The Design Builder's Blog

General Contracting Starts With a Good Construction Contract

Guest Blogger: Diane Menke, VP/Operations Manager of Myers Constructs, Inc.  Diane Menke (left) and Tamara Myers (right) are the co-owners and principals of Myers Constructs, Inc., an award-winning design to build firm serving the greater Philadelphia region. A certified Women Business Enterprise, Myers Constructs is also a member of the U.S. Green Building Council, NARI, and NKBA.

General Contracting Starts With a Good Construction Contract

Over the years, I have heard from many contractors — some of them with very big companies — about how they handle drafting their business contracts. Many times, these documents consist of a collection of "stuff some guys I know have in their contracts" cobbled together. It doesn't even occur to these business owners that laws vary by state, or that they might need an expert to customize contracts to fit their own business's unique needs. By not having a professional create legal documents that fit a clear sales procedure and overall company goals, they are putting their company at serious risk. I know because we learned the hard way, too. 

When we first started our business, we used "homemade" and very simple carbon copy contracts that Tamara put together over the many years she was a carpenter working for herself.  Basically, it stated: "Seller will do X for Buyer for $Y." Like most carpenters and trades people, Tamara loved working with her hands and helping people. Carpentry was a joyous creative outlet for her. At that time, if a customer didn't pay, Tamara would "make nice" in order to "keep the peace and her good name" and move on to the next project. Lucky for Tamara, most of her customers were good people, the projects were small, and she probably didn't lose as much as she could have. 

What motivated us

In 1998, we incorporated as Myers Constructs, Inc., because we had taken on a huge and complicated renovations project. We knew we needed serious business structures in place to protect us, so in 2001 we asked Dana Priesing, an attorney who is now our office manager, to read our contracts to look for problems. (She had us sign a contract before she did so!) Dana interviewed Tamara to better understand how she sells, and how our customers buy, and then gave us a few recommendations right off the bat:

1. Don't give away design work. That was a huge lost income stream. It drained endless hours of Tamara's time, and sometimes we didn't even get the project. Dana advised us to bill for it, and she created a contract just for design work. We can now use the same contract if a customer with an architect needs consulting work during the design phase. 
2. Our income streams should be separated out, and clear and simple contracts should be created for each one. We now have one for fixed price contracts and one for time and materials contracts, which are typically smaller, simpler projects.
3. Don't use "softening statements" EVER in contracts. By softening the rules, boundaries and regulations of our agreements, and by being vague about price, payment schedules, and customer expectations, we had unintentionally created confusion. Our customers didn't know what we needed from them in order to do a good job, so Dana created a contract for us that clearly and separately identifies buyer's and seller's responsibilities, rights, and remedies.

 Protecting our investments

Our company supports a lot of people. We have invested decades into it, and we are depending on it to help us retire. It deserves great contracts to protect those objectives. And great contracts mean we can sleep soundly at night because we know we are doing what we agreed to do at the right price, and we are protected against any possible issues that may arise.

Liked this guest blog?   You might like this one too:

What Happens In Vagueness Stays In Vagueness!

Guest Blog: What Happens In Vagueness Stays In Vagueness!

 Guest Blogger: Reva Kussmaul, owner of Remodel411.  Reva began her practice as a remodeling coach in 1998.  Reva believes that remodeling should be a 50/50 relationship and if it wasn’t cultivated as such - nightmares can occur.  According to Reva, those nightmares are typically caused by a gap in communication and it could come from either side.  For Reva it became quite obvious that someone who knew about and cared about both sides was a missing piece to the puzzle of remodeling nightmares.   So, she decided that both homeowners and contractors could use a coach when it came to their relationship - the remodeling relationship that is.  In this guest blog Reva talks about the difference between an designer and a decorator.  Check out her book: Remodel 411: Secrets to a Successful Remodeling Relationship

What Happens In Vagueness Stays In Vagueness!

