The Design Builder's Blog

Guest Blogger: Spencer Powell, Inbound Marketing Director at TMR Direct.  Spencer joined TMR Direct to spearhead their social media marketing efforts and to assist clients who want to implement social media marketing campaigns.  He also specializes in helping builders and remodelers who are frustrated with the lack of leads they are getting from their current websites.  Recently Shawn and Spencer have teamed up to help several of Shawn’s consulting clients.  First, Shawn helps remodelers strategically identify and decide their target customer(s), project type(s) and niche(s).   As an Inbound Marketing Certified Professional, Spencer and his team then help remodelers get found by their targeted prospects on the web. 

How Your Website Can Get You Involved in the Homeowner's Sales Cycle

Just think about it for a second.  That's how you find EVERYTHING today.  Yes, I'm talking about Google.  If you're looking for a product or service, there's a good chance the first place you'll go is the web.  This is where your research process begins.  Well, it's the same for homeowners who are looking to remodel their kitchen, bathroom or any other part of their home.

Helpful information is key

So, how can you ensure that you'll be a part of their research process...and how can your website help you do that?  There are a few factors that we want to look at.  First, your website needs to have lots of helpful information that your prospect might be looking for.  This could be information on the process of going through the design phase.  It could be warning signs to look out for when selecting a contractor.  It could be information on cost and why certain things cost more or less.  It could be information on change orders.  Think about it.  The more information you can provide to your prospects, the fewer questions they'll have when they contact you. 

BUT...most importantly you'll position yourself as a trusted advisor in your industry because you're the one helping them make an important decision.

Google LOVES content

In addition to becoming a trusted advisor, the more content you create on your website, the more chances you have to actually get found in search engines like Google.  Google LOVES content, so the more you create, the more you'll be found.  Just think of your website like a planet.  The more pages and articles you create, the bigger the planet gets, and the more gravitational pull it has.  So, you'll be pulling in more web visitors. 

Once you have more prospects coming to your website because of the content, you'll notice that your website actually helps you get heavily involved in the homeowner sales cycle because you're helping them with their research.  In addition, your information doesn't all have to be readily available.  It's a good idea to have and offer much more in-depth information that a visitor can download.  This might be in the form of an eBook like "10 Kitchen Design Trends for 2012".  However, in exchange for being able to download it, they need to provide their Name, Email, Phone Number and Zip Code.

Once captured, nurture those leads!

Now you're in great position to solidify your company as one of their options for helping them achieve their goal.  This is where lead nurturing comes into play.  Lead nurturing is simply sending out helpful emails with more information that helps your prospect do research.  These emails allow you to stay in touch with the prospect all the way through the sales cycle.  How to execute a lead nurturing campaign is the topic for another post, but are you starting to see how your website can really get you involved in the homeowner sales cycle?

What are YOUR thoughts on this?  Are any of you using your websites to participate in your prospects’ sales cycles?

Designer or Decorator – Know and Manage the Difference

 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

COMMUNICATE TO CREATE AN AMAZING REMODELING EXPERIENCE

IT’S ALL ABOUT THE TEAM-WORK!

Contractors & Homeowners:  There is a distinct difference between someone who chooses pretty things for the home (see the definition for decorator below) and someone who knows what choosing pretty as well as designing for the building/installation of pretty is (see definition of designer below).

Designer:  A person who plans the form, look, or workings of something before its being made or built; a creator, planner, inventor; maker, architect, builder.

Decorator:  A person who decorates, in particular a person whose job is to decorate the interior of someone's home, by choosing colors, carpets and furnishings.

Many decorators call themselves designers and they are far from it

I’ve worked with them, so I know.  Now, I’m not making them wrong for what they do, I’m saying how they define themselves is incorrect.

Perhaps it’s easier to sell one’s services if called a designer as opposed to a decorator - maybe more money can be charged?!  However, there is a very important difference.  When a decorator, who sometimes has no true knowledge about building, has a plan B with possible change orders for “unforeseens”, etc.; the project suffers UNLESS they have consulted with the contractor and are willing to refer to their expertise.  Then, we have what is called “a team” and an experience is created.

