The Design Builder's Blog

Rebuilding Your Construction Business On Purpose in 2013

Most remodeling and construction business owners didn’t start with a plan for where their business would end up; they just ended up where their businesses took them.   As they did business the employees and subs who worked for them, the clients who bought from them and the project types they bought are often the factors that eventually defined the business and therefore defined who their target customer type and job types are today.  If you’re not happy with where your business ended up, and you had to downsize during the recession, your current position might just provide an opportunity to rethink how you move forward before the economy and your business picks up.  Here’s a path to consider if you want a different business going forward.  Reflect back on and take advantage of lessons learned in the past as you map out your plan.

First establish goals for your business.  

Make sure the goals support both your professional and personal ambitions.   If you want to work to live, rather than live to work, now is your opportunity to make the change happen.

Your goals must be measurable

Next, establish metrics by which you will measure whether your business is on the right track and is achieving those goals.   In your metrics include ways to measure things like financial health, quality of service, quality of work, company culture, when you will be ready for the next stage of growth and the related employee growth or advancement that needs to be achieved. 

Decide who you will need for employees

Now that you have a clear idea of your goals and have defined objective ways to measure whether you’re achieving them or not, you can develop organizational charts for each stage of growth as well as job descriptions and candidate profiles for the people you will need to hire and advance.   Rather than let who you hire define your business and the job descriptions for those people, you will this time be able to proactively define, seek out and better qualify the right employees for each job position you will need to fill as the business grows. 

Here are a few examples. 

If you want to use a lead carpenter system, hire field staff with both trade and management skills.  If you can’t find real lead carpenters with management skills (because in reality very few exist) find good carpenters with the cognitive abilities and desire to learn and use those skills.  Then, train them yourself or find someone else to properly train them.  Your lead carpenter job description will help define the training you will need to provide.   If you want managers who will lead employees rather than supervise them, make sure you include that consideration in the employee profiles you will use to complement your job descriptions and hiring decisions. 

Putting the pieces together

If you hire the wrong managers you will be compromising your ability to hire and keep the right employees to do the work.   If you have to compromise on who you hire to do the work they will not be able to live up to your metrics or you will have to lower the standards by which you measure their performance.   If you drop the bar on your metrics you will either have to accept that you will never achieve your business and personal goals, or you will have to drop the bar on those too.

One definition of insanity is to keep doing the same things but expect different results.  If you want 2013 to be the year you changed the direction and performance of your business, you would probably be insane not to consider the path described above.

Thinking about figuring all this out on your own? 

If you and your business have the ability, the time and the money to learn all this stuff on your own check out this list of Five Great Books for Remodeling Business Owners.

Rather work one-on-one with a coach to help you?

Contact Shawn to find out how he helps remodelers and other construction related businesses all over the country achieve the business and personal results they desire.  If you're not earning and keeping enough money for your retirement yet he can help you change things.

Interesting Considerations For Putting The Right Employee On The Right Job

Just like business owners, all employees have their own strengths and weaknesses.  The key to efficiency and making money is recognizing these differences and putting employees in job positions and on tasks that they can be successful at.   One consideration is how employees learn.   As a business owner I came to discover that some employees are sequential learners while others are global learners.  How they learned new information and used it helped me decide who I should hire or not and ultimately what job positions and activities they should be assigned to.

Sequential Learners

Sequential learners learn best when information is presented to them in logical step by step order.   By presenting information to them in the order tasks should be completed, they can see how one step prepares for the next and or how subsequent steps are dependent on the previous step.   These employees are typically successful at repetitive activities, even activities that require a high level of skill.  Examples could include install crown moldings or estimating projects that can be done using a unit cost method.  However sequential learners might not make for good lead carpenters at a business where every project is different and or projects are highly detailed.   A sequential learner lead carpenter may be challenged if the business does not provide adequate project specifications and facilitated planning opportunities before the project begins.  Also, a sequential learner might not have success selling Design/Build projects to prospects who are global learners.

Global Learners

On the other hand global learners can take in random bits of information about a project or task and can quickly connect the dots between that information to assess a situation or assemble a solution on their own by quickly understanding the connections between those bits of information.   These employees can be very successful at job positions like handyman repairs, troubleshooting roof leaks and or gathering information from Design/Build clients who know why they want to do a project but might not know yet how to get started or what needs to be considered.   Also consider these employees might quickly become bored with repetitive activities or duties.

