Got sales?

When sales do not appear in the numbers anticipated and budgeted in a new home community, the prevailing solution among homebuilders is often to first blame and then change the sales staff.  If sales still do not materialize then it is time to blame and then change sales management.  And if sales still do not appear then it is time to change the advertising and promotion and then change the ad agency.

Many years ago I interviewed for a position as regional sales manager with a national homebuilder.  The position was located in their largest region which had 32 operating communities.  As part of the decision process I was invited to attend one of their regional sales meetings which were held on a quarterly basis and led by the person who would have been my predecessor in that position.  The meeting was an elaborate affair, held in the ballroom of an upscale local hotel as there were over sixty sales people in attendance and a very nice breakfast was served.

The current sales manager opened the meeting by welcoming the attendees and then said “I hope that everyone enjoyed the breakfast as for some of you it may well be your last meal”.  This company had what I believe to be the unique philosophy of terminating the two lowest performing (per budgeted sales) sale people every three months and, in what they apparently believed to be a motivating experience for the remaining sales personnel, did so at these breakfasts.

I declined the sales manager’s position when it was offered to me.  I did not disagree with the belief that there are certainly times when the sales staff should be changed nor that weak sales people should be replaced. In fact, I am an advocate of a “power line” in sales situations where applicable.  And I did not necessarily disagree that a pro-active course of action is usually far more effective than a reactive one.  But I did not (and still do not) believe that terminations should be public affairs, similar to the use of the guillotine in France during the revolution, nor that proper and positive motivation can ever be derived from fear.  More importantly, I did not believe then and continue not to believe today that the sales staff, sales management nor the advertising agency is necessarily responsible for poor sales performance. Continue reading

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. Continue reading

Why I have stopped reading newspapers.

There was an article on-line earlier this month that forecast the date when print editions of newspapers would no longer be published in each of the major metro areas.  New York, Washington, D.C. and Los Angeles were among the few metro areas in which the forecast suggested a life extending beyond two or three years so it would appear that my hometown newspaper will soon be writing its own obituary and I will not be sad when that occurs.   

I live in South Florida and used to read the Sun Sentinel, a Tribune publication. My wife still enjoys browsing the Sunday travel and lifestyle sections and perusing the ad circulars as well as glancing at the Friday weekend section to see what movies have opened and read the reviews but I had always preferred the main news and business sections.  Earlier this year I decided to simply stop wasting my time as there seemed to no longer be any “news” being reported. 

The main headline and front page story in yesterday’s paper was titled “Home Vacancies Nearly Double In S. Florida”.  This paper has been featuring stories almost daily for the past two years on the decline in real estate values, the residential foreclosure fiasco, and the death of the homebuilding industry so one has to wonder why this story was news.  But more importantly, upon actually reading the article, it was apparent that once again the publication was merely trying for sensationalism as the headline, while true, was very misleading. 

The article included a large map, color coded to reflect current vacancy rates in each of the cities within Broward County (Fort Lauderdale MSA) with a key to the chart showing vacancy rates in percentages ranging from “up to 10%” to “42% to 50%”.  9 of the cites showed rates of “up to 10%” which by its very title is prejudiced as 0% would be included in this category; a small inset noted that one town within this category had a vacancy rate of only 3%.  15 additional towns showed rates of 10% to 20% (again, a wide range allowing for substantial disparity) while only 5 municipalities, all of which have high incidence of resort/vacation/second home usage, had vacancy rates over 20%.  While failing to mention the fact that South Florida has always had a higher incidence of home vacancies than many other markets due to seasonal usage, the article did mention in the body copy that the countywide vacancy rate was “in the mid teens and rose only a few percentage points (from 2000).”  Continue reading