Latest / Contractor Business Builder Podcast / The key link between design & build that’s wrecking your profitability
Transcript
- 0:00Most contractors don't realize they're losing money even before
- 0:03they get the job. The disconnect between design
- 0:06and build isn't just a process issue, it's a profit killer.
- 0:10I'm going to be showing you how one document, the PCSA can
- 0:13transform your sales, your trust, and your bottom line.
- 0:16So why do you need a PCs? What does that even stand for?
- 0:20It's a pre construction service agreement.
- 0:22It can go by other names as well, but essentially you are
- 0:25locking the client in to some sort of an agreement before you
- 0:29get into the construction phase. And the reason for this is it
- 0:32helps bridge that gap between someone thinking about a project
- 0:35and them actually paying you money and you working for them.
- 0:38There's a whole bunch of benefits to this and it's a very
- 0:41key component of, of having a really good profitable
- 0:45experience as you know, a builder, but also providing that
- 0:48great experience to the client because you're helping them
- 0:50through this process. If you've ever tried to run into
- 0:53a construction project after, you know, it's been designed and
- 0:56planned and everything else and then you provide a budget to a
- 0:58client and it's a huge shock, you can understand why this
- 1:01process is so important. So this is going to help get rid
- 1:04of some of the shoppers around as well.
- 1:06Because a lot of clients, if they're kind of shopping around,
- 1:10they found you online and they're gonna try a couple of
- 1:13different contractors. By having a good PCs a process
- 1:17and being able to make that first sale and get them into
- 1:20that construction planning phase is a lot easier.
- 1:23And it's going to help kind of get rid of shoppers or very
- 1:26early on let you know if this is someone that's only economy
- 1:29driven and just looking for the the lowest price.
- 1:31This also solves the first problem of your client because
- 1:34as a contractor, you're solving like the building of the
- 1:37project. And that's a huge problem to
- 1:39solve. But a lot of clients don't need
- 1:41that problem solved yet. When they come to you, when they
- 1:43first contact you, when the lead comes in, often the first
- 1:46problem they have is they don't really know what they want.
- 1:49They don't know how much it's going to cost.
- 1:51They don't know what kind of design features.
- 1:52They don't have any clue about the building experience.
- 1:55So they need all this preconstruction work and problem
- 1:58solved first before they get into the construction.
- 2:01And if you don't have a good CSA process, then you're kind of
- 2:05leaving that ball in someone else's court.
- 2:07And you can see why your profitability can sink because
- 2:10now you get contacted later for the building problem, but now
- 2:13they're just shopping with a whole bunch of other
- 2:15contractors. So it's a much easier sale as
- 2:18well because it's a low commitment for the client
- 2:21compared to a full contract of a build.
- 2:23You know, the a new home for them, maybe $1,000,000.
- 2:26But to get them into a PCSA agreement, maybe it's $5000
- 2:30retainer or you know, $15,000 package or whatever is a lot
- 2:34easier for them to commit to 5 to 1015 grand than it is for
- 2:39them to put $1,000,000 on the line and choose you as a
- 2:41builder. And especially when you don't
- 2:43have any, you know, working relationship or trust build up,
- 2:45which is why the process matters.
- 2:47So if you want a guide for this, check out the links in the
- 2:51description below. I've created a full guide.
- 2:53I'm going to be going over a lot of this information in the video
- 2:55here, but the guide really pinpoints and it's kind of like
- 2:57a working document where you can create this for yourself.
- 3:00How you going over the process how to sell CSA is 2 clients in
- 3:05the right way that that helps guide them to the next stage.
- 3:08We're also going to be looking at different things like what's
- 3:11actually included in in a package to make it more
- 3:13desirable to be able to sell this.
- 3:15And also the design component. If you're, if you're a builder
- 3:18that's not familiar with design or you don't have, you know, a
- 3:21designer on board or or not, you know, haven't gone through that.
- 3:24I'm walking through, you know, what to what to do with that.
- 3:26So here's thing, to build trust, you need a PCs agreement.
