Category Archives: Best Practices

How home builders find savings by implementing software and deploying integrated and automated services for building tasks.

Our client’s success is our number one priority. Money matters a lot in homebuilding, every dollar counts, and beyond improving your product offering, finding the right land to build on and acquiring resources for the right price – investing in a homebuilding system that’s truly integrated could be the investment to save you money and resources in the long run.

As you will see, our findings show that an average home builder producing 200 homes at an average selling price of $350,000 and approximately 30 employees can profit from integrated management software by improving hours of ineffective process and optimizing the margins of their operations. We have taken a conservative estimate for wages and for all other variables, and this standard is based on decades of industry experience with hundreds of home builders using Constellation software in their business.

Profits during the Building Cycle

Calculating Field Construction and Sales Operations Savings

The industry standard index dictates that the average building firm of 30 employees about 10 percent would be directly involved in the construction process (3 employees), each builder would be compensated an average of 25 dollars. Due to improved data flows between the head office and on-site builders, each builder will save 4 hours per work week since manual paperwork is eliminated. Considering a 50-hour work week. It is estimated Builders can save an average $15,000 per year.

Hours per week saved due to automation = 4 Hours

X

Weeks worked per year excluding weekends = 50 weeks

X

Hourly wage = $25 Dollars

X

How many builder/ superintendents employed = 3 Builders

TOTAL Savings Per Working Year = $15,000

Calculating savings due to Reduced cycle time due to field integrations

More importantly, the amount of savings created from improved communication between builders and trades is around $90,000 dollars per year. A builder invests significant capital in terms of labor for each extra day a home sits on a lot incomplete. With the new and improved scheduling capabilities integrated back into your accounting process, expect a 6-day decrease in your home build cycle which ultimately cuts costs.

Number of homes built yearly = 200 Homes

X

Number of reduced cycle days for builds = 6 Days

X

Estimated cost per day when a home is under construction = $75

TOTAL Savings Per Working Year = $90,000

For more on NEWSTAR’s Scheduling benefits with on-location scheduling, see how DSLD Homes accomplishes a 43-day building cycle on each home, try “5 Keys to Effective Trade Management”

Calculating improved margins from field integration/scheduling

The biggest return on investment procured from the construction process will come from integrating your field operations with your schedules. Considering the 200 homes built annually by our sample builder with a 2% savings in upgrade costs averaging to about $ 35,000 per home closed – a building company can find new revenue of $ 140,000 simply by paying attention to the productivity of model upgrades and ensuring that the product upgrade process fits perfectly within your existing construction and trade management process.

Average upgrade revenue (option dollars) per closing = $35,000 Dollars

X

Improved options margins with field integration/scheduling = 4%

X

Number of employees = 30 employees

TOTAL Savings Per Working Year = $140,000

Savings Generated from Minimizing Back Office Manual Work

Calculating Home Closing Entry

Builders/superintendents are each spending 4 hours weekly processing POs. Within a company of 30 people, 1 person works full time administrating work orders and 1 person also helps on a part-time basis. At the end of the year, having a manual process is costing you roughly $ 7,500. As an integrated technology provider for home builders, our concern is the build process. An inconsistent process will also incur the builder running costs from building errors.

Hours spent weekly per builder Processing invoices/work order/PO’s = 4 Hours

X

Working weeks = 50 Weeks

X

employees are allocated to Invoice/PO/Work Order Processing = 1.5 Employees

X

Hourly wage = $25 Dollars

TOTAL Savings Per Working Year = $7,500

Calculating Hidden Costs, controlling committed cost

Industry hidden costs accumulate over the year from work order processes lacking accuracy in capturing billable and back charge items, keeping consistent to contracted pricing, consistency with buyer selections, and timely ordering and delivery of resources. With integrated software from warranty, to sales, keeping a steady schedule all the way to accounting. Our prospect builder will save $ 87,500 per year while creating an impactful home buying experience to earn them future referrals.

