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As a resource, Shinn Consulting would like to share articles and publications you may find useful. Below are the links.
 

February 28, 2009  Financial Impact Webinar Series

In this series, Jim Weigel and Chuck Shinn explore the importance of evaluating the financial impacts of your decisions in the short and long term across your organization. Discussions will also focus on best practices and provide proven tips on how to increase efficiencies and improve your bottom line.
Learn More

January 27, 2009   Chuck and Emma Shinn Gave Presentations at IBS

Despite the challenging state of the economy, over 60,000 building industry professionals attended the 65th annual International Builders' Show. With 1,600 exhibiting companies and over 250 education sessions, IBS continues to be the building industry's premiere event.

Building professionals noted the importance of attending IBS, especially in the current down market; seeing it as an opportunity to re-tool their businesses and educate themselves in order to be ready when the housing market turns around. Exhibitors indicated that IBS once again demonstrated its strength and value as the center point of the building industry.

Both Chuck and Emma Shinn gave presentations at IBS to rave reviews from participants. To see their presentations, click on the links below:

The information above appeared on the IBS website.

December 14, 2008  Financial Impacts: Is Bankruptcy an Option?*

Jim Weigel led a discussion exploring the impacts of declaring bankruptcy. The strategic reasons to consider it, use it, and operate through it were presented.  Cost to view recorded session: $50.  Click here to register.

Click here to view coverage by BUILDER on this event.

*This webinar will not provide any legal advice.  We strongly encourage you to contact a bankruptcy attorney if you decide to explore the option further

 

 

November 12, 2008  "How to Evaluate Land" by Ethan Butterfield
Home builders around the country have been swamped this year with news reports of public builders selling land for some fraction of its peak worth to get out from under the carrying costs on loans now worth more than the land's value. To read the entire article in BuilderOnline, click here.
October 29, 2008  Common Mistakes Homebuilders Make With Land

By Charles C. Shinn, Jr.

1. Paying Too Much for the Land Purchase

Paying too much for the land purchase is always an issue for homebuilders particularly during such times as these when there is a feeding frenzy and land appears to be scarce. Builders begin to hoard land and bid land prices up. The land purchased may not fit the current product line the builder is offering or the price might move his home sales price out of the competitive price band forcing him to develop new product or reducing the sales velocity of the community. Builders should keep the emotions out of the land purchasing process and use the economic model that was presented last month.

2. Lack of Adequate Market Research

Prior to going hard for the land the builder should have a market research study done to determine the appropriate product for the land, the current and potential competition, the depth of the market, the appropriate sales price for the homes and the anticipated absorption rate. It surprises me at how often the builders buy land without a market research study to determine the feasibility of the project.

3. Going Hard for the Land Too Early

In today’s hot land market, many builders are making the mistake of going hard on the land prior to completing their due diligence. Builders should negotiate an adequate option period to allow enough time to conduct several basic studies to ensure the projects feasibility and profitability. The builder will start spending money, but the
money will be well spent at this point instead of making a land acquisition mistake. The preliminary research should include: market research to determine product, sales price, and absorption; feasibility study to determine the basic financial model and profitability; environmental study to determine the presence of endangered species or wetlands; political study to determine the political atmosphere of the community in general and the given parcel of land in particular; utility study to make sure that all necessary utilities are
or will be available and adequate for the community; and a preliminary land plan to determine and verify the lot yield.. If any of these studies generate a problem not anticipated the builder can renegotiate the price or walk from the agreement.

4. Aggressive Takedown Schedules

Today, landowners and developers are requesting aggressive take-down schedules. If the builders cannot sell homes at the same rate as the lot take-down, they will have to inventory land to stay in the community. Wile builders are naturally optimistic, they should negotiate a conservative land take-down schedule that matches or
is a little short of the community’s projected sales volume. Builders need to protect their cash flow. If the take-down schedule proves too aggressive, the builder needs to go back to the landowner and renegotiate.

5. Holding Too Much Land

Builders tend to be gluttons for land. Consequently, today we are seeing builders amass huge land inventories. Builders should have a clear land strategy such as outlined in the article in the May issue. The land strategy should match production capacity and sales velocity. Large land holding with its drain on cash flow has been the cause of numerous homebuilder failures. Builders holding land ready for development or developed that cannot be absorbed within the target period of time, should flip the land to another builder, capture the profits, improve company liquidity, and/or reinvest the funds in land that better fits future needs.

