Accessory dwelling units and the value of going Pro with Whitney Hill

Zach Wojtowicz:

This is “The Building Code.” We’re back. Third episode in a row, Charley.

Charley Burtwistle:

Third episode. They somehow, for some reason, brought us back.

Zach Wojtowicz:

We’re just going to keep going until they say we can’t.

Charley Burtwistle:

Until somebody kicks us out of this studio, we will be permanent interim cohosts of “The Building Code.”

Zach Wojtowicz:

This is getting quite the title. We’re the assistant to the senior manager of podcasts, and we report to the executive podcast …

Charley Burtwistle:

Chief executive podcast strategist producer.

Zach Wojtowicz:

And today we have an exciting topic. We’re going to be talking about ADUs with Whitney Hill. Charley, what do you know about ADUs, man? Do you know anything? Have you heard of an ADU?

Charley Burtwistle:

Before today, I knew absolutely zero about ADUs. They’re now my new favorite thing. I spent about four hours today actually prepping for this podcast recording.

Zach Wojtowicz:

If this was cryptocurrency in ADU, you’d be all in.

Charley Burtwistle:

I’d be all over it, but no. Yeah, we have Whitney Hill here with Snap ADU. One of the premier ADU builders in the nation, specifically out in San Diego. Whitney, maybe tell us a little bit about yourself, kind of how you got to be where you’re at right now.

Whitney Hill:

Thanks so much. Happy to be here and happy to share the story of how we got into Accessory Dwelling Units. So, I was actually doing renovations on the east coast remotely while living in San Diego, doing some high-end flips in the greater New York City area. So, my exposure to Buildertrend started back there. I was working with a small general contractor there to partner on deals.

Meanwhile, moved out to San Diego though, was excited to read about some of the regulation changes that you no doubt were reading about. A lot easier to build an ADU in the last 18 months or so. So, we realized once regulations were lifted, the real bottleneck would be construction capacity, and ADUs are an interesting asset class because it’s infill development, but at the same time, it can be a lot of new construction. So, we figured this was a space that would probably be too small for a very large developer to take, probably too big for someone to serve well if it was just a small mom and pop.

So, I had my eye out for someone I could partner with and someone who had a construction business and is already excited about ADUs. I came across that person. It was Mike Moore and Moore Construction, and he’d been running his small operation for about seven years. So, our skillsets align really nicely, and we’ve been collaborating on what became Snap ADU for just over a year, and we’d run his business tenfold in that time by focusing exclusively on getting to be the best possible builder of granny flats in San Diego.

Zach Wojtowicz:

Interesting. So, I’m curious about that when you’re looking at the growth and the model. Is there a reason the market is so hot in ADUs specifically?

Whitney Hill:

Absolutely. It’s a number of things. One, there’s just the underlying housing shortage, which means folks are always looking for opportunities to add units to their property, either for family members to be able to move in at a price point that’s reasonable or to generate rental income. So, that’s one factor. And then as I mentioned, the regulations have made it considerably easy to add an accessory dwelling unit to every residential lot, pretty much by right, unless you were in some very specific overlay zone in the coastal zone on hillside or some unique situation. Except for those, you’re pretty much able to build an ADU on any lot that has a single-family home. And that can be between 400 up to 1,200 square feet. So, you can actually fit a four-bedroom, three-bath home in 1,200 square feet. So, you can actually get quite a bit in there. We’re building typically a one- or two-bedroom unit between 500 and 750 square feet.

But for folks who are truly moving their granny into the granny flat, we see folks building really nice 1,200-square-foot units that have a lot of space, and it becomes a new home for someone who’s perhaps downsized and wants to be closer to their family.

Charley Burtwistle:

That’s super interesting. You touched on a couple of key things there. So, I actually just purchased a home, a first-time home buyer. I close on Friday. Fired up.

Zach Wojtowicz:

Congrats.

