Latest / Contractor Business Builder Podcast / The Estimating Strategy That Built a $10M Contracting Business

Transcript

The Estimating Strategy That Built a $10M Contracting Business · Contractor Business Builder Podcast

0:00
My big promise to you with our training today is going to be
0:03
less time estimating with more profit.
0:06
If you're like pretty much every contractor out there, last time
0:09
you got to spend on estimating the better.
0:11
And of course, profitability stems from estimating.
0:14
If you've underestimated a project, you can run it as
0:17
efficiently as you want. You're going to have a real hard
0:20
time making making a profit on it.
0:21
If you're out, you know 510% on your estimate.
0:24
So why am I sharing this with you today?
0:25
20 years of contracting experience myself, started on
0:28
the tools, did pretty much every job between have my own general
0:32
contracting business, have worked in some some large home
0:35
building companies as well as other general contracting
0:37
companies as well. So kind of know the ins and outs
0:39
from various different sides of the industry.
0:42
Systematized dozens of GC companies.
0:44
So worked with a lot of different GC companies across
0:46
the US and Canada as well as a few international ones as well
0:49
and help them with their systems, processes and all those
0:52
good things. And finally, the the purpose of
0:55
these training as well as our company is to lead a movement
0:59
towards systems leadership and generational wealth for
1:02
contractors who want more than just staying busy.
1:05
So what we've refined it down to and realized is that systems is
1:09
what's going to generate the results.
1:11
Systems though leadership falls apart.
1:12
So we need the leadership in there as well.
1:14
After you have great systems in place.
1:16
And then finally thinking long term, what's the end game?
1:20
You know, generational wealth, whether that's selling your
1:22
business, passing it on, providing for your family so
1:25
they never have to, you know, worry about money ever again.
1:27
So that's what we're really all about.
1:29
I want to start with the end of mine.
1:30
So we're going to go through the training today.
1:32
There's three kind of larger components to the training and
1:36
through this I want you to imagine future state here.
1:40
You know you're fishing with your buddies or your family or
1:42
whoever and you're turning bigger than ever profits.
1:46
You actually have time to get away and enjoy fishing or
1:49
vacation or whatever you like to do and no more evenings and
1:52
weekends estimating crunching numbers, trying to push bids
1:56
through to the clients just to to stay busy.
2:00
All right so let's move on. I'm going to be sharing with you
2:03
the 3 tier estimating process. So this is 3 levels of
2:07
estimating that I'm going to show you how you can utilize in
2:10
your contracting business to help you save a lot of time and
2:14
really fine tune your bid for specific type of client and
2:18
their client journey to make sure that it makes sense for
2:21
them and it makes sense for the amount of work you're doing for
2:24
that that person. All right, So the first level of
2:28
estimating, this is your ballpark budget.
2:30
This is just basic kind of range numbers should take you about 5
2:34
to 10 minutes. If you're super experienced and
2:37
you know, like we did a project like this and this is exactly
2:39
what it costs. You can probably just do this in
2:41
your head or from past experience.
2:43
But typically speaking, you're gonna use at least a little bit
2:45
of calculation so that you have somewhat of a process to get a
2:50
ballpark budget. You're gonna give a price range.
2:53
So Mr. Mrs. Smith, based off of square footage for your house
2:57
and location and kind of the level that you're looking for,
3:00
your project is going to range from, you know, 600, just
3:04
$750,000, something like that. You're going to use historical
3:08
similar projects that you've done.
3:10
You can use a quick spreadsheet or calculator.
3:12
I like to have a spreadsheet for this because it's really easy to
3:16
access on your phone. It can be in your Google Drive
3:19
or you can have a link on your phone somewhere to a
3:21
spreadsheet. You plug in a few key numbers
3:24
and it'll give you a ballpark budget essentially.
3:27
You could create a template in your project management software
3:30
as well, but the estimating and using the app is not as
3:34
generally as easy as just using a spreadsheet on your phone.
3:37
So whatever works, even just some quick numbers like square
3:39
footage, cost per builds or if you're doing remodels, you know,
3:43
medium kitchen, large kitchen, you know, like you could use a
3:46
couple of numbers, kind of plug them together, get a ballpark
3:49
budget and you're using this to quickly qualify the lead.
3:52
Typically you can do this probably over the phone or if
3:54
they've emailed you, you ask for some information.
3:57
Can you send me a picture of, you know, where you're planning
3:59
to build or what's, you know, what's your lot size?
4:01
What's the how big of a house do you want?
