Over the years I’ve worked with many large and small residential builders starting back in the halcyon days of AV Jennings and I’ve seen the good and the bad many times.
The following seven traits are what I believe to be the seven most important traits or parts of their DNA that contribute to a business’s success in the residential building industry.
1. Business Principles are Defined and Embedded in the Business
The business principles are the guiding light and the foundation on which the whole business is established and continues to function. These ‘business principles’ are the:
· Purpose and Culture
· Leadership Principles
· Social Principles
· Sustainability Principles
Without these ‘principles’ defined and embedded in the business, the business tends to wander along looking for the ‘next best thing’ or it loses staff because of the behaviour of some that doesn’t meet their own principles.
Having these business principles defined and communicated to the marketplace will attract customers who will be the ideal customers for the business and your business planning will become easier as it will help define your strategies. Trying to operate a business without these business principles in place will mean you will be continually trying to work out where you should be in the marketplace.
2. Market Dominating Position is Defined
Businesses that have created their own market dominating position, will consistently get customers who choose their business over their competitors. There is a process to determine your ‘market dominating position’ and this begins to also build up the strategies for the business in areas such as the strategic position in the market, business model, customer service, product and pricing.
The successful businesses in the residential building industry understand these areas clearly and have spent considerable time developing them and fine tuning them.
3. Customer Journey is Defined and Understood
Customer-centric businesses are more profitable and have more employee satisfaction than those that don’t. Many businesses operate in ‘silos’ according to the function eg. Sales, marketing, estimating, construction and so on. I have seen this numerous times where the ‘functions’ or ‘departments’ in the business ‘wag the tail’ and decide how ‘they’ will run the business. All the time, not considering how the customer feels and how the customer has to navigate their way through the process.
Having a ‘customer centric’ business looks at the business processes and systems from a customer perspective and eliminates unnecessary duplication, multiple touch points and the frustration many customers feel when dealing with businesses that operate in ‘silos’.
One of the first steps to creating a ‘customer centric’ business is to define the customer journey. This quite quickly shows up the duplication, complication and frustration in a business.
Those businesses that have defined their customer journey by mapping it become more efficient and have happier clients – and employees.
4. The Business is a Great Marketer
AV Jennings changed from being a building company into a powerhouse in the Australian residential industry when it realised in the early 1960s it had to become a ‘marketing orientated business’ not just a builder.1
Marketing is difficult to undertake without having dealt with the three traits above first. Once these have been clearly defined and documented, the process of marketing becomes a whole lot easier.
The businesses that create great marketing understand the difference between ‘strategic marketing’ and ‘tactical marketing’. Most businesses focus on the tactical marketing and tend to blame the medium or channel by which the marketing has been delivered. Without the strategic marketing, the tactical marketing will just deliver platitudes and look the same as everyone else in the marketplace.
The strategic marketing works together with the customer journey to deliver an awesome customer experience. The best marketing businesses also understand the roles that lead generation, lead nurturing and customer education play in the customer journey. Digital marketing has changed the way in which we engage with customers and take them on a journey before the customer makes a commitment to buy.
1 “AVJennings - Home Builders to the Nation” by Roy Edwards and Vic Jennings with Don Garden 2013
5. Process and Systems are Documented
In my time in the industry, AV Jennings did it the best and many in the industry have been attempting to emulate this ‘system’ ever since. A business that has fully documented systems and processes is well on the way to becoming successful by the sheer fact that a lot of time will be made available for the ‘real’ work of managing a customer’s project rather than discussing what to do next or even worse, re-invent the wheel each time.
When a new employee starts with a business that does have all the systems and processes documented, the training is easier, the temptation to ‘re-invent the wheel’ goes away and the employee becomes productive much faster. All this means the team is more efficient.
If a new employee starts with a business that does not have the systems and processes documented, new processes are ‘invented’ to deal with situations and next thing you know the customer’s project is going off the rails and issues develop leading to an unhappy customer. The systems end up being run to suit the employees, not the business. I have seen this numerous times over the years and the business owners are oblivious to it.
As a business owner, you should spend the time to document all the systems and processes in your business, not only for your staff and your customers but also for your peace of mind in knowing the business is operating the way you want it to.
Two quotes from people in the business world who understand business extremely well -
Mark Bouris – The Mentor “Successful businesses are systemised, ‘manualised’, documented, thorough, thought through. Basically, if YOU ARE the business, you’re the biggest risk to the business...You owe it to yourself to have systems and processes. Document it”
“Organize around business functions, not people. Build systems within each business function. Let systems run the business and people run the systems. People come and go but the systems remain constant.”- Michael Gerber - E Myth
6. The Business Knows the Real Costs
You only start making money when construction begins and so the best managed projects are usually the most profitable, but the best businesses know where profit can leak from other areas? These businesses get on top of their 'real' costs by knowing where the problems and extras are coming from.
The really great businesses in the residential building industry also know how to reduce the complexity in their business. In order to reduce the complexity, there are a number of key areas that they deal with to be successful:
· Business Strategy
· Lot Type vs Home Design
· Adding Designs without Proper Development
· Inadequacies in Plans and Documentation
· Increasing Customisation
· Insufficient Training
· Incomplete Trade Packages
· Scopes of Work
· It's a Production Line
· Managing Customer Expectations and Knowledge
· Indecisive Senior Management
These businesses understand that having a ‘complex’ business also leads to profit leakage. It follows that if you document your business, you can also start to reduce some of the complexity since you will now know where to focus your resources in improving the systems and processes to eliminate the profit leakage, improve the customer experience and retain more engaged employees.
7. The Business is a ‘Gun’ Scheduler
A building company is essentially a ‘process management’ business. It manages processes undertaken by staff and hundreds of external businesses such as trade contractors and suppliers. Completing a successful home is the result of the process and project management of many processes and people over a long period of time.
The best builders are the best schedulers. As I mentioned above, having all the systems and processes documented will make it so much easier to run the business however, at the end of the day unless your business can schedule properly, all the systems and processes won’t prevent it from blowing the $$ on a project.
There are numerous steps to becoming a great scheduler and too many to describe here but if you manage more than 2 or 3 homes per month, then the way in which you release jobs to site can have a devastating effect on profits and staff. A friend of mine at RMIT in Melbourne, Ehsan Gharaie published a thesis for his PhD in 2011 that looked at the “House Completion Time in Australia: Workflow Planning Approach”.
He was able to show that the frequency with which you issue jobs to site is directly correlated to the time it takes for the slowest trade contractor on the job i.e. if a plasterer takes one week to complete his work then you can only issue jobs to site at the rate of one per week. To increase that rate, you will need to engage more plasterers. This theory was the basis for scheduling at AV Jennings and was the reason that they were able to complete so many homes in such shorter construction periods. It was just never mathematically proven back then.
To become a great builder, you must become a great scheduler or project manager and not just by using computer software.
The seven traits above are what I believe are the fundamentals to the success of a builder in the residential building industry. The whole purpose of The 3C Mentor and Alpha Edge is to help create really great businesses in the residential building industry. The seven traits discussed above are all serviced and delivered by our ‘Four Pillars to Success’ – Business Coaching, Business Consulting, Business Resources and Construction Software.
For an overview of these four pillars go to Alpha Edge here. To find out more about our Business Coaching go to The 3C Mentor here, for further information about the services Alpha Edge can provide go directly to Alpha Edge here and to access the many documents and resources you need as a residential builder, go to our Builder’s Business Resource Centre here. For more information on the construction software and how to ‘Be a Better Builder’, click here.
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