“I don't want to do free estimates. I would much rather work with the client and be paid to develop a budget and a plan. So why do we keep doing it?”
Welcome to another episode of Builder Nuggets, the show where builders and remodelers discover how to build thriving businesses while working less. I'm Duane Johns and together with Dave Young, we share the elements of success that have helped hundreds of contractors like you build better lives. [00:24.5]
Duane: Our guest today is a graduate of the University of South Carolina. He's been a builder for two decades. A third of that career was with a large semi-custom builder before making the entrepreneurial leap to business owner. His search for finding a better way to do things, led him to memberships, such as NARI, NCHBA for modelers advantage.
Dave: In this session, we're taking a hard look at the free estimate. We know a lot of builders spend a ton of time, energy and resources working on these often with no results. Duane gave up on free estimate years ago, but that doesn't mean there isn't a place for estimating. Today we break down the role of estimating and help you reposition it so that it becomes an asset to your company instead of a trap. [01:07.6]
Duane: So our guest today is Paul Kowalski joining us here from Charlotte, North Carolina. He's a friend, he's also a fellow competitor here in this market also, and have known Paul for quite a while through NARI and some other organizations. So Paul welcome, and let's dive in.
Paul: Yeah, absolutely. Thanks Duane. Thanks Dave. So glad for you to have me on and talk about this topic for sure. And hopefully add some value to the folks that are, that are listening. So yeah, looking forward to it.
Dave: Well, the first one's a tough question. How much is a free estimate worth?
Paul: It's free. It is free. Yeah, right. It's a great guess and I don't know if that's a question coming directly to me, but I couldn't help jump on it and think about that. That's typically what it's worth. Or in some cases, if you're the builder, it may cost you actually, it does cost you, right. If you're actually putting any sort of number to paper or paying anybody to do that research, you are in now a negative position as opposed to a positive position from a business standpoint. So yeah, it's free to your client, but it's a cost to you. [02:14.7]
Dave: So why do, why do we do it?
Paul: Well, why, why did I used to do, do it?
Dave: Okay.
Paul: And why, why do some people still do it? You know, there's the old, I think part of it is, well, it's the way business is done. And it's a, it was an expectation that was set. It's also viewed, I think from a business perspective, if somebody is taking this as part of their strategy, it's an opportunity cost, you know, and maybe they chalk it up in that line to say, Hey, this is an opportunity cost. I'm willing to risk this for the biscuit, so to speak. But I think that's why the practice is done. But I think it's, it's a disservice in a couple of different ways and hopefully I'm not going too far down the here, but you're generally not diving as deep as you need to in most cases, you're not engaging the right data points that you need to collect and it can become a disservice to your client in that you don't know exactly what you're getting into with a free estimate, depending on how much work you've put into it. And then at some point, if you're doing X amount of estimates over X amount of time and doing a detailed job, like you're getting every single one of them, man, I'd like to put a measure on it, of what that opportunity costs is, you know, verse the, the return on investment that you're getting. So if it is truly an opportunity cost and that's your model, have some data to back it up, otherwise I would suggest there's better ways to do it. [03:50.4]
Duane: And the industry has done this to us through the years and competitive bidding even if you look at it on the commercial side of things, it's not necessarily a bad thing and it's pretty common practice, but it's usually based on having a very detailed set of specifics plans everything's outlined so that you could, in a sense, get three or more competitive bids. They're all pretty much going to be pricing the same thing. And in a sense, you would have the opportunity then to have an apples to apples comparison. The sad part is in, in residential custom contracting, that is just not something that happens. Usually people are going to enter the estimating phase when there's not much known at all. And then to, to drag multiple contractors in up against each other to start estimating on a bucket of unknowns, it's really, that's where you see, you have to ask yourself what is the value. [04:44.0]
Paul: Yeah, you hit the nail on the head. That's it. That's a great scenario. I mean, I experienced it today. You know, another version of this is you have, and you know, the design, what I call the design bid model, design bid build, where you have an architect draw something up, there is no handle on the cost. And then you're, you can't see me, but I'm dealing out some cards here and you're dealing out these plans to people and different contractors. And there's no gauge on, on, on what the basically you're going to let a group of people determine what the cost of this thing is with different experiences. And a lot of question marks when it comes to Duane, you hit it on the head. A lot of unknowns, some cases there is no engineering and a pricing set. In some cases, there's no idea of what the finishes or allowances are going to be for that particular product. I always ask folks when they say they've gotten some pricing or a free estimate, one of the first things I ask is, ‘when did their, you know, what did their HVAC guy say when he visited the home? [05:47.2]
