Homebuilding is a numbers game.

There are many numbers that are essential to a successful homebuilding operation.  Land acquisition and development costs must be reasonable and competitive as does the cost of materials, labor, interest and G & A.   But when “push comes to shove”, the only number that really matters is sales.

 Let’s assume the minimum absolutes: 

1,   You have an acceptable location where the neighborhood home values support your pricing, the site is convenient and accessible and people wish to live there;

2.   Your homes are well designed, providing the sizes, styles, utilization and features that the market desires and they are offered at appropriate and competitive pricing and values;

3.   Your company has an established image and reputation within the local market for quality, value and service.

Those “numbers” are minimum requirements, the basic essentials to get us to the starting gate to be able to sell a new home but they do not even begin get us to the finish line.  If we cannot sell an adequate number of homes at a profit then the other numbers are of no importance whatsoever and we are merely “also rans” in the race to success in the homebuilding industry.  In fact, if we are to concentrate our efforts on the true components of success, we probably should rename our business the “home selling” industry.

The sales number is the product of two factors, traffic generation and conversion ratios.  We can increase qualified traffic generated to our site (first to our web site and then to our sales office) and we can increase our sales conversion ratio (the number of visitors that buy as a percentage of traffic generated) or, preferably, we can do both.

Traffic is created and generated by promotion which, according to “Marketing 101”, includes advertising (today that would be both on-line and other traditional media), promotion (public relations, events and other promotional activities) and personal selling.  Advertising is paid placement of space or time and for housing in the 21stcentury would be concentrated in on-line activities – not just a fabulous web site that properly functions as a remote sales office but also the essential enhancements and accoutrements to that web site to maximize visibility and performance including ongoing search engine optimization (SEO), purchased links and banners, and blogs and other social media to drive traffic to the site. 

Recognizing that over 80% of all homebuyers will shop for a new home via the Internet, we must allocate proper resources to web-based activities but that does not mean that we can ignore other viable media opportunities including print (magazines and newspapers), radio and TV, outdoor (billboards and traffic signage) and direct mail as are appropriate for our specific product and local market. 

Promotion and personal selling also remain critically important in today’s marketplace to get our message out and positively differentiate us from the competition.  How many of us are achieving an appropriate customer referral rate today (a minimum of 25%)?  Similarly, what is our broker referral rate and what have we done today (and every day) to assure that we maximize broker traffic and sales? 

Increasing the conversion ratio is about selling more of the prospects with whom we come into contact and, in today’s market and for the foreseeable future, that has two components as we really need to make at least two sales. 

The first sale in homebuilding is to our web visitors, convincing them to invest the time and effort to come out to our sales office and physically see, smell, feel, taste and touch what we have to offer.  The only sense that we can truly stimulate in our promotion is sight, yet we need to positively stimulate all five senses to make the sale.

A great web site positions you within the visitor’s consideration set (or at least prevents your elimination) but unless you provide immediate response to email inquiries (within 24 hours maximum) and, even better, web concierge services then you are passively waiting for that web visitor to take action.  With a web concierge you can interact with the visitor when they are on your web site, provide the specific answers and additional information they require, begin to build a personal relationship, and finally sell them on the physical visit and set a specific appointment. There are also web tracking programs available that will tell you which pages were visited on your web site, how long was spent on each page, and whether this was a first or return visit to provide both your web concierge and your on-site sales staff with details of the visitor’s specific interests.

Finally, we need to sell more of the visitors that physically visit our sales office.  To accomplish that goal we need better salespeople.  Perhaps that may mean different salespeople but more often that means better trained, better educated, better coached, better encouraged, better stimulated, better motivated and better managed personnel.  

New home sales are being lost every day in every market.  During a previous market downturn I was consulting on a luxury condominium development.  We had retained a leading and well respected carriage trade Realtor© to provide the on-site sales as they not only were familiar with our marketplace and the potential buyers but also had an established client base of upscale local homeowners who were our primary target market.  One weekday afternoon I was sitting in the sales office visiting with the sales representatives when a young man walked in the front door.  Dressed in cutoffs and a T-shirt he did not fit the image of the “Palm Beach” target market that the sales people had established in their minds and, for all practical purposes, he was ignored. 

As neither of the debutantes staffing the sales office deemed it valuable to spend time with this visitor, I approached him, began a conversation and after just a few minutes discovered that he had developed a computer game company that he had just sold for $35,000,000 (a number more than sufficient to pay for all of the penthouse units in the building) and he was looking for a place to “hang out” when visiting his parents.  While I certainly am far removed from a great new home salesperson, I knew enough to identify a live prospect so, after taking off my jacket and apologizing for being a consultant to the development and not as knowledgeable as one of the community’s sales representatives, I took him on a tour of the building, continuing to build a rapport using my two sons’ involvement in both the Internet industry and gaming.  An hour later I brought him back to the sales office, introduced him to one of the salespeople, provided a summary of what we had seen, and suggested to the sales representative that “Jerry” would like to purchase the Bristol model including all of the furnishings. 

The fact is that I was lucky as Jerry was ready to buy when he walked in the front door and all we had to do was not lose the sale but that sale would have been missed were it not for my serendipitous visit that day.  And there is no doubt that sales are being lost every day in every new home sales office around the country, if not through snobbery or prejudice then because of countless other unnecessary errors and lapses, both conscious and unconscious, errors of omission and co-mission.  When the market slowed a few years ago most homebuilders cut back on sales management, sales training, and sales supervision and have yet to increase their attention and commitment of assets to this essential aspect of the homebuilding business.  The new home market is now coming back and to maximize  our success we need to remember that homebuilding is a numbers game and the truly important number in that game is “sales”.  But that’s just my opinion.

Please visit our company’s website at www.levitanassociates.net. to learn more about our background, qualifications and services to the homebuilding industry and how we can assist homebuilders, developers, lenders and Realtors© achieve success.

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