Design/Builders can offer the full service option

This is also part of the remodeling relationship I write about in Remodel 411: Secrets to a Successful Remodeling Relationship. My advice to homeowners - choose a design-build firm that is full-service and if you feel a need to have someone help you decorate with pretty, simply ask if their company is staffed for that service as well.  Save yourself time, money as well as emotional fall-out.  In the long run, this is what will create a great remodeling relationship.

My suggestion to design/build firms is to have a decorator either on staff or one you’ve built a good relationship with available to you, that is willing to work in conjunction with the designer and/or contractor as far as the pretty aspect of such things as tile lay-out, mirror and sconce placement goes.  This is where creating a team comes into play.  When all parties are able to communicate clearly with one another and work together everyone wins.  That’s the whole point - everyone does what they’re good at, has a good time and works together so more business is forth-coming.

It’s about clear communication and teamwork

A great team, which includes quality craftsmanship, is what creates a win/win experience for all involved. It’s not about anyone being right or wrong, it’s about creating an amazing experience.

How to Cover the Cost of Non-Productive Time in Your Remodeling Estimates

As a remodeler you need to know what your labor costs are if you want to price your work properly and for profitability.  Inside estimates, your estimated labor costs for any project must include everything required to compensate and support field employees.  This labor rate is called the burdened cost of labor or your burdened labor rate.   Of course, the total estimated cost is then marked up by a predetermined factor so the selling price also covers your overhead and planned profit.

If you have been guessing at the markup you use, you might want to read this article.

Non-Productive time

Check out the Labor Worksheet below.  An important consideration when determining the burdened cost of labor is the difference between the hourly pay you give an employee and the hours that they actually work producing income. When you add up all of the hours for paid vacations (one week, 40 hours), holidays (five days, 40 hours), paid time while attending training programs or trade events (10 hours total), as well as attending company meetings (2 hours, every other week, or 50 hours annually), where will that money come from if you’re not charging for it in your estimated labor costs? 

Request a FREE copy of Shawn McCadden’s Burdened Cost of Labor Worksheet

How much is non-productive time costing your business?

Many remodelers I’ve worked with never even realize that they’re making this mistake. With the standard fifty-two weeks in a year and a 40-hour work week, your company pays each full time employee for 2080 hours. The time paid for non-productive hours, as listed above, totals 140 hours, or 3 ½ weeks.   Look at row 54 of the worksheet.  The wages alone to be paid to the employee total $2800.00.   That doesn't even include other related costs paid by the business like payroll taxes,  liability insurance and and workers compensation insurance!

No more guessing!

So, when you determine the burdened hourly rate to use in your estimates and for job costing you can't be guessing. To get the accurate rate you must divide the total annual cost to compensate and support each employee by the number of hours he or she will be working producing income. For the example above, you must collect enough money in 1940 hours of productive time so you will have enough money to pay the employee for 2080 hours.  Non-productive time and other labor related expenses are easily calculated into a burdened labor rate using a spreadsheet like the one shown above.

Request a FREE copy of Shawn McCadden’s Burdened Cost of Labor Worksheet

Remodelers: I Bet You Don’t Know Your True Burdened Labor Costs

Labor cost is one of the most difficult costs to predict in an estimate. Basically, this cost is determined by calculating the hours required to complete a task or project and then factoring those estimated hours by what it costs your business per hour to compensate and support your field employees.  The cost per hour to compensate and support your field employees is commonly called burdened labor costs or your burdened hourly rate. 

If you’re not sure which employee you’ll assign to the project you are estimating, it might be wise to use the burdened labor cost of the highest-cost employee and then also estimate the work hours based on his or her abilities and performance. If you are using my Free Excel Estimating Template, this would be the rate you would enter into the top section of the template as shown below.  (Note, depending on your company’s situation, other options for which rate to use might make more sense.)

Don’t use another contractor’s labor rates

Because no other company is exactly like yours, it’s important to know precisely how much it costs your company to do business. The burdened labor cost used inside your estimates must reflect your company’s actual expenses. If you don’t know your true labor costs and or how to determine them, and you fail to account for a couple of dollars per employee per hour, your loss could quickly become significant.   To make matters worse, also consider that the if the costs are missing from your estimate, those missing costs will not be marked up and included in your selling price to help contribute to required overhead and profit.

