Feature Selections & Change Orders: From Negative To Positive Once & For All

Transcription

1 Feature Selections & Change Orders: From Negative To Positive Once & For All JANUARY 20, :00 2:00 PM Presenter(s): Timothy Faller: Field Training Services/ Falcon Remodeling What It s About: Builders small and large struggle to manage customer selections and the inevitable change orders that accompany nearly every new home construction project. Even with new technologies, these challenges seem to remain constant - negatively affecting your project's schedule and profitability. In this advanced session, you'll learn how to create systems, procedures and policies that not only make the process better, but also help you increase customer satisfaction and your bottom line. Along the way, see how technology and good-old common sense can finally turn these challenges into a net positive factor for your business. 1

2 Learning Outcomes Create simpler processes and policies to manage feature selections and change orders. Learn how to save money and increase profits by appropriately navigating these two difficult topics. Discover how a better feature selection and change order process can lead to improved customer satisfaction. Explore technologies that can support your efforts. My History Remodeling in Georgia Lead Carpenter Production Manager Consultant/Trainer 2000-Present Remodeler 2009-Present Project Manager Sept 2010-May 2011 Sales/Estimating - Yellow Dog Builders, Westerly, RI 2

3 Features Issues Usually in a rush to start a project - $$$ Clients have trouble deciding Too many options The trouble with the internet New things are costly to install Feature Positives They can increase your net profit Help distinguish you from other companies They are fun! 3

4 Feature Selections 8 Things To Do #1 Create a standard this needs to be done before checklist What selection must be done before start of construction, framing close Discuss the why with clients #2 Have a pre set time frame for completion of list and job start Depending on project Remodeling 2 weeks Use this to motivate the client #3 Use a Reverse schedule to control the process Task Due Date Responsible Party Preliminary Design Contract 14-Mar-13 FalCon/Smiths Initial drawings Due 28-Mar-13 FalCon Sign off on Initial Design 4-Apr-13 Smiths Selections Apr-13 Smiths/Falcon Selections May-13 Smiths/Falcon 90% Drawings due 16-May-13 FalCon Final Drawings due 30-Jun-13 FalCon Final Selections 10-Jun-13 Smiths/Falcon Final Contract signing 17-Jun-13 Falcon/Smiths Permit Application 18-Jun-13 FalCon Hand Off Meeting 24-Jun-13 FalCon Pre Construction Meeting 1-Jul-13 Falcon/Smiths Start Date 8-Jul-13 FalCon Production Construction Time 2.5 months FalCon Production End Date 20-Sep-13 FalCon Production 4

5 Feature Selections #4 Talk about budget early What can they afford based on the budget What are they willing to compromise on and what not Show them items in their budget #5 Limit choices Offer good ($), better ($$), best ($$$) Walk them through the process don t leave them on their own! #6 Provide the choice and see if they like it Clients often want someone to tell them what looks good, or what is in Feature Selections #7 Use showrooms yours or others Yours show what you like to use, does not have to be big space Others Prepare the showroom rep with a written form that tells what you want Style, costs per foot/item, entire budget Be there! #8 Use cloud based computer software BuilderTrend allows the use of a shared platform to communicate pictures, documents, and final selections with clients Create and sign CO s for that product. 5

6 Feature Allowances Good and Bad Essentially a place holder Good Allows project to move forward before every detail is selected Bad Financial issues can create a profit issue Delays in schedule Client assumes you can do it for that amount Poorly defined (Tile- trim and field) Example: Financial Issues Example: Tile Allowance $2000 in tile x 1.67 = $3340 materials $2000 labor x 1.67 = $3340 materials Gross profit on tile allowance is $6680-$4000/$6680 = 40% GP Add $1000 in material marked up 20% adds $1200 to tile allowance ($1000 at 1.67 is $ ) New costs are $4000+$1000=$5000 New total is $ $1200 = $7880 New GP $7880-$5000/$7880=36.5% 6

7 Allowances for Features Use as few as possible Perhaps use only to establish preliminary pricing Use allowances that reflect what the clients want Do not low ball allowances to get the job Detail the allowance spec to represent what is in and what is not. If possible use actual products to specify an allowance. Detail how you will adjust allowance change vs. other changes What About Changes to Features? Even with a great system of selections something will change Especially with remodeling and custom building When clients see space they rethink features Allowances will almost always change 7

8 What Are some of the Issues? Don t get written up (or not till the end of job!) Take too long to process Inaccurately priced Allowances and markup losses Communication errors #1 Do Not Get Written Up Reasons Too small nickel and dime to death, not worth the effort Staff focused on building not on the process What to do Write up every change of any kind Even if no cost simple change of a feature paint color 8

9 #2 Take too Long To Process Why? What is the big deal? Clients forget They should choose to spend their money They will not know the cost differences budget is an issue What to do? Set policy for turn around time Discipline turn around time Assign to someone else #3 Inaccurately Priced Changes always cost you something Try to think of everything Admit that you missed something Realize that it will seem like a lot of money Realize that even no cost changes cost you Realize that there are down the road costs that are hard to see 9

10 They Always Cost You Something! The client changes a ceiling fixture to a chandelier Admin time Framing issue Electrical Perhaps wiring Labor Bulbs!!!!!! Schedule issue lead time Warrantee #4 Communication Errors 4 Basic Kinds of Errors Client driven request Hidden or unforeseen conditions This just needs to be done to keep the job going you shoulda known or we shoulda known 10

11 Setting Expectations In contract language Staff needs to be familiar with contract language Pre Construction meeting Project Manager/Lead Carpenter talks about Changes and how it will be handled Discuss Features that have not been selected Job site discussions Examples On Site Client Driven requests We would like to know how much it will cost to. or I would like to. Don t say, We can do anything Or That should be easy enough Say I m sure it can be done but it will cost additional money and add some time to the project. (Setting expectations) Discuss what client wants. Perhaps ask if they have a budget in mind Advise how long it will take to get back to them In show room Speak up immediately Just be sure you know that you are moving beyond your budget for this item 11

12 Examples Unforeseen conditions selected item will not work Contact client: phone, fax, Do not proceed without written permission assuming that everyone understand that the client will pay. Now that we are framing in the bathroom we see that the shower unit you selected will not fit. We can use the unit??? that we looked at. It will add??? To your contract amount. Would you like us to do that.. or Would you like me to go ahead and write the change order and send it over? Let them tell you to go ahead Presenting a Change Order Schedule a time to meet and discuss Be confident of your numbers Be ready for many different responses Do not take on the clients pain Never reduce a price Never feel sorry for a client Deal with objections by finding out what they are really concerned about Remain confident of your numbers 12

13 Things to remember Clients do not want to pay for anything they do not have to. Some will use you to get their way Shoulda is not the issue did we? If you had seen it before, the client would be paying for in the original contract. People have access to money It is a slippery slope give a little now and it will be more later Clients often forget conversations during the sales process Speaker Contacts: Timothy Faller Field Training Services/Falcon Remodeling Hillview Drive Westerly, RI

14 The End Any Questions? 14