Charley Burtwistle:

Thank you. So, I was telling Zach about that. I’m like man, ADUs, I’m going to have to build one in my backyard.

Zach Wojtowicz:

He’s already tearing down his detached garage. He’s got a hammer.

Charley Burtwistle:

Day one, I’m going out there, but he brought up the same thing that you said there with the regulations and kind of some of the changes. Maybe just before we dive too far deeper in this episode, if you could give a quick high-level run down of what some of those regulation changes were and how that benefited what you guys were doing as a company and what you wanted to do as a company.

Whitney Hill:

Sure. I would be happy to. So, my partner Mike had already kind of started to build some of these over the years, even before some of the regulation changes went through. So, he kind of knew about them as a class, but the specific changes, there’s no minimum lot size requirement now based on the state legislation, so that’s taken out of the equation. Additionally, the setbacks required have been reduced. So, there’s a four-foot side and rear setback requirements where you can build up to an 850 square foot one-bedroom ADU, or a 1,000 square foot two-bedroom ADU. So, given those generous requirements on no lots size minimum and then pretty reduced setbacks. And in some jurisdictions, it’s even lower. The city of San Diego itself has gone to zero setbacks for ADUs. So, you can actually go all the way out to that lot line. So, given that, even a very small property can fit an ADU now, whereas they couldn’t before.

The other important changes have been that a lot of the parking requirements have been waived. You can also convert your garage to an ADU. And at this point, you don’t have to offer any replacement parking when you do that. It’s in line with a lot of the other regulation that’s been passed that’s just kind of encouraging folks to use other methods of transit. So, that applies in areas that are near public transit.

Then, also, importantly on fees. Most of the impact fees have been waived with regard to developing ADUs below 750 square feet. They’re still around $10 a square foot in fees that we tell our clients budget for, but previously it would cost $20,000 to $30,000 to get these things permitted. And now it’s much lower than not.

Then finally, a lot of the local control and HOA control has become less of a factor. So, the state regulations override a lot of what the local government can say no to. That’s making it possible to build ADUs where it just wasn’t even a consideration before.

Zach Wojtowicz:

Interesting. So, is this a trend in San Diego that a lot of builders are following? Or are you guys kind of the pioneers out in the market?

Whitney Hill:

I’d say a lot of builders are doing this. I would say we have really gone all in on it. This is all we build at this point. A lot of folks will have an arm that does accessory dwelling units or might partner with some of the feasibility companies that will look into what you can build on your property. We felt there needed to be an integrated solution for a design build contractor that could take someone through the entire process. Because, frankly, we were seeing folks get things designed that were too expensive to build.

So, our background, given Mike’s history with more construction, is in custom homes. We know how to build quality products, and what we’ve really been honing over the last 18 months is how to deliver a quality product that’s somewhat standardized, so that we can realize some economies of scale and offer a better price. And more importantly with COVID-19 now, also avoid some of the stockouts and supply chain issues. So, we’re trying to standardize the windows, doors, even standard shower inserts to make sure that we’re working with our suppliers to know which stock keeping units are always available or at least mostly available.

Charley Burtwistle:

Right. That’s an interesting combination that you’ve kind of touched on there with the custom home building background and kind of trying to standardize some of that processes over the past 18 months, as you mentioned. What does that kind of transition look like? Where’s Snap ADU at now? Maybe just how many jobs are you doing? How many employees? What’s your team structure and setup look like?

Whitney Hill:

Sure. At this point, we are signing six to eight contracts a month. So, we’re on track to build 75 ADUs in the next 12 months. We have 30 live jobs right now, and it’s not an overstatement to say this would not be possible without Buildertrend.

Zach Wojtowicz:

Hey, we didn’t even ask her to say that.

Charley Burtwistle:

Yeah, unpaid ad.

Whitney Hill:

You didn’t have to. I talk about Buildertrend all the time.

Zach Wojtowicz:

Heck yeah. We love that.