4:03
If you got plans, you can just work off their square footage,
4:06
but you're giving them that range to, to really qualify them
4:08
and say, you know, is this inside your budget?
4:11
If you're telling them it's, you know, $700,000 to, to build this
4:14
house and they're coming back and saying, well, really we
4:17
wanted to stay under 400. You know, there's a disconnect
4:20
there and either they're not the right client for you or we need
4:23
to go back to the drawing board. Or you need to set the
4:26
expectations that you may not be able to achieve, you know, the
4:30
size or the full extent, or maybe you've got to cut back on,
4:34
you know, not finishing out the basement or not in the garage or
4:37
the outbuildings or whatever rate to kind of bring in budget.
4:39
But you could have that conversation super early with
4:42
only spending about 5 to 10 minutes doing estimating, saving
4:45
yourself a ton of time instead of, you know, going down that
4:47
road of getting, plugging in a whole bunch of numbers and, and
4:50
getting like a proper estimate or quote out to them.
4:53
You're checking project feasibility.
4:55
And your goal with the ballpark budget is to be within 15%
5:00
somewhere in that range. You're, you're not looking to
5:03
get, you know, specific, you're giving them a range and this
5:06
gives them a scale of the project and the scope of it and
5:09
lets them know kind of where things are at.
5:12
So that's the ballpark budget. You probably have met, you know,
5:15
clients have leads coming out to you all the time where you can
5:18
give them a quick budget and it's, you know, nowhere in their
5:21
range and, and pretty much that's where the conversation
5:23
ends. Of course, you, you don't want
5:24
to like tell clients that, OK, well, you know, we can't do
5:28
anything for you. Of course you want to kind of
5:29
explore and see how you can make the project work.
5:32
But if it's just too far out, you essentially have to move on
5:35
and just save yourself the time and energy, move on to greener
5:38
pastures and, and better clients who's, you know, more in line
5:41
with their budget. Next up would be the rough
5:43
budget. So this is typically gonna take
5:45
you anywhere from one to two hours.
5:47
Most of the time, this would be a free estimate.
5:50
If you are bombarded with work and you've got more than enough
5:54
projects to bid on, you may even charge a small fee for a rough
5:58
budget. And you know, you'd have to kind
6:01
of create a little bit of an offer or whatever, a way of
6:03
selling it. But it could be, you know, hey,
6:05
for $400.00 or $200, $1000, whatever it may be, you know,
6:10
we'll provide you with with a rough estimate based off of, you
6:12
know, our general pricing or whatever.
6:14
But typically speaking, this would be a service you provide
6:16
for free. Because when you can give
6:18
someone something and you want to show some goodwill towards
6:21
them and their project, you do it for free.
6:23
You're more likely to kind of move to a sale and get into a
6:26
pre construction service agreement, which is the the goal
6:30
of that first step to be working with the client.
6:32
You of course do this after you pass the ballpark in qualifying.
6:35
So you can have qualifying questions that are part of your
6:37
lead process beyond just budget. You want to know, is that the
6:40
type of project you want to do? Is it, you know, are they
6:42
located in your area? When are they planning to start
6:45
the project? So you're going to go through
6:47
that, given that they passed the ballpark, you know, budgets
6:50
within their range and all the qualifying questions.
6:53
They'll then move on to rough budgeting.
6:55
You'll use a template. So you'll have an estimating
6:57
template for their project and you'll, you'll do proper
7:00
takeoffs for the project, but you're just using your, your,
7:03
your base numbers of square footage costs and generalized
7:07
cost. And you're not kind of going
7:09
into super high detail of getting bids from like
7:12
subcontractors or suppliers, doing any kind of selections or
7:16
diving into, you know, specific materials and stuff like that.
7:19
It's, it's really just you're doing a detailed level of
7:22
estimating, but you're not going into specific kind of costing
7:25
and pricing, Going to use base pricing.
7:27
A lot of allowances in a, in a, in a rough budget.
