Breaking the margin squeeze: How process, procurement and pricing strategies protect your profits

Carly Ward:

Hey everyone. Welcome back to The Building Code. I’m Carly Ward. And even though this is my fifth time on The Building Code, this is my first time in the driver’s seat hosting. So super excited to be here today. And joining me is someone I’ve had the pleasure of presenting and working with at previous Buildertrend University panels. We’ve teamed up on profitability discussions in the past. So, I’m excited to bring some of that same knowledge and insight to the podcast today. Introducing our director of product design, specializing in our profitability features, we’ve got Sarah Biben.

Sarah Biben:

Hi there. Sarah Biben. Excited to be here today. I work with the product and design and engineering teams that are focused on better financial management out of Buildertrend. We really spend our time learning from builders. Where are their gaps? Where can your process be a lot more efficient and how can we make the experience a lot more usable for you and your teams in the day-to-day?

Carly Ward:

Amazing. We also have another guest joining us here shortly. He is a frequent flyer of The Building Code. So not his first time rodeo. Excited to bring him out. Today we’re going to be focusing on something that likely all our builders are feeling in some way or another right now, which is margin pressure. So, we’re going to be talking about protecting profits, tightening workflows, and recognizing how those small gaps in process can create big margin problems over time. And this is relevant regardless of your role within the business. So excited to bring out Tyler Farrell from Killowen Construction. And Tyler will be at the International Builder Show in Orlando coming up and at our 20th anniversary party that we’re having to celebrate all of our years of business. And Sarah will be there as well. She’s going to be on a panel, so we’re excited to hear from them a little bit more than just today’s podcast episode.

But for all our listeners, if you’re going to be at IBS, we really encourage you to come to our 20th anniversary party, which will be on Tuesday, February 17th from 6:30 to 10:30 PM at the Canvas event venue. We will have all the details for the party in our show notes. So be sure to go look at those and be sure to register with a link that will be provided. Without further ado, let’s bring out Tyler.

All right. We are bringing Tyler Farrell back into The Building Code. Tyler, how are we doing today?

Tyler Farrell:

I am doing excellent.

Carly Ward:

Amazing.

Tyler Farrell:

How are you?

Carly Ward:

Doing so good. Well, I know this is not your first time on the show, but in the past, you’ve always been with Charlie. So selfishly, when I figured out that you would be our guest for mine and Sarah’s first-time hosting, we were pretty excited.

Tyler Farrell:

Is it your first time?

Carly Ward:

Fifth time on the show, but first-time hosting.

Tyler Farrell:

Hosting. Okay.

Carly Ward:

Yeah, yeah.

Tyler Farrell:

All right.

Carly Ward:

And then Sarah’s first time.

Tyler Farrell:

Well, I’m excited to be part of it.

Sarah Biben:

It’s my first time joining. Yep.

Carly Ward:

Well, cool. Well, I know most of our followers and listeners are very familiar with you, but just kind of providing a little bit of a background, Sarah and I have both followed your journey for quite a while. Luxury custom home builder across the Wasatch and Summit Counties in Utah. You’ve built an incredible reputation within the building community based on craftsmanship, communication, scaling with intention, and even featured on Netflix’s Dream Home Makeover. So, you have a truly impressive background, but for those listeners that might not be as familiar with Killowen and yourself as we are, do us a favor and give us just a little snapshot of the company and catch us up with what’s been going on with Killowen lately.

Tyler Farrell:

Yeah, absolutely. So, thank you. That was a nice introduction. We do custom homes, high-end luxury in Utah, in the Park City area. I mean, I don’t love being necessarily pigeonholed as a luxury builder because I will build whatever people want, really, whatever they want, if they have the budget for it. Just so happens, most people come to us because of the homes they’ve seen and it’s a luxury market, all that. But I do… I don’t know. I have a hard time putting us in a box, but yes, we are on the high end. As far as what the company is today versus when I started this company, and I do think I’m on year 12, I think, of starting this company. I should… Yeah, I think.

Sarah Biben:

Got to celebrate your milestones. Yeah.

