225. Running Profitable Projects With Russ Stephens and Erika Mosse

Welcome to another episode of Professional Builder Secrets. This episode was a part of a webinar series we ran to launch the 2026 State of Residential Construction Industry Report. But we go beyond the data and it's so valuable that we thought the insights would be worth sharing with our podcast audience as well. I interview Erica Moss from jobtrad Software and Russ Stevens from the association of Professional Builders and we look at what actually makes the most profitable projects. We pair real data with real life insights about where builders are making profitable projects work for them. And there's a whole bunch of Q and A with the audience that attended the webinar too, so you'll see a bit of back and forth going on throughout the episode, but I hope you enjoy the insights that came from it. This episode of Professional Builder Secrets is brought to you by Apparatus Contractor Services. Apparatus provides full scope end to end QuickBooks, Precision Construction accounting and CFO services for residential builders. If you feel like you can't completely trust your weekly and monthly financial reports or you feel like you're flying blind, Apparatus will rebuild and operate your QuickBooks accounting system and give you precision construction accounting capability you can trust. Learn more@apparatusteam.com or or on the APB Rewards Partner directory.

Not enough builders have that level of insight to know that the numbers haven't come out as good as they'd hoped. Scheduling is the silent killer that most builders are unaware of. The cost of scheduling and job overruns, you know, blowing out on timeline, it doesn't show up in the job profit and loss.

There are numerous little fixes that can.

Happen when you get hyper focused on the profitability of your job. That translates into all the decisions that you make on site every day that a job runs over what you've planned in your schedule. That is money that's actually costing the business. Over 40% of builders didn't know what their fixed expenses per job per day were. Pricing for profit is a very different methodology. Anything we add to that figure becomes pure net profit.

I want to emphasize today's session is not your typical webinar, so there's not going to be slides apart from the slide that you see on the screen at the moment. We're going to take that down and we're going to dive into the details. So it's going to be a deep conversation between Russ and Erica. We'll dive into some of the most pressing topics that are happening around projects and the profitability of projects in the industry at the moment. And so it's a great opportunity for the people here today to ask questions and lean in and really listen actively to the conversation because I think that's the most important thing. So let's dive into a little bit of an introduction. So Russ Stevens is the co founder of the association of Professional Builders, if you don't know him, and the APB is, is obviously the company that I work for as well. I'm the head of marketing. My name is Will and I'll be hosting the webinar today. But Russ is a data analysis expert and has introduced a lot more data driven decision making to the industry. One of the backbones of that data driven decision making is our annual report, which we'll be diving into a bit more today. He's also the author of the Amazon number one best seller Professional Builder Secrets. So Russ, welcome to the webinar today. Thanks for joining us.

Thanks so much, Will. Yeah, really excited to be on here and, and chatting with you and Erica.

Great. And obviously we also have Erica Moss with us today from Jobtrad. So Erica is a research and content strategist at Jobtrad, but she has over 20 years of experience in construction, media and the construction industry, having worked as an editorial director at Zonda and Pro Remodeler magazines as well, and a strong advocate for inclusion in the trades. Founding the founding leader of the Women in Construction Conference. Erica, welcome to the webinar and thank you for joining us.

Oh, thank you. It's great to be here.

Awesome. So what we're going to do today is we're going to talk primarily about some Data from the 2026 State of Residential Construction Industry Report. The report actually launches next week on the 2nd of February, but we've got some deep insights around the profitability of projects that we'll go into today. If you're not familiar with this report, it's one that we do annually here at the association of Professional Builders. And I'd like to just acknowledge jobtrad's part in helping us collect the data as a partner. They were very supportive during the survey collection of all of the data. This report's been going for six years. So the data and insights that we have this year have been taken from over 8,000 builders across the U.S. canada, New Zealand and Australia. And this year we actually leaned into artificial intelligence to do deep cross correlation of data. So we're looking at things that are influencing multiple data points across your businesses, which is really exciting. And some of the insights are nothing we've ever seen before. So very excited to see the response that we get from that, but also excited to see how those insights can be applied to building companies. You know, from today's session, but also from the full report. Don't worry. If you wondering where you can get the report, we'll send a PDF PDF version to everyone that's attended today, so you don't need to worry about downloading that. Great. So today's focus, we couldn't go through everything in the report, so we wanted to focus on the project section, which is one of the key sections in the report. And as I mentioned before, this won't be a typical webinar. And don't worry, I'm not going to be talking for the most of it. I'm just taking the load at the front end so that we can settle the context. But what we want to do is use real data. I'm going to ask some hard questions to both Russ and Erica so that you can walk away with a clearer view of where you may be losing profit on projects, understanding what typically causes some of those things, and learn a little bit more about where the best performing, most operationally disciplined builders and what they're doing differently. And hopefully by the end you'll walk away with some practical things you can actually implement in your building company. There we go. So that's the, the preamble and the introduction. Why don't we dive in to question one? And as I mentioned, just as a reminder, any questions that pop up, put them in the chat and then we'll bring it to the floor. So very much welcoming. Any questions throughout the conversation. Let's kickstart then. So, Russ, the first question. Have you ever seen builders finish a job, look at the numbers and feel surprised that the profit just wasn't there like they expected it to? What's underneath this and what's the data telling us?