Burden and benefits

The hard cost of labor includes not only the hourly wage of the employee, but also all employer-paid taxes, Social Security, insurance, vehicle expenses, and any employee benefits. Workmen’s Compensation, liability insurance, auto insurance, paid holidays, vacations, medical benefits, education, employee meetings, cell phones, pagers, and every other labor-related expense must be factored into your hourly rates. 

Keep in mind, if and when the new Obama Health Care Law comes into effect, you will need to add this cost to your burdened labor rates for each employee.

Also, be aware that Workers Compensation rates are expected to increase in many areas around the country.   You might want to budget early for this increase.

The burdened cost of labor will be different for each employee

To calculate the burdened labor cost you should use when job costing employee time cards, you’ll need to collect the expenses specific to each employee. For example, one employee may have a company vehicle; another may get a vehicle allowance. This consideration alone will result in different costs for each, even if the two employees are paid the same basic hourly rate.

Are you paying for non-productive time?

In my next blog I will discuss how missing or improperly accounting for the cost of non-productive time may be eating away at your bottom line.  I will also share how to build the cost of non-productive time into your burdened labor costs and how you can down load a free Excel Labor Burden Calculator.

Compliance Checklist: Will You Be Ready If OSHA Visits Your Job Site?

Recently there has been a lot of buzz around the remodeling and home improvement industries regarding OSHA enforcement.   OSHA has definitely stepped up its focus on residential construction.   With the onset of summer weather much more work is being done outside making it easier for OSHA Inspectors to observe not only where work is happening but also easily observe and identify violations by only having to drive by construction sites.  Inspectors have been instructed; if you see it - make a visit.  One contractor even reported that an OSHA Inspector was driving around Cambridge MA on a bicycle!

OSHA requirements are not new, even though you might think so by reading some of the banter on sites like LinkedIn.  Significant OSHA enforcement within the residential construction industry has only recently been happening and has been getting a lot of press coverage.  As a result many contractors are only just now becoming aware that OSHA compliance and the related expenses to comply apply to them.    

When Does OSHA Apply?

OSHA requirements do not apply if you are the business owner and only work alone.   However, OSHA requirements do apply when employees or other workers conduct work activities at your jobsite. So, if you are a general contractor, OSHA will hold you responsible for verifying OSHA compliance and overseeing the actions of your subcontractors while at your jobsites.   

Depending on the type of work you perform, specific OSHA compliance requirements will vary.   To simplify what you need to consider, just assume that no matter what they are doing, your business is responsible to protect the health and safety of all workers at your jobsite.  To protect your business and your employees, I suggest OSHA compliance oversight should be included in the job descriptions for lead carpenters, production managers and project managers.

Be Sure To Document Worker Training

Below is short a list of things contractors should consider if they want to be ready when an OSHA Inspector drives by and or stops in to check out your job site.  This list comes from Mark Paskell of The Contractors Coaching Partnership.  Mark helps contractors and their employees comply with OSHA.  He offers group training classes as well as company specific training and assistance with compliance requirements including jobsite practices and the gamut of required documentation.  When I spoke to Mark about this topic he stressed that OSHA was concentrating heavily on worker training and protection from fall hazards, and that contractors needed to have written documentation of the training they provide.

OSHA Compliance Checklist for Contractors:

• Keep your job site in a clean an orderly manner
• If on roofs above a 4 pitch use anchor points, harnesses and lifelines
• If you do not use harnesses use guard rails
• When setting ladders make sure they are 3 feet above the roof edge and on stable ground
• Don't use ladder jacks with ladders over 20 feet
• If you use ladder jacks over 10 feet makes sure you are tied off from above
• Wear hard hats and safety goggles
• Make sure scaffolding is set properly with planking
• Set ladders at the right angle
• Don't climb scaffolding bracing
• Don't use the top steps of your step ladders
• Use ladders and step ladders only within the manufacturer's parameters 
• Use guard rails on pump staging and do not forget the ends
• Cover skylights in the work area
• Always us guard rails on landings, stairs and ramps
• Use guard rails across large openings on upper levels
• Don't set ladders or staging within 10 feet of power lines

Should You Add Design/Build to Your Company Name?

