A Custom Revolution

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Remember when chess champion Gary Kasparov went up against Deep Blue, the supercomputer? Kasparov won the first time. But the second time, Deep Blue's programming included almost every possible combination of moves. As a result, a shaken Kasparov conceded defeat. Simonini Builders, Inc. (SBI) has done to custom building what Deep Blue did to chess.

December 01, 2005

Sidebars:
Key Facts About Simonini Builders
Simonini Builders: A Retrospective
The Numbers Don't Lie
Behind the Scenes
The Sweet Spot
Bragging Rights
Super "Structure"

Remember when chess champion Gary Kasparov went up against Deep Blue, the supercomputer? Kasparov won the first time. But the second time, Deep Blue's programming included almost every possible combination of moves. As a result, a shaken Kasparov conceded defeat.

Simonini Builders, Inc. (SBI) has done to custom building what Deep Blue did to chess. This North Carolina-based firm has used information technology to change the definition of "custom." Home building may never be the same.

But that's just one of the reasons Professional Builder chose Simonini Builders as the 2006 Builder of the Year — the first ever custom builder to be recognized as the fairest construction firm in all the land.

The other reasons? How about fierce employee loyalty, sales volume rivaling a mid-sized production builder and customer satisfaction ratings 13 percent higher than FedEx? Here's a glimpse inside SBI's world-class operation.

Quantum Shift

"We had reached the point in our business evolution that we needed to more clearly define our brand, reputation and market position," says Ray Killian, Jr., co-owner and chief executive officer of SBI. "A few years ago, we had an outside firm conduct a brand evaluation of SBI. They met with bankers, brokers, agents, politicians, customers, lawyers and other influencers and asked the [influencers] many questions about impressions of SBI.

"One of the questions was 'If you were to compare SBI to a movie star or a car, what would the image be?' The answer was Paul Newman (as a movie star) and Lexus (as a car)."

That information, Killian says, convinced him and company co-owner Alan Simonini to apply the tools and marketing methods of the luxury auto industry to custom home building.

"When you buy a Mercedes, you have thousands of options to choose from," Killian explains, "but that doesn't mean you're getting any less of a product. We call [this strategy] our Hedgehog (referring to the book, "From Good to Great," by Jim Collins). We want consumers to feel passionately that they have received a custom home, even though it's a portfolio home."

That goal led SBI's dynamic duo to aim higher for their company on every level. They began by cherrypicking key employees, often spotting talented people among the overworked ranks of public builders. For example, new chief financial officer Bill Saint, a former Centex division controller, took the lead in setting up SBI's "Structure" management software (see "Super Structure" on page 74). And veteran builder Bob Pugh joined the SBI team to head a new Renovations Division, aimed at high-end clientele (see "The Sweet Spot" on page 70). The company also diversified into the window and building material business, opening Southeast Builder Supply in Charlotte.

Through the whole re-layering process, however, Alan Simonini, whose father Al founded the original company back in 1973, zealously defended the company's core values — insisting that good people and construction quality remain at the center of every move forward.

"A lot of builders expect the client to accept all kinds of defects," Simonini says, "but we wouldn't accept a dent in our new car or any other products, so why accept it in our homes? There's no such thing as too picky. If it's wrong, it's wrong."

That zero tolerance standard sometimes puts a strain on SBI's management in the field, but it also earns their respect.

"Alan will go to the end of the universe to satisfy people," Bob Pugh says, "sometimes to the point where it may hurt [financially]. But Simonini's reputation is untouchable."

What does quality mean in a Simonini home? How much time have you got? From through-wall copper flashing to ensuring that the screws in the light switch covers are vertical, no detail escapes notice.

Expanding Universe

Simonini is keenly aware of the narrow, affluent niche it serves. To expand that base, the firm has been expanding into promising new regions. These include several parts of South Carolina, including Charleston, the Hilton Head area and wealthy enclaves such as Daniel Island.

