A Checklist for Turbulent Times
Designed for Residential Builders & General ContractorS
Use this simple checklist and masterclass to mitigate price rises, material delays, and their effect on your profit and cashflow.
The "Right Now" Checklist: Immediate Actions
1
Project Pipeline Review
Re-evaluate profitability, identify delay-sensitive projects, and prioritize high-margin, low-risk projects.
2
Client Communication
Inform clients about potential price adjustments or schedule changes. Document all communications.
3
Supplier Check-In
Verify pricing, lead times, and availability of critical materials for upcoming projects.
Client Communication - The "Heads Up"
Transparency
Contact clients immediately on projects not yet started. Inform them of potential price adjustments or schedule changes.
Documentation
Document all communication with clients regarding pricing or schedule changes. Include dates, times, and specific details discussed.
Supplier Check-In
Price Verification
Contact key suppliers to get updated pricing information for materials on upcoming projects.
Lead Times
Get updated lead time information for materials on upcoming projects.
Availability
Confirm the availability of critical materials and identify potential long-lead items.
Contract Review (The Fine Print)
Price Escalation Clauses
Examine existing contracts for clauses that allow for price adjustments due to material cost increases.
Force Majeure
Review clauses related to delays caused by unforeseen circumstances (like supply chain disruptions).
Change Order Process
Ensure you have a clear and well-defined process for handling change orders.
Cash Flow Quick Check
1
Invoicing
Ensure all invoices are up-to-date and sent promptly.
2
Collections
Follow up on any outstanding invoices.
3
Expenses
Scrutinize current expenses for any areas where you can temporarily cut back.
The "Masterclass" Modules:
Strategies for Long-Term Resilience
1
Maintaining Margins
2
Client Communication
3
Contract Clauses
4
Operational Edge
Module 1: Maintaining Margins - Understanding Your True Costs
1
Detailed Cost Tracking
Implement a system for meticulously tracking all project costs.
2
Labor Cost Fluctuations
Factor in potential increases in labor costs due to market demand and inflation.
3
Contingency Planning
Build in appropriate contingencies for unexpected price increases and delays (5-15%).
Pricing Strategies for Profitability
1
Cost-Plus with a Buffer
Use a cost-plus pricing model, but add a larger buffer than usual to account for volatility.
2
Escalation Clauses
Incorporate price escalation clauses into new contracts to adjust prices based on documented increases.
3
Staged Pricing
For longer projects, consider breaking down pricing into stages, allowing for adjustments.
Value Engineering & Alternatives
Client Collaboration
Work with clients to identify potential cost savings through value engineering (e.g., alternative materials, design modifications).
Supplier Partnerships
Leverage relationships with suppliers to explore alternative materials that may be more readily available or less expensive.
Module 2: Client Communication Secrets - Keeping Clients Happy
Proactive Transparency
Communicate challenges before they become major problems. Be upfront about price increases and delays.
Regular Updates
Provide regular updates on project progress, even if there are no significant changes.
Build Trust
Focus on building trust and managing expectations through clear communication.
Empathy and Understanding in Client Communication
Acknowledge Frustrations
Recognize that clients may be frustrated by price increases or delays. Show empathy and understanding.
Focus on Solutions
Instead of dwelling on problems, focus on finding solutions and working collaboratively with clients.
Documentation is Key
1
Meeting Minutes
Keep detailed records of all conversations with clients regarding pricing, scheduling, and change orders.
2
Written Confirmation
Follow up verbal agreements with written confirmation (e.g., email summaries, change order documents).
Module 3: Contract Clauses - Your Shield and Your Sword
1
Price Escalation Clause
Allows for adjustments to the contract price based on documented cost increases.
2
Force Majeure Clause
Protects you from liability for delays caused by events beyond your control.
3
Change Order Clause
Defines a clear process for handling changes to the scope of work.
Negotiating Fair Contracts
Balance of Risk
Ensure that contracts fairly allocate risk between you and your clients.
Legal Review
Have all contracts reviewed by an attorney specializing in construction law.
Module 4: The Operational Edge - Smart Ordering Strategies
1
Early Ordering
Order materials as early as possible, especially for items with long lead times.
2
Bulk Purchasing (with Caution)
Consider bulk purchasing to secure better pricing, but weigh benefits against storage costs.
3
Supplier Relationships
Cultivate strong relationships with multiple suppliers to increase options and leverage.
Storage Solutions
On-Site Storage
Secure on-site storage to protect materials from theft and weather damage.
Off-Site Storage
Explore off-site storage options if on-site storage is not possible.
Modified Just-in-Time Delivery
Schedule deliveries as close to the required time as possible to minimize storage needs.
Dynamic Pricing
1
Real-Time Cost Tracking
Stay on top of material and labor cost fluctuations and adjust pricing accordingly.
2
Price Quotes with Expiration Dates
Provide price quotes with clearly defined expiration dates to protect from sudden increases.
3
Open Book Pricing (Optional)
Consider sharing actual costs with the client and charging a pre-agreed markup.
Cash Flow Management
Deposit Schedules
Secure adequate deposits upfront to cover initial material purchases.
Progress Payments
Structure progress payments to align with project milestones and material deliveries.
Line of Credit
Consider establishing a line of credit to provide a buffer for unexpected expenses.
Continuous Monitoring and Adaptation
1
Stay Informed
Keep up-to-date on industry news, economic trends, and supply chain developments.
2
Network
Connect with other builders, contractors, and suppliers to share information and best practices.
3
Be Flexible
Be prepared to adapt your strategies as the situation evolves.