The Perfect Site Setup

Greg Wilkes (00:01):
“The construction industry can be a tough business to crack, from cash flow problems, struggling to find skilled labour and not making enough money for your efforts, leaves many business owners feeling frustrated and burnt out. But when you get the business strategy right, it’s an industry that can be highly satisfying and financially rewarding. I’m here to give you the resources to be able to create a construction business that gives you more time, more freedom, and more money. This is the Develop your Construction Business podcast, and I’m your host, Greg Wilkes.

(00:36)
Today I wanted to talk about the subject of why you might not be making as much money as you expect on some of your projects. This can be a real frustration if you’ve priced the projects, you know you’ve priced it right, maybe you’ve got a QS (Quality Surveyor) to price it, and you’re a hundred percent confident that your pricing’s okay. But then once you finish the project, you just haven’t made as much money as what you’re expecting. That can be a real source of frustration, especially if it’s a long project. If you are winning 250 grand projects, 500 grand projects, and they’re six months to a year long, it takes all that time and you get to the end of the year and then you think, “That just did not go as expected. What a waste of time, I didn’t make any money on it!”

(01:18)
We want to stop that. We’ve clearly got to stop that problem in your construction company at the moment. What we want to do is break down why is that happening? What’s the reason for it? The purpose of this podcast today is just to really get your brain cells firing a little bit. I’m going to go through a few reasons why projects don’t quite run the way they should. Maybe there’s little bits and bobs you can take out of this that you can apply to your own sites.

(01:44)
Now, just thinking of your sites at the moment, what’s your general gut feeling? How are they running? Do you find that they’re smooth? Are they running on time? Are they running on budget? Or do your sites feel like there’s a little bit more chaos going on? Maybe there’s over ordering of materials, they’re not profitable, they’re a bit messy, you’re not happy with the quality of the work? Maybe the clients are not satisfied. Hopefully that’s not the case for you, but unfortunately, that can be the reality. It’s very easy to lose control of our projects, especially if we’ve got multiple projects on, or there’s big projects going on. As the business owner, when you’ve got so many other hats to wear in the business, you’re doing the finance, sales, marketing and HR etc, its easy to lose control of how sites are running in your business. Now, one thing I’ve noticed is that the way our sites run, especially on larger projects or longer projects, is often a direct relation to how much effort has gone into setting up the site before you start. So just bear that in mind. Often the way it will run throughout the entire project is the way that you set up the project to begin with. A lack of planning on the front end can really lead to a world of pain for weeks, potentially months, if we don’t get the planning side of it right.

(03:05)
I guess the first question just to ask yourselves is, how much effort am I putting in to setting up my sites? Another important question to ask is, what things should we be focusing on before we get started? That’d be a valid question. Now, I’ve obviously been in the construction industry over 20 years. I’ve had sites myself that have gone really well and of course I’ve had sites that have just not gone as planned at all. There’s been nothing more frustrating, like I say, than finishing a project and realising you’ve lost money on it. You’ve actually paid out of your own pocket to get that customer site finished. That is just absolutely heartbreaking, especially when it’s a long project. We really made sure that we put in some crucial steps before we started sites to make sure that that didn’t happen again.

