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HouseRaising, utilizing
its proprietary/patented software and one-stop shopping system that saves homebuyers 15%
or more, is poised for substantial growth in the large design/build custom home market
Services
Homebuilding
(HRAI-OTC:BB)
HouseRaising, Inc.
4801 E. Independence Blvd.-Suite 201
Charlotte, NC 28212
Phone: 704-532-2121
Charles M. Skibo
Director, Chairman and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
March 10, 2005
BIO:
Charles M. Skibo
Director, Chairman and Chief Executive Officer
Mr. Skibo, a venture capitalist and telecommunications/internet industry veteran serves as
Chairman and CEO and is responsible for directing the company. He also manages
acquisitions and is responsible for all financial related matters. Mr. Skibo was
previously CEO of SE&C, a consulting company focused on providing financial assistance
and funding of acquisitions for companies in the IP & Telecom related market segments.
Prior to SE&C, he was Chairman and CEO of Colo.com from 1999 to 2001. During his
tenure, Colo.com raised $535 million, built and operated 27 colocation data centers with
staffing increasing from 9- to 350 employees. Prior to Colo.com, Mr. Skibo was President
and CEO of US Sprint where he merged U.S. Telecom, GTE Sprint & GTE Telenet to form US
Sprint.
Company Profile:
HouseRaising currently owns and manages three (3) wholly-owned subsidiaries:
HouseRaisingUSA (HR-USA); HR HomeBuyerDirect (HBD); and HouseRaisingAcademy (HRA). HR-USA
operates regional companies that design and build homes for discriminating homebuyers.
HR-HBD is an Internet-based company working for homebuyers desiring to act as the builder
of their own home. HRA is an Internet-based technology company providing management
software and support structure for all HouseRaising activities. Each entity functions as a
profit center for HouseRaising, Inc.
CEOCFOinterviews: Mr. Skibo, what attracted you to
HouseRaising?
Mr. Skibo: “I am attracted to companies that have big
ideas. That is what I have been doing for the last twenty years starting with US Sprint. I
was the guy who came into US Sprint and built it up into a large company and frankly,
there are some similarities here between the strategy that US Sprint employed and what we
are doing at HouseRaising. US Sprint had an underlying strategy to utilize a new
technology, fiber optics, to build a big business. Our fiber optics in this company is a
proprietary/patented software program that was developed by the founder that takes the
3,400 steps required to build a custom home and put it into six platforms. That meets a
serious need for homebuyers that want to build their dream home. That idea and the ability
to build a big company is what attracted me to HouseRaising.”
CEOCFOinterviews: How
are you taking the founder’s idea and making it work?
Mr. Skibo: “The software is practically complete; we
should have that done in February. That would be the period in which we would launch the
rollout of our regions. The plan is to rollout twenty-six regions over the next five
years. Think of a region like the greater Charlotte area or Columbia, South Carolina.
There are thirteen regions in North and South Carolina and those are the first markets
that we are going after and then we are going to move to the Mid-Atlantic States, the
southeast and southwest. It is important to understand the economic model behind the
company; when we build out fifty new homes and fifty renovations in a single region, we
produce $27 million of annual revenue and an EBITDA (earnings before interest, taxes,
depreciation and amortization) of about four million. Recognizing that we are going to
roll out 26 regions over five years, you can see that we can build a sizeable company over
that time frame; something in the range of about 300 million dollars by the fifth year of
operation in terms of revenue.”
CEOCFOinterviews: How
does your software operate and what exactly are you providing to your customers?
