As with previous recessions and times of economic uncertainty, the housing industry is leading the current downturn. New home sales are down. Sales prices are down in most regions. Although demand for land is down, most land owners have not reduced prices or improved terms. Construction labor remains tight, especially in the skilled trades. Most home builders are feeling the pinch.
To survive the downturn, home builders need to monitor economic conditions and use the information to develop strategies that make sense given the current environment. We have identified five steps to help our builder community be better prepared to take action to protect profits (and businesses) in this volatile housing market.
1. Identify the team.
Assemble a team of engaged leaders. The team should include representation from each area of the business. Clearly communicate expectations and define the objectives and deliverables for the team. Team members should be committed to implementing solutions in alignment with company goals.
2. Develop strategies.
It is crucial to identify alternative strategies when dealing with the uncertainties inherent in economic information. Assess the strategies applicable to each internal and external condition, starting from your base case forecast, through the best and worst cases and each significant stage in between. Develop an action plan for implementing and monitoring each strategy when the appropriate trigger point has been reached.
3. Define triggers.
A trigger is a pre-planned point when one or more metrics are above or below a threshold which causes a business to take immediate action to implement a pre-chosen strategy or course of action.
4. Take action.
Select the best strategy for each combination of internal and external trends or conditions. Commit to taking action. Do not defer taking action unless absolutely necessary. Take small actions earlier whenever possible.
5. Monitor progress.
Establish “dashboard” reporting to evaluate the results of implementing each strategy. Analyze the impact each action had on internal metrics and make adjustments as necessary. Progress should be monitored on a weekly basis at a minimum.
Shinn Consulting is here to help. We offer customized consulting and coaching packages involving every area of the home building business. Contact us a 303-972-7666 or firstname.lastname@example.org
to discover how we can help you develop effective strategies to succeed under ANY market conditions.
Jim Weigel is a senior consultant at Shinn Consulting. He specializes in helping builders implement effective management systems with a focus on disciplined leadership and performance excellence to increase revenue. Jim’s areas of expertise include management, marketing, sales, finance, quality, valuation, owner transition.