- 3:29If you are a general contractor builder, anybody that that does
- 3:32work for clients, essentially it doesn't matter if you're
- 3:35residential or commercial, there should be something that's
- 3:37available to you that you can use to help guide clients
- 3:41through the process. Alright, moving on to #2 I don't
- 3:44do design. We, we are a general contracting
- 3:46company. We don't have a designer in
- 3:48house. I might know a few interior
- 3:50designers, but we don't really help or you know, we don't want
- 3:53to deal ourselves with design. You need to start changing your
- 3:56mindset to that you are a design build company.
- 3:59Even if you're not going to advertise as one, you should
- 4:02always have that component as a, as a key kind of step in your
- 4:07sales process. You don't have to do the design.
- 4:10You don't have to be super involved with the design, but
- 4:12you should know at least three to five really good designers,
- 4:16interior designers or architects, depending on the
- 4:18size or scale projects you're doing.
- 4:20But you should know people that can fill that design gap and
- 4:24they should be kind of included in your business as far as
- 4:28having some sort of a working partnership with them.
- 4:31You can let them know. I will send you clients and you
- 4:34know, we're going to do a retainer and they'll pay me and
- 4:37and you know, I pay you or you just have an agreement that you
- 4:39send them to them, but that you're heavily involved with
- 4:41that client and you guys are having like regular meetings
- 4:44together. So that you have that working
- 4:46relationship and that you're getting paid for your time to be
- 4:49the consultant, the trusted advisor to help the client do
- 4:52like value add design and make those design decisions based off
- 4:56of budget and a schedule thought process that you as the
- 4:59contractor. And it also helps you really set
- 5:03yourself in a position where designers are going to want to
- 5:06talk to you. So this is a great way to
- 5:08network with designers because you can let them know, hey, I
- 5:10have clients that come to me or I get leads and they need design
- 5:14help on putting together preconstruction type package.
- 5:17What are your rates or how can you include this?
- 5:19How can I include you in that conversation?
- 5:21So we can work together to make sure we're, we're serving the
- 5:24client really well, but also getting paid at the rates that
- 5:27we should be as professionals in the space.
- 5:30So I don't do design. Get that out of your lingo.
- 5:32You do design, but with, you know, a partner, if you're big
- 5:37enough contractor maybe looking at bringing this in house and
- 5:39having an in house designer, it can be a great revenue
- 5:42generator. And you can also get rid of a
- 5:45lot of that conflict. If you've worked with designers,
- 5:47you, you know, the issues of like having blueprints that are,
- 5:51you know, out of whack or design decisions that were made without
- 5:54you and now you kind of have to clean up the mess or, yeah,
- 5:57you're at, you know, a standstill with the designer.
- 5:59We want, you know, the race ceiling.
- 6:01Clients want to raise ceiling design and doesn't think it
- 6:03looks good. Whatever, right?
- 6:04So it really helps the whole process.
- 6:06Alright, moving on to #3 you with me here.
- 6:08Like I said, we've got a full design to help you specifically
- 6:11gives you a ton of information. It helps you work through
- 6:13exactly all these steps. So you can have like a really
- 6:16robust preconstruction package, which is number 3 here,
- 6:19preconstruction package. So you can just sell this as
- 6:21like go talk with my designer or something like that.
- 6:25And that's the probably the easiest way to start
- 6:27incorporating design into your process.
- 6:29And then just have a really good agreement with your designer
- 6:31that if you send them someone, they're obviously going to
- 6:33recommend you as the builder or they provide you some sort of
- 6:36compensation, you know, if leads work out or whatever.
- 6:38But what I suggest is getting an actual package in place.
- 6:41You want to position this as an offer to the client.
- 6:44And I'm going to be going through the process of like,
- 6:46which steps of how to like from first lead to like getting them
- 6:50on a preconstruction agreement to like what that entails all
- 6:52the way up to the build. So hang with me here.
- 6:54But first of all, the package is what you need to offer the
- 6:57client. And the package is going to
- 6:58include design services. This is going to be, you know,
- 7:01value add design services. You're going to provide a
- 7:03budget. So estimate whatever you want to
- 7:06call it. But I would, you know, you want
- 7:07to portray it as a budget because it's a working budget.
- 7:09It's going to change, it's gonna, you know, things can,
- 7:11can, can move around and then also a schedule.
- 7:14So those are kind of like the big three things as well as
- 7:16permitting, you know, planning anything like that.