Oh, he didn't. Well, what about his framer? Oh, he didn't. Hmm, okay. Is, is he going to be doing the HVAC himself? Well, no, I'm not licensed in HVAC. Well, that's interesting. You know, like I said, anyway, you see where I'm going with it. But man, taking the time to have the people who are going to perform the work, look at this is essential to your client and to your margin line, right. And being able to produce an accurate estimate. And wow, if you had a bid that was tied to a subcontractor agreement that was for a fixed period of time for him to perform that work, that's something powerful. You can actually create a budget off of that and maybe get a certain amount of margin backs on being kind of coy. I apologize, but I feel passionate about it and you know, doing the research is important for yourself and for your client. [06:40.4]
Dave: Lets back up for a second to the client and the client expectation. And we touched on it earlier and that we've all been conditioned that, you know, you want to, you want to get in and talk to three people and get three quotes, somewhere along the way we've commoditized ourselves. And it feels like when we make it about the numbers, it becomes about the numbers. I think the challenge that we need to look at is, what do we make it about when we have the opportunity to sit down and meet with a client, how do we shift their mindset and talk about the things that we that are really important to talk about at this stage, like their vision for the project, what their dreams are, what experiences they've had in the past, how they're going to create a budget, all those sorts of things that are so much more important than just the number.
But I think we get stuck on the number, we get stuck on you need to talk to three people about what their price would be. And it is three different best guesses from whatever treasure map is out there right now that may or may not lead to the right ending point. You've mentioned that you've switched away from this. I mean, we know tons of reasons why estimating can be a trap and we could dig into that for hours, but I'm interested in hearing, how do you give a client an idea of what they should budget on their project and do you do it all at once? Cause the way Dwayne and I coach on it may be different from what w what you're doing. So share with us how, how you got off the free estimate train, and you're doing something different now. [08:12.4]
Paul: Yeah, no. So the largest shift I'll give some credit to the group, Remodeler's Advantage, they introduced me to the idea of design build. And design build was the fundamental shift for me that led me away from pre estimating and producing massive amounts of estimates and burning out estimators in the process and producing projects that weren’t truly ready for production to some degree, or at least having a project manager dance around to try and perform on a less than stellar production package. So.
Duane: So what you're saying is prior you used to estimate for free, and I'm sure that led to designing stuff for free a lot as well.
Paul: Absolutely, absolutely. Not fully vetted out, designing on the fly sometimes trying to deliver a superior customer service, but not having everything we needed to do it. So the switch to design build once it was introduced, this is the idea for folks that don't know design build approach. [09:10.4]
This is where you're going to work with the client holistically on what Dave mentioned, what the why's are, what is the future state, what is the outcome, why this property, how do you want to make it, what you want it to be? And being able to offer a solution in terms of design, in terms of their financing and, you know, working with them. And by the way, having them pay your team of professionals to do this and there's value in it, that's design build, but that's where it started for me, Dave is when I was introduced to design build model. And that's when I realized, gosh, the people I'm paying for this can be paid for this too. And there's a lot of value and changing that. And you know, when you talk about, so that's, that's, that's the for, I guess one of the first questions is that's when I switched over discovering design and building the power of it and what it can deliver to my clients and what it can deliver to my team in terms of retention of project managers, talk about giving a fully developed package to somebody versus handing them something with a bunch of missing pieces. [10:24.7]
It's quite a different experience having a career with a company that can at least assure to some degree and in the tricky world of remodeling a plan and a process in a way to get there. But the way that I think affects the client experience, you know, I touched on it a little bit earlier. I gave that example of the client, who's probably spent 15, $20,000 on a set of plans for a renovation in which they have no clue what that thing is going to cost until they hand it out to the classic three people. And you're right, they take the treasure map and they give you certain options on where you might end up and how much treasure is there, how much isn't, what's going to cost in the design build model. And I know you guys focused on this too. It's a little; we do it a little bit differently, right. But you know, the idea of in my first conversation with the client, the second question I ask is why? First is what? Then, Why, where are you at in the process and in what do you want to get out of this? What do you want with this experience? You know, and, and what's your goal for this initial call. And we'll talk about that. And that shapes whether or not a, they're going to be a good fit, and I can offer our process, which is kind of classic design build, you know, where you're going to move from predesigned services, schematics design development, and then onto construction contract and construction documents. But it all. [11:57.8]
Duane: I'll just real quick while you're on that, just to clarify.
