Our president John Bitely was interviewed by Mike Nichols of the Grand Rapids Business Journal to discuss Sable Homes’ recent growth spurt and how we got to where we are today.
Mike Nichols – Grand Rapids Business Journal
There are bad problems to have and there are good problems to have.
John Bitely currently has what he believes are a number of very good problems. He can attribute those “problems” to being the owner of Sable Homes, a Rockford-based residential development firm that has been seeing phenomenal growth in recent years.
2013 was a breakthrough year for Sable, a year in which the company built and sold more homes than ever before, Bitely said. In the years before and during the Great Recession, the firm sold about 25 to 30 houses a year, he said, a number the firm was comfortable with maintaining.
In recent years, however, that average has changed dramatically.
“We finally broke the 100-homes market last year. Last year, we sold 100 homes and we built about 10 percent more than that,” Bitely said. “If we wouldn’t have gotten buggered up by municipalities, we were on a pace to build 140 this year. As we get things ironed out, we’ll get there.”
Professional Builder Magazine recently ranked Sable No. 285 on its annual House Giants list, which includes 293 of the nation’s largest builders.
Sable has the potential to grow its home sales and builds by about 20 to 30 percent for the next three to five years, Bitely said. The growth is good, but it’s one of those “good problems,” he said.
“Most companies, if you’re growing more than 20 to 30 percent per year, those are numbers that make people pretty nervous,” he said.
Sable’s growth found its roots in the intense “grow or die” environment of the Great Recession. When the housing market was hit hard, the firm found it needed to expand its market area to keep its head above water.
“If we go back before the crash, we were selling 25 to 30 homes a year. … We were a big frog in a mud puddle,” Bitely said. “We traveled further to do (jobs), but after we had already begun travelling, we stayed in those areas.”
Need drove Bitely to create a system that became a production. Housing is like manufacturing in the fact that it is systematic and needs to be controlled, he said. Although the firm originally kept to the northern region of Greater Grand Rapids, it began to do business as far south as Wayland and as far north as Cedar Springs, he said.
“(The Great Recession) forced us to be a larger company today than we ever intended to be, because we had to expand into the markets to survive,” he said. “Well, when it turned around we were already there working and we had put these systems in place to reinvent ourselves into a larger company.”
Bitely believed if he could figure out how to build and sell houses under the adjusted prices, Sable Homes would survive the recession. Sable pushed hard to keep its volumes up through the downturn, and when the weight of economic turmoil were lifted, the firm found itself sprinting ahead.
“We paid our price to survive. … What wound up happening is we gobbled up market share as other people left the business,” he said.
“The homes we were delivering two to four years ago are going to go down in our history as the ‘Vanilla Age.’ There weren’t a lot of options. It was housing, and people could only afford to house themselves — and we built a lot of plain vanilla. But vanilla ice cream is still better than no ice cream. Now we’re building Moose Tracks and Cookies ’n Cream.”
The unexpected sudden growth of Sable Homes created a number of good problems, Bitely said. The Great Recession changed everything in the real estate industry, and the issues facing Sable are issues construction companies nationwide are attempting to address, he said.
“The problems we’re dealing with today are very different than the problems we dealt with three years ago,” he said. “They’re good problems, but still problems.”
The first major issue is a labor shortage, Bitely said. The industry currently needs more carpenters, cement layers, dry wall installers, roofers, electricians and other types of tradesmen, he said. Many of these jobs are trade jobs that are traditionally a younger person’s job. Often, subcontractors will hire teenagers to help out during the summer, and many of them eventually become part of the trade, he said. By the time they are in their late 30s or early 40s, they’re no longer “running and gunning” out on the job, but are in management or running a crew, he said.
However, during the recession, subcontractors weren’t as likely to hire teenagers as extra help, Bitely said, and some of the men in their late 30s and 40s — men who had families relying on them — wanted to get out of construction and into safer industries. That created a vacuum that is now a labor shortage.
“With the crash, we didn’t train people for six years, so we don’t have 18- to 20-year-olds in the cycle, and now we have no 40-year-olds because they got out,” he said. “A lot of people were jaded. We’ve got a lot of that because that last crash was so bad. Traditionally in West Michigan, we don’t get hit as hard (by national economic ups and downs), but this time, we led into the recession.”
The industry now has to train new workers and spark interest in the trades, Bitely said, adding that since there’s such a pent-up demand for work, he strongly believes it’ll be a long time before work runs out.
Sable is one of the firms looking to get key people hired right now, he said.
“We’re at max expansion right now. Businesses can only grow so much a year without having maxed out at the amount we can grow right now,” he said. “Our growth is controlled by how fast we can grow, be successful and not overextend it. I’ve got enough, but I’m not overstaffed and I’m still looking for key people.”
Another major issue is with the municipalities, he said. It takes about two years to get through all the procedures of land development in Michigan, he said, which means the current shortage of housing will not be cured any time soon because demand will continue to outstrip supply, leading consumers to face an uptick in prices.
“(There’s too many) systematic regulations that require a box to be checked and not enough people to check the boxes,” he said. “And they can’t hire enough people to check the boxes because of their budgetary restraints.”
As for the future, Bitely said he’s undecided about how much longer he will continue to run his business. In the next five years, he’s considering either selling Sable Homes or handing it off to his daughter, who is currently studying sustainable business at Aquinas College and works as Sable’s assistant general manager.
One thing is he certain about, however, is that residential construction is back in West Michigan and will be for a long time.
“We’re going to get by and we’re going to be strong. It’s going to be great industry to be in for a number of years,” he said. “There’s lots of work for those of us already here. We’re going to be busy for a while.”