Tyler Farrell:

But anyhow, I’ve been with Buildertrend since the start, and I think we’ve been a partner for the past few years, but I always do use Buildertrend. And the evolution of my company, I’m not doing things perfectly. There’s so many SOPs we’re trying to dial in and we’re just trying to get better. And I have the absolute best team. It started with just me and I was an entrepreneur, the mindset to do everything yourself. It took me so many years to take the SOPs out of my head and put it into a system, and we’re still not quite there. And my personalities, my team must pull it out of me.

And I’m a way better delegator than I used to be, but I think people listening to this who are looking at scaling and are looking at creating some standardization in their company can learn from how we’ve done it and maybe some of the things we did wrong and where we are today. So hopefully I can touch on some of that and will be helpful for those listening to say where we came from, where we are, and I think where we’re going.

Carly Ward:

Amazing. And just out of curiosity, is there anything specific that you’re excited about for the company or personally heading into this year before we start diving into all the profit protecting stuff?

Tyler Farrell:

Yeah, I mean, I’m excited for IBS. I always enjoy going. This will be my first time going to Orlando. And usually I bring my team, but it seems like at home, this is the first year we haven’t had a baby, so my wife is coming with me. So, I’m really excited for her to meet everybody, meet all of you, just have a few days to have a date with my wife is going to be awesome. So, I’m really looking forward to IBS, not only for all the great people I get to see from across the country but spend some time with her and she can be with work Tyler for a little bit. But as far as our company, it seems like every year… I mean, this is not a boring job. For all the things it is, it is not boring. For this upcoming year, we have, just every year it seems like our projects get increasingly impressive as far as the design we’re getting, what we’re asked to create, some of the challenges.

This industry is amazing in that way where you really should not be bored doing custom homes. And so, we’re in some new developments this year. We’re working with some different design teams we haven’t worked with before, and it’s challenging but exciting. And we’re continuing to grow and scale, but I think it’s at a sustainable pace and that’s a whole other conversation. I think at IBS, in the Central Hall, that’s what we are speaking on is scaling.

Carly Ward:

Yeah. Really excited to talk about IBS, so might as well just get into it now. You mentioned it’s at Orlando this year, and I’m just curious, I usually hear from people, it’s like they’re either pro-Vegas or pro-Orlando. And just in your experience, do you think that there’s going to be any differences with it being at Orlando this year versus Vegas?

Tyler Farrell:

I’ve never been to Orlando. I’m very pro-Vegas because it’s very close to me. So selfishly, yeah, I think it’ll be interesting. I would expect it’s a little bit of a different crowd because probably more East Coast people who have a hard time getting out to Vegas. So yeah, I really don’t have a lot of expectations other than it’ll be fun.

Carly Ward:

Yeah. And how many years have you been going now at this point?

Tyler Farrell:

I think I’ve gone for the last six or seven. I think so. Yeah.

Carly Ward:

Any favorite memories or stories from past shows?

Tyler Farrell:

Well, I think last year was special. I was on one of your panels and it wasn’t just me. I was almost moderating it and we had three more of my team on the panel. And it was cool to see them take pride in the company and kind of boast about us without me doing the sales about how good we are. It was great to hear from my team and what they’re excited about, and they could share that with other people as opposed to it just being me. But that was a good experience.

Carly Ward:

I always feel like it’s a great experience when you get to pull in everybody else instead of just like, okay, this is how great it was and come back later. They really get to live it, breathe it. And I feel like that breeds life into your company, so that’s awesome to hear.

Sarah Biben:

Proud moment.

Tyler Farrell:

Yeah, it was cool. It was cool to see them be really excited about it and just talk about the great things that are in our company. I think when you hear it from the owner like, yeah, he still owns this company, of course he feels that way. But to hear my people talk about the processes we’ve created as a team and how we do it as a team, I thought that was great.

Carly Ward:

Well, and IBS is such an environment of just pouring into other builders or vice versa. And so, coming off that experience, I’m sure it’s just super invigorating from the team and going into projects and new developments and things of that nature.

