The modular home building landscape has changed over the years. Fewer builders are entering the market, amplifying the need for every existing builder to be at their best.
Especially if you are building fewer than 6 homes a year, the challenges can multiply. Projects can span several months, increasing the risk of encountering issues.
While many “new to modular construction” turn to the factory where they buy their homes for help, modular factories are ill-equipped to help with any of these seven problems. They build and sell you a product. It’s not in the factory’s realm of responsibilities to make sure you understand how to successfully run your business.
Understanding this, let’s delve into seven pitfalls you should steer clear of:
1. Incorrect Pricing
A major misstep new builders make is undercharging for their homes. This can stem from a lack of understanding of how to set effective prices or the misconception that offering the lowest price is the only way to secure a sale. Unlike a commodity that is purchased regularly, for many clients, building a modular home is a once-in-a-lifetime project. Assuming that a low price is the primary dealmaker is flawed.
Seek expert advice. Engage with consultants or franchisers to devise a well-calibrated pricing strategy that mirrors your value proposition.
2. Overemphasis on Sales
For many modular home builders, sales numbers become the primary success metric. But equating increased sales with long-term success can be a false equivalence. Overcommitting can lead to an overextended pipeline. And, combined with under-pricing, this can fast-track your business towards insolvency. The ultimate cost? Disappointed clients left without a home despite their investments.
3. Neglecting Tax Implications
It’s non-negotiable: taxes must be paid. Many builders struggle with balancing expenses with revenue, especially after receiving bank draws. If taxes aren’t factored into the price of homes, you might find yourself with a significant tax bill and an empty wallet. Engage with an accountant to ensure your pricing is tax-inclusive.
4. Operating Without a Business Plan
Remember the adage, “If you fail to plan, you plan to fail”? For home builders, a lack of business planning is alarmingly common. Imagine constructing a home without a blueprint. Sounds ludicrous, right? In the same vein, operating without a business strategy is a recipe for disaster. Start with a quarterly plan, detailing your objectives, methods, and monitoring mechanisms. Over time, you’ll appreciate the foresight this approach offers.
5. Mismanagement of Human Resources
Employees can either be the backbone of success or the harbinger of downfall for many builders. Hiring without a discerning strategy or neglecting employee management can adversely impact your business. It’s crucial to identify the skills required for specific roles and ensure prospective employees align with those needs. Investing in quality hires, even if it means paying a premium, will often yield dividends in performance.
6. Overlooking Customer Service Excellence
While every builder aspires to offer good customer service, mere aspiration isn’t enough. In our interconnected digital era, one bad review can snowball into a reputation crisis. Platforms like Facebook, Instagram, TikTok, and Angie’s List have amplified the voice of the consumer. Conversely, outstanding service can lead to word-of-mouth referrals – a critical driver for sustained business growth. The bottom line: bad publicity can devastate new home builders.
7. Stagnation in Skill Development
The home building sector is constantly evolving. From emerging green building standards and HERS Ratings to Energy Star and updated code requirements, there’s always something new to grasp. Beyond construction, skills in management, strategy, and organization are vital. Moreover, modern marketing avenues – from social media platforms to vlogging and podcasting – are continually expanding. A commitment to continuous learning is non-negotiable.
In a world where modular home building is becoming more challenging, understanding and mitigating these pitfalls is essential. A proactive approach, coupled with ongoing learning and adaptability, will pave the way for long-term success in this dynamic industry.
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Gary Fleisher, the Modcoach, author
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