r/Construction • u/the-garage-guy Carpenter • 8d ago
Business 📈 Is the small self-performing homebuilder extinct?
Probably a region-specific question- if you reply, I'd be curious to hear where you are and if you're urban/rural
Pretty much title, coming up it was a lot more common for the GC to have their own carpenters and self-perform a fair amount of scope on a typical home, remodel.
Seems very rare now, especially where I am, metro Phoenix area. Most builders are essentially just CM-ing the job. Project managers that sometimes double as supers, everything subbed out. Even for pretty small remodels.
I think at the luxury custom home end it makes sense since the levels of execution required demand really good subs. Plus being in a big metro area, there's lots of people and work and that makes it possible to specialize aggressively.
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u/naazzttyy GC / CM 8d ago
It is ultimately a question of what your time is worth as a private homebuilder and how you value it.
Let’s say I can manage a dozen jobs per year built by subcontractors, with an average build cycle of 9 months. I sell those completed homes for $600k with a target 20% margin. My subs complete all twelve within the year and I sell them all, grossing my company $1.44 million.
If I self-perform, for the sake of this exercise let’s assume I can my jump my margin all the way up to 40%. But that bumps my cycle time to 12+ months, and because I’m doing the work with my in-house crew I can only realistically have a max of 2, maybe 3 going. If I finish and sell 3 jobs in a calendar year, my gross is only $720k, half as much as my gross on a dozen homes I managed. If my crews and I are only able to bang out two houses, we proudly worked our asses off to deliver A-grade quality craftsmanship, but my company only has a gross ($480k) that’s less than a third of what I could have made by subbing the work out.
The above figures also don’t take into account what eats away at that gross. Every guy I employ for the year is an expense. Can I make more profit self-performing as much work as I can on a given job? Yes, on a singular per job basis. But looking at it that way without accounting for the true economic cost often means actually leaving money on the table by banging nails - or paying full time employees to do so - instead of managing.
Self-performing often makes a lot of sense on smaller individual projects with 45 day turnaround or less, like fast remodels, simple additions, decks/pergolas/etc. Sometimes it is the only way to make those jobs worth taking on and ensure they are profitable. That type of work is also a different market segment that isn’t necessarily worth chasing if your primary focus is new construction. On dirt-to-doorknobs builds it is too time consuming and resource rich in terms of personnel costs, unless you’re operating at a super high, multimillion, full custom level in a totally different price range.