I'm constantly running into consumers who, not only used the lowest priced proposal and bidder, they also want me to offer the lowest proposal to fix the work “done wrong” and yet provide the highest quality work.

I've looked at three "done wrong" electrical jobs in the past four months and one shower installed incorrectly as well. When I advise the homeowners about exactly what’s wrong and what it will take to fix it, they're blown away at my pricing.

I get very clear about what the costs are and why, even to the smallest details;  like "materials don't just appear - someone has to go to the store, wait in line, load the truck, use the gas to go to and from then get the materials to the job-site - all of which is part of the cost."  

If it’s too good to be true…

I understand home owners’  “wishin' and hopin” aspect of wanting the lowest price to work out; plus get high-quality work and having no change orders.   But much research has to be done by the contractor to know if such WILL be the case.  I always give my potential clients a possible change-order scenario regarding something that just isn't visible when going out to look at a project.  Plus, I usually have my sub go in the attic and under the house to check joists, plumbing, electrical to see just what might be change-order possibilities waiting to happen.

If he finds something questionable, the beauty of technology these days is - he takes a picture and shows it to the homeowner immediately, along with an explanation of the problem.

So, it's not accepting the lowest price that is the homeowner's challenge. It's "hoping" it will turn out the best and everything will work out as intended. Again, as I state all the time, it's a 50/50 relationship, not a one side is wrong all the time scenario. It's about clarity of communication on both sides. And, until both parties know and recognize this we'll keep hearing the stories and there will be a constant need of fixing the "jobs done wrong!"

Contractors must stop under-bidding. 

They should be honest about what things cost.  Being in business as a contractor is not a hobby, it's how we earn a living.   Homeowners must be willing to do the research it takes to find out why things cost what they do and stop wanting to get things "on-the-cheap".     I have found many homeowners who get it and, unfortunately, many who don't. Contractors can separate themselves and their businesses by helping them.

Solving this problem should also include a “how is your relationship with money” conversation; both about the giving and the receiving.  If either party is vague about their discussions about money think of it this way: 

“What happens in vagueness stays in vagueness!”

Love this industry and I will continue to move toward win/win rather than making either side wrong!

Making everything that goes or has gone wrong one-sided is to live in the problem and not become part of the solution.  I've had “homeowners from hell" and, on bad days and during some tough years, I’ve probably been thought of as a “contractor from hell".  For many of us it’s simply being human and bringing our personal “stuff” into our work.  Happens in every area of life and, truly, that is where the work lies.

I know there may be some web sites out there focused on making the contractor wrong but please keep the above in mind.   It’s a relationship and absolutely not a one-sided affair.  It’s a 50/50 and must be treated as such.

Let’s get out of vagueness!

Happy Remodeling!

Purpose of Accounting and Financial Management For Contractors

A fundamental goal of any growing business is to maximize and protect the profits.  By understanding the profit process - that is how to define it, create it, and measure it - a business owner or manager will come to better understand how fragile profits can be and the importance financial management plays in protecting it.   For many Remodelers first getting into the business, myself included, financial management skills were not necessarily part of our educational background.   However, our lack of knowledge on the subject would be a weak excuse to give our family for not being financially successful.

Try This Self Quiz To See If A Properly Setup Financial System Can Help You

Profitability is ultimately the responsibility of the business owner

There is way too much to learn about accounting and financing to cover or explain in this short blog article.  I suppose that is why it is actually a career for some people.  That’s why there are accountants, business consultants and financial advisors. For a business owner though, understanding and overseeing the process are the bare minimums.  The ultimate success and profitability of your company is typically not left to someone else; it’s the owner’s responsibility.  In order to identify what business owners need to do, I find have found it helpful to show my consulting and coaching clients a path for how it should happen. 