Average base home sales price = $350,000 Dollars

X

Industry % – Hidden Costs, controlling committed cost = 25%

X

Number of homes built yearly = 200 Homes

X

Conservative adjustment = 50 %

TOTAL Savings Per Working Year = $ 87,500

Revenue Generated from Improved Process for Interior Decor Upgrades  

Design center appointments are the new expectation when buying a new home. The secret to increased revenue for interior upgrades is to offer your homeowners enough customization to please them without sacrificing your automated process. For example, our customers are finding improved appointment productivity with our new product, Design Studio Manager. With a standardized décor center selections process that promotes relevant products to your homeowners, it is estimated that a NEWSTAR user with a Design Studio Manager integration is earning $15,250 dollars yearly (seems low; overall per year or per house per year? Or per week?). $5,250 dollars in earned revenue from having a software system that promotes your upgrade products logically. While the remaining $10,000 is saved money calculated by the manual process your décor agents would have spent selecting products for your homeowners manually.

Calculating Design Studio Revenue Savings

Time savings from integrated design software = 1 Hour weekly

X

Number of homes built yearly = 200 Homes

X

Hourly wage of a designer = $50 Hourly

+

Upgrade revenue per closing = $ 35,000

X

Percentage increase for optional upgrades = 15%

TOTAL Savings Per Working Year = $ 10,000 + $5,250 = $15,250

 

Savings While Providing Homeowner Care and a Simple Buying Experience

Closer to home sale, builders on average are spending 2 hours with each new homeowner drafting contracts / coming to a sale agreement and 1.5 hours entering home close information. Over the course of a year – the prospect builder would have invested $17,500 for a task that otherwise could be automated. With NEWSTAR, expect sales selections to update in the accounting main module for the real-time budgets analysis and current financial terms. Also, home walkthroughs can be completed on-site with NEWSTAR’s on-location warranty module that directly integrates with the scheduling and accounting departments in case of late-extras or any final adjustments for the fastest reaction time possible.

Calculating Warranty Process Savings

Homebuyer Agreements – Hours spent per home = 2 Hours

X

Number of homes built yearly = 200 Homes

X

Hourly wage = $25 Dollars

+

Hours eliminated from automated home closing entry = 1.5 Hours

X

Number of homes built yearly = 200 Homes

X

Hourly wage = $25 Dollars

TOTAL Savings Per Working Year = $10,000 + $7,500 = $17,500


The Verdict

After examining our clients and their financial performance before and after their NEWSTAR implementation. A home builder producing 200 homes yearly will save $363,625. Over the long term, the return on investment for implementing an integrated software solution comes to $1,818,125 in just 5 years. We acknowledge that all homebuilders are different and operate under many different variables. With the help of industry experts, we have created an ROI calculator to help you customize your potential revenue that is possible with software implementation. Calculate Your Savings today.

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The 2018 Builder 100 List: How the 10 fastest-growing public builders found success after “The Great Recession”

Recent findings show we are close to reaching the all-time high in the home building industry in terms of the number of homes sold when comparing the numbers from a decade ago, before “The Great Recession”. In 2007, we had a record high in home closings of 389,902 units in comparison to 2017 with 326,984.

The numbers are a sure sign of a healthy growth year over year, especially after one of the worst market crashes since the great depression. We have explored the past decade in providing hundreds of home builders with mission-critical integrated software solutions.

We found that many of the Top 10 fastest growing public companies listed on the Top Builder 100 list not only leveraged Constellation’s software but also shared a common theme when it comes to business operations during recession recovery.

They Doubled Down on Resources in a Down Market

As company growth stalls, builders invested back into their communities to produce more homes and tried to be mindful of their bidding strategies. As the recession hit the housing market, so did all other resource assets related to infrastructure. Builders tightened up their budgets and running costs to invest in the long term. Although this has not been a complete comeback, 2017 did see higher revenues in the homes sold to due to a rise in the average home price as demand is also rising and home builders were more willing to innovate with their products for higher margins. Last year saw $133 billion in revenue versus $123 billion from 2007.