How did a relatively small custom building company create field teams in these remote areas? By making nice with the locals.

"We had to export our brand, not our crews," notes Saint. "We found that if local subs don't know you, they won't work for you. So what we did was hire a well-respected superintendent who lived locally, and set up a satellite operation.

In addition, the company now plans and builds complete neighborhoods, not just the "one-off" homes typical of many custom firms. And when SBI builds a community — whether close to their home office in Charlotte or far afield — they often include several spec homes.

Hey, isn't that called production building? Well, yes and no. It's not that simple. These are not what most people think of as spec homes — floor plans pulled out of a book and plopped on a vacant lot.

In Heydon Hall, SBI's upscale community in Charlotte, Killian notes that "one architect designed all of the homes, after taking 300 or 400 pictures of older homes in the area. These are basically custom homes."

The custom-production distinction gets even more blurred when clients enter the picture. They can choose from a few layout options in floor plans, but as many as 10,000 surfacing, cabinet, flooring and other options. Which begs the question: How many options separate a custom home from a production home? Is 10,000 enough? Simonini's customers apparently feel it is.

Market Smarts

"If you think about it, 1/10th of 1 percent of the market is who we sell to," says Saint. "We've learned that we need to reach the influencers, the people who they ask when they go to buy a home. That means politicians, attorneys and previous customers."

Scott Teel, Simonini's marketing director, has a lot of material available every time he tries to turn the heads of those "influencers." The company has garnered about 60 awards in recent years, for design, business ethics, housing quality and other areas of excellence.

"The truth is that the most effective and essential marketing tool that I employ is the simple leverage of our reputation," Teel says. "People know our name." What does he use for "levers?" Anything he and marketing coordinator Sherie Lewis can dream up, including advertising, parties and grand openings, newsletters, a fancy website, and, of course, lots and lots of award entries.

Those tactics have paid off. The SBI sales and marketing staff have shared in that shower of awards, consistently raking in national and regional awards for everything from newsletters to model homes. Suffice it to say there's almost no aspect of Simonini's business that hasn't been applauded by one awards program or another.

Another incidental part of SBI's marketing, is the company's outreach in the community — a generosity that extends to local causes and beyond. For example, Killian and Simonini asked employees to pitch in after Hurricane Katrina (against their matching funds). And they have set up a $25,000 annual charity. Employees may ask that certain charities get a piece of that pie, or request their other matching donations from the top brass.

And unlike many builders, who tend to steer charitable funds only toward conservative groups, Simonini's generosity is non-partisan. Sure, there's a fund for the Boy Scouts — a perennial builder favorite, but there's also money going to social causes and progressive groups such as the Sierra Club and the Nature Conservancy. Balance. That's a word you'll hear again.

Human Capital

A lot of companies recite the "we're only as good as our people" jargon, but at Simonini, you actually see that philosophy in action. Every employee can voice an opinion, or make a suggestion for change.

 

The two guys at the top, Simonini and Killian, make no secret of their reliance on the talents of others.

"Alan and I have made a practice of always trying to hire people who are better at what they do than we are," notes Killian.

Equally important, those people stick around. Average retention is five years and growing. It's not for nothing that this company ranked among Professional Builder's "Top Companies to Work for in Residential Construction," for two years in a row.

"We want them to work here the rest of their lives, so they can ultimately retire in comfort," says Killian. "We know there are risks we all have to deal with, and we've chosen to be in an environment that supports them through their working lives.

"We don't have to answer to outside stockholders," Killian continues, "and that gives us more freedom in how we run our company. If we don't compensate our people well and give them the kind of incentives that help them, they're not going to want to stay with us."

Graydon Jackson, one of the newest builders at SBI, left Toll Brothers looking for more than just a job. He wanted his life back.

"I was working 70 or 75 hours a week, overseeing 35 homes, getting home at 8 o'clock," he says. They were burning me out. I get the sense that [Simonini] really understands that people have families."