- 7:19You can include like site inspections or selective demo.
- 7:24If, if it's like a remodel or a tear down or something like
- 7:27that, you're going to need to get testing.
- 7:28You're going to have to do some preliminary stuff to get, you
- 7:31know, clear the lot and, and all that stuff.
- 7:33So that could be not the actual clearing the lot necessarily or
- 7:36the kind of construction stuff, but testing, making sure that,
- 7:39you know, environmental, Geo, whatever, all that
- 7:41preconstruction stuff can be included in that package.
- 7:44Now, as far as the pricing goes there, there's a number of
- 7:46different options. The easiest option is just to do
- 7:49some sort of like cost plus you get a retainer.
- 7:51Typically 5000 I think would be typical if you're doing like new
- 7:55home builds, if it's like a remodel, maybe it's 3000 or 2500
- 7:59depending on like how much planning and designs are needed.
- 8:01But if you're gonna need architectural or planning, you
- 8:04know, going to have to pay a bunch of other people then at
- 8:07least 5 to 10,000, you know, retainer and then you just kind
- 8:10of charge your time against that.
- 8:11Of course, the client, you want to make the value upside really
- 8:15high. So they're going to get design,
- 8:16they're gonna get architectural, they're gonna get your
- 8:19professional services, they're gonna, you know, do value add
- 8:22design and all this kind of like permitting and you're gonna take
- 8:25care of everything for them. So you want to build up the
- 8:27value of it and then minimize the risk.
- 8:29So no long term contract. This is the pre construction
- 8:32agreement. We work together for as long as
- 8:34it makes sense. If it comes out through
- 8:36feasibility that something comes up and it doesn't work or
- 8:38there's no nothing kind of holding them to that contract or
- 8:42holding them to do work with you.
- 8:43Of course, if you work through this pre construction phase and
- 8:46you've got everybody on board and you've really shown them
- 8:49that you're professional, there's no reason why they
- 8:52wouldn't move into the the construction, you know, phase of
- 8:54the project. The nice thing about this PC SA
- 8:56too is there's iterative budgeting.
- 8:58So at first you're going to give them like a ballpark budget,
- 9:01kind of like a scale, and then you're going to give them a
- 9:04rough budget and then a detailed budget.
- 9:05So they, you know, there's not a big surprise kind of at the end
- 9:09where they're like going through all this design and it's like,
- 9:11yeah, we want that, we want that, you want that.
- 9:13And then all of a sudden the bill comes in, it's like, wow,
- 9:15this is like $500,000 over budget.
- 9:17I don't know if we can do this now.
- 9:18They gotta scale back. And of course no one wants to
- 9:20scale back and, you know, realize that they're not gonna
- 9:23get their nice swimming pool or whatever, right?
- 9:25So it's a, it's a great thing like that.
- 9:27So that's how you build your package.
- 9:28The pricing, like I said, that's the best one that I've found is
- 9:31some sort of retainer and it's kind of an easy buy for them.
- 9:35It's like, yeah, we're just, you know, $5000.
- 9:37If we don't use it all, we'll return your money or just roll
- 9:40it into the construction portion of the of the project.
- 9:42And if anything over, we just bill and we bill, you know,
- 9:45weekly or biweekly. So you always know what's being
- 9:47paid and where costs are out. We're going to get, you know,
- 9:49you get an estimate from the designer or architect or
- 9:51whatever, just so they have like some basic kind of numbers of,
- 9:54of expectation. You always wanna make sure your
- 9:55expectations are really good. You following me here?
- 9:57There's a lot that goes into a like you said, grab the guide,
- 10:00go check out the links, grab the guide.
- 10:01It's going to help you work through all of this and and
- 10:03really organize all this information that I'm giving you
- 10:05here. The other kind of thing that you
- 10:07can do if you are a very niche type general contractor, then
- 10:12like if you just do basement, you know, remodels or just do
- 10:15remodels of like, you know, large homes and stuff like that,
- 10:18then you might have a package. So it could be like you could
- 10:21have two different packages. You kind of have your all in
- 10:24everything included. We'll do the plans, we'll do the
- 10:26design, all this pre construction stuff that I
- 10:28mentioned and you know that that package is $7500 or if you don't
- 10:33want it, the full design and all that stuff.