7:31
You're again, you can have allowances for fixtures,
7:34
flooring, any sort of selected materials, could even be
7:38
allowances for things like landscaping if they've given you
7:41
like a set of floor plans, but you have no idea what the lot
7:44
looks like. Or you know what, if they've got
7:47
any driveways and stuff like that, you're just gonna put
7:49
allowances and, and just sort of like a, a bump kind of sum for
7:54
certain parts of the project. If there's no good details on
7:57
the plans and things like this, Typically speaking, in this
8:00
rough budget, you want the number to come in as low as
8:03
possible. You don't want to sell them
8:05
something that's not feasible, but you're using really base
8:09
pricing and general allowances. You're not doing like high end,
8:13
you know, fixtures unless you're like just a super luxury builder
8:16
and that's all you do. And you know, your clients are
8:18
gonna be like luxury minded. But typically speaking, you
8:20
wanna have this rough budget kind of on the lower side, very
8:23
base. And then when you go into a PC
8:26
SA and go through the actual drill down budget, which we're
8:29
going to get to in, in a moment here, that's when you start
8:32
getting selections And it's like, oh, well, we budgeted for
8:35
a standard, you know, bathtub of whatever $400.00, the one you
8:39
want, it's going to be 600. So that's, you know, additional
8:41
and they can kind of see how their decisions as during the
8:44
selections are, is leading to the, the increased budget
8:48
overtime. You know, they may start at
8:50
600,000. You know, they're probably going
8:52
to end up at 7 or 800,000 by the time they start including
8:56
everything. But as far as a rough budget
8:58
goes, it's sort of like we can do a project for this price
9:01
with, you know, kind of base materials.
9:03
Although you know that once you kind of move into the, into
9:07
their actual selections, they're probably going to go higher with
9:09
the budget, which is just a natural kind of course.
9:11
But you're doing that before you move into the project, after
9:14
they've accepted the proposal. This is really a set up for the
9:17
pre construction agreement. This allows you to present a
9:20
preconstruction agreement and a, a proposal.
9:23
And they've already kind of worked with you.
9:24
They've seen the level of detail you're putting into this
9:26
estimate and you've already got a pretty good budget in place
9:31
that's ideally within 10% of what the final budget is going
9:35
to be. 5 to 10% is, is ideal, but depending on, you know,
9:38
where things go with the preconstruction, it can
9:41
fluctuate. So that's a rough from here.
9:43
You would then propose that they work, they go into PC USA and
9:46
that moves us on to our drill down budget making sense for
9:50
everybody. Can you see, like I know when I
9:52
started general contracting, I was just like, I I wanna give
9:55
like button down pricing, get quotes from Subs and and
9:59
everything from, you know, for my clients and present them kind
10:02
of at the final approval go above and beyond.
10:05
But in reality, I was spending so much time estimating that
10:09
really wasn't necessary at the time.
10:11
And this erative process, it's kind of like essentially, if if
10:16
there is like kind of steps to the pricing, you can see like
10:19
you go to buy a new car, right? They tell you, you know, they're
10:21
going to show you the base price, which is, you know,
10:23
$20,000, let's say. And of course you're gonna want,
10:26
you know, the upgrades, whatever it may be, AC sunroof, the, you
10:30
know, extended warranty package. And you're going to end up at 25
10:33
or 30. It's just that's kind of the the
10:35
model here. But to get them in the door and
10:37
to get them, you know, if they want the base, you can do the
10:40
base and, and you work from there.
10:42
Yeah. So tell us here.
10:43
I've been presenting that final proposal costs and I'm starting
10:46
to see it isn't efficient for me.
10:49
Yeah, definitely. And not every client or every
10:52
situation is gonna fall specifically into perfect
10:54
buckets like this. But you can see as a general
10:57
rule of of process, this can save you a bunch of time still
11:01
gives the the client a lot of detail and you're still
11:04
providing a wonderful service. But you just you don't need to
11:07
go all the way to the end if there's already a disconnect
11:10
earlier on. All right, So moving into the
11:12
drill down, typically speaking, this is after you have a
11:15
preconstruction services agreement.
11:17
You are going to be paid for this drill down budget 5 to 10
11:21
hours plus depending on the complexity and size of the
11:24
project. But this is where you're, you're
11:26
doing your preconstruction agreement signed, you're doing
11:28
selections with the client either yourself.
11:31
Typically speaking, you're gonna have a designer, interior
11:33
designer either in-house or working with one and they're
11:37
helping the client do the selections.
11:39
But you need to know those because you're going to get
11:41
supplier pricing, you're going to plug in numbers.
11:42
It's going to be a very specifically placed and accurate
11:46
budget for the client. And this is where you go above
11:49
and beyond because essentially you're getting paid for your
11:51
time and this. So yeah, you're tearing out
11:53
bids, you're doing site visits, your maybe maybe meeting with
11:56
engineers. You're doing like, you know,
11:58
getting like geotech in there. Whatever you could be doing,
12:01
like selective demo on doing environmental testing to see if
12:06
there's, you know, any environmental issues for
12:09
asbestos mold, whatever may be be if you're doing a tear down
12:12
or remodel or what have you getting a bunch of clothes and
12:15
you're helping with the design of the project value, you know,
12:18
doing value add essentially budgeting.
