Shawn McCadden is a leading remodeling industry expert on the topic of Design/Build. He was the owner of his own multi-million-dollar design/build remodeling business; Custom Contracting, Inc., in Arlington, Massachusetts, incorporated in 1991. Accomplishing his original business goals and his written business plan, his business was employee managed by 1996 and he successfully sold his business in May 2004.
In this two-part article Shawn explains how a true Design/Build process could be used to build or remodel a Design/Build remodeling business.
Article 2 of 2, (Article 1)
Design/Building Your Business’ Future
Article 2 of 2, (Article 1)
Creating the Plan and Specifications
In part one of this article we looked at who might comprise the team if a design/builder wanted to build or remodel an existing business, using a design/build project as the analogy. In this article, we will look at ways to leverage the team’s talents and knowledge in ways that will help facilitate the design and construction of an award-winning and mutually beneficial design/build firm. Like any design/build project, a simple outline of activities must be identified and managed for successful completion of the design and the build. Consider the following list of activities as a place to start when creating your own list.
Explore Your Options, Then Decide How You Will Go Forward
First, explore your design options. Should you build up or out by advancing current employees or by bringing in new team members? You may need to do both. Should you take on more of the same project types you have done in the past or should you explore new niches? Will your existing business systems be adequate to grow and support the new business, or should you create new systems before you implement your plan? The options list can be endless, but like a good designer a good business consultant will help you concentrate on a combination of design options that can meet your business goals. I use the word “can” because the ultimate success of the design will likely be up to the business itself and not the designer.
Document Your Plan
Next, as you commit to options, develop a formal business plan to document your strategy in a sensible format. Similar to plans used by design/builders, the plan will not be put out to bid. This plan will be used by only one construction team and we already know what they know and can do. A simple strategy usually works well, provided your plan includes the critical information your team needs to build the project. Unless you are applying for financing or creating a new business, you may not need a lengthy and overly documented business plan. Also, as with project plans, have your employees review the business plan before you consider it to be complete. In this way they can provide input and /or specific details they feel will help improve and better manage the production phase of your plan.
Accurately Estimate The Cost Of Your Plan
Comparable to how those on a design/build team operate, estimate the project cost as the design evolves. This process prevents the over-design relative to your budget realities and/ or ability to capture the necessary resources. To accomplish this feat, find or develop a financial budgeting tool, such as a spreadsheet to explore “what-if” modifications to your plan. Allowing the owner to modify the design of a construction project without knowing the relative cost impact often kills the project. Designing a business plan in the same manner may net similar results.
Prepare Contract Documents
Once the owner commits to a design, its time to create contract documents. In this case, contract documents could be a contract with yourself, something to bind you to your commitments. Assuming they helped with the design, sharing this contract with your employees may help them see your commitment to their success. You may also want to create “subcontractor agreements” with others who will be involved in the construction of this business, such as the employees and any consultants. Be sure to add general conditions and contingencies into your agreements. The realities of life and/ or business may require that you edit or dramatically change your overall strategy. Don’t be stuck with a contract that requires you to fulfill the completion of a project that is no longer right for your company.
Create a Realistic Project Schedule
Next, create and confirm the schedule for construction, identifying the critical path required to achieve measurable milestones within your plan. Be realistic. The owner may get frustrated or loose confidence if the schedule is too aggressive or nearly impossible to achieve. Your critical path should identify which activities or milestones need to happen before moving to the next phase. Just as you cannot paint plaster until it has dried or cured, you cannot complete a future client’s project estimate until you know the markup that this new company must add to direct project costs. Determining that future markup requires completing your business budget beforehand.
Be Sure To Job Cost As you Build
Finally, be sure to job cost as you go, measuring your plans and financial assumptions against the reality of construction as it happens. I was speaking with a contractor in California recently who shared that he had almost a year’s worth of work already scheduled. Originally he thought this was a good thing. After speaking with his tax accountant, he realized that he had lost over $50,000.00 the previous year. Unfortunately, he had used the same pricing strategies to sell the work he was already under contract to complete.
A design/build project can take several months of planning and preparation before construction can begin. Think of the next year as a new project and start your business planning now!