Want to learn the truth about custom home builders? Those custom home builders doing new builds and renovation projects?
Well, custom home builders are a more powerful industry sector than you might think. Learn from our latest research – read on.
In January 2021, Live Life Build commissioned some market research into the custom residential construction industry, and custom home builders.
We worked with an amazing company, Insights Exchange, to create a survey that was sent out and completed by hundreds of Australian builders.
We waited patiently in anticipation for the results to come in. And they did! And it’s fantastic to see what it tells us about our residential construction industry.
We’re really excited to (finally) be sharing the results of this market research with you.
In this blog, Amelia shares the key findings of our market research, why we did it, and what it means.
5. WHY WAS THIS RESEARCH IMPORTANT TO DO?
For some time, we’ve had a hunch that our sector of the industry – builders doing custom new builds and renovations – actually have greater spending power than volume builders.
However, because the volume companies are easier for brands and membership bodies to deal with directly (one company building thousands of homes per year, vs thousands of builders building two or three homes per year), the focus has always been on the volume side of the industry.
Our industry’s main membership bodies strongly represent the project home / volume builder part of the industry. The latest government incentives, which the industry membership bodies fought for, were far more focussed on the volume sector (as they were able to mobilise to meet customer timeline requirements far better than a custom builder).
So, we wanted to test our theory that our custom sector is a bigger contributor to our overall industry, and find out more for ourselves.
Plus, we knew we could find out some other really insightful information about how you, the custom builder, operate your business, and what your main challenges are.
The market research was a big investment, however, for us, it was an incredibly important one.
In Live Life Build we’re incredibly passionate about improving this industry. And part of that means testing our theories, and getting to know this industry in A LOT of detail, so we are better positioned to help those in it.
We wanted to ensure we really knew – not that we were simply acting on our assumptions having been in this industry collectively for over 45 years.
4. SO WHO ARE WE FOCUSSED ON – BOTH IN THIS RESEARCH AND IN LIVE LIFE BUILD?
Being in the industry ourselves, both Duayne and I have seen, and personally experienced, how intensive it is as a business owner to run a custom residential construction company.
Your family is usually involved. Your partner is often helping out – either in a dedicated way, or after hours (and squeezed around their own working or family lives).
You have everything on the line to make your building business work and succeed. It’s with you every waking minute. There really is no ‘off’ when it comes to owning your own building business, and even if you’ve got your business to the point of being able to take holidays away from it, it’s hard to switch off your brain from solving problems and looking for opportunities.
You probably started your building business to have some autonomy and flexibility in your working life.
However, running your own business can be all consuming. And when you wear all the hats, and don’t have systems to help you scale, then it can end up taking a lot of hours. And that can make it very difficult to balance with family life and personal time.
As a builder, you’re most likely a people pleaser. You really want your clients to love what you create for them, and to love working with you. Which means you usually go over and above to deliver their project (often to your own detriment or business profitability).
You’re easy going, but most likely will carry a lot of the stress and struggle yourself. And chances are, if your partner is also involved in your business, they’re very aware of how well (or poorly) it’s doing, and also carry the stress of that silently. We know of builder’s wives and partners who cry in the shower to hide their worry and fears, whilst putting on a brave face with the family and their builder.
Building businesses can break families, break people, and be hugely challenging businesses to operate – where so much feels at stake.
However, when they’re running well, they can be an amazing vehicle for personal fulfillment, lifestyle support and wealth growth for your family. And you’re ultimately building wealth for others too, as well as creating the places they raise their families.
It’s these builders that we help, and these builders that we wanted to ensure we knew really well through this market research. And it’s this part of the industry that we feel is a huge, and vastly underestimated, powerhouse.
3. SO WHAT DID WE FIND?
One of the key findings from our market research was this: Of those we researched, 70% identified as residential builders. And of that 70%, more than half (54%) are doing custom new homes and renovations.
Given that the value of the residential construction work completed in Australia in 2019 was $76 billion, this equates to $41 billion as custom projects: $6 billion more than the volume / project builder sector.