Mr. Skibo: “Let’s say that you are a homebuyer; you
have bought your lot already and now it is time to build the house. You then come to
HouseRaising and what we provide you is a one-stop shopping capability. You can come in
and if you don’t have a house plan, you can select from 2000 plans that we have. We
provide the engineering drawings behind the architectural plan. While you are there that
day, we get you to fill a questionnaire and from that questionnaire, we can give you the
price of that house within about one percent. We have a design center that you can access
so that you literally within that same day can go into the design center, pick out all the
features and products that you want in your house like your cabinets in the kitchen, your
windows and flooring and on and on. In addition, we have a construction arm in our
company, that if you would like HouseRaising to build your house, we can be your general
contractor. However, if you want to be your own general contractor, then you can be
that as well and you can pay a fee to access our software over the internet. It
takes you through the same process of the 3,400 steps or tasks that you have to do to
complete a custom house. Either way, whether HouseRaising is the general contractor
to build your house or the homebuyer chooses to be the general contractor, the house is
built with the HouseRaising patented software that covers the 3,400 tasks.”
CEOCFOinterviews: How
does that compare to the way a consumer might do it now?
Mr. Skibo: “Today, given the market that we compete in,
you could contact one or more of the small builders in the marketplace that typically
build three to five houses a year and usually don’t have the system that covers the
3,400 tasks. Frequently, these are people that started in a trade, developed some
capability over the years but are generally lacking in the financial skills and controls
that are really important to a homebuilder. Frequently what happens is the homebuyer
contracts with one of these small builders who get in trouble along the way and houses end
up costing a whole lot more, or said a different way, they are not able to save money. We
typically save a homebuyer about 15% of what he would ordinarily pay if he were dealing
with one of these small homebuilders. If he decides to be the general contractor himself,
and takes on all those headaches, then he could save 25 or 26%.
There is quite a difference between what we do and what a track builder does. We do not
compete with the track builders. The track builders typically buy a track of land or a
developer has a track of land and they commit to taking so many lots from the developer.
When they get under construction, they will be building 25 or 30 or maybe even 50 houses
at a time so they take the risk all along the way in terms of financial risk. At the end
of completing those houses, they may or may not have sold them. They will have some
financial risk in those houses that they have to hold. We do not take any of those risks.
The homebuyer comes to us with the lot and we help him get his financing immediately; both
his construction loan and the long-term loan. We have no risk during the period of
construction, nor at the end, because at the end he has a permanent loan. In
summary, we have very low costs of operation due to our System C (proprietary/patented
software) process and we have a low risk operation due to the way we administer the build
out of any single home. Our low costs and risks translate to good margins for
HouseRaising while saving our customers 15 to 26%.”
CEOCFOinterviews: What
kind of fees would you typically charge for someone using your plan?
Mr. Skibo: “Our fees are structured based on the amount
of the design/build process that we take on, i.e., we charge less if the homebuyer is
acting as general contractor and only accessing the use of our proprietary/patented
software and we charge more if we are building out the house for the homebuyer. We
typically have a larger overall margin when we are building the project out and taking on
more of a responsibility and frankly more headaches than just licensing our software.”
CEOCFOinterviews: It
seems to me that if you can give someone a price within one percent, it is a no-brainer
that they would want you to build it!
Mr. Skibo: “I think the value package of the one-stop
shopping coupled with the 15% savings is the big appeal. We can do everything for the
homebuyer starting with the house plan, giving him a price, helping him to get financing
and building the house out, in a way that ends up saving you 15% or more. If you are
building a $400 thousand house, that is a savings of about sixty thousand dollars and that
is meaningful to most people.”
CEOCFOinterviews: Why
did you start in the Charlotte area?Mr. Skibo: “It
happens to be where our corporate office is, so that is where we are starting. We can
build a house anywhere in the country. If you are a homebuyer and you have a lot in Dallas,
what we would do is go to Dallas, interview local builders there, and when we find the one
that we like and is interested, we bring them to Charlotte, train them on the software
program and the HouseRaising way of building a house. We would then enter into a contract
with the homebuyer to build that house in Dallas.”
CEOCFOinterviews: Your
costs are minimal; is that correct?Mr. Skibo: “We have a
very efficient operation but the other way we are able to save homebuyers money is with
our vendor relationships. We have vendor relationships where we get goods that go in the
house at substantial discounts. We pass along those discounts to the homebuyer. A small
builder is not able to do that because he is not doing the quantity of builds that we are
doing on a nationwide basis.”
