Category Archives: Online Resources

Home Builder Software: ERP vs. BOB

Integration is the key!

A lot has been written on this subject over the years, but most of the verbiage has dealt with generalities. Builders have asked me to explain some of the differences and I have tried to relate these differences to their business.

The Best of Breed (BOB) solution is usually interfaced together by one of the vendors involved in the solution. Indeed there are solutions available that require a vendor of accounting software, sales software, project management software and customer service software. The system interfacer will claim that they have married together the best of all solutions on the market, by bringing together four databases. Let us consider this claim when it comes to a comparison the truly integrated Enterprise Resource Planning (ERP) software.

Consider for instance an integrated ERP customer service module:

  1. Does it integrate to the purchase order module, in such a way that warranty staff are able to easily determine who did the original work on the lot?
  2. Does it integrate to the sales module so that all customer information and option selections are automatically transferred over?
  3. Does it integrate to accounting module to the extent that all work on the lot that cannot be charged back, is automatically posted to the warranty cost code in the costing module?
  4. Does it integrate to the accounting module to the extent that all backcharges approved by customer service, automatically reduce the payment to the errant subcontractor on the next pay run?
  5. Does it integrate to the purchase order software to allow warranty to issue customer service purchase orders that can be tracked through the normal process of the builder?

These are integration questions from just one module! Most or all of these will not be handled by BOB software.

Consider other more general questions that I have found important to the builder:

  1. Is the production software integrated to the extent that the closing entry to the general ledger with all the associated Work in process and Cost of sales entries (etc.) automated on a lot by lot basis?
  2. Can sales see the current status of all lots in a community by virtue of having the schedule integrated to the sales module?
  3. Can the approvers of an agreement run a margin report on a new prospective deal by virtue of having the budgeting and costing software integrated to the sales module?
  4. Can the builder run a report with data from all four BOB modules? An example may be where the CEO requires a field from warranty to be included in a required accounting report. As a general rule the BOB supplier would recommend that the builder set up yet another database to consolidate the reporting.
  5. The vendor portal in most solutions does a good job with purchase orders. However does it integrate to the accounting software to the extent that the trades can see the check number and amount that paid the purchase order?

I could go on and on but true integration that pays back to the builder.

One objection pointed to the ERP vendor is that you have “all your eggs in one basket”. Check out the ERP vendor you are dealing with as it may be that the vendor is on very solid financial ground. In a BOB solution you must do due diligence on say four vendors, any one of whom could bring down the solution which no one really owns. Will any one or all of the vendors continue to be a best of breed vendor? Who decides this?

When problems occur in an ERP solution it is one call to one vendor. In a BOB solution you would be faced with four numbers. Many times they may say the problem is another vendor’s problem.

Don’t get me wrong, I have seen BOB solutions function but usually to the extent that IT resources are hired to run it. The running cost of a BOB solution has to be higher because of the databases involved and the resulting reporting requirements.

I ask the reader one question. If you built a software solution, would you not want to be in complete control of it?

Share this article or connect with Simon via LinkedIn.

LinkedIn: Simon Gardner

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The 2015 Public Builder Report Cards

In 2014, public builders continued to see their balance sheets improve and sales grow.

While the market may have closed for new public home builders over the past year, 2013′s burst of activity introduced five new companies to the latest BIG BUILDER report card.

In 2014, it was good to be big. While many smaller private builders were struggling to secure both capital and land—the basic elements of growth in the business—the big were getting bigger. Whether they were looking for land or an entry point into new markets, the publics were aggressive.

But public growth wasn’t measured in number of acquisitions. According to stats compiled by American New Homes Group president Jamie Pirrello and his team of Robert Yemola, Kylie Berrena, David DeFreest, and Christine Zoerner—members of the Accounting, Business, and Economics Department at Juniata College in Huntingdon, Pa.—the publics grew in a lot of other metrics in 2014.

For the full list of grades and comments, continue reading via builderonline.com

40% of the top homebuilders on the Builder 200 list trust Constellation as their software partner. We’ll show you why.

Hanley Wood: 2015 Public Builder Report Cards

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The Atlantic: The Unfinished Suburbs of America

Images: Alana Semuels, The Atlantic

In the boom years of the early 2000s, builders and developers bought up land as fast as they could pave and name the streets. Development of America’s suburbs pushed full-steam ahead towards creating affordable housing options for a market that demanded bigger houses and backyards for families.

