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54 Balancing Production Capacity and Sales - Alan Trellis

Balancing Production Capacity and Sales - Alan Trellis

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Production by: Josh Williamson and KT Maschler 

Editing by: KT Maschler 

This week on the Home Builder Digital Marketing Podcast, Greg and Kevin sat down with Al Trellis, co-founder of Home Builders Network. Not only does Al have 40 years of experience as a custom home builder and consultant, but he has a secret talent and love for poetry. During this episode, they discuss the philosophy of balancing production capacity and sales in a shifting marketplace. Al is incredibly insightful with a unique viewpoint. You don't want to miss this episode.

Home Builders Network provides management consulting, marketing, residential design, and land planning for home builders throughout the United States and Canada. Collectively, their clients build 3,000 homes per year, for a sales value of $1.2 billion. Six of their clients have been awarded the prestigious “America’s Best Builder” award through the National Association of Home Builders (NAHB).  

Working with Design Basics, the leading home plan service for builders, HBN created the Neighborhood in a Box series of house plans. The series offers an entire community of compatible plans for builders, including multiple elevations. HBN has seven series of plans currently available through Design Basics in addition to creating approximately 100 custom plans a year directly for builder clients.  

Show Notes

Guest Links:


References:


We have a favor to ask; if you enjoy the podcast, please take a minute to rate it on iTunes, Spotify, or wherever you listen to the show. A quick rating and short review help others discover the podcast.

Production by: Josh Williamson and KT Maschler 

Editing by: KT Maschler 

Transcript

Greg Bray:  [00:00:00]Hello everybody and welcome to today's episode of the Homebuilder Digital Marketing Podcast. I'm Greg Bray with Blue Tangerine 

Kevin Weitzel: and I'm Kevin Weitzel with Outhouse. 

Greg Bray: And we are excited today to welcome to the show Al Trellis, the president at Home Builders Network. Welcome Alan. Thanks for joining us.

Al Trellis: My pleasure. 

Greg Bray: So Al for those folks who have not been around very long and don't know who you are. Cause I think, I we all do, but, there may be a couple out there. Why don't you give us that introduction? Tell us just a little bit about yourself and some of the things you've been doing. 

[00:01:00]

Al Trellis: So I have been fascinated by houses ever since I was a young child. I grew up in New York, while Long Island was being built and my dad who was a working man, would take us every weekend to look at houses. By the way they, if there was that day, it was 12,990 for a new home. And we would look at the models and walk around and I was fascinated and we did that almost every month.

For years, we never bought one. By the way, my father only owned one house in his life in Buffalo, New York, which he sold when we moved to New York City. And so I looked at those houses, I became a love, love of houses. And then I was in the army and the Army Corps of Engineers after I had a degree in civil engineering.

I met my partner there actually, we were lieutenants together and I decided afterwards, I would like to go into home building. I had several offers to go to work for general contractors, including Peter Kiewit, very large. GC. And instead, I went to work for the National [00:02:00] Association of Home Builders.

And from there I became a builder. I was an okay builder. I wasn't a great builder because I was a customed builder. Didn't really understand the industry that well being in a custom builder means you have to listen to a bunch of baloney from people who don't really know what they want or what they need.

So this is what I've tried to help many of my custom builders become production builders or semi production builders. So in the late 

nineties, I began to do consulting, speaking, writing. I really love that. And pretty soon it became a full-time gig and we stopped our home building operations about 30 years ago.

Then over the years, the speaking turned into more and more consulting and then that turned into ownership of other home building companies. So today what we do is we consult for 42 builders across North America. Where we have ownership stakes, I think in five or six home building companies.  We are partners in about eight or nine land developments across the United States. [00:03:00] And then we own another company together with Mollie Elkman, from Group Two Marketing called Values That Matters, which is a private plan portfolio service that we offer to builders on an exclusive geographic basis. So that's a long answer to a quick question. But that's what we do. 

Kevin Weitzel: So Al that's the business side of Al what's the personal side of Al? Can you give us something that nobody knows about you?

Al Trellis: I write poetry 

Kevin Weitzel: really?

Al Trellis:  And if I could find a music partner, I would, a lot of my poetry would be really good song lyrics.

I've had it assessed by some professional poets who told me that I actually have talent, but it will probably be talent that's never fully utilized because I haven't been able to find the right music partner. But if anybody hears this, who's a musician, let's talk because my goal is to have at least one song recorded and published someday.

Kevin Weitzel: That's fantastic. 

