“We have to continue to create a one-company culture here, because we are not just rolling up contractors, we are building a construction company,” says Michael Mahre, SelectBuild's CEO, describing the guiding reasons behind SelectBuild's coming-out party. “Doing business under 16 different names doesn't help internally or externally to create that one-company view. That's where SelectBuild comes in.”
Mahre says it wasn't until after the firm bought into Knipp Bros., and started learning about the production home builder customers it served, that a vision for a construction services empire was born. By watching Knipp Bros., the firm began to understand that the high-volume, production home builder customer was a completely different animal from custom contractors, where BMC West had its roots. Not only did production builders need the best material at the best price—and lots of it—they asked their suppliers for a lot more in terms of service, especially when it came to managing a jobsite.
“The missing ingredient beforehand was the lack of a rigorous effort to separate the needs of the two different types of customers and recognize that there's a lot of gray between them,” Mahre says. The firm commissioned a strategic market study, which “prompted us to take a closer look and understand where the big builders were going, as well as what they wanted. At the same time, we had our answer right in front of us, and it was our Knipp Bros. investment. When you put the two together, that was the real ‘Ah-ha.' That's when we said let's take this business model and put together a vision and a strategy for the future. And that's what became SelectBuild.”
To see Mahre talk about providing home builders with turnkey services is to witness a man with a remarkable focus, the lead architect of a sprawling build-out. If Mellor is the distinguished patriarch of the BMHC family, Mahre is its ambitious son, the next-generation rain-maker who's carrying the construction services baton forward. Drawing a diagram of his company on a conference room whiteboard, his dry-erase marker pounds away like a pneumatic nail gun lashing sheets to studs. The rightness of the firm's strategy is so obvious to him that he seems perplexed as to why other firms haven't made more progress duplicating it, though competitors like Stock, Builders FirstSource, Lanoga, and 84 Lumber are starting to make serious inroads. “Driving efficiencies and controlling quality through integration across the trades just seemed to make so much sense,” he says.
Taking that strategy to its logical conclusion, Mahre inspires a vision of a national horizon filled with entire subdivisions of SelectBuild-built homes. When asked how far the firm is from delivering a complete house to home builders, Mahre chuckles and replies, “It's not an improbability to see us performing whole-house construction. I prefer to think about that as construction project management.” He concedes his firm would need a bevy of additional trades to achieve that goal, though, including electrical and roofing. Others in the industry point to drywall services as a must-have for SelectBuild to bring that vision to reality.
Of course, BMHC's corporate structure has spurred insistent suspicions within the industry about its true balance sheet objective. Set up as a holding company for both BMC West, its traditional distribution arm, and what is now SelectBuild, its construction services division, BMHC has often been accused by both competitors and customers as building the services business simply to sell more sticks out of BMC West. (The distribution arm, which offers its own construction services to custom contractors and production home builders alike, still accounts for more than half of BMHC's total revenues.) It's a point the company has emphatically, and routinely, refuted. The firm admits that in markets where BMC West and SelectBuild can work together, the services arm will indeed buy from the distributor. But, Mahre says, “that's more the exception than the norm, and it's not a corporate mandate.” In markets where it doesn't have a BMC West footprint, SelectBuild buys from BMC West's competitors. According to Kailer, the firm bought 100 percent of its concrete and plumbing supplies, and 50 percent of its lumber, from outside suppliers in 2005, translating into approximately $364 million of spending with outside vendors in those three categories, or 70 percent of the $520 million it spent for those materials overall. Case in point: Both Hylbert and Chambers characterized SelectBuild as “a very good customer” in their respective Southern California and Florida markets, where BMC West doesn't have coverage.
Happy Home Builders The package SelectBuild has assembled from its various parts—and the plans it has for the future—make production home builders gush. As consolidation has swept through the home building industry and buying land has become more difficult, home builders have focused more on development and marketing, leaving the hammering to someone else.