Naming or renaming your building or remodeling company is an important decision. Many business owners may not realize this significance or the long-term impacts this decision can have. Many things can and should be considered before committing to a business name, far more than can be covered in this blog post. The purpose of this blog post is to focus only on what architects and other design professionals may think about your business if you add the words Design/Build to the business name.

I suggest that you don’t look at this information as an architect-bashing session or as a complete guide for making your own decision. Concerns expressed here are based on real experiences shared by contractors. Use what is being shared as a start toward qualifying what you should consider. Then, Design/Build your business’ name.

Will architects be willing to work with you?

If they find the words “Design/Build” in your company name, many architects and design professional may be hesitant to work for you as your employee or as a sub contractor.  Depending on their belief system, education, or what I call their “reality”, there could be several obstacles to their willingness to work for or partner with you. Here are a few:

• They may be challenged if no longer the one in control of the design process, the construction methods and the client.
• Removing the bidding process may send shivers down their spines.
• Not putting their name, but rather your company’s name, on the plans may feel completely unacceptable.
• Not being the guardian or protector for the homeowner and the homeowner’s money may feel completely unacceptable.

Will they refer you to their own clients?

Assuming your business is still willing to bid, if they see the words “Design/Build”, will an architect or designer refer you to their clients? Other legitimate concerns could include:

• Will you embarrass them if their plans are incomplete or not quite buildable? 
• Will you start offering value-added construction options or product alternatives directly to the client without first consulting them?
• Will they be afraid you will steal the design process away from them,
• Will you expose mistakes in the plans or overlooked zoning issues due to your own acquired expertise?

Read more of Shawn's thoughts about adding Design/Build to your business name.

Characteristics That Separate Successful Design/Builders From Other Business Models Include:

• An experienced Management Team that has created and follows a strategic and sustainable business plan, implements industry best practices and continuously identifies and mentors strong leadership within the team in each department.

• A strong Financial System that that predicts, tracks and analyzes the cost of doing business and producing projects, and includes an estimating system that facilitates timely and accurate "What-if" project pricing abilities during the entire design process.

• A Marketing System and Strategy that identifies and attracts targeted prospects qualified to do business with the Design/Builder and helps them discover the unique values and advantages of the Design/Build project delivery method.

• An established and tested Sales System used and or supported by all employees which prequalifies that a prospect's purpose, budget and decision making process is a match with the Design/Builder's Business model and provides a consistent approach and results for those prospects who become clients.

• A Design System that properly identifies and documents the information needed by the client as well as the Design/Builder's project team and serves as a communication tool to make sure the design and final project serve the client's purposes within the agreed budget and timeline

• A Communication System and Process that uses technology to create, capture, manage, and distribute timely and accurate business and project information between team members, trade partners, design professionals and the client in a way that manages and meets established expectations.

• A Production System that produces a quality project and experience for all of the parties involved within the established budget and puts management of the project at the jobsite and in the hands of a qualified Lead Carpenter and or Project Manager.

• A Personnel System that identifies, attracts, advances, recognizes and rewards those employees who best support a true Design/Build Business model and project delivery system.

If you are looking for help or training to create or switch over to a Design/Build Business Model contact Shawn today.  Will you be ready when the economy improves and there is money to be made?

"The topics you touched on yesterday really hit home and the light bulb has gone off!
We will take this information and start to apply to our business immediately."

David Haney, Dave Haney - Custom Woodworking

Don’t Underestimate Your Estimating System’s Potential

Knowing what to charge clients for the work you do is often the difference between long term success and eventual failure for the business. Many contractors look at estimating simply as a way to determine the cost of a project. In the traditional design-bid model of project delivery, this simplistic approach may work, assuming your sell price generates enough gross profit to cover your overhead and profit requirements. However, if you’re doing design/build, and your current estimating system is limited to only producing the number you charge clients for a project, you may be missing out on many other possible benefits.