12:20
And if the client wants to change the scope and there's
12:23
like, while this budget is kind of getting out of hand, maybe we
12:25
can change this or we don't finish this, you know, no
12:27
worries. I know this is a big pain point
12:30
for contractors is like you present a proposal to the client
12:33
and they're like, oh, that's more than we wanted.
12:35
Or we're now thinking maybe we don't want to double car garage.
12:38
You might want, you know, a triple or maybe a single or
12:41
whatever. And now you've got to go back to
12:43
the drawing board, revise your estimate, go back, you know, and
12:45
you've got this like back and forth with the client.
12:48
When you're in this sort of a process here, Yeah, it takes
12:51
time and it may be a little frustrating, but at least you're
12:53
getting paid for your time. And this positions your company
12:56
in a way that if you don't have project managers right now, if
12:59
you don't have an estimator, you can hire someone because you can
13:02
just kind of let them run with this.
13:04
And if they want change is good. You know, they're on your
13:07
payroll, the money's flowing through.
13:09
So tell us how we paid for our time at this point.
13:11
So what you missed earlier was our we do a rough budget, which
13:15
is one to two hours and then we move into a drill down budget,
13:18
which is typically a paid for and you have a preconstruction
13:21
service agreement. So the client signs that they're
13:23
gonna pay for your services to go through and you're gonna
13:27
create offer the scope of this training.
13:29
We're we're, you know, we're keeping it tight here.
13:31
So I'm not gonna go into the preconstruction service
13:33
agreement. If you want help with that, just
13:34
send me an e-mail or message later.
13:36
I'll send you our guide for it. We've got a guide that kind of
13:38
shows how to put one together. But essentially you've got an
13:41
offer in place that they're going to get a budget.
13:42
They're gonna get, you know, they're budget budgeting, get a
13:46
schedule as well as, you know, go through the permitting
13:49
process and whatever else that you need to do.
13:51
But you present that you're gonna help them with everything
13:53
so they're ready to build and, and then you move into the
13:55
construction agreement. And the big goal of this drill
13:59
down budget is ideally to be within 5% of the final cost and
14:02
not necessarily 5% of your final cost, but the final cost of the
14:06
project. There's typically going to be
14:07
some change orders or something that comes up that's going to
14:10
kind of like bump that that budget up.
14:12
The decline is going to ideally pay for during the process.
14:15
No estimate is 100% accurate, but by the time you've tendered
14:18
everything, you've done selections, you've got supplier
14:21
quotes, you plugged in all your numbers, you've gone through
14:23
this iterative process back and forth to the client, you can
14:26
kind of rest assured that you're estimating is, is really in a
14:29
good accurate place both for the client to so they have, you
14:33
know, trust in you and they've seen the level of detail you're
14:36
going into. Plus for yourself moving into
14:38
the construction side of thing, you know, there shouldn't be any
14:41
big surprises for you ideally as you move through with the
14:44
construction that's we're going to get into like estimating
14:47
mistakes and things to watch out for later.
14:49
So I'm not going to go through it now, but that is the three
14:51
kind of tiered step budgeting that you can do with clients to
14:54
save yourself a ton of time and fine tune the level of budgeting
14:59
to the specific client budgeting, estimating
15:01
interchangeable parts. The wording here making sense
15:04
for everybody. All right, a little bit of a
15:06
funny here. Estimator.
15:07
What's a good definition? An individual who does precision
15:10
guesswork based on unreliable data provided by those of
15:14
questionable knowledge. So I like this.
15:16
You also wizard and magician. It can feel like this sometimes
15:19
the use the three-step process that drill down budgeting
15:22
hopefully should eliminate a lot of this, but sometimes it feels
15:25
like a lot of guesswork. Definitely.
15:27
And just like that seems about right.
15:29
It's not what you wanna be feeling, but sometimes it is
15:31
Alright, so let's move on here. Top five estimating mistakes.
15:35
So you don't want to be like this guy, you know, found out
15:39
that you just lost a couple $1000 because you forgot
15:42
something in the scope of work or maybe who knows right?
15:45
There's 101 things of of ways to lose money on a construction
15:48
project, and you've probably experienced more than your fair
15:51
share of those if you've been in business for, you know, anything
15:54
over over a couple months. Alright, so the, the first one,
15:58
poor markups. I see this time and time again
16:01
where especially when starting out, you've probably kind of set
16:04
a markup rate and you're a little bit afraid to go beyond
16:07
that markup rate because you want to stay busy because you,
16:10
you think you're maybe overcharging client or what have
16:13
you. So the proper way to find your
16:16
specific markup and not go by just industry standards or what
16:19
your competitors may, may or may not be doing is figuring out
16:22
your overhead for the last 12 months.