Paul: Yeah.
Duane: Do you, do you provide design services in-House? Because you can, you can have a design build model either way.
Paul: Yeah, correct.
Duane: But in your case, are you doing it in house?
Paul: We do both, right. So we have, we have two different contracts for this. The first agreement is a design agreement, that's what we're going to work in house. You're going to get to work with our lead architectural designer and interior designer on your project, as well as course access, our estimator and our production manager, that's the full packages, our design agreement. But we also work with some choice outside architects that we believe can deliver a set of plan with the right information on it and are willing to collaborate with us as if they were in house. So we're willing to do that. And we do that through what we call a feasibility study agreement. And I like to tell clients, that's our way to access a design build firm, if you already have your own designer. You know, we've got to have a good conversation to make sure we're a good fit, but we provide a pathway for that to happen too. So Duane, we do both. [13:02.2]
Dave: We joke around that we liked the design build model because build design is very expensive.
Duane: We built it nice because we build it twice.
Paul: Wow. That's awesome.
Dave: So let's back things up for a second. Having a plan is key to all this and helping your client understand the value of planning and Paul, you mentioned it, the value of the people that you're bringing to your team. One of the secrets here is to control or to have to shift the conversation away from the commodity piece being, Hey, what's your price and have conversations around your team, their goals, the outcome, educating around the steps that it takes to run a successful project. Some of the things that they'll be able to avoid through doing that, how do you create value? Cause this is really the secret. How do you create value around your planning process?
Paul: Yeah, no that’s great. So there there's, there's a couple of different ways. First of all is understanding that clients, why and their ultimate goal, and you empower us. I look at design as a puzzle to some degree, Ahha. [14:15.8]
It's a puzzle for my team. And the client's job is really to well pay us and lay it at our feet. And they have a given amount of, you know, finance available or investment. They also have a desired outcome, their why and what they want the future state of this remodel to be. And then we also have physical parameters, the existing home or existing lot that come along with it. And it's our job as a team to make all those pieces of the puzzle fit, to allow that customer, to achieve their goals, why, and let us manipulate the physical instances and the financial pieces and try and plug them together to get them to where they need to be. That, I mean, that's, that's a big nutshell for the value, but if you wanted to get into brass tax, some of the value is being able to provide optional lines and estimating, letting that customer have a choice of what material they use, or maybe to a greater degree, being iterative in the design process and saying, you know, we've gotten a schematic design price at this point, but that's over where we want to be. [15:28.8]
What options do we have to get this cost in line with where we're comfortable in our investment into this particular property or home, or showing them the world of possibility, right? Like if you have a great designer, like we do, you're going to be able to open their eyes to things that they didn't thought possible. Not everybody's a designer, right? We have folks that come to us and say, Hey, I want to do this, this, this, this, this, and it's going to be over here in the closet is going to be over there and which is great. They might be spot on. But part of the value in designing and working with a contractor is being able to show you the world of possibility and what can happen in design, which allows them to make confident decisions, right? They know they've had a professional guide, lead them through the architectural steps of a particular project. And they may decide not to do the wild version of what we had in schematics. And maybe they land somewhere in the middle cause they liked some features of it, but it also holds some of their original idea. And then guess what we get to provide them pricing on that. [16:31.8]
You're paying our estimating and production department to give you costing on that so that you can make a confident decision. So confidence in decision, a guide in the design process, documentation, all of those things. I think it's invaluable. Right. You know, we, we're talking about value. I mean, like I look at it, of course I'm sold on design bill, but I'm like, heck else, do you do that? You know, you're guessing otherwise, how do you make a confident decision without that information? [17:03.2]
Duane: Yeah. Paul wouldn't you agree that one of the biggest things, when you get your head around the design build concept, you start to realize that it's at its most basic level. It's not putting the cart before the horse. I mean, it's because I think so many times you get folks that will come to you and whether this is for a custom home or if this is for a remodel, whatever it is in most situations, folks have probably thought about something like this for a long time. And for whatever reason it's been put off, they've been waiting for design waiting to get in a financial position, whatever the case, when they finally get ready to do it, boy, are they ready to go. And that's the only thing they think of is how ready to go they are. And I think it's our job, especially if you're embracing the design build model is to slow those folks down. And really you have to start to uncover all the reasons why they're not ready to go.