Greg Bray: Yeah, that's really cool. Do you have any particular [00:04:00] themes that recur in your poetry or is it kind of all over the place? 

Al Trellis: Mostly they're about life and fate and karma and how people deal with things? And some of them are funny. Some of them are sad, some of them are all about truisms. I mean, one of the books that we wrote, I've written five or six books, one of the books I wrote is called The Road to Success is Always Under Construction. That's sort of a life guide. I wrote that with a fellow who used to be our partner. He's still a little minority party, but he's retired, Paul Sharp.

So we have a book on that. It's kind of, we call it the 20 laws of success. And so I think those things impact my view of the world. I'm not cynical. I think I'm pragmatic. And so I actually wanted to write a broadway play, but that's another whole conversation. So, and we love to travel.

My wife and I had been on 54 cruises to 72 countries and I've been to every state. My dad loved to travel. My dad died young. My dad died when he was 52. So I want to travel and do as [00:05:00] much as I can while I'm still here. Life is fleeting. The first song I ever wrote was about that.

It's just all about how time in the end is really the ultimate enemy, right? That first poem was called When Love is Gone. You know that it's not really commercially viable when it uses the word bereft.

Greg Bray: I'm trying to think of all the things that rhyme with bereft 

Al Trellis: Started with, When Love is gone and the heart is bereft, what can remain when nothing is left. Remember promises of a time gone by, a murmur and I love you a whispered reply. The carefully planned evenings that went awry, the lingering kiss, the trembling sigh, the little things that seem so small, suddenly you remember them all. They flood your mind at a tide of grief. That love is so frail and life is so brief. So that was my first poem I ever wrote.

Greg Bray: That's beautiful. 

Kevin Weitzel: And because people will be listening to this podcast. We can pay you your royalties. Oh, you know, a penny, a lesson.

Al Trellis: a penny, a lesson, and then you'll listen.

Greg Bray: But, they don't pay us. Kevin. [00:06:00] We can give them 1%. We can do that 

Al Trellis: by the way, my partner and I are big believers in owning a little bit of a lot. Yeah. There you go. You know, when I tell you that we're we're partners in seven or eight home-building companies, I mean the most we've ever owned at any one home-building company was 20%.

You know, the largest stake I have in any one company now is 12%, but we did own and put a group together and we bought a good size home company and we sold it last year and did really well. So that was interesting. Cause you bought it, I tried to put some of my theories and practice to see if I could build it up and sell it, and we did.

I've helped two of my other clients sell their home building companies. One of which we had a little microscopic 2% interesting. So, I like to, yeah. I like to commit to my involvement. I'm prepared to put my money, my time up with my partners [00:07:00] to prove that my ideas are valid.

Greg Bray: So tell us a little bit more than about how home builders network actually works. You described consulting, you described some partnerships. If somebody is trying to really get a grasp around what it is that you do in these partnerships and what do you consult about tell us a little more detail there?

Al Trellis: So we do both strategic and tactical consulting. And we can talk a little bit about what the difference is. I only work with companies up to a certain size where I have access to the principals. I'm certainly prepared to work with other people on the staff, but if I can't talk to the principal, if I can't get on the phone and some of my clients, I talk to him six times a week and I can't influence their thinking, I don't want to.

I'm not interested because life's too short for me. I don't want to take people's money if they're not going to do or consider the things that we talk about. I don't think with some of the big corporations you can't get that you just can't get that access. And [00:08:00] we've done, we've done consulting work for major corporate national corporations, and I've always had access to the senior leadership.

If I can't get senior leadership access, I don't want to do the work. 

So the things that, we think that we have the most expertise in our product development land planning the integrated approach to the product, how you create the land plan and the product to go together. Oh, I consider myself to be an expert on the creation of product lineups.

I've written extensively about lineups and one of the services that we provide for builders. Is we help them create the right lineups for their neighborhoods and or if they're on your lot builders for their different kinds of lines, I'm engaged in a project like that right now, helping to build it, put three lines together.

We also designed plans for builders and or help them fill their lineup with plans from our existing portfolio. Kevin would know a lot about that. He's seen we own the copyrights to 700 plans. And in the Values That [00:09:00] Matter collection, we have over 60 unique plans with hundreds of options.

And then, I consider the other two things that I'm the most knowledgeable about and like to talk about the most are spec houses, which I refer to as inventory. But I use the phrase spec houses for those builders who like to use that phrase and pricing. I consider myself to be one of the leaders in our industry.

