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The profit averages in our graphs indicate a direct correlation between size and profitability. ThatÆs a myth the public builders try to pass off to investors. Nothing could be further from the truth. Keep in mind that these are averages.
Lower profit averages for smaller GIANTS show that as size declines, the number of unsophisticated business managers increases. Their poor results probably play the critical role in driving down the averages. But make no mistake, many builders in the Strivers category are well-managed, making margins that no public builder has achieved.
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Fortunately, we know more about some of the Strivers than just whatÆs on the GIANTS questionnaire they return each year. LetÆs start with DiYanni Homes in Reynoldsburg, Ohio, a Columbus suburb. DiYanni checks into the rankings at No. 325, down slightly from 319 last year. The firm closed 195 detached and attached homes in 2003 for $46.5 million in revenue. President Henry DiYanni wonÆt let us publish his margins but agreed to discuss the range. ôOur gross margins are usually in the 30%-and-up range,ö he says, ôand our net profit is always in double digits.ö
No. 362 Bigelow Homes in Aurora, Ill., rose one notch from a year ago on revenue of $38.1 million from 282 closings. ôYou can make money at any level of production,ö Perry Bigelow says. ôI can verify that from my benchmarking group.ö
Like DiYanni, Bigelow wonÆt specify his margins but allows that his gross exceeds 30%, and his net always is in double digits. ôWe have a niche and brand that weÆve worked hard on,ö he says. ôWe design and build communities that are environmentally and culturally sustainable. They promote human interaction, so as we get closer to build-out, our margins go up. We make better margins than the public builders.ö
Southern Homes of Polk County in Lakeland, Fla., closed 282 homes in 2003 for $35 million and moved up to No. 366 from 390. ôWe quit building specs, cut out buyer incentives and worked hard on construction scheduling to reduce build times,ö president Ed Laderer says. ôTightening our schedules reduced mistakes and eliminated callbacks. We reduced our number of supers because they now have fewer houses under construction at a time, and every job runs smoother.ö
His margins? Again, more than 30% for gross, double digits for net. And these three are not alone.