Then came the recession. Development stalled on thousands of acres across the country. In some counties in the West, 15 to 33 percent of all subdivision lots are vacant, according to the Sonoran Institute. In Teton County, Idaho, 68 percent of land bought for subdivisions was left undeveloped. In Tustin, CA, the Tustin Legacy development left over 1,500 acres of prime California real estate a difficult mix of tightly-packed homes and sparkling retail mixed with open fields and abandoned military buildings.

As this valuable land sits idle, Americans’ preferences for how and where they live are changing. Walkability is quickly becoming an expectation – less driving and more walking to work, school, the grocery store and the ball park. These changes impact where and how builders create communities – and impact the value of the land they bought back in 2004. One report from the Lincoln Institute of Land Policy has gone so far as to call them “zombie subdivisions” in a report on how to “combat” them.

Land pressure

The housing industry’s boom and bust of the 2000s has put pressure on land from various directions – these zombie subdivisions are just one. (Drought and flood plain rules are also on the horizon.)

We’ve provided some resources in the links above and below, but we don’t have a crystal ball to tell you how or where to build. What we do have are the tools to help you see your land in a new light. Though we specialize in developing software for homebuilders, our homebuilding partners have pushed us to develop software for their land departments.

Homebuilding software vs. land development software

In the world of residential construction/homebuilding software, project management involves a flurry of schedules, invoices and purchase orders between the builder and various personnel, vendors and trades.

In the world of land planning and development, far fewer invoices and purchase orders are generated over the life of the project. The value of these invoices however can be massive – and breaking those costs down to specific divisions, communities, and individual lots becomes a monumental task.

Take into account the stale land environment of the past decade, and depreciation of those tracts adds further pressure on the accounting department to effectively translate historical costs to active projects.

The cost of sale of the lot

LandDev is a software solution built specifically for managing land development projects, including the complex numbers behind the scenes. Begin with acquisition costs, financing costs, construction costs, closing costs and carrying costs, and distribute them down to the cost of sale of the lot. LandDev makes this process simple, breaking costs down to individual phases or even sub-phases of projects within the lot itself.

With increased demands on the land department to find and develop new plots for an increasingly active homebuilding department, effective budgeting and accounting starts with effective operational job costing. In addition to allocating costs down to the lot, LandDev is a fully featured land management solution.

From acquisition and bid comparison to project management and contract generation, LandDev has the features you need to manage the land development process.

To learn more, request a demonstration of LandDev.

Land Planning Resources

America in 2015: Bridging the Access Gap for Healthier Amenities
The Unfinished Suburbs of America
Data-Driven: Leveraging the Potential of Big Data for Planning
Arrested Developments: Combating Zombie Subdivisions and Other Excess Entitlements
After housing slump, 1,100 homes to open at Tustin Legacy
Water Woes: What the California Drought Means for Home Building
New Floodplain Rules Would Limit Construction

 

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Homebuilder Moneyball

Take an ‘everything matters’ approach to operations, and ‘small ball’ will get you the wins.

With ballparks opening across the country, Clark Ellis for Big Builder draws similarities between the inflated numbers produced by “The Steroid Era” of baseball and the inflated numbers of the early 2000′s housing market.

“The Steroid Era” from 1996 to 2005 produced year after year of incredible baseball records until regulation came down hard on MLB. History has since proven that these numbers were not a meteoric rise in talent, but the result of an external factor: steroids. Here are a few of those numbers:

Isolated Power (ISO): a measure of batting power, 7 of the top 10 scores occurred in the Steroid Era.
40 Home Run Seasons: 27% of all 40 home run seasons occurred in the six seasons from 1996-2001.
Total Home Runs Per Season: Between 1996 and 2005, the average number of league-wide home runs per season was 5208. The average between 1980 and 2014 is 4262.

After “The Steroid Era” the best teams in baseball, once again, are well-rounded clubs focused on pitching, defence, on-base percentage. Baseball calls this razor-sharp focus on the details “small ball” or in Hollywood, Moneyball.

