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What Makes a Construction Project Most Profitable?

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It All Comes Down to Dollars and Cents

It’s week six of learning the Building a Better Proposal system. As time consuming as learning new things is…Gene is beginning to see the benefits this proposal system will provide.

Just like building a house uses repeated actions to reduce the need to think about how to do things, this proposal system does the same thing when bidding construction projects.

As they settle in and begin the meeting, John tells Gene, “Let’s take a quick look back at what we’ve covered so far. We started by asking ourselves some foundational questions. Next, we discussed the common mistakes contractors make when doing bids. Then we went over the system and its parts. The last couple of weeks we’ve worked on gathering information and turning that info into a Scope of Work. Today, we’re going to start working on Pricing the Project

Communicating a clear description of the project is achieved with the Scope of Work. Accurate pricing is equally important to avoiding misunderstandings.

Poor communication will cause heartache, poor pricing will cost you money.

Open the Worksheet template. This blank Worksheet is where you will paste the information from the Data Base as it relates to each of the specific tasks of the project.

The Worksheet template has six different options for overhead and profit ranging from 20% overhead and 10% profit to 40% overhead and 20% profit. You can use whichever of the six options works best for you on the specific project you’re working on.

Typically, larger projects, i.e. new construction, large renovations, remodels, or large additions will use smaller percentages, while small projects will use bigger ones. You can use whichever works best for you. These percentages can be adjusted after you have finished the pricing if you want them increased or decreased. These documents can be modified with custom percentages as well.

Open the Data Base and prepare to copy the appropriate content into the correlating cells of the Worksheet of the project you are working on. Use the previously written Scope of Work to determine which of the categories specific to the project need to be copied from the Data Base and pasted on the Worksheet.

If more than one item for a specific task is needed, for example shingles, synthetic underlayment, and metal flashings, these individual items will be entered separately then added together to create one price for roofing.

You can add as many additional rows as you need, just be careful to keep the formulas intact by filling the content of the existing row to the new ones.

Determining which tasks should be inserted into the Worksheet is the next step.

Most of the tasks on the Data Base have options; determining which to use will depend on the specifics of the project. For example, how is the excavation, trenching and landscaping going to be done…with a skid loader, mini excavator or by hand?

Once it’s determined which methods, actions or materials are to be used for a specific project, copy the pertinent cells from the Data Base and paste them to the Worksheet.

After the pertinent information from the Data Base has been placed on the Worksheet it’s time to…

Enter the quantity of the work to be done.

Fill in the quantities needed to do the work for each item listed on the Worksheet. This may be in lineal feet, square feet, square yards, cubic feet, cubic yards, or numbers of pieces. Once this is completed for all the categories, you’ll have a price for each task of the Proposal!

This system offers a consistent repeatable process for preparing accurate proposals and is the difference between making money or losing money on construction projects.”

John looks at Gene and asks, “Well, what do you think?”

“Well, I thought my head was spinning before today…now I’m getting dizzy.”, Gene replied with a grin.

“I know it seems like a lot, but it really isn’t once you get started using it.” John says reassuringly. “Experiment with it this week. Call if you have any questions. Next week we’ll bring everything you’ve learned together into a proposal ready to be presented to the customer.”

Construction projects are consistently more profitable when you’re intentional with the dollars and cents.

Previous posts in this series:

What is “business clarity” and how do you find it?

What Does it Take to Build a Successful Construction Company

It’s Time for the First Meeting

Being Aware of Bid Mistakes is the Best Way to Avoid Them

Constructing a Building is Better with a Plan, a Proposal is No Different

Do You Want to do a Good Construction Proposal?

What is a Construction Scope of Work and Why Do You Need One?

Benefits to a Construction Proposal That We Haven’t Even Talked About Yet

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An Overview of the Blueprint for Building a Better Proposal System

This past week John used the Blueprint for Building a Better Proposal system to do a couple of proposals. Just like when he’d learned to build a house, he had some questions.

As John smelled the pizza setting in the passenger seat, it reminded him of his first meeting with Gene. It’s hard to believe that today’s meeting was going to be the 8th time they’d met to learn this proposal system.

As they are eating some pizza, Gene asks John if he had used the proposal system this past week. John said he had. Gene asked what questions he had.

