Start by Mapping Out Your Costs
No matter what level or levels your project planning requires, a good resource that will enable you to begin mapping out your project’s basic framework of projected costs and how they will be allocated is the NAHB Chart of Accounts. To download a free copy from the NAHB members-only Web site, click here, or request a copy by e-mailing NAHB’s Business Management Department by clicking here. With this in hand, you must now consider the direct costs likely to be associated with your project.
Software products can provide various levels of project planning sophistication.
- A relatively simple spreadsheet may suffice for planning and feasibility purposes.
- A budgeting system that incorporates actual bids and to-date numbers requires integration with an accounting system. Without the integration, users must manually re-enter data from a separate accounting system.
Stand Alone vs. Integrated Systems
The advantage of stand-alone products such as DealBuilder is their flexibility and relative simplicity. Users can set up as many project plans as needed, replicate them, expand or contract the cost centers or accounts, set up constants and formulas, and produce a summarized pro forma for interested parties like lenders and investors. A large, integrated system builds the project plan off the project database, charts of accounts, supporting schedules and company structure.
Integrated systems offer virtually limitless flexibility. Unfortunately, they are very expensive to license and maintain. A product like DealBuilder can be installed for as little as a couple of thousand dollars. A product like J.D. Edwards’ Project Management package can run as high as six figures.
Project planning should involve demographic analysis as well as project overhead budgeting, and cash flow and warranty reserve projection. “Industry average” costs of sales can be found in publications such as NAHB’s “Cost of Doing Business Study,” available through BuilderBooks.com. In addition, you need to nail down non-formula related factors like market potential, absorption and product pricing.
The More Data In, the More Accuracy Out
Good market research is vital for project planning, especially if you intend to build a different product or build in a different location or price range. Companies such as the Meyers’ Group, Metro/Study and Market Perspectives Group offer online subscribers detailed reports on market trends for most metropolitan areas of the U.S. These firms also track sales versus existing inventory for various price ranges. First American Real Estate, which profiles the resale market, is another potential resource for market research.
In addition, municipalities can furnish facts about future infrastructure for communities, confirming where growth is planned. Accessing information and services (electronic permitting, zoning requests, etc.) on municipal Web sites and on chamber of commerce sites can save you lots of time and trips to city hall.
Thinking through the due diligence steps required to get a project ready to build and estimating the associated costs and timing is crucial to project planning. Not surprisingly, that upfront work becomes more complex for projects involving land acquisition and development and/or phase development. Simple, stand-alone products like Microsoft© Project do a fine job of tracking due diligence tasks. However, Project is a generalized tool, not an industry-specific scheduling product. Primavera Schedule Project Planner, another stand-alone product, is more adapted to the construction industry.
Many back-office systems such as the True Line Homebuilder System, Timberline Office, Mark Systems Integrated Homebuilder Management System and Newstar Real Estate Management Suite offer budgeting and job costing capability for land development contracting. Because they’re completely integrated to purchasing, payables and general ledger functions, these systems can be effective stepping stones from stand-alone products.
Earlier Articles in This Series
To read, “Know Your Technology Needs Before You Invest,” Part 1 of this series, published April 14, click here.
To read, “Strategic Planning Software Can Help Focus Your Business Model,” Part 2 of this series, published April 21, click here.
Next: product design and development
Note: Various software products are mentioned throughout the tech talk series. The intent is not to recommend these products as being right for you, but to identify some fairly well-known players and to note a few new ones. My apologies to vendors who are not mentioned — the omission was not intentional.
Bill Allen is president of W.A. Allen Consulting and a member of NAHB’s Business Management & Information Technology Committee. His company, headquartered in Redmond, WA, provides information technology consulting services and process management assistance to the home building industry. Allen can be reached at 425-885-4489 or via e-mail. Or visit the W.A. Allen Consulting Web site.
Want more information about using technology in your business? Check out the online resources available from NAHB’s Business Management Department: “Tools for Running Your Business.” There are also articles about human resources, financial management, sales, production, customer service and other business-related topics. In addition, visit the NAHB Software Users Network Discussion Forum (SUN) to ask technology consultants and other builders what they think of various software packages and applications.
BuilderBooks.com also offers a variety of publications about strategic planning and business management. To view or purchase these publications online, click here.