The intellectual aspects of properly pricing your product offering. So those are the things that I specialize in. If you want advice about quality, you know, quality and customer service call Carol Smith, if you want to know about different things, I refer you to different people, but we're an unusual consultant because we really do understand all 15 aspects of a home building company.

One of my papers that I wrote talks about the 15 functions of a home building company. I understand all 15, I typically only get involved in about eight to 10 or 12 of them. There's three or four or five of them that I'm not an accountant. I understand accounting. I understand [00:10:00] finance I'll help my builders go get a $10 million line and help them negotiate the terms of that line.

But I don't want to be their CFO. And I don't want to be their warranty manager. I definitely don't want to be their warranty manager. So on the sales side, I often work together with other consultants who are sales consulting experts, but I consider myself a generalist who really understands home-building and I'm also the personal coach to many of my builders.

If I told you the personal things that my builders was telling me, you wouldn't be, but I'll never tell you,so you can't know. You know, that a lot of builders mid-sized builders. They don't have anybody to talk to about their problems. You don't want to go back and you don't really necessarily want to tell all your problems to your spouse.

And you don't, you can't tell some of your problems to your staff, certain problems you can discuss with your staff, but certain ones you can't and who are you going to talk to about the fact that you're not happy with your life or your kid's got a problem or. I do a lot. I'm 

[00:11:00] 60% consultant and 30% psychologist and 10%, whatever they need. So that's kind of who I am.

Greg Bray: Oh, that's interesting insight. Yeah. Well, I think today I wanted to tap into that product knowledge about designing, you know, the right product, the right plans and things, and kinda connect that to the sales and marketing process a little bit. I read something recently that you wrote, and now that I know you're a poet, it makes a lot more sense of why, because I thought this was rather poetic.

But if I could read this back to you just for context, right? You're talking about designing the home plan, and you said trying to sell a home that is very livable, but ugly is difficult attempting to sell one that is beautiful, but totally non-functional is almost impossible.

Creating a home that is both beautiful and functional, but beyond the financial reach of your customers is nothing more than an exercise in irrelevance. Are those your words? Just want to make sure 

Al Trellis: I  [00:12:00] it's funny when you hear them from someone else, I'm thinking that's pretty 

good stuff.

Greg Bray: I thought it was great stuff. I did. I read it. I was like, and again, it's poetic too. Right? So it's terrific. 

Al Trellis: It was very fortunate. I was in a special program in New York City. There was a program for gifted kids where you could take the seventh, eighth and ninth grade, and two years. It was a special program.

And so one of the great things about those classes, where you were in the class with all the other kids, you thought you were a smart kid that you got in the class with these kids, and then they really didn't feel so smart anymore. I had an English teacher for two years, Mr. McCollum, who was probably one of the greatest English teachers of all time, he died very young.

I actually had his wife as my guidance counselor in high school, but I'm an unusual person because I'm an engineer by training, but I can write and I understand the language and how to use it. And so, by the way, some books would refer to that as [00:13:00] left brain, right brain or at least the creative part of writing, which is also the creative part of creating plans that's the left brain.

You know, that's the right brain part of your mind. And the left brain is the orderly engineering part of your mind. And only about 6% of the population are pretty equal. Everybody's got some skill on both sides, but most people are weighted 80 or 90% on one. As opposed to the other I've trained myself to balance those two.

I think that the word that I use with my clients a lot is balance. Everything in life is about the right balance for the circumstances surrounding that situation. And that's what I was trying to say in that. Then that quote that you said, if it's too functional and no one likes the way it looks that doesn't work, if it's beautiful and you can't live in it, that doesn't work. And if you can't afford it, that doesn't work. So I guess it's all about a balance between those three things. And I [00:14:00] think anybody who really understands business understands 

that. Yeah, I got to make the customer happy, but I can't make them happy at the extent that I don't make any money. Right. It's always about balance.

Your marriage is about balance. Your health is about balance. You know, you try to eat a little healthy, but I'm not a kid anymore. 

If I want a Coke, I'm going to have a Coke. Right. It's not that complicated, you know? And so by the way, especially in COVID like, if you can't give me a lot of the other things I like, I might have two Cokes.

That's the way it is. So I think I know a lot of the consulting that I do is philosophical. I'm a little bit of a philosopher. 

And so I try to help my clients see the world in the way that I think they need to see it. And I try to temper that with who they are, 

because I think a good coach. Always is trying to help the player, maximize their strengths and make their weaknesses irrelivent, which is a quote [00:15:00] from Peter Drucker, the famous management consultant.

