Why I left the client side of contracting

I’ve spent the past 20 years in the residential construction sector focusing on large-scale addition/renovation/new construction projects.  In this time, I’ve had every type of client experience there is. What I learned over those years is that the construction business is systemically broken and communications are to blame.

Let me explain.

Talk to anyone who has had a home renovation done and they’ll tell you a similar story: it went over time and over budget.  Even the best builders aren’t exempt from this tale. So let’s deconstruct why this occurs.

I can sum it up in one sentence: The issue with project delivery in residential construction centres around communication deficiencies.

Don’t believe me?  Let’s look at the process from stranger to project closeout and I’ll highlight the areas where these communication challenges come into play.

1. New client: ahhh… like meeting a new potential love interest.  It’s all puppy dogs and rainbows at this phase. As the builder, you are working hard to show them the best version of you and your firm.  On the client side, they are trying to figure out if they can trust you and more importantly if you are telling them the number they want to hear.

Problem: Many in this position on the builder side have learned over the years that telling a new client exactly what the job will cost at this phase is a good way to have the door slammed in your face.  The art of the sale is exactly that… an art. If you are competing on price alone, however, you have already lost.

Solution: As a firm, you have a circle of competence and this stems from your interests as a founder.  What are the skills in the industry that your team excels in? Many builders bloat their offer over time so they include everything under the sun.  “No job too large or too small… we do it all!”. You MUST specialize and not get distracted by the ‘shiny new object syndrome’. Builders who say things like “I need to keep my guys busy” are really saying “I am happy competing in a bloody red ocean on price alone”.  Come across as the ONLY solution to this clients problem and consider not engaging with every single client that comes across your inbox if they don’t meet your ideal client avatar.

2. Estimating and bidding.  Oh boy… probably the centre of it all.  When you look at the estimating process as a competition as opposed to an objective view of what the work costs based on compiled empirical data (ie: trade estimates and financial reports from similar past projects) you are creating every stressor in the relationship that follows.

Problem: Bidding is typically done by looking at ‘what you can sell the job for’ as opposed to ‘what the job actually costs’.  But many builders stop here and don't try to think of ways to deliver the project for less. They think of things like lowering their mark-up but that is illogical.

Solution: As the builder, you are the expert. If you know that the scope doesn't match what the client intends to spend then don't simply tell them that unless you want the door slammed in their face. Come up with solutions to their problems that are more in line with their intended spend. If at this phase of the relationship you can’t tell come up with solutions and tell the client exactly what it costs in a confident way with the empirical data behind it and solid client references that speak to this transparency, then consider this may not be the right client you want.

3. Construction.  Here’s where the real problems start to surface.  People hate confrontation. People avoid it like the plague. How many times have you or one of your team said this: “The cost is actually going to be $XXXX dollars but let me get them there slowly.  I’ll drop a seed that it could be a few hundred up to a thousand dollars and then we’ll tell them the full price when we get there in the project”.

Problem: The real problem is that your PM’s aren’t accountants and they are often fighting an uphill battle with trades, internal team members, professional partners like architects/engineers, city inspectors, etc.  However, they are also the main client contact and they are the ones that ARE responsible for managing cost control and COMMUNICATING changes to the client. But human nature dictates: People hate confrontation. People avoid it like the plague.

Solution: Starting with a transparent model of bidding combined with detailed cost tracking that is CONSISTENT is the key to success.  But in order for this to work, you must sell the job on what it will cost versus what you HOPE it will cost. You can’t take HOPE to the bank!  But this doesn’t help at this point because you’re already into the project. As the PM, you must inform the client of the actual costs as early and as often as possible even if you are fighting a losing battle.  

4. The end of the project: Usually when the proverbial S*&# hits the fan.  It’s the culmination of a stressed and displaced client, hemorrhaging bank accounts, HELOC’s, other lines of credits.  Whether it’s the result of client changes, site conditions, inspector/engineer requirements, or poor estimating this is when the real opinion about you, your firm, and your business practice is formed.  Often at this point, both sides are finding it challenging to communicate in a positive manner even if the communications seem pleasant. Underlying are the issues with these statements a client would say if under truth serum:

?? “I wish I would have known what the real cost would have been from the beginning”

?? “There were many points in the project where I made decisions without knowing the overall financial outcome of the project on a whole”

?? “I appreciate that they told me of the costs, but the timing of the communications could have been much better”

Problem: Unfortunately by this point, things have snowballed if you haven’t had a system in place from the very beginning including selling the job for what it will cost.  You have an upset client, even if they aren’t really expressing this to you, and it’s probable that your team is also frustrated with being on the receiving end of an unrealistic estimate that they had to defend from the beginning.

Solution:  Regardless of how you have gotten here, you need to appear as a united front. Any PM or senior management personnel that ‘throws someone under the bus’ is only hurting themselves as well.  If it’s a trade who has let you down, remember that you hired them on the client's behalf in the first place so what does that say about your judgement?  If it’s a poor original estimate and you tell your client this, what does this say about your firms estimating practices? And if site errors by your team are to blame, it’s always best to speak of errors that occur on a site in general that we are all human and as a result we all make errors.  Stand united but NOT in a confrontational way and focus on the end goal by referring to any costs as "costs of work".

I’ve always said that 100% of every error in construction is as a result of communications. Think about it for a moment. Every situation is a result of either not informing, or not informing accurately about something to someone.  

There are various stakeholders in a project and the PM needs to be included in the earliest of discussions as the ‘voice of reason’ and the trusted confidant to the client. Don't mistake this for me saying that the PM is there to polarize the positions in the project, but there to call out things that have elements of risk so a client knows this as early as possible. As a PM, your role is the manage project risk but more importantly: be vocal about it.  Don’t sit on information when you know there is an impact on time & money for the client.

For the business owner: invest in developing your bulletproof brand by investing in systems & templates from sales → estimating → construction → close out.  Firms that reinvent the wheel every day will never get ahead. You want to be a progressive firm but not by changing your stripes daily.  

So why did I leave the client side of the business?  Fixing a problem happens when you diagnose the root cause and trace it back to the human psychology of how it happens. I know how you feel when client issues come up. Often as the business owner, you see how it was easily avoidable and how you wouldn't have made that mistake. But it's not that simple and you know it.

Clients are challenging and believe me, I know this. With all of the information out there, especially how you can build a house on TV in 7 days for $100,000, I know the kind of battle us builders are facing.  BUT, as a business owner, you need to have your process worked out in detail to ensure that you price jobs properly from the beginning and that you and your team know what to do when X occurs. But overarching is that communication always governs any situation. When you approach the building process from this perspective, you will make promoters out of your clients. We all want to sleep well at night knowing that our clients are happy, our teams are happy, and your firm is seen as a leader in the industry.

Starting right from the beginning is the absolute key to success: That is where I come in. If any of this message resonates with you and you feel your systems and processes are not fully developed, book a free strategy session with me to discuss.