- 10:35Then we've got another package for $2500 where we'll do the
- 10:38budget, the schedule and you'll get like maybe a 2 hour meeting
- 10:42or two meetings with our designer to, you know, help you
- 10:45with your selections, if you kind of want to do your own
- 10:48selections or whatever. So you could have two different
- 10:50options that they could, they could pick from and you have
- 10:52like just a flat price. So that is the preconstruction
- 10:55package. Now we're gonna be going into
- 10:57the actual marketing and sales. So you've got your offer, you've
- 11:00got the package. Now you need to be able to sell
- 11:02it because if no one's buying, you're not going to move the
- 11:04ball down the field to the construction portion of the
- 11:07project. So what you need to get into
- 11:09place is have some sort of brochure.
- 11:10It should have your, your marketing, your logo, your
- 11:13colours, get it professionally designed and it doesn't have to
- 11:16be super complicated or a lot of stuff.
- 11:18But essentially it's gonna, it's gonna really clearly tell the
- 11:21client what is the PCs? A So what is this thing?
- 11:24What are the steps? Why is it important?
- 11:26Frequently asked questions as far as like objection handling
- 11:29of, you know, why do I need to pay for this?
- 11:32Why don't I just go get a free quote?
- 11:33Why don't I just find my own designer or do my own design?
- 11:37So, you know, it's gonna kind of outline all that stuff, the
- 11:39specific process, what they're all going to get.
- 11:41Ideally, if you'd like testimonials from past clients
- 11:44who've gone through this process, things like that.
- 11:46And as far as like the sales goes, I mean, so the brochures
- 11:49are really important piece. I think a quick video to put on
- 11:52something nice and just make a quick video, 3 minutes or
- 11:56something and pretty much you're just going to go through the
- 11:58information that's in the brochure, but essentially just
- 12:00telling them. We work with clients.
- 12:02We always get into a PCSA because we want to be involved
- 12:04with the, you know, preconstruction process.
- 12:07We found it's the best experience for our clients,
- 12:08yada, yada, yada, the benefits of it and things like that.
- 12:11So quick little video. There's a nice touch as well
- 12:13that you can send them afterwards or whatever.
- 12:15As far as the actual sales need to be really confident and kind
- 12:18of sell yourself that like this is by far the best way to work
- 12:21with the client. And after, if you haven't done
- 12:23this process, you're gonna realize that like it's just
- 12:26crazy not to work in this way because it is so many benefits
- 12:31to both you and the client. And it's just a much better
- 12:33experience. The end product is much better.
- 12:36You know, everything just works better.
- 12:38Your, your referrals are better as well because you're going to
- 12:40be talking with designers, you're going to work with other
- 12:42designers more. So you've got these like
- 12:44partnerships with other professionals in the industry.
- 12:47It's just a great way to do business for everybody.
- 12:50And then the the final kind of piece I'm gonna say as far as
- 12:53the sales go is have an objection list.
- 12:55So I mentioned the FAQ, you objection list is going to be
- 12:58like what objections come up? So, you know, I just want to get
- 13:01a free quote or I'm just going to go to Home Depot and pick my
- 13:04own stuff. I don't need design help or, you
- 13:06know, whatever may be whenever you get an objection, when
- 13:09you're you're presenting this to a client, make sure you write
- 13:11that down. You should have a running list.
- 13:13I have a document, you know, objections that that come up
- 13:16common ones. And then you want to formulate
- 13:18responses. Nothing you need to memorize
- 13:20every response, but at least you have some sort of a kind of
- 13:23mental acuity to how to respond when a client asks you these
- 13:27questions instead of just kind of stumbling around and, and not
- 13:30knowing what to say. So I know your offer, you know
- 13:33how to market and sell it. Now we're moving on to the fifth
- 13:36spot here and I'm going to be going through a quick kind of
- 13:39overview of the, the guy that I mentioned to help you work
- 13:42through and, and build this all out for yourself and really fine
- 13:44tune your process. So I'm going to go over overview
- 13:47in the next step before we get to that number 5 though, is the
- 13:49process. So what actually happens in the
- 13:51preconstruction process? We've, you know, we've got the
- 13:53client, they're excited, we're excited, but now what?