(03:57)
One of the first things want to do before we even think about stepping down onto a site, is understanding our costs. Now, if you’ve won a project, and maybe you’ve won it by giving bulk pricing to a client, so some people won’t use QS’s and they might bulk price projects (when I’m talking about bulk price, I’m not just talking about giving a lump sum e.g going “right, this is a 200 grand job”) maybe you are bulk pricing into actual stages. You might say: foundations are five thousand, brickworks = 20 thousand, carpentry = 10 thousand and so on and so forth. Even that type of pricing, although the client may accept that, that’s not detailed enough for you as the business owner to be running your site. What I would do is, if you’ve won a project like that, a decent size project, and it’s only broken down into phases, or it’s just a bulk price, I would really consider getting that broken down even further by using a QS company. There’s lots online, ‘Estimators Online’, and lots of others, you do have to check their pricing. Don’t just accept what they give you. You do need to check through it. We won a million pound project that was using a company like ‘Estimators Online’, we had to go in and amend a few bits & bobs, but it was a highly profitable project because we checked it through and it was broken down. These companies will break it down into so much detail. It’ll literally tell you how many sheets of plaster board you need to order. It will do a takeoff, which is really useful. You get measurements of absolutely everything. You are going to be able to use this breakdown for; 1) your subcontractor pricing to make sure that they’re not overcharging you for certain items of the build 2) you’re going to be able to use it for your material ordering, which can be save you a huge amount of time. So step number one is you must break down the costs. Even if you’ve won the project, get a QS or an estimator to do a proper takeoff of that project so you know exactly the amount of materials you need to order and the price per phase, and even broken down further than that e.g what is the price per item per phase was, this is going to be much more useful for you. That’s the first thing. Break down that cost and you’re going to use that to serve you going forward. I would argue and say that, I know some people are not a big fan of giving clients too much information on their projects, but I really feel it’s useful to be completely transparent with clients, especially in this market we’re facing at the moment with price volatility on materials. I think clients should know exactly what you’ve priced for to the square meterage, and that way you just save yourself problems. If you ever need to go back to a client after and raise additional costs & say “Look, sorry, we didn’t cover this. We didn’t expect this much concrete was going to go in the foundations” (or whatever it is your going to go back with them with) it’s very difficult to do that if you’ve only given them a lump sum price and you haven’t actually defined what you’ve priced for. To protect yourselves, I really would be going down to that detail and itemising every single cost on a project, and I think that will serve you well going forward. Step number one, as we’ve said, let’s get those costs broken down at least into each trade. If you can do it per trade, that’s going to really help you going forward.

(07:28)
Step number two is, once you’ve got the project broken down, you really then need to think about locking in your profits before you start the project. How do we do that? How do we lock in the profits? What I would be considering then, is how do we get your subcontractor prices in and agreed before you even begin? Some of you may be looking after the entire project yourselves and have a completely in-house team, which is fine, but there’s a danger of that because with a full in-house team, things can overrun. If you’ve got your electricians and labourers and build team that are all on day work, it’s very common that projects can overrun because they’ve not got the same desire as people on price to get you finished in time. I would highly consider getting as much as you can done on a fixed price, and that’s really going to lock in your profits. What I would be considering is taking down your breakdown of costs, having a look at them. Let’s just give an example. Let’s imagine we want our groundworks to come in at 10,000 pounds. I would then be going out to groundwork subcontractors and ensuring that they can do it for 10,000 pounds and go out and get yourself three to five prices from subbies that you know, and even give them the price. It’s often much easier to tell someone what you want it done for, than it is for them to have the hassle of going away and trying to work it all out. I often found that when you’ve got that breakdown in price, if you can go and give them that breakdown and say, “Look, this is what I need you to come in at”. You might want to strip the material cost out of it so that you can make profit on the materials yourself and supply. You want to be locking in those costs from your subcontractors, as many packages as you can do, is going to serve you well. You may well need to have your own core build team on it. You may decide that, you need your bricklayers and your general builders in-house and your labourers, but if you can lock in your electricians, your plumbers, plasterers, decorators etc that’s going to really serve you well.

(09:36)
The simple way of locking in the costs are working out what your gross profit needs to be per project. Let’s say you are working to a 30% gross profit margin. If you’ve priced a project at a hundred thousand, you need to be making 30,000 pound profit out of that. What I would then do is go into your breakdown of costs and deduct that 30% off of your breakdown of costs. You’ve got your client costs in at a hundred thousand. Go in and strip that out and break it down so that you know what should your total cost be for labour and materials without profit. Then you use that second spreadsheet as your budget. You’ve got to come in on budget, and then you know that you’ve locked in that 30% gross profit at the end of the project. That’s step number two.

(10:25)
We’re going to first break down the costs, and then secondly, we’re going to use that breakdown to lock in as many prices as we can before we even get started, which is going to help you with your project.

