Don't let your ego get in the way of cost savings

November 11, 2011

Talking to builders today about improving the cost and efficiency can be an interesting proposition. When the topic is directed to managing a better commodity price, 6 out of 10 builders will respond as follows.” We are at the top of the food chain in market share in the areas we build and consequently have the leverage to obtain bottom prices from every sub and vendor in the marketplace” If I ask how they know, there response is consistent,” we just know”

Another response for 2 of the 10 builders regarding best pricing is “ I am sure we have beaten the sub down to a point that even if there was more money to be saved, I would be concerned about putting the sub out of business.”

The 2 builders that remain from my example of 10 are always interested in listening to opportunities to shave cost without destroying the quality image of their brand.

For the 8 builders of 10 in this example who conclude for one reason or another that the exercise of exploring opportunities to reduce cost isn’t for them either because their ego’s say they have already driven that number as low as possible or the sub has no more room to move or disaster will strike, I couldn’t disagree more.

Sure we want to partner with our subs and vendors. We want everyone involved in our process of building homes to feel as though they are making a living. What I haven’t told you is when builders do elect to explore the alternatives, many find what they thought was the best pricing, will actually pick up 4% to 8% in addition. I see it happening every week.  

Don’t let your ego or your purchasing director keep you from really understanding the real numbers. There are a handful of builder clubs and partnerships I work with that offer the builder a real look at actual commodity and national vendor pricing at its base level. Use them.

Call me for more information.


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