Yeah, we've certainly seen that. But I'd say not enough of them do. And by that I don't mean not enough of them are feeling surprised. Not enough builders have that level of insight to know that the numbers haven't come out as good as they'd hoped. So the ones that do have that level of insight, yeah, we, we hear this all the time. There's that frustration when they get to the end of the job, but there's always this eternal optimism that, you know, there was a specific reason why that job didn't deliver the amount of. Prof. That they are expecting, but the next one's going to be better. But the reality is in this industry, it never is because there's always something new that comes up. So builders that are working on tight margins are particularly exposed to this. There's always this idea that more sales and increasing the revenue is going to solve a profitability problem, but it really doesn't happen. And part of the problem, I think, is a lot of builders still don't understand the difference between markup and margin. We have seen in the data over the last six years that that is improving. There's no question this industry is getting smarter year on year. We can really see that. But the builders that do not clearly understand the difference between markup and margin, these guys do get caught out at the end of the job simply because of that one simple thing. Estimating can be a problem, a big factor in this challenge as well. But, you know, to be fair, the majority of builders are estimating to a very high level of accuracy. What I. I'd probably say in relation to this is that scheduling is the silent killer that most builders are unaware of. And that's because the cost of scheduling and job overruns blowing out on timeline, it doesn't show up in the job profit and loss. It only shows up in the company profit and loss. And this is where I think the real challenge lies for a lot of builders that are looking at their numbers in terms of projects and not factoring in the company P and L at the same time.

I think just sort of piggybacking on that point. I think that those are fantastic points. I think scheduling is a big profit suck right there. I agree with you. I also feel that there are a lot of builders out there that are losing small amounts in a number of different places. It's not like there's often one key, and if you just turn that key in the lock, your profitability increases dramatically overnight. I think that often there are numerous little fixes that can happen. Something I'm hoping to drill down into in this conversation, for instance, would be being just super intentional about what your client looks like and controlling your client, ways of reining in your schedule, ways of understanding your numbers, what those numbers are, ways of dialing in your processes so that they're very robust. They serve as, like, guardrails around your business. And I think all of those things taken together can enhance profitability greatly. And to this overarching question of, you know, this question of builders sort of not being clear about where they're missing profit, I think it's just throughout the entire contracting industry, I think it's really an epidemic, unfortunately.

Yeah, that's so, so true. Yeah, There are so many different factors in play, and it's the reason why one of the things we get builders to do is to measure their profitability on every job every month and then document it in a spreadsheet. Because what you find is these jobs have a life of their own. And you can see your margin in decline over a period of time. And it might be only small amounts, but, you know, it gives you a clue as to what's going on. But what we really want to see is that margin increase. It might only be by 0.1 of a percentage point each time, but that shows you're all across. But the real key here is when you start doing that, you get hyper focused on the profitability of your job. And that translates into all the decisions that you make on site. You're not going to be doing a variation at cost or even for free. When you're hyper focused on watching that gross profit margin month on month per project. And this translates to your team as well. Because you become hyper focused on the profitability, your team starts to become hyper focused as well. But yeah, like Erica says, there's so many whack a mole, isn't it? There's so many things where these little things are going to pop up and eat your net profit. Yeah. You're just constantly trying to hit them.

