Consider how Quadrant has upped its land holdings over the past two to three years, a result of the market research it conducts regularly to see what demand is doing. That land buying spree has led to an increase in its openings, and the expansion of its building footprint over its six-county market.
So now, when it starts to develop a new community, Quadrant’s new communities team—following the lead of the center of excellence in its construction division at headquarters—meets regularly to pull the levers to begin the process down the line. That includes making sure platting and development of the dirt gets done, that entitlements get taken down, that vendors are identified and contracted, and ultimately, that starts fall in line when they should.
“No matter how many homes we start in a day, that group’s meeting daily to mature our backlog,” Krivanec says. “So when it comes time to start a home, they’ve gone through all the issues of the home site, and bundled it up in a way that they can go directly to our vendors and signify when the lumber will drop.”
At that point, the company’s site superintendents are notified, which signals that they have 10 days to prepare the site for material delivery and to get their resources lined up internally.
Norma Bar, Dutch Uncle
“We’re not out there talking to our vendors saying, ‘Hey, do you think you can be out there next week?’ When the order goes out, we know, and our vendors know, that on the other side of the order, 10 days later, a house will come to full start,” Krivanec explains. “That takes extraordinary discipline to keep that manufacturing side consistent, but that’s how we control our costs, that’s how we control our customers’ expectations, and, ultimately, that’s how the buyer gets delivered the best home in the market.”
Process, Process, Process
For Michael A. Kehl, president of Long Valley, N.J.–based home building consultancy Marketlogics, integrating subcontractors into the process is critical to producing a quality product in the end.
“Because most new homes are still not built in a factory, builders need to use teamwork to bring subcontractors and vendors into the fold,” Kehl says. “They need to be empowered with a common goal: to complete their specific product on time, with high standards, and at a competitive price.”
When he’s asked how he keeps his processes consistent, Krivanec says it starts with how he buys his land. And it’s no secret that a focus in the beginning on the land buying process is a strong determinant of profitability in the end. But to do that well, you need to know, to the penny, what it will cost you to build the home you want to sell.
“If you don’t understand the cost to build the home, you won’t know what you can pay for land. Your land cost, brick-and-mortar cost, and sales price equals profit,” McElroy says. “Look at the cost side—purchasing and estimating—first. You’ve got to understand what it costs to build a home because you’re setting your sales price off it. Let’s say a house costs $100,000 to build. Do you know that for certain? If you’re off by $5,000, and you close 500 homes that year, it’s $2.5 million in lost profits.”
On the other hand, if you focus on your processes first—as you buy your land, take down your lots, contract with your subs and vendors, prep your sites, drop lumber, pass inspection, and, ultimately, do your final walkthroughs—you’ll be able to generate the profits you need with a product your customers will be sure to see as excellent.