(10:39)
Step number three is managing your client’s expectations. Sometimes, we can be great builders, we know how to run sites, we know how to build, can do that with the back of our hands, but sometimes the biggest problem for us and the stress, can be clients themselves. Clients’ expectations. Whether that’s expecting how quickly a project’s going to be done or expecting you to work in a certain way or the type of communication that they’re expecting. We really want to manage those expectations and understand how our client wants us to deal with this project, or even better tell the client how we are going to deal with it so they understand how we work. It’s really crucial to have a pre-start meeting with the client and set out all the expectations with that client. We used to do this, we would have a pre-start meeting with the project manager and the sales director who’d won the project, and we would just sit down with a client and let them know simple things like, for example, what are the hours of communication? We don’t want the project manager being contacted at seven / eight o’clock at night. He’s got a life to life as well. Let’s keep the communication between 8am – 5pm, unless it’s an emergency then leave a message and we’ll get back to you. That’s crucial. Set the client expectation with communication. How are you going communicate? Is it going be done on things like WhatsApp, which I would not recommend <laugh>, because again it is too intrusive for the project manager. Your phone’s going to be going off at 10 o’clock at night when the client thinks of something. Set the expectation with how you communicate, what channels will you use? Maybe you could say something like, all our communication needs to be on email because if you start texting us or using Facebook Messenger (or whatever other communication methods they can think of) it’s going to get lost. Whereas if we can keep everything on email, it’s all in one place, all in one channel, and we can track any changes going forward. Manage the expectation with communication. The second thing we want to manage expectation with, is how often we are going to have progress updates with the client. Are we going to have a weekly meeting that we all attend? Is that meeting going to be minuted, which I recommend? Make sure that when you’ve had that meeting, action points that you’ve got to take and the client’s got to take, have got to be minuted. The reason for that is because, how often do you get to an end of a project and the client will say, “Well, no, I told you I didn’t want the socket over there. I wanted it over there. I did tell you that.” That happens, doesn’t it? Maybe the client thinks they’ve told you something and they haven’t, or maybe you’ve just forgotten. Minute your meetings and assign responsibilities to the architect or the client or to yourself, if that needs to be done, and track those changes. Also you want to manage expectations with timeline. Set out a clear timeline for your clients. I would consider having at least two timelines. One timeline in-house for yourselves. Maybe you’ve got a 30 week project, you think it’s going take you guys 30 weeks, so you would have a Gantt chart and a timeline scheduled for 30 weeks in-house, but maybe the client doesn’t get that same Gantt chart. Maybe the client gets the 35 week Gantt chart, for example. What do they say? Under promise and overdeliver. That could save you a bit of stress if the project starts to run over slightly, you’ve got a bit of cover there. They are a few things that you want to do with the client, manage those expectations with the client. That’s going to save you a lot of stress as you go forward.

(14:26)
Now, going back to timelines, to go into a bit more detail in that, it’s absolutely crucial that you do take the time to prepare a Gantt chart for your projects, especially the longer projects, because slippage is huge. It’s absolutely huge. It will really hit your profit margins if you allow your projects to slip. To give you an example of that, imagine your projects go over by 10% regularly. Now I know <laugh> maybe your projects go over a lot more than 10%, but let’s say a 30 week project goes over by three weeks. If you keep slipping 10% on all your projects throughout the year, let’s imagine your forecast to do a million pounds worth of work in a year, if you’ve got 10% slippage, you’re only going to do 900,000 pounds worth of work in that year. That’s a hundred grand you are missing out on just for a 10% slippage on your sites. That’s huge. That a hundred grand, if your on for example 30% net profit, you’ve got 30,000 pound profit there that you’ve missed out on because of that slippage. It’s crucial that you do a Gantt chart and there’s no point just doing the Gantt chart. You get the Gantt chart done and you put it up on the site, let everyone see it, all the trades. I think is absolutely vital that everyone is responsible for that Gantt chart. Then make sure it’s monitored. Every single week that Gantt chart needs to be looked at. Are we on time? If we’re not on time, then who do we need to bring in? What resources do we need to bring in to make sure we are back on time? Monitor that with your project manager or your site foreman. Have a look at crucial time indicators when you need to be ordering materials. Make sure they’re linked to the Gantt chart. You may even want to link to the Gantt chart payments. That helps you forecast your cash flow. You could say, “Right when we hit this stage, when Brickworks reach roof height, we get another 30,000 pound…When the roof’s finished, we get another 10,000 pounds.” You could even link that Gantt chart back to the initial cost tracking that you’ve done, and now you’ve got a full cashflow forecast of when you’re going to be earning your money on your project. That’s going to serve you really well as you go through. Keep tracking your timeline. It’s a fluid document. You do need to keep updating it. If you start falling behind, update the timeline, have the original timeline there, and then the live timeline, and then try and bring it back if you can. Get more resources on if you can or try and shorten phases if possible, overlap phases if needed. But it’s really crucial you don’t allow slippage on your projects if possible, because that’s certainly going to cost you. It’s quite easy to do timelines. You’ll finding if you’re using estimators, some of them provide timelines for free when they’re pricing out projects. They’ve got software that does that. That’s easy to use. Or you can use tools like InstaGantt, that’s a useful project management tool for planning out your timeline. Lots of apps that will do this, but don’t put it off. Make it part of your routine every single week to monitor that timeline.