Tyler Farrell:

Yeah, it’s great. I mean, IBS, I’m going to try and slow down a little bit this time. I felt like last time I was going from event to event to event. And again, I had a lot of my team there and this time just it’s me and my wife. I think we’re going to take our time. We’re going to tour the halls a little bit more than we had in the past, and it’ll be great. I’m looking forward to it.

Carly Ward:

Awesome. So, I’m curious, for anyone who hasn’t been, whether they’re conference-adverse or maybe they’re just not sure what to expect from IBS, what does attending it feel like? And specifically, is there any session or anybody there that you’re most excited about?

Tyler Farrell:

Yeah, I think it’s probably different for everybody. For me, it’s a little bit invigorating. It pumps me up. The end of the year is so hard when you own a business and especially when you’re trying to move people in for Christmas and it is just, there’s a lot. There are employee reviews, there’s bonuses, there’s all this stuff. And then you get kind of burnt out in that winter and usually you’re dealing with a tough winter as well. We do not have a tough winter, which is kind of a bummer. There’s like no snow out here. But I think for me, it really pumps me up. I get excited. It helps me take that energy through the rest of the year. Now I have teams, people on my team, I haven’t had the time, but they’ll go to the classes and they’ll come back with like, “Hey, I’ve learned this at IBS. We should implement this.”

So, one thing, when we get into some of the finance stuff, some of the processes I think probably began from going to IBS, some of our checklists, stuff like that. We’ve taken little pieces that we’ve incorporated into our company. So, there’s a lot to learn. Networking is awesome. I’ve met really, great people from across the country that typically only see on the internet, and it’s great to see them in person. That’s fun. A lot of my friends who I went to school within construction management, they’re out there. It’s fun to connect.

Carly Ward:

Well, and you already teed us up, but you’re going to be on two Buildertrend panels this year. One is with our CEO, Dan Houghton, and that session is Scaling with Intentions, Signs You’re Ready and Steps to Get There. Why is this such an important conversation for builders right now?

Tyler Farrell:

I think, again, I’m in my own little region. I don’t build farther than an hour from where I live, but at least for me, I believe there is more good work than there are good builders, which can be very enticing to go and grab it all and say, “Yes, yes, yes, yes.” Especially when you’ve come from the world where you have to say yes to every project or you’ll starve. So, I start saying yes to every bathroom, yes to every closet, yes to every basement remodel, all that stuff. And then when you get to a level where like, oh, we are getting some real serious jobs, I think it is easy to over-commit. And I’ve seen some of my peers locally over-commit, this is six, seven years ago, and their reputation suffered for it. And there’s a lot of reasons that you can go that that occurred, but I just think, again, there’s so much good work. You must scale very carefully and very thoughtfully.

Carly Ward:

Well, and I know so much of your brand is built on intentionality and honesty, and in an industry where it can be enticing or easy to cut corners, how do you keep yourself and your team to that integrity?

Tyler Farrell:

Well, I think a great thing we have is we all kind of see the bigger picture. There’s some excitement. There’s still a lot of excitement here of where we’re going. I don’t want to be the biggest, baddest builder in Utah, but I want to be in the conversation like, “Hey, those guys know what they’re doing.” And that’s not volume to me. I like how many we’re doing and we’re going to staff accordingly to the opportunities we have. We’re kind of hovering in that 40 million a year range, depending on starts and everything. We’ll probably get up to 50. And I think I don’t want to go much farther than that, but ultimately, I like that the team sees how important it is to do it properly. And we’ve been doing this long enough that you see what happens when you don’t do it properly, because my warranty ultimately is if I did it wrong, we’ll come back and fix it forever.

If your house leaks because we, did it wrong, I don’t care what the warranty or the one-year workmanship or whatever it is, if we did it wrong, we will fix it. And my team takes that very seriously because we’ve had to honor that, and they see like, “Oh, that’s coming straight out of our pocket,” and that home was four years ago. Which makes, I think, of the homes we build, excellent, because we all know if we don’t do it right the first time, we’re coming back to fix it later and we won’t get paid for it. So, I do like that the team has that kind of long-term mindset and the growth mindset to be a part of something special that’s not all the way where it’s going to be but getting close and having a good reputation. And yeah, again, I keep talking about the team focus, but we build way better homes now than when it was just me. We absolutely do.