Managing a Tight Market with Automation & Innovation

With limited internal support, growing builders turned to cost-cutting strategies that streamline processes on the job site, that eliminated manual work in the back office, and provided insightful reports for better decision making – this became a necessity for every real estate investment after the recession. Many growing builders stayed afloat by spending less time administrating tasks and more time on strategy. They also leveraged software at any given opportunity, time became of the essence in investing in real-estate. Builders waited for key pockets of metropolitan neighborhoods close to a bigger builder’s community to ensure buyers would come. Builders constantly assessed and reassessed plots of land, they integrated accounting into all their business functions for increased financial analytics, scheduling became the law of these firms as any building errors were simply too much to pay for.

Simultaneously, as precision home building became more and more automated, design center upgrades became a trend. New homeowners wanted personalization from production home builders. With integrated décor centers, home builders were able to offer up “premium” finishes to home interiors that improved margins without sacrificing too much building time. Some builders have even integrated their contract addendums to their homeowner’s selections for real-time data on profits and capital costs of each home.

Also try, “Top 5 Builder Tips for Efficient Décor Centers to Drive ROI” for improved design center appointments.

Rebuilding Teams with Goals and Effective Processes in Mind

As the housing downturn affected where people worked, home builders carefully restructured their companies with key talent that understood the company’s deliverables and goals. Key members were usually sales driven and understood the necessity of streamlined processes. This new generation of builders figured out that the old way of building needed to change as new technical solutions became available, with data and metrics injected into the workplace culture of building companies. Accountability to achieve financial success was heightened, while streamlined process left more time for home product innovation.

The Verdict

The fastest-growing public home builders today are where they are because they believed in their trade. During the recession, they doubled down where they saw fit and planned for future developments. They invested in automation technology and best practices that became cost-effective ways of completing the same task with less effort. They also innovated but did so in accordance with what they can afford by measuring, tracking, and budgeting. Overall, home builders chose to innovate and offer better homes than before by rebuilding their company culture around goal setting and improved workflows.

The Housing Leadership Summit

At this year’s Housing Leadership Summit, we are proud to be supporting Hanley Wood and “Top 200” builders as a gold event sponsor. We are happy to announce that builders can now anticipate and maximize productivity with the latest advanced home building technology. From artificial intelligence to the design studio, access real-time business predictions so you can focus on improving all aspects of your work processes. We look forward to meeting all top thinking builders at this year’s event.

Source

“The Great Recession: Builders Look Back” by Jennifer Goodman | Builderonline.com

“The 10 Fastest-Growing Public Builders” by Hanley Wood Data Studio, Charlotte O’Malley | Builderonline.com

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It’s a visual world – develop your product from the inside out

This content was co-written in collaboration with Kim Bianchi, leading Décor Studio Manager at OPUS Homes

A home is where memories are made; where homeowners spend time with friends and family. These moments are the backdrop of a successful builder. Your buyers are increasingly sharing experiences online with builders for better or for worse. Social media sites like Instagram, Pinterest, and increasingly Houzz – are all giving homeowners a precise picture of the final product and service you are offering. Make your homes visually appealing – your builder product and brand will speak volumes in the market. What strategies are you taking to ensure your décor centre is assisting company growth?

Tip 1: Customize homes without sacrificing growth

Offer your homeowners the ability to add the final touches to their home’s interior. Do this in moderation. Successful builders understand that building custom homes from the ground up is contrary to scale. Allowing your homeowners to choose their interior selections involves you spending personal time with homeowners, allowing for interior finishes means you can increase the valuation of your homes sold. This too can be an opportunity and a differentiator amongst builders looking to secure a “premium” builder brand.