Your Estimating System Should Support Your Business in Several Ways

If you think of Design/Build as a way of doing business, your estimating system must become a tool that facilitates how you do business, not just a way to get to the price.   Here are several ways a Design/Builder or a remodeler can maximize the potential of the method and system used to do estimating:

• A design/builder’s estimating system should be fast and easy to use.
• A computerized system should be used that allows the estimator to concentrate on estimating, not adding up numbers.
• All estimating cost assumptions for labor must be accurate in terms of time per task.
• The system used for estimating should have the ability to use your company’s actual burdened labor cost per hour to determine total labor cost per task.
• The system should also allow for on the spot “what-if” adjustments to quickly estimate the effects of any changes or suggested alternatives to the project during design.
• To increase accuracy, estimating should be done so it is comparable to the company’s job costing system and job costing categories.
• Information within the estimate, and job costing, should be broken down to a level of detail that allows the insight you need to make future estimating adjustments.
• The estimate should also help you or your lead carpenter produce an accurate materials list, not just a materials cost allowance.

Below is screen shot of a simple estimating spreadsheet template used to estimate a deck project. 

Request a free working copy of the template for your own use.

Read more about the potential benefits of your estimating system

Going From Carpenter to Businessman as a Remodeler

I received the follow question from a carpenter via the send a message function of my web site:

“Where is a good start for a carpenter to become a business man as a remodeler?”

Here is my reply:

Bruce:

Thanks for your question.   It’s a great one! I’m glad you are asking before you start out on your own.  That makes you very different than most. 

I suggest you find a mentor to help you get started.   Find a person who has done it before so they have the experience and knowledge to guide you.   Even if you have to pay this person it will end up being an investment that can be quickly paid off if you do your part because you will get going toward success much faster and will save a lot of money in tuition at the lumberyard school of hard knocks.

One of my current remodeler clients got his parents to finance the coaching and mentoring I am giving him to help him get going.   We prepare reports for him to share with his parents so they can see how the money is invested and so they can see how he is doing regarding actual profitability against the plans and budget I have been helping him with.  In actuality it’s the same information any business owner needs to know how the business is doing.  It’s the same information a bank would want to see if it loaned you the money.

 Thinking about and planning what you will do before you get going is critical.   

Consider this: "You can either set up what you want to have happen or you can settle for what you get."

For a good overview see if you can find the book below.  It’s an old one that is out of print, and some of it is dated, but I think if you read it you will get a lot of good info to consider before you get started.  Try Amazon to find it.

Professional Remodeling Management

By Walter Stoeppelwerth

Using the book as a guide, find out about all the legal requirements, insurances and all the overhead costs you will have before you start.   That’s what I did before I started my business.   Then, do a budget so you will know what to expect for costs and what markup to use so you don’t guess at it.

 Keep in mind, 9 out of 10 contractors will fail within 10 years.   You can beat the odds by doing your homework before getting going.

Keep me posted about how you are making out.  Let me know if I can help.

The Design/Build Remodeler’s 10 Step Plan For Long Term Success

A long time ago a remodeler in my NARI Chapter who was just starting his business asked me for advice about how he too could have a successful and profitable business.   Seeking to keep my response simple and to the point I came up with a list of nine steps.   When I was explaining my list to him he asked where he would find the time to do all these things.  He said he was already straight out trying to sell and complete work.   That’s when I added step number one to the ten step list below. 

Success won’t happen by accident.  If you are disappointed with your level of success use the list below to help identify what you need to do to get your business on the path to planned success.

Recharge Your Batteries!

Step ten might be the most important.  Unless you take time to recharge your batteries they will go dead.  My experience has shown me that business owners get a lot more done and can remain positive even during challenging times if they take the time to reward themselves for all their hard work and effort.

“To get to the next level in your life will require a higher level of thinking than the level of thinking that got you where you are”   Thomas Edison

The 10 Step Plan For Success

1. Make time to create and implement your plan.
2. Establish your criteria for personal and financial success.
3. Establish an obtainable volume of sales for the coming year.
4. Create a budget based on historic information.  Adjust as needed to achieve current goals.
5. Establish the Mark-up required to provide planned gross profit.
6. Accurately estimate project costs and mark-up as planned.
7. Find your customers and sell them projects at the price required to obtain planned gross profit.
8. Monitor production and overhead expenses.
9. Adjust business as needed to maintain path to planned net profit.
10. Enjoy planned personal and financial success.