I am a general contractor. Generally, that’s a great word for me because I generally know a lot about most things, but I don’t know everything. And I lean on my team. We have an excellent team. Our subcontractor list is just… Our trade partners are amazing. We have the best of the best, and we’ve kind of gotten rid of all the Jokers that are charging too much. They charge fair, and they just want to do a good job and go home to their families, pay their bills. And I feel that is the vibe of the company. And I think a lot of contractors have heard that and do like working with us because of that. They might not like me personally. That’s whatever. But if they say we build crap homes or we’re not fair with people, I have a big issue with that. That’s our whole thing.

Carly Ward:

Well, what I’m hearing from everything that you just said is it really starts at the top, starts with you and it trickles all the way down to your field employees, your office managers, your trades. So, leaning back into the session or the panel that you’re going to be in at IBS, without giving too much away with that session, who’s the builder or who’s the person that needs to be in that room to benefit from what you’re going to be talking about?

Tyler Farrell:

I think a person who’s like me, but six, seven years ago. You’re just starting to hire. You have a lot of potential work, but you’re not sure how you’re going to staff it. I think the best time to have gotten someone like me if you were a client for your budget was probably six or seven years ago because I didn’t know how to charge. I didn’t know the real cost of an employee.

I know when I first started, I was trying to get into these amazing communities, high-end communities, and I was like, “Ah, experience doesn’t matter. It matters how hard I work.” Yeah, experience doesn’t matter, unfortunately. And you can’t get it unless… You got to start somewhere. I totally understand that. But the people in the room should learn from my mistakes, and I’m very open with those, where I’ve messed up, where I wish I would’ve done it differently. Doesn’t mean I would’ve changed things. I am who I am because of my experiences, but I’m big on learning from someone else’s mistakes. And a lot of our checklists, I’ve hired people who have worked for other companies, all that. We have a wealth, we have decades worth of construction information in our company, and we try and pull out all those mistakes people have made and put them into our checklist. And I don’t care how good a builder you are, you’ll forget something unless it’s written down.

Carly Ward:

Well, worth putting on your calendars if you’re going to be at IBS. Just a reminder, this session is Scaling with Intentions, Signs You’re Ready and Steps to Get There, and that is going to be hosted Tuesday, February 17th from 2:15 to 3:15. Now, Sarah, you’re going to be moderating another big conversation at the Buildertrend booth, Profitability and Practice, Inside the Workflows that Protect Your Bottom Line. I know profit talk isn’t always the hottest, most exciting topic, but why should builders be excited about this one?

Sarah Biben:

Yeah. I kind of think it is though. When you talk to builders and you hear about the kind of freedom profitability really unlocks for them, that gets me excited. Freedom to slow down, be more particular about the jobs you take on, why it matters for their lives and the types of business and culture they want to lead, that is a pretty hot topic, I think. So, I think what makes this session meaningful in that way is you can leave this session with those bits and pieces. I like how Tyler mentioned that. Going to IBS and taking pieces away to start implementing in your process at home. You’ll leave here with smaller habits and practices you can start implementing right away next week when you get back, as well as some bigger things to be thinking about and scaling into your process for more sustained improvements on your profit protection over time.

Carly Ward:

And I know traditionally, Buildertrend is kind of all over the place at IBS, but we’ve been a little bit more intentional about our stage presence this year. We have two sessions. Why was profitability such a big priority for us?

Sarah Biben:

Yeah. Yeah, it’s just where a lot of builders are feeling a lot of pressure right now. Revenue is looking okay, but the increased cost, the kind of chaotic cost environment and the tightening margins, it can be hard to keep up with and hard to see where you are losing money and why, especially early enough in a job that you can have some room to adjust and take corrective action. So, this conversation really matters because your profit isn’t protected by one perfect estimate or one right way of setting it up, but it’s really protected when you have that full system in place across your estimating, job costing, purchasing, the communication, who’s on point to do what, really all reinforcing each other to give you that real-time insight your business needs to make day-to-day informed decisions.