Paul: That's a good point.
Duane: And I'm saying that out there. So that also some of the, some, some fellow builders out there that have not embraced this type of model yet understand that, that you're positioning yourself. And you said a huge nugget before as a guide to come in here and let these folks know that there is a lot to do. This is a huge decision, huge investment, lots of moving parts. Let's assess where we are before we just start talking about estimating. [18:12.9]
Paul: You got it, you got it. Yeah. And some of those questions come out upfront before we sign an agreement, right? Like what's the desired investment level to some degree understanding where that is. Again, that's part of that puzzle. Understanding the why's are, are these things achievable? And as you move along in the design process, making sure you have checked with me, somebody check and talking about the guide, I'll use that analogy, take it another step further. But we're looking at the compass as we get through schematics, right? Where are we? Where are we going? Where we've been, and should we continue in this direction before you spend more money and more time. And quite frankly, if you're the builder or the design build firm, you've got opportunity costs. So if you're spending time with somebody who doesn't know where they're going, and doesn't have all those parts and pieces together for you, you might end up with no project on your hands. And a lot of time spent with somebody who's doing a whole lot of nothing and probably very good intentions on both sides, but you have taken on a responsibility of being a guide at that point and must request all the information from that client, including financing to make sure that you're going in the right direction. [19:24.3]
Dave: Let's face it. This is a very personal decision for our clients. It's also personal for us, who we choose to work with and why. And you just touched on some of those things. So totally agree with you. You want to get to know your client. You want to understand in a collaborative environment, if they value you, if they understand what you are doing, if they respond to your coaching and they need to see, Hey, does this person communicate with me? Does this company get me? Did they, do they all understand who is on their team? And you talked about that confidence earlier, if all of this stuff is up in the air and yeah, we'll figure it out. Like, look at my track record. I've been doing this for 30 years. Trust me, that's great. It doesn't mean every single one of these is going to work out and be a good fit. And there is value in experience and track record. Absolutely. But today's client really has so many choices available to them. You need to have a system to manage those choices. [20:26.8]
And you know, in our experience we've found there is no effective way to guess your way through a budget. And we've also found that when we have done that, when we've tried to force it, or when we've moved off our, our position, we end up creating an estimate. That's maybe, you know, the more detailed you make it is the more lines that you have to defend. And it is all make, believe. It literally becomes a choose your own adventure novel instead of a detailed roadmap. And I've been in that position before where I've had to defend every single line item and you're going back and constantly defending that, Well, yeah, but you said it should be this, but I didn't know what you were going to pick. It's that constant dance back and forth when the alternative is to sit down with the client and say, all right; we're going to figure out exactly what you want in your project. So we're going to do the vision. [21:25.5]
Here's how it works. We're going to figure out exactly what you want. Who's going to do it, when it's going to be done, how much it's going to cost. And before we demolish your current house, or we dig a big hole, you're going to know all those things and have a really good idea, if you're going to like it. We know how the novel is going to turn out. We are not going to guess our way through the end. And here is how we do this. It's with these professionals and through these steps. But even with explaining this, we oftentimes come up with responses or hear things back. Like, but I just want an estimate. I want to know how much it will cost. Why does the other guy do it? What are some of the objections, you get at this stage? Like, cause, cause we hear like, well, why should I have to pay for that? Don't you know how much this stuff should cost, that's why I'm hiring you as a builder. Shouldn't you know, even though we have no idea what they're going to pick. [22:22.8]
Paul: Yeah. That's a great question. And you know, really what I try and do is first of all, I'll try and answer the question directly, but I'll start here. I can't sell anybody, anything. I can tell them that what we do and what value we bring, if they choose to understand that or share that value. Well, then we've kind of opened the door there and I know who I'm working with. You mentioned, well, the client take to coaching and my experience and what we do and some degree, some folks will. You know, and then may just end there, but to combat the objections, what I do is just kind of show them the path, right. Like this is, and I asked some questions to combat that. And you know, I I'll go back to something I mentioned earlier, okay, you've got this estimate, right? That's awesome. You got these people that are doing this free estimates. Was there an electrician out there, their HVAC guy, their plumber, the Mason, the framer, the roofer?
