2005 Business Resolutions

This article first appeared in the PB January 2005 issue of Pro Builder.



	Heather McCune, Editor in Chief

New year's resolutions, made with determination before 12/31, rarely survive. Resolutions typically involve improving our personal lives: eat less, exercise more, etc. The list goes on, but changing behavior because of a change on the calendar rarely proves motivation enough to make what we resolve reality.

How different is it in business? With the year that was in home building in 2004, why would anyone want something different? Can't we just wish for more of the same? Sure, however, getting more of the same involves more than just wishing it. Growth in volume may not be your goal, but an increase in profitability must be. Creating a sustainable business — one that provides for its customers, employees and vendors — is the obligation of every owner. The costs of doing business demand that improved profitability be your goal. Realizing that goal takes planning.

What then should a home builders' business list of 2005 resolutions look like? As an employee of no one company, but as an observer of many, I suggest:

Resolve to stay in step with buyer demand, not ahead of it.
Few believed that residential construction could sustain growth for nearly a decade, yet the numbers don't lie. Closings and permits continue to climb, and the only number on a bigger trajectory is builder profits. Discipline drives this last number and should continue to be the watchword in 2005.

Many builders — those of a certain age — remember the last housing recession when too many of their compatriots were caught with too much inventory when interest rates skyrocketed and the market turned. That memory makes this resolution moot for them. However, there are a significant number of builders who know nothing of the boom and bust housing cycles of the past. Their entire careers have been the boom. To these people, make this resolution your mantra. Study the numbers in your market. Understand changing buyer profiles. Practices the discipline that keeps your inventory in step with demand rather than in front of it.

Resolve to win the race between rising interest rates and improving business fundamentals.
The low cost of money covers a lot of sins. Overlooking the missed margin on one house or the cost overrun on site work at your next lot or plot is easier to do when the cost of capital is low.

Don't assume that cheap money will always be there. In fact, plan that it won't. Commit in 2005 to improve your business fundamentals as a means of building the bottom line in every economic cycle. No matter what your title — owner, president, CEO, superintendent, salesperson, purchasing agent, construction manager, intern — make your number one job goal improving the area of the business you impact. There is no better job security or resume booster.

Resolve to document one step in how you manage work in your company with an eye toward improvement.
Start by analyzing what is. Uncover the inefficiencies, the wasted steps that cause errors rather than prevent them. Involve every person in every department inside the company or out in the process. Ask for their suggestions on how to improve the way work gets done. They have the answers and are just waiting for your permission to share them.

Resolve to explore a promising new niche in 2005.
Second home communities, 24-hour infill residential or active seniors housing will be in big demand in 2005 and beyond as the baby boomers define their next housing need. Figure out which of their housing desires you can fulfill.

Resolve to set aside the time to work on your business instead of in it.
This is so easy to say and so hard to do. Walk in the office before 8 a.m. and already there are three fires to extinguish, two problems to solve, four phone messages and 50 e-mails. The desire is there but the struggle forever is how to make the time. Try a few of these tricks others have generously shared with me:

Daily 10s: meet with each direct report for 10 minutes at the same time each day. This preserves your in-office time and improves their confidence and productivity as well.
Off Sites: gather with your key managers or advisors away from the office at least once a quarter. The agenda should always be on where the business is going not the work being done today.

Will all of these suggestions be right for every business? No, but in that my new year's resolution is that each of you enjoy a year of profitability better than you've ever known before, our responsibility is to suggest ways to achieve it.

To realizing that wish for a more profitable business means making ourselves comfortable with the uncomfortable. Not one of us greets change without a degree of fear or a sense of longing for what we've known before. That is basic human nature, yet each of us — intent on building a business, building a career or building a house — must let go of yesterday and embrace tomorrow.

Heather McCune
Editor-in-Chief
630.288.8190
hmccune@reedbusiness.com

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