Establishing sell-by dates can be a game changer for a builder’s operations. Also known as even flow or slot scheduling, the sell-by date is the procedure whereby you preset the production starts based on the anticipated sales volume for the year. The sales team is then able to sell the production start dates and communicate a reasonably certain completion date to the buyer. The sell-by date is built to the current business plan and will help a builder manage several key pieces in its operations.
For a builder to keep its business on target, the management team needs to know exactly where it stands at all times on sales to date per community and company-wide, so chart it! Measure closings per month and cumulative closings, and compare actual closings to the sales goals. This will help manage when spec homes need to be released for sale.
If you have a slow month due to seasonality, you need to release a specific number of spec homes per community. Make sure you don’t exceed the limit of specs per community; it’s better to lose a slot than overbuild specs.
Questions for you to ask: Do you have a spec home procedure? Do you know what the plan is for the percentage of sold homes to spec homes?
If the company is at capacity, there’s no need to release spec homes. If sales are exceeding the sell-by date or the business plan, then you can plan and increase capacity and better manage price increases, but you need a written process. For example, if the deadline for a price increase is Sunday, Dec. 1, and a buyer is not under deposit, the price increase is in effect. You also can set a deadline to go from deposit to contract. This is typically a black hole of lost profits in most builders’ operations.
Having sell-by dates provides clarity in establishing policies and procedures. If you are at or above plan, no discounts are required. If you are behind, discounts are called for, but you need a written discount process. The same concept will apply to customization.
Establishing sell-by dates will help you manage your production capacity. That increases quality, cuts build times, and reduces direct construction costs. They drive better customer satisfaction ratings because buyers are given accurate delivery dates. They also help meet bank/investor requirements as they clearly show the financial capacity in the operation.
We can help your company establish accurate sell-by dates. Contact us today to learn more.