Duane: It goes on and on. [23:24.4]
A quick reminder that the best way to get the most out of this podcast is to engage with the Builder Nuggets community, visit our website at BuilderNuggets.com and follow along on Facebook and Instagram. [23:38.7]
Dave: And Paul do, do all of those guys want to come out during the free estimate? Or do they want to work with you when you have an actual client under contract? Like to do that I mean, some of them will as a cost of acquiring the lead, like you talked about before, but it gets to be awfully monotonous and an awful waste of resources to have people coming out, especially when it's not fully specked to give make-believe prices on make-believe projects.
Paul: Yeah, so you can't do, so that's the thing. You need a developed plan. You need a client that is invested in it, has done their work. You've asked them about their finance. You've asked them and gone through schematics and the details and now you have a design development plan. And that's the point that you bring those contractors out there, right. Because they are they're your trade partners. And if you're going to burn their time, aimlessly, the willingness to come out and do that is going to decrease. So you need to be careful of how you use that tool, but it's an opportunity for them on the other side, to win your business and to get a look at what they're getting into. And I'm a long play for somebody. I'm in this market for a long time. And I plan to be, and this is the long game for me. [24:56.4]
So that particular trade knows that I'm not that one project or a two year deal. I can continue to feed them in their business and maybe be a client on their books when they want to sell their business, then I'm going to be part of their revenue shrink. So those are the people that we choose to partner with. If they see that value, then they're going to come out and help us with it because they know we're doing the vetting, right. We've had some projects. Yeah. We've, we've gotten to that phase and maybe they weren't awarded the project on that one. Or, you know, in some cases, you know, maybe we didn't win the project or something's happened and it's fallen through or been delayed. But to some degree, I find they take the good with the bad on that. But going back to the original question with folks and, you know, a free estimate, how do you combat it? I'll ask that question. And if the answers that none of those people have been out here, I mean, I just let that marinate for a second. Your guide magically knows what everybody's going to cost without looking at it. And are they licensed in all of those trades? Do they have some sort of amazing software that calculates a remodel and factors, the old HVAC system and a crappy non-insulated duct work that’s in your home and now. [26:16.9]
Duane: It's a square footage cost, you know that.
Paul: Oh yeah, that's awesomest myth ever. What's your square foot price on a hard scale, residential remodel? That is a, it's yeah.
Duane: That’s one yeah, that's one of the worst. It's a myth and then.
Dave: It depends on how much the project weighs.
Duane: Yeah.
Dave: What’s the cost per pound.
Paul: I'm like four thousand per, per square foot.
Dave: Yes.
Duane: And then we've got to realize too, that a lot of what we're fighting is we're undoing what the industry has done to itself over a period of time, you know, over many years and these three things have come together to make it really difficult to because let's face it. A client is going to try to go the path of least resistance. And when you combine free estimate pricing set and allowances together, it's a nightmare scenario. And, but it sounds so good to a client because it's, it's not a huge investment to them on the front end. [27:19.1]
You know, someone's going to give me a free estimate cause they do this all the time. So that's gotta be, that's gotta be of some value. Pricing’s set cause I don't want to go too far with plans. Let's just get it down here, cause they're all these builders know how to build. And then allowances. Yeah. Well let's put, just, just put numbers in for tile and cabinetry and countertops. And what happens is it's a double-edged sword because this misleads the client quickly. Cause they, they, they actually think they're getting some real information. And then what happens is every contractor that comes to the table realizes they need to put no effort into this because you know, we're, we're going to guess, I'm going to guess at something without getting paid and someone's already provided me an outline of what things should cost. How much efforts really be put putting involved there. It's just, there's so little value to that approach. And that's what we have to undo, almost every time when we talked to him a new client. [28:13.1]
Dave: Hey, undoing is a good point because I feel like the first person that needs to be undone is the builder. I think most builders would recognize, I don't want to do free estimates. I would much rather work with the client and be paid to develop a budget and a plan. So why do we keep doing it? And that is the real problem that we should work on solving. And I think there's two pieces to it. One, most builders do not take the time to properly train on this. And that's the power of collaboration and working with other builders and figuring out, Hey, how do you get over these objections? And then you think having an objection with a client is hard. Try having it when there's an architect who has some control over the project and is more of a trusted advisor, then you are initially to the client and they're wired different. [29:05.9]
How do you develop the skill? So developing the skill to be able to become a good educator is the first piece. And the second piece is knowing how to map it out, how to help a client build their own budget, how to help the client be a proper teammate and set those expectations and understand this is how it's all going to go down. This is how a successful project runs. This is what a successful plan looks like. This is how it's all going to go down to create the around it. So you need to have that framework, but you also need to work on your game and understand how to be a better educator. Paul, how did you, how did you get to the point where you are now? Because obviously this is a very, very hard thing to do and our audience is going to be saying, yeah, I come up against these objections all the time. How do you make the switch mentally yourself first? [30:06.7]
Duane: Yeah and Paul, let me just add to that. Really the same question I was going to get to is, is it, it's a mind shift. It's it's, it's putting yourself, you know, taking yourself totally out of that commodity mindset, repositioning yourself. So think back to, you know, when you were in that position or there's listeners out there that might be in a position they're, they're uncomfortable with this. They haven't really done it. And they're like, I just, there's no way people are going to pay for this.
