Posted by Tom Lombardo on Fri, Feb 20, 2015 @ 09:00 AM
Most successful building materials owners and managers would say that running their business requires a balance of both art and science, especially as we emerge from the recession.
Scientists measure things, and on the science side the recession changed your market considerably. Post-recession, the richest 1% of Americans own 40% of the country and the top 5% of earners account for nearly a third of all consumer spending – while incomes for average Americans have declined more significantly than they have in generations:
The Science of Supply
The top 1% or even the top 5% constitutes a really tiny market, but a lot of businesses had to target it because it was the only segment spending.
It’s something of an art to supply a small, finicky market – especially when so many compete for its attention. You may have had a few opportunities to work with it, and if you did you learned something about trending tastes.
But since you’re still standing, you probably focused on supplying the multiple-family boom that built rentals for people who couldn’t afford to buy.
Which is another way of saying that your business development was mostly scientific – following demand for quality affordable housing materials – but was also artistic, as you tried to anticipate what the occasional wealthy homebuilder would want.
Now that we’re emerging from the recession it seems like art may need to become a bigger part of your business development plans, mostly because of the path the country took as depicted on that income chart.
A lot of people spent several years with a higher income than they have now, and while today’s income may be lower, it is often accompanied by far greater financial wisdom and by a true appreciation of quality.
In fact, it’s possible that people’s financial wisdom might cause them to delay their gratification until they can afford the quality they want.
The Art of Supply
The National Association of Home Builders found that tight credit locked a lot of buyers out of the homes they wanted. If new FHA rules that lower mortgage-insurance costs and down-payment requirements for some buyers have the desired effect, that might change this year, especially since consumer confidence also improved.
More significantly, a NAHB survey found that four out of five Millennials want to own a three bedroom house. Two thirds of them want that home to be in the suburbs, with another quarter wanting to live farther out in rural areas.
The oldest among them are thirty-five, and if they’re saving now to realize that dream as soon as they can qualify for a loan, then the next few years might see a healthy revival of the homebuilding industry.
The Science of Art
Building suppliers who cater to the tastes of the 1% with materials their builders can put into homes average Americans can afford may be best positioned to take advantage of this housing boom.
Your clients will need your help in two areas.
First, they’ll want materials that limit the need for craftsman-level labor because there are far too few craftsmen available right now. Your contractors can’t find heavy equipment operators or iron workers to start their project, and they can’t find pipe fitters or welders, either. Even if your client manages to get the walls up, he still can’t find carpenters or even assistant craftsmen to do the finish work.
The skilled labor shortage is so severe that nearly half of your clients are on a rampage to hire any skilled person they can find and to take jobs in-house to keep him busy. A quarter of your clients fear they won’t be able to bid on new jobs because they lack skilled workers.
Anything you can do to alleviate this problem will help you close your sale -- so long as it’s also green, because nearly nine in ten contractors are currently adopting green construction as an essential component of their own business development.
Demand for “net zero energy” homes impacts every market, including multi-family, because buyers want to live with this advanced technology and are willing to pay for it. This demand extends to everything; today’s buyer wants to know where the materials in her home came from practically down to the mine or forest where the raw materials originated.
Building suppliers who can provide the whole story for everything on their lot stand to win business because their contractors need that story to help close their own sale.
That’s because industry analysts expect tomorrow’s buyers to be patient and discerning. Even first time buyers may not always be on a strict budget, since most of them conduct an unhurried search while living comfortably.
In particular Millennials, who became adults during the recession and so were hardened by fire, will not do anything on the spur of the moment. They will save until they can qualify for a thirty-year loan at a low fixed rate, and then they will buy within their budget when they find the perfect property.
Science Becomes Art in Today’s Home
Your builder is terrified of building homes they don’t want, so be sure that you have the green materials they need to appeal to this buyer. Be sure you can provide as much prefabricated and manufactured craftsmanship as possible.
And be sure you can help them build the wired home that today’s buyer already fully expects, where the thermostat, lights, security cameras, garage doors – even disaster-sensors and kitchen appliances – all obey a phone app.
While balancing the art of living with the science of profit, help your builder toss traditional room definitions. Embrace the garage as well-appointed man cave, the mud room as a built-out pet care area, and the master bath as a personal spa.
If you’re one step ahead of your developers and can provide them with the materials – and perhaps even the inspiration – to meet these complex demands, and to do it within the compressed post-recession incomes of most Americans, you’ll be well positioned to grow your business as the country recovers.
And since each of your contractors will almost certainly land several new projects this year, be sure you can help them manage their limited labor resources by delivering materials when and where they need them.
If you integrate a “cash on delivery” program into your payments policies you’ll be able to provide the just-in-time workflow your developer needs to get the most out of his crew. And if you use our C.O.D. system, you can accept his favorite form of payment when you make that delivery – and receive a guarantee that you’ll receive the revenue the check represents even if it’s returned. Learn how here.