16:24
So if you go to your your bookkeeping, hopefully you have
16:26
up-to-date books. If not, you can use your last
16:29
year, although the most current numbers are better.
16:32
You look at your trailing 12 months and what is your revenue
16:35
or your overhead and the trailing 12 months.
16:38
So let's say you spent $20,000 on overhead in the trailing 12
16:43
months and you've done $1,000,000 in revenue.
16:46
Then I don't know the exact percentages are there, but I
16:48
believe that would be 5 or 20%. No, it'd be about 2%.
16:52
That seems kind of low. You're, you're probably more
16:54
like 50,000 or or even 100,000 overhead.
16:57
But anyways, whatever your percentage is, you'll divide
16:59
that by your, your revenue. Typically speaking, what I see
17:02
most contractors are at least 7 to 10% overhead, if not, if, if
17:09
not more. And that includes your, your
17:11
salary typically as, as the owner as well as any like hard,
17:14
hard fixed costs for the company.
17:16
If you're not sure how to do that, just, you know, go Google
17:18
it or ask your accountant or bookkeeper to help you out with
17:20
that. But essentially, if you're
17:21
running a 10% overhead, that's a margin.
17:24
And if you have 15% markup, most people will think that's gonna
17:28
leave me with a 5% profit. But in reality, that's not the
17:31
case because of 15% markup, I believe is about a 12% margin or
17:36
13% margin somewhere in there. So really you're only making
17:39
like 2 to 3% profit above that 10% of overhead that you need to
17:44
cover in your markup. So that's why you need to know
17:46
the difference between markup and margin and why typically
17:49
speaking, your markup needs to be at least 20% to, to be
17:52
profitable. Because what you're not
17:54
accounting for, if you don't have contingencies in your
17:57
estimating or some sort of miscellaneous, which I would
17:59
suggest you do have, it's very easy for a project to run over
18:02
to 3-4 or even 5%. And that's why it kind of
18:06
you're, you're at the end of the year, you're not making any
18:08
profit and you don't, you're realizing you're not really
18:10
making any money is because your markups are, are too low.
18:13
So that's kind of the idea and the calculation behind it.
18:16
If wherever you're at, try to just ratchet it up.
18:19
I would like depending on what you want to do.
18:21
But if you are at, let's say 15%, you know, jumping up to 20
18:24
or 25% may be a big jump for you.
18:27
Try 12 or 13 or 14% and kind of slowly ratchet it up.
18:31
Or if you've got a lot of leads and you've got a lot of projects
18:34
that are already running, try bumping up to 20%.
18:37
See what happens. You may find that your closing
18:39
ratios don't actually, you know, change that much.
18:42
And even if they do, it's better to do a little bit less projects
18:46
and make more profits because it's going to be easier to run
18:49
and you've got you're just in a healthier state in the business
18:53
financially. And it'll give you practice of
18:55
selling jobs at a little higher margin and having to kind of
18:58
find the right clients for you, if that makes sense.
19:00
Alright, no project management time.
19:02
Another mistake I used to make, especially when I started out, I
19:05
would just put a mark up. I would, you know, have all my
19:07
different costs in there for Subs, materials, suppliers,
19:10
whatever. And I would, I would put down,
19:12
you know, 1520% markup, leave it at that.
19:15
And I was like, I make my money off the profit or the markup and
19:19
I didn't have any management time for the project, which of
19:22
course I was spending all my time managing projects and not
19:26
really being paid for it. And so you wanna have specific
19:30
project management time, number of hours.
19:32
If you're doing like a new home build, that could be anywhere
19:35
from, you know, 203 hundred hours of your time dealing with
19:38
clients, suppliers, checking sites, doing quality control,
19:41
dealing with county, city, you know, inspections, whatever it
19:45
may be. Make sure that you've got a, an
19:47
hourly rate and you've got amount of hours for that
19:49
project. Because again, if you need to
19:51
hire project manager, you've got project managers, you're paying
19:54
them a salary or, you know, hourly rate, you want to make
19:57
sure that you've got their expenses covered so that you can
20:01
easily transition to that and get out of the project
20:04
management role inside your company.
20:05
Rushing is a common one as well. I, I like to move fast.
20:09
I remember, you know, nailing out estimates and just running
20:13
through numbers and kind of doing a quick review and, and
20:15
getting them off to clients and, and rushing is a quick way to
20:19
forget things, leave things, you know, undone.