Dave: That won't work in my market.
Duane: It won't work in my market.
Paul: And yeah, that's, that's another meth. Seeing the first thing is understanding your worth. You know, this was a big thing for me, you're worth it. And I guess that sounds kind of free fruit potentially, but you are worth it. The skillset that you have is not possessed by many people, residential large-scale remodel, the ability to estimate it, to be able, the ability to project, manage it and execute it is extremely difficult. And I would say highly underrated in our just general society, right.
Duane: That’s a great nugget right there. You got to value your own time first.
Paul: Right.
Duane: If you're going to get your head around this. [31:13.7]
Paul: So you are a professional with a valued skill set, that's number one, you're a pro and you approach that professional means you get paid. Otherwise you're an amateur, right? But I don't want to put it out there, that's getting way too harsh, I guess maybe. But the idea that you're a pro you're a professional, you get paid for what you do. Part of what you do is being a guide and estimating and producing value adds for your client in a project and getting them where they need to be. And you need to be paid for it. And you need to wrap your head around that and you know, separate yourselves from other competitors in your market that aren't doing it and raise this industry again. I'm an industry guy and we are too talented as a group. We are too talented and too, I think heartfelt, hardworking, put blood, sweat, and tears, risk our families outcomes on this to not get paid for what you do. And at the end of the day, the people who help you get there need to be paid as well. And it's your job to create a vehicle for everybody to be able to get there, get paid what they're worth and make this happen. To me, that's number one, you're worth it. [32:29.8]
The other piece is what we're doing right here. It's a mastermind it's having other people let you know that it's been done before and it be done and there's different ways to do it. So you need to be a listener and be able to absorb some of this information. My outlet happened to be NARI, remodeler's advantage other local builders and friendships. Those are the things that kind of led me to this path and, and opening your ears, reading, learning, and learning how to, you know, deal with some of this stuff. But industry groups or, or groups like the network that Alair has and other industry groups are huge. That's a something that you can rely on, lean on, ask questions. Somebody who's invested in your success and you can be invested in theirs, so network is network is key. So that's, that's what flipped the switch for me when it really sunk in like, who do I want to be? [33:33.5]
Dave: Right.
Paul: And this is my chosen profession, my chosen profession, and I want to represent and how do I best do that?
Dave: Yeah. It's hard to stick to your guns if you don't have guns. So you got to build those guns and then stick to them and value value yourself. While we were talking there, I'm going to challenge you on something. While you were talking about there, one of the things you talked about that you do in your business still is estimating. When in your process, are you doing any estimating? [34:02.8]
Paul: That’s a great point. We will begin our first scan. We have a schematic design budget. So once we've kind of gone through the schematic design process and we've narrowed down to a very loose maybe floor plans, set of elevations renderings that represent what the client wants the first time that my estimator actually has something tangible that he can sink his teeth into we, the dream has taken shape so to speak. We are going to.
Dave: For clarity, are you on, are you getting paid at this point? [34:36.6]
Paul: Yeah, so we got paid beforehand. We would've never done that until.
Dave: Right, just wanted to clarify that.
