America’s Best Builders 2007: Focus On Flexibility

Anything Else Is Not Ideal

A quest for continuous improvement drives a fast-growing builder that targets first-time buyers and first-time move-ups.

In 1988, after nearly 20 successful years in real estate and home building, Gene McKown went belly-up, a victim of an economic slide in the Southwest brought on by collapsing oil prices. Two decades later, the 62-year-old McKown—in partnership with co-owners a generation younger—not only has recovered from that setback but also can lay claim to being Oklahoma City’s largest and most innovative builder.

What’s behind that rebirth? McKown’s own savvy in assembling and developing land in the metro area’s choicest locations. Just as important, co-owner and son Vernon McKown has revved up a bright young sales and marketing team and made Ideal Homes a national leader in energy-efficient homes. Meanwhile, Todd Booze, the firm’s remaining co-owner and Vernon’s friend from the University of Oklahoma, presides over a buttoned-down building operation that wins praise from trades and suppliers alike.

Together since the company’s start in late 1989, the three owners have spearheaded a growth surge that took Ideal from 29 closings in 1990 to 435 in 2005. Even in a real estate market off by about 20 percent, Ideal was on track in 2006 for more than 500 closings and about $75 million in revenues. In all, the company has notched more than 6,000 sales in 16 years.

And Ideal isn’t about to rest on its laurels. Whether it’s a new Web-based scheduling tool, employee courses in financial literacy, or a gleaming new design center for home buyers, the management team keeps looking for more ways to gain an edge.

“They are not builders who make a lot of money in the boom times and then go off and lead the good life,” says Bob Schultz, a Boca Raton, Fla., sales and marketing consultant. “They are very good business people who just happen to be home builders.”

CHASING SCHOOL DISTRICTS
Learning from Gene’s bankruptcy, Ideal now owns free and clear about 1,500 acres of undeveloped land, paid for out of $15 million in retained earnings and investor capital. Moreover, it has methodically accumulated that land primarily in close-in suburbs that encompass the area’s best schools.

“If you are going to be a large builder over the long haul, you need to buy land in the right places,” says Gene McKown, “and our strategy is to chase the school districts.”

Case in point is Valencia, a 600-acre tract that two years ago was part of a vast wheat field in the fast-growing community of Edmond, north of the city. Ideal’s first master planned community, Valencia straddles two of the area’s blue-chip school districts.

That $7 million land investment is paying off. With a product mix that caters overwhelmingly to first-time buyers and those moving up from their first home, Valencia accounted for 50 percent of Ideal’s sales in the first half of 2006. The firm also is building at 15 smaller sites in the metropolitan areas—almost always on lots it has developed.

Valencia, with its winding streets, cul-de-sacs, and 40 acres of parks and open space, offers Ideal its first chance to offer all of its product lines in a single community that will build out over a seven- to 10-year period. The mix ranges from a 1,000-square-foot model costing about $110,000 to models running more than $250,000 with 2,600 square feet and even some larger custom homes that top $300,000. Among the fastest sellers in Ideal’s largely brick façade, ranch-style lineup is the 1,964-square-foot Kingsley, featuring an open floor plan with study off the front entrance, formal dining room, chef’s kitchen with island, and vaulted 10-foot ceilings in the living room and master bedroom. Price: about $160,000.

ACCENT ON ENERGY
Regardless of model or price, Ideal emphasizes energy efficiencies that have done more to distinguish its homes than perhaps any other feature. Adecade ago, the company was among the first builders in its price range nationwide to qualify an entire line of homes under the EPA’s Energy Star program. Says Energy Star national director Sam Rashkin: “Ideal Homes is one of a select number of large national or regional builders who have committed 100 percent of their homes to be Energy Star qualified. More importantly, Ideal generously shares invaluable lessons learned about bringing energy-efficient homes to the marketplace with the rest of the industry.”

A partial list of these energy-saving technologies includes: blown-in insulation for walls and ceilings, low-E window glass, Tyvek breathable moisture barriers, radiant heat barrier roof sheathing, 90 percent efficiency gas furnaces, and SEER 14 air-conditioning systems. In 2005, to further demonstrate its commitment to pioneer new energy-saving techniques, Ideal built and showcased in Valencia the first zero-energy home priced under $200,000. Among its features: photovoltaic roof panels, ground-source heat pumps, and tankless hot water heaters. An earlier “Health House,” built in cooperation with the American Lung Association, boasted a fresh-air ventilation system—now found in all Ideal Homes—that recycles the air in the entire home every 24 hours.

As Vernon McKown sees it, energy efficiency may not be what attracts buyers to a development, but it is a key factor in closing the sale, particularly with women. “When they start thinking about buying soccer shoes and all the other bills they have to pay, saving $40 or $50 a month on energy really has an impact,” says Vernon. In fact, Ideal guarantees buyers that heating and cooling costs will not exceed a predetermined usage rate, or the customer will be reimbursed the difference.

“My biggest electric bill was $103 in a month with several 100-degree plus days,” says Chris Bergin, a young television production specialist who bought a 1,280-square-foot unit in Valencia in early 2006. “I am really impressed with the construction and the energy efficiency of this home.”