And you know, you mentioned sort of tracking that stuff on a spreadsheet. And because I work for a software company, John Treadmill, I said the wrong thing there. Spreadsheet. And I will raise you to a project management software because I do believe that really it's so, so, so helpful to have those KPIs and to have them really dialed in on a per project basis. To your point, Russ. And it's a lot easier to do it if you have an entire eco, entire ecosystem that you're working with rather than just something that's on Excel or on a Google Sheet.

Oh, 100%. 100%. Yeah, I was, yeah. When I said spreadsheet, I meant the, the snapshot each month to log where it's at.

Yeah.

Because that's, it's a dynamic figure. But yeah. Do not use spreadsheets for estimating or scheduling. 95 to spreadsheets contain errors.

I want to try and bring you both a little closer together. Russ, you initially spoke about how the profitability issues may not come out until the end of the year when you're doing tax, et cetera. And Erica, you were talking more about them on a granular detail per project. So how do you Bring those two things closer together and not get caught out at the end of the year by looking at the detail on each project.

I think there's some big areas where we do get the profit leaks. Yeah, we could group them, change orders, variations. Invariably these cost more than the builder realizes because they may be adding a percentage to whatever it's going to cost them for the change order or variation. But they don't always factor in the cost of delays. And there is a very important number to be all across which is the cost per project per day. And if there's a change of mind on the tiling, for instance, that's going to cause a one week delay. The costs are in the region of 6, 650 a day. When you push a job out by a week, that's over $3,000 straight off your bottom line. And that doesn't always get factored into these change orders and variations. Delays as well for the exact same reasons. Because every day that a job runs over what you've planned in your schedule, that is money. That's actually cost in the business. And the way to kind of get your head around this is you can, you have a finite capacity. There's only so many jobs you can run at one time, maybe your capacity is six. So you can't start another job until one of those jobs drops off. So when a job overruns, it's delaying the start of the next job. And what that means is you get to the end of the year and it actually affects your revenue because you haven't been able to start that other job faster. So less revenue means less gross profit. The fixed expenses stay the same, but it means less net profit. So when you can get your head around that, then you can understand that every day is actually costing you money. I think in the, in the Saucy report in the US 26, it was like 26 and a half percent of builders in the US they were reporting that the majority of their projects ran late. Now that's a huge cost when you're considering fixed expenses at over 600 a day for the typical building company. And yeah, and like I say, it's coming straight off the, the bottom line. So if you think in theory your building company should be doing well, but you get to the end of the year and the net profit's not there. This is, you know, a very common cause of the leak. A lot of builders, they're just unaware of the size of this problem because over 40% of builders that answered the survey didn't know what their fixed expenses per job, per day were. So until you understand that number, you're never going to realize or understand the cost of these delays.

And, you know, to your point, you were talking about change orders. And I think another area, I think change orders are a huge culprit in terms of causing delays. But I think another one is the selections process. I think you have a lot of clients who change their mind or don't handle the selections process well. And I think that sort of policing that, you know, if you have a client who changes their mind on tile, and now you have to order different tile, and now perhaps your subcontractor isn't available at that time because it was delayed because of this new tile order. Stuff like that can really derail a project. And it can be a few days here and a few days there, and then before you know it, you know, you're. You're in trouble. And I think that that's, again, it's setting those expectations for the client really early and really, really staying on top of it.

And this is where software like Job Trader saved builders so much money because it keeps everything a lot tighter. But you've still got to manage the communication yourself and manage client expectations. You know, really take the lead. Don't be led by the client. You know, you're the builder, you're in charge of this project. Really got to take the lead and be clear what the deadlines are and what the expectation is of the client in making those decisions.

And you know what? I'm a big believer in Gantt charts. And I think that running a project where everybody is in that schedule all the time, whether it's the subcontractor or your project manager, yourself or your homeowner, future homeowner, it's really, really imperative that everybody is so well versed in that schedule. And that way you don't need it doesn't creep out. We have in Job Trek, we have these daily logs that everybody fills out every day. We have a single source of truth, whether for the homeowner and for the subs, that they're all in that schedule all the time. Looking at what those expectations are, they have tasks they have to dos that they're responsible for. You can assign to tasks and to dos to different people. And it's just super helpful about getting that operational discipline in the right spot.

That's so important, isn't it, that one source of truth across the business in all areas. When you have multiple sources of truth, that's when the problems really start to Explode.