Carly Ward:

Well, this is setting us up for the meat and potatoes of our conversation, protecting your margins. So, before we lean into that, just a reminder that that session at IBS will be on Wednesday, February 18th at 1:00 PM on the Buildertrend Boost stage. So, add that to your calendars as well. But again, margin pressure, I feel like everyone’s feeling it in some way or another right now, but margin loss, a lot of the times I feel like builders think it’s going to result from one significant area, but really, it’s a combination of tiny gaps, slow leaks, or maybe handoffs that don’t quite connect. So, Tyler, you’ve scaled your business super-fast, and in your experience, where are you typically seeing those big margin links show up?

Tyler Farrell:

I think, gosh, there’s a lot of answers to that, I think, but again, it came from one person into a company that has many, many people, a lot of hands on it. I think one of the very best things I did was hire my controller who took the finances, not completely out of my hand, but took the day-to-day out of my hands. We have reports and all that stuff every… I am unsure if we would still be in business if I’ve not hired Gabby, but just because I wanted to do everything and keep everything. So, the small leaks every day, like we’re saying, if you’re not constantly trying to improve, record where your warranty costs are, record missed estimates. One of my favorite professors, Weedman, when I was in college, he would always repeat repeatedly, “What gets recorded gets done.” And I have that in every aspect of my life.

I am also kind of a crazy person. We do these personality tests to help us place the right team members in the right spot, see who can work together the best. And I feel for my company, because I am a crazy person. I’m very in the 99th percentile and a lot of different, and I need to get back to the middle. But I do really believe in checklists and writing things down from the moment I wake up, and I love it. I love checklists. For example, just pretend.

Carly Ward:

Is there a bigger dopamine hit than crossing something off a list?

Sarah Biben:

Right?

Tyler Farrell:

Oh, it’s amazing.

Carly Ward:

I don’t think so.

Tyler Farrell:

But sometimes I’ll cheat and write, “Brush your teeth.”

Carly Ward:

Yeah. Yes.

Tyler Farrell:

Yeah. But anyhow, just this morning, had a bad experience. Wake up, I think it’s like 4:30 in the morning, I check my email. I try to not check my email till later in the morning so it doesn’t ruin my morning if there’s something terrible waiting for me there. Anyway, didn’t do it today. Woke up. Saw on email, a house we built six, seven years ago was, it said the neighbors are building, and they got a survey and they said our driveway encroached from their property. And my first thought was like, well, that doesn’t sound like us. I don’t think so. This has got to be a wrong survey, all this stuff.

Anyway, so I drove out there early because I couldn’t keep my mind off it. I went and looked and I looked at the property line and I was like, “I don’t think so.” I’m looking at surveys, looking at all this stuff. But anyway, the main point of the story isn’t if we did it right or wrong, we’re still investigating it, but we have, and I think we got this from Buildertrend, or sorry, not Buildertrend, but IBS, I believe they call it the monorail, which is, it was a class that I went to that talks about all these things you need to check off along the way, very important things. So, we just went around with that, and I mentioned it on podcasts before, we have 70 plus checklists of all the things we’re supposed to do.

So, I messaged my team this morning. I said, “Good morning. If you are pouring a driveway remotely close to a property line, make sure you get a survey.” And the bottom was like, “Derek, make sure that’s on our monorail.” So that’s a checklist before every phase. I don’t care how good a builder you’ve been or how long you’ve been with us, you check that off. And it’s not something you check off after, because that defeats the whole purpose of it because again, you could be a great builder, but a great builder can forget to put sleeves under the driveway. There’s just so much going on. So, if we had had that seven years ago, we probably wouldn’t have encroached on this, right? And it’s going to be what it is. I’m probably building on the other lot too. I’ll figure it out. And if we did it incorrectly, we’ll fix it.