20:22
And I think anybody is willing to.
20:26
Take an extra 15 minutes, 15 minutes.
20:28
Your time is definitely worth taking in order to save, you
20:31
know, 10s, even hundreds of thousands of dollars on a
20:33
project by not forgetting something or having a
20:37
altercation with the client later on because you don't have
20:40
something in your scope of work or whatever it may be.
20:42
Take a little bit of extra time, take a breath, maybe even just
20:45
let the estimate be and get to it the next morning or or
20:48
whatever. Get a fresh set of eyes on it
20:50
and put the the amount of time you need because as mentioned
20:54
earlier, you're profitability is set in the estimate.
20:57
This is where like the financial security and financial
21:01
profitability of your of your company all starts with the
21:04
estimating. So take the time needed.
21:06
Yes, make the process quicker. Yes, you don't get this
21:09
delegated and make it as easy as possible exactly as possible,
21:12
but don't over rush it. Next one is no review.
21:15
So keep this one super simple. Get somebody else to review it.
21:19
Ideally, if even if you've got like a Superintendent foreman on
21:22
site, get them to quickly review your numbers for you because
21:25
they're like hands on. They're in the frontline.
21:28
They may be like, you know that framing amount of time.
21:31
I feel like it's not accurate. You should bump it up or maybe
21:34
that's a lot of time and get their feedback.
21:36
Not that you need to change everything they say, but at
21:38
least it gives you a second set of eyes.
21:40
If you've got a project manager or an estimator or whoever,
21:44
obviously you would typically be the second set of eyes for them,
21:47
but get someone to review it before and after.
21:49
If beyond anything else, review yourself and just go through a
21:53
line by line. Make sure everything is correct.
21:55
Last one you mentioned here is no mist or contingency, so you
21:59
may not want to put a line item miscellaneous or contingency
22:03
because your clients may be like, why am I paying for
22:05
something that's you know, miscellaneous or contingency
22:09
Miscellaneous. You should be able to make the
22:11
case that with every project that comes up, there's always
22:14
something that needs to get taken care of that's just
22:17
slightly outside of the scope of work or is just can't be
22:21
accounted for ahead of time. If it's something larger that's
22:24
going to be, you know, constitute a change order.
22:27
But little things like miss, maybe you're finished Carpenter
22:30
forgot to install a little bit of baseboard somewhere or you
22:33
know, maybe the wall is a little bit crooked.
22:35
You need to call your guy back or whatever rate.
22:37
There's always these little things that's like you could
22:39
call someone in to to redo that or maybe it falls a little bit
22:43
outside the lines of which trade should this be for need to get
22:46
your own guy in there. Little things like that.
22:47
That's what miss is for both missed for materials as well as
22:52
as ours. Alright, so hopefully this
22:54
making sense for everybody. If you've made a couple of these
22:58
mistakes, then I'm sure you felt the pain of it later on.
23:01
And this is definitely upstream thinking here of take care of it
23:04
in the moment in the estimate so it doesn't become a problem
23:07
during the project. Alright, so this is sort of the
23:10
the the second part of the training here.
23:12
We move on to the third right away and stop this from
23:15
happening. We already mentioned kind of the
23:17
mistakes that can cause, you know, money down the drain.
23:19
Essentially, we've talked about how to save time, how to
23:22
increase profitability. Now we're gonna be talking about
23:24
saving money. So proposal protection pack,
23:27
you've provided that you're going to provide this proposal,
23:30
you've done your estimating, you need to protect your pricing,
23:32
protect your company and make sure things don't go sideways as
23:36
best you can inside the project. Obviously having a good contract
23:39
in places is important, but there's things you can do on the
23:42
proposal to set the stage and, and make sure that you're not,
23:46
things aren't, aren't going, you know, sideways.
23:49
As I mentioned with the, the the client accepting the proposal.
23:53
So terms, inclusions and exclusions.
23:56
I am going to share this document with everybody here
23:59
because it is very important that you have this.
24:03
So I'll put in the chat here. So in the chat you can go and
24:06
click that link and you can get access to this document.
24:09
Essentially, you may have something like this and
24:12
hopefully this template will give you some ideas of other
24:14
things you can add or how you can modify it.
24:16
But on a proposal, this isn't like a final contract, but on
24:19
the proposal, you wanna kind of sell your company a bit.
24:22
So let them know what they're getting, what's included, you
24:24
know, quality workmanship, warranties, any sort of awards
24:28
you may have won, if you have portals or certain clients like
24:32
relationship things that you do, let them know about it.