Yes, we have a couple of questions coming in. I'll send this one to you, Erica, because I think I know the answer already, but Eric's asked, what are you recommending for estimates if not spreadsheets?

I sound biased when I say this because I work for jobtrad, but I wouldn't work for jobtrad if I didn't love the product. And people who do know me know that it is a fantastic product. And in the world of jobtread, the estimating, the job costing features are the crown jewel. It is so robust, it is easy, it is intuitive, it is accurate, it is integrates seamlessly with the other parts of the actual software. It's just a great tool. I, I highly recommend it. And if you don't, you know, check it out. If you don't, if it's not for you, it's not for you, but at least check it out, you will really be blown away.

You know what's really interesting? In the US Spreadsheets still were the, the top estimating tool in the sourci data. 22.1% of people were still using. Builders were still using spreadsheets as their, their estimating tool. So other markets, that wasn't the case. But yeah, the US Was still using a lot of spreadsheets for estimates.

A lot of opportunity there.

Yeah. Another question here, probably for you, Russ. When should clients be paying for the change order regardless of the amount?

Yeah, ideally as soon as they request the change order in an ideal world. But legislation doesn't always permit that. So it depends on where you're located. But certainly as soon as the change order is, the work is complete at the very latest, that's when you'd be issuing the invoice. What you don't want to do, which is what we've, we've seen happen to a lot of builders, is they just take them all on to the very last payment. That's a recipe for disaster. But the sooner you can get that, the better. But you've got to get the change order signed off regardless before you start, because what you're actually doing is making a variation to the contract. And if you don't get that agreed in writing and signed off and documented, the client can actually argue that not only do they not have to pay for the variation, they can actually argue that you've got to put it back to the contract because that's what you've been contracted to do. So we've seen that happen with builders as well. And these clients, they always like, they'd Never do that because they're lovely people. But yeah, people do change throughout a build. It's quite a long process, quite emotionally straining. And when people don't have the money, they will do strange things that you would never anticipated at all. So, yeah, trust doesn't come into it, unfortunately. You've really got to get your processes tight and go by the book.

Erica, I'll give you 30 seconds to answer this one because I don't want to get sidetracked into a product comparison, but Rick has asked what the difference between Job Tread and Builder Trend is and so maybe just quickly if you could respond to that one.

One of the big ones is the cost Job Tread. You know, we are founder led. We are not owned by private equity. And so we have this very passionate, very engaged CEO and all of the profits go back into the product. So we are making constant product improvements and as a result, we are much less expensive than buildertrend and we are passionate about improving the product. I think our estimating is much stronger than the way that buildertrend handles theirs. I think that we have. It's a very, very customizable system. It kind of can grow as you grow. You can use as many features of it as you want and you can really customize it to suit your needs. I think a lot of the time with BuilderTrend, the reputation that they have is someone that is something that serves sort of larger companies. They won't even like take you on unless you have a certain revenue floor. And with us, we believe that we're with you in that journey from the day that you sign on with us all the way until you are just extremely large. So without getting too granular about actual, like, features, which I don't think think is really the purpose of this call, those are just kind of like the overarching differences.

Yeah, thanks, Erica. And I think you've mentioned this before, Russ. Like every builder's got a slightly different way or a way they like to approach their builds. And, and there's lots of different softwares out there that can serve different purposes. Right. So we won't dive further into that. I know there's a couple other questions about software and the differences, but that's probably one to, to go and do some research on separately. And yeah, so we can kind of keep this focus on the, the profitability of projects, which is what we're here for today. Interesting question did come through before we get back onto the agenda though, Russ, and I'll put this one to you. What's the best time to determine revenue per day is it at the estimate phase, scheduling phase, or after contract signed?

Yeah, I was just looking at that. I wonder if they mean the cost per job per day rather than the revenue per day. Do you think that's what is meant.

Could be what they're referring to? Because that's what you mentioned.

