There are two major components to profitability: cost of sales and operating expenses. Included in the cost of sales is the cost of the land and the direct construction cost (sticks and bricks and the labor to put them up). Both these costs are variable, meaning they are attached to a unit or house and change in direct proportion to changes in volume. By contrast, most of the operating expenses are fixed in nature, which means the expenses are the same from month to month and will not change with changes in volume unless management intervenes either to increase or decrease the expense. To maximize profitability it is essential the fixed operating expenses remain in balance with the sales volume.

The staff represents the major portion of two of the operating expenses classifications: indirect construction cost, and general and administrative expenses. In the indirect construction cost classification, we track the superintendent's salaries and those other employees supporting the field operations. In the general and administrative (G&A) expense category, we track salaries for office personnel and top management level employees. Therefore, monitoring the number of employees as it relates to the sales volume and the ratio of dollars spent in indirect cost and G&A expenses provides feedback as to the efficiency of the work force and its burden towards profitability. 

Your model merchandiser's job is to ignite potential home buyers' dreams while creating a realistic 'story' on how to live happily in the homes you build. With excellent interiors and great architecture, potential buyers undoubtedly fall in love with their future and all parties end up happy. But, before the happily-ever-after is found, there are many steps, leaps, even bounds all partners must take to ensure success. And with challenging timelines and tight budgets, a good working relationship with clear communication will make all the difference!

At Lita Dirks & Co., we have successfully created and cherished the relationships we have made over the last 30 years of being involved in the industry. With our extensive background, we have learned the do's and don'ts of model merchandising. Here are some tips on creating a win-win relationship that helps fuel sales. 

• Your interior designer/model merchandiser should be on board as soon as you get the architect on board. The earlier they are involved, the more they can learn about the market, location, lifestyle and community as well as your branding and any challenges involved with the project. Remember, a good merchandiser can also provide valuable input on floor plans, window placement and much more. 

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