We also found that the average revenue for residential custom builder companies is $2.78 million per annum. However, more than half (54%) of those surveyed who identified as custom builders, have an annual revenue of $1 million. Our average was being pushed up by those who were doing $20M+ in our survey.
Over a third of the companies surveyed are only completing one or two custom residential builds per year. Core projects are new homes and renovations, with some of those surveyed doing smaller projects (decks, bathrooms, landscaping, pools) to bolster their revenue.
That’s a lot of builders with revenues on the small side, and very few projects completed each year.
2. UNTAPPED POTENTIAL WAITING FOR AN IMPROVEMENT IN BUSINESS SKILLS
The overall confirmation from those surveyed was that running a business is not the same as building. Three quarters of respondents strongly agreed that as builders we learn on the job, not in a classroom, but business is different.
And over two thirds of respondents strongly agreed that they wish they could learn more to run their business better, but never seem to have enough time.
When viewed in combination with how many builders are only doing one or two projects per year, with business revenues of $1 million or less, something really stood out to us.
It feels like, to us, that there is a HUGE untapped potential in the custom residential construction industry, with builders being limited to sub $1 million revenues through their own (lack of) business knowledge and support.
If we can unlock that potential, by helping builders know how to run their businesses better: imagine how much our sector of the industry would scale overall?
This really excites Duayne and I, because we know when we work with builders, and teach them how to know their numbers, how to systemise, how to better develop their processes and client relationships, then they’re able to scale. They’re able to grow their revenue, whilst protecting their profitability.
The volume sector of the industry generally keeps our lowest common denominator pretty low. In build quality, design quality and customer service quality.
Live Life Build is all about elevating the professionalism of the residential construction industry, so all can enjoy renovating and building and we can create great quality, sustainable homes for our clients.
If we, as the custom builder sector, can be delivering more projects per year, imagine how that can improve the industry overall? The quality of housing? The lifestyle of the homeowners who get to enjoy these custom solutions?
We know that many builders struggle to find time to work on themselves and their businesses. However, we know (first hand) that for those that do, the rewards are huge. Better projects, better businesses and better lifestyles.
1. SO WHAT DOES THIS ALL MEAN FOR YOU?
You know what? $41 billion dollars per year in expenditure is not to be sneezed at. As custom builders, you are a part of the industry that is, and can continue to be, a powerhouse.
Do you feel like the industry walks to the beat of the volume building companies’ drum? Do you feel like the top end of town often dictates the standards, the logistics, the status and the goals of the residential construction industry overall?
And do you feel like the brands and businesses you work with and support through what you do in your business, are more interested in what the volume builders are doing? And in taking care of them at the cost of fully servicing the custom residential sector?
Currently, according to our research, the custom residential sector has an annual value of $6 billion more than the volume / project builder sector.
Live Life Build is all about elevating this sector of the industry. Your sector. In giving you a voice, in helping you grow and thrive, and in driving change so that our sector of the industry is recognised and valued for the contribution it makes – rather than sidelined as a less important part of our overall industry.
Custom home builders can be the powerhouses of this industry.
You can have a much stronger voice, and collect together.
And together, we can then help move the industry to one of greater professionalism, and more enjoyment, for everyone involved.
We’d love to help you get in a better position to scale, whilst protecting your profitability and supporting you personally as well.
Let’s do this – let’s unlock the potential existing in our fantastic sector of the industry, and change the game for how homes are built and renovated in Australia and beyond.
So, here’s our 5, 4, 3, 2, 1 of the 5 Steps of Building Contract Preparation.
5. Deciding on what contract to use
4. Understand your contracts (or get legal advice)
3. Discuss your contract with your clients prior to signing
2. Other documents to go with your contract
1. Presenting your contract to your client
Live Life Build’s 6P Methodology unlocks the 6 ways to elevate your building business:
Want to learn how to be a better business owner? Learn the systems, marketing tools, mindset, and business skills you need in our group program and mastermind, ELEVATE. Learn more here.