Why care?

It is important to recognize that every successful remodeling business needs employees with complementary skills.  A team dominated by one or the other of these learning types would definitely run into challenges.   Learning how employees and recruiting candidates learn and process information can help you make better hiring decisions and help promote employee retention.  Having the right employees in the right job positions can also help free the business owner up from “in the trenches” involvement in the business so they can concentrate on big picture and high value opportunities.

Example of why you might need both learning types on staff and in the right positions

Installing windows these days requires building science knowledge and an understanding of installation options regarding the methods and products that can be used.   A lead carpenter who is a global learner can be real good at understanding the science considerations and specifying appropriate installation details.   With those project specific details in hand a sequential learner carpenter can then be instructed by that lead carpenter, right at the jobsite, on how to install all the windows.   While the carpenter installs the windows the lead carpenter can be making the materials list for the next phase of the job so the materials will be ready for the carpenter when the carpenter is done installing the windows.  Unlike a production manager driven production system, because a lead carpenter driven system is being used, the global learner who specified the installation method is at the job site to oversee and if needed trouble shoot the efforts of the carpenter.  With a production manager driven system, after being instructed, the sequential learner carpenter might be on his own without anyone overseeing his or her activities to be sure the windows are being installed correctly. 

Right or wrong?

If you’re frustrated or disappointed with your current employees’ and or your production system’s performance you might have the wrong employees.  On the other hand you might have the right employees assigned to the wrong job duties.   Considering how they learn and process information might be the insight you need to get them and your business on the right track.  Let me know if I can help!

To Be Successful In 2013 Create a Business Plan And Do An Estimate

For me, when I still owned my remodeling business, getting ready for business growth meant I would first need to do two things; make a plan and create a budget. 

Create your plan

First was to create a plan for what I wanted to do and how I would do it.  I considered what projects I would specialize in, who I would work for, where I wanted to work, and how I would market my business so the right people would find me.  I determined how many employees I would need as the business grew and what skills they would need now and later so I could delegate some of my current responsibilities and include the money needed to do so in my selling prices.  After determining the how, I needed to predict how much.

A business budget is kind of like a project estimate

The first budget I created was very simple.  By looking at the end of year profit and loss report, the financial history of my business from the previous year, I was able to list the majority of the expense categories I would need to consider to predict the costs of my new plan.  For anything I wasn’t sure about, I would call my accountant or another remodeler I knew at my NARI Chapter for advice.  Just like a remodeling project estimate, I listed the related expenses and then got current prices for each of them.

The Numbers Game

Creating that first budget for my plan to grow the business seemed very overwhelming.  After all, I had never done one before.  Looking back, the hardest part about doing it was actually sitting down to do it.  

Once I had become clear on the financial definitions and formulas used, the budget actually went together fairly easily.   I admit it was very time consuming that first time.  However, because I kept notes on how I had determined certain expenses and where I got the information, the second budget I did was a breeze.  I did not have to completely recreate or try to remember the entire thought process.

Planning and budgeting assumptions

As a result of living through the experience, I developed four simple assumptions, in addition to keeping notes, which helped organize the way I looked at the process.  They should be completed in the following order as well.

1. Commit to making a real profit, establish how much, and think of it as an expense that must be paid.  You only need a budget if you plan to make a profit.  
2. Be clear on how you will define and separate direct and indirect costs.   Once you identify which is which, recast your current accounting software's account list.   This requires moving misplaced accounts and costs to their proper locations as either cost of goods sold or overhead expenses.
3. Look at the big picture.  Consider your annual budget as just one project, like a whole house project that takes a year to complete.  Use your profit and loss report for the previous year as a start to estimate the coming year’s budget. Then start making adjustments for each account to reflect any price changes and or your new plans for the coming year.
4. Be sure all of your direct costs will somehow show up in your individual project estimates.   Pay particular attention to labor costs, equipment purchases and repair, and general miscellaneous supplies.  Make sure the hourly labor cost you use is burdened over and above the wage you pay employees to include all labor-related expenses and benefits.  If you own and repair your equipment, and or you use assorted hardware and supplies that do not end up as line items in your estimate, establish a percentage to add to your estimated direct costs so you will cover and include these costs before you add your markup.

