Recently, I have had roughly a half dozen consulting calls discussing pre-construction, budgeting, proposals, job-costing, estimating, invoicing, and fostering leads. No matter which direction the conversation leads, it always circles back to one common theme…transparency. Transparency of costs, budget, changes, proposals, and all job-related costs and numbers. I have learned that there is no single more valuable business system than full-transparency.
In the past few years I have come to the realization that I do not want anything more from a financial business perspective than to be compensated for my time and my costs. I want to be reimbursed for efforts, my investments, my subs, my markups, my overhead, and my profits. I do not need to make more than what I put in, and I do not want to make less than what I put out. I simply want to be reimbursed for my efforts. If customers are not willing to pay those fees, then I do not want to work for that customer.
For years I did my best to accurately assess how much each job would cost and how long it would take. For most projects I grossly underestimated the time and cost of each project. A handful (generally shorter projects), I accurately gauged the correct amount of time and costs. There were even fewer projects which I made a rate higher than which I felt I had earned. The consistency of profitability was non-existent. At this point I simply want to be paid for my time and reimbursed for my costs. To me that is fair. The only way that I have found to accurately budget, track, and invoice for my costs is to comprehensively track costs, schedule, and scope. In order to be reimbursed for my time and costs, I need to transparently budget for and document those costs during construction.
Nowadays for each project I develop a detailed and comprehensive schedule, budget and scope. I secure a retainer at the beginning of the project, and I invoice roughly every two weeks as work is completed. It is simple (not really, but really). I put work in place, and you pay me for that work. If we do not do the work, you do not pay us. If we do the work you pay us. If we run into work that is above or out of scope we determine which route the customer wishes to take, and the impact on budget, scope, and schedule. My customers understand my hourly rate, the rate of any/all of my hired labor, my markups, my sub costs, and all of my material costs. They are aware of my markups and they compensate me for all of the above when I invoice them. In my opinion this is how business should be done. Maybe there are more lucrative ways of doing business, but I will take the tradeoff between slightly less profit and more emotional/mental freedom any day.
If the job is behind schedule I know how and why. I can accurately inventory the overages according to our schedule and the job costs related to said overages. Every two weeks we can meet with the customers, designers, subs, and anyone else who is involved with the project and assess where the job currently stands and how to proceed. If we need to reduce scope or reduce budget due to overages, we know immediately when and what to do. We work with our customers to determine what needs to be done. They are fully engaged and kept in the loop. I would not be able to do this if we did not have a clearly defined scope, budget, spreadsheet, schedule, and job costing during the project. We would have no point of reference or any numbers to back up against.
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For example, if the designers add four additional outlets to the scope and the customers do not want to spend the extra $600.00, we can address that when the suggestion is made. We can clearly illustrate how we went from 12 budgeted outlets to the proposed 16 outlets, and how much that additional cost impacts the budget. On a larger change, say an engineering issue, we could address the added cost to the budget and the impact on the timeline as well. This is determined immediately prior to putting the work in place. If funds are tight we can determine what can be omitted or reduced on the back end to reduce budget or timeline in order to maintain costs and schedule. If they elect to not go ahead with the work, we do not charge for it.
Every day, every week, every month, and every year I understand exactly how much money I made, how much I worked, and how profitable I am. I have a full understanding of my numbers and my customers do as well. There is zero gray area. For most of my career my numbers were convoluted. We worked against a lump sum cost, a generalized scope, and a vague schedule and I felt that we were always underneath the work, always behind, and never had a full grasp on our numbers. How are we to feel confident in our numbers and have that confidence reflected in our customer relationships if it is never clearly and transparently defined. In order to be compensated for your time and costs, you must share those costs with your customers. This establishes trust and promotes a healthy and successful relationship with your customers, subs, and employees.
The past four months have reaffirmed the importance of transparency for me. We have uncovered so many unforeseens and had so many delays, that if we were not transparent with regard to scope, timeline, and budget we would have no way of accounting for or communicating all of the changes. Many of these costs would be missed or eaten on our end. Transparency has afforded us peace of mind, profitability, and reduced anxiety on a project that has literally fallen apart at the seams. We have been able to secure additional funding from our customers, account for added time on the schedule, alter scope and design when dealing with changes, and remain prepared for anything that has come our way. We continue to refine budget, refine schedule, and communicate with our subs, our customers, the designers, and our vendors. Without full transparency, we would be underpaid, unable to advocate for ourselves or subs, and unable to maintain trust throughout this process. The line between original scope and change orders would be much harder to distinguish.
In my opinion there has been nothing as important to the health of my business and my own mental state as operating as a fully transparent business. I am compensated for my time, I am profitable, I am less stressed, and I am better able to manage my projects. I am confident in my process, I can engage everyone involved with the project in decision making, and I do not feel like I am underneath every project. I make my margins, I work my pace, and I am fair. Without sharing all of my numbers with my customers, I would not be afforded this luxury. I would have no leg to stand on. If you want to know more about my systems, or more about what this looks like from a business perspective, please feel free to reach out to me. I truly feel as thought my life and business has transformed over the last few years due to transparency, and I would love to help anyone anyway that I can!
Knowing your numbers is not enough. Your customers must know them as well!
- Tyler Grace