6. Lack of Adequate Financing for the Project

The land development process can have many very expensive surprises. The amount of time need for both entitlement and development can be substantial expended.
During the entitlement process the builder will hire a number of professionals to assist
with the land planning and municipal submissions. Generally their will be delays and
numerous resubmissions during the entitlement process and the professionals clocks are
running during the whole process. During the actual development process there can be
substantial cost overruns for unanticipated events. If the project gets delayed and the
roads are not installed before the asphalt plants close for the winter the project opening
may be delayed for six months. Also don’t forget the municipality will typically require
a bond for the public improvements which may not be released until the end of the
warranty period.

7. Not Developing the Team Approach

During the land planning process the builder will rely on a number of professional: civil engineer, environmental engineer, land planner, market researcher, architect, marketers, merchandisers, advertising agencies, etc. Frequently the builder works with each of the professionals one on one. The professionals should work as a
team to allow for cross fertilization. The builder is the team leader giving the team direction.

8. Phases Are Too Large

Generally there are efficiencies in developing large phases due to the mobilization costs, and the ability to spread the up front costs of the amenities, fencing, monuments, utilities, spine roads, etc. over more lots. However, there are a lot of negatives. Large phases substantially increase the required carrying costs. Construction tends to be spread throughout the phase on scattered bases reducing efficiency and the appearance of excitement and viability of the community. It also reduces the ability to increase prices
with the opening of a new phase which not only increases profitability but allows for the liquidation of the less desirable lots in the earlier phase without discounting.

9. Selling Premium Lots First

The balance of premium lots to standard lots needs to be maintained thought the development. Too often the builders sell off the premium lots first and then are left with the standard lots and the less desirable lots for the remainder of the communities build out. The balance of premium lots should constantly be monitored and the lot premiums adjusted to assure there will be premium lots available throughout the developments live. The lot premiums should not be discounted just to get sales since it will eventually have a greater impact on sales and the premiums will not be available for the discounting of the inferior lots.

10. Not Offering Multiple Product Lines 

Instead of developing the site for one product line the builder should consider designing the property for multiple product lines. Since each of the product lines will be marketed to different target markets the lot absorption will be increased. This will reduce the risk and increase the builders return on investment.

11. Going It Alone

Consider putting a consortium of complementary builders together for land acquisition. The builders can afford to buy a larger development, and spread the advertising, promotional, marketing costs amongst themselves. The community will have more energy, excitement, and vitality. They can develop the land into separate
neighborhood for each of the builders and improve their return on investment.

12. Land Not Treated as a Profit Center

Builders should keep the land development operation in a separate profit center from the homebuilding operation and transfer the finished lots to the homebuilding operation at the “builder retail price” or the price at which the finished lots can be sold to independent builders, thus capturing the land profit in the land development operation. Too many builders subsidize the homebuilding operation with the land profits realized from the land’s increased value as derived from entitlement, development, and appreciation. Finished lots are recorded at cost instead of market value in the house cost of sales. The builder thinks he is making a profit on his homebuilding operation but in truth he is making money on the land and potentially losing money on the homebuilding operation. He would be better off selling the land instead of building homes.

13. Lots Not Adequate for Standard Plans

Too often builders end up with a number of lots that will not accept the standard plans. The builder should make sure that all lot building envelops will accept all standard plans with the standard options. If the builder is going to offer a three car garage option it should fit on all lots. Too often I see builders having to design specific houses for specific lots because the building envelope will not accept the standard plan. This happens very frequently on cul-de-sac lots and lots with utility easements. This is typically a result of lack of adequate review of the land plan, trying to force the number of lots, and/or the architect and land planner not working as a team.
Land acquisition and development can substantially improve builders’ profitability provided the builder establishes a land strategy, makes sure the purchase agreement is structured for the targeted housing sales price, profit objective and sales velocity, and the builder does not make too many mistakes. Land is an appreciating asset as it moves through the development process. Therefore, it should be treated as a profit
center to capture it profit instead of commingling it with homebuilding profit.

September 5, 2008  Trade Secrets: Staying Afloat

Bob Chapin does not want to foreclose on builders. The senior vice president of the ­Atlanta region of SunTrust Banks would much rather keep them solvent and reorganize their debt. But he can’t do it alone. Read more.

Source: BuilderOnline

September 5, 2008  Bailing Out

Bob Schultz and Jim Weigel have been through tough housing markets and lived to tell about it. Read more.

Source: BuilderOnline

September 5, 2008  Chuck Shinn Interviewed by BuilderOnline

Chuck Shinn, president of the esteemed Lee Evans Group and Shinn Consulting, was a builder in Colorado when the savings and loan crisis threw the housing market into turmoil in the 1980s. To the builders who are struggling now, Shinn has a survivor’s credibility. Read more.

Source: BuilderOnline

May 25, 2008  Prep Talk
Part leadership school, part town hall meeting, and part locker room halftime coaching session; that was the feel of the latest business improvement seminar from Chuck Shinn and the Lee Evans Group cast of experts.
Source: Builder Magazine
April 18, 2008  Interested in selling assets? - We know interested buyers.

