7 reasons why many real estate development companies are not profitable

For more than 20 years in the world of construction and real estate development, we have been able to analyze different projects and companies that have managed to maintain themselves over time.

In an interview with Arch. Diego González, a developer with more than 15 years of experience and a partner at Archetika, we came to the conclusion that companies that fail to be profitable coincide in overlooking the following factors:

1. They hire the wrong team: they are generally family businesses that delegate the management part to relatives who are unaware of the real estate business and are not properly trained.

2. Lack of certainty in the land: the legal status of the land, physical characteristics or local regulations are not reviewed. Skipping this process can cause companies to incur litigation and problems that strain their resources.

3. They do not standardize processes: each project that arrives at their office is worked intuitively and they omit carrying out fundamental activities that are later reflected in cost overruns.

4. They are not professionalized: the knowledge they acquire is empirical based on trial and error, compromising the profitability of the company.

5. They use the credit from one project to develop others: each project must have its own capital structure. Disperse the financing of a project to build several, only compromises the profitability and reputation of the company.

6. Overconfidence: thinking that the success of a development guarantees future success, ignoring the needs of the target market.

7. Lack of after-sales service: they do not structure a post-sales service team for their customers and guarantees are not attended to in a timely manner, generating long-term problems that affect their reputation.

If you consider that your company incurs in one or more of these 7 practices, there is still time to correct course. Your present decisions will define the future of your organization and it is better that these decisions are made with knowledge of the facts. For now, you can start by taking one of these actions today:

• Constantly train yourself by acquiring knowledge of all areas of your company
• Define the processes that each area must follow each time a project is started
• Check the attitude and aptitude of your collaborators. Let go of those who are not aligned with the principles of your company and support those who are willing to support you.
• Listen to your clients and their needs, they are the best market research for your next project.

Call us if you don't know where to start, at Archetika we support developers to improve the performance of their companies so they don't waste time, money and reputation.