When home builders are asked which information they deem most critical to the improvement of their businesses, info about new products is always near the top of the list. And for good reason.
Analyze Numbers for an Accurate Picture of Financial Performance
A quarterly variance analysis of estimates versus actual job costs can be quite revealing.
I'm a numbers guy — I love 'em. They can be exciting, frustrating, insightful and depressing. One of my favorite set of numbers to review every quarter is a variance analysis of our estimates versus actual job costs. In order to get maximum benefit out of the data, we take several “cuts” across the numbers. One such cut is by job type — kitchens, bathrooms, additions, whole house, etc. Another cut is by job size, where we aggregate the job costs into various “buckets” according to project size. We also analyze the numbers by project manager and by salesman.
At the conclusion of each project, during the project de-brief or autopsy, we pull together all the subjective comments from sales and production. That is to say, we try to qualify any specific circumstances that may help to explain whatever variances (positive or negative) exist. This helps us use the data more effectively when it is looked at historically.
The analysis can be quite surprising. For instance, we thought we were solid on large room additions. These are my favorite types of projects — lots of heavy lifting, framing challenges and so forth. Likewise, I have never been a huge fan of bathroom projects. Why sell a little $50k bathroom when you can sell a $100k addition?
Well, the numbers told a different story, namely that our financial performance on room additions was significantly lower than on bathrooms. In rooting around for an explanation, we uncovered many contributing factors that we then set about to improve on our room additions. In the meantime, we pursued any and all bathroom leads with much more zest than in the past. So don't be afraid to sit down and spend the time aggregating and analyzing your numbers. It can be some of the most productive time you will ever spend as a business owner!
Read more posts by Jeff Hunt at www.HousingZone.com/Blogs.