And Jackson is a perfect example of what makes a Simonini employee special. A veteran builder at age 28, he also speaks fluent Spanish. That's a priceless skill to have on the job site, when 70 percent of construction crews are Hispanic.

Along with a generous pension profit sharing program and health benefits, SBI has another strength that no public builder can boast — a small enough staff that every employee knows the boss.

"Life is a balance, it's truly a balance," says Killian, waxing philosophic. "I love my leisure life, and I love business, but I expect to have a balance. These are all the things that go into making the character of people.

"We find that within a year, if you don't fit in with our team, the problem purges itself. Everybody pulls their own load here, though we help each other. That's what makes a great company."

 

Key Facts About Simonini Builders

Proj. Price Range (Homes): $500,000 to $4 million

Renovations: $125,000 and up

Avg. Sales Price: $900,000

Building Area: Charlotte, NC; Charleston, SC; Hilton Head, SC

Spec Homes: 60 percent of New Home Sales

New Homes: 98 Closings (2004)

Total Projects: 120 (2004)

Employees: 102

Total Annual Revenues (2004) Home Building: $85,270,000

Renovation: $2,747,000


 
From left, Bill Saint, Ray Killian, Jr., Phil Hughes and Alan Simonini

Bill Saint, CPA

Simonini Builders

Chief Financial Officer, Director

Bill earned his stripes in the home building business as a division controller for Centex. During his time there in the early 1990s, he managed operations for the construction of more than 300 homes per year. That experience, along with an accounting degree, led him to join SBI in 1994. Bill has implemented systems to organize, track and control the operations and activities of SBI on all levels — with an eye toward eliminating redundancy and waste. Bill also oversees neighborhood building activities as well as the marketing and advertising programs.

Ray A. Killian, Jr.

Simonini Builders

Chief Executive Officer, Owner-Director

Since 1994, when Ray bought half ownership of Simonini Builders, he has acted as a prudent, patient steward of the company's growth. An experienced developer and real estate broker, Ray knows when to take risks, and when to sit tight. During his 11-year partnership with Alan Simonini, SBI's scope and volume have risen dramatically. Ray has steered that hugely successful transformation, converting a family-run organization with $15 million in business into a nationally recognized company, generating revenues in excess of $100 million annually.

Phil Hughes

Simonini Builders

Chief Operating Officer, Director

Another hardened construction veteran, Phil Hughes left his job as a vice president of construction after 10 years with Centex to join SBI in 1997. His role now: directing mid-level project managers. Hughes also oversees the company's building materials company: Southeast Builder Supply. The company has recently divided management duties among the four top executives, and Phil now oversees the Charleston Division, Lowcountry Division, Renovations, Custom Homes and Southeast Builder Supply.

Alan C. Simonini

Simonini Builders

Chief Creative Officer, Owner-Director

Alan Simonini has a passion — some might say an obsession— with quality and customer satisfaction. Those traits have guided his hand as SBI's CCO and half owner. Under his watch, SBI has grown eightfold since 1994, now building between 75 and 100 homes per year. Along with his direction of construction quality and management, Alan also acts as the creative force behind SBI's complex home designs. He has kept quality and customer satisfaction at the forefront of every decision. As a result, SBI has won dozens of regional and national awards for design, planning, innovation and ethics.


Simonini Builders: A Retrospective

1973

Single-handed. Al Simonini (Alan Simonini's father) forms Simonini Builders, Inc. (SBI). His first projects: two homes in River Hills, N.C., a lakefront golf community on Lake Wylie.

1993

Fast forward. Now an experienced custom builder, Al Simonini and SBI average about 20 homes annually. SBI has earned a solid reputation for quality. They break ground at The Peninsula, an exclusive Crescent Resources Community.

