SALES PACE CAN MAKE OR BREAK A PROJECT
Property developers don’t always have all the cash they need to finance a development. So they borrow. Then, the longer it takes to sell their properties, the more it costs the developer in interest on outstanding debt. Which eats into hard earned profit. So, cash flow is critically important to the success of a property development, which is why sales pace can make or break a project.
“It’s really important to sell at your budgeted ‘Pace’
if you are to achieve your profit goals.”
Easier said than done. As with promotions, fast sales pace depends on getting the foundations right:
LAYING THE FOUNDATIONS
- Is your development site in the right Place?
- Do you have a detailed profile on who you Ideal Customer is – i.e. the People who will come and buy your properties off you?
- Does your Market Positioning give you stand out from your competitors?
- Have you designed your property Product to take into account the above three factors?
- Does your Pricing take into account a host of other value components other than just size, quality and local competition?
- Do you have a carefully considered direct response marketing style Promotions plan in place?
With all of the above in place there’s a very good chance your sales will fly. If you’re a belt and braces sort then here are some other tips and tricks to further minimise risk:
THE POWER OF PRODUCT & PRICING
We’ve already blogged on these subjects (click the links above under “Laying The Foundations”), but on a big development deciding the right Property Mix (family home : townhouse : apartment ratio) and Bedroom Mix (1-bed : 2-bed : 3-bed : 4-bed ratio) for your target market is critical to selling at pace. It’s also good practice to maintain good inventory in every construction or sales phase if you want to maintain sales pace and finish with a flurry!
Bear in mind that although your basic target audience stays the same throughout a development, its behaviour and attitude to what you are doing will change as you go through your Product Life Cycle. Make sure that your sales messages keep up to these refinements.
The right salespeople come full of beans – like Energiser Bunnies. But they need to be properly incentivised. In my experience, onsite sales teams work best if they are on a team commission i.e. the whole team benefits each time there is a sale. The amount of commission each individual gets can vary. But if you only reward the sales person that made the sale, the team will soon pull itself apart. It’s different with offsite agents and brokers, where individual commissions are the norm and work well.
The following checklist will help the sales team perform:
Ensure that leads passed on to the sales team are properly qualified, or you will waste their time and lose their interest
Keep a steady flow of qualified leads coming with a strong lead generation and lead nurturing campaign
Give the sales team a theatre from which to perform: beautifully dressed show properties, a private and comfortable closing area and some great presentation tools
Make the sales process as simple and easy as possible
Provide the sales team with tools to enable them to follow-up prospects and maintain interest
Help the sales team get some commitment from people when they view: ideally a holding deposit, but, at the very least; name, email address and phone number, if you don’t have it already.
DATABASE / CRM SYSTEM / EMAIL MARKETING SOFTWARE
Some developers just keep details of prospects that visit their site on a spreadsheet. This misses out on some cool tools and opportunities.
For example, Customer Relationship Management software (CRM) not only helps you capture customer data, but also to track activity by prospect. If this is then integrated with an email marketing tool, you have a way of nurturing leads to prospects, to viewings to sales. A good CRM will help you with record all activity you have with a prospect, analyse them, segment them by price band, product interest etc, report on them, and so on.
If you integrate your CRM with email marketing software, you can set up fully automated workflows that send prospects special offers, viewing visit invitations, construction updates and so on, without you lifting a finger (once it’s set up!).
What CRM and email markertng software are you working with and have you trained your staff to use it properly?
CREATING SCARCITY & URGENCY
One way of maximising sales pace is through Phasing, which I mentioned in an earlier blog about Pricing. If you launch all of your properties at once you create a lot of choices for the buyer. Then there are so many options that they cannot make a decision. Also, because there is an abundance of property the natural reaction is to procrastinate. However, launching in smaller phases creates scarcity and gives you more control over budgets. It helps buyers to focus. It’s amazing how the phrase “We only have one of those left” can concentrate the mind!
- “We only have one 2-bed townhouse with a double size balcony”
- “We only have one west-facing penthouse in Phase 1”
- “We only have one 4-bed family home with a mountain view”
- “That’s the only end of terrace left in this phase”
Urgency messages should be at the heart of your promotion campaigns, providing they are authentic. You may think that words and phrases like “now”, “today”, “first-come-first-served”, and time-related offers are corny or old hat. But they are effective, but only if genuine and adhered to.
LAUNCH TIMING & SEASONALITY
The big classical composers knew something about how to get an audience’s attention. Many of their compositions would strike up the whole orchestra for that first big opening note. Are all your marketing instruments ready for you to play on Day 1 of your marketing campaign? If so, you should hit the ground running and gather momentum fast? Also, be sure to launch at the right time of year – for example, the run up to Christmas is to be avoided in the UK, but as soon as the New Year is behind us, the real estate buying season begins.
A good Project Manager is worth their weight in gold. Keeping your build programme on track through skilful Project Management has so many benefits. Development Profit and Cash Flow are the obvious financial benefits, but delivering on time to happy customers helps build strong testimonials, case studies and word of mouth in your marketing, which will help you accelerate towards to the end of your sales programme rather than running out of steam.
Construction and Sales Pace should match
Your architect and your marketing team should work hand in hand to ensure that construction phases and sales phases match each other for speed. If you treat them separately you will either build ahead of sales or sell ahead of construction – either way pace and cash flow will be affected badly.
Another way of increasing sales pace is by increasing construction pace. Let me explain how. I was involved in the business planning of a project in the UK selling retirement village homes. Originally we were going to build traditionally, but we then investigated using panelised off-site manufacturing.
The process involves manufacturing the property off-site in panels, bringing these to site and assembling them. It does away with most of the wet services involved in traditional construction. So the construction time is dramatically reduced. Trades people like “brickies” are in high demand and low supply. So are bricks! That often slows developments down too. We found that using panelised off-site manufacturing reduced the build time for each property from six months to 10 weeks. From a sales perspective, it meant that a 10% deposit could be taken in January and the completion balance collected in March, rather than June. This was done with no reduction in construction quality or specifications. With the advances in modular and panelised off-site manufacturing these days, it is definitely worth considering.
Above all though, you need to commit to construction. If your construction site is at a stand still when prospects come to view they will wonder why. Why should the buyer commit to buying if you aren’t committed to constructing? Before you start your sales programme, start construction. Only commit to a construction phase that you can afford to finish. Ensure each construction phase is stand alone. Then don’t stop construction until the development phase is complete. If you are not in a position to do this, don’t start selling your development or development phase. Simples.
If your property is “key-ready”, ignore this bit. You will go through the normal buying process: offer, acceptance, exchange, completion. But, if you are selling “off-plan” at no point should you ask buyers to invest in your development project if there is a risk they will lose their investment. It’s not illegal, most of the time, but, to my mind, it is immoral and unethical. Buyers are neither shareholders nor bankers. In other words, if you take a holding deposit, make sure it is refundable and held in an escrow account. If you take stage payments, these should also go into escrow, so that if needs be you can pay them back. By all means borrow against these payments to support your cashflow, but don’t rely on them to finance your project. Or get a construction or completion guarantee in place – whatever protects the buyer.
Finally, planning your Sales Forecast (in terms of Income and Cost of Sales) and your Marketing Expense Budget, and then monitoring your performance against these, will enable you to fine tune your marketing programme once your development is underway. In this way, your marketing will become more and more effective as you learn which initiatives are working best. Keeping Sales Pace moving along will help you move from ‘Cash Poor’ at the beginning of your project to ‘Cash Rich’ long before the end of it.