Don’t Settle for Low Profitability, Part 1

Monthly Briefing

Profits | Relationships | Knowledge

November 2023 Volume XVIII, Issue 11

Don't Settle for Low Profitability, Part 1

By Charles C. Shinn Jr., PhD

President, Shinn Consulting

The last thing a home builder should do—given the financial risk involved in building homes and the cyclical nature of the industry—is settle for single-digit profits. And as much as some home builders would like to blame external forces for low profitability, the truth is, well-run, efficient, profit-oriented home building companies make double-digit profits in any market, under any market conditions, with any product lines.

There are several steps home builders can take to increase profits, but simply increasing volume is not one of them. An increase in volume does not equal an increase in the rate of profitability. The components of the profit equation with the greatest impact are expenses and direct construction costs. To generate double-digit profits, home builders need to focus on things within their control. Here are five proven methods to increase profitability.

1. Get rid of bad deals

One bad deal can wipe out the profits from several good deals. Conduct gross profit analysis by community, model, and each house. Eliminate plans that do not generate your target gross profit. One method of analyzing standard plans to improve gross profit margins is to conduct a comparative job cost classification for your best gross profit generator.

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Maverick Warranties and Insurance

Joins Builder Partnerships

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Builder Partnerships is pleased to announce the newest service provider member to our organization:

Since 1989, Maverick Warranties and Insurance (“Maverick”) has established itself as a leading specialist in tailored warranties, insurance, and risk management for home builders. The company is dedicated to protecting, managing, and simplifying home building businesses, providing builders' risk coverage, warranties, workman's compensation, general liability protection, and more. Their comprehensive solutions and builder-focused dedication empower home builders to focus on their construction projects while Maverick Warranties and Insurance helps them navigate the complexities of modern risk management. Learn more at www.maverickbuilders.com.

Read press release...

Join us for an eye-opening webinar presented by Maverick Warranties and Insurance on Wednesday, December 6, 2023, at 10 am MST / 12 pm EST. Gain valuable risk management insights and strategies to safeguard your business. Register now.

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Consultant's Corner

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Making the Cut: Designing Attractive and Affordable Homes

By Ed Hauck

Senior Consultant, Shinn Consulting

To combat affordability issues for home buyers due to high interest rates, home builders are looking for ways to cut sales prices by 20% or more to keep mortgage payments within reach for their buyers. To reduce sales prices while maintaining desired margins, home builders need to make appropriate cuts, buy better, and redesign to get square footage down.

In this era of cutting costs to maintain affordability, it’s crucial for home builders to focus on the spaces buyers care about most to give them a reason to move. It all starts with the plans. Leave room in the budget for designers to give buyers memory points.

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Product Feature: Lighting

Colors that Capture the Cottagecore Look

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The cottagecore look is a study in romance and simplicity. Inspired by rustic farmhouses mixed with edwardian elegance, cottagecore takes vintage antiques and partners them with modern, neutral elements. As cozy as it is creative, our Homestead Collection captures the quintessential quality of cottagecore beauty.

Why not enhance your cottagecore look by selecting cottagecore inspired colors? That’s why we’re bringing you the Behr® paint colors that accent and augment the lights of our Homestead Collection for a whole-home cottagecore look.

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Why External Accountability Matters

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A shared understanding of measurements and reporting mechanisms provides the foundation for trust with employees, investors, customers and communities.

In 2022, we made significant progress toward our targets for our 2030 Sustainability Commitments. In our 2022 ESG Report, we shared a first glance at our Net-Zero Roadmap to offer insight into exactly what actions we are taking in the near-term to advance our ambition with a positive and lasting impact. We also shared that our actions have been broadly recognized by trusted voices in the sustainability community. Why is that important?\

As we move forward through a decade that demands action and collaboration, it will be even more important to maintain the trust of our employees and our stakeholders and continue to build trust with new communities. Operating with a shared understanding of measurements, reporting mechanisms, and frameworks provides the foundation of that trust.

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Stand Out from Your Competition

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business people celebrating in front of laptop

By Lisa Putnam

Program Manager, Shinn Consulting

In today’s competitive marketplace, it can be a challenge to stand out in a crowd. Earning awards is a credible way to boost your brand, attract top talent and new customers.

The Shinn Consulting Achievement Awards recognize company performance in connection with the high standards required to maintain an organization dedicated to continuous improvement and excellence.

Wherever you are on your journey of achieving excellence in your organization, you will benefit from participating in the Shinn Consulting award program.

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2023 Driving for Kids Recap

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This year’s Driving for Kids event was very successful thanks to the generosity of the twelve participating driver teams and their contributing members. The event raised $95,820 for chronically ill children and their families to experience a week of camping at Roundup River Ranch in Gypsum, Colorado.

During the eight years of the Driving for Kids event, which is organized by Ross and Ann Robbins, teams have raised over $500,000 allowing 166 kids with serious illnesses to attend camp.

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Manufacturers Offer Valuable Rebates to BP Members

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We have 500+ incentives available through our rebate program
We can help you maximize your earnings with a program review
View our manufacturer members and service provider members

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Partner Notes

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Global Warming Potential Code Progress Update

The Definitive Guide to Permeable Driveway Pavers

Providence Homes Wins 2023 Bigelow Award

DOE Awards Recognize Several NAHB Members

Investing in HOPE Virtual Event, November 29

Omaha Magazine's Best of Omaha 2024 Winner

VIEW ALL

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Upcoming Events

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Training Seminars and Workshops

The Art of Purchasing

January 8-9, 2024, ATLANTA. Register

The Superintendent's Job: Front Line Manager

January 10-12, 2024, ATLANTA. Register

Managing for Profit

January 23-25, 2024, AUSTIN. Register

Scheduling Mastery for Performance & Profit

February 5-6, 2024, ATLANTA. Register

2024 Executive Summit

April 22-24, 2024, CAPE CORAL. Register

Key Metrics Workshop

On-demand training, ONLINE. Register

Value Engineering: How to Design Profitable Homes

On-demand training. ONLINE. Register

Technical Training Powered by IBACOS

On-demand training. ONLINE. View lineup

Webinar Wednesday

Builder of Choice: Proven Financial Strategies to Attract Home Buyers

December 1, 2023, 10 am MST / 12 pm EST Register **Special Friday Edition**

Be Proactive: How to Protect Your Assets and Avoid Litigation, presented by Maverick Warranties and Insurance

December 6, 2023, 10 am MST / 12 pm EST Register

Be the Builder of Choice™ Podcast

Click here to check out our podcast on Spotify (or listen on your favorite platform).

Networking Receptions

Managing for Profit Enhanced Reception

January 24, 2024, AUSTIN. Register

This event is exclusively for Managing for Profit seminar attendees. Manufacturers and service providers: click here for information on sponsorship opportunities.

IBS 2024 Networking Reception

February 26, 2024, LAS VEGAS MARRIOTT. Register

For the complete list of events, click here.