We recently completed the site visits for the National Housing Quality Awards, which are based on the Malcolm Baldrige awards but specific to home builders. It's a program we co-sponsor with the NAHB Research Center, and we've been doing these awards for 15 years. After all that time, I think we can safely draw a few conclusions about the gold winners. They separate themselves from the rest by doing one thing no one else does: they benchmark themselves against other builders.
Benchmarking is a difficult process to establish. It is difficult to set up internally, and establishing a benchmarking program against external companies that also provides reliable, consistent data is extremely difficult. At best, the data you acquire is uncertain. At worst, it is misleading.
Professional Builder has recently established a new program in partnership with iLumen Financial Information Network that will make benchmarking much easier for builders. Called the Reed Construction Dashboard, this online program allows builders to quickly and efficiently upload financial data and compare it to other builders' metrics.
Let me address the biggest concern you have immediately. Will your financial data end up wandering around the ether for any builder, IRS agent or unscrupulous character to seize? No. The upload is protected, the data is stored anonymously and the information is offered in a completely blind format. It is secure, secure, secure.
The program works like this: you upload your trial balance and the program automatically provides you with analyses and reports, as well as industry benchmarks. Uploading is easy. After the initial setup, you can upload your information on a monthly basis in about two minutes. For builders with off-the-shelf accounting packages, the program does all the work. But even if you have a custom package, you can cut and paste your data (it just takes a bit longer).
What do you get? Access to dozens of key metrics and ratios. You can compare those to your previous data, providing easy and good trend information. More important, though, all those ratios and trends can be matched against your industry peers.
Want to know how your percentage cost of materials compares to the industry? Whether that is trending up or down? How about working capital? Current ratio? Line of credit? Revenue per employee? Gross margin?
Right now, there are hundreds of home builders using the site, allowing you to match your data against a pool that can be broken down by size and geographic region. Alongside your data ride industry analyses from experts and quick links to industry resources. That network of information, wrapped within the simple package of Reed Construction Dashboard, will give you new power at your fingertips.
One of the most exciting opportunities is what this community will be able to achieve as we grow the site. We'll add more key metrics beyond financial data. We'll create more peer groups with greater specificity. But right now, because so many builders already use this site, you already have the chance to benchmark against the industry easily and efficiently.
It is this kind of information package that will allow good builders to become better, strong builders to grow faster and competitive builders to hold an edge.