Using this simple process year after year, I came to learn how important it was to my business’ success that I planned ahead for what I wanted to accomplish.  With a plan in hand, and a budget for what it would cost, I had the confidence and motivation I needed to make success a planned reality.  I also had full confidence in asking for the real price I needed to sell each project.

25 Sample Questions Contractors Can Use For Prequalifying Prospects

Smart remodelers and contractors know that time is money.   Wasting time on the wrong prospects eats up the time they need and should be spending with the right prospects for their businesses.   By using methods to prequalify leads contractors can gain back a lot of time currently being wasted on people who were either the wrong client types and or were never going to buy from them to begin with.

Incorporate prequalifying questions into your lead sheet

Below is a list of suggested questions contractors can use to help determine whether someone who inquires about doing business with them meets the business’ pre-established definition of a targeted prospect.   To help contractors make best use of this list I’ll be discussing how and when to use these questions, on the phone and or in person, at an upcoming sales workshop.   At the workshop I’ll also explain how to customize a lead sheet using questions that help prequalify a prospect and captures information the sales person can use if a sales call is scheduled.  With the right lead sheet as a tool, anyone at the office can be trained to use the lead sheet to begin the prequalification process even before a salesperson becomes involved.

What you say and how you say it

If you plan to use any of the sample questions below, be sure to put them in your voice and or use your own vernacular.   Just be sure your prospects will understand any of the words or terms you use without the need for previous construction or remodeling experience.

Questions for prequalifying prospects:

1. Is there anything you’d like me to know before we begin; about you, your family, your home, your expectations…?
2. Why do you want this done?
3. Have you remodeled before?  What was that like?
4. What are you looking for in a contractor?
5. How long have you lived in your home?
6. How long do you plan to stay in your home?
7. Do you know what year your home was built?
8. How long have you been thinking of remodeling?
9. How long have you been considering this project?
10. Are you trying to stay within an investment amount?
11. What is your ideal start date?
12. What is your ideal completion date?
13. Have you done any research on this project?
14. Where are you in your research process?
15. Are you looking to hire a carpenter, or a professional remodeling company?
16. Are you speaking with any other contractors?
17. Is there a reason you haven’t already decided to work with one of the contractors you have already spoken with? 
18. Is there something you were hoping I would be able to do differently?
19. Do you have any plans or a design in mind?
20. Are you interested in financing or paying cash?
21. How will you decide which contractor you will partner with for your project?
22. How will you measure whether or if your project has been successful?
23. Will there be anyone else involved in making decisions about this project or which contractor you will choose to work with?
24. When Mrs. Jones referred you to us/me, was there something she said that stood out and motivated you to contact us/me?
25. Are you looking for an estimate or a fixed price for this project?

Bonus question:

What do you think we will need to do or discuss if you want me to give you a fixed price for your project?

Remember, contractors make money selling the job, not building it!

Want to sell more jobs and make moe money?  Need sales training or coaching to help you and or your team reach your sales goals?   Contact Shawn today to discuss how he can help.  

Lumberyard Ambassadors - Partnering With A Lumber Dealer’s Yard Staff

Several recent surveys and polls indicate that contractors, when they have more than one option to consider, put a lot of weight on relationships when they share why they choose one lumber yard or supply house over another. Let’s face it, whether shopping at a lumber yard or at your local grocery store, when you enjoy some type of positive and mutually beneficial relationship with the employees representing that business you become much more motivated to stick with that business and even refer others to that business.   Good lumber dealers know this and make it a priority to offer training and mentoring for their employees.

Earlier this week I presented a webinar hosted by The Northeast Retail Lumber Association (NRLA) and sponsored by The Lumber and Building Material Dealers Foundation (LBMDF).  LBMDF supports and advances the educational and charitable programs of the NRLA.  The webinar was for lumber dealers’ yard staff.  The purpose of the webinar was to help yard staff see and take advantage of how their efforts can help the lumber dealer they work for, the contractors they serve, as well as the yard staff employees themselves. I like to refer to them and hope they see themselves as “Lumberyard Ambassadors”

During the webinar I asked the attendees to share their suggestions for how contractors could help them do their jobs better and make their jobs more enjoyable when doing so. 

