Pro Spotlight: Chuck Miller

Today, we had the pleasure of interviewing Chuck Miller, author of Plan To Profit: Business Planning for Builders and Remodelers, and owner of Chuck Miller Consulting LLC, Chuck Miller Education Services LLC, and Chuck Miller Construction Inc. Together, we talked about his career, business relationships, and educating clients.

What are the most essential parts of the construction business that business owners need to be mindful of?

First and foremost, as I emphasize in my book, business owners must be mindful of who their target market is. It became evident after the 2008 market crash that it all starts with marketing and market research. I got involved with the National Sales and Marketing Council of the National Association of Homebuilders years ago. One of the things they emphasize in their training course is the focus on market research. I truly believe that if more builders would have practiced market research that we wouldn't have experienced the crash that we did back in 2008.

I like to say that most builders' form of market research is what I refer to as “follow the herd” marketing. Business owners see what everybody else is doing and copy it. The only problem with that is if you're at the front of the herd, you're pretty safe, but if you're at the back of the herd you will inevitably fall prey to the competitors. I saw too many guys jump on the bandwagon, building homes for customers that didn't exist. 

The other key component is the finances. Understanding your cash flow, key ratios, and break-even point every year is essential in planning to keep your business afloat and successful. I believe in lifelong learning and continually adapting to your surroundings and to the market. People will never know what they do not know. The key to success is learning and knowing every aspect of your business. 

How do you foster relationships with contractors and clients to produce quality work in your projects?

One of the things that I did as a builder is helped bring clients along as team members. I would sit down with them and learn how they estimated their projects. When I got an estimate that required client feedback as part of the project, I could basically prepare their estimate and send it to them. They were then able to look at it and essentially tell me if I had it right or not. Getting them involved in this way allows them to have a bigger role in the project and builds trust into the process. 

What would you recommend for companies trying to bounce back after the Pandemic and what are your thoughts on a strategy to get back to a new normal? 

For one thing, I think that High Performance building is going to be more important in the upcoming months and years. High Performance building used to be just energy efficiency, but now it's indoor air quality, and much more—all related to energy efficiencies. I think people are going to be much more aware of the need for those things. 

As we come out of this pandemic, we have to remember the importance of finding out what the market is and what people are going through. How are their perceptions of new homes changing, and what can you do as a builder to understand those perceptions and meet your clients’ needs. I would also encourage builders to have an operating reserve for when we experience a downturn, as we have now, so there's always cash in the bank to cover those regular expenses. 

Can you talk a little about the rates of high performance homes in the construction industry and how you found yourself in that sector of home building? 

When I refer to High Performance building, it's based on the National Association of Homebuilders’ Green Building Standard, which covers everything from land development through the operations of the home. Green building standards were made years ago when green initiatives started to gain traction as a movement. 

There was a survey conducted by Robert Charles Lesser that concluded that only about 30% of new home buyers were interested in energy efficiency at that time. They were then able to break that 30% of new homeowners down further into three different categories. The largest category, about 21%, were individuals looking to lower operating costs. 

The second largest group’s primary concern was the indoor environment and air quality. They were concerned about health issues, such as allergies and asthma, and how the home could impact those either negatively or positively. Only a small percentage of about 3 or 4% supported the green initiative due to the impact home building and operations had on our environment. Overwhelmingly the focus on high performance building was due to the financial savings of an energy-efficient home. No matter how many multi-million dollar homes you work on, the price will always be a concern.

I was fortunate as a builder to get involved with Joe Steve of Brick and Building Science Corporation. I started work on the Department of Energy Program where we were working to build homes that were 50% more efficient than a standard home, built to code with little or no increase in cost. The success of that project found its way into building codes today. 

After that project, that became the only way I built homes. I was able to build high performance homes and offer those energy saving benefits to all my clients with little differentiation between my product costs and my competitor’s product costs. Although only a third of my clients came to me because they wanted an energy-efficient home, it became important to them after moving in and realizing what they had.

One of the first homes I did under the Building America program was finished in the summer, before a particularly cold winter. During that winter my clients had a dinner party and invited a bunch of their neighbors over to their home. Eventually, the topic turned to utility bills and everybody started talking about how much they paid for their natural gas bill for the last month. It almost got to be a competition of whose bill was lowest. 

My client just kind of stood there listening and not saying anything. When they finally asked her what her’s was, she was happy to say her bill was about a third of what everybody else was paying. She had to go get her gas bill just to show them because nobody believed the natural gas bill could be that cheap. 

What are some misconceptions about high performance homes and how does that play a role in the market today? 

The market completely shifted due to the market supply of existing homes being much smaller than just a few years ago. By making a comparison between an existing home and a new home that's built to high performance standards it's a very easy choice for most consumers. Although new home builds have risen in popularity, there's still a misperception about new home builders and the new home business. 

I think if you were to poll 100 people and ask them how much profit the typical home builder makes on a house, the answer would probably be somewhere in the neighborhood of 20% commission. In reality, the average net profit after taxes for homebuilders often ranges from 4% to 5%. It's all about education and dispelling any false perceptions of what new homes are and can do for a community. 

There's a national association of homebuilders that publishes an issue of the book called The Cost of Doing Business every two years. They poll builders of all different sizes and different product lines from around the country. It's very interesting what they find. I use the book a lot in my education programs because it shows people where the costs are and possibly what they don’t know about new homes. 

What is the benefit of giving your client’s itemized lists of the project costs? 

One of the reasons I did my estimating and contracts the way I did was to give my clients more wriggle room in their decisions. By giving them a list of what everything will cost instead of saying you have a $4,000 allowance for carpeting or flooring, I open up more choices for them. I would give them an estimate that showed room by room what the flooring was, how much the quantity for that room was, what the unit prices were for material and labor. I would put this all in a three-ring binder, so when they went to make their selections, they could customize their design with the most accurate information. I would give them the tools that they needed to make informed decisions. 

Any tips for pros beginning to engage in those discussions with homeowners as they're ramping up on education? What's the best way to help them to educate their clients?  

The best way to educate your clients is to get educated yourself. Once they understand the systems that are involved, they will not only be able to explain the features of high performance homes but more importantly, they will be able to explain the benefits of those features. Educating yourself gives you the tools to empower your client while building credibility for your business. The goal is to be able to present different options and say, for example, we can do this, but it will cost this much on the front end. It'll save this from month to month, and it's only going to add X number of dollars to your monthly mortgage payment. So you're netting this much savings.

Chuck has a book out called Plan to Success, Plan to Profit about building a business plan to succeed. Oftentimes business owners forget about the plan for success because they have the skills and know-how, but no training on how to build a business. How does your book speak to that issue?

Small businesses in the construction industry have the second highest failure rate of any small business in the industry. When the National Association of Homebuilders spoke to their members about business planning, they found that only 12% of them had written business plans. I think a good deal of those failures in our industry could be prevented if we could just instruct builders on how to prepare clear business plans.

For anyone who's listening who's interested in contacting you, how would they go about reaching out to you?

I have a website it's chuckmillerconsulting.com. I also have a personal website at chuckmillereducation.com and I'm on Facebook as well so I'm not hard to find.