A simple path could be as follows

1. Make a plan for what you want to do and how you expect to do it.
2. Create a realistic budget for your plan so you will know what it will cost in total and how it breaks down into direct costs, indirect costs and profit.
3. Determine the markup percentage to add to your estimated costs, and what gross profit margin that represents so you will know if you’re on track as you complete projects.
4. Estimate your projects using qualified information for pricing assumptions, and then do job costing to track your actual results.
5. Use financial reports to monitor your actual gross margin, overhead costs and profitability.
6. Take advantage of the information you collect to make changes to your plan and or to create your next plan.

Is your accountant a historian?

With much to be learned, be sure you find the right accountant to partner with.  Do you want a historian who will collect your information and report to the government what happened while you were working?   Or, do you want a proactive partner helping you to create and protect your profits?  I tell my clients to seek referrals for someone who can answer their many questions and perhaps helps them create and understand the accounting reports needed to track business performance. 

Keep in mind this harsh truth...

If you still have a historian, it’s not his or her fault!

You Need a Target Before You Can Target Your Marketing

Recently three of my consulting/coaching clients have started the process of updating their web sites.   All three of them had sites that were created several years back and have since sat on the web with few if any changes, updates or the addition on any new content. Only one had a blog. All three of them also came to realize that prospects were not finding their sites via search engines.   However those prospects were going to their sites to find out more about the remodelers after they already had a first meeting and became aware there was a web site to look at. As a result of my questions and little follow-up discussion with their prospects these remodelers came to realize they essentially had static on-line brochures that offered little to differentiate their businesses from other remodeling businesses. And, they also learned that their sites did not attract prospects or help them move them along to a decision during the sales process.

I’m sure this story is true for many remodelers. If you’re one of them and you’re tired of never ending sales cycles, having to sell on price, working for people you’d rather say no to and you can’t seem to generate enough volume and or gross profit to have a healthy business; it’s time to decide who you want to target for prospects and start strategically marketing so they can find you and so you can convert them into customers.

Think of it like this 

The target below offers a shooter points no matter where the bullets land, as long as they land on the paper.  However, if the bullets land in the center the shooter will get far more points than if they hit somewhere around the perimeter.  The goal for the shooter should be to calibrate his or her weapon and then properly aim so the bullets hit the center each time.   The same holds true for remodelers.  If your margins are low because you’re not hitting the paper, or if you are and you’re only getting low scores, it’s not the targets fault and it’s not the weapon’s fault, it’s the shooter who needs to make the adjustments.

Need help?

One resource remodelers can take advantage of for help with better targeting is their vendors.  Vendors who carry well known product brands know which demographic of customers buy different products based on their quality, benefits and related cost.   They also typically get support in this area from the product manufacturers and distributors they do business with.   If you establish a relationship with a good vendor who offers marketing help and support, it can be like having a whole team of marketing experts working on helping you find more and better customers.   The great part about it is that helping the remodeler helps the vendor, the distributor and the manufacturer all at the same time.  When something gets sold everyone one wins!

Recently I had a discussion about this topic with Marshall Baser, Business Development Manager for AW Hastings in Enfield CT.   Hastings is a distributer that specializes in the Marvin Window and Door brands.  Marshall and his team work with the vendors they supply to help remodelers and replacement contractors improve their businesses and therefore sell more.   One way they do so is to help contractors better target their marketing to the right prospects for the different price points of windows Marvin offers.  In addition to help with strategy, Hastings also helps vendors and remodelers attract quality leads through joint advertising that highlights the remodeler, the dealer and the products. If that has you excited you’ll love the fact that Hastings and their vendor partners typically share the cost of the advertising with the remodelers they work with. 

Ready for the new normal?

Being successful and profitable as a remodeler is and will be different as we eventually enter into an improved economy with new and changing customer demographics.  Smaller remodeling businesses with fewer resources need to find ways to gain an edge in the marketplace.  I think Marshall summed it up really well for these businesses when he shared this advice:  "Contractors should consider aligning themselves with retail suppliers who truly understand them and their business.  They should get to know each other well, and create a strong business partnership with one another.  A quality retailer can be a tremendous resource helping the contractor improve their overall business volume and profitability through the products that they sell, as well as through the value added services that they offer, including targeting the right prospects for those products."

