Monday, October 6, 2014
20 Clubs Annual Financials Analysis Shows Big Gains for Members
One of the biggest benefits of a NAHB 20 Club membership is the annual company-to-company financial comparisons. The analyses commonly show that most builders who join a
20 Club double their net profits by their third year of membership. This most recent year was no different.
Kim Bailey, NAHB executive director of networking programs, said that the Overall Financial Analysis, which is conducted exclusively for 20 Club members each year, showed that the top 10% of production builders made 24.1% gross profits, the top 10% of custom home builders made 20.5% gross profits and the top 25% of remodelers made 38% gross profits.
In broad comparison, three years ago, single-family builders across the industry made 15.3% gross profits, while remodelers made 26.8%, according to the NAHB Cost of Doing Business Study. This most recent survey was conducted in 2012 and based on income statements and balance sheets for fiscal 2011. The study is conducted every two years.
“As a group, the members of the 20 Clubs are back to profitability,” said Builder 20 Club member Chris Nelson, of Nelson Construction located in Farmington, Conn. “We’re not quite back to pre-recession highs, but we’re operating very well now.”
Nelson, who has been a member of Club 3, “The Saws,” for nearly 14 years and a member of NAHB since 1991, said that his participation in the 20 Clubs has been invaluable to the growth of his business.
As a young builder, the club helped him by simply exposing him to what other builders were doing to become and remain profitable.
“It challenged me to look deeper and harder for places where we could be more efficient,” he said. “And by doing so, we increased our margins significantly in the first few years.”
Being a member also helped him develop critical business skills, like managing his contracts better, finding efficiencies in general administrative overhead, and refining sales, purchasing and scheduling processes, which allowed him to stay out of trouble and manage the market downturn in a fairly organized way.
Each time he meets with his club members, he comes away with a number of ideas he wants to try and/or refine for his own business. For instance, learning how to track variances especially helped boost his company’s return on investment, he said.
“By just knowing how to track variances, we can react. Once we discover and learn why we have variances, we can fix things before we repeat the same mistake three and four times,” he said.
Nelson said there’s no question that the 20 Clubs has helped his company grow and prosper. Without it, he says, he might still be trying—and struggling—to figure things out on his own.
To learn more about how you can become a member, visit nahb.org/20clubs today.