- 13:56Right. So the, the way that I like to
- 13:58structure this, and you may move these pieces around or, or do
- 14:00your own thing to depending on your company, but at first
- 14:03you're gonna have a free consultation.
- 14:04So you typically you're going to meet the client somewhere.
- 14:07You're going to go through them. If they got plans, you're gonna
- 14:08go through their plans. You're gonna go meet at the lot
- 14:10or their house to remodel or whatever.
- 14:12Even if it's a new build. You you might wanna meet at
- 14:14their house and kind of show them your little sales branches
- 14:17station so you can do a free consultation, give them, you
- 14:20know, your advice, look to their whatever plans or get, you know,
- 14:23their questions answered and stuff like that.
- 14:24Then you're gonna provide a ballpark budget.
- 14:27Ballpark budget is just like kind of back of the napkin quick
- 14:29math. They wanna 2500 square foot
- 14:32home. So times that by X, you know,
- 14:35hundreds of dollars per square foot.
- 14:37This is kind of what you're looking at as far as budget
- 14:39range, right? Does that sound about right to
- 14:41you? They're like, yeah, that's sort
- 14:42of what we expected. Great.
- 14:44Let's, you know, kind of move into the next stage.
- 14:46If, if they're like, you know, balking at the, the ballpark
- 14:49budget, then, you know, maybe you have to have another
- 14:51discussion with them or maybe it's not a right fit.
- 14:53You always want to salvage the sale.
- 14:55But if they're like way out to lunch, it's an easy way to get
- 14:58some FaceTime with them. But also not to waste your time
- 15:00providing some sort of like estimating and then realizing
- 15:04like after you spent a couple hours and estimating that this
- 15:07isn't even close to what what they're expecting.
- 15:09So that that ballpark of free console kind of like, it's like
- 15:12you're presenting yourself and promoting yourself, but you're
- 15:15also sort of interviewing. You don't you don't wanna make
- 15:18an interview, but you're kind of like, you know, seeing as this
- 15:20client someone I want to work with, are we on the same page as
- 15:23far as, you know, budgets and schedules and all that kind of
- 15:25stuff? So after that you will
- 15:27essentially move them into PC USA.
- 15:29So after that it's like, OK, sounds like your budget is is,
- 15:32you know, reasonable or workable.
- 15:34Anyways, let's get this into some like a design to kind of
- 15:38start formalizing a plan. If they already have plans, you
- 15:40could just say like, you know, this is great.
- 15:42We will do a really great budgeting for you for this
- 15:45project. We don't do like free budgets.
- 15:48You could do have a little bit more of a detailed estimate for
- 15:52them. Again, it depends on your
- 15:53situation. If you've got like leads coming
- 15:55in left, right and centre, you could just move into PCSA.
- 15:58If every lead really matters, if you're looking to scale or grow
- 16:00your business, then you may want to provide a free kind of rough
- 16:04budget as well. And this is going to be more
- 16:06detailed. You'll work from a template.
- 16:07So it should be pretty fast. Like you should be able to get
- 16:09it done in less than an hour, 40 minutes to an hour.
- 16:12And you're just sort of taking base numbers, doing a couple
- 16:14take off from the plans, but providing them with a pretty
- 16:17detailed quote. And then from there, you can
- 16:19then move them into CCSA, which lets them know like this is a
- 16:22rough budget. Now we're going to kind of
- 16:24finalize the design, the selections we're gonna apply for
- 16:27permitting. So you're ahead of the game on
- 16:29that as well as we will start to tender, you know, the bids out
- 16:33to our subcontractors and suppliers and, and get really
- 16:36accurate fine tune pricing, right?
- 16:38And then you're going to get paid for all that work and
- 16:40you'll charge for your time and, and what have you.
- 16:41So that kind of gets you to that stage.
- 16:43Once they sign the PCs a then you can move forward.
- 16:47And now you're going to do your drill down, budgeting,
- 16:50designing, inspections, scheduling, all that kind of
- 16:53stuff and, and, you know, running into permits and
- 16:56everything. So it's a really nice kind of
- 16:58preconstruction, you know, phase and, and nice way to, to kind of
- 17:02keep the ball moving with the client.