Here are some of the suggestions they had to offer and some of my thoughts as well

As a contractor please don't come in with a bad attitude.

This one can go both ways.  Actually, it was also on my list of pet peeves to share with the attendees!  Contractors and yard staff can both have legitimate reasons to be in a bad mood.  However, it doesn’t mean that bad moods need to be shared or demonstrated by either party.  As professionals we all need to control our emotions.   Plus, if you let your bad mood effect how you interact with lumber yard staff, they might just be inclined to return the “favor” the next time you’re in the yard.

Better planning by contractors. When we have to go out multiple times to one jobsite it costs us time, when we could just go there once.

I shared with the attendees that this was one of those things I have been working on for years; trying to help contractors and their employees improve their processes and even use checklists to help make sure everything is on the job site before it is needed.  Here’s the thing; making multiple trips cost both the contractor and the lumber dealer money that could be better invested elsewhere.  Plus, if as a contractor your employees aren’t smart enough or don’t care enough to plan ahead, it might be time to find new employees who can and will plan ahead.  If you or your employees need training to help curb this problem, consider attending this production workshop.

My drivers need good directions from the contractors; many times the contractor isn't very helpful.

Again, I think this is one that both the lumber dealer and the contractor can share responsibility in.  Whoever takes the order at the yard needs to ask for directions and should also probably make a point of always asking if there is anything they should know that would help the driver find the right location for the delivery.  At the same time I think contractors should also be proactive by speaking up and offering advice if they know their job site is difficult to find or access.   Posting a job sign in a visible location could be helpful.  Also, if there’s no room to turn around to strategically drop a load where you want it, why not suggest that the driver back in from the street when you’re placing your order.

Bottom Line

By fostering a good working relationship, contractors and lumber dealers’ yard staff employees can both make their jobs and their day much more enjoyable.   And keep in mind; each has an opportunity to set the example for their peers.  Many thanks to the webinar attendees for sharing their thoughts!

Have a suggestion to add to the discussion?  Please share it by leaving a comment below.

Guest Blogger: Thomas Messier, CIC.  Tom is Vice President of Construction Industry Services at Mason and Mason Insurance Agency, Inc. in Whitman MA.  He speaks frequently to construction industry groups about insurance related topics. Tom is a Certified Insurance Counselor, and is a graduate of St. Michael’s College.

Note: To help better understand this article you might want to first read Tom’s previous post titled: Does Your Liability Policy Have the Right ‘Coverage Trigger’?

What’s a “Triple Trigger” — Can You Or Your Insurance Agent Answer That Question?

The Set Up

Let’s say five years ago you completed work on a commercial construction project. Then last month you received notice that part of the structure collapsed and that your client is filing a claim against your firm for the needed repairs, plus loss of use of the structure during the rebuilding. Their complaint is that your original work was done improperly and the stress cracks had been noticed soon after completion. “It was only a matter of time,” alleges the complaint, “before this collapse happened.”

Now What?

Ignoring for the moment the fine points of litigation, which Liability insurance company should you notify? Your current carrier? The one who had your policy at the time of the construction? Or both of those, plus every policy you’ve had during the past five years?

Although the correct answer will depend on the nature of the claim and the exact cause of the collapse, the best response at this point would be “all of the above.”

Policy Details Are Very Important

Because Liability policies usually state specifically that they cover damage occurring during the policy period only, you’ll need to ask when the damage actually “occurred.” At the time of original construction — during the time the cracks allegedly appeared and continued to worsen — or on the day the actual collapse took place?

Many courts, when faced with similar situations, have ruled that all three apply.  This is what’s called the “Triple Trigger”.  The courts held that because the damage had been occurring continuously since the first day of construction, every policy since then should provide a defense.   And, if you’re found liable, you’ll have to pay a part of the claim as well.

The Good News

If you’ve been dealing with reputable and skilled insurance providers and your policy has been continuous and reviewed regularly in a constantly changing marketplace, the coverage will be there for you regardless of the “trigger” applied by the courts.

Bottom Line

If you have an experienced and recognized construction insurance specialist helping you, you’ll sleep better at night knowing an expert is watching out for you, even if you’re not fully sure of what you have to watch out for!

Window Giants To Face Off in Hockey Battle Supreme For a Good Cause!

