With interest rates and inflation both on the rise, many of us have predicted a contraction in new home construction. Well, it’s happening. According to the US Department of Commerce, 12.7% fewer new homes were sold in July than in June, and 8.1% fewer in June than in May. It’s not exactly a “crash,” but it’s a slowdown.
With fewer new-home sales, many modular factories—startups as well as those owned by established companies—will be deciding whether or not to shut their doors. That’s not because of poor management or inadequate capital, but because their business plan doesn’t fit the changing landscape.
Like all changes, however, this one presents an opportunity. Those troubled factories might find a way to stay in business by embracing that opportunity.
Residential modular companies have traditionally built single-family and multifamily housing. But the past decade has seen an industry shift towards big projects: multi-story affordable housing complexes, hotels and apartments. This shift has been driven by investors who are turning to modular because of the construction labor shortage.
Modular companies who want to thrive in the coming years should take a serious look at the big project market.
Of course, big projects require a factory to change its production, sales and business practices, as well as its customer base. To make sure those changes are the best ones for the company, leadership needs to ask what part of the project market will be easiest and most profitable for them to embrace. That means taking a hard look at the company’s strengths and weaknesses.
Listing what your factory does well isn’t hard, but admitting what your factory doesn’t do so well is. There are probably some shortcomings that you don’t want to admit to outsiders, or even to yourself. Without a full list of both strengths and weaknesses, however, you won’t be able to choose the best direction for the company.
Start by having internal conversations with all members of your business network, including your builders and investors. The things they need today, and in the future, may actually be news to you.
Also, encourage everyone in your company to help identify external threats and opportunities. This is healthy paranoia and can save an established company that has always owned its market but is now facing real competition.
To gather the needed information, you need to spend some time reading industry journals, attending conferences and talking with customers and investors. These conversations may reveal competition you didn’t know you had—if another company has a new idea or product, you can bet your bottom dollar they will approach the people in your network.
When looking at threats and opportunities, try not to get distracted by the small stuff; instead, figure out which ones require action. If and when you pinpoint a significant threat, it’s time to sit down with your employees and business partners to talk strategy.
Once you and your team decide what strategies to implement, you need to get employees on board. Talk to each department head personally and listen to his or her input and suggestions before putting your strategy into motion. Generating support throughout the company will make you stronger and better able to fend off competitors.
Remember also that the need to evaluate threats and opportunities, and to make the changes needed to respond to them, will be ongoing. This isn’t 1990. The pace of change in today’s modular industry is Darwinian, with losers being forced to close their doors because they couldn’t figure out what they needed to do to stay competitive.
The bottom line is that you have to constantly work to adapt and innovate. The modular industry is changing and being one of the last kids on the block doing it the same way you’ve done it for decades just won’t work anymore.