Whitney Hill:

I’ll kind of give a quick history of how we evolved, because I think that’s always something that’s ambiguous when you’re thinking about what to do with your project management. Who do I even hire first? How do I structure this? When we joined forces, Mike’s construction company was himself, his main project manager, and then a field crew of four framers and finish carpenters. And then when he and I joined forces, we immediately brought on a dedicated head of sales who handles all of our inbound leads. And then we also very quickly brought on a head project coordinator who, as soon as the needs are converted to jobs, shepherds that process through until we’re ready to build. So, then we hired two more project managers.

Today, we have seven employees of Snap ADU plus our field crew, and we rely heavily on independent contractor labor for things like marketing, HR, finance. So, we don’t bring those in-house. We partner very closely with the right contractors for that. So, just to recap on what our structure is now. Mike and I are co-founders. He’s now heading up finance and field ops. I’m heading up business development and operations. I have then sales and project coordination reporting to me. So, that’s our sales manager and our head project coordinator. And then Mike has his three project managers reporting to him. So, we’ve been able to scale without really scaling our W2 workforce, you could say. Because as we’ve started building out our systems in Buildertrend, it’s forced us to develop repeatable models, which can then be handed off to them to… I guess you could say cheaper labor, frankly, because once you have the playbook, you can look to something like Upwork to find independent contractors to just run those processes for you.

Zach Wojtowicz:

I’m like tearing up over here.

Charley Burtwistle:

Yeah. I know.

Zach Wojtowicz:

Just how beautiful your processes are. I mean, that’s what we talk about a lot at Buildertrend when you’re talking to our reps and stuff, it’s like, how do you outline your business? Who reports to who? How do you do the handoffs? And I know, obviously, a lot of companies are successful in doing that, but hearing how you were a really small company, and you’ve grown so quickly, it just shows you the power of laying out those procedures can go and helping even just beyond software, but business processes. That’s just absolutely incredible.

Whitney Hill:

And I think you hit the nail on the head that from the beginning we were thinking about what that growth would look like. At the beginning it felt like, why are we building this massive cumbersome system when you could just email somebody, right? In the beginning, you can handle it all. And then you have to think ahead that we couldn’t take this up 10x or 100x doing it like that. And we kind of had that mentality from the beginning.

Charley Burtwistle:

Yeah. What percentage of your projects, I guess, would you say are templated out and kind of rinse and repeat? Or what are some of the different kinds of ADUs that you’re building? Because, obviously, Buildertrend has the template feature where you can go through and get a lot of that stuff pre input, and just kind of copy and paste to different jobs. Would you say that’s something that you guys are kind of taking advantage of, or is each one a little bit different there?

Whitney Hill:

We’re a hundred percent taking advantage of templates. At this point, our job standup process is not handled by our project coordinator. It’s in our back-office support is what I’ll call it. And we actually utilize, I love this that we’re able to do this in today’s world, our back office support is in Ukraine. So, they’re working overnight to do things like job stand-ups for us. That’s a hundred percent just copying over a template that has a link to schedule, all the purchase orders, the owner invoices, the to-do’s. Everything is coming over.

Then our key team members review what’s actually in there before it’s released to a subcontractor, before it’s released to a client. So, we’re focusing our team members that are actually W2 employees of Snap, we’re focusing their efforts on those high value interactions. So, it puts a repeatable task that you could basically do a video to explain to someone, and someone can follow that procedure. We aren’t doing that. We want to be involved when it’s a conversation with a client to weigh trade-offs, or we’re reviewing plans, and we’re thinking about cost versus benefit of different designs. We’re trying to make sure that our employees are handling only high-value interactions and not spinning their wheels doing stuff that we could have someone else handle.

Zach Wojtowicz:

Did you find it difficult to transition from give your customers whatever they want to kind of like this is the choices that you have to make? And I’m sure you have some flexibility, but I’ve just had many conversations with builders where we used to let them have everything and we kind of took it away. Can you speak to that experience for you for yourself?

