Here’s one way to measure performance in the single-family market. It’s a simple equation: change in sales to single-family builders minus the change in single-family construction in your market. The spread between those two figures is a pretty good indicator of how well (or how poorly) you’re performing. So, your sales to single-family builders were up 10% in 2013. How’s business? If your yard is in Seattle-Tacoma, Wash. where single-family activity was up 9%, you pretty much kept pace with the market (SALES UP 10%, MARKET UP 9%, SPREAD= +1).
If your yard is in Nashville, Tenn. where single-family activity was up 33%, you lost share. Your sales were up, but your performance wasn’t so good (SALES UP 10%, MARKET UP 33%, SPREAD= -23).
If you were in Jacksonville, N.C. where single-family activity was down 38%, you gained share. Your performance was very, very good (SALES UP 10%, MARKET DOWN 38%, SPREAD= +48).
And, if you operate a facility in Deltona-Daytona Beach, where singlefamily activity was up 70%, you lost significant share. In fact, if your sales had been up 25 or 30%, you might have been thrilled, but your performance would still have been weak compared with your market (SALES UP 10%, MARKET UP 70%, SPREAD= -60).
A note of caution: Be careful not to get too caught up in the excitement of major year-over-year surges or the panic of precipitous declines. And be sure to consider the economic fundamentals of your market and where you are in the housing cycle before making large investments or major cuts.
Understand that there’s noise in these permit numbers, especially the monthly ones. And the level of noise varies from market to market. The accuracy is a function of how well the permit-issuing agencies in your market report the numbers. It’s not a perfect system. It doesn’t work in every market. And it doesn’t measure your share in other market segments. But, if single-family builders are an important part of your business, it can be a very useful tool.
You already have a good handle on your sales data, and you know if your market is up or down from last year. But if you want to understand how well you’re performing, you really need to quantify that up-ness or down-ness.
Remember, numbers are relative measures. How are you doing compared with last year is a good question. How are you doing compared with your market is a much better one.
