By reading my previous work, you already know that I am in favor of any worthy and productive business cause.
You also know I pull no punches for losers, bullies, and those with entitlement mentality (See “The Customer Will Never Know;” published on 4/1/2022).
The building, developing, and construction arenas have always held a certain mystique, privilege, and ‘pecking order’ as conveyed in society to those that are not part of the inner circles of these disciplines.
Such as, “Why are you questioning us? We are the builders and have a license to do so, and you do not.”
The attainment of a license to build can be a monumental achievement, or it can be the next logical step on the course of one’s life plan. In the U.S., requirements are state-specific with some states granting reciprocity to other states and still others maintaining their own cryptic requirements. Some require that one gain many years of jobsite experience to attain a top-level contractor’s license, while others have merely one level of licensure and only require the passage of a written examination.
If you have not yet wondered, you may now be wondering what I mean by “production builder.” (Thanks for asking). The National Association of Home Builders (www.nahb.org) defines a production home builder as one that builds communities; in other words, the company may own a large plot of land and develop an entire subdivision.
I don’t like that definition.
Other definitions from the industry include “production home builders build many homes in sequence, thus saving on labor and materials along the way.”
OK, that to me is a better definition. Actually, production builders can build homes in sequence and/or simultaneously. They typically have multiple projects going at once. Typically, the term “production home builder” is used as an antonym to “custom home builder.” Any time we hear the term “custom home builder,” we’re conditioned to see dollar signs, to hear the quintessential “cha-ching” of a sale being made, of money being spent. “Custom” simply sounds more expensive than “production” because we’ve been conditioned to that.
I’m not against production builders. Remember, I support any worthy business enterprise.
In any business or industry, one finds that improved efficiency leads to greater profit.
In construction, efficiency means building more for less. Less time or fewer dollars; usually both.
Many roads lead to “building more for less.” The road most often traveled is cutting costs.
Cutting costs in any business or industry can result in greater profits. So why don’t we follow this model in all business industries?
The answer is, there is a floor, a level below which we won’t generate an effective return after cutting more costs. The floor is a situation below which you really don’t want to exist. You can try to exist, but you will end up cutting yourself into a corner. You can’t cut your way to success or prosperity. Life is too short. Don’t cut yourself to Amazon levels. You’re better than that!
Q: Can you do better than a production builder?
A: If the question refers to me personally, then the answer is yes. If “you” is meant in the general sense, then the question may be irrelevant because the customer may or may not want or need a product better than what the production builder offers. I’m always happy to be the contrarian; I have experience in this space. From what I’ve seen, production builders seek any and all means to extract whatever profit they can out of a build. Note: Profit isn’t a bad word; it’s how businesses stay in business. But you need to know when to draw the line.
Because after a certain point, why bother??
You may or may not have heard of Matt Risinger.
He is a top-notch builder and host of the “Build Show” podcast, also resides at www.buildshownetwork.com. He’s really done an excellent job of “putting himself out there” over the last 5-10 years and has promoted good building practices, great ideas from other professionals, and great products.
On his podcast, Matt mentions a time earlier in his career when he worked for a production builder. Life was good. The bills were paid. Houses were being built. The economy was good. The company, every year, would poll its employees as to how it could be more profitable for the next year.
The winner probably received a $100 gift card; I can’t remember the details. Matt, however, described the winning idea one year: Discontinue painting the steel beams (usually 2 of them) in the basement, those that hold up the first floor.
Hey, great idea. The beams will still hold up the house. They won’t look as nice, but who cares, they’re steel. We’ll save maybe $60 per house. We build lots of houses. We can afford to give you that gift card or holiday bonus!
The reality: Terrible idea. Delivering a product, likely the largest purchase in that family’s life, with a “fit and finish” you’re not proud of, while you ruminate that what you failed to provide the customer, you have added to your profit.
That, unfortunately, has become the prevailing “production builder” mentality. Note, I didn’t say universal: I’m sure there are production builders who think differently and those that do exemplary work.
Here are a couple of personal examples:
1. I designed an enclosure that is very well-insulated. It will have 3” of exterior insulation, in addition to insulation within the wall assembly itself. And more (a story for another day.) Problem is, exterior insulation of 3” thickness, especially mineral wool (rocks don’t burn, insects don’t eat rocks) is hard to find these days. Heck, anything and everything is hard to find these days, and if you can find it, you probably can’t afford it.
Should I re-design the project? It would involve a chain reaction of several other decisions and changes, some of which are likely to be overlooked.
“The thickest exterior insulation I’ve seen used on any house in this general area {as an aside, we are talking about climate zone 6 – ask me if you don’t know} was 2 inches last year, and there was only one house built that way,” the insulation supplier told me. “You better check with your engineer on the attachment methodology.” (In fact, the engineer and I designed it together.) The real problem isn’t the cost or availability of the 3” thick product, although both facets are challenging enough…it’s the minimum order quantity.
WWTPBD?….(What would the production builder do?)…not sure, but I know what I’m going to do:
A. Find a company with a lower minimum quantity. Done. (Darn, it costs more
per square foot this way.)
B. Purchase 1.5” thickness and install 2 layers. Purchase enough to have leftovers. Use leftovers on projects that aren’t insulated to such eyebrow-raising levels.
2. On the same project, the roof assembly calls for 3” of exterior polyisocyanurate insulation. You can get polyiso, but not on your schedule – on theirs. You order it whenever, you get it when you get it: 4 months lead time, maybe 6. The price you pay is the price when delivered. Hint: it won’t be going down.
However, my roofing contractor happened to have a stockpile of 2.6” polyiso sitting around. Do you think I’m going to make that substitution? You better believe it! From his warehouse to mine, I’ll trade the R-2.5 differential I’m giving up (from 3” to 2.6”) for the peace of mind that I can have it now. (For more information, see my previous article, “R we clear on are our?” here.)
WWTPBD? Invalid question. Production builders don’t use exterior insulation on roofs (and rarely if ever on wall assemblies).
The basis of my writing usually comes back to value engineering. As a review, value engineering is analysis of a project and making necessary changes to arrive at the desired result in a more cost effective manner. Value engineering is what I know, because value engineering is what I have done. I don’t know any other way to build.
Nearly all aspects of a project can be value engineered – for more cost-saving examples, download my eBook, “How a Doctor Learned to Develop Real Estate” below.
Because when you employ logical principles of value engineering along the way, you’ll never have to worry about cutting corners or abbreviating a paint job to save a buck.
Until next time,
Dr. Lee Newton
How A Doctor Learned To Develop Real Estate
- Learn the consequences of delegating your real estate and construction decisions to others
- See for yourself how a physician cracked the code to success and profitability in real estate development