But it's not my job to force you to be good at something you don't want to be good at. It's my job to help you take your natural talents and the things you want to do and help you do them the best way that we can do those things.

So. I am a bit of a philosopher and it kind of came true to me. When you, when you quoted back my own stuff to me, I love to hear when people read me my own stuff, it's my favorite thing. 

Greg Bray: Well, we could read more, but, to dive into that a little bit more I'll so you're talking about the balance here in the product, right.

And having to meet these things. So what are some ways that a builder could recognize if they're out of balance? What would be the symptoms that you might see ifvsome of these things aren't quite, you know, where they need to be? 

Al Trellis: Well, the classic symptoms for a homebuilder being out of balance are he doesn't have enough sales, then he's out of bounds.

He's not, he has a lot of sales, but he's not making any money. He's out of [00:16:00] balance. 

He's got a lot of customers, but none of them are happy. He's out of balance. 

He's got a lot of customers and every one is ecstatic. He's probably a little out of balance too, because if you can please, a hundred percent of the people I would argue, you're probably doing something wrong, right?

If nobody argues about the price, you're out of balance, right? So I'm a big believer that if you really want to be a better home builder, don't necessarily read a lot about home. Building, read a lot about everything else. Because the last people you want to get advice from in home building most of the time it was other home builders.

You really want to get your advice. You want to learn about speed, study FedEx. You want to learn about bundling, study McDonalds. You want to learn about different things. 

You want to learn about pricing. Go look at the way different people are pricing, internet kind of usage things, usage plans. So you really have to concentrate on what does that mean in the circumstances? I have a [00:17:00] thing I've been writing about lately and I'm writing a big article about it now called Dynamic Thinking. And for me, dynamic thinking means you have to adjust your thinking to the environment in which you're operating. 

Right. And so what does being out of balance mean? As I see the circumstances, I can really understand what it means, but I just had a conversation yesterday with a builder and three of his key staff, people about they oversold. I told him don't sell 

more than X a month and they 

sold X plus. And now five months later, we're running out of lots. And I basically said to him, I don't want to be an, I told you so guy, although I actually like to be that guy, but I said to him, so that was 70 houses that we sold beyond what we kind of agreed we should've sold. We could sell those now for $15,000 more than we sold them for before. So maybe we didn't, we're going to make money. We're doing fine, but we serve optimized when we could have optimized. And most of life is a [00:18:00] sub-optimization.

It's a really, it's a question of degree. How much, if you're looking for perfect optimization, you're searching for something you'll hardly ever find. Once in a while we get an upper deck job and we hit it into the third grand stands, by the way that counts the same as if it makes it over the wall by three feet, let's not confuse ourselves, but you know, everyone wants to talk about their home runs.

And nobody wants to talk about how they got caught, trying to steal second it's life is a balance. And in the end, if you get around the bases more times than you didn't you win. And so I always told my clients, I've got a couple of them, they're always looking for perfection. I'm telling them why are you wasting your time?

We're not going to get it. Let's just get close enough and move on. 

Have you ever heard that quote about the perfect is the enemy of the good? 

Greg Bray: Yeah. 

Al Trellis: Well, that's what I believe. I have a friend who makes a living as a professional speaker. He's very well known and very good. We're having dinner one night together and he says, that's really strange cause I give a speech about how the good is the enemy of the perfect. [00:19:00] And I get paid to give that speech and you get paid to give a speech about how the perfect is the enemy of the good, how can that be? So I go home and I'm thinking, and I'm thinking, and I write an article called when truisms collide.

Yeah, really? What's the answer. How can both of us be saying that? And both of us be right? The answer is depends on the circumstances. If you're Microsoft coming to the market with a new product version, 1.0, it doesn't have to be perfect. They just got to get out there and get out in front of the other guy.

So they're the perfect is the enemy of the good. Now, if the three of us are going to get on the rocket ship and fly to the moon, I think the good is the enemy of the perfect, because I want that rocket ship to be perfect because I can't get a spare part up there. And so both truisms can apply. Just depends on the circumstances.

I mean, this is true with old sayings. I love this. This is one of my things I love to talk about. It's like, Hey, do you ever hear this expression look [00:20:00] before you leap there's a lot of truth in that. How about he who hesitates is lost? Well, wait, there's a lot of truth in that. Well, those two collide, but that's okay.

There's a time when one governance and there's a time when the other governance. That's what true understanding is about. It's not some slavish devotion to a philosophy with the inability to change. I wrote another article, which I'd be glad to share with anybody who requested called what's the matter with flip-floppers.

