A Winning Strategy

In 1966, Professional Builder named its first Builder of the Year, William J. Levitt. Levitt was a fitting choice for the award’s first year as his company’s assembly-line techniques for building homes revolutionized the industry, setting the stage for the many production builders that followed. Those techniques allowed Levitt to build quickly and cheaply—but sturdily—and offered an answer to the post-war housing crisis: affordable housing for the thousands of soldiers returning home from World War II, now armed with VA loans.

This year, the 50th anniversary of the Builder of the Year program, the award goes to Houston-based LGI Homes. LGI is a fitting choice for a momentous anniversary year—not only for its extremely efficient and effective processes and systems but also for making homeownership possible for thousands of entry-level buyers during an even more dire housing crisis (Left to right, Rachel Eaton, chief marketing officer, Mike Snider, president and COO, Charles Merdian, CFO, Eric Lipar, CEO, Meg Britton, chief administrative officer, Jack Lipar, EVP land acquisitions; Photo: Nathan Lindstrom/dbphotoagency.com).

I first became aware of LGI during the late 2000s while crunching numbers from the top builders. In 2009, the firm was given an award for fastest growing company, based on its financials for the three preceding years, 2006 through 2008. During those years, LGI achieved substantial growth, when other companies were struggling to keep their doors open. And it has never looked back.

The company has now closed 15,000 homes, and currently builds in 61 communities in 16 markets in 10 states across the country. It has gone from being a private company that borrowed capital from banks to depending on friends and family to dealing with private equity to becoming a public company in 2013. And in all of those years, save one, it has grown in both closings and revenue, been profitable, and has not laid off a single employee.

How does LGI do it? What is different about it? Well, almost everything, but much of the credit for its success goes to its marketing and sales processes. For example, the company currently sends an average of 400,000 direct-mail pieces a week to the areas surrounding its active communities. And it tracks the source and cost of every lead and every sale. Its marketing department knows how many calls it gets from each mailer, how many people set up an appointment, how many people sign a contract, and how many people close.

And when people call, LGI makes it easy for them to make an appointment. Community information centers are open from 8:30 a.m. to 8 p.m., seven days a week, 359 days a year.

Many of LGI’s customers are renters and first-time buyers, and they come looking for a house to buy on a 30-to-90-day time frame. As a 100 percent spec builder, the houses are built ahead of time and when a prospective buyer comes looking, they are shown the house they will buy, already constructed, and ready for move-in.

LGI works on a 60-day construction schedule, slab to finish without a basement, 90 days with. Variances are few and far between—management even asked its tech consultant to turn off the cascading effect on the builder’s construction management software. “The schedule is the schedule,” they say. Wherever LGI builds, it’s a builder of choice. Not only are the trades happy about having a set schedule, the amount of work is consistent and predictable.

The in-house staff is happy, too. They often work directly with top management, and there are considerable rewards for good work. As a result, during the past year, 47 percent of all new hires came from in-house referrals.

What LGI doesn’t do is design and build new plans every year, or offer options. While this may not appeal to move-up buyers, they are not LGI’s target buyers. But having bought their first homes, LGI’s buyers will likely become move-up buyers, expanding the pool of homeowners and creating more opportunities for other builders.