Whitney Hill:

Yes. It’s a huge learning curve. I would actually say that our head of sales has to deal with that more than anyone. As we’ve refined our focus, we’re saying no. We’re trying to be helpful. We’re always trying to help the client, but we’re turning them over to a different contractor who does want those jobs. So, at this point, we’ve honed our focus such that we’re not doing renovation work for ADUs. We’re doing standalone work only, new construction, because it’s extremely controllable, and to your point, can be templated out. With a garage conversion, there’s so many variables because you’re dealing with existing construction and existing footprint, and there’s just too many unknowns and too much handholding.

However, there’s some contractors here who love those jobs. So, we are very happy to send those over to that contractor. So, that transition, at first it feels limiting to set those kinds of boundaries. It feels scary because you’re turning away work, right? Who wants to do that? But at some point, once you really refine what your goal is and who your target client is, then you’re refining the message that resonates with those leads. And suddenly, it’s a higher quality interaction. We’re probably sending out fewer proposals, but our close rate is much higher because we’re really serving those clients that we want to be serving. It’s a good product for them. Right?

But knowing where to draw that line on custom versus standard is something we constantly do weekly, maybe daily. So, we’ll continue to review those as a team, trying to make sure we have the right players in the room to take into account the sales perspective, the build perspective, the design perspective. But it really just hit the sweet spot of almost a semi-custom model, because it’s totally reasonable and expected. Clients are going to want to have some customization. So, how can we make it easy for them to make choices within a constrained set of options?

Charley Burtwistle:

Yeah. It’s so funny to hear you talk. Zach and I talk about this all the time is like businesses that we talk to on the podcast and then onsite consulting, they face the same exact challenges that we face here at Buildertrend. So, like selling to the right people, turning away sales, but getting a higher close rate and things like that. It’s like, man, if we could just listen to and learn from the people that we sell our products to and run businesses. Not bashing Buildertrend on the Buildertrend podcast right here.

Zach Wojtowicz:

You’re just going to on the pod go after Josh Kaiser, put him on blast. Huh?

Charley Burtwistle:

If Josh Kaiser listens to this podcast …

Zach Wojtowicz:

We’ll know.

Charley Burtwistle:

He can call me out on that one for sure.

Zach Wojtowicz:

He’s our chief revenue officer.

Whitney Hill:

Okay.

Zach Wojtowicz:

Yeah. Yeah, I totally agree, Charley. The sophistication that these construction companies have. I mean, they are incredible from a process standpoint, but it takes time for people to get to that point too. Like Whitney talked about, that’s not how they started, and that’s where Buildertrend can come in and help them see that plan and bring it all together.

Whitney, you’re a pretty good user of Buildertrend. We were looking at your reports and our backend data and your team and their usage rate and Charley, we have ways to kind of just look at you and be like, “They’re a good user. Here’s the metrics behind it.” And it was really impressive, but I also noticed you use a lot of our other services as well. You use our online payment system or at least you have in the past, who built your website. As far as those added features, those pro services, why did you decide to go with us over, say, another third party contender? Was it because you trust Buildertrend or what was that auditing process? What does that look like?

Whitney Hill:

Yeah, I’ll start with the website. So, in the East Coast flipping business, that was when I first had exposure to it. And frankly, it was an easy thing to try because the payment model with Buildertrend websites makes it easy to say yes. So, it felt like low risk. And then after I saw how easy and beautiful that was … And I should caveat that I would say, I’m just experienced enough to be dangerous in the web design space, I’m the person who’s like, “Oh, I can do it. This will be fine.” And I’m up until 3:00 a.m. I kind of know what’s going on, but not enough to be great at it.

Charley Burtwistle:

I’m definitely going to steal that motto. Yeah. Just experienced enough to be dangerous. I love that.

