My client Eva is the Head of Operations for a homebuilder that’s in the early stages of its EOS® journey. She’s a terrific leader on a terrific team, and she recently demonstrated what can happen when you start reporting a key metric weekly instead of monthly.
Eva’s company sells most of its homes “pre-construction.” They invite their customer to select a floorplan and choose finishes, appliances and other upgrades. Then they agree on a price, sign a contract and build the home.
One of the numbers they track is “Margin at Acceptance,” which is the projected gross margin at the time they sign the contract. It comes from making sure that construction costs have been estimated accurately and that the home has been fully priced to cover them. It’s a standard industry metric that homebuilders typically include in their monthly reporting package.
Hitting this number is critical to profit because variances always occur during construction. Life being what it is, those variances almost always involve costs going up, not down. There has to be sufficient margin in the home when the customer agrees to buy it because if there isn’t, the company’s odds of making it up during construction are pretty close to zero.
This number is critical, and Eva is really strong performer—someone you’d want on your team in a heartbeat. And yet she frequently missed her goal.
Why? Because like most department heads she has a very big job. She’s accountable for all aspects of getting her company’s homes designed and built. In addition to estimating costs and setting prices, she also manages architecture, design, scheduling, construction, repairs and so on.
The reality is that as important as “Margin at Acceptance” is, when she reported it monthly, it sometimes got a little lost in the weeds. The company sells 5-6 homes a week, so if she priced a home low at the start of the month, subconsciously she felt like she had 15-20 chances to make it up. But often, she didn’t.
When Eva’s company started implementing EOS®, they put this key number on their Scorecard and started reporting it in their weekly Level-10TM meeting. With that small adjustment, things changed. All of a sudden, every single sale became visible, and no underpriced contract could hide. There’s no more “I’ll make it up at the end of the month.” This has helped Eva pull pricing and margin out of the weeds, make sure she and her team focus a little more attention on it, and be as accountable as she wants to be.
The results? Eva missed her “Margin at Acceptance” goal for 3 of the first 4 weeks the team used its Scorecard. After seeing the weekly trend and realizing that she couldn’t let any contract slide, she has hit her number every single week since.
If you think you’re hearing the sound of cha-CHING in the background, you’d be right. Because every time that number goes from red to green, the cash register rings. This is mostly about pricing, so every incremental dollar drops straight to the bottom line.
This is what Traction looks like—implementing simple, practical tools to help you and your people stay focused on the handful of things that matter most and make sure those things are getting done. If you’d like more of that in your business, let us know. We’re here to help.