Over the last month, we have been contacted by several banks and investors who are interested in purchasing land, unfinished units / projects and unsold inventory across the country.

If you would like to unload any of these assets, please click on the links to complete the Housing Inventory and / or Project Questionnaire and return to Emma Shinn (eshinn@shinnconsulting.com). We can then present your projects and put you in contact with the relevant interested parties.

April 1, 2008  Mistakes to Avoid when Running a Home Building Company

Most business articles tell you how to improve your business. Because we like to think we march to a different beat here at Professional Builder, we've decided to try a different angle and let you know what not to do. We turned to experts such as Chuck Shinn, Scott Sedam, John Rymer and others for input; the list on the following pages represents merely a sampling of their recommendations (Believe us — they could go on!).
Source: Professional Builder

February 16, 2008  Participate in Annual Industry Study

It is time once again to conduct our annual financial, operational, and compensation and benefits surveys.  Prior year’s participants have found this exercise to be very beneficial, since they have been able to quickly identify areas of concern and develop strategies to increase profitability. You can also benefit greatly from your participation. Click here to access the survey documents, including a worksheet in the format in which we need your financial information, and the operations, benefits and compensation questionnaires. All information provided will be held in the strictest of confidence!  You can submit the information by e-mail (eshinn@shinnconsulting.com), fax (303) 972-7667 or mail.

February 1, 2008  Ross Robbins discusses how to ramp up your marketing and sales efforts

One key to getting to the next cycle in the housing market is to cut costs and let home buyers “option up” their homes through pre-priced structural options much like automobile dealers sell cars, said Ross Robins, MIRM.  Robbins discussed how to strengthen company financials during NAHB’s free hour-long teleconference, “Ramp Up Your Sales & Marketing in a Changing Market,” on Dec. 12.

A recording of the teleconference, “Ramp Up Your Sales & Marketing in a Changing Market,” is available free to NAHB members on the NAHB Web site. To listen to the teleconference, NAHB members can click here.

November 1, 2007  How Homebuilders can handle their fear

As I travel the country, I see builders lost in this new economic environment with no knowledge or mental map of what to do. Many continue to operate the same way, thinking they will get different results if they just work harder and hope the problem will go away. All have a high chance of failure during this cycle. To be a survivor, you need to turn your fear into focus and make a new mental map of where you are and the environment you are in.
Source: Professional Builder

September 1, 2007  How Homebuilders Can Survive the Housing Cycle Downturn
Consultant Chuck Shinn Jr. lists 9 steps homebuilders should consider right now to survive the housing downturn.
Source: Professional Builder
August 6, 2007  When Scheduling Jobs, Don’t Overlook Your ‘Soft Schedule’

By Mary Alice Hewitt
When builders discuss scheduling, they typically only think about their hard schedule — the actual construction time and process. While the hard schedule is very important, there is another type of schedule — the soft schedule — which is just as important but often overlooked.
Source: Nation's Building News Online

July 1, 2007  Tips to Reduce Homebuilder Land Risk
Land and its affiliated debt has always been a home builder's Achilles heel, causing many builders to fail. As the market stabilizes this year and builders begin to acquire land, they need to reestablish good land acquisition risk management techniques.
Source: Professional Builder
April 1, 2007  KPIs Help Home Builders Obtain Financing
To obtain a loan, home builders should understand the key performance indicators that drive the decision. Some of those KPIs include operating performance, financial stability, liquidity and cash flow.
Source: Professional Builder
February 12, 2007  New Service Offering: Website Design and Upgrade
Work with industry experts and a proven website / database development team to improve and streamline your web presence and get results. Click here to learn more.
February 12, 2007  IBS Presentations

Click on the session title below to download a copy of the presentation.

Cut Construction Costs: 20 Proven Techniques
Historically, land & direct construction costs have represented 78-85% of the sales price. To obtain higher profitability, these cost needs to drop to 70%. Learn the 20 ways to cut these costs without cutting the value and quality of your homes.
Presented by Charles C. Shinn, Jr., PhD

A Picture is Worth a Thousand Numbers
Bring standard number reports to life through the use of charts and graphs. Easily interpret your data, and promote the call to action. Our examples will demonstrate the power of the visual presentation of key measurements.
Presented by Emma S. Shinn

Developing a Web Strategy
Developing a new website? This session gives you the tools to create your own strategy for its development, and techniques to plan for and implement the website. Learn how to find a "good" developer, develop a scope of work; and improve your website.
Presented by Craig Schweikart

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If you are familiar with an article or publication you think other builders would benefit from, please send it to info@shinnconsulting.com, and we will get it posted.