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A tennis acquaintance of mine, with whom I was corresponding via e-mail, said he noticed from my signature line, which has a link to my website, that I am a builder. After viewing my website, he wanted to know if I was interested in meeting with him and his wife about a major addition he is contemplating.
Given an opening to talk about Grant Homes, what we do and who we are, and knowing that I did not want to appear either too pushy or overly anxious to sell him, I talked briefly about the process of design/build. I told him our approach involves three major steps: budget, design, build. "First we will ask you to tell us your budget goals and parameters, then we go through the design process, and then if the budget and design are accepted, we build." He said, "Sounds great. Let's get together and talk further."
In an architect's or builder's dream world, all prospects tell us their vision, ask us to create a plan for implementing it, and then ask to build it — design/build! After 20 years of building residential projects, that dream client has yet to knock on my door.
Prospects generally believe it is not in their interest to reveal their true budget. And when prospects become clients, they usually maintain the same position.
For example, we are building a custom 5,500-sq.-ft. home for a client. After my architect completed his plan, the client authorized us to start building. He then proceeded to upgrade many phases, such as adding an elevator and changing the shingles from a $20,000 asphalt roof to an $80,000 hand-split cedar shingle roof.
Since we build using open-book construction management, we custom bid each phase; he approved each phase as we progressed through framing and roof construction. We gave him a total of 15 variations of cedar roof bid details. At the mechanical stage, he asked us to provide a final construction budget. When we gave it to him, he was surprised how much the total budget grew. He realized that the budget he had made for himself had accidentally omitted our builder management fee, so he was off by 20 percent.
Fortunately, he only joked about Grant Homes building for free. It wasn't until this point, which was now 40 percent through construction, that he finally revealed his true budget goals. He hurt himself by not sharing his budget goal from the onset of the project.
The more clearly a client communicates his budget goals, expectations and parameters, the better a custom builder can meet those expectations. Our roles as custom builders are to convince clients they are not going to spend more money by sharing their true budget with us. That is not an easy task.
Recently, a prospect asked me, "What is your track record for bringing your projects in, on or under budget?" I told him we put 3 percent contingency in our new home budgets and 10 percent contingency in our renovations' budget, and that we rarely use the entire contingency budget. When our clients change the design and the scope of work, then the original budgets are revised. Have you noticed that even when you show clients updated budgets due to change orders, all they remember is the original budget?
A more accurate description of the custom design/build process includes the following: budget, design, revise and update budgets, redesign, review and get client approval on new budgets, build, redesign per client requests, get revised bids, review and get client approval on revised budgets again, then complete building. Unfortunately, that title would be difficult to fit on the front cover of this magazine!
Jay Grant is president of Grant Homes (granthomesusa.com), a residential design/build firm in Mendham, N.J. Grant's business focuses on controlling and developing land for construction of luxury custom and speculation quick-delivery homes. His strict attention to weekly cash flow reporting results in industry-leading profit margins. Grant has given numerous seminars across the country and is available for consulting by sending e-mail to granthomes@msn.com. Read his past columns at rdbmagazine.com.
author: By Jay Grant