A key component of a company's business plan is the sales and marketing plan, which describes how the company will market and sell its homes. This section should include the following components:
Critical to a builder's success is an understanding of its market. Ask the following questions when performing an economic analysis of your marketplace:
Identifying your customers is a necessary step in choosing your product line and the features and options to include in your homes. Analyze your past customers. Assess homes closed over the past several years and identify who your customers are, looking at things like what they do for a living, average household income, age and family make-up. Examine the profitability of your homes by these criteria. You may be surprised to see some trends that help you identify your best customers.
Another critical area is to understand how many potential buyers are in your marketplace. Analyze basic census data, which is readily available through www.census.org .
Understanding how your homes fit your customers and potential buyers in your marketplace can by done by answering the following questions:
Do you know as much about your competitor as they know about you? How often are you shopping your competition? Knowing your competition will give you an edge when it comes to pricing, marketing and sales. Take the time to analyze all of your competitors and ask the following questions for each:
In addition to understanding competitors building new homes, it is also important to understand the resale market. How many resale homes are on the market within your price range and how many days are they on the market? Are the listing and closing prices the same, less or more on resales? It is worth the effort to compare county records with Multiple Listing Service (MLS) information?
Do you know where your customers are coming from? Do you know how many prospects you had last year? Do you know where your leads came from? It is important to understand the answers to these questions so you can analyze your sales-to-leads ratio by advertising/marketing source. Divide total sales by total leads to determine this ratio. For example, 5 sales divided by 100 leads results in a 5% conversion ratio. Once you know this number, it will help you to develop a marketing plan that will get you the best "bang for the buck." Questions you should ask in developing the lead generation portion of your sales and marketing plan include:
What do you build? What is your justification for building each type of product (e.g., presales, specs, remodeling, etc.)? How do you price your homes? Where do you build and why did you choose these sites? Do you plan on offering any new plan types? If so, when do you plan on offering them?
List all the communities/subdivisions where you are currently building and are committed to build in the future. For each community, supply the following information:
With this and all of the other information within your sales and marketing analysis, it is now time to develop your sales budget. When developing your sales budget, make sure to consider production capacity, home site availability and even flow-process timing. Your sales budget should identify the number of homes that you plan to sell by month, by community.
Next installment: Production Plan