1994

Perfect union. Alan Simonini joins his father's building company, Simonini Builders, purchasing 50 percent of the firm's shares. Ray Killian purchases the other 50 percent, and the two begin a close business partnership. As a first move, the two implement testing to find exactly the right employees to fit the company culture.

1995 1996

Doubling up. The company's production reaches about 40 homes per year, twice what it was in 1993. Killian and Simonini begin to retool their company systems to meet demand. SBI makes headlines for building the first spec home in Charlotte priced at more than $3 million.

1998 1999

Creating Communities. SBI moves into planning and building complete communities, starting with Connor Quay, a collection of 24 waterfront and waterview lots on Lake Norman. Next, they break ground on Myers Park City Homes, a national award winning community of 34 attached custom homes on Kings Drive in Charlotte.

2000

Golden Times. SBI begins operations in Charleston, building four homes there. The company also enters the upscale renovation market. Overall, SBI completes 50 homes, averaging $845,000 in price. Also this year, SBI becomes the first custom builder in the nation to win the National Housing Quality Award from the NAHB.

2001

Raking it in. Simonini continues to grow steadily each year, up to 60 projects per year, including about 12 major renovation jobs. They break ground on Heydon Hall, their most ambitious community yet, which will include more than 125 homes in South Charlotte.

2002

Labors of love. As the company's production tops 70 projects companywide, Simonini Builders ranks among the "101 Companies to Work for in the Residential Construction Industry" as

chosen by Professional Builder magazine.

2003

Overdrive. This year, SBI's completes 90 projects, a new high. The company also wins several local and regional awards for business ethics and customer satisfaction.

2004

High Times. Once more, SBI's growth reaches a new benchmark, at 115 projects, with an average price of $906,000. Also this year, the company once more ranks among the "50 Best Companies to Work For," according to April 2005 Professional Builder.

2005

Fine Tuning. This year, SBI expands into the Hilton Head, SC area. Their Heydon Hall community is named one of the Top 5 Single Family Communities in the Nation at the National Sales & Marketing Awards. And of course, SBI wins the mother of all home building awards —Professional Builder's 2006 Builder of the Year Award


 

Brooks Henderson, Builder

Hails From: Atlanta, Ga.

Experience: Henderson worked as a site superintendent for seven years in Charlotte, plus one year as a director of purchasing and estimating before joining SBI

Years with SBI: 2

Off-Duty Interests: Wakeboarding, snowskiing and whitewater rafting.


Graydon Jackson, Builder

 

Hails From: Sumter, SC

Experience: A graduate of Clemson University with a degree in Construction Science and Management, Jackson started building homes in Charlotte, NC in 1999, working for Toll Brothers and MR Homes before joining SBI this year.

Years with SBI: First Year

Off-Duty Interests: Woodworking, fishing and basketball.

Steve Augustine, Project Manager

 

Hails From: Philadelphia, Pa.

Experience: BS in business administration/marketing from the University of Pennsylvania, combined with 22 years in the residential construction business.

Years with SBI: 2 plus

Off-Duty Interests: Coaching youth sports


The Numbers Don't Lie

On the Level. When Alan Simonini says his aim is 100 percent customer satisfaction, he's not just talking tough. The company's satisfaction surveys bear him out. "In high-end one off custom building, 100 percent is achievable," says CFO Bill Saint. "In a community, we still aim for that, but 95 percent is what you'll probably get."

Stepping Stones. Since making the decision to grow the company, Simonini and Killian have managed the company's growth in a way that is organic rather than frantic. They know what their market will sustain, and carefully avoid missteps.


Behind the Scenes

"I FIND IT'S A LOT BETTER IF I REALLY UNDERSTAND THE BUILDING PROCESS [WHEN DEVELOPING SOFTWARE] — I'LL OFTEN GO TO A TEAM MEMBER OR A PERSON WHO'S IN THE OFFICE AND FIND OUT HOW THINGS REALLY WORK."