If you flip flop for the right reason, because of new circumstances or new facts, that's just a person who's changing with the times. And if you claim to some outdated mindset. That's no longer applicable. That's not consistency. That stubbornness.

Kevin Weitzel: are you telling me that look before you leap and leap in the net and the net will appear are not mutually exclusive.

Al Trellis: I think there's very little 

in this world that's mutually exclusive. 

[00:21:00] Greg Bray: So let's touch on that example that you just shared a moment ago about someone who oversold. Cause I think right now there's a risk for a lot of builders to be overselling, but would you agree with that in today's market?

Al Trellis: Not only is that a risk in today's market, it's been a risk for the last seven 

months. 

Greg Bray: So, how do you share the idea of we've got buyers and they want stuff and we can't sell them right now. I mean, from a sales and marketing perspective, that seems like a really tough challenge to deal with.

Any thoughts on that? 

Al Trellis: Yeah. Sure. In fact, let me rephrase the question or let me make a comment. What is the toughest thing for a salesperson to do say no, every sales person has been trained to say yes, right? In fact, we have to control our salespeople because they'll say yes sometimes to almost anything because what's their job? To get a sale.

Kevin Weitzel: So, what's that other word that you just [00:22:00] said? I don't know what it is. I've never heard it before.

Al Trellis: I know you been, no, it's a word I've never heard that is often underused. So, the reality is a smart business person tries to balance. Here we go again, their production capacity to their sales.

If they feel that in the long run, not the short run, that they can get more sales than their production capacity, then what should they do? You answer me? What should they do? Increase capacity. I said, answer me then I wouldn't let you, but that's my nature. So increased capacity. Right. But we don't want to increase capacity just for a temporary boom in the market because you don't want to become manic.

And so, we have an engineering, something that we call surge capacity. We build that into every system that we engineer. That's one of the purposes of the water tank, the water tower in your town not [00:23:00] only gives you pressure, but it understands that sometimes we need more water that is coming into the system.

So we have to have a reservoir which can move up and down as the system, it's a way to balance the system. The thing that we're talking about right now is actually in mathematics, a queuing theory problem. Queuing 

theory, Q U E U E I N G theory is the study in mathematics of lines and the people who are taking care of your call, the server and the people who are in the queue.

Their the line and that area, that how many of them they are, we call that the waiting area or the buffer. Okay. In queuing theory, we're trying to balance it. We always want to have a line because if I don't have a line, my server is idle. This is all fancy economic queuing theory talk, but, okay.

 But we don't want an idle server now let's take it to the builder. [00:24:00] How many houses can you dig a month? Let's pretend you're the builder. Answer that question for me. 

Greg Bray: Really answer it or do you want me to, alright. Kevin says 20. 

Al Trellis: Okay. So then I should have at least 20 people waiting to dig all the time so that the diggers never run out of people to fill up their capacity, but diggers.

The construction department, that's the last server in the process and it has its own little line in front of it. If it doesn't, I run the risk of losing a slot this month. 

Everybody agreed. 

Greg Bray: I agree. 

Al Trellis: Before the diggers and before the digger line, there was a server called the permit and selection server.

And until we had a permit and selections, I couldn't put them into the digger line. True. So there's a certain number of people in that server. I don't for the moment. I don't really care how many are in that server, but you tell me how many have to [00:25:00] come 

out of that server every month? 

Greg Bray: The same 20 

Al Trellis: Right. Now here's the good news. If only 15 came out a month this month, is it a problem? 

Kevin Weitzel: Yeah,

Al Trellis: no, that's why I had 20 people in the waiting line for the diggers. If I only had one person in the waiting line for the diggers, and this month is server that was called selections and permits fell short. Then the diggers would be short.

Is everyone follow that? Well, you have to work that all the way up to the front. This is a long answer to your question. What's the first server. 

Greg Bray: What's that is that lead generation marketing and sales, 

Al Trellis: right. That first server is the sales guy. Now, if the marketing department is outstanding and 45 people show up at the sales guy and I let him sign 45 contracts, what just happened?

Greg Bray: You're waiting, the waiting room is overflowing.

Al Trellis:  Which waiting room? No, I emptied the waiting room at the front of my [00:26:00] company. I shoved them all into the server that was called selections and processing permits. And they were like, dude, I can't handle. So they're going to wait somewhere. And the name of the game is you got to figure out where to have them waiting.

