Builders we’ve met share a common trait. For many, many of them, “can’t” is not an acceptable boundary. For an equal number of them, what’s too difficult for most people is table stakes.
Here’s a fresh take on data from the economics department at the National Association of Home Builders that speaks to just how different builders are from many of the other people we meet in other industry communities.
The amount of capital startups need to hang up a shingle and become a going concern in most sectors of the American economy is $77,000.
Among 640,000 or so construction firms surveyed by the Census Bureau, the median start-up capital used was less than half that amount: $33,000. NAHB economics analyst Benjamin Whetzel notes that one in five construction firms say they got up-and-running on $5,000 or less in startup capital.
Whetzel adds this qualifier:
Home builders and remodelers are lumped together with firms that build non-residential buildings, highways, and bridges; as well as with specialty trade contractors (roofers, electricians, drywall installers). As a previous study has shown, over two thirds of construction establishments are specialty trade contractors, which may help explain why a substantial percentage of construction firms require relatively little startup capital.
If anything, this commentary affirms that shared characteristic among builders–be they residential or non-residential, subcontractors, or owners–that reflects an entrepreneurial “bootstraps” attitude that says a lack of resources is never a deal-killer.
The very definition of bootstrapping–to finance your company’s startup and growth with the assistance of or input from others–is at the core of many of our audience members’ business DNA.
Harvard Business School’s Howard H. Stevenson talks about entrepreneurship as “the pursuit of opportunity without regard to resources currently controlled.”
It may be that that very nature, that knack for doing with less, and that cleverness at cobbling together support and resources when few are clearly evident, and that sense that other peoples’ limitations are ones’ own opportunities, may be part of why home builders and their respective on site partners are, well, so independent-minded.
Still, as another Harvard Business School professor David Collis notes, entrepreurialism and strategic thinking need not cancel one another out.
Entrepreneurs, Collis writes, “all suffer from a shortage of money, talent, intellectual property, access to distribution, and so on. While acquiring additional external resources is partly the answer, the internal challenge is to wisely shepherd, conserve, and deploy the resources the venture does possess. That is exactly what strategy is all about. Indeed, the single best piece of advice for any company builder is this: Know what not to do. Strategy helps you figure that out.”
For many firms in the home building environment, the “what not to do” may simply be this: spend an inordinant amount of time and effort pursuing capital finance to carry on operations and grow the business.”
Recognizing this is driving companies to some creative new ownership ventures that we’re seeing play out in some of the deals that have happened recently. We’ll continue to see such ventures and partnerships, since certain organizations are much better suited to work as investment and capital sources, whereas others are just better at putting value on the land and making customers happy with their new homes.
That’s part of what makes builders different from others.
