Sale Strategies for Custom Builders

The strengths of a home builder’s skill set typically include being adept at assessing risk, entitling land, securing permits, negotiating with finance people, and, of course, managing construction. But selling tends to be the weak link. 

Sales consultant and author Jeff Shore says that the advice he first gives his builder clients who are looking to improve in this area is to decide what you are. For example, are you a home building company that has to sell houses, or are you a sales company that builds homes? 

“I think we often approach this backward, with the ‘If I build it, they will come’ attitude,” Shore observes. “Well, I built it, and nobody came. So now what do I do?”

Building Trust

Fred Reikowsky was a builder and remodeler for more than 30 years before he sold his construction company and, ultimately, got involved in business coaching, starting his Canton, Ohio-based company, Legacy Business Leaders, in 2012. Most of the builders he has counseled initially lacked a documented sales process or practice that they would consistently follow. Consequently, they reaped inconsistent results. 

“I usually challenge builders to look at the sales process in terms of a lot of mini-closes,” Reikowsky says. “Even when that very first phone call comes in and you’re trying to prequalify the lead and ask to set up a time to meet—that’s the first mini-close.”

A good sales process is a series of mini-closes. Reikowsky explains that the builder should invite the prospect to take small steps through the sales process in a logical way so the buyer perceives the builder as a trusted advisor, and the builder, in turn, knows that the prospective client is onboard. If a prospect objects to any of the steps—even after you’ve attempted to explain how the process is in his or her best interests—the builder should recognize that the client might become a difficult customer. At this point, it may be time to “graciously invite” the client to leave your sales loop, Reikowsky says, adding that, when dropping a prospect is done well, “you can actually create an advocate for your company even though you’re not doing business with them. I’ve seen it happen. In fact, it’s happened to me. It’s amazing. Someone once called and said, ‘I got your name from so and so. They’re not building with you, but they really liked you.’ That’s a good thing.”

Customer Mindset

A beginning step toward improving selling skills is developing a sales mindset. How does a builder steeped in years of construction schedules, house plans, and relationships with subcontractors do that? Get into the head of your customer, Shore says.

“If I’m counseling small builders, the first question I’m going to ask is: What does the avatar of your buyer look like in detail? I mean, get a blank whiteboard and really sketch out who this buyer is, where they are in the buying process, and what else they’re going to be looking at,” Shore says. His rationale: Starting with a strong idea of who is going to buy this house paves entry into the mindset of your customer. “Everything you do as you go through this process is seen through the filter of the eventual purchaser of the home,” he points out.

Before founding Dwell Development, in Seattle, Anthony Maschmedt worked in corporate sales and marketing for an international professional hair care products manufacturer that competed against giants such as Procter & Gamble and Unilever. He already had a sales mindset, so he saw the mission for Dwell as building its brand, even more than building houses. With fewer than two dozen closings annually, Maschmedt was “a small fish in a big pond,” he says. In a market dominated by Craftsman-style houses, he differentiated his brand with sleek, modern homes that were five-star Built Green certified. Then he focused the message of his selling process on the value that Dwell homes can deliver to buyers.

In talking to prospective buyers, Maschmedt says he would point out the benefits of building an energy-efficient home: “If you have the option of building a sustainable home that’s more energy efficient, and you can show prospects the value of that compared with a code-built home—which is the worst-built home you can legally build and get away with—it’s just logical for people [to choose you as the builder],” he says. “People bought our homes during the downturn when they could have bought short sales, code-built, and all other kinds of products. They have to see the value, and we have to beat that drum.”

That drumbeat included educating brokers, mortgage writers, and appraisers about the tangible and intangible benefits of a Dwell home through press releases, speaking engagements, and marketing via videos on Dwell’s website. Today, the spec builder presells almost all of its houses, even before framing begins. 

Making the Connection

Past customers are a rich source of information when you’re researching buyers. Go to the people who actually wrote you the check and ask what motivated them to do business with you. Building a great house is merely “the ticket to the dance,” Shore says, since there are many competitors that also construct wonderful homes. The kind of answer a builder should be seeking is what was it about you that would prompt a customer to tell friends and others thinking of new construction to call you. 

“There is a boldness here,” Shore says. “You’ve got to talk to customers. A lot of builders don’t want to do that, but if they get over that fear and discomfort, they’re going to get market knowledge directly from homebuyers that they won’t get anywhere else.”

Too many builders set getting the contract as their primary goal so they can break ground and trigger a release of funds from the bank or the client. Instead, Reikowsky says, business owners should have these two goals: Make a profit, and make customers really happy. He calls it the win-win outcome of a successful sales process. Most builders are too scripted, he says, as in, “Oh my gosh, I might lose this sale. I really need this sale. I need to take another house this month.” But all that does is jeopardize their side of the win. Many builders, he adds, are more about win-lose than win-win, and, as a result, are constantly undermining their own best interests and profits. “Win-win is a discipline,” he says. “It’s not a thought; it’s not just a great idea. It’s a discipline that takes time and being very intentional.” 