But you’re just, in this industry, you’re always trying to solve for the next future problem. You wake up every day to problems, that should not be a surprise. You’re a professional problem solver in construction, but that doesn’t mean you can’t do your utmost to eliminate as many as possible before they become a problem. I know, I absolutely 100% believe that I’ve already put out a hundred fires every day because they didn’t happen because of our systems, but we’re still going to hit four or five, and that’s okay. But if you have too many of those, you are going to sink.

And if you’re not tracking your costs, if you don’t have these standard building practices for checking off things, again, if you’re a younger builder and you’re getting into these big homes, one mistake could really set your company back years. Years. And fortunately, we haven’t had anything like a setback like that, but we have had problems. So that’s where our monorail comes in. We had; we missed this. Oh, let’s check this. Oh, that was a close one. Let’s make sure we check this every time.

Carly Ward:

No, I love-

Tyler Farrell:

So yeah, that’s one that’s been on my mind today because there might be a financial impact on this if we did that wrong. But again, our team, I just sent it to them like, “Hey, make sure this is on the list. Anyone have one coming up? Just make sure, double check.” And we do survey them a lot of the time but putting it on that monorail kind of makes it gospel. You must check it.

Carly Ward:

No, I love what you said about the SOPs being… You’re solving for future problems that you might incur or the millions of issues that you’ve incurred previously, but you haven’t made an SOP for it to solve for, so it doesn’t happen. So, I love to hear that. Sarah, I’m curious, we hear builders say all the time, “We’re slammed, but the numbers don’t show it.” Why are standardized workflows such a pivotal part of this industry, especially in a market that tends to shift?

Sarah Biben:

Yeah. Yeah. I mean, in the shifting market, your competitive labor and your material costs are subject to change. You don’t have as much room to make mistakes and recover effectively. So, you really must have that system in place and those standardized financial workflows for that predictability so you’re putting out fires without even knowing it so you can better see them when they do happen so you have some time to recover. The builders who are weathering that volatility the best are not guessing less, but they’re just tracking better. They’re keeping those lists. They’re keeping things up to date and capturing the details in the day-to-day. Those disconnected systems, you’re missing so much visibility.

And even this, I hear this all the time from builders, “We are looking good on this cost code, but oh, a few team members accidentally mis-coded it and now we can’t see it. But oh, we actually have a team meeting to all orient around that job costing budget together and now we can better see it and better have the satisfaction of like, okay, we’re done spending here, we’re done spending here, and orient together as a team.” So yes, ideally, they’re catching those problems before they happen, but reducing the amount of time until it becomes a bigger problem than it really needed to be.

Carly Ward:

Well, and you mentioned the team aspect. I feel like we’ve been talking a lot about it being a team problem rather than leadership or accounting or an owner. Something interesting that I heard at a recent conference was one of our builders that implemented doing incentives to his change orders. So, he implemented doing a 10% bonus on any change orders to his project managers. He’s now implementing that same percentage to his office staff that has admin work associated with that. And in 2025, they made $360,000 in profit on change orders, or excuse me, it was 260,000. 26,000 of that went to incentives. And so, I mean, just a ton of profit and an easy way to make this a whole team initiative rather than just trying to-

Sarah Biben:

Yeah, yeah.

Carly Ward:

… poke at them constantly.

Sarah Biben:

Motivating individuals all working together. Exactly.

Carly Ward:

I’m curious, Tyler, do you guys have anything like that in your company?

Tyler Farrell:

No, it’s interesting. I think with us being a cost-plus builder, we don’t have your kind of more traditional type of change orders of extra work, but I’m always looking for a good bonus program. And I’ve talked to so many builders and it is all over the place and the consensus is there’s not a good one.

Carly Ward:

Right.

Tyler Farrell:

So, if you have one and you’re coming to IBS, come grab me, let’s talk about it. I have a lot of thoughts, because I love incentivizing people, but it is hard to quantify that for a good project manager. And I have a whole spiel I could talk about that. But something that I just thought of, again, for the people who are, I think, trying to scale and become a larger company, something as simple as purchase orders, because if you’re used to just having under a million in the bank as far as billing, and then you start getting over the one, two, all that, notwithstanding all this, “Hey, do your change orders,” all this stuff, there might be invoices you’re not billing for or you paid someone twice.

