February 22, 2023

My Preconstruction Process: Part 2

This blog post is serving as a follow-up to last week’s blog. If you have not read or listened to that (hopefully both), I recommend that you do so before going further. My experience over the last 14 years has motivated me to move away from the price-driven commoditization of our industry, and to start implementing systems and tactics that typically are reserved for much larger firms. I have been able to do so through providing a service, a product, and an experience that is truly different than the status quo, and then finding the right customer for my offerings. A customer who is willing to wait, who is willing to pay, and who wants me. In my opinion these two principles are not independent of each other. In order to maximize your success, you must deliver the product AND serve the right customer. 

Now that you understand how important it is to understand who you are, who your customer is, and how to vet that customer, you can move onto the preconstruction process. This process is reserved only for clients, not potential clients. This means that in order for me to engage in pre-construction, I must have a check and pre-construction contract in hand. I will work with potential clients and serious leads to provide some sort of loose napkin budgeting, but I cannot devote hours of my time to customers who are not willing to engage with me more seriously. I have to remind you that it took time and effort to get here. I had to develop my systems and build confidence. I did not come through the door with my heels dug in, saying no to everyone who would not hand me a check.

At this point, let’s assume you have a vetted lead who has checked all the boxes for you and your firm. You have established a loose budget, your customer understands the timeline, and they are willing to engage in a pre-construction agreement with you (which will require a financial investment).

First things first. We need a formal design in place. A verbal design/scope does not work. A design from the customer is not sufficient. A design from a cousin who lives out of state and does floorplans on the side won’t cut it either. This is a great opportunity for you to make money and establish your control right off of the bat. 

For example, I have the ability to handle design in house for smaller projects, but if it is beyond my capacity we will bring in an architect, an engineer, or an interior designer. Deciding whether or not you want to hold this design contract is a separate blog post, but let’s assume for now that you are going to hire a designer under your umbrella. You must have a conversation with the design professional as to the basic scope of the project, develop a budget for their work, and clearly articulate the budget/deliverables to the customer. You should be adding your markup to this service. Think of it as subcontracting/managing design. You have to cover your exposure and liability, and you should not be doing this for free. 

Once you have a design in place it is time to develop more accurate budgeting. I have constructed  a comprehensive spreadsheet for all facets of a construction or remodel project. This spreadsheet is a mashup of my colleagues' systems, along with my own inputs and information. Next I draft a comprehensive scope of work, building the job on paper. The goal is to be able to create a construction narrative that the customers, subs, and designers can all follow, digest, and approve. This also serves as the basis for a schedule if the job requires it.

At this point I typically schedule a trade day for my subs and vendors to visit the project. They meet the clients, designers, and everyone who will be involved with the project. I provide them with the design, scope, and notes regarding their duties/responsibilities. I ask them for input as to anything I am missing, and then ask them to provide me with an estimated cost of work. I can then add this along with my markup to my line item budgeting spreadsheet. 

I want to reiterate that I am not willing to get my subs to a project or go through this amount of work for a customer who has not signed up for a pre-construction agreement. This does not mean I currently hold the work contract, but everyone has skin in the game. Everyone understands how serious this is, and it reassures the team that it is not a pricing exercise. I am here to protect my potential clients, protect myself, and importantly protect my team. These sub trades are by my side before and after this singular client, so if I tarnish the relationship with them for one customer, it can impact the long term health of my business.  

Once we have finalized our budget we submit it to our customers with our design. They now own this pricing and own this design. They paid for it. Technically they could opt out of working with you and choose a different contractor, but if you showed good faith, worked as a team, and brought value to the relationship, there should be no reason for them to explore working with another contractor. Assuming a worst case scenario where they do, you are paid for your time, and if need be you can compensate your subs for their time as well. 

If your pre-construction design or budgeting does not align with your customer’s budget, you can choose how you want to address that based on the situation. You can value-engineer the project, wait until the client has more money saved, make slight modifications to scope or design, phase the project, or concede certain aspects of the job to save money. The important thing here is to be continually adding value to the project through your expertise and experience. The clients are investing in you, your systems, and your team, and you owe it to everyone to see this process through. 

- Tyler Grace