Qualified Remodeler Magazine

JAN 2019

Qualified Remodeler helps independent remodeling firms to survive, become more professional and more profitable by providing must-have business information, namely best business practices, new product information and timely design ideas.

Issue link: https://qualifiedremodeler.epubxp.com/i/1070573

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Page 37 of 66

years, however, Normandy had to supplement its current pool of subcontractors with additional partners because of its business growth and the ongoing labor shortage. Some workers have also requested higher compensation rates, Well says. "We'll adjust our cost book quickly and appro- priately if we find trends are happening," he adds. "For example, we're in the suburbs. If we do down- town work, now that everybody is really busy as far as the trades, they're charging a premium to go downtown. And it's justified because it's harder and takes longer to go there, so we have to build that into any Chicago high-rise projects." The remodeler provides a detailed scope of work to clients and lays out scenarios in which extra job expenses will be collected. Unforeseen conditions, such as mold growth discovered within a wall cavity, can raise project costs substantially. Normandy also has been toying around with the idea of presenting estimates more transparently without inviting constant negotiation, Well says. "We don't have that figured out yet. When peo- ple say transparency, you're kind of likening it to buying a $50,000 car," he explains. "You're not seeing what the spark plugs cost. And it doesn't really matter; the car is still $50,000. Negotiating the cost of the spark plugs—it doesn't matter. We don't want to get to a point where we're negotiating individual items just for the sake of it." Next-Level Service Developing cost sheets and breaking them down by trade has permitted Jackson Design and Remodeling to close its typical project within 1 percent of the estimate, says Todd Jackson, CEO and president of the San Diego-based company. The remodeler maintains a list of tasks that each subcontractor performs regularly and calculates a fair market price based on its multiple partners. "From 2007 to 2017 our plumbers charged us the same exact price. And just like everybody else, we experienced a jump," he explains. "We had some guys jumping a tremendous amount, [and] some guys trying to pull just a little bit [more]. [So] we surveyed all of our plumbers. We came back and looked at an average all the way across for those things that they charge for regularly." The company then sent out a pricing list to its plumbing contractors that described how much the business would pay for every item. Jackson admits that a larger volume of work—more than $21 million in 2017—allows the remodeler to dic- tate many of its job costs, but not all of its vendors. "You work in a manner where it's a sense of fairness for everybody [and] recognize the fact that you need guys to be in business," he adds. "You also recognize the fact that at the end of the day, our plumbing costs went up about 15 percent all the way across the board. That seems like a lot for one year, but if you average it over the 10 years that nobody got a raise—it's actually pretty cheap." When framing contractors began submitting exorbitant prices, however, Jackson took a differ- ent approach. The company had always received separate bids for labor and lumber, so basically its framers purchased all the lumber, which they said would only get more expensive. He revisited his relationship with the lumberyard and established the remodeler as a large framing contractor. "We were getting the high end of that pricing," says Jackson, who found somebody to do lumber takeoffs for $300 to $600 depending on the project. "Historically, we're more of a sub base, and we get lump sum bids. We don't dive down into the widgets and how many nails. [Now] I get a lumber list, [and] I get a hardware list. Then I give that list—I give the engineered plans, I give the lumber list—to my framing contractors. [And] they have the ability to do a couple of things." AƁer reviewing the list, framers can either take on the lumber themselves or purchase it with the account run by Jackson. If they accept the list and buy the wood on their own, the company will pay them 20 percent more than the lumber costs—10 percent for handling, as well as 10 percent for prof- it. If they choose not to acquire the wood, they collect only 10 percent for handling. "My lumber has come down 30 [or] 40 percent. I don't necessarily know that our framers have been trying to cheat us," Jackson notes. "I think it's more everybody is so overworked, and what they're going to do is, if I send out a bid to the lumber company to get bid, they have a guy who gets paid $50 or $75 for each job he bids. He burns through those jobs as fast as he possibly can. "Then he stamps on there, 'This lumber list could be 20 percent off,'" Jackson continues. "The [framers] add 20 percent, and then they mark it up 20 percent. They're just adding a buffer on top of a buffer. We actually have framers who say, 'This is great.' [And] it saves me thousands throughout the year. Part of it is, 'How can I give the next-level service to my subcontractors?'" To reduce slippage even further, the company conducts site visits with its partners before bidding on a project. The collaboration usually takes an extra two or three hours, but each participant can arrive at the most accurate estimate. "The goal on that is if you can look at what the surprises are on the front side, everybody is going to be a little happier [on the back side]," Jackson explains. The remodeler purchases about $1.2 million in cabinets per year, but he started forming alliances with vendors when it bought just $200,000 annual- ly. Now, manufacturers apprise him in advance of a price increase to see whether the company would " YOU WORK IN A MANNER WHERE IT'S A SENSE OF FAIRNESS FOR EVERYBODY [AND] RECOGNIZE THE FACT THAT YOU NEED GUYS TO BE IN BUSINESS. " Todd Jackson QUALIFIEDREMODELER.COM QR JANUARY 2019 35

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