In between bites John said, “The project I was doing the proposal for was a small repair project to a deck that was settling and pulling away from the house. As I put in the numbers for digging a couple of holes, filling them with concrete and setting some posts…the price didn’t seem to be enough for the work that would be needed.”

Cartoon man looking up at large question mark

“Great question.” said Gene. “Sometimes a specific task is small or more difficult than normal. This will be determined once the quantity is entered and the price is deemed too low.

To adjust this, insert an additional row in the spreadsheet, below the row with the low price. Fill down the content from the row with the low price to the new row. Then in the description cell of the new row write small and in the quantity cell put in an amount that will adjust the price as needed for the time to do the small task. Usually the material price can be removed from the second row, due to the small task not requiring additional material. This will depend on what the specific task is. (See the highlighted cells in the example below)

If the low price is due to the task being more difficult, instead of, or in addition to being small, you will use the same procedure listed above. An example of this would be a small concrete project in the back yard where a concrete truck couldn’t get to the construction area and the concrete was going to be moved with a skid loader.

If you remember early in the process, we talked about the common mistakes that contractors make when bidding projects and one of those that this system solves is…

A construction proposal system that is customizable.

This leads to some of the other benefits this proposal system offers that we’ve only discussed in passing. These include, but aren’t limited to, a Scope of Work, a Production Budget and accurate progress payments.

A Scope of Work is important so that production crews and subcontractors know what’s included in the project and what’s not. This prevents the subcontractor/employee from doing more or less than was expected – if too much work is done there will be cost overruns, if everything the customer expects is not done then the customer is unhappy.

A Scope of Work is easy to do. It is simply saving a copy of the proposal and removing the customer’s prices for each item and the totals at the bottom of the page. Making a couple of simple changes to the document title and removing the signature lines.

That easily you have a Scope of Work

Preparing a Production Budget that can be shared takes a little more work. It involves the transferring of numbers from the Worksheet to a separate Production Budget template. The numbers that get transferred are generated automatically when the Worksheet is prepared.

We’ll wait to get into the payment application until later. For now, you just need to use the system for a while and get familiar with it.

This whole system comes down a clear description of what work the project includes or doesn’t and a consistent and accurate process for pricing.

This proposal system is the foundation for building a profitable business.”

Previous posts in this series –

What is “business clarity” and how do you find it?

Learning How to Get a Construction Project Started Out Right

It’s Time for the First Meeting

Being Aware of the Common Bid Mistakes is the Best Way to Avoid Them

Constructing a Building is Better with a Plan, a Proposal is No Different

A Good Construction Proposal Starts by Asking the Right Questions

What is a Construction Scope of Work and Why Do You Need One?

Dollars and Cents Are What Make a Construction Project Profitable…or NOT

The Final Step to Completing a Professional Construction Proposal

Dollars and Cents Are What Make a Construction Project Profitable…or NOT

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Having a System for Proposals, Is Better Than Just Guessing

It’s week six of learning the Blueprint for Building a Better Proposal system. As time consuming as learning new things is…John is beginning to see the benefits this proposal system will provide.

Just like building a house using a system that repeats routine actions prevents time being spent rethinking and guessing at how to do things. This system will do the same thing when preparing proposals.

As they settle in and begin the meeting, Gene tells John, “Let’s take a quick look back at what we’ve covered so far. We started by asking ourselves some foundational questions. Next, we discussed the common mistakes contractors make when bidding. Then we went over the system and it’s parts. The last couple of weeks we’ve worked on gathering information and turning that info into a Scope of Work. Today we’re going to start working on…

Pricing the Project

In this step we will determine the price for the project. Communicating a clear description of the project took place in the Scope of Work which is important in avoiding misunderstandings. Accurate pricing is equally as important.

Poor communication will cause heartache, poor pricing will cost you money.

Open the Worksheet template. This blank Worksheet is where you will paste the information from the Data Base as it relates to each of the specific tasks of the project.

The Worksheet template has six different options for overhead and profit ranging from 20% overhead and 10% profit to 40% overhead and 20% profit. You can use whichever of the six options works best for you on the specific project you’re working on.

Typically, larger projects, i.e. new construction, large renovations, remodels or large additions will use smaller percentages, while small projects will use bigger ones. You can use whichever works best for you. These percentages can be adjusted after you have finished the pricing if you want them to be increased or decreased. These documents can be modified with custom percentages as well.

