How home builders find savings by implementing software and deploying integrated and automated services for building tasks.
Our client’s success is our number one priority. Money matters a lot in homebuilding, every dollar counts, and beyond improving your product offering, finding the right land to build on and acquiring resources for the right price – investing in a homebuilding system that’s truly integrated could be the investment to save you money and resources in the long run.
As you will see, our findings show that an average home builder producing 200 homes at an average selling price of $350,000 and approximately 30 employees can profit from integrated management software by improving hours of ineffective process and optimizing the margins of their operations. We have taken a conservative estimate for wages and for all other variables, and this standard is based on decades of industry experience with hundreds of home builders using Constellation software in their business.
Profits during the Building Cycle
Calculating Field Construction and Sales Operations Savings
The industry standard index dictates that the average building firm of 30 employees about 10 percent would be directly involved in the construction process (3 employees), each builder would be compensated an average of 25 dollars. Due to improved data flows between the head office and on-site builders, each builder will save 4 hours per work week since manual paperwork is eliminated. Considering a 50-hour work week. It is estimated Builders can save an average $15,000 per year.
Hours per week saved due to automation = 4 Hours
X
Weeks worked per year excluding weekends = 50 weeks
X
Hourly wage = $25 Dollars
X
How many builder/ superintendents employed = 3 Builders
TOTAL Savings Per Working Year = $15,000
Calculating savings due to Reduced cycle time due to field integrations
More importantly, the amount of savings created from improved communication between builders and trades is around $90,000 dollars per year. A builder invests significant capital in terms of labor for each extra day a home sits on a lot incomplete. With the new and improved scheduling capabilities integrated back into your accounting process, expect a 6-day decrease in your home build cycle which ultimately cuts costs.
Number of homes built yearly = 200 Homes
X
Number of reduced cycle days for builds = 6 Days
X
Estimated cost per day when a home is under construction = $75
TOTAL Savings Per Working Year = $90,000
For more on NEWSTAR’s Scheduling benefits with on-location scheduling, see how DSLD Homes accomplishes a 43-day building cycle on each home, try “5 Keys to Effective Trade Management”
Calculating improved margins from field integration/scheduling
The biggest return on investment procured from the construction process will come from integrating your field operations with your schedules. Considering the 200 homes built annually by our sample builder with a 2% savings in upgrade costs averaging to about $ 35,000 per home closed – a building company can find new revenue of $ 140,000 simply by paying attention to the productivity of model upgrades and ensuring that the product upgrade process fits perfectly within your existing construction and trade management process.
Average upgrade revenue (option dollars) per closing = $35,000 Dollars
X
Improved options margins with field integration/scheduling = 4%
X
Number of employees = 30 employees
TOTAL Savings Per Working Year = $140,000
Savings Generated from Minimizing Back Office Manual Work
Calculating Home Closing Entry
Builders/superintendents are each spending 4 hours weekly processing POs. Within a company of 30 people, 1 person works full time administrating work orders and 1 person also helps on a part-time basis. At the end of the year, having a manual process is costing you roughly $ 7,500. As an integrated technology provider for home builders, our concern is the build process. An inconsistent process will also incur the builder running costs from building errors.
Hours spent weekly per builder Processing invoices/work order/PO’s = 4 Hours
X
Working weeks = 50 Weeks
X
employees are allocated to Invoice/PO/Work Order Processing = 1.5 Employees
X
Hourly wage = $25 Dollars
TOTAL Savings Per Working Year = $7,500
Calculating Hidden Costs, controlling committed cost
Industry hidden costs accumulate over the year from work order processes lacking accuracy in capturing billable and back charge items, keeping consistent to contracted pricing, consistency with buyer selections, and timely ordering and delivery of resources. With integrated software from warranty, to sales, keeping a steady schedule all the way to accounting. Our prospect builder will save $ 87,500 per year while creating an impactful home-buying experience to earn them future referrals.
Average base home sales price = $350,000 Dollars
X
Industry % – Hidden Costs, controlling committed cost = 25%
X
Number of homes built yearly = 200 Homes
X
Conservative adjustment = 50 %
TOTAL Savings Per Working Year = $ 87,500
Revenue Generated from Improved Process for Interior Decor Upgrades
Design center appointments are the new expectation when buying a new home. The secret to increased revenue for interior upgrades is to offer your homeowners enough customization to please them without sacrificing your automated process. For example, our customers are finding improved appointment productivity with our new product, Design Studio Manager. With a standardized décor center selections process that promotes relevant products to your homeowners, it is estimated that a NEWSTAR user with a Design Studio Manager integration is earning $15,250 dollars yearly (seems low; overall per year or per house per year? Or per week?). $5,250 dollars in earned revenue from having a software system that promotes your upgrade products logically. While the remaining $10,000 is saved money calculated by the manual process your décor agents would have spent selecting products for your homeowners manually.
Calculating Design Studio Revenue Savings
Time savings from integrated design software = 1 Hour weekly
X
Number of homes built yearly = 200 Homes
X
Hourly wage of a designer = $50 Hourly
+
Upgrade revenue per closing = $ 35,000
X
The percentage increase for optional upgrades = 15%
TOTAL Savings Per Working Year = $ 10,000 + $5,250 = $15,250
Savings While Providing Homeowner Care and a Simple Buying Experience
Closer to a home sale, builders on average are spending 2 hours with each new homeowner drafting contracts / coming to a sale agreement and 1.5 hours entering home close information. Over the course of a year – the prospect builder would have invested $17,500 for a task that otherwise could be automated. With NEWSTAR, expect sales selections to update in the accounting main module for real-time budget analysis and current financial terms. Also, home walkthroughs can be completed on-site with NEWSTAR’s on-location warranty module that directly integrates with the scheduling and accounting departments in case of late extras or any final adjustments for the fastest reaction time possible.
Calculating Warranty Process Savings
Homebuyer Agreements – Hours spent per home = 2 Hours
X
Number of homes built yearly = 200 Homes
X
Hourly wage = $25 Dollars
+
Hours eliminated from automated home closing entry = 1.5 Hours
X
Number of homes built yearly = 200 Homes
X
Hourly wage = $25 Dollars
TOTAL Savings Per Working Year = $10,000 + $7,500 = $17,500
The Verdict
After examining our clients and their financial performance before and after their NEWSTAR implementation. A home builder producing 200 homes yearly will save $363,625. Over the long term, the return on investment for implementing an integrated software solution comes to $1,818,125 in just 5 years. We acknowledge that all homebuilders are different and operate under many different variables. With the help of industry experts, we have created an ROI calculator to help you customize your potential revenue which is possible with software implementation. Calculate Your Savings today.