Whitney Hill:

After that first experience with it, and you end up with what looks to be a very custom website, and we constantly would get strong feedback on that. That was when I was building high-end custom homes outside of New York. I already knew that like the, I guess, distilled version of WordPress that Buildertrend uses to build those was something that we could very easily ramp up again. So, when it came time to ramp up Snap, my partner Mike out here already had a website going, he had somebody working with it. I was like, “Mike, I hate to tell you this. I know you just did this, but we need to do our website with Buildertrend.” So, luckily, he ran with that and we were very quickly able to get up again, like a very flexible, but not overwhelming interface. And honestly, I would say almost daily, we get comments on how informative the website is, how easy it is to navigate. And from folks who know what they’re talking about.

As far as usability for us, the integration of a contact form that’s part of the website with Buildertrend’s lead management system, that’s indispensable. So, we’ve now got this flow … Or how to flow, that was the first thing we set up actually was our CRM when we first went live with Buildertrend with Snap ADU. We wanted to automate that flow. We didn’t want somebody manually entering leads. We wanted to be able to have full transparency on how that lead had been handled. All that’s possible with that web integration. So, it just cut out immediately so many steps and put it on autopilot. You want to take as many steps as you can out of the hands of folks that are actually going to be managing the process. Automate as much as you possibly can. So, to me, that integration with the website was a no brainer for that reason alone.

Charley Burtwistle:

It sounds like your clients are involved all the way from the lead contact form. I know you guys are taking advantage of the owner portal. Then as Zach mentioned, the online payments as well. Is that something that you guys are kind of actively pushing for and kind of what you think sets you apart is how closely you work with clients? Or is that just something that kind of happens organically and naturally with the course of business that you guys are doing?

Whitney Hill:

We definitely see it as a differentiator. It’s a huge selling point. Transparency is a core value for us anyway, and Buildertrend and enabling our client to see everything that’s going on and the job just completely goes hand in hand with that. So, the owner invoicing and payments, the app, all of the schedule visibility, the to-do’s that we use to interact with the client. All of that interaction is set up early in the process. We almost train the client to interact that way. They see that we’re most responsive that way, so that we’re not getting as many of the one-off calls at like 6 o’clock on a Friday, right? Because they know to go to the app, and they’ll have the information there. The invoice payments and all that, again, yet another thing that in a small contracting business can feel like a scary thing to let go of.

If you’re someone who’s used to cutting your own checks and managing all those releases manually, maybe even with literally a stamp, right? That feels like a tangible control. So, figuring out how to translate all that stuff into Buildertrend was a big part of what Mike and I worked on where it’s, how can I take an existing process that’s kind of manual, translate that to something that’s more automated in Buildertrend and feel confident that there’s an equivalent level of control in that? So, ramping that up and getting everybody comfortable was a big part of it. But then on the client side, once we already have all that in place, the transparency just builds so much trust because they can see exactly where we’re at, where we’re trending, what’s going to be due when. It just answers a lot of questions upfront.

Zach Wojtowicz:

You bring up something that I experienced myself, which is getting your team to buy in. Talk about how you did that. How did you build a culture around a software? And what were the challenges you faced that you slowly start to see them come out of that and really begin to conquer and be the great users that you are with the program?

Charley Burtwistle:

In a pretty short amount of time, too. You guys have only had your Buildertrend account a little over a year now, right?

Whitney Hill:

Yes. Yes. And it was completely new to the existing Snap ADU team.

Zach Wojtowicz:

Had to take their notebooks away.

Charley Burtwistle:

Yeah. That’s our biggest competitor right now is pen and paper, Excel.

Zach Wojtowicz:

No, Excel files.

Charley Burtwistle:

Yeah.

Whitney Hill:

Yes. I mean, I have a sweet spot for Excel, too. I think we all do, but figuring out how … Basically, when you have the realization that you’re not going to be able to keep up with the volume in your old system, folks very quickly become adopters. And we’ve even seen that with our subcontractors.

