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Every builder wants to grow their business, increase profits, and keep costs to a minimum, yet only a few manage to do this easily. There’s no “secret sauce” to becoming a highly successful builder overnight, but some key actions collectively and gradually lead to flourishing businesses. Mike Benshoof, president and chief operating officer of Berks-Firefly Homes and Red Door Homes, reveals the fundamental elements that top-performing builders use to grow their businesses but rarely disclose.
Focus on Four Areas
According to Benshoof, builders must focus on four areas to grow their businesses successfully: groundwork, leadership, people, and operations.
Groundwork encompasses defining who you are and what you stand for as an organization. “The most successful builders can articulate their values and can easily define who they are,” Benshoof said. They know their strengths, work to them, and foster a sense of accountability throughout the organization so that the business culture supports the quality outcomes they seek. This is the foundation for top-performing builders and enables an environment that supports authenticity and accountability, which is critical to long-term success.
Leadership is an essential area that leads to long-term success. According to Benshoof “top performing builders have great leaders that inspire their people to follow the agenda they set. If your leadership sets the right tone and is clear about the company mission – they’ll transform and elevate your business.”
People are what ultimately make up an organization. Effective leaders play a significant role in identifying and hiring the right people. Benshoof encourages builders to transform their thinking about the human resources function. “HR is not admin, but an active part of your business. Again, it’s important to hire for qualifications and culture. I follow one rule – ‘hire slow, fire fast,’” he said. “If you’ve identified someone who is not a top player and doesn’t fit within your culture, let them go this week.”
One highly effective tool used by HR to help identify and retain top talent is the personality assessment. Benshoof stated they use both SDI and PDP personality assessments in his organization. Such assessments allow companies to identify job candidates and even manage employees once they’re onboard. “One of the secrets that the best performing builders have is their people,” said Benshoof. “At the same time, we builders tend to be abysmal at training, which is critical to our success.” Benshoof encouraged builders to invest regularly in training employees, but also recognize that employees learn in different ways. While hands-on training may work for some, self-paced or online training might be better for others.
Operations, including financial management, is the final area of focus for builders. “Having a detailed understanding of your operations and financials allows you to have a proactive management team versus a reactive one,” Benshoof said.
“The best performing builders out there know their numbers, so make sure you know your numbers,” he advised. Specifically, there are four key areas that he advised builders to emphasize within their operations:
- Budget v. Actual Financials – “Get your budget done and maintain a good record of your job costs,” he said. “There should not be a single action taken that doesn’t show up in your financials if you’re doing it properly.”
- Cash Flow – Understand the difference between profit and cash flow. “Your goal is to be able to maintain free cash flow in good markets,” he said. “Again, your aim is to have a proactive operation, not a reactive one, and you can’t do this without properly managing your cash flow.”
- Slot Schedule – “The start of the home is the most important point in the sale of the home, so make sure you have a good grasp on the schedule.”
- Two-Minute Report – This “top of the pyramid” report details key activities, including sales, starts, marketing activities, and customer satisfaction. “This type of report creates a leadership feedback loop that allows businesses to adjust operations as needed and is variance driven, allowing a focus on identifying what went wrong and making necessary adjustments.”
Taking the Long View
Benshoof emphasized the importance of consistency in each of the elements and cautioned against running your business solely on financial numbers. “The best performing builders have an even blend of leadership, culture, and accountability to the numbers.”