While consolidation among the nation's largest home-building firms may grab the headlines, custom builders remain the bread-and-butter of the residential realm. Not only do small-volume companies account for 42% of NAHB's total builder membership, they make up 37% of the customer base of the largest LBM suppliers, according to the latest ProSales 100 research, the largest share by far among all customer types.
Still, dealers tend to be mystified–and in some cases, frustrated–with small-volume and custom builders, those that build relatively few unique homes on speculation or for specific home buyer clients, respectively. Their special-order requests, far-flung locations, drawn-out production schedules, and relatively low-volume purchases for commodity products cause headaches that may not outweigh the higher profit potential of handling their business.
As is often the case, however, those headaches often come from a lack of understanding the motivations and pressures put on custom builders, a far different set of circumstances than what their large-volume and midsized contemporaries face. To provide dealers with a bit of insight, we solicited questions from ProSales readers and answers from leading custom builders across the country, and interjected a bit of context into the conversation, as well.
ProSales: What's your general philosophy about multiple suppliers or shopping around for the best price?
Mitch Handman: I like to have relationships with one or two lumber suppliers [per category]. For a large project or order, I'll have both of them give us pricing. For specialty items, I keep a list of suppliers I've used in the past, but usually the architect will tell us who made it, and perhaps where to get it.
FYI: According to a recent NAHB Research Center survey, custom builders are more likely than production firms to increase the number of suppliers to find the products they need, but are far less likely to look for new suppliers based solely on pricing, value, or selection.
Richard Wodehouse: Maintaining a steady schedule is our biggest challenge. As it relates to the supply chain, the big lumberyards are OK, but the smaller cabinet and door shops sometimes get so busy that we can't count on them to deliver on time, which affects the schedule. Or a shipment coming from somewhere else gets held up by [winter] weather.
Hollub: Our biggest challenge depends on the job. It takes a lot of time to manage the information and decisions that go into a custom home, from the home-owners and the architect, and delays can be critical. It's important to get the right information in the right time sequence.
Handman: We run into problems when we allow a lumberyard to do our takeoffs. Generally, they haven't been up to the task, though it would be a nice burden to unload.