This month, our annual PROSALES 100 report on the nation's top dealers arrives at your desk on the heels of our April issue that featured a comprehensive analysis of the big builder market and the results of a study commissioned by BIG BUILDER magazine, a sister publication of PROSALES. This was not happenstance; it was a coordinated effort to provide you with side-by-side coverage of the nation's largest builders and dealers so that you can compare the leaders of the pack. When we evaluated the trends, we found some interesting parallels between the two groups:
Growth minded. The big plan to keep getting bigger, and we can expect tandem expansion through the ranks of the nation's largest home builders and dealers. Almost half of the respondents to the BIG BUILDER Study (43 percent of the total 409) said their companies plan to enter new geographic markets in 2004. According to the BUILDER 100, an annual May ranking of the nation's largest builders published this month by BUILDER magazine, another sister publication of PROSALES, the number of U.S. homes closed by the country's top 100 home builders grew 14 percent from 2002 to 2003. Those 393,178 units represent 34 percent of all U.S. homes built last year.
Similarly, the sales volume of the PROSALES 100 jumped 14.2 percent from 2002 to 2003, totaling $28.9 billion. When asked about growth plans for the next five years, 74 percent of the PROSALES 100 anticipate expanding in the same geographic region, while 31 percent expect to grow into another geographic region. Ten percent even plan to seek national growth.
Rapid expansion. Both M&A activity and organic growth are fueling these expansion plans for dealers and big builders alike. The PROSALES 100 collectively reported acquiring 104 facilities and opening an additional 81 in 2003, and they expect this brisk pace to continue throughout this year with another 111 acquisitions and 115 openings. Similarly, according to BIG BUILDER magazine, merger deals are expected to continue fueling growth among the nation's largest builders. Last year, big builders made two dozen acquisitions, according to BIG BUILDER.
Targeted diversification. Major players aren't losing sight of depth as they grasp for breadth. Big builders are reporting long-term growth strategies that look to dig deep into hot markets such as active adult and resort housing, and new types of development, including infill, on-your-lot, and high-rises. Right now there is enough business to keep everyone happy, BUILDER magazine reports, but analysts predict that sooner or later the companies will have to start fighting to take share from one another, which means that the more products big builders offer, the more entrenched their footing becomes.
The same holds true for PROSALES 100 dealers, as many continue to dive into ancillary products and services, such as manufacturing and installed sales, to expand their business reach. Over the next five years, for example,23 percent of the group say they anticipate rapid expansion in component manufacturing, and 25 percent predict rapid growth in installed sales. Moreover, 39 percent of the PROSALES 100 predict that their customer bases will change over the next five years, and many relayed that they believe large production builders will grow in importance.
These trends are interesting because they point to smart growth, not random expansion for the sake of becoming a behemoth. Builders and dealers alike are committing to improving core competencies, and it shows a synergy that should keep business rolling even when the stakes start getting higher.
Lisa Clift, Editor