CEOCFOinterviews: You
just announced today, some proprietary project management software; will you tell us about
that and why it is so important?
Mr. Skibo: “Our recent news event was that we filed for
patents around the System C software. That is the software that covers the 3,400 tasks. It
is laying out the whole process of building a custom home and all of the financial
controls that go with that along the way. Where a lot of small builders get into trouble
is they enter into a fixed price contract of let’s say $400 thousand. It is typical
that a homebuyer wants to make changes after the initial contract is signed. The small
builders do not have a way of capturing all that data into a common database. They also
need to have the controls in-place to get the homebuyer to sign off on all these changes
and have a loop back with the bank or whoever made the loan to get coverage for the
changes so when the construction is complete, the builders capture all the costs and the
homebuyer is properly financed. Often times this is where the builders get into trouble;
they have not captured all the costs. They haven’t documented it, so they come out at
the end of the project where they contracted to build the house for $400 thousand and all
of a sudden, it is $405 or $410 thousand.”
CEOCFOinterviews: Do
builders need to be educated into the use of technology or do they welcome it?
Mr. Skibo: “They welcome it. Last year, the founder of
this company wanted to make a check on desirability of the product to homebuilders, so we
invited builders from North and South Carolina to Charlotte. About 150 builders came in to
our headquarters after learning about what we had in terms of the software. Many of those
builders said that they would like to join HouseRaising and be a builder within
HouseRaising. Many of the others said that they would just like to license the software.”
CEOCFOinterviews: Why
should potential shareholders be looking at HouseRaising now?
Mr. Skibo: “I think the first thing to consider is that
we don’t need a lot of money to build a big business. It is very low-risk. With the
initial capital, we build the company through to cash flow, break-even. We take the cash
flow generated as we build out these regions and continue to reinvest in subsequent
regions. That is why we will be able to build out the 26 regions in five years generating
about $300 million in revenue in our 5th year. Our existing business plan only
includes going to 26 regions but we have ways of expanding beyond our base plan that is
three-fold. One is by franchising our operation. The second is by acquisition and we
have a couple of acquisition candidates we are working on at this time. The third is
to bring in more capital and expand the initial 26 regions in five years to perhaps double
that number. We have an opportunity to make this company into a far bigger company
over the ensuing five years.”
CEOCFOinterviews: What
affect might the housing boom have on HouseRaising?
Mr. Skibo: “It is interesting hat you should raise that
question. U.S.A. Today had an article out several weeks ago about a study done by
Brookings Institute that forecast the industry from 2000 to 2030 and Brookings Institute
was projecting a significant growth in that time span. There will be a number of houses
that were existing that will go out of the market so they have to be replaced and then
there is the natural growth associated with population growth. They were projecting
substantial growth for the home building industry over the next 30 years. I suspect that
if you looked within those years there might be cycles up and down, but for the long-term
they are projecting sizeable growth.”
CEOCFOinterviews: As
CEO, what is your focus?
Mr. Skibo: “Right now, I am spending a lot of time
preparing for the roll out of our regions, putting the proper infrastructure in place,
recruiting additional members of our management, and reviewing our business plan with
investors and potential investors. I pay a lot of attention to the financial aspect of the
business. I also have board business to tend to, so those are some of the activities,
which I deal with.”
CEOCFOinterviews: Are
there any final thoughts that you might have for our readers?
Mr. Skibo: “In summary, at HouseRaising, we have a
company that is likely to be a large company in a few years. We are in an industry that is
large and growing nicely. We have a terrific value proposition that is appealing to our
customer. Our margins are good; we have an efficient operation and have little risk. There
is a high probability that our stockholders will enjoy nice returns for investing in HRAI.
I think it is going to be a great place for our employees to work; we are going to make it
an enjoyable place to work with plenty of challenges yet a fun environment. We are going
to build something significant here.”
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