Being bigger has some advantages and there are lots of phrases that extol those advantages. However, that doesn't mean that being small doesn't have some advantages as well. Oftentimes there's the perception in the home building industry that the big firms have significant advantages in costs, expertise and access to capital that put the small volume builder at a disadvantage. While the larger builders usually have some cost advantages due to economies of scale and greater borrowing power, there are a number of ways the small volume builder can compete successfully.

There are three generic competitive strategies firms use to compete in the market place: low cost producer, differentiated provider and best-cost provider. The low cost producer's focus is on having the lower production costs in the industry. The differentiated producer looks for niche markets and provides products that cater to small market segments with specialized needs and tastes. The best-cost provider attempts to provide a good experience by keeping costs relatively low and offering more than the customer expects.

Most large volume builders target the low-cost producer or the best-cost provider markets because they are the markets with the volume these builder need to tap to be profitable. The best strategy for a small volume builder is the differentiated provider strategy because the markets are small enough to make them unprofitable for a big builder to chase, yet large enough to provide profits a small volume builder needs. There is a good strategic fit between the agility and adaptability of a small volume builder and the needs of the differentiated market segment. The key to being successful in exploiting the differentiated market is having an accurate abiding knowledge of that market segment and industry design trends. Here are five ways a small builder gain a competitive advantage.

1 Be an information magnet - While everyone has access to much of the same information, the small volume builder has some unique advantages when it comes to gathering and interpreting the data. A small volume builder should stay in close contact with local real estate agents, bankers, and past customers and always be on the lookout for comments or questions that might signal a change in the market. If one is detected - follow up on it immediately. Spend time asking real estate agents what kind of housing they need that they can't find. Watch all the housing/building related new cable and TV shows to see new trends your buyers are learning about.

2 Capitalize on unique expertise - The big builders are slow to move outside their traditional method of building and doing business. That leaves an  opportunity for a small builder to capitalize on quickly evolving design trends. For example, buyers learn about innovative construction methods as well as interesting and intriguing design and finish details from the cable TV programs and the internet. The small volume builder is in a position to learn more quickly about the techniques and even offer them to the local market.

3 Offer something special - It doesn't take much to change a standardized plan into a unique design with special touches. While large volume builders hunt for plans with mass appeal, the small volume builder can work with plans that offer specialized designs and personalities that give the homes a one-of-a-kind appeal. Based on conversations with local real estate agents and past customers, the small-volume builder can create designs that are more specifically targeted to a select market segment. Consider creating a reputation for a certain kind of home. One builder I know specializes in tree houses.

4 Cater To Your Customer - Large companies hide behind policies and procedures in an effort to maintain some manageability through their large organizations. They don't take the time to really understand the buyer's needs or set the buyer's expectations. That means the customer usually has to conform to the builder.
Small volume builders should create customer-friendly systems that allow the builder to conform to the buyer's needs and desires without losing organization and control. The small volume builder has fewer departments and closer contact with the buyer. This gives the builder a better sense of what the buyer's expectations are and which expectations need adjusting.

5. Don't chase every deal - Large-volume builders have many mouths to feed and therefore need to take every contract they can get. As a result, they sometimes wind up with a customer or two that they should have never worked with. The result is aggravation at best and costly lawsuits at worst. The small volume builder should have more discretion. A small volume builder can't afford very many bad customers. They take too high a toll on the organization and the builder's reputation. Since the small builder can spend more time with a prospect before signing a contract, there's a greater chance the builder will be able to spot problem clients before it's time to sign. Walk away from these problem clients or refer them to a large volume builder in your area.

Dennis Radice, MIRM, CRP, provides process evaluations and training for homebuilders in the areas of sales operations, customer relations, and broker relations. He is a certified instructor for Carol Smith's nationally recognized Home Address customer service programs and writes Home Building, a weekly nationally distributed newspaper column.

His book "The Home Builder's Sales Management Tool Kit" is available through Home Builder Press (www.builderbooks.com). He is a licensed real estate broker and an experienced national speaker, trainer, and instructor, with more than a quarter century experience in new and resale home sales and marketing. He can be contacted at diwrite@aol.com.

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