- 17:04And then once you've gone through that preconstruction
- 17:07stage, they've worked with you for so long, they've already met
- 17:10your whole team. You've worked through this
- 17:12budget with them multiple times. They've already gotten in the
- 17:14habit of paying you for invoicing so they can see,
- 17:16hopefully you got your systems in place and your payments and
- 17:19everything kind of runs smoothly.
- 17:20Communications great, there's no reason why they wouldn't now
- 17:23move forward with the the construction portion of their
- 17:25project. Alright, so that's like all the
- 17:28the details there. Now I'm gonna go into the guide
- 17:30that I mentioned. I'm gonna give you a quick
- 17:32overview of the guide. Go get it in the links here and
- 17:34I'll see you in the guide. So here's the preconstruction
- 17:36service agreement guide for builders.
- 17:38And I'm just going to do a quick overview so you can see what it
- 17:41is. Then this is all about your
- 17:43process. So you're going to build out
- 17:44what is your preconstruction process is going to be a little
- 17:47different for every builder. How do you want to have the
- 17:50pieces moved together? And the reason to get this into
- 17:52places so that you can communicate properly to your
- 17:54client when they ask you like, why is this important?
- 17:57What does it matter? And then you can create your
- 17:59marketing materials as well. Like, OK, this is like the first
- 18:01step and the second step and it's just like very clear, very
- 18:04lineal for them to see like, oh, that makes sense, right.
- 18:07So we talked about, you know, you've got your free console.
- 18:09You got your ballpark estimate. Ideally they signed up CSA at
- 18:12that point, you could have as a third step more.
- 18:14Of like a rough budgeting where you get a little more provide
- 18:17them with some sort of proposal it's not so much a proposal it's
- 18:20just like this is a rough budget.
- 18:22But in order to get you an actual detail budget, we need to
- 18:25go through the design. So in order to do that, we do a
- 18:27PSA and you'll go over, you know, the reasons for it and the
- 18:30benefits and all that kind of stuff.
- 18:31And then ultimately you go through the preconstruction
- 18:33process. And then after that they would
- 18:36then sign the construction contract and you move into the
- 18:39actual scheduling them in your pipeline and stuff like that.
- 18:41That's another thing with this whole PC SA is like, you could
- 18:45tell them, you know, we can't hold your spot in our production
- 18:47pipeline unless we have a PC USA in in place with a client
- 18:50because we may be scheduling, you know, six months or 12
- 18:54months. So if we, if our production team
- 18:57gets gets full and our pipelines full, we may not be able to
- 19:00start your project when you, when you actually like get
- 19:02started. So in order to, to hold your
- 19:04spot in the pipeline, we request that you, you know, you sign a
- 19:07PCA so that we can then get you in our schedule.
- 19:09So that's another reason for them to move ahead with you and
- 19:12make sure that your schedule and it kind of positions you as an
- 19:14in demand builder. You're not just Willy nilly, you
- 19:17know, taking on every client as fast as you can and like
- 19:19cramming in as much work as you can.
- 19:20You're actually structured and and their project is gonna get
- 19:23due process with the other clients that you have.
- 19:25This is about creating the marketing piece, the video piece
- 19:29more about the video there. This is about building like what
- 19:32is the actual PCs ink agreement look like?
- 19:35So once you've done the earlier steps, now you kind of know
- 19:38what's going into it. You know the process.
- 19:39So now you can create the actual agreement that you're going to
- 19:42provide to them for them to sign and and how to get that in
- 19:45place. Obviously you're going to want
- 19:46to involve a lawyer to make sure everything is, you know, proper
- 19:49and it's not just, you know, some random thing that you got
- 19:51chachi PT to make, even though that it's probably better than a
- 19:54lot of lawyers nowadays. But make sure you you get an
- 19:56actual professional person to vet the PCs a or, or build it
- 20:00for you based off of what you provided.
- 20:02And then this goes over all the sales process about actually
- 20:05sell this handle objections and you know, doing your follow-ups
- 20:08and, and things like that, as well as some next steps here.
- 20:11So go grab this document. It's in the description.
- 20:14There's a link there. Click the link, go and get this
- 20:17and start utilizing your company.
- 20:18You'll make a world of Disney difference for you.
- 20:21Move quickly and smoothly into construction with your business.