Begin Planning Now So You Can Reap Business Success Later
Home builders and other industry professionals who want to be in a position to take advantage of new opportunities when the market returns need to reevaluate every aspect of their business and begin instituting new ways of conducting their business, said panelists at a recent audio seminar on how to position businesses for the next economic upswing.
If business owners don’t take these steps now, said Manny Schatz, MIRM, CAASH, CGP, CMP, of Professional Builder Services in Danville, Calif., “you will revert to your old business habits when our markets come back.”
“To survive and do well in the future, you will need a fresh approach to your business practices starting today,” he said.
Speaking at NAHB’s National Sales and Marketing Council-sponsored seminar, “Beyond the Best Case Scenario,” recently, Schatz, along with panelist Ross Robbins, MIRM, CMP, CSP, of Lee Evans Group and Shinn Consulting of Littleton, Colo., outlined a three-step strategic process that can help guide business owners through the planning process needed to reposition their companies.
Much of the process, they told participants, had to do with changing their outlook and attitude on the current down cycle.
Change Attitudes and Learn From History
Robbins said that business owners trying to survive the downturn will have to accept what they cannot change before being able to move forward.
Asking questions such as, “How bad will it get?” or, “When will it get better?” as well as placing blame or guessing when the turnaround will happen is wasted effort, he said. The key to finding success now is to focus on who is buying homes, now on who is not.
“People still need homes, but they will probably be different from the homes we built in the last cycle,” said Robbins. “Understanding what your real buyers want and, more importantly, what they will pay for, is the most important thing you can be doing as the housing spring comes.”
Being able to deliver to those buyers will depend upon how prepared your business is today, Schatz said.
“You probably think we are crazy to suggest that now is the time to be looking at focusing on your business future — when you are in the midst of survival,” he said. But he stressed that business owners won’t be successful when the good times return if they don’t take the time now to prepare.
One way to prepare, Robbins said, is to examine and compare patterns in housing cycles of the past.
He noted that housing did bounce back after a five-year continual decline from 1978 to 1982 that cut housing starts almost in half by the time it ended, and that housing is following a similar pattern in the current downturn.
While the current decline is much more drastic, Robbins reminded participants that the building industry is cyclical, and accepting that there will be some slow years ahead will help business-owners better plan for their future. Even if the market comes back quicker or slower than anticipated, he said, builders will find it much easier to adjust a plan that’s already in place instead of scrambling to react to changing circumstances.
Map Out a Vision for Your Company
Robbins and Schatz advised participants not to give up, let things happen or ignore the control that they don have over their businesses. Instead, they recommended that business owners should make a plan that addresses all the things that they can control, and begin with their vision and mission statement.
“With a vision and clarity of purpose, you can develop a realistic plan to achieve your goals,” said Schatz. “We call the plan to achieve our vision, our mission. However, the vision must come first. You cannot plan an effective route until the destination is clear.”
The first task to map out your business path is to create a vision statement. This statement should achieve the following:
• Reflect and embody what an organization hopes to be when it is as good as it can be
• Help create and define a sense of shared purpose that inspires strong performance and productivity
• Serve as the only realistic way to begin establishing a business plan and a business philosophy
Schatz said the next step is to create a mission statement, which will flesh out the vision with additional detail such as specific tasks or processes. Once these processes are identified, they need to be defined to maintain consistency.
“All processes should have their own procedural information listed and clearly defined,” said Schatz. “This way, everyone on your team will have a clear understanding of what they are expected to do, when and how they are expected to do their tasks and what result they are looking for upon completion. In short, they will understand how to do their job as part of your team and your organization.”
Robbins also suggested that builders should make sure they recognize their most valuable assets — their employees. Showing your appreciation is important to keep your employees invested in your business, he said. By doing such things as creating and updating position descriptions and providing training, you keep your employees invested in your business.
Watch for Cues, Develop Strategies and Put Your Plan in Action
Robbins said most builders miss the peaks and bottoms of cycles “because we are herd animals. When the herd starts moving, it is well after the best opportunities have already passed.”
To break from the herd and be in the best position to take advantage of new opportunities, he said builders should identify trends in their local markets, develop strategies and plans to take advantage of those trends and, finally, put those plans into action.
He said builders should establish their own predictor trend charts — based on leading predictors — so that they can identify trends. These predictors should include:
• General local housing market predictors — mortgage interest rates, housing foreclosures, net employment change, building permits, retail sales revenue and new automobile sales
• Existing home market predictors — inventory, average days homes spend on the market, average existing home sales price and the sold-price-to-asking-price ratio
• Internal predictors — weekly company buyer traffic, traffic capture rates, percentage of contingent contracts, contract fall-out rate and voluntary cancellation rate
Once builders have their market predictors in place, they need to create a business plan, if they don’t already have one, and take the time to continually update it.
“You wouldn’t think of building a home without a set of blueprints,” Schatz said, “so how can you consider building a company without a comparable blueprint?”
The business blueprint should contain all aspects of building and maintaining a viable business, including:
• Marketing plan — To define specific activities needed to reach and maintain levels of qualified traffic, sales and closings necessary to achieve the income objectives noted in your business plan.
• Sales plan — To forecast the sales cycle each week based on releases, market timing and other factors. This helps eliminate panic if there are low or no sales predicted in the sales plan.
• Plus-minus plans — With the overall business plan as the main, neutral strategy to most likely follow, develop supplemental plans — one optimistic the other pessimistic — to address situations if the market improves or becomes worse than expected. Thinking of these possibilities ahead of time, Schatz said, will enable business owners to be proactive in adapting to market changes.
To complete the process, the panelists urged participants to tie their action plans to predictors with pre-established triggers.
They advised listeners to determine where on the trend chart their plans and strategies will fit in order to achieve maximum effectiveness. They also stressed that their listeners should, of course, adjust those plans according to circumstances.
If people are not buying during a certain period, they said, you will want to use strategies and tactics that differ from what you would use when they are buying, they said.
Seminar Recording Available Soon
A recording of the audio seminar, “Beyond the Best Case Scenario,” will be available for purchase soon from The NAHB University of Housing. For more information and updates, visit the university’s eLearning page.
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