On Saturday January 12^th there’s going to be an international hockey battle in upstate Minnesota.  Window manufacturing rivals Marvin Windows and Loewen will each be sponsoring a hockey team made up of their employees.   The game is a charity event, but you can bet that winning the game, and taking bragging rights, will be a huge part of the event!

“We’re happy to invite our friends from Loewen to Warroad, to show them how we play hockey in Minnesota,” says Paul Marvin, Marvin's Director of Materials. “All kidding aside, these are two great companies that share a Northern heritage and a love of winter sports that crosses national borders. We’ll have players from just about every department, and every age range."

But, it’s not just about hockey. 

It’s about building and maintaining a community.   This event is a fund raiser to help raise money for Warroad’s newly remodeled Olympic Arena. Refereeing the game will be Warroad native, NHL All-Star and 1980 Olympic gold medal “Miracle on Ice” team member Dave Christian.  I also found out there are already plans for a rematch in March on Loewen's turf in Canada!

If there’s a town that lives and breathes hockey, it’s Warroad Minnesota, home of Marvin Doors and Windows.  I’ve been fortunate enough to have been invited up to Warroad by Marvin to visit their corporate location, training center and manufacturing plant more than a dozen times.   Each time I hear and learn more about how important hockey is to the community in Warroad and for the employees at Marvin Windows and Doors.  One Marvin employee, Tim Slukynsky, Tours and Training Instructor, takes hockey very seriously.   Check out this video of Tim and his kids’ backyard hockey rink.  I can tell you from my experiences chatting with Tim; he does this rink every year for the love of hockey and instilling that same love in the children of the Warroad Community. 

Other than ice fishing, what the heck else would kids want to do during those cold Minnesota winters besides play hockey at Tim's House! That's where I would be!

Guest Blogger: Thomas Messier, CIC.  Tom is Vice President of Construction Industry Services at Mason and Mason Insurance Agency, Inc. in Whitman MA.  He speaks frequently to construction industry groups about insurance related topics. Tom is a Certified Insurance Counselor, and is a graduate of St. Michael’s College.

Does Your Construction Liability Insurance Policy Have the Right ‘Coverage Trigger’?

What Is An Insurance "Coverage Trigger"?

A “coverage trigger” is an event that causes your Liability policy to pay a claim. There are two basic types of “triggers”: occurrence and claims made.

What is an Occurrence Trigger?

An “occurrence” trigger means that the policy will cover any injury or damage during the policy period. For example, if a roof that you installed four years ago collapsed last week, injuring five people, the occurrence trigger will apply and the policy will pay. It doesn’t matter when the roof was built or when the claim was filed – only when the actual injury took place.

What is a Claims Made Trigger?

A “claims-made” trigger, as the name suggests, focuses on the date the actual claim is made. Underwriting and rating provisions might limit how far into your past the policy provides coverage. However, the key question is: “did the claim come in during the policy period?” If so, a “claims-made” Liability policy will pay. Using the example of the collapsing roof, it doesn’t matter when the roof was built or when the event took place, the trigger won’t apply until the claim is filed.

If this claim is made during the current policy period, your insurance company will pay it. However, suppose the claim isn’t made for several weeks, and by the time it arrives, your current coverage has expired and you’re into a new policy period? In this case, the “claims-made” policy will pay the claim, since it was made during the new period.

Maintaining Coverage Is Key

One type of trigger isn’t necessarily better than the other. However, it’s almost always wise to keep the current type in order to provide relatively seamless coverage.

Make Sure Your Insurance Agent Is Able To Offer The Right Advice

Questions to ask your insurance provider if your a contractor:

• What is Claims Made Liability Insurance Coverage?
• What is Occurrence Liability Insurance Coverage?
• Which one is right for my business and why?
  

If you’re offered a Liability policy that offers broader coverage or more attractive pricing – but has a different trigger than your current insurance – consult with a construction insurance specialist before you make a decision. The only way to be sure you get the protection you need at a fair price is to consider all possible underwriting considerations and how the change in coverage trigger might affect your liability needs.

Watch for Tom's next guest blog where he'll discuss what a "Triple Trigger" is and why you should care about what it is.