Guest Blog: The Perfect Storm  -One Contractors Opinion About the Dietz Lawsuit and Angie’s List

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.

(Click here to take the quick Dietz Lawsuit Survey)

The Perfect Storm 

I think the lawsuit overall will be a good thing, providing the Perfect Storm scenario doesn't pass thru and the contractor looses.

Most of my clients have never heard of Angie's list (I usually ask), and the one reference I have on there was to straighten out a bath remodel for a client who initially hired another contractor from "the list" to do the job and they botched it in just about every possible way.

That was a few years ago and the only follow-up I've had from that one positive reference has been to get hounded by the sales reps from the "List" trying to sell me bag after bag of magic beans (which is why I ask clients if they use the "list").

I agree that social media is here to stay and like it or not, the construction business is going to have to come to grips with it. It would be great for the construction professionals among us, if it worked properly. The downside is that any customer who gets tee'd off at you for whatever reason, legit or not, can get on there and bash you.

And unlike (in theory) our court system where you are innocent until proven guilty, in social media any mud thrown your way will stick to some extent.  It's kinda like online matchmaking services - if everyone on there told the truth, it would be a wonderful thing.

Nothing breeds respect like fear, and a few successful lawsuits by contractors caught in this situation is probably the only thing that will help keep it in check. The promotional sites like the "list" sure aren't going to. If they operated with that type of integrity, they wouldn't be telling the general public that "contractors can't pay to get on the List"; then repeatedly barrage us with the deal of the week to get our advertising dollars.

I wish Dietz luck on behalf of all of us.

Does CNBC News Interview With Dietz Show Media Bias? 

Check out this video of a news interview with Chris Dietz, the contractor who is suing his client, Jane Perez, for defamation related to her Angie's List and Yelp Reviews of Dietz and his business.   Based on the questions they ask him they either:

• They did not prepare very well
• They weren't listening to his answers
• They don't understand why he is doing what he is doing
• Or, they want to put their own spin on the situation. 

Check it out and let us know what you think.  You'll have to watch a commercial first.

 (Click here to take the quick Dietz Lawsuit Survey)

Click here for updates and information about the Dietz defamation Lawsuit

More possible Meida Bias?  Check the link below out and you decide:

A Woman Is Being Sued For Posting A Negative Review On Yelp

ACLU, Public Citizen to fight lawsuit over negative Yelp review  (Check out my comment, should be the first one, assuming they publish it after reviwing it)

How To Help Your Remodeling Prospects Make Buying Decisions

Consumers reading or watching the news are being fed information everyday about financial scandals, difficulty obtaining credit, increasing costs on just about everything, and the uncertainty of when things will improve.  Let’s face it, bad news sells better than good news, there is plenty of it and as a result consumers have a low confidence level. 

The consumer needs to have confidence

Before they will commit to buying remodeling, or anything for that matter, they need to have confidence in themselves, what they plan to buy, and, their salesperson.  Take the time in the sales process to understand their concerns so they gain the feeling that you know what they are up against.  Again, they want options, but just throwing options at them will increase their confusion and concerns about making a decision.  Work to gain their trust and confidence, not by what you say, but rather by the intuitive questions you ask. 

If you know and ask the right questions, questions that help them feel you must know what you’re talking about, and that get to the heart of the purpose for their project, as well as their concerns about it, they will come to see you as the trusted expert.  If you go about interacting with them in a sincere and purposeful way, they will come to trust you, your solution, your business, your purpose, and, ultimately their ability to make a good decision.

The consumer needs proof

A good conversational exchange may help swing a prospect over to your side, but I suggest they will need proof of your offer and claims so they can confirm any agreements and stay confident after closing the deal.  Proof can be accomplished in many ways.

