How Small Businesses Can Compete with Larger Ones

Saying that volume builders have some advantages over their small-scale counterparts may be pointing out the obvious. Big builders are able to leverage their size to buy materials cheaply, execute elaborate marketing campaigns and pay for dedicated sales staffs.

But despite the perks, simply being a large corporation does not guarantee success in building or remodeling. In fact, small-scale builders can succeed in markets dominated by larger players if they carefully define their mission and emphasize the things they can do better than their larger counterparts. Here are three strategies that successful small-scale builders employ:

1. Buy differently
Large-volume builders don’t usually build houses; they build subdivisions. While plenty of homebuyers move happily into new homes surrounded by construction crews working on the adjacent lots, many would prefer to move into an established neighborhood.

Jeff Fish, president of Fish Construction NW Inc. in Portland, Ore., says his company builds about two dozen homes annually, almost all in existing neighborhoods in Portland. While the volume builders concentrate on land outside the city limits, Fish buys individual lots in existing neighborhoods, and then builds new homes to match the neighborhood’s character. He has realtors who are always on the lookout for properties he might develop. When the project is complete, the same realtors help him with the sale. He focuses on selling to buyers who value Portland’s vibrant urban culture and the ability to commute to work quickly.

“There aren’t too many big builders who want to work on the fringes like this, doing one or two or three houses at a location,” Fish says. “So my competition is with other companies that are about my size. We don’t really compete for the same buyer, either—the people who want to be in town are different from the ones who want to live in the suburbs.”

2. Personalize your product
George Schluter doesn’t mind the disadvantages that come from building only three to five houses per year in Kansas City, Mo. In fact, he figures his small business’s size works in his favor: He can devote personal attention to customers and make extensive design changes because he’s not building the same model over and over.

“[Larger] builders are just going to build the way they want to, but most smaller builders have the flexibility in their operation to meet the needs of their customers,” says Schluter, owner of GWS Homes in Kansas City and immediate past president of the Home Builder's Association of Greater Kansas City. “I’m not just asking, ‘Do you want hardwood or linoleum?’ It’s ‘Do you want to shift this wall over here so you get the extra closet that we talked about?’”

3. Focus on service
Small builders may not have large sales staffs. But that can be a positive for buyers since they get to deal directly with the builder.

Schluter, for instance, believes his job isn’t just to build a great house; it’s to make sure his customers get exactly what they’re looking for. He’ll listen to any suggestion and research new products that his customers mention. He’ll offer advice, and once he feels a customer is making an informed decision, he’ll do his best to accommodate almost any request.

“Customers come to me for advice and assurance that what they’re looking to do is smart and logical,” says Schluter. “I can sit there with them, one-on-one, and apply my 30 years of experience so they can reach a decision that they’re comfortable with.”

Likewise, Fish makes sure he’s on hand when a customer is ready to move in to a new home. He takes them on a walk-through, showing them how everything works. And when there’s an issue, he makes sure the job superintendent addresses it personally.

“We respond quickly,” says Fish. “We want customers to understand that, with us, they’re dealing with ownership one-on-one. That means your problem is going to get taken care of.”

Sure, smaller builders don’t have the big budgets or flashy marketing campaigns that some the bigger builders use. But they do have some competitive advantages that can be the foundation of a thriving business.