By Anne Balogh
Savvy homebuilders and remodelers are constantly looking for ways to boost profit margins. Yet many are bypassing an opportunity to earn cash back, in the form of rebates, on most of the construction products that go into their homes. Cash incentives from manufacturers aren't new to the home-building industry, but for many builders — particularly smaller firms — the cumbersome process of negotiating the deal, tracking product usage and submitting the required paperwork is too time-consuming and complicated to make rebates worthwhile.
Fortunately, advances in computer technology have led to a renaissance in how rebate programs are managed and executed. Web-based rebate management programs automate the process and ensure that builders receive 100 percent of the rebate with few of the hassles. (See the HGTVPro Best Practice video Builder Rebate Systems for an overview of how these programs work.)
"Manufacturer rebates are something the small-volume builder never focused on before, because he didn't have the resources to dedicate someone to go after them," says Charles Shinn Jr., president of Lee Evans Group, Littleton, Colo., who launched Builder Partnerships, a Web-based platform where builders will be able to track and manage rebates and other incentives from manufacturers of a variety of home-building products.
Even builders who pursue rebates don't always follow through and claim them, according to Glenn Renner, chief marketing officer of HomeSphere, Lakewood, Colo. "Administrative tasks like this aren't a homebuilder's core competency, so they're missing these opportunities. Our market research shows that two-thirds of builders who participate in rebate programs don't think they're getting all the rebate dollars they negotiated." In 2000, HomeSphere launched a Web-based version of
Builder Resource Inc. (BRI), a program that streamlines the rebate process and today serves more than 800 builders and 65 manufacturers.
Rebates vs. 'a better price'
When Renner talks to builders about the benefits of rebate programs, the first thing many of them ask is: "Why doesn't the manufacturer just give us a better price?" The problem is that typically the builder and manufacturer don't have a direct relationship, so there's little opportunity to negotiate price breaks. Distributors usually serve as intermediaries, and subcontractors working for the builder generally are the ones who purchase the products.
Rebate programs administered by third parties, such as Builder Partnerships and BRI, facilitate relationships between homebuilders and product manufacturers while providing compelling benefits for both groups. For small builders, the chief advantage is the ability to join forces and maximize their rebate potential by increasing their purchasing power to the level of larger national builders. "In 2005, the builders participating in BRI closed 90,000 homes on the Web-based tracking system. That about equals the production of the nation's top two homebuilders," says Renner.
How much a builder can accrue in rebates depends on construction volume, the regional market and the subcontractors they work with. Builder Partnerships anticipates that potential rebate amounts for members could be as high as $2,300 for a 2,800-square-foot home.
Cashing in on the extras
Builders not only cash in on incentive dollars, they may get intangible perks as well, such as greater exposure to new products and opportunities to partner with manufacturers on product marketing, advertising and testing.
For manufacturers, third-party rebate programs minimize administrative headaches and give them access to important market data and customer feedback. "They get to see which homebuilders are using their products and where, all the way down to a specific address — information they can't typically get by shipping product to a distributor," Renner explains. Builder Partnerships plans to give manufacturers feedback as to the reasons why a builder may not be using their products, such as the price outweighing the value of the rebate or poor service by the local distributor.
Not all rebate-management programs offer builders the same benefits or ease of use. Before enrolling, be sure to get answers to the following questions:
- How much does it cost to join? Some programs are funded entirely by manufacturers and offered free to builders, while others charge builders membership and administrative fees.
- How much, if any, paperwork is required?
- How often are rebate checks issued?
- Will you automatically be notified when new manufacturers join the program?
- Who are the participating manufacturers, and do they supply the products and services you need at a competitive price? A pointer from Renner: If the prices and products the manufacturers provide are equal to what you were getting before, the rebate is the icing on the cake.
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