Paul: Yep. So we would engage in a design agreement. At that point, we have been paid a portion of our total agreement and we would come out to predesigned services, create an as-built. And then off of our conversation that our architectural designer would have with the client, we would begin to create different future states for this plan and show different options and different schematics. That would be a schematic presentation, one, which is riddled with feedback from the homeowner, which will probably fuel a second schematic design again, all already paid for in advance, which it should be. And then we would take, once we land on a schematic design where the client is saying, Oh, that's, I want that. Can you build that for me? That's when we're going to produce our first schematic budget; our first schematic budget does have all the trades going out there. [35:39.1]
That's when we're going to use maybe some more traditional estimating methods, historical data that we have from past projects to put together what I call the guidepost. That is the schematic design budget. It's going to be the first time that we provide a hard bit of data where they can start to make decisions, whether to move forward into design development, we're going to further this plan. Whether we're going to go back and be iterative and start changing the plan, or maybe something in between. We're going to look at being cautious on some of the finishes that we're going to select later on down the line. [36:14.7]
Dave: Sound familiar, Duane?
Duane: Sounds familiar, sounds very familiar. It is for anybody that has embraced the design build method. It's the concept of planning really.
Paul: Yeah.
Duane: That's what it is getting paid to properly plan out a project.
Paul: Does that follow Alair’s model? I mean.
Duane: Alair.
Paul: We talked about it. I know it's close. We have some differences when we come to the actual contract execution, but is very similar on the upfront. [36:42.4]
Dave: The fundamentals are the same, one understand the vision of the client and get as much information as we can upfront. Our clients may be all over the map. Some may come in without the design. Some may have the designer, but you're trying to capture the vision first. And as soon as you get to the point where, where you're ready to invest your time in the client, the client is ready to invest in the next step of the plan, that's when we answer into a, into a contract. So in order to determine, should we invest in any more money into a plan, we work with our clients in advance to understand, Hey, what is the general scope of this project? Is it 200 to $400,000 project is an 800 to 1.2 million, depending on how much we know about our interviewing with the client are our background research, the things that you're willing to do as part of the discovery with the client that you're willing to do for free. [37:40.2]
Paul: Yeah.
Dave: Those things, we do those things with them. And at that point, your overall project size is going to be somewhere between 800,000 and 1.2 million. We understand that's a great degree of difference. And here's the way you go about creating certainty around your pricing and your plan and your outcome. And that happens in the different steps of the, of the planning process. So you enter into an agreement that very similar to what you're talking about. You've got your plan, you can create your scopes of work for the various disciplines. We recommend doing it in three distinct chunks, one sort of the, the foundation and the groundwork, then the infrastructure, then the finishes so that you don't get all the way into the end. And you're way over budget. You're doing sanity checks at every stop on the map. So it's, it's a journey. There are several along the way, and you teach your client, you don't need to go to the next one, commit to the next one, pay for the next one until you're there. [38:42.5]
And like you said, you can go always go backwards and reroute, take a different direction. And you can do that in the most cost-effective way. So it's very, very similar to what you're talking about, but our recommendation to any builder would be break it down into chunks because what the client is really looking for when they say I want an estimate is they want to know clearly price, price is important. The numbers still matter, but it's how you get to those numbers and when you get to those numbers and those different pieces that are the important part. You don't want to ask them to make a $1.2 million decision off wet finger in the air, and a guess you want to help them to make and you want to see if they're willing to make an investment in the plan. If they're not willing to spend their money on the plan and their dream, then why should you spend your, your time on it? But you really want to create an environment where it's the next step that they're paying for and when you get to the end of that next step, you unlock the next one. [39:45.6]
And you're making you talked about it earlier confidence, well that confidence drives those, that series of mini commitments. So instead of selling a $1.2 million project, you're selling $5,000 worth of planning, then you're unlocking another $6,000 worth of planning and they're becoming more and more competent. You're getting more and more momentum. And you as a trusted guide are de-risking the project for them. You're creating more certainty around what it is it's going in there. You're determining that those trades are available, that the products are available, that what they want can actually go in here and you're doing it one step at a time. And at the end, you've got a full playbook. Now you just go execute. [40:28.4]