Zach Wojtowicz:

Oh, really?

Whitney Hill:

As we’ve scaled this business 10x, we’ve had more and more of our subcontractors start like poking around Buildertrend. Suddenly, they’re using more of the functionality, they’re asking us how they can submit for payment. They started to see that too. But on our team, you couldn’t have said it more beautifully, it is a culture in Buildertrend. And when you know as an owner that you’ve made it, it’s when your employees start to ask you, “Where did you put that in Buildertrend?”

They start calling you on it when you’re sending emails outside of the system. That’s when you know that the culture is there. I would say it’s like you kind of start to see the matrix, right? You can’t look at Buildertrend just as a single thread. We often will say it’s like a quilt where everything’s integrated. And to talk about one part, you have to kind of have this broader understanding. When we’re onboarding new hires now, we spend a lot of time talking about the philosophy with Buildertrend and giving them the overall perspective, so they can start to see how everything ties in with the schedule. And it’s almost like this thread that moves the rest of the quilt around and all that. So, it does take some doing to get people to that point, but the payoff is just so worth it. It’s not even a question that it’s worth the training time.

Charley Burtwistle:

Right. I mean, it just sounds like you guys are super forward looking, like not only on the ADU aspect of things, but also just the scalability and knowing where you want to go. Yeah, maybe you can get away with current processes if you’re doing one or two jobs at a time. But I think you guys said you had over 30 active jobs right now and obviously, looking to continue to grow there. And that’s just something that’s not going to be possible unless you kind of force that culture and force to be forward-looking.

Whitney Hill:

Exactly. And I think engaging employees in the process development is huge as well because then they’re part of the process. They’re getting giving input. It’s just so much better that way. So, that’s also how you’re generating those promoters along the way, not only of Buildertrend, but of your processes and giving that ownership. Mike and I are both very big on delegating large chunks of responsibility, so that folks have their own areas that they can really dig their teeth into. And I think that also helps with adoption because then someone has a reason to start poking around, figuring out how this works, and suddenly you have somebody else running with it, and you’re not in the business. Now, you’re working on the business, which is where you want to be.

Zach Wojtowicz:

Well, I think we’re actually up against the clock here as far as our interview goes. Whitney, it was an absolute pleasure to talk to you about your processes, your business, what you do. If you have any advice that you could give our listeners who are out there on construction, on ADUs, on Buildertrend, what would you tell them if you could give them one final piece of takeaway here?

Whitney Hill:

I think we’ll go with ruthless prioritization, both in your own personal work and in the work of the company. Knowing what your lane is, knowing what you’re good at, getting extremely good at that core allows you to then decide where you’re going to expand. So, I think that that’s been the secret to our success. We focused very early on on ADUs in San Diego. We’re at some point going to be able to expand when we’re ready and to other markets, but focusing on that core, just prioritizing exactly what you’re good at has been the secret to our success.

Charley Burtwistle:

Ruthless prioritization. I love that. I feel like you’ve dropped some big time one-liners in this interview, Whitney. So, I definitely appreciate that. Snap ADU, if anyone’s listening in the San Diego area, we’ll link the website in the shownotes after this. Otherwise, Whitney, thank you so much for your time and all you do to be such a huge promoter of Buildertrend.

Whitney Hill:

It’s my pleasure. Thank you so much.

Charley Burtwistle:

Thank you, again, for tuning into this episode of “The Building Code.” Make sure you subscribe and like wherever you listen to podcasts. Zach, go ahead and tell them where they can go out for additional information.

Zach Wojtowicz:

If you’re on social media, join The Building Code Crew on Facebook. And finally, drop us a line at thepodcast@buildertrend.com. We want to hear from you. Suggestions, guests, topics, anything goes. Charley, data, whatever it has to be.

Charley Burtwistle:

Data. A lot of data. Thank you so much for joining us, guys. We’ll catch you next time.