That seems simple, but when you have so much money going through the company, occasionally, it does happen and our vendors are awesome and they’ll be like, “Hey, I got this $40,000 twice. What do you want me to do?” That is one, so cool that they brought that up. And two, you need to have checks and balances, make sure that doesn’t happen. And it’s something as simple as a purchase order, our requirement with us is, “Hey, to invoice us, you have to have a PO and you get that PO from your project manager. We cannot pay this bill without a PO.” And PO means our project manager has seen it, they approve it and they’ve assigned it to a job. So, every invoice we pay has that PO.

Now, occasionally there could be a double-up because of the way maybe the bank is working or whatever, but those are rare. But I remember one of my employees who worked for me kept bringing up POs when I first arrived like, “What are you talking about? We don’t need POs. Just pay the bills. We’re fine.” But I finally wrapped my head around it and that was something I was resistant to because I just didn’t want more admin work. And looking back, it’s such a good idea. And we do it now. And again, there’s so much you can talk about with Buildertrend and how you can implement it in your books and how you’re doing your pay applications, your draw systems. But there’s a couple just basic ones everyone should be doing, and that’s one of them.

Carly Ward:

Well, I feel like that, implementing POs, like you said, that is a huge change in your business going to something that is process-oriented versus the on-the-fly negotiation or the gut feel situation. So, it’s great to hear that. I’m curious, Sarah, from a homeowner’s experience and their perspective, where does clarity around selections, change orders, invoicing make a huge difference in protecting margins?

Sarah Biben:

Yeah. Yeah. I would certainly love to hear Tyler’s perspective here from the open book side as well. But just regardless of contract type, clarity and what your client is signing off on, and can they see that picture alongside with you the whole way? So what impact is the selection having on your overall contract price? Are you still in? What are you signing off on? How are your costs fluctuating along the way and why? And what are you really agreeing to here when you’re signing off with us? So really making sure our Buildertrend system has that clarity, not only for your team, but that you can present to your client in a polished and professional way so that they’re confident in working with you as a builder and they know where their price is sitting and how much they have left to pay you. That goes a long way with reducing their anxiety and they’re agreeing to a lot with you and that transparency goes a long way for them. So, setting those clear expectations upfront and carrying that story through with them as things evolve along the project.

Carly Ward:

And even six or seven years later when they might be dealing with a driveway issue, right?

Sarah Biben:

Yeah, and they can still go back and see. Yep.

Tyler Farrell:

Six or seven. Let me add to that. So, the monthly budget, so we’re cost plus, so this isn’t really… I guess it would work for a fixed fee situation as well, but we insist on having a budget meeting with our clients every month. I think it’s easy for a builder to tell you what you owe. That’s just adding up invoices, right? But projecting throughout the whole project, when you’re just a few months in, you haven’t ordered everything, you don’t have all the POs, but projecting what those final costs are going to be is a skill. And I think it’s something that’s very important. You mentioned being anxious. I know some builders locally that never even really have a budget, and I have no idea how their clients let them get away with that. And that would drive me nuts as the builder not knowing. I’d be like, “Oh, are we going to have to have a really hard conversation in two months?” Because there are.

I mean, every budget meeting, it’s money. They’re hard-earned money. And if we screwed up, that’s my money. It’s important and it is personal. So, every month we have this update and like, “Hey, end of last month, we’re a 3.1, dang it, we had to add something, now we’re 3.12.” But then the next meeting, it might be going down because we saved on lumber or something like that. And it is our job; there’s 200 $20,000 decisions on our house. That doesn’t seem a lot for a multimillion-dollar home, but they really add up. And every month, we want to give them as much authority with their budget, their hand on the wheel to make that next $20,000 decision. And if we haven’t forecasted, if we haven’t signed some of those purchase orders, all of that, then we don’t really know if at the end of the project we’re going to be like, “Crap, we’re 400K over budget. Sorry. You have funds for that?”