So A, they feel good that they're progressing. And B we're managing the different pieces of the system. So everything's in give me that word...

Greg Bray: Balance.

Al Trellis: Exactly. So the answer is, No sales department you can't sell 50 this month. And that Mrs. Jones, I'm only allowed to sell 24 this month. You're number 25.

Sit down with me, we'll go over your contract. We'll figure out what options you want. I can price the options, but I can't, you know, in that contract on the first line where it says base price. I can't fill that until the first of the month when I know that next basee price, but I want today's price, but Mrs.

Jones, you can't have today's price. The good news is you can have the [00:27:00] April 1st price. Oh. And there's 17 people behind you in line. And they're all going to get the April 1st price. But all the others, people who arrive in April, some of them are going to run out of gas and they're going to get the May 1st price.

Aren't you lucky to get the April 1st price? That's the answer.

Greg Bray: Absolutely. And, I think it's an area that right now I hope people are talking about seriously. 

Al Trellis: All my people are talking about it seriously, cause I'm making them 

Greg Bray: so what's your feeling then on when is it time to say, well, this is a just a bump, an artificial surge temporary, or we need to change capacity for the longer term.

Al Trellis: So that's a great question. And I happen to think housing is going to 

be good for the next year or two. In fact, I can show you some numbers that I built. I can prove it because there's no inventory. [00:28:00] I think if you look at the chart of inventory against underlying demand, you can see that we built too many houses from 1996 to 2005, about 3 million excess, I believe cumulatively.

And then what happened in 2005? 

Greg Bray: Oh, there was a little boom and then things kind of went bust pretty quick. 

Al Trellis: And if you look at the production, I could put it up with anybody who wants it. I'll be glad to give them the graph from 2005 to 2012, we didn't produce a lot of houses. It went down every year until eventually we used up that whole surplus.

But then as housing began to rebound, we were still not producing as much as the underlying demand. And by 2018, I believe we were a million and a half to two and a half million houses short. And when did we begin to see short inventory, 2018? We, even this year, when we'll produce about 1.5 million, I believe that's about the normal, natural demand of the country.

And so. I think there still is [00:29:00] a deficit, a cumulative deficit that it's going to take several more years to get through. So I don't think we're in balance right now. I think we're still on the deficit side now. So go back to your question. Increasing capacity though is not trivial. There's a great book called The Goal.

One of my favorite books. So an interesting book because it's a teaching book written as a novel. 

He was the first guy to really do that, to say, I'm going to teach some people, some things, but I'm going to disguise it instead of a textbook. It's going to be a story. It's a giant parable, right? I love, I love parables.

I'm not a religious person, but I love parables. And so I love allegories and I love similes and I love all those things that compare things. I think life is all about comparisons. And so in the goal, the point he's trying to make the book is really a book about constraint theory and constraint theory says if I fixed the constraint in that system that I just described, but so wait, Al, we got, we [00:30:00] need more people in the middle of the process and the selections and permits.

They can't keep up with sales. So I increased that. And now what do I have? I just have more people in the line waiting for the diggers. So now I got to increase the diggers. Well, I increased my people and I get more foundation guys, and we now can take 40 a month and then they say, but we can still only frame 20 a month out.

So then I got to go get framers. And then the plumber says, man, I can't plumb 40 a month. I can only plum 28. So I gotta go get another plumber. And then everything's going along until I don't have enough finished carpenters. All I do is move the constraint downstream. Until I build the entire system fatter and people use the analogy of a pipe.

I need a bigger pipe all the way through that's a valid analogy, but it's only a partial analogy. The full analogy is home building construction process has some places with one pipe. And then in some parts of the process, there's a manifold [00:31:00] and we have multiple pipes, then it comes back. Right? So we have one.

We have one foundation guy who was pretty good. He can keep up, but I have four framers, but then I have one electrician, but to fall. So it's a much more complicated system than just a pipe. And so unless you're prepared to get in there and fix the whole system, don't just tinker. 

Greg Bray: Well, if I can restate what I think you're saying is that this idea that.

The mistake that that is made is okay. We're going to increase capacity, but we only focus on the place where we see the bottleneck today. the place where things, you know, we can't get selections done. So we spend all our energy there without acknowledging that opening up that gate, so to speak is going to have some other impact further downstream.

And we need to look at it as a whole. Did I understand where you were going with that? 

Al Trellis: You said it perfectly, and what you just said is a corollary of the law of unintended consequences. Every action has consequences. 