Open the Data Base and prepare to copy the appropriate content into the correlating cells of the Worksheet of the project you are working on. Use the previously written Scope of Work, to determine which of the categories, specific to the project need to be used from the Data Base and copied to the Worksheet.

If more than one item for a specific task is needed, for example shingles, synthetic underlayment and metal edging, flashings. These individual items will be entered separately then added together to create one price for roofing.

You can add as many additional rows as you need, just be careful to keep the formulas intact by filling the content of the existing row to the new ones.

How to determine which tasks should be inserted into the Worksheet

Most of the tasks on the Data Base have options; determining which to use, will depend on the specifics of the project. For example, how is the excavation, trenching and landscaping going to be done…with a skid loader, mini excavator or by hand?

Once it’s determined which methods, actions or materials are to be used for a specific project, copy the pertinent cells from the Data Base and paste them to the Worksheet.

After the pertinent information from the Data Base has been placed on the Worksheet it’s time to…

Enter the quantities of the work to be done.

Fill in the quantity needed to do the work for each item on the Worksheet. This may be lineal feet, square feet, square yards, cubic feet, cubic yards or numbers of pieces. Once this is completed for all the categories, you’ll have prices for each task of the Proposal.

This system offers a constant repeatable process for preparing accurate proposals and is the difference between making money or losing money on construction projects.”

Gene looks at John and asks, “Well, what do you think?”

“Well, I thought my head was spinning before today. Now I’m getting dizzy.”, replied John with a grin.

“I know it seems like a lot, but it really isn’t, once you get started using it.” Says Gene reassuringly. “Experiment with it this week. Call if you have any questions. Next week we’ll bring everything you’ve learned together into a proposal ready to be presented to the customer.”

Guessing is not a good way to build a profitable business.

Previous posts in this series –

What is “business clarity” and how do you find it?

Learning How to Get a Construction Project Started Out Right

It’s Time for the First Meeting

Being Aware of the Common Bid Mistakes is the Best Way to Avoid Them

Constructing a Building is Better with a Plan, a Proposal is No Different

A Good Construction Proposal Starts by Asking the Right Questions

What is a Construction Scope of Work and Why Do You Need One?

It’s Time for the First Meeting

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And John’s Not Sure He Can Squeeze It In

It’s Friday and John’s in his normal state of overwhelm. He’s supposed to be meeting with Gene tomorrow afternoon to go over the Blueprint for Building a Better Proposal system and he doesn’t know how he can fit it in.

There are still so many things that need to be done.

“Maybe we can reschedule,” thinks John, I’ll just give Gene a call and see about moving the meeting back a week. “Okay, that’s enough.” John says to himself. “The whole purpose for this meeting is to change things, so that I don’t have to feel this overwhelmed.”

I’m tired of always feeling out of control.

John pulls up in front of the XYZ Construction Company office and admires the building. As he gets the pizza out of the truck and goes up to the front door he thinks, “I sure hope I can have a place like this someday.” As he walks through the door Gene greets him with a solid handshake and a grin as he says, “I wasn’t sure that you would make it.”

“I wasn’t sure either.”, John says with a smile. “I came really close to calling yesterday, to see about rescheduling. “I’m glad you didn’t.”, replies Gene. “You’ve taken the hardest in a series of hard steps.”

“The first step is the hardest. It requires a change of thinking and direction.”

“Bring the pizza and let’s go into the conference room.” As they make their way into the spacious comfortable room John thinks back on when they used to have their weekly production meetings in this very room. Looking back, he realizes how much he had taken what Gene has accomplished for granted.

Gene hands John a plate and they both get some pizza. “There’s water and soda in the fridge like always.”, says Gene, “Help yourself.” As they set down and start eating Gene asks John, “Why did you go into construction and start your own company?”

“Why do you do what you do?”

John sat there for a while chewing his pizza at the same time chewing on this question. “Why was he doing this?” He had asked this question a lot, but it was usually a question of frustration, not really looking for an answer.

After what seemed like an eternity, John answered, “I really don’t know. I suppose that seeing what you had accomplished, I wanted the same thing.”

“That’s the same answer I would have given when I started XYZ Construction.”, agrees Gene. “It wasn’t until I realized that to have a successful and profitable business, one that I was running rather than it running me, I needed to make some changes. One of those was to answer this question.”