And then that’s horrible. That’s awful. I had that happen on one job about five or six years ago and he was hard to work for. I can make a lot of excuses. He was hard to pin down. He was living out of the country. I was also terrified of him. He was mean to me and I did not do a good job. I got changes approved like, “Hey, this staircase is going to be an additional 50 grand. Are we okay with that?” What I didn’t do a good job is giving him the total aggregate every month, be like, “Hey, this is now your total number.”

Because we got in the end and I had all these, what I thought, changes approved, but I guess I didn’t do a great job of explaining to be like, “Yeah, we’re going to be over budgeted by this much.” And he lost his mind and I ended up eating a lot of it. And he said… I didn’t want to go to court. Do I think it was fair? Absolutely not. But at the same time, I should have done a better job. I really should have. And I don’t think we’ve missed a budget meeting since.

And again, just the documentation, the legwork you need to do to know these numbers, because they change all the time. You must always be learning, always talking to your trades about what’s going up, what tariffs are we dealing with? Oh, great. We have another appliance annual increase. Are they going to honor their quota? We got to tell our homeowners; they got to pay another 4%. It’s a lot of work. And I think our finance team, I’ve delegated a lot of that, but our finance team does a really good job with that. It’s not perfect. This is such a hard industry that way with all the things that change. And these homes can take two to three years to build and it’s things you just can’t predict. But we’ve done an audit on the last nine or 10 jobs, I think. And the bones of the house where we have the most control, Killowen has the most control, we are one, one and a half percent. And I’m proud of that.

Where we get out of control is with selections. And some of that can be our fault too because we didn’t give them a high enough allowance. So not throwing it all on the homeowner, but the things that we can control the best we can, some of the concrete, the framing, the bones of the home are really, close. It’s just those finishes, and luxury is so subjective. And we work with so many different designers that think, “Oh, this house, we need 40 grand for lighting.” Oh no, we need 340. What are you talking about? So that’s where I can… Pre-con and just bidding as you’re going throughout these monthly budget reviews, documenting those is so critical for your sanity and your bottom line.

Carly Ward:

Well, it’s clear that our builders have a ton to learn from you. And especially if you’re going to IBS, I think this teed up enough interest to have them book your two panels on their calendar. I want to be conscious of your time, so really, really appreciate you chatting with Sarah and I today and just for being so open and vulnerable and willing to share some of the hard mistakes that you’ve learned along the way. That’s what makes this industry so amazing is just the people that are passionate like you, that are willing to pour into other builders. So, so appreciate you being on and excited to have you on the two panels at IBS and look forward to seeing you in Orlando.

Tyler Farrell:

Yeah, it’d be great.

Sarah Biben:

See you in Orlando.

Tyler Farrell:

It’s going to be awesome.

Carly Ward:

Perfect. Well, we’ll see you soon and can’t wait to have you on again.

Tyler Farrell:

Yeah. Thanks so much guys.

Carly Ward:

We’ll see you. Bye.

Sarah Biben:

Bye, Tyler.

Tyler Farrell:

Yeah.

Carly Ward:

Well, we have a lot to look forward to at IBS this year. Just as a reminder, we are having our 20th anniversary party on February 17th, which is a Tuesday from 6:30 to 10:30 PM at the Canvas event venue. Just as a reminder, there will be details about the party within the show details along with a link where you can go to register ahead of time. Also, we are giving away a free Buildertrend subscription for a whole year to anyone that is live attending. So, you’ll be entered into a raffle and we’ll be giving away one free subscription for a year. So don’t miss out on that. Additionally, put on your calendars the two panel sessions that we had mentioned earlier, one featuring Sarah as well as Tyler Farrell from Killowen Construction.

We look forward to seeing you all there and to being able to connect and hear about how things are going within your business, as well as how we can help optimize any of your standard operating procedures or workflows. So, thank you again, Sarah, for being on for your first time. I hope it’s not your last time on the show but thank you everybody for listening and look forward to chatting with you all again next time.