Julie Carothers, Chief Programmer

 

"WE NEVER HAVE A DUL L MOMENT IN THIS OFFICE. I TRY TO CREATE EYE-CATCHING AND OVER-THE-TOP MARKETING PRODUCTS THAT WILL DIFFERENTIATE SIMONINI FROM OTHER LOCAL — AND NATIONAL — BUILDERS."

Sherie Lewis, Marketing Coordinator

"MUCH OF OUR WORK HAS NOTHING TO DO WITH CLEVER MARKETING TECHNIQUES OR GIMMICKS. WE SIMPLY TELL PEOPLE THE TRUTH ABOUT HOW WE RUN OUR COMPANY, AND WHAT OUR GOALS ARE."

Scott Teel, Marketing Director


"I TRY TO RECOGNIZE INNOVATIVE WAYS THAT TECHNOLOGY CAN ASSIST OUR BUSINESS, AT THE SAME TIME CREATING A SYSTEMS ENVIRONMENT THAT IS CENTERED ON SERVING OUR CUSTOMERS' NEEDS."

Don Koster, "IT" Manager

 


The Sweet Spot

In keeping with Simonini's vision of building custom homes with production-level organization, Bob Pugh aims for perfection with SBI's many renovation projects.

"One thing you realize pretty quickly is that a $1.5 million house has less supervison than ten $150,000 dollar jobs," Pugh notes. "The mentality of a new home supervisor and a remodeler are totally different. We're not selling a finished product. We're selling a service," Pugh notes.

Since it's creation in 2000, SBI's renovation division has between 12 and 20 jobs underway at any time. The jobs tend to be larger renovations, often on homes that were built by SBI.

"We've found that jobs that come with an architect—with detailed drawings, priced over $500,000 is our sweet spot," Pugh says. "With our overhead, we're pretty efficient at that level, but our efficiency suffers once we drop below about $100,000."

Because his firm is part of SBI, Pugh says, maintaining a sterling reputation is essential—that means keeping job sites clean and organized, and constant communication with clients.


Bragging Rights

Whole-house Humidification

 

A common complaint among new home owners are unexpected gaps — in drywall, exposed beams and hardwood floors. By installing a humidification system, Simonini gets a twofold perk. First, they reduce callbacks by mitigating the rapid drying that often causes drywall pops and cracking of hardwood. Second, they improve the home's perceived quality and actual comfort level. Ultimately, the choice results in higher customer satisfaction.

BRAND: Aprilaire Model 700

Heavy Wallboard

Although not mandated by code except where fire ratings are required, SBI uses 5/8-inch drywall throughout every home. As a result, homes have fewer callbacks for nail pops and cracking, along with much better soundproofing than the more typical 1/2-inch drywall. But as Ray Killian points out, the heavier drywall also makes a home "feel" more solid — a critical detail in homes of this price range.

BRAND: USG

Monogrammed Housewrap?

Simonini goes to great lengths to "brand" their homes. Sometimes that branding even applies to the housewrap. They've developed good relationships with companies such as DuPont Tyvek by allowing the company to test new products on their spec homes. For example, project manager Steve Augustine is currently working the bugs out of a new radiant foil-type wrap Tyvek is developing.

BRAND: DuPont Tyvek


Super "Structure"

Bill Saint is a true believer in the power of software to make or break a business. Since 1994, he has been massaging and tweaking Simonini's proprietary management software — which they have dubbed "Structure."

"We started it from scratch," he says, "and we kept adding modules — change orders, warranty information, loan draws. We've invested about $200,000 in the system over the years — but we've more than reaped that in efficiency.

"We never duplicate lot numbers, or job numbers," Saint adds, "nor does accounting. Once a sales prospect's name and information is entered in the database, it never needs to be entered again—anywhere in the process."

All of Simonini's employees carry BlackBerry PDAs, primarily for communication (both voice and email) with the many far-flung operatives who work for the company. But it's Structure (left), the "back end" business management software, that gives the firm its competitive edge.

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