According to Ellis,

In the housing industry, we essentially had our “Steroid Era” as well in the early 2000’s through 2006 or 2007. Interest rates were extremely low, banks were willing to extend credit to consumers with little to no verification, and home building companies were able to borrow using low rates to purchase land and to finance construction. As we all recall, the numbers associated with the results of housing’s “Steroid Era” were just as exceptional for this industry as the baseball numbers were.

And, similar to baseball, homebuilding had its own inflated numbers:

First-Time New Home Buyers: In 2005, these accounted for 600,000 new units. The days of easy financing for the first-time buyer are gone.
Land: Competition has driven land prices up, making pricing from the early 2000′s no longer possible.
Operations: As prices ballooned faster than costs, inflated margins meant lots of flexibility in the operations department. We’ve heard from Scott Sedam and Ken Pinto that pressure from trades and suppliers is increasing fast.

Like the best baseball teams of the past decade, homebuilders must change their focus from a “long ball” to a “small ball” approach to operations and decisions.

Here is Clark Ellis’ How to Play “Small Ball” Top 10 List:

  1. Drive the market research and land evaluation process with realistic product, pricing and costing assumptions, clear roles, responsibilities and accountability. [Solution: Our land development systems manage every aspect of the planning process with strict rules and automation.]
  2. Know your customer: size of segment, demographics, psychographics, submarkets, price points and product needs.
  3. Deliver clean, flexible, low cost and easily constructible product.
  4. Attack and minimize “Sale to Start” cycle time. [Blog: DSLD's 43-day cycle time]
  5. Scheduling system must provide accurate, real-time visibility to trade partners and suppliers as well as internal staff. [Blog: Scheduling for Higher Profits]
  6. Make Material Management a critical discipline with the dual goals of optimizing margins and eliminating time wasted while waiting for additional material to be shipped to the job. [Blog: Pain Points in the Homebuilder Supply Chain]
  7. Engage Trade Partners in a collaborative fashion and develop incentives that align all interests towards executing efficiently, with high quality and on schedule. [Demo our trade partner portals.]
  8. In the context of #4, aggressively and ruthlessly attack Start to Completion (of construction) cycle time with a collaborative and motivated team of builders, trades and suppliers.
  9. Eliminate Punch Lists.
  10. Commit to the market. Partial effort and incomplete execution wastes time and money and only leaves you further behind your competition.

Ellis’ final “small ball” tip is to reduce opportunism: just because a deal is “too good to pass up” does not mean it aligns with your strategy and goals. Reconsider these decisions, while thinking like the manager of the Oakland A’s.

Request a demonstration of how our solutions can help with these goals.

See also: Homebuilder Shark Tank

Read the full article from Big Builder Magazine.
Clark Ellis is a principal at Continuum Advisory Group.

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Homebuilders range widely in their acceptance and investment in new software and technologies. Every day, we hear from a new builder who is looking to “drop the paper and pencil” or “finally get rid of random spreadsheets” – but we also hear from builders looking to streamline their reporting for a new round of financing.

The data below is from Professional Builder magazine, gathered directly from homebuilders in 2014. The data shows that builders are digging into the digital toolbox to manage workflow, schedule, accounting, estimating, purchasing, project management, and selling.

See below how homebuilders are utilizing technology, and how our solutions can help.

Professional Builder Software and Technology Survey - Software Tasks

We believe that Scheduling, Estimating and Purchasing should form the foundation of any solid homebuilding software solution. However, it cannot stand alone. Our solutions begin with New Home Sales and guide customers through their warranty.

 

Professional Builder Software and Technology Survey - Software Usage

Project Management and Workflow can provide huge, measurable benefits to homebuilders. Some of our customers send tens of thousands of automated workflow emails daily – each one can save you from a costly game of phone tag.

 

Professional Builder Software and Technology Survey - Software Benefits

NEWSTAR Enterprise automatically keeps customers in the loop when it comes to changes to the standard plan. A brand new addition to the Constellation family, Conasys Homeowner Care, is another powerful tool for communicating with customers after their purchase.

 

Professional Builder Software and Technology Survey - Website

Software solutions from Constellation link directly with your website to ensure a seamless transition for your prospects. Followup can begin immediately using our sales solutions – as a module within your management software or as a stand-alone sales management tool.

Request a demonstration of how our solutions can help with these goals.

Read the full article: Professional Builder’s Exclusive Research: Technology Tools

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