ULTIMATE BUYING EXPERIENCE
In a continuing effort to keep first-time buyers such as Bergin happy and manage their expectations about the experience, Ideal Homes has implemented a steady stream of customer service programs over the years—focus groups, surveys of past buyers of Ideal’s homes and those of competitors, and a customer service coordinator who maintains regular contact with buyers before, during, and long after the closing. Based on feedback from all these channels, as well as that of the sales staff, Ideal Homes revamps one of its product lines each year to bring it closer to prevailing customer desires. A good example is Ideal’s former entry-level Medallion line, which shed its vinyl siding exterior for brick, in its transformation to the new Classic line.

Visit an Ideal model home, and you’ll be greeted by a sunny “new-home consultant,” who mirrors the early 30s age profile of the company’s typical buyer. Before touring the models, you’ll first get an orientation on a large touchscreen plasma display, installed new in 2006, that provides essential information on the surrounding community, Ideal’s track record in the industry, and the quality, design, and energy efficiency of the home. “The touchscreen does a great job of showing our innovations and sets us apart from other builders,” says sales consultant Jennifer Seale. “Plus, we can update the images as we add new features and programs.”

Does it work? “About one in eight people who visit our model homes end up buying,” says Ideal’s 30-year-old marketing director Steve Shoemaker. He and his wife, Jama, bought a Kingsley model in Valencia.

And once a family decides to buy, Ideal is adding new tools to make the process easier. In 2006, the company opened a 4,500-square-foot design center just 10 minutes from Will Rogers Airport. There, under one roof, buyers can view and choose virtually every option, inside and out, that they need in their new home: brick façades, exterior doors and lighting, appliances, flooring, cabinets, and more. “With all the choices they need to make, people’s eyes tend to glaze over,” says selection center coordinator Beckie Neff, “so we typically work with them over three visits.”

Buyers can also supplement their trips to the design center with visits to Ideal’s Web site, where a new “Builder Vision” option lets them decorate their home and try out different options.

All closings will soon take place in a new office area adjacent to the design center. Ideal runs its own mortgage company and offers a gamut of programs, ranging from 100 percent financing to a new lease-buy plan that lets a family rent an Ideal home for up to a year until they raise the needed down payment or pay off bills. And if a move-up buyer’s efforts to sell a home stalls, Ideal will buy it at an agreed-upon price based on current market value, as determined by an independent appraiser, with no agency commission.

These and other programs, such as a “guide to homeownership” with plenty of details on maintenance concerns, have combined to steadily increase the level of buyer satisfaction. Company surveys show that the share of customers who say they would refer others to Ideal has risen from 86.3 percent in 2002 to more than 95 percent today. Typical is Russ Trafford, who heard about Ideal from colleagues when his company transferred offices from San Jose, Calif., to Norman, Okla., the south suburban community that is home to the University of Oklahoma and Ideal’s headquarters. “We looked at a couple other builders, too, but Ideal was the clear choice,” says Trafford, who adds that he got “twice the home at half the price” of his San Jose space, as well as the “best-built home I’ve ever owned.”

THE PEOPLE FACTOR
Innovative programs aside, Ideal’s senior managers will tell you that the quality of its people—both its employees and its trade and supplier partners—is the chief reason for the company’s torrid growth record. Every job candidate goes through five hour-long interviews with staff, a three-hour work-history interview, and a thorough check of references. Once hired, employees must attend financial literacy courses, which explain Ideal’s operation and the impact of each worker’s job on the company’s success. Attend those sessions and, whether you are a custodian or a leading salesperson, you qualify equally for quarterly profit-sharing pay-outs, which in 2006 were projected to total about $12,000 per employee, according to Gene McKown.

It’s all a part of the company’s open management style, which Ideal adapted from the “Great Game of Business” program. “Nothing can improve unless it is first measured,” notes CFO JaRee Stambeck, “and we are very open about sharing with the employees all the details on how we are doing on closings, revenues, and other important details of the business.”

That same open-book approach drives co-owner Booze’s relationship with the vendors and construction trades. For example, Booze shares Ideal’s annual strategic plan with key subs and vendors and has formed a trade steering committee that meets monthly to discuss sales, construction activity, and quality assurance issues. In addition, he is introducing a new online “Web Information Services” site, where Ideal’s building and vendor partners can check progress on jobs, as well as track purchase orders and payments. Each day, Ideal’s building superintendents download new information into this system from their PDAs, so crews and suppliers have the latest information.

Says Booze, “Our culture is to communicate and to help our partners get what they want, which is steady work, fair prices, clear specs, and job-ready building sites.”

Rick Ogle, a principal of Brewer Carpet One and a supplier for a decade, says Ideal has gone out of its way to educate its building partners and help them integrate the same kinds of efficiencies and management practices that the builder has implemented in its own operations. Adds Ogle, “They’ve taught us all to never be satisfied with our success.”

And no one battles apathy more zealously than Ideal’s senior managers. Every quarter, each manager takes on an important “rock” or task that must be completed before that three-month period is over. Among fourth quarter 2006 goals: a thorough study of every development in the metropolitan area to assess the market; preparations for certification under the NAHB’s National Housing Quality program; and development of the strategic marketing message for 2007.

Meanwhile, with the company’s solid record of achievement, public builders have come calling. But for now, says Gene McKown, Ideal is quite content to pursue its “big, hairy audacious goal” of 95 percent employee and customer satisfaction and steady annual sales growth of 5 percent (the increase was nearly 30 percent in 2004). “We feel very fortunate,” says Vernon McKown. “We’re in a business where we make people’s dreams come true, and we’re pretty good at it.”