Developing a sales mindset may also require changing the builder’s perception of the customer. Although some builders cringe at spending more time on phone calls and face-to-face meetings with customers and would prefer to avoid dealing with client emotions, complaints, change orders, and, ultimately, conflict, hiding from the customer can ruin the relationship.

“The reason that is such a huge mistake is that those homebuyers are coming to the small builder in the first place because they want the connection with the person who is actually going to be building their home,” Shore says. “They could choose a [big company], but then they feel disconnected from the builder and the process. When they’re working directly with the builder, they love that. They take pride in that. So the idea of minimizing contact with your customer goes directly against the reason they’re your customer in the first place. We need to increase the conversation between the builder and the customer. And the customer doesn’t expect a salesperson; they’re expecting the builder. They give a lot of grace, even if you’re not the most polished person in the world in your presentation skills, that’s OK. That rawness is exactly what they’re looking for.”

Setting Clear Boundaries

However, even if a builder is diligent about being more available and open with buyers, the relationship still needs parameters. Set expectations with buyers from the onset about the frequency of meetings and the methods for contact. Small builders can jeopardize their well-being by allowing customers to call them at all hours, Reikowsky says. Clearly explaining communication protocol is just one of a series of expectation-setting exercises that the builder must go through to show prospects that the company has a detailed process for taking care of customers. Other processes that should be outlined include how change orders and selections are handled, what to anticipate regarding extra costs and overages, the impact of weather on the schedule, scopes of work, and how the warranty process functions. Defining and explaining these expectations can provide more mini-close opportunities for builders.

“That’s going back to what I said about building a bridge between price and value,” Reikowsky says. “You can do that by saying something like, ‘Mr. and Mrs. Prospect, I want you to know that we have a process here at ABC Builders and what we’d like to do at this point is to share some information about that process with you. Could we do that?’ That’s a closing question, and 99.9 percent of prospects are going to say, ‘Sure, I’d love to see that.’”

Building the Relationship 

Clearly defining expectations and getting buy-in from clients early also can make conflict resolution easier. 

Establishing trust early in the process means that when you need to say no, clients understand and don’t perceive you as “being a jerk about it,” Shore says. “That trust allows us to sustain the relationship. This is Stephen Covey stuff, when you talk about an emotional bank
account,” he says, referring to the author of 7 Habits of Highly Effective People. “If I’ve invested enough in our emotional bank account and want to make a withdrawal, I’m not going to be overdrawn. Increase the communication. Don’t decrease it for fear that there’s going to be an emotional conflict. Increase it and get to know that customer, so that when you have to tell them no, it doesn’t damage the relationship.”

An important part of any builder’s sales process is determining the budget. Prospects may be hesitant to provide details about how much they have to spend because they want to get the builder’s best number. One approach for getting a figure that builders can be confident in is bracket budgeting. Reikowsky advises that after meeting with a client—who, for example, says he wants to spend $120 per square foot building a new home—get more information about the house they want to build, and then produce an estimate. You can say something like, “Based on what you shared with me, we can build this home for somewhere in the range of $140 to $150 per square foot. Would that work for you?” 

If the client agrees, that’s another mini-close, and having that approval removes the builder from the position of being a price giver. To get to this point, Reikowsky recommends that builders refine their estimating skills, at the very least by looking at job history and crunching the numbers on a spreadsheet to see how their bids compare with actual costs. “Have an estimate that you are confident in,” he says, “and bracket those numbers in such a way that allows you to ask the questions that will get you a solid answer.”

Along the lines of having the client and builder on the same page, he recommends that builders document change orders and their impact on the customer’s budget. If a client wants to enlarge the kitchen from the dimensions of the original plan, the builder should present a document showing a bracketed estimate—if presenting a single figure isn’t possible at that time—and the revised running total cost for building the house. Asking clients to sign off on the revision enables “owning their budget,” Reikowsky says. They’re also less likely to be surprised later by the final cost.

Getting pushback from the prospect on price is another challenge in the sales process where builders are at risk of giving in and ceding control of the project. Often, in their eagerness to get a contract, a builder offers to draw a house plan thinking that step will move his company closer to a deal. But if the client decides to take those plans and shop around for quotes, now the builder is in a bidding war with competitors. A design agreement can help wrest such control from the homeowner and protect the builder’s profitability.

Other names for this document are a pre-construction agreement or a preliminary design agreement. Whatever the name, the builder, through this document, offers—for a small fee—to draw up house plans using his or her draftsperson or an architect. The key proviso is the stipulation that the plan belongs to the builder, not the client. “It’s a case of: If you’re signing a design agreement with us, and we’re designing your home, the assumption is that you will build with us,” Reikowsky says. “We already agreed on the price bracket and you [the prospect] are learning how to trust us, and we’re learning to trust you, so there is a trust level established. And, since the design agreement has been signed, we aren’t selling price anymore, only selling value. In other words, the builder is doing away with a price mentality and shifting to a value mentality. That’s the bridge you have to build to be a successful custom builder.”