Yeah, yeah. You would calculate that literally as soon as you produce the budget. Because when you're estimating a job, I think one thing that's really important, you're not just estimating the costs at the same time you're doing the estimate. You've got to put together a schedule because you cannot price a job correctly unless you know how long it's going to run for. So you've got your budgeted cost for the job, then you've got your timeline. Then you can obviously divide the costs by the timeline. You know what your cost per day is in terms of the job here? Because when I say the budget, what we're looking at here is two components. We're looking at the cost of sale, which is the materials and labor, but we're looking at the fixed expenses for the company. And when we look at the fixed expense for the company, and we can run, say we can run six jobs concurrently at a time, we divide those expenses for the company by say six, because we're running six jobs at a time, then we might divide by 48, 48 working weeks in the year, and then divide by five, five days in the week. Now we've got our cost per per day in terms of that fixed expense. That's the bit we multiply that by the timeline and we add that to the cost of sales in terms of the material and labor.

Well, my next question was around builders being frustrated with subcontractors and clients, because that came out as two of the top issues on projects for builders in the data. But there's also a question here from James, which, Erica, you might be able to address both of these at the same time. Hopefully. He's asked how you recommend capturing the cost of delays without the clients feeling like they're being penalized. And so I think that ties into, I guess, a frustration builders might have from clients or subcontractors during projects. Do you want to touch on that?

It depends on sort of the reason for the delay on the subcontractor side. It's really ironic when I saw that this was one of the questions that we were going to be discussing. Jobtrad has a user conference called jobtread Connect, which is a really big conference that we do once a year. And I moderated a panel on sort of protecting yourself from bad things that can happen with subcontractors, like how you protect your business and how you protect yourself. So this is actually a topic that's sort of near and dear to my own heart. And I think one of the things you can do is make sure that the subcontractors, from the day that you hire them, when you vet them, make sure that they are aligned around the values of your business and know what those values are and talk them over with anyone before you hire them on as a subcontractor. Visit their job site. Look, is their job site clean? Are people smoking? Is everybody sort of behaving the way that you would want? They are your representatives on your jobs? Are they behaving that way on their job sites? It's really important. You know, I don't know the system as well in Australia, but in the U.S. you know, you have COIs, you really have to have. Everybody is going to get audited at some point for their cois. And it's super important that all of your contractors have that. What does their insurance look like? If you're insured for 5 million on a job and your sub is insured for 1 million and something happens on that job that costs more than a million, what is going to happen then? All of that needs to be addressed in your contracts with your subcontractors, which is another area of protection. Have extremely robust contracts. Contracts should include items like the trade partners cannot work for the homeowner directly. They have to work with you. The trade partner has to. You are not taking any responsibility for things that may happen. Like to a pet. I mean, there's. These contracts need to be living documents. When something goes wrong, correct the contract, update the contract. So it's always protecting yourself with the insurance, with the contracts, and at the same time, thinking through that relationship with that subject, showing them that you appreciate them. A lot of people are very, very mindful of not scheduling the subcontractors to letting them know the schedule far enough in advance that you're being mindful of their time and their schedule, being really careful to maybe bring them lunch, maybe discuss things with them after the job, praise them, make them feel like they're really part of your team, that they're not just sort of an appendage that you have to kind of deal with. And I think that having that attitude is immensely helpful for having a successful relationship with trade partners.

Love that, Erica. It's so important, isn't it? Subcontractors are effectively part of your team. So just like you would set core values, expect your team to adhere to your core values, and you attract your team with your core values, hold them to account, hold yourself to account. It's exactly the same with your subcontractors. They're part of your wider team. So, yeah, you want people that have the same values and have high, high standards because they're reflecting your, your building company. So yeah, I love that one. The other one, you reminded me of something when you were talking about contracts. I mean, so, so important. But what I never realized until recently is by having these contracts all locked in and tied down and tighter, having that level of information, you'll actually drive your insurance costs down as well. Because through working through the rewards program with insurance brokers, one of them explained to me, this is exactly what we do. We look at the systems and processes the builders have in place and the contracts they have with their subcontractors, and this is what we present to the underwriters because it lowers the risk and lowers the premium. I'd never thought of that before, but yeah, this, that's a real genuine cost saving. But at the heart of it all as well is communication. Because we've got to be communicating to the subcontractors that we get the painter, that last job's overrun, going to be there Wednesday instead of Monday. A lot of time. Yeah, okay, no problem. But that two days, you know, it's cost you $1,300 because it's delayed the whole job. We understand that number. We might get frustrated, but we still got to share the information. We've got to communicate so that they realize, like, you're definitely going to be there Monday because if not, these delays are going to cost money. When the subcontractors understand that and they understand that you understand that your jobs are going to get prioritized a lot more. And yeah, they're not going to be pushing dates out as easily. So if you can improve the dialogue with your subcontractors, you will reduce the problem. You won't eliminate it, but you'll certainly reduce the problem.