24:35
I like to, you know, all materials, labour, supervision,
24:38
everything's included for them. Like I imagined qualifications,
24:41
so your licenses, your certifications, your insurance,
24:45
if you have like a work safe or some sort of safety program,
24:48
mention it. And and then any exclusion.
24:51
So environmental, structural upgrade, city upgrades, you
24:55
know, permits, typically I don't include permits at the be, you
24:58
know, on a on a rough budget because you don't really know
25:01
what the permit costs are going to be.
25:02
And normally either you'd be paying for it and just
25:05
forwarding that that cost the client or the client would be
25:08
paying for it. So keeping that budget kind of
25:10
low, you don't necessarily want to include certain things and in
25:13
terms of conditions. So how long is it valid for talk
25:16
about allowances, you know, with some materials that do you,
25:21
what's your, you know, deposit policy?
25:24
What can they expect? Invoicing, just all these
25:27
little, you know, little things you don't want to overwhelm it
25:30
with like, you know, pages because it again, you're going
25:34
to have a contract that's going to specify these things very
25:37
explicitly. But this is like a general kind
25:40
of terms and conditions and things like that.
25:41
So you want to put that on a proposal to help protect
25:43
yourself and let the client know you know what's what
25:47
essentially. So go download that and use it
25:49
as you wish. Details definitely matter on a
25:52
proposal. The more detail you can put on a
25:54
proposal, the better. So you may be thinking that you
25:58
just want to have like large kind of functions like
26:01
categories, framing, demo, drywall or whatever it may be.
26:06
Put some details, especially if you've gone to the extent where
26:09
you've detailed line items, show everything to the client.
26:12
Like all the details you have, show that to the client.
26:15
You don't have to include pricing for every line item
26:18
depending on how you want to run your business and then
26:20
proposals. But the more detail you have in
26:22
there, don't feel that you're overwhelming or client with
26:25
information because even if the client is just going to skim
26:28
over that, which they probably will and they may not understand
26:30
it, they can at least see that you've gone to a high level of
26:33
detail and it makes it feel more solid.
26:35
If you, if you provided a, an estimate and your competitor has
26:39
both like similar price, similar scope of work, but yours has a
26:43
lot more detail on it, It seems a lot more secure and like
26:47
you've, you've spent a lot more time on it, even though you're
26:50
probably working from a template.
26:51
And a lot of that stuff should just be kind of templated
26:53
details that are standard for, for most projects.
26:56
So detailed definitely matter. Doing a risk assessment, this
27:00
would happen in your review of the, the estimate.
27:03
You guys are on track. I know I'm throwing a lot at you
27:05
here, but this is, you know, really important stuff.
27:09
And it's the kind of stuff that you kind of do once or you set
27:12
up the process once and, and you're good to go.
27:15
All right. And that's, that's the beauty of
27:18
systems. Do the work once you set it up.
27:20
Yeah, you're always kind of improving and refining it.
27:22
But once it's set up, once you have it in place, you can just
27:24
continue to use it, do the work once, get paid forever.
27:27
That's that's the anytime you can do that, you know, you're
27:30
you're doing, you're doing good work and that you should
27:33
prioritize. So do a risk assessment.
27:35
What are the risks? Is this, you know, trust your
27:37
gut. Does this client seem a little
27:39
bit off? Is there maybe some issues here?
27:41
Maybe they've mentioned the other three contractors that
27:44
they worked with in the past three years that are all idiots
27:46
and I didn't know what they were doing and had a, you know, a
27:49
horrible time. Again, use information as
27:51
information, but you can start to pick up kind of
27:54
commonalities. Maybe the projects really far
27:56
away. Maybe it's a really, you know,
27:58
difficult approach to the property.
27:59
Maybe super sloped. Maybe you've built in this area
28:02
before. You know that you're there's a
28:03
bunch of like clay and uneven terrain or, or you know, issues.
28:07
So do a risk assessment and put that in your estimate.
28:12
If there is some sort of risk that you've identified, again,
28:14
details matter. Do you know risk excavation
28:17
without geotechnical analysis, You know, excavation could be a
28:20
risk. We don't know we're going to
28:21
find underneath the ground is a risk factor, right risk without
28:25
doing proper environmental testing, we can say that the
28:30
there's a good chance or possibly the house has Festus in
28:33
it because of the age and you know, remediation could be an
28:37
extra 20 to 30 grand or whatever it may be, right.
