Moneyball for Home Builders

Just as owners of baseball teams need wins, builders need profitable sales. If you saw the movie or read the book “Moneyball,” maybe you recognize that although this story is set in baseball, it’s really about developing a passion for knowing and understanding how to use critical numbers and statistical probabilities that create wins, which then create championships and higher profits. In “Moneyball” it was number-cruncher Peter Brand, played by Jonah Hill, and not a baseball expert, who understood that a win is not a thing that just happens. It is the end result of consistently getting on base, and then scoring.

In the business of new-home sales, a sale doesn’t just happen. True, a contract to buy and sell has been achieved, but a sale is really the end result of a series of well-defined and executed steps and tactics that can be measured and improved. As each step is improved, an increase in profitable sales is the result. For example, marketing and promotional spending must be measured for ROI (see “The Opportunity For a Breakout Year in Sales").

Now when we look at POP, or point of purchase activities, we want to see what happens when a prospective buyer comes in contact with a new-home sales representative. We also need to measure, benchmark, and improve critical steps of that process. Some of the essential and fundamental stats to examine for each salesperson, each community, and the company as a whole include the following:

• Conversion of traffic to sales by sources of traffic

• Percentage of traffic and sales generated by Realtors

• If sales are negotiated, what is the percentage of total sales where concessions were involved, and what was the dollar amount given away by each salesperson.

• Sales accomplished by visit, i.e., first, second, third, or beyond

• Cancellations

• Follow-through activities with prospects who have been in contact but have not purchased. We use a system called Customer In Process (CIP) Analysis and Action Plan.

I am always mystified when I ask a salesperson or sales manager, “How many sales do you have for the month?” and the response is something like “I’m not sure” or “I don’t know.” The fact that they don’t know is not as troublesome to me as is the issue that they don’t have a passion to know. Peter Brand demonstrated an unbridled passion to know who gets on base and who scores as his fundamental benchmarks. Then he motivated and involved Oakland A’s general manager Billy Beane, played by Brad Pitt, to the same level of passion. I encourage all sales managers and builders to develop a passion for knowing the important numbers critical to your sales operation. Understand what they mean and know how they will benefit you to increase sales revenue and profit.

In keeping with our format of presenting real-world experts, active salespeople, managers, and builders who each day are challenged and charged with the responsibility of generating a consistent level of profitable sales, I introduce Jay Webster, vice president of sales and marketing with Marrick Homes in Prince Frederick, Md.

“We have made a practice that has become part of our culture to measure all of the benchmarks that are referenced,” Webster says. “The benefits to us are measurable. Both management and the sales team, collectively and individually, are tuned into the process that produces sales.

“Building on Professional Builder’s January article, ‘Debunking The Myths of Social Media and Internet Marketing,’ we focus on tracking each appointment that we have from our online and other marketing efforts. Our Prospect Process Tracking (PPT) form is the primary tool our sales team uses to ensure that each prospect is given the attention needed at each step of the decision-making process of purchasing a home.”

Webster adds that the Marrick sales team meets weekly as a group to review and discuss these details:

• Contracts written month to date

• Number of closings month to date

• Review of top prospects for each community, which often leads to a Customer In Process (CIP) group discussion. The CIP review process is directly credited for generating approximately 10 percent of all 2013 sales.

• Appointments scheduled or that need to be scheduled for the week with top prospects. This review also often leads to a group discussion on individual prospects that have visited more than one of our communities to create a specific strategy to get them back and buy. “As Bob says, ‘Selling is a contact sport,’” Webster notes.

• Contingent contracts are discussed with group input, which often leads to strategies that can be helpful in selling the contingent property.

• Community events that current homeowners and prospective homeowners are invited to attend. This interaction has proven to be an excellent tool to promote our company and community.

• Realtor outreach, including presentations at Realtor sales meetings and events for Realtors at our communities

• Available inventory homes

• Current month sales goal per community and year-to-date sales per community

“The PPT is updated during the week to reflect appointments that have been confirmed for the week,” Webster says. “Appointments are the key to turning prospects into sales. I manage and lead by objective, and our team constantly strives to improve that which we measure.”

Remember that the goal is to measurably increase profitable sales and always ask this question: Doing what we are doing the way we are presently doing it, how many sales, how much revenue and profit are we missing, and how much time, money, and human resources are we wasting in the process? If you aren’t tracking activities critical to improving your sales process through each step of the system, you won’t really know if your efforts are resulting in increased sales. Having and properly utilizing CRM (customer relationship management) software that is specific and custom to home builder operations is critical.