Tip 2: The homeowner is always right – interior décor demand is a sales opportunity

Customers need confident validation from the builder that interior décor is the right option for their investment. The trick to interior décor as a builder is to position the design studio experience as an educational session on their home. By now, if your customer is considering décor finishes, they must have already selected a house model. Ensure that your décor appointments follow guidelines of what fits best with their selected product. Smart builders give enough choices to their homeowners while strategically controlling what’s possible for each type of home model in terms of installation. Builders are also implementing online design portals based on each homeowners style and capabilities within the each selected home.

Tip 3: Get personal at décor appointments – ditch the paperwork and go digital

Décor Studio Manager, Kimberly Bianchi of OPUS Homes shares the value of an integrated design centre solution. “Design Studio Manager is easily customizable for our growing décor selections. The software provided us with an efficient and logical workflow for our appointment sessions”. OPUS Homes clients have the opportunity to access an online portal, before meeting with Bianchi to complete their décor selections, where they can view available finishes options for their particular model of home and save any “wish list items” to be further discussed the day of the appointment.  Bianchi carries a tablet around the décor studio which allows her to be mobile with her clients while she educates them on their finishing options.  She is logged onto the design agent portal and utilizes it as a tool to guide the homeowner through the décor studio’s product library. Each client takes home a detailed document of all selections added. This method provides OPUS Homes with meaningful real-time data. In the future, Bianchi is excited to implement the floor plans module which allows for digitally integrated redline floor plans that communicate back to NEWSTAR for drafting contract addendum items.

Tip 4: Integrate décor appointments to all your departments

Great software ultimately should ensure customization in a manner that is logical, that brings efficiency out of décor appointments and integrates the customer data to all other departments. OPUS Homes design studio software pushes the data out to their accounting platform for updated production costs, warranty information is logged for interior selections for possible future claims, trades are also notified and their schedules are customized so the interior selections can enter the home after the initial build so there are no damages. It is always costly when materials are installed incorrectly or worse, products must be destroyed and re-added if critical infrastructure is yet to be set up.

Tip 5: Join the décor studio expert panel on modern design studio appointments

Hear from builders how new technology is improving the design studio experience. We are hosting a free webinar with a panel of sales, marketing and design studio managers will discuss how Design Studio Manager has transformed their customer’s experience of the design studio, as well as preliminary impacts on sales of options and upgrades.

WHY: Hear 3 Builders Share The NEW Design Studio Experience

WHEN: April 25, 2PM EDT / 11 AM EDT

Register NOW

The Verdict

Interior customization in moderation can make you a more profitable builder if integrated correctly, reap higher margins and position your product as premium in the market. The right software allows options available for the homeowner that is pre-established for each home model. The right system allows your homeowner to get creative and become part of your building team. Select software that showcases your selections in a logical order that reflects the building process once the interiors are ready to enter the home. Finally, Your décor software should tie all departments back to everything that occurred at the décor centre. Accounting should have an accurate amount of the home price, the warranty department needs the selections information logged in case of future incidents, and trades need their schedules set out in accordance with the selections and the building process. Homeowners expect high-end products, a standardized décor studio process is key to meeting this demand.

Source: Custom Builder Talks Design Centers and Trends That Sell | Builderonline.com – Leah Demirjian

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Innovative yet practical land development and acquisition strategies for up and coming builders to meet the shortages and challenges of your market.

Acquiring land is the starting point for all builders, and is often a major issue. Regardless of size, land acquisition will dictate your volume of builds, the market size and demographic you can sell to, and can change the way you finance a new community development.

What The Experts Say

“Small to medium sized builders were crushed during the recent land depression in the recession, and a lot of their equity base is just gone so they don’t have the cash to close or the equity that is now required for a lender,” says Richard Guerard – Illinois attorney. Guerard’s legal expertise is in real estate transactions, he recommends that growing builders “compete with big builders by developing their own lots based on their specific strategy”.

