By Ed Hauck
Builder Partnerships Senior Consultant
Most builders have a clear concept of the importance of maintaining control over the production cyclein their home building operations. What they often don’t realize is the opportunity that exists to control and reduce of the “soft” cycle from the time a sales contract is signed until the house is released to production.
Having a properly staffed and managed design center provides the opportunity to:
Control the soft cycle,
Reduce the soft cycle time,
Improve the buyer experience, and
Reduce mistakes and change orders.
The first key measurement is the soft cycle should account for 25 percent (or less) of the days in the production cycle. The time spent in planning and preparation up front will greatly reduce the risk of costly change orders later on. To achieve this metric, plan on two to three meetings: a preview meeting and one to two design meetings. The type of product will determine the number of meetings; first-time or move-up buyers are different from luxury buyers.
The preview meeting is held prior to contract; it helps increase closing ratios. Buyers also need education to help them allocate dollars in their home purchase. There are so many decisions in this process. They need to balance home size, base price, structural dollars, and finish selection dollars. This should happen on the front end of the buying process.
Most builders can finalize the selection process in the second meeting. One large benefit of multiple design meetings is that it will reduce change orders.
Design center size
The size of your design center is a function of homes sold per year, not products offered. The design center meeting time with buyers is a function of your product line and whether your team is working with first-time or luxury buyers.
If your sales volume is 150 homes per year and you need two meetings per client, one designer and one or two work stations can handle that volume. If you are building 300 homes per year, you probably need two designers and 3-4 work stations to accommodate the volume.
What can a design center do for you? It can increase your options sold as a percentage of sales price. You can also get higher margins on your options. Also, it's a competitive advantage in the marketplace to have a design center.
You should see a higher closing ratio; with a well-run design center, you can increase your sales by 10 percent or more. In a model home, prospects only see one or two design options. Design centers can show them so many more design ideas. In addition, your sales team will have more time for new prospects and sales.
Naturally, customers will want to see the options displayed. Some products, such as kitchen cabinets, countertops, flooring, lighting, and bath products, require square footage. We use option sales volume and profit by option category to allocate space in the design center.
We can help you create a plan for a design center or help manage your current design center to increase sales and margins. Contact us for a consultation.