I thought of something else too. When you were talking, something you said sparked this in me, which is that I think it's important. Even with trusted trade partners that you've worked with for many, many years, it's important to shop those bids every once in a while. Because what happens is things creep up and people will trade on existing relationships and just raise prices. And the Prices continue to go up and without shopping the price that your sub is giving you at certain intervals, whatever that interval might be, every year, every couple of years, you never really know if you're getting the best deal that you can. Even people that are your friends. I mean, of course we're all friends, but we're also in business.

So yeah, in terms of. Yeah, bids I always like to have three minimum depending on the size of the business. You might have more, but at least three. You've got your primary, who's going to get to the quote on all the jobs? You've got your secondary. You know, you're going to throw them a few jobs but then you've got your tertiary one as well, who basically these are the ones that are approaching you, they want to work for you. You're going to throw them out some quotes and, and then, yeah, if they look good enough, you might give them a job every now and then. So one is a very dangerous number in business. And it's the biggest problem we see as well in terms of delays because it is, is always in our experience of working with builders. The subcontractor that is the most established, great guy, worked with him for years. When you actually look at the data, they're always the one that lets you down the most. And it always comes as a shock when we actually start analyzing this and putting the data down on paper. It always comes as a shock that they actually turn out to be the worst. And it's familiarity breeds contempt, unfortunately. So yeah, you got to stay sharp. Yeah, good point.

Shout out to Rocky, who with all his software chat, he's asked a question about what APB offers. So I'll throw this quickly to you Russ, and then we'll get back on topic again. But he's asked if our training on pricing for profit is the best place for per day fixed expense calculation.

You know the answer to that one. Of course it is. Yeah. But the pricing for profit is a very different approach to pricing jobs. About about 85, 90% of builders will typically create an estimate. They'll look at the cost of materials and labor, they will add a percentage to that and then they got the contract price. Now the problem with that method is that the gross profit you add, you're hoping that will cover the fixed expenses. In some cases it does. In a lot of cases it barely covers them adequately. And then when you get timeline blowouts or budget blowouts, then yeah, we end up in a loss situation. Pricing for profit is a very different methodology for builders to use when pricing their jobs. Because what we look at is the materials and labor as one component. But then like I was touching on earlier, we look at the fixed expenses for the company, we divide it by how many jobs the building company can run concurrently. And then from that we calculate a cost per job per day. We calculate the timeline that the job's going to run for. We factor in, you know, some contingencies there for weather as well. Well, but we've got the timeline and now we know the cost of running that job or the share of the fixed expenses that that job needs to cover. And when we add that to the cost of materials and labor, we've got a true break even point. So we don't stop there because now we want to make some money. But anything we add to that figure, that becomes pure net profit. So what we're effectively doing is adding a net profit to jobs rather than the gross profit, which is how most of the industry works. And the beauty of doing this is we are guaranteed to be profitable on every contract we sign. I think almost every member that goes into coaching and really understands this, they always use this, even if they still like to do it the old way and just add a percentage. They always use the pricing for profit to double check their numbers to make sure they're not missing anything. Because it's always those bigger, more complex jobs with a longer timeline that cost us more money. And the, the temptation for a builder is to look at 1, 2, even 3 million dollar contract and trim their margin just to make sure they win the job. But they actually need to be doing the opposite. They need to be increasing their margin because it's consuming a lot of their capacity. So they lost the opportunity to sign other work. But because it's more complex, it's consuming a lot more of their resources. And if unless they price it accordingly, they won't hit that 10 net profit at the end of the year. So does that answer your question? Rocky, you know the answer to that, didn't you?

Another question from Rick is around subcontractors again before we move past this section and Erica, you might want to start with this one. If a subcontractor has caused a delay, do you charge them the cost per day as a penalty? And if so, when do you charge them that?