To understand the effects on land development during the recent recession, also try – Land Pressure: Combating “Zombie Subdivisions”

Top 3 Land Acquisition Tricks for Rising Builders in 2018:

  1. Approach Land Acquisitions with Multiple Payments – Establish a purchasing schedule to buy the land gradually while selling homes to clients
  2. Band Together with Smaller Builders – Unite with other local builders and establish your presence and buying power as community members in acquiring land together in strategic locations
  3. Begin Small, then Build Up – Local builders have an advantage over giant production builders by harnessing local relationships – automate your purchasing capabilities as you focus on acquiring more land in strategic locations

 

To reap the benefits of these tips for land development, builders need a level of commitment to standardized work process. Bonus Tip:

  • Investment in Technology is an Investment Towards Success – these tips cannot be implemented with spreadsheets alone. Prospecting various land packages, and working with other local builders, requires an advanced land acquisition and development software solution.

The Verdict

Having the right strategy alone may not be sufficient enough to outpace the big players in the industry. Always look for innovative technical solutions for purchasing and land development. Our Land Development software – LandDev automates lot planning while integrating financial data with established enterprise resource management platforms. Investing in an integrated land development solution will take care of resource allocation and vendor contracts to maximize profits. Cost efficiency means you can start planning your next big land purchase for new communities!

Content Source: Land Strategies for Small Builders | Brian Croce – BuilderOnline.com

Join Us at The 5th Annual Real Estate Private Equity Forum

Increasingly, today’s market is about catering to millennials as first-time homebuyers, ensuring creative – yet cost-effective homes are tested and taking advantage of niche markets. Join our Director of Professional Services at The 5th Annual Real Estate Private Equity Forum. Bob Swainhart will cover:

  •         Innovations in homebuilding and condo products
  •          Appealing to the modern homebuyer
  •          Effective building strategies for cost savings
  •          Testing new home designs and taking advantage of niche markets

Event Details:

The 5th Annual Real estate Prive Equity Forum on Land,

Homebuilding & Condo Development (East)

April 10-11, 2018 | Four Seasons Miami, Miami, FL

Register here

Posted in Best Practices, Blog, Constellation News, Events, FAST, LandDev, NEWSTAR | Tagged , , | Leave a comment

Enterprise Resource Planning from Constellation HomeBuilder Systems

 

You’re a homebuilder…

Homebuilder with too much Software

You’re great at building homes, communities, and condominiums. But the peripheral requirements of homebuilding can become a complex mess of estimates, options, upgrades, schedules, contractors, contracts, financing, cost allocations, warranties, and much more. Not to mention your trades need access to their schedule and your customers need a copy of their dishwasher warranty.

You understand this problem because you live it every day – managing the internal and external teams that are required to build a home. Our solution is Enterprise Resource Planning (ERP). Manage your resources – people, materials, time, and money – throughout the homebuilding process with one software system.

Let’s walk through the process of building a home with powerful software:

It all begins with your customer, relaxing on the couch, browsing your available communities and models pulled right from your ERP and displayed on your website. Your prospective customer completes a form to request more information: it looks like we have an interested buyer!

Prospective Buyers at HomeA personalized, automated message invites your prospective customer to visit your sales center. Your sales team finalizes options and upgrades with the customer, and the contract is signed immediately – or at electronically from anywhere in the world.

Takeoff immediately as purchase orders are pushed directly to your approved vendors and trades. Trades access schedules, documents, and purchase orders in the field – and receive automatic notifications of any changes or updates.

Meanwhile, land developers can acquire and develop land with tight controls over schedules, changes, and costs – tracked and costed through to the completed sale.

Construction hits a milestone: framing is complete. Once checked by your superintendent, electronic payment is released, or the trade is notified of exceptions. Notify your customer to keep them excited – they will want to tell their friends!

“Welcome to your new home!”

Home is Complete!A welcome message invites the customer to one of the happiest moments of their life. Walk them through their brand new home, complete the inspection and signoff immediately.

Track your revenue with specialized accounting features for homebuilders – and dashboards to monitor the entire process.

One partner. One solution. Powerful software.

Watch the video below for the full story – then request a live demo of our software solutions. Our team of homebuilding software experts can provide a consultation of your business needs and recommend powerful software to maximize your resources.

 

 

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