28:40
So if you can identify those risks, you don't want to scare
28:43
them away. But if if there is some specific
28:46
like risks that are specific that are worth kind of
28:51
discussing, it puts you on a different level than the other
28:54
contractor. That's like sunny skies,
28:56
everything's fine. Let's just get this contract
28:58
signed, move forward. Don't worry about anything.
29:00
You want to make it easy for them, but you also want to let
29:03
them know that you're in their court, you'll identify risks and
29:06
that you provide them with the information and they can make
29:09
the decisions moving forward there.
29:10
And you know, the driver's seat, you're there.
29:13
As you know, they're they're trusted advisor for for the
29:16
getting the construction project done.
29:17
Expectations super important to set the expectations as far as
29:22
kind of each step I mentioned the three tiered process of the
29:25
estimate. Let them know like, hey, you
29:26
know, ballpark budget project like this is whatever $700,000.
29:32
Our next step is to go to a rough budget.
29:34
If you know, after they've said like, yeah, that seems about
29:37
later. That's a little bit more, but
29:38
it's, you know, we were expecting maybe 6 hundred 650.
29:41
It's like, well, we're not too far off there.
29:43
Let's move into rough bugging you kind of like always tell
29:45
them what the next step is so they know what to expect in, in
29:48
your process, even during the rough budget, you tell them
29:50
we're gonna give you a rough budget to kind of get within,
29:52
you know, 10%, five to 10% of of what the project costs are.
29:56
From there. Our next step would be PCs a so
29:59
that when you offer it to them, it's not like a big surprise,
30:01
like, oh, now you want me to pay you to have to go to
30:04
preconstruction or whatever. It's like you've sort of set the
30:06
stage a bit already ahead of time.
30:08
So expectations, exploratory demo, I mentioned that earlier,
30:11
especially on remodels is super common.
30:13
If there's like some cracks in the ceiling and the house was
30:16
built 100 years ago and the roof is, you know, sagging or
30:21
whatever, doing like you don't want to.
30:24
Yeah, if you can pop your head in the attic and take a look and
30:27
easily see that something out of place, great.
30:29
But typically speaking, the exploratory demo would be done
30:32
during the preconstruction stage and you would maybe remove a
30:35
little bit drywall, maybe get a structural engineer in there to
30:40
give like, you know, analysis of what's going on so that, you
30:44
know, before you move into the project, what may be happening
30:47
or what may be cause for, you know, consideration and what may
30:51
cause change orders while during the project, more that you can
30:54
do ahead of time. Again, just the better
30:56
experience the clients going to have.
30:57
Because now when you move into the project, it's like, yeah,
30:59
you know, we thought this was a risk.
31:01
We've opened up the wall. It's pretty obvious that this
31:04
was framed, you know, using like some old trees and some rubbish,
31:09
2 by fours or whatever. And there's there's rod mold
31:12
here. So we've got to RIP it out.
31:13
And you know, at least the clients can give him the heads
31:15
up with the exploratory demo, environmental testing and
31:18
geotech, as I mentioned is, is what you want to do.
31:22
And this if you've done all of this now you're very well
31:24
protected. Everyone knows the risks,
31:26
everyone's has the expectations going into it.
31:29
You've provided a very detailed drill down budget.
31:31
It should be a very natural process that you've been working
31:34
with this client now to then move into the construction
31:37
phase. They already know the budget.
31:38
It's been arrive from the beginning.
31:40
There's real there's no real reason for them to put the
31:42
brakes on now and not move forward with you and your
31:45
business. But you can always frame it as
31:47
especially with the preconstruction is like we're
31:49
gonna do all this like testing. We're going to identify risks.
31:52
We're going to get you a schedule.
31:54
We're going to create a very detailed drill down budget.
31:57
If you don't want to move forward with the construction
31:59
where you want to go with a different contractor, there's
32:01
nothing stopping you. The CSA is, you know, non
32:04
binding as far as like moving into the construction phase.
32:06
So it's always low risk. You want to keep the very low
32:09
risk. And then by the time you get to
32:11
this final stage, it's like we just need to sign the dotted
32:13
line. We've already kind of applied
32:15
for permits. We can get into the
32:16
construction. This is what's gonna cost.
32:18
They know everything and it's it's typically is a fairly
32:21
seamless process. Alright, making sense to
32:23
everybody. I tried to keep this as concise
32:25
but impactful as possible. So I hope that you've, you know,
32:29
got a lot out of this today. Just as a quick read tech half,
32:32
we talked about how to save time with the three tier estimating,
32:35
how to get more profit, eliminate those mistakes and
32:38
protect your profit with the protection pack.