(17:44)
One other thing that you need to be preparing beforehand, to make the site run easier, is your health and safety documentation. Again, it’s something that can often go by the wayside depending the culture of the company and the business owner. Some companies are absolutely brilliant at health and safety. Others, it’s shocking. “What is health and safety?” some might ask! But it’s crucial. Again, if you’re doing big projects, the health and safety’s got to be in there. As a director, you are responsible. There could be heavy fines, even imprisonment as a director of a business, if something goes wrong. If someone died on one of your sites and you were safety negligent, you didn’t have health and safety in place, then you as a director could be held accountable for that. We don’t want to be taking that risk in business. It’s really important we take health and safety seriously. Get your health and safety prepared beforehand. Get it done and filed away. Even if you can get someone else in the business that can be trained up in that, someone in admin. It’s not a task a director should be doing. Get a pack pre-prepared, like a site safety folder that is the same every time. Sometimes it’s the same documents that go in that. Get that fully prepared and then make sure you link again, your health and safety to your phases. For example, when you’re doing foundations: have you got RAMs for that? Your risk assessment and method statements. There’s lots of programs online that will help you out and do this quickly for you. Get a policy in place of doing that and get it prepared before the project starts and that’s going to serve you well. Then keep monitoring it as you go forth.

(19:25)
There are a few things there to give you a few ideas on what you need in place. There’s lots of other things to help your site set up. I guess that the other things you want to be thinking about is, making sure you’ve got document storage sorted beforehand. What is your procedure for document storage? Are you goingg to be digital? Is it all going to go into Dropbox or OneDrive or Google Drive, whatever it is that you are going use. Make sure all the documents are uploaded, all the drawings. Have you got a drawing register so that when drawings are updated, can that register be updated so everyone knows the latest drawings that they are going to be working from? Things like that you want to be thinking about. You want to deal with your variations. Have a plan in place on how change orders are tracked and variations. Again, there’s simple apps you can use to send documents quickly that can be signed by clients or architects. Make sure that procedure’s in place and that’s accounted for and detailed for with the client. Things like that can be useful too. Think about how you’re going to deal with snags on the project. Have you got a software app that you can take pictures of snags and the descriptions so they can sit there until they’re marked off? How are you going to deal with quality control? Have you got sign off sheets, so that when a stage is finished you’ve got sign off sheets to check things? You might say, “Right, have we checked it for plumb? Have we checked this? Have we checked that?” That can be a simple sign off sheet that a project manager or the trade person can go round and tick off. Then the project manager can go round and tick it off. If needed, the architect can go and do the same.

(21:05)
All these sort of things, this all takes time. You might be listening to this and think, “Wow, that’s a lot of extra paperwork. You’ve put a burden on us there Greg!” And it is. There is extra paperwork and it is more hassle to do these things, but it’s worth it. if you’re going to run a professional company and you want your projects running to time and you want them running to budget and you want to lock in that profit, you’ve got to do this. As you start scaling up your business and you’re taking on these bigger projects, this is real foundational stuff that’s going to serve you well going forward.

(21:41)
I hope that helps a little bit, thinking about how you can potentially do that. Reach out to me if you think there’s some some steps that I’ve forgotten. I’m sure there’s a few bits and bobs that I haven’t included. Maybe there’s other bits that you do in your sites. It’d be interesting to know how you do that. Lets share the knowledge because it’s useful for everyone. I hope that helps in some way in ensuring that your sites run to time, they run to budget, and they’re nice and organised and not chaotic. See you on the next one.

(22:09)
If you’d like to work with me to fast track your construction business growth, then reach out on www aus.developcoaching.co.uk.