Some good, some [00:32:00] bad, some we don't know right. Until we take that action, we're not sure exactly what the fallout from that accident is that we try to anticipate. And we try to, I wrote a new paper recently on managing the future a pretty big one, 3000 words. I really like to write 300 or 400 word articles. They're much easier, but I wrote a 3000 word piece about how to manage the future and,

I've been implementing that program at Kudo Homes, which is a client of Kevin's and to some success. And we gave that presentation at the IBS this year about what it's like to try and manage the future. 

Greg Bray: So I want to be respectful of your time here. You've shared so much with us today, but a few more questions as we kind of wrap up, when you are looking ahead now we've kind of talked about, you know, You think that things are going to be still a few more years to get back into balance as far as inventory levels go, what are some other trends or things that you're [00:33:00] watching that you think people should be getting ready for in the next year or two?

Al Trellis: Well, so we've written a lot about how we think product has changed a little bit because of COVID and a lot of how you think about the world is how you think about what part of the COVID. Impact is permanent. What part is temporary and what is the world really go back to? And I don't, I'm not a sear. I can't really know, but I can make an educated guess and then I'll find out whether my hypothesis was valid or invalid. And so my educated guess is the world will not be exactly the same or even it will be significantly different. I'm glad I don't own a lot of office buildings 

because I believe that 30 to 50% of the people who are working at home will never go back to the traditional. I only work in the office. Some will continue to work at home all the time. Some will work at home some of the time. 

So I really believe that. I [00:34:00] mean, I'm pretty confident of it. I believe that again, there's a dichotomy in this country based on economic ability. You know, the people that we sell houses to are different than the people who will always be renters.

And the rental percentage in America moves between over the last 20, 30 years, between 60 and 67%, by the way, it hits 67% in the last boom went back down to 62% in the bust. It's back up to 65, 66%. Somewhere in there is stability. Well, that still means that 33% of the people don't own a house.

And some of those people will never own a house. Some of them are on their way to homeownership, but some of them are not. And so when I talk about home buyers, they are the people who have the economic wherewithal either today or in the future to become buyers. And so when people. By the way, there's a lot of single family houses that are rentals, many, many of those people who rent, rent, [00:35:00] single family houses.

But I think whether you're a buyer or a renter, what COVID has done is it's pointed out to you how important, where you live is. And as people spend more time in their house. I live on a street that's a pretty well-to-do street. There's not one person on the street in the last year that hasn't done something to their house.

It's kind of insane. You drive up the street, there's like five different trucks every day. This guy's getting a roof, this guy's getting a new deck, this guy's getting a new porch, this guy put in a swimming pool, by the way, the wait right now around America for a swimming pool contractor is about six to seven months.

I mean, I don't want to say it's nuts, but it's nuts. And so, who knows. I can tell you that kitchens are more important today than they were before. I know that much. I know people want a little bit more room in their lots than they did before. I know that there's some percentage of people want to move from a more dense environment to a less dense environment.

I know there's lots of people who think, you know, we really do have to get a house with another bedroom because I'm tired of listening to Billy [00:36:00] and Jane argue about where they're sleeping. So, I think that's kind of part of it. I don't know if that actually answered.

Greg Bray:  Yeah, no, those are, those are awesome.

Some great trends and there's implications of course, for product and location and everything else that builders have to be looking ahead. Right. Because we can't just do that today. We're going to build two years from now, we're kind of figuring out now what it's going to be like, it's one of those challenges you talk about being a seer, right.

Builders in general have to all be good at that future look, it's, that's one of the challenges of the industry compared to some others. 

Al Trellis: Well, because it's basically a cyclical industry. You have to be extra careful. And then those cycles are not only national, but they're cycles locally when the new factory comes to your town or the old factory left your town.

And so, you know, I love college towns. If you're going to get past big markets into secondary and tertiary markets, what do I think makes a great secondary or tertiary market hospitals and colleges? [00:37:00] Those are huge economic engines. So if you live, if you're lucky enough to live in a town of a hundred thousand people, it's got a university and a really good hospital, you got good engines in your town.

And if you got the widget factory where the buggy with factories, as they would say at the business school, you got the buggy whip factory. You better be prepared for the day when we're not selling any more buggy. Oh, wait. That was last week. And so the factory closed in. We're trying to get the new fiber optic factory. Maybe we'll be successful. Maybe we won't. 

Greg Bray: So Al any last thoughts or pieces of advice, things we didn't touch on that you just wanted to share with our audience today? 

