I learned a lot at this year's virtual EEBA Summit, but two things stand out. One is that sustainable, high performance homes, the homes EEBA has promoted for 38 years, are mainstream. Buyers at all price points expect them.
If you're a forward-thinking designer or builder, that's a great opportunity.
If you're new to the game, however, it's also a threat. The second point that became clear during the Summit is that many builders need to improve their business acumen if they want to take advantage of this opportunity and avoid being left behind.
The opportunity is the demand for homes that tread lightly on planet and climate, homes that are healthy, energy efficient and durable. My company, Thrive Home Builders, hears this demand all the time but as a healthy, high-performance builder we expect to. The Summit confirmed that more builders than ever are hearing it.
That shouldn't be a surprise—the motivating imperatives have never been more clear. Wildfires, pandemic-related lockdowns, and political violence are leading people to seek refuge. They want homes that are safe and economical to operate, that tread lightly on the external environment and offer a healthy indoor environment.
Most want traditional homes. Our newest customers include young people fleeing city centers for the stability of small-towns and suburbs, families with young children who need space for working, learning, playing and entertaining, and older people who don't want to be warehoused in unhealthy "independent living" facilities.
This makes today a great time to get on what EEBA calls The Path to Zero.
You probably know that the International Energy Conservation Code is slowly pushing all new construction down that path. What you may not know is that some cities have aggressively picked up the pace. Denver wants to accelerate the Net Zero carbon-reducing goals set by its Climate Action Plan from 2035 up to 2030. Builders here have 10 years to get ready. Other cities will follow.
Ten years isn't a long time. It's taken my company that long to figure out how to build these homes effectively and profitably.
In addition, big builders are already on the path. This year's EPA Indoor airPLUS leader is Fulton Homes, which will deliver over 1000 homes in 2020. Meritage Homes, the nation's ninth largest builder with 8000 per year, will build to Indoor airPLUS specs in all its divisions. Joel Abney of Woodside Homes, the 25th largest builder with 2100 per year, serves on the EEBA Board.
That brings me back to the second point. Big builders have the resources and sophistication to build healthy, Zero Energy Ready homes quickly and cost-effectively. Small and mid-size production builders who want to compete with these behemoths need to start gaining more skills now. That means learning better ways of building and better ways of doing business.
Thrive has been living in a preview of this. Denver has one of the largest concentrations of national builders of any city, and an October 5 CNBC story called us "one of the most competitive housing markets in America."
Despite stiff competition, we've grown our volume and our profits. We've done this by carving out a highly differentiated market niche centered around a three-legged brand we call "Efficient, Healthy and Local." Some of our experiences can serve as lessons for builders just starting down this path.
The first step to creating our brand was learning how to build healthy high-performance homes. All of our field managers are EEBA-certified and our VP of Operations, Bill Rectanus, has taken the training needed to become our in-house building science expert. (Bill will replace me in January as president of the EEBA Board.
But we would not have succeeded with technical skills alone. We also needed compelling architecture, operational efficiency, and productive labor. We needed good quality assurance and customer satisfaction. We needed sophisticated sales and marketing.
In other words, to succeed in this market we've had to become a formidable competitor. You need to do this, too.
Building a Better Business
For a long time, Thrive built great houses but had not yet built a great company. Our build times were too long, our customer satisfaction ho-hum, our budget variances excessive. Quality expressed as outstanding punch list items was middling at best. Our customer service was frustrating.
Increasing competition called for drastic action, so we launched a program of continual improvement. Over the course of several years we did the following:
- Wrote a one-page business plan to keep all Thrivers pulling the company in the same direction.
- Implemented Open Book Management to give everyone a stake in our success. When we hit our goals, everyone in the company participates in a simple, predetermined bonus plan.
- Adopted Lean Building practices to reduce waste and cost.
- Began surveying trade partners and started a vendor council. This helped us improve our trade satisfaction and productivity. (Feedback from the surveys and the council were eye opening: I thought we were better than we were.)
- Created a job completion checklist through our FTQ 360 Quality Assurance program. We're now more apt to get things right the first time and have reduced dry runs.
- Centralized our scheduling with Build Pro/Supply Pro software. This has improved our trade relations and build schedules.
- Streamlined and packaged our design center options. Customers now make more prompt decisions, which keeps jobs on track.
