March01

March 2012 – Take Control of Your Profits by Controlling the Process

TAKE CONTROL OF YOUR PROFITS BY CONTROLLING THE PROCESS

A builder’s job is not an easy one, with so many variables to control and decisions to be made.  Any job with this many component parts requires a good critical path plan to ensure successful results.  A critical path is simply the pre-planned succession of events from initiation through completion.  When you think about any building, it shares a basic similarity with almost any other building.  They virtually all begin with engineering and design, require planning for utilities and waste disposal, need a foundation on which to start, and are usually framed in a conventional method using studs, headers, joists and rafters.  Sure there are variables, but there are usually more similarities than differences in the basic components of buildings in our area.

Cost control is always a hot topic.  We spend a lot of time quoting projects and a lot of that time straightening out bid lists that compare apples to oranges and oranges to pears.  We see a lot of “bottom line” shopping in which customers (both yours and ours) go straight to the final number without really knowing what is involved in producing the bottom line.  We’ve all seen people get fixated on the price that they want to pay, sort of like the homeowner who swears they can build the house themselves for $65/sq. ft.  Ten people can tell that homeowner that it can’t be done, but when price denial sets in, the common sense talk falls on deaf ears.

Price denial in our business takes on interesting forms.  We see many people who are obsessed with the price per piece of what we sell but who don’t make any effort to control the number of pieces. Bottomliners may even figure that a quote with fewer pieces is a cheaper quote.  It certainly isn’t, if it doesn’t have enough of those pieces to do the job, or the correct size or type of pieces.  How good is that lumber price when you have a dumpster full of scrap?

We set ourselves a goal several years back, of creating a new approach to lumber and building material estimating.  In the old school, the lumber supplier gives the builder a “budget” quote, which is a rough calculation of what they estimate it should take to build the house.   Today, we have taken a different approach.  We create a “parts list,” which details all the necessary components in the house and breaks down their use and location, providing the general contractor with a control document and the framer with a working list.  By clearly spelling out all the details, listing assumptions we have made and questions we need answered, we have begun the planning process for budget and delivery.  It is still up to our salespeople to pin down the answers and to verify the assumptions.  If we do this before the fact, we can help provide you control. If we wait until after the fact, the horse is figuratively out of the barn.

The work and decision making must all be done at some point during the job.  The weakness of how it has often been done is that it is much more expensive to make decisions and changes in the field than it is to make them on paper.  We consider it our job to provide the framework for making those decisions up front.  Anyone who has ever had a job stop because no one could make a decision on the roof shingle type or color will know what I mean.  How about that complicated trim detail that needs a week of shop time, but your framer needs it this afternoon?

We want to do the heavy lifting.  We want to give you and your framer a document to check, not to figure, and to help answer the questions up front that will keep the job running smoothly.  It is our job to help build consensus in advance as to what we will need on your jobsite.  We would prefer that you don’t end up with an extra lift of lumber and one of plywood sitting on the job.  It encourages theft and does not discourage waste.  You don’t need the risk exposure created by either one.

Please think about this…what difference does the price per piece make if you can’t control the number of pieces used?  You should know, as you go, how you are doing compared to your  budget.  You should not have to wait until the end of the job to see how big the scrap pile was or how many dumpsters you had to pay for.  Our estimating department and salespeople are ready to help you take control of the ordering process and, therefore, control of your profits.

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