Al Trellis: Yeah. Really train yourself to think dynamically. Don't accept what other people tell you as the truth as the truth question. Questioning your core values. I'm not saying you should give up your core values, but you should always ask. Is it still a good core value? Is it what is what I believe in still valid? Right. I mean, I'm not throwing it [00:38:00] away because I want to throw it away. In fact, someone's going to have to assault it, but if it's assaulted successfully and proven to be false, then it shouldn't be something I believe anymore.

And so I don't, if it's good, I think I wrote this in one of my papers. If it's good, it will stand up to that test. Right. And so, I have one of the things I love to do is I used to have these quotes of the month. I would take a quotation that I liked, and I would write about it sometimes 50 words, sometimes 200 words, sort of looking for the deeper meaning in that quotation.

Right. And so some things that seem like simple quotations have very, very deep meanings. And I love to listen to what other people say and try to understand what are they really saying.

I'll give you an example. Here's a quote, knowledge is power. A lot of people use that quote. Well, have you ever heard, you've heard people use it, right? That's not a good use of the quote because the [00:39:00] quote is not complete. It's an incomplete quote. The real quote should be this, and I'm not saying that the person who sent it said it, but this is what he should've said.

He should've said knowledge is power in the hands of those who know how to, and are willing to use it. Otherwise it's just knowledge, right? So knowledge is power, you know, if you know how to use it. Yeah. If you're willing to use it, otherwise that quote makes no sense. But if you believe that by getting smarter and learning things, you're more powerful.

That's an illusion. It's not about the knowledge you got, it's what you did with it. And that that's kind of sums up my view of the world. It's not about what I know it's about what I did with it. It's not about who I am. It's how I act, which to some degree defines who I am, but it's a big circle.

It's all confusing and integrated. I'm a huge believer that every everything we do and say is just a part of something else. So think [00:40:00] dynamically, think from an integration point of view, don't be afraid. Sometimes you got to be on the ground and look at the problems that are three feet away. And sometimes you gotta get in the helicopter and go to a thousand feet and look at the whole battlefield.

And sometimes you got to get in that same helicopter, go to 10,000 feet and look at the whole theater. Right? That's every great commander. I was in the army for three years and there's certain things they beat into your head that you can never get out. Right. So that idea that different commanders at different levels have to have a different view.

Well, when you're the general, you got to understand the view at all the levels. When you're the, when you're the grunt on the ground, the Sergeant, you really only have to understand your tactical situation. It's not your decisive decision to understand why you have to move to this crossroads. That's somebody else's decision, but he's looking at 40 crossroads and deciding which ones we have to control.

And so that's what a home builder. Owner [00:41:00] manager, president. Those are the kinds of things he's got to think about. Got to think about sales and product and land, having great product and great sales. If you run out of lots, was that do for you? Nothing, nothing. And if you got too many lots and not enough sales, what does that do for you?

Greg Bray: Costs a lot of money, right? 

Al Trellis: But it still does. It's just a more expensive version of nothing. Those are my final thoughts. 

Greg Bray: Yeah. Well thank you so much. I'm going to put a challenge out there cause everybody's learned a lot of knowledge today, right? So now it's all about where they take some action with it.

Right. Are they ready to use it and ready to, willing to take that action? So thank you so much Al for your time. We really appreciate it. If people do want to reach out and connect with you, what's the best way for them to make contact. 

Al Trellis: So we have a home builders network website called H B N N E T dot.com

You can find us on the line at Home Builders Network. You can find our private plan portfolio online at Values That Matter. You can go there and look at it. If it's intriguing to you, [00:42:00] you can call Home Builders Network office, and the Valley of the matter office. And they'll give you a temporary password, so you can look at the plans and go, Ooh, and anybody who wants to reach out to my office, I'll be glad to send you materials or answer any intelligent questions. I will be the sole arbiter of what constitutes an intelligent question. I always reserve that right for myself.

Greg Bray: That's an important right to reserve. I agree. 

Al Trellis: Well, by the way, I really appreciate the opportunity to vent and to talk. I love to do that. And so I probably talked a lot more than either of you, but I do appreciate the opportunity very much. 

Greg Bray: We really appreciate your time and sharing your knowledge and wisdom. You've been doing this and understand it, and you've seen lots of different portions of the cycle, shall we say?

And so that's a great insight and we want to thank everybody for listening today to the Home Builder Digital Marketing Podcast. I'm Greg Bray with Blue Tangerine 

Kevin Weitzel: and I'm Kevin Weitzel with Outhouse. Thank you.

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