- Entered the DOE's Housing Innovation Awards several years on a row. The high bar for these awards forces us to constantly look for ways to improve our product.
- Entered the National Housing Quality Award (NHQ) process twice. The NHQ process includes a site visit and feedback on our business processes from successful builders. Implementing that feedback has helped us become better in a number of areas.
We've learned from these efforts that it's not enough to build great houses; if you want to be a great high-performance builder you also need to be a great business.
There has always been a tendency among high-performance builders to think "if we build it they will come." But the truth is that while customers want health and efficiency, they also want a home that feels like home. And they prefer to do business with a professionally managed builder who has great systems.
We're still working on improving our systems—our lot pipeline and our management systems could be better—but our improvement efforts have helped us create a durable brand that has withstood Denver's competitive onslaught.
Our experience is a preview of what all EEBA builders will have to do to succeed in coming years.
Benchmarking Your Progress
We didn't walk this path alone. We had support and encouragement at every step of the way from our peers in the EEBA community, and I don't think we would have been able to achieve the success we have without that support. That's why I got involved as a member of the Board of Directors.
Much of the support that Thrive and other builders have gotten has come from networking during and between events like the annual Summit. But while networking and relationship-building have always been key benefits of EEBA involvement, we realized that if we want EEBA to grow and help more builders we would need to formalize those benefits. We needed great systems of our own.
EEBA already offers the technical training you and your team need to build quality, high-performance homes. You can use this training to earn designations as a Site Supervisor, High Performance Building Professional or Zero Energy Building professional. We also offer training on how to sell high-performance homes.
We want to add more such offerings. The Board is talking about new seminars and designations on indoor air quality and high-performance home sales.
But the most exciting development is our new Builder Benchmark Group. Modeled after NAHB's Builder 20 clubs, the Builder Benchmark Group gives EEBA builders the chance to learn from one another and help one another build better businesses. The only prerequisites are that you're an EEBA member and that your homes meet ENERGY STAR performance levels.
The group has been meeting for six months and includes 10 builders so far. We'll probably cap it at 12-15, then add more groups as needed. Although we eventually hope to have a couple of two-day in-person meetings per year, one of them at the annual EEBA Summit, for now we're holding monthly virtual meetings that last about four hours and focus on one or two topics. The virtual meetings began as a stopgap while no one was traveling but have proven extremely effective. We intend to continue them.
Group facilitator George Casey does a great job making sure everyone gets value from the meetings. He helps identify the challenges members of the group are grappling with and helps us address those challenges.
The frequent meetings have let us take deep dives into a range of business topics. We've discussed how to deal with a bottled-up supply chain. We've learned how to use Return on Assets to gauge true profitability, and how to improve our scores on that metric.
We've talked about after-sale service as an additional profit center and as a way to keep customers for life. The car business is a good model for this: all else being equal, the dealership with the best service department will enjoy more loyal customers than the competition. A couple of the builders in the group are now looking at implementing this model.
Sales and marketing have also been on the agenda. For instance, we all realize that indoor air quality is more important than ever to homebuyers, so we have discussed what sales and marketing messages are most effective at communicating the health message.
To facilitate learning, EEBA's Builder Benchmark Group includes large, mid-sized and small production builders. Smaller builders learn from the sophistication of the big guys, while the big builders learn from the small companies' entrepreneurial cultures. The attitude among everyone in the group is that they want to raise the bar not just for their company, but for the industry as a whole.
The point of all this, and the Summit’s big takeaway, is that the high-performance building business has matured. We've come of age. That's why I titled this article "The End of The Beginning."
I am passionate about EEBA because of the learning and resources my company has gained and the relationships we have built with the best people in our industry. This has provided us with a foundation on which to build our homes, our business, and our brand.
I want other building professionals to share in these benefits and urge anyone who designs or builds—or wants to design or build—high performance homes to get involved. Become a member. Take a class. Participate in a webinar. Earn a designation. Join the EEBA Builder Benchmark Group. Doing so will make your company stronger, more flexible, and more resilient.
EEBA members are the vanguard of a changing industry. We have broken the code on how to build for the health of our customers, our planet and ourselves. And we're committed to becoming better businesses. We're not alarmed by the growing competition. After all, what does being a leader mean if no one follows?
The market has come to us. The world needs us. This is our time. Join us.
Gene Myers is CEO of Thrive Home Builders in Denver and President of the EEBA Board of Directors.