Duane: That’s where that team collaboration really starts to come in and let's face it that's really what it's about at the end of the day, it's our responsibility to put together just a fantastic team that's going to work well together. And this is really the only way you should be doing it. Paul, I'm sure you can relate to this. It's it is pretty simple a lot of times and this is, this is debated a lot, whether you're in builder 20 groups from remodeler advantage, NARI all across the, the industry. But you know, a lot of times you'll hear people say, well, it's not about the numbers. Well, almost every time it is about the numbers. I mean, I think the problem is it's usually about the wrong numbers. That's the thing. Yes, it's about the numbers, but we have to get to the right numbers first. And there's no way you're going to get to accurate numbers, accurate details without going through all this. [41:13.5]
I wanted to read some as we were going through this, I pulled up something that I put a post together a while back. And when I was really thinking about that whole concept of free estimating and value, and I kind of wanted to compare the two and I said, free estimate equals no value. It's time and effort spent to produce a random number based on assumptions, that's very likely to change. You receive no compensation for this versus pre-construction planning is huge value. It's time and effort spent to develop detailed scopes of work specifications, accurate pricing, and a realistic timeline. All of this is done in a collaborative and transparent environment, and you will be compensated for your time in return for delivering a professional level of service. That's really, and I'm saying that because for folks out there that haven't gotten their head around this, or they're contemplating this type of model, that's where you have to move your mindset, get out of the commodity, play of free estimating and elevate yourself to providing a professional level of service. Because if you're not providing more than your competition, you're going to be dragged right down to a commodity. And your only option is going to be a free estimate. [42:21.5]
Paul: That's well said. And you know, I just, I heard I listened to that and as you were talking about it, man, that sounds like a race that you just have to keep. That sounds like a series of sprints over and over and over and over and over and over and over and over again. And I don't know how many different people and how many team members are going to keep sprinting with you. It, God.
Duane: And then if you think of free estimating, how can it not simply be a race to the bottom? You know, it's just, ultimately, it's going to become, compare this one to that one, to this one, to that one, to this one. And then the, well, all of a sudden they all start to look the same. So it must be the number. You're, you're just not providing value there.
Dave: When your price becomes your sales rep, you're in trouble.
Duane: Yeah. And again, part of this whole community, we're building here, the builder nuggets community, this shall reach out. I mean, if anyone's listening out there and they want to reach out to us, they want to connect with Paul and talk to him about it, just hit the website and send us an email goal@ buildernuggets.com and we can certainly dig deeper on it. Paul, anything else that you wanted to touch on before we closed out today or? [43:27.9]
Paul: Just, just a quick snippet to, as you begin, if you do decide to do this for all the builders out there that are considering this, and maybe you reach out and kind of do that one, one thing I would consider, and Dave touched on it real quick and Duane, you did too. The idea of this doesn't happen overnight, right? There's experience level. There are shortcuts, certainly talking with folks like us or joining a peer group is, is something that's excellent. But especially in understanding that client and being able to qualify was one of the hardest things that I had to do. And I will say just a quick snippet, a sales training, like a Sandler or something along those lines, understanding some of the psychology behind the way people make decisions and really what they're saying and asking questions and active listening is a large part of this. You really have to dedicate to upping your game in those departments to be successful. You will struggle, but if you push on and you find the right resources, you'll get on the other side of it. And it's where you probably you belong and it's where the industry belongs. [44:34.2]
Duane: And wouldn't you say that once you've been immersed in something like that, you start to realize that it's actually not a sale at all. You're not selling.
Paul: It's not. I've mentioned it before. It's I have a certain set of things that I do. I bring a certain value and I have a certain process and you either fit or you don't. And we have to ask questions to make sure we get there and introduce and make sure we've, we've presented it properly. But once you do that, you're right. No, you're not. You can't sell anybody anything. Right.
Dave: Paul, what do we have to do? What do I have to do to get you into this remodel today?
Duane: That doesn't, that doesn't go over.
Paul: Let me; let me go talk to my sales manager. I think there's a special on the turbos this week. [45:20.3]
Dave: Yeah.
Duane: Paul, thanks, man for, for taking some time you're doing some great stuff there.
Paul: Likewise Duane, likewise.
Duane: Yup. You stay part of these mastermind type groups, which is great and appreciate your time.
Paul: Yeah, no, thanks for having me. I appreciate you guys elevate the industry. It's awesome. It's what's the direction it needs to go, so very thankful. Happy to come on any time and anybody out there listening ever wants to follow up, you can, you can check us out. You know, certainly my webpage pkbuilders.com Guys, thanks so much really appreciate it. This was super fun. Thanks for having me.
Duane: Thanks, Paul. Appreciate it, take care. [45:56.1]
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