In Moscow during World War 2, there lived a university statistics professor. During air raids, he was known by his friends never to bother with air raid shelters. By his calculations, the odds were minute that he would ever be killed by a German bomb. One night, his friends were shocked, when, as the sirens went off, the professor joined them in the air raid shelter. When asked why he had changed his mind, he said, “In Moscow, we have 7 million citizens, and one elephant. Last night, they got the elephant.”
If you think of common things you hear in our industry, they include such gems as, “I’ve been doing it this way for thirty years” and “I’ve never had a customer not pay me”. You’ve likely also not had a bomb hit your elephant either, but odds are odds.
In our role as supplier, we get a view into many of our customer’s businesses . We see what works and we see what doesn’t. The number one challenge, that can quickly turn into difficulty, is that of job definition. As a successful builder, you have to wear two hats, that of creative practitioner, and that of business person. Most people struggle trying to fit two hats on one head. Usually one fits more comfortably than the other! The ability to balance is the key to success. There are plenty of talented artists who can’t sustain a business model and here’s how to not become one:
Start with definition, define expectations in a contract for each job. Spell out scope of work, price, payment dates, schedule, and the change order process up front. Keep careful track of change orders and front load the process by defining their impact on the job in advance in terms of cost and schedule. Put my five word business motto to work, “use common sense, no surprises”. Let’s be real, we all hear what we want to hear so if you leave it loose, you and your client will have two different expectations come payment time. This is what we see over and over again. Same plot, different players, unhappy ending. #1- get a signature on that change order, and #2 make sure your client understands what they are signing.
Spelling out the details doesn’t mean a leather bound legal document, half the length of War and Peace. It means putting the details of scope, price, payment and schedule in a form that leaves no gray area. We’ve seen them as simple as a page and as complicated as breaking down an entire job, room by room and phase by phase. Third party contracts like American Institute of Architects (AIA) contracts are usually well received. Also, check the National Association of Home Builders (NAHB) website for books on how to write contracts. Their library is extensive for member’s use. Look for good contracts you may find from subs or suppliers and build your own, or sit down with your attorney. After all, without a good contract, you may be spending time with that attorney anyway. Later won’t be better!
I know what you’re thinking, “But, I’ve always done business on a handshake”. Well handshakes are still legal in this state, so you go right ahead. But give your client the additional clarity they need to understand the way their project will work. Don’t just protect you, protect them by spelling out the conditions. Remember, no surprises!
Crazy vision here—but imagine yourself as the builder people trust because of the transparency and detail in your contract. Use your way of organizing your job and your contract as a selling tool. The number one reason we see conflict between builders and clients is because of mismatched expectations and people hearing what they want to hear, not what was said. If you’re going to say it, then back it up in writing. Remember, handshakes are wonderful expressions of good intention and friendship, but also remember that every arm wrestling match starts with a handshake too.
“If you fail to plan, you are planning to fail!”
– Benjamin Franklin