Potton's Custom Build Model Explained
Mark Stevenson discusses Potton’s successful custom build homes model
With 51 years’ experience in the self build arena, it comes as little surprise that Potton is embracing custom build, as Managing Director Mark Stevenson explained to Custom Build Strategy.
“We’re extremely customer focussed at Potton,” says Stevenson, “and in the four years since I’ve been here we’ve refined this interaction all the more.”
Potton sees itself as an enabler helping people build the homes they want, and until the recession it had a successful model based on building package homes for self builders chosen from its numerous pattern books. But a changing market led to review, and Stevenson has helped the company reinvigorate its brand, focussing on the custom engagement that is at the core of its business.
“The most common setback facing people who want to build is their inability to find a plot,” says Stevenson, “and we saw an opportunity in custom build to help satisfy this desire for land, bolstered by the fact that Government policy was moving in favour of the sector,” he says.
Potton’s first foray into the sector was with Igloo Regeneration’s Heartlands scheme, where customisation came from the choice of six designs from different manufacturers. “This was a new experience for us, but ironically the design offered less flexibility than we’d normally offer. But it was the catalyst that helped us formulate our own approach to custom build,” says Stevenson.
“We decided that going forwards we wanted to stay true to our roots. We know that the thing that drives people to want to build their own homes is individuality, that is, how they want to live and interact with their families, so we decided to build on this principle,” he says.
Simplifying the process
Self build isn’t an easy route to home ownership, so Potton decided to take the best of its experience and knowledge and use custom build as a way to bypass the problem of finding a plot with planning permission.
“Fundamental to what we do, is the fact that we’re not a developer,” says Stevenson. “We don’t sell land and don’t operate as a middle man taking value from the land. Rather we make our money from the design and supply of our homes.”
So when an introduction came via BuildStore to a landowner in Cheshire, Potton got involved with the scheme that would later become French Fields. “We saw it as an opportunity to unlock land for self builders,” says Stevenson. “The landowner had been frustrated in his attempts to get planning, and we knew that this was something we could help with; we just had to figure out how,” he says.
The solution lay in Potton viewing the site not as a single custom build development, but rather as 18 self build sites with the hassle of services and access taken out of the equation for the consumer. “This worked for the purchaser, the local authority and most importantly for us, as it meant that for the actual builds we weren’t doing anything radically different from a one-off self build,” he says. And with this, Potton had hit on its winning formula.
Fixing on a model
From here on in, Potton knew that its model would be to present plots to purchasers with outline planning already in place, and then let the builds progress as regular self builds through the standard Potton system. But key to the success of its custom build model is the fact that it doesn’t own the land, which means that there is very little limit on the number of new sites it can bring on. And currently it has over 10 sites on its books.
“Potton doesn’t want to be a developer,” says Stevenson, “it’s not what we’re about. Small and medium developers end up with their money tied up in the land until the houses are sold, and this model relies on homes going up and being sold on quickly to release the equity. Naturally, this precludes customisation, which slows down this process and increases costs.
“There’s nothing wrong with this prevalent model, but it’s not where we want to be in the market,” he adds. In addition, he points out that developers get somewhat demonised for their limited model; “but it’s down to Government to change this through diversification in our land management systems, planning and housing delivery routes,” he says.
A key aspect Potton’s philosophy is the sense of working together with stakeholders, and the fact that the company is not actually buying the land makes it an attractive proposition for landowners. “They’re happy as they get full market value, it works well for us as our money isn’t tied up, and the consumer is happy knowing there aren’t costs being added to the plot price,” he explains.
“For us, stepping in on the land transaction would just slow down the entire process. Although we would increase our margins, it would also restrict us as our finance would be tied to the life of the project,” says Stevenson, “so why do it?”
And Potton’s approach is working: “In fact, the success we’ve had is indicative of a problem with the dominant model,” he explains, “as we shouldn’t theoretically be able to enter a market and go from no sites to over 10 within a single year. And in reality we’re turning landowners down who are approaching us with custom build opportunities.”
Importantly for the company, Potton’s unique model strengthens its role as an enabler, allowing greater numbers of people to build their own homes. “We’re not greedy about trying to rinse the maximum value out of the land, but rather we rest secure knowing that we make our money out of our houses – it’s our core business,” he says.
A by-product of this is that Potton is increasingly being asked by landowners and local authorities for advice about land that could be built on, meaning that Potton, in addition to being an enabling supplier, is becoming something of a service provider, too. Local authorities in particular are especially attracted to the fact that they can bring on sites and retain the full land value, which is important for their transparency and procurement routes.
Focus on land
Potton’s explosion into the custom build sector has led it to recruit a dedicated construction professional whose role will be to work with landowners, managing the process of land moving into the system. “This is the key element for us,” says Stevenson. “Once the consumers have committed themselves, the builds progress as a normal self build for us, so it’s this initial land management aspect that we need to invest in.”
Moving forwards, Potton is making the most of the perfect storm that’s the current market. “We’re able to bring these sites on with help from the Custom Build Serviced Plots Loan Fund, which means we only need 25% of the cost to come from the plot purchase,” says Stevenson. “There’s plenty of land coming to market for small sites, typically with scope for 10-20 homes on them. But the unusual thing about the post-recession market is that the SME builders that would previously have brought on these sites are no longer around, so the landowners are struggling to sell them. These sites make the perfect custom build developments, and for now we plan to capitalise on that.”
For Stevenson, the fact that there aren’t enough players in the market to satisfy demand means that companies operating in the custom build industry should work together to make the most of the sector. “We don’t see any of the other custom build players as competitors who are threatening us,” he says, “rather, we should be sharing best practice and innovations to bring on as many individual homes as possible,” he says.
“There’s a lot of debate about what custom build is or isn’t, but actually it doesn’t matter. The industry just needs to acknowledge that we all do it differently, and get on with it. After all, now is the perfect time to be getting involved with custom build: land is available, finance is there and the demand is there – it’s time to bring it on!”
Credit: Steve Hodgkin/Chadwicks
Custom Build Strategy
For further information and insight surrounding custom build, please take a look at the Custom Build Strategy website at www.custombuildstrategy.co.uk
Potton Self Build Homes