Creating Long-Term Revenue Streams

It's the current Holy Grail sought by volume home builders-find products or services that can create an on-going revenue stream from the homes and communities that you have built and sold.

Pat Hamill, for one, has taken up the quest. President of Denver-based Oakwood Homes, Hamill is seeking to earn long-term residual income from customer service and home maintenance by developing a workable service model.

Hamill has disbanded his in-house service department, forming in its place a wholly-owned subsidiary called Home Service Plus+. The new subsidiary will not only handle Oakwood's normal warranty work, but will also market extended warranty service, pre-scheduled home maintenance programs and home repair service to the homeowner base. In the process, he hopes to turn Oakwood's service department from a cost center to a profit center.

Selling approximately 850 homes a year, each with a standard one-year warranty, Oakwood has approximately 1500 homes in warranty at any one time. The firm, says Hamill, had been spending $1 million a year on warranty work.

"Instead of a revenue stream," says Hamill, "we had a negative annuity trail as long as seven years."

Initially HSP+ will perform the following services:

•Standard warranty service for all Oakwood homes based on a one-year contract between Oakwood and HSP+.

•Offer extended warranty plans (three-year, five-year, and 10-year structural) to Oakwood homeowners for a fee. A deductible is built into the extended warranty to prevent nuisance calls.

•Offer homeowners pre-scheduled maintenance inspections based on a 35-item checklist. Fees range from $119.99 to $159.99 depending on inspection schedule and home size. Repairs based on the checklist can then be performed by HSP+ at the owner's discretion.

•Provide home repair on an as-needed basis, either on an hourly basis ($50/hour) or on a project bid basis.

•Handle collateral damage on a fee basis. HSP+ will do the work and back charge the vendor.

•Provide homeowners with 24-hour emergency service ($100/hour).

Once the HSP+ brand name has been established, future services could include home remodeling, model home maintenance and warranty service for smaller area home builders.

"Our goal," says Arlene Battishill, president of HSP+, "is to turn the single transaction of building and selling a home into multiple revenue generating transactions."

Scheduled for full implementation this month, HSP+ began field testing in early April. The operation currently has eight full time employees (each a jack-of-all-trades former remodeler). "With that staff," Battishill claims, "we can handle 300 to 400 warranty calls a month."

HSP+ will also have a password-protected Internet site for Oakwood homeowners. Battishill envisions selling advertising space on this site to strategic building supply allies.

Warranty or handyman service concepts have been tried in other markets. The problem with those concepts, according to Hamill, is that the handyman technicians are independent contractors, not employees, so there is no real quality control.

Projected first year revenue from the new firm is $1 million. "And that," says Battishill, "is conservative."