A Simple Strategy For Payment Schedules That Create And Protect Cash Flow

Contractors are forever complaining that they don’t have adequate cash flow when producing projects.  More times than not they blame this on their customers, citing that the customer is holding back or delaying progress payments.   If a contractor keeps working without getting paid he or she has no one to blame but themselves.

Consider these questions. 

Will Delta Airlines let you pay after you land?  Will Dell Computer let you pay for a custom computer after it’s built?   Of course they won’t!  So why do contractors find themselves financing projects for their customers and then end up waiting and even begging for their money?

Protect your cash flow before you sell the job!

On February 26^th, as part of a six workshop program, I’ll be leading a strategic estimating and proposal creation workshop for contractors titled: “Know What You’re Selling Before You Sell It!”   One of the topics I’ll be covering in that workshop is how to write a project payment schedule that creates and protects cash flow.  I’ll also be explaining how that same payment schedule, if explain correctly to a prospect, will help a contractor sell the job.

Below is a brief summary of how to do it and what I will be sharing more about with the attendees.   The attendees will then be encouraged to try the strategy when estimating and selling their next project.  They can then come to the free lunch and learn session scheduled before each next workshop for help with any questions or challenges they experience implementing the new strategy.

10 Steps to create and protect cash flow:

1. Estimate all tasks in critical path order (same order you would actually build the project)
2. Group tasks to establish easily definable (for the contractor and the property owner) project and payment milestones
3. Add up all direct costs the business will incur between milestones and include overhead and profit
4. Establish payment amounts based on the total cost of the milestone (Including overhead and profit) plus add some money to each to maintain frontloading for safety (you’ll make up for the frontloading when establishing the final payment)
5. Word payment schedules so each payment will be due prior to the start of each milestone
6. Collect the money needed to finance all of a milestone’s tasks before you start it (don’t be Wimpy on this!)
7. Get a significant amount of the outstanding balance at the second to last payment
8. Make sure the project cannot be used for its intended purpose until after the second to last payment is received.
9. Make the final payment due on “Substantial Completion”
10. Make sure the final payment is far less than your expected net profit but a comfortable amount for your prospect

Guest Blog: This Contractor Avoids Bad Reviews.  Is He Lucky or Smart?

Guest Blogger: David Profitt, owner at Profitt Custom Homes, LLC is a NC Licensed General Contractor.  David’s business offers construction of custom homes and remodel/renovation projects ranging from simple decks and porches to whole house makeovers, all as a Design/Build contractor.

Avoiding Bad Reviews

Anyone who has spent much time in this business knows full well the law of averages apply religiously. Out of every 10 customers, you will have two that think you're great, one that thinks you're a thief and the rest fall somewhere in between.

I suppose the word is "thankfully", the rise in social media has been offset by the economy so the events highlighted in the Dietz lawsuit news story haven't become as widespread as they no-doubt would have otherwise. I have been fortunate that over my nearly 3 decades in the business the overwhelming majority of my customers have been well satisfied with the work I did for them. But. like everyone else, I have had a few that felt otherwise.

Lucky or Smart?

"Thankfully" may not be exactly the correct word for it, as I typically put in a lot of long hours planning every project before the first shovel hits the ground, draw out the projects in cad (3D since 2001), run structural analysis on everything affected (engineer for 11 yrs before getting into building), put only known-entity skilled tradesmen on the job, personally oversee all the projects, visit the adjacent neighbors and introduce myself before stating any project that might potentially impact them, and constantly communicate with the client.

So I wouldn't attribute the low percentage of problems to just luck, but every once in a while you're going to get that one "special" client.....

Some real examples from my experience:

• The one who, at the closing table on a completed new home, decided he wanted to re-negotiate the price and not pay for his $15k in accumulated change orders.  I went to a "pay as you go plan" after that.  
• Or the one where the client had a one-of-a-kind rooftop cedar deck built as an add-on to the original whole house remodel. She was thrilled to death with it until a trusted friend who lived 300 miles away in a totally different building-cost market told her she had payed too much for it.  Truth is I had over-charged her so badly that I actually lost money on it.
• Or the guy who wanted a financial concession out of the cabinet maker when the CM put a more expensive (turned) faux leg on his master vanity that was shown in the CM's pre-construction 3D representation. This was even though he and his wife both liked it a lot better than what they had "approved" and the price didn't change.

The more I think about it, the more I'd like to retire.