Making the Grade Ė A, C or F
In a series of articles we have been addressing the process of re-tooling in difficult times. The future success of builders (any company for that matter) requires them to consider their sales processes for maximum performance.
Too many businesses look around, see a slow economy and justify their own non-performance because they believe everyone is in the same boat.
But some are re-tooling right now to be more successful in anticipation of growth.
You may have already heard the story of the two woodsmen, one older and experienced, the other young, cocky, and more than a bit arrogant. You can imagine the banter as they work together.
One day the young man decides to show up the older woodsman by challenging him to a competition to see who can cut down the most trees in a single day.
So the day comes, and the young man finds himself well ahead in a short time. His physical strength was superior, and he regularly taunted the experienced woodsman who, after cutting each tree, would take a short break.
The end of the day came and they counted up the trees. The young man was in disbelief as he saw the older woodsman had cut down more trees. "How can that possibly be?" snorted the young man. "You were always taking tea breaks and I cut trees non-stop the entire day".
The older woodsman paused for a moment before responding "young man, you thought I was taking a tea break after every tree, but I was just sharpening my axe!"
Have you considered that now is a great time to sharpen the axe?
Having worked with builders for almost 20 years I have found three distinct categories of builder.
I refer to the first group as "F" as in "fail to appreciate". The "Fís" are the builders that donít want any help, they fail to see the value chain, and donít want to change the way they have been doing business.
The "Fís fail to see finance as relevant and important to their business success. These are the builders who say things like..."ALL our clients are cash buyers" or "ALL our clients have their finance sorted", or "If they canít get the finance sorted, then we donít want them anyway", or "we have always done it this way, and we are unwilling to change".
These same builders take a crack at the banks every chance they get, and then wonder why they get treated so poorly. The lights are out, and thereís no chance of getting the bulb to work.
Have you ever attempted to cut down a tree with a blunt axe or chainsaw? Itís a frustrating waste of time.
We move on.
The "Cís" as it turns out, are passing, but could do much better with a little more help. They are the
ones that really want to be the best, but often have insufficient knowledge or understanding on what they need to do to progress.
When I speak with the "Cís", and this is the largest group by far, I sense a real willingness but they just canít quite see their way through the obstacles to a more successful business so they plug along the best they know how. They are simply unsure how to implement new strategies that work.
The lights are on, but not burning as brightly as they could be.
Then there are the "Aís", and like any typical bell curve, there are only a few in this group too. But these are the builders who genuinely understand the whole value chain for their clients - including finance. They understand that building is the delivery mechanism but not their occupation (i.e., building is only the method to deliver a home to a client).
These are the builders who see what the clients want, and take them there. These are the builders who can see the obstacles and hurdles their clients have to go through to get to an end result, and they give a helping hand along the way, removing as many of the obstacles they can as they go.
Let me give you another example.
One of my clients had a bad experience with a builder who went under early in the piece, and they had contracted to a new builder. They owned their land, had their plans, and just needed the consent to build. So I was surprised to get the phone call from the wife explaining that they had given up on building, were going to sell the land and buy a used house.
What on earth had gone so terribly wrong? She explained, the building site had a tea tree in the way of the drip line and required a consent to remove it (has to be Waitakere). In frustration with council they were ready to pull the plug.
I asked if the builder had been helping. "No" was the reply, "they did not see it as their responsibility". I called the builder and explained that without their help the build would not proceed and everyone would be the loser. A week or so later, it was all sorted. The clientís home is completed and they just love it.
They love their builder and they are talking about building again soon.
Thatís an amazing success story that was hours away from failure. So let me ask you, if you were that builder, what would you have done?
I need you to consider finance as a drip line issue too! It is something that somehow you must address, even if technically itís not your responsibility, just like that tea tree.
If you donít find a way to manage clients through the finance process you may never get the build Ė and you wonít even know it.
I will finish with some statistics that speak for themselves.
Consider, for every 100 prospective clients who speak with you, a sales consultant or visit your show home, at best, 4 will sign a contract with you. In fact, if you are very good, 4 will sign with you because the average is only 2 out of every 100. Because the "Fís wonít read this, letís assume you are an "A" builder, or a "C" builder who wants to be an "A". So we will use 4.
Consider this, of the 100 prospects 82 of these will need to visit their bank for finance. 18% pass this hindrance and will make their decision to build with you, or not, for another reason.
Next, consider that 57 (about 70% of those who need finance) will be turned away from their bank because they have insufficient deposit, insufficient income to build, or just because the bank does not think itís a good time (Itís true, we hear that one regularly).
Letís look at that again. 57 of the 100 will be made to buy a used home, will be discouraged from building or outright refused the opportunity to build with you.
So before you ramp up the spring marketing campaign to double the show home traffic to 200, and keep your conversion rate at 4%, consider putting more resources into sharpening the axes for your sales consultants, and doubling the conversion rate from 4 to 8 instead (that would be less expensive too).
And how about the wise old woodsman who took a little time out to ensure that he was working with the sharpest tools to beat his competition?
Ian Webb is Managing Director of NewBuild Home Finance. Ian designed construction lending for Wells Fargo (formally Norwest Bank) while living in the US. In 1999, he introduced the concept of financing that simplifies the process of building. www.newbuild.co.nz or 0800 NEWBUILD