It’s real a challenge to find people who still want to remodel these days – and when you start talking to them, you’ll probably find those clients have different priorities from the last few years.
Budget is now more important than it ever has been. There’s constant pressure on you, as kitchen and bath designers, to create the project for less money than you’d like. Your billable hours have to be lower, and the remodeling itself is often being scaled back, as well. People have less money to spare.
When it comes to actually building the project, there’s more insistence that the work be completed at a lower cost than ever before. This can even show up before the job is complete; the clients feel like they’re spending way too much and you have to finish up the project for less money than you’d quoted at the start.
What we’ve found at our business is that you can indeed reduce the costs of building – and it’s critical that you make sure your clients see you trying to build for less. Explain to them what you’re doing, and how you’re lowering the price for them!
You may want to simply take your profit out of the price. This doesn’t work all that well, and not just for you and your business. Some clients don’t feel all that great having a builder who’s working for nothing. After all, where’s the motivation to produce high-quality work?
What seems to work better is when you can communicate to your customer just how you’re finding ways to build the same job for less money. Take one of the following ideas and put it into practice – and you’ll be able to build work for less money.
The relationships you have with your suppliers are a big deal these days. Make sure you have a personal connection with your building supply house – either with the owner, the sales manager or the controller. You’d be wise to ask for the best prices, good credit terms, and perhaps discount terms for quick pay. Remember that a 2% discount for prompt pay is money in your pocket.
You may want to be spending more time comparing material prices among your suppliers. It’s not out of line to ask companies whether they can match a lower price you’ve received for the same items elsewhere. They can always decline.
Many suppliers are desperate for your business, and will be ready to offer you bulk pricing.
There’s pressure from more customers to let them purchase some materials, although most builders and designers don’t think highly of this practice. Cabinets, electrical and plumbing fixtures, in particular, can be a nightmare if not ordered correctly and in a timely manner.
Just like your material suppliers, you need to be getting more than one price from subcontractors. Yes, times are tough, and there are many tradespeople out there willing to work for less. If you’re a design professional or a builder, and you want to keep getting work, you’ll have to use multiple bids rather than single sourcing your subs. Again, let your clients know you’re doing this. It will increase your credibility and can drive the overall pricing down without necessarily affecting your own bottom line.
This is not great for your loyal subs – people you’ve worked with for a long time. However, it is reality, and if your clients are putting pressure on you to reduce the price of the work, that pain should be shared with the team. Ask your drywall contractors to give you pricing-based costs used back in the ’90s – that’s what they’ll have to do to get the work.
Here again, you may find yourself in the position of asking subcontractors to match numbers you’re getting from other people in the same trade. Some may say you’re treading on thin ice here, and getting close to price fixing, but these are times where the lowest, most qualified company gets the project. If you are the person organizing and running the job, you have to find ways of somehow making it happen.
And don’t forget to be vigilant with your subs on change orders. They have to justify any extra work before it’s done (and you need to get the owner’s approval, too) or they don’t get paid. Keep an eye on any back charges you may have to hand down to the sub. If you find yourself cleaning up after the electrician, getting rid of the painter’s empty cans or making a dump run with your framer’s scrap lumber, that’s all time and money that you’re spending that your subs should be paying for. So charge ’em.
Ask yourself whether you can sub out the work before you take it on yourself. It may well cost less to have a good painter finish out the job rather than having your crew do it. Plumbing and electrical work often is cheaper and more efficient when performed by specialty trades.
As for your own labor, take a good hard look at your own staff. Are your people as efficient as they could be? Try visiting your job around 8:00 a.m. and see if the power cords are set out and the compressor is running. Are your people sipping their morning lattes or are they ready to go?
You may have to cut back staff and let everyone know you expect more from those who are left. Let’s face it, these days your employees are lucky to be employees, and it’s only right that they operate at 100%. That’s the deal, and it’s okay for you communicate just that to them. Tell your clients about it, too. It’s a sales opportunity!
OVERHEAD & MARK-UP
Here’s where you have to watch your hidden costs like a hawk. Any kind of middle management goes under the microscope. Can you run your project without a project manager? Can your lead carpenter do more? Any time spent not doing the actual work is suspect.
Your own pay should be looked at, too. If you’re taking too much out of the business right now, it may not be the best thing to do. If you have to cut your salary back, so be it.
The same goes for benefits. Maybe it’s time to raise the co-pay amount your workers come up with each month for the health plan. Perhaps you can suspend any 401K matching this year. Perks, bonuses and gifts all should come under review. They all affect how much you have to charge to do the work and stay in business.
And that’s what you have to do – tighten your belt and somehow stay in business. This is a cycle, and a painful one, but it will pass. When we all come out of it, we’ll be able to start getting more money for what we do.