Patrick L. O’Toole is the former editorial director and publisher of Professional Builder, a 77-year-old publication that is read by 112,000 builders each month. Previously, O’Toole served as editor and publisher of Qualified Remodeler magazine. He started his career as a reporter for the Associated Press in Chicago. He holds a B.A. from Miami University and a masters degree in journalism from Columbia College.

Good experience, good margin

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Remodeling and custom home building are similar in that both are ‘high touch’ relationships. Not to say that production home building is not high touch; but there is a gap. People who build one-of-a-kind custom houses expect a lot of your time when they commission you to design and/or build their next home. Nobody wants to feel like they are ‘owned’ for any period of time, but if you were somehow able to crawl into the mindset of most clients, they feel like they ‘own’ a good portion of your time during the building process. Yes, they know you have other clients, but they don’t care about that very much.

Good remodelers and good custom builders know how to manage this type of mindset. They know how to make the client feel extremely special during the building process. In short, they know how to deliver a positive and rewarding building experience for clients.
In my years covering the remodeling business, I came across many remodelers who really knew how to properly set expectations about timelines, costs, and any number of other possible inconveniences posed by an impending project. Some had developed a way of reinforcing possible glitches and gaining the client’s verbal acknowledgment of potential negative outcomes with delays and added costs. But this balance is delicate because you don’t want to caution buyers so much that they decide to take their business elsewhere. 
By far the best tool for setting proper expectations with clients came from a Houston remodeler named Dan Bawden of Legal Eagle Contractors. He called it a Funk Chart. This chart assigns a happiness value over time. When a project starts, everyone involved is nearly euphoric. Then as the project wears on and outward signs of construction progress slow down, the clients become ornery. This stage is the low point of the emotional roller coaster, Bawden will explain to clients. But later, when the project is complete, we are all going to feel great again, he adds. This primer really helps the client know what is coming, and that knowledge keeps them on a more even keel during the process. 
I say this because I frequently see custom builders devote too much of their time chasing an elusive happiness factor from their clients. In the process, they are increasing overhead against the project and in effect reducing margin.
By observing successful custom builders, I have noted that the best and most profitable know how to deliver a good experience without impacting margins. The next time you do a post-mortem on a completed job, be sure to get a good gauge on overall profitability, and be sure to account properly for all of your time. You may discover that you’ve not earned as much as you think. If you can set proper expectations about the building process and deliver a great product while making a good profit, you are among an elite group of builders who stand to make good money in this business over the long term.

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February 2017

This Month in Professional Builder


Builders and architects report on what's been happening with expenses, square footage, and buyer demographics.

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