I think that needs to be addressed in your contract with the subcontractor. If you try to incur a cost for the delay and you don't have anything set out in advance, the subcontractor is going to be like no, what are you talking about? Right. You really need to protect yourself. There is this idea of this master contract, which is a contract that's like an umbrella contract between you and the sub. And then many professionals, many builders, many remodelers will do a per project contract as well. It is slightly more time consuming, but it really does protect you in the eventuality of those delays. I do think it's appropriate to charge. I do. I believe that. I just think, like I said, you need to be protected legally. There's a lot of fantastic construction attorneys out there who can give you like boilerplate contract language that will solve those problems.

Follow up question from James on pricing for profit. And maybe we can make it more about, I guess, if you're increasing your margins, how do you still win work? If your competitors are not charging that.

Same price for us, you can increase your margins without affecting your ability to win work to a certain degree. And I only say that because the other builders that we start working with, they increase their margins instantly. And they're always surprised. They're shocked. They come back and they said, I presented it and they signed. Yeah, they're just amazed that it didn't make that much difference. But when you're talking about increasing margins to the levels that we are recommending, which is a 33.3% markup on new construction, 55% on remodeling, because those are the margins that are going to clear you 10% net after you've drawn a realistic salary for yourself to get there. You can't just put your prices up and expect clients to sign because they've got to see value. So the important thing to remember here is that margins are linked to marketing. So if you cannot charge the benchmark margins that we are suggesting, it's not because the clients in your area are different and no one will pay those prices. It's because your marketing has failed to demonstrate value. Your sales process has failed to demonstrate value. So you've got to fix those, those two things. And when you have a systemized, documented process for creating content, which is the key to attracting quality clients, and you've got a repeatable sales process in place, what you'll do is you're actually increase demand. And we know the, the basis of all business is the demand and supply formula. So when you can have more demand than you can supply, this is how you reach the margins that you need to reach.

Interesting. You mentioned process documentation, because I know, Erica, before we came on live, you mentioned that that was a statistic that stood out to you in the report as well. Did you want to touch on processes and how that plays into the pricing equation?

Yeah, yeah. In terms of processes, this is what has really stood out in a lot of areas of the source you report. And this is where AI enabled us to go even deeper and identify key things that builders needed to do in order to increase their margins. At the top of my head, in terms of sales, there was the repeatable sales process being documented, but there's also the process for qualifying. There's sales scripts, there's objection handling. But when builders do this, it's the difference between a builder marking up their jobs by 20% and 33%. So it's enormous. But there's other aspects as well. We can look all the way through the business being more systemized. When those boxes are ticked, the margins go up. The hours that the builders work, you know, is not any greater. If anything, they're working less hours as well. So, you know, systems are really at the heart of a professional building company.

So.

Yeah, sorry. Yeah, go on.

Yeah. So I. I have a couple of thoughts about that. So my first thought is, I think when you look at where there is friction in companies, where there is confusion, where there is loss of profit, often, not always, but often it is in the place where two departments meet. So where you have a handoff from one department to another, where work is flowing from one department to another, and I think that that is a result of poorly defined processes. Processes should be written and documented and everybody's role in the process should be clearly documented. And I think another. So that way you get rid of that blurry area between departments. You see it between sales and marketing, you see it between design and sales and production and production and sales. Another area where I think that's super important to remember in terms of process, is to take the people. People take the people out of the process. So rather than think of your processes like, you know, Bob does this and Ann does this. It's this position does this and this position does this. And what it does is it prevents, like, role creep within people's individual jobs. And it also allows for, like, less finger pointing when something does go wrong. It's not about the person, it's about that role and that role's spot in the process. So I think that similar to the subcontracting, you know, documentation is your friend when it comes to processes. And clearly defined processes can plug a lot of profitability holes.

Yeah.

See the org chart? That was a key metric, wasn't it? In The SOURCEI data will. We do see it slightly increasing year on year, the amount of builders that have this org chart. But it's a very simple thing to put in place. And the guys that have an org chart are working three and a half hours less a week than the guys that don't. So it kind of proves that doing these simple things can have a massive impact.

Yeah. And to that point also, this idea of KPIs, like kind of everybody being responsible for their KPIs. Part of, I think success comes when KPIs are reported upwards instead of downwards. So if you have a company leader who sits everybody down and says, this is what our performance looks like, everybody sits there and passively listens to those numbers and takes them in. But if managers and people working on the front lines and really everybody, every team member is responsible for certain KPIs and reports them up, you take ownership of the things that you're reporting on. And I believe that that can really help kind of getting a whole team aligned in the same direction. And it can also help making people feel more tied into the numbers that they're responsible for.