For example you could provide strong references that can back up from personal experience your abilities and promises as real.  Professionally prepared project specifications and agreements that detail the project as well as the customer’s purpose for doing the project will show you truly listened and captured important details.  A payment schedule in your remodeling proposal based on project milestones can help them feel confident they will receive and actually see value as they make progress payments.  Describe for them your process for producing their project.  Let them know about your preconstruction and precompletion meetings and why you do them.  Tie several benefits of these meetings to any concerns they may have expressed during your discussions. 

Some of you may already be doing these things. 

If you are, but your still not seeing results, rethink how and when you do them.   Make sure your solutions are presented in a way that your customers can see how they address their purpose and concerns.   Don’t assume anything anymore, except that you can’t make assumptions.  People remember 10% of what you say, but 90% of what they say. If a customer says they like your solution, ask them why and seek a detailed answer.  In doing so they will hear themselves justify their decisions and you get a chance to make sure they didn’t add something you couldn’t deliver on or miss something you may already be including.  

Looking for sales training and or a sales coach? 

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.

Deitz Lawsuit Update: Ralph Nader To Fund Appeal Against Dietz Case

This from Chris Dietz just this morning.  I spoke with him briefly via phone on his way to join his daughter at school for an event.  We agreed to follow up on our conversation and offer more information later in the day, as he needed to spend his time this morning with his daughter. 

Here is what Chris Dietz shared with me:

The defendant is appealing to the Virginia Supreme Court. Oh, and Ralph Nader and his organization Public Citizen is providing the attorney(s) for the appeal.

I have sent an email, and spoken by phone to my local NARI, asking for help. If others can ask their local NARI chapters to contact NARI national about this case, and contact my local NARI or NATIONAL NARI, I would sincerely appreciate it.

I am just a small contractor locally trying to defend my business from lies, proven lies. This case can help protect all of us from bogus lies, false accusations from former clients, people claiming to be clients etc.

As business owners we have to wonder...  If this lawsuit is about protecting businesses from false accusations of fact, what is his motive for becoming involved? 

 (Click here to take the quick Dietz Lawsuit Survey)

The following update was added at 11:35 AM

Accoring to Mary Busey Harris, Executive Vice President, NARI National

"NARI National has reached out to NARI Member Chris Dietz and supports him in the quest to right this wrong. NARI National General Counsel and Board of Directors are reviewing the case and will determine next steps."

Short Video of TV News Report about Dietz Angie’s List and Yelp Reviews Lawsuit

According to the news report filed with the video below, a local TV New Station said that the case is far from over and could change the way consumers criticize businesses on the Internet.  According to the report:

 “Dietz says the situation has not only hurt his reputation, but cost him hundreds of thousands of dollars in lost business. He is suing Perez for $700,000 in damages. No word yet on when that trial will begin.”

(Note: According to the Complaint filed in court the lawsuit is actually for $750,000.00)

In the video below Chris Deitz offers his point of view regarding the actions of Jane Perez who wrote reviews about Dietz and his work on Angie’s List and Yelp.  Jane Perez’s lawyer also comments.

 (Click here to take the quick Dietz Lawsuit Survey)

 According to the same report Yelp released the following statement:

"Consumer freedom of speech provides an important public service, protected by law. Yelp provides a valuable contribution to this dialogue by providing a two-way platform for consumers to share their experiences and for businesses to respond to their customers. Courts have consistently ruled that consumers have the right to share their truthful experiences. As a result, businesses that choose to sue their customers to silence them rather than address their comments, rarely prevail and often bring additional unwanted attention to the original criticism."

In my opinion the Yelp statement is a cover-your-butt attempt by Yelp.

The statement does not address the issue of reviewers posting outright lies about a business and causing unjust and often business killing consequences for that business.

Click here for links to updates and information regarding the Deitz lawsuit.