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How to Stay Profitable When Competing with Large Volume Builders

There are numerous ways to push back and stay profitable.

Small-volume builders who are feeling boxed in by large production builders in their area should take heart. Daniel Levitan, MIRM, IRM Fellow, CMP, CSP, owner of Levitan & Associates in Fort Lauderdale, Fla., who recently spoke at the NAHB International Builders’ Show, said there are numerous ways to push back and stay profitable.

 

Levitan conceded that large production builders have a lot of advantages over small-volume builders. To list a few:

 

 

– Easy access to capital
– Economies of scale
– Favorable treatment from subcontractors
– Library full of home plans with known costs
– Market visibility
– Sales and marketing efficiency
– Ability to survive market conditions

 

The upside for small-volume builders, however, is that most production builders are resistant to change, typically unable to respond rapidly to new opportunities or create new housing products, and find it challenging to take on smaller jobs or sites or typical developments. “And as most of you know, some of the small projects are more profitable than the large ones,” Levitan said.

 

Large volume builders also struggle to market outside of their established comfort zone, and are rarely able to accommodate requests for customization.  So if you want to stay competitive with the big builders, Levitan recommends the following:

 

  • Develop a significant Web presence to make yourself stand out.
  • At a minimum, do some limited customization.
  • Build in a sub-market. Go where the big builders won’t go.
  • Directly target their weakness. For example, if they build quality, build to price or vice versa.
  • Fill in the holes they leave behind. “If they’re doing all brick, you do stucco. If they’re doing one-story houses, you do two-story houses,” Levitan said.
  • Partner with other small-volume builders.
  • Find private investors.
  • Pursue urban infill housing opportunities.
     

Interested in learning more? Search NAHBNow.com or visit NAHB.org for additional tips, strategies, articles and resources.