. You need to include your taxes in the price of the house. If you aren't sure how to calculate what to add to the house price, contact your accountant.

4. No business plan.

You’ve heard the old saying, “If you fail to plan, you plan to fail.”

Home builders are notorious for not having a business plan. It would seem absurd to even consider starting to build a new home without a set of floor plans and a schedule, so why don't you have a good set of “floor plans” for running your business?

It can be as simple as planning out your next 3 months. What do you want to accomplish? How are you going to do it? How do you measure if you are on track? These are not hard questions. During the first month, start planning for the second three months. Eventually you will start to see the advantages of having a business plan.

5. You don’t know how to hire or keep good employees.

Many small home builders with one or more employees do not have a clue how to effectively manage or train them. You hire whoever comes in the front door looking for a job you need filled and send them into the field to represent you and your business.

Your employees, whether you only have one or a staff of them, are your business’ most valuable asset. It has been proven that they can make or break you business. You need to think real hard about the position you need filled and if the person you’re looking to hire is that person. It is better for your business to not hire just to fill a slot.

In today’s tight labor market, you may have to pay more for the right person but it could be money well invested.

6. You fail to provide outstanding customer service.

Every builder strives to provide good customer service. It’s expected but if you fail to deliver, the homeowner will not only yell at you, they will tell every one of their Facebook, Instagram and TikTok friends, Angie’s list and some have even created blogs to tell anyone reading to stay the hell away from you.

If on the other hand, you provide outstanding customer service, the customer tends to only tell a couple of people but don’t be fooled by that, those comments are called referrals and that’s what you need to keep your business healthy and profitable.

Bad publicity is NOT good publicity for new home builders.

7. You stop developing new home building skills.

If you try to do business like you did last year, your business will slip away. There are just too many things to learn! HERS Ratings, Energy Star, Green Building and new codes requirements are just the tip of the iceberg.

You also have to learn more about management, business strategies, organizing and other things too numerous to mention about the nuts and bolts of home building.

There are the new marketing avenues that have to be explored. Facebook, Pinterest, Google, Yahoo, direct email campaigns, webcasts, podcast, Vlogging and so on and so on and so on. Whew!!!

If you aren’t constantly learning, you will fall behind and soon the other builders will be building homes for your prospects.

Staying abreast of these things can be a real challenge without help from someone. It could be the factory that supplies your homes, national organizations like the BSC and the MHBA, NAHB Chapters and your franchiser.

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Gary Fleisher is a housing veteran, editor/writer of Modular Home Builder blog and industry speaker/consultant. 

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