“The WHY is more important than the HOW. Maybe your why is to make a lot of money, the enjoyment of building, the control that comes with owning your own company, something completely different or a combination of things.”

“Do you love what you do? In your current situation, do you even like it?”

Now John has another unanswered question to ponder. “Does he like what he does. Life sure was easier when he worked for Gene. What is it that prompted him to go into business?”

Gene interrupted John’s thinking, “John you probably won’t get the full answer to these questions today and we’ve already been discussing this for a couple of hours. I would suggest that you take some time to think about these and dig down deep to find the answers.”

“The answer to these questions are the foundation you will build your business on.”

“Before we run out of time today, let’s move on to the topic you came for, Building a Better Proposal. Just like the why question for your business, you should answer the why question about proposals.”

“Why do we need to do proposals?

“John, there is a huge gap between the construction industry and customers. The biggest portion of this gap is poor communication. Even when attempting to communicate clearly it can go badly. Let me give you an example.”

“Several years ago, when meeting with a customer early in the process of building a new home. The customer pointed out that the distance from the electric meter to the house was more than the 50’ allowance, as per the agreement. He asked if this was a problem. He was told it wasn’t a problem. Guess what…”

“It was a problem.”

“The problem didn’t surface until later when the customer was billed for the additional 100’. After some research, the communication breakdown was uncovered. The customer asked, “if it was a problem”. What he really was asking was…”is it going to cost more?”.”

“The response ‘in reality’ was, “It’s no problem to dig the additional 100’, but it will cost you more.” Neither party intended nor expected this to be a problem. It was a simple matter of misunderstanding…a lack of communication.”

The bulk of the communication responsibility is the contractor’s, we are the professionals after all.

“As we wrap up today John, I would recommend that we schedule some time weekly to work through the proposal system. I know that you don’t feel like you can spare the time, but I would point out that if you want things to be different it is going to require you to do some things different.”

John thought about this for a few minutes, “I get excited about the possibilities for my future every time we talk about this. Let’s do it. How does next Saturday, same time and same place work for you?

“If I don’t commit to doing something different, nothing will change.”

Gene got a big smile and remembered when he had made this same decision. He was encouraged about John’s future and excited to be a part of it. “Remember when you called me a few weeks back and how frustrated you were? And then in the next call we discussed the possibilities for your future? Think on these things and your why as you study the pages from today. When we get together next week, I want to hear about your why and we’ll go deeper into the Blueprint for Building a Better Proposal system.

“As you go through them write down any questions you have, and we’ll discuss them next week.”

(or send them to me in the comments below)

The New Website Is Here, The New Website Is Here

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“Things Are Going to Start Happening to Me Now”

Just like Navin R. Johnson in the movie, The Jerk, we all want to be somebody. Being somebody is more than just having your name in print in the new phone book…

or having a new website.

This doesn’t mean that we shouldn’t be excited about the newly rebuilt Solution Building website…because we are! It’s been a long process but totally worth it. Thanks Stacey with Custom Internet Services, for another fantastic job. This site is every bit as good as the Timber Creek Construction site.

Like Navin, we all start out wanting something but aren’t sure what it is or where we’ll find it. Navin’s search is filled with up and downs, successes and failures. He could have avoided some of his heartache if he’d only had access to a website where someone was sharing what they had learned from similar experiences.

Struggles are a part of life but can be reduced if we’ll some get help.

My hope for this new Solution Building website is twofold. First it is to help prevent construction companies who are struggling with a lack of business knowledge and understanding from becoming overwhelmed and unprofitable. Second is to help their customers avoid disappointment and frustration by knowing what to expect from the construction process.

We will do this by providing businesses with systems and training to make them more efficient and profitable while educating customers in what to expect through the entire construction experience.

When construction companies have the tools they need and customers know what to expect, both can achieve their dreams.

The first tool that we’re offering is the Blueprint for Building a Better Proposal. This tool consists of templates, samples and instructions on how to use the system. We are also offering a day long live workshop coming up on March 13th, where you will be given more in depth teaching and training.

You can find out more about this in these posts:

This is designed to help companies in the construction industry prepare consistent, clear accurate proposals for their customers. If you or someone you know would benefit from this Blueprint for Building a Better Proposal system, send them this link so that they can build better proposals.