Yeah, underline. That was great advice there. Yeah, involve the team.

Yeah, we'll quote that one, then get a clip out of that. Speaking of documentation, the data from the SOURCEI report found that 36.7% of builders have a documented client handbook. Now, obviously, a client handbook is a critical part of the relationship with the client during a project. Russ, why do you think that's so low and why is it important?

I honestly have no idea why it's so low. But I'll tell you what, it'd be great to get some feedback in the chat. If you do not have a client handbook in place, maybe type in the chat and let us know what's prevented you from doing it up to this point, because I'd love to know the answer to that one. But what we do know is that having a documented onboarding process and a client handbook that actually prevents scope creep and communication breakdown. So a bit like what we were touching on earlier with selections, these can lead to profit delays which suck the profit out of jobs. Setting expectations in the client handbook and an onboarding process is absolutely key to that. So if you can do that, then you will significantly reduce these problems. In the sourcy data, about 70% of the builders that actually cited client selections as being their number one challenge in terms of running projects. So they've identified where the, where the obstacle is. About 70% of these builders that cited that as their number one profit. Their problem didn't have a client handbook in place. So yeah, it does take a little bit of time to put together. But if you factor in that these delays are costing the typical builder over $600 a day, I mean do the maths across the how many jobs you run at a time, that's gotta be a good investment of your time. But yeah, I'd love to hear as to anyone that doesn't have that in place, what's the obstacle? Because if we understand what the obstacle is, then we'll figure out how we can help you guys to do that quicker.

So I have a question for you, Russ. When you say client handbook, are you thinking of something that's only like a handbook, that's a printed thing that people read through. Could you see something like utilizing technology like maybe it's something that's on Google Slides or maybe it's something that's on Loom, which is a really, really great video tool for people. Do you think that that would help or do you think that it really needs to be a printed handbook?

No, I think printed is nice because you know, especially during this process, people do like the glossy tangibles and it can be a nice looking document. But I also like because you can keep it up to date, obviously the build process is a long process so things are going to change during that process. And you can update your handbook on the fly if it's live. I also love tools like Notepad where they don't even have to go scrolling through an online document. They can simply interact with Notepad with free text to get the information that they need. So yeah, there's a lot of different ways that you can approach this.

A project management software, job tread, or you know, I'm going to say job tread because I'm jobtrad. Right. You know, you can have those in one spot like where it's, you know, you can have your client handbook or your videos or whatever it is that you want there, which is just super helpful to have for reference and to have for all of your projects.

That's the most logical place to put it, isn't it? In the platform? Because that's where they are for their client selections. This is the portal where you want them doing all their communication and interaction. So yeah, 100%, that's a great place to have that. Your one source of truth.

We've got a lot of questions coming in to clarify exactly what a client handbook is. Scott, Chris, Matt Reid are all asking, can you just go over what's typically included in a client handbook. Maybe. Russ, do you want to start off?

Yeah. Well, we've actually got an action plan in the members portal that takes you through this process in a lot of detail, gives you a template and even examples. So if you are a member of apb, make sure you jump in the portal and, and check that out. But at a very high level, what we're talking about is, well, if you think of your company manual, where you've got all your processes and, and procedures for your staff, it means that whenever someone's not sure how to do something, they've got that central place they can go and find out how to do it. It's exactly the same with clients. You know, clients, a lot of them haven't built before. Some might have only built once or twice. They need to understand how you do things, what your expectation is of them. And this is the document that stores all that information and it's key to managing client expectations. And it's not something you just hand over. When they sign the contract, you actually. Part of the onboarding process is taking them through the key points and then making sure they go away with the documentation, either digitally or in print where they can refer back because they're not going to remember everything. So that's pretty much. Yeah, what, what we're to achieve here.

Erica, anything to add there in terms of how it would be delivered through Job Tread or any other thoughts?

I think that like I said about the contracts, it needs to be like a living document. Obviously, you know, you don't want to set it and forget it mindset. So if you realize that there was a client that perhaps misunderstood something, you might want to change that part of the client handbook for subsequent projects. I also think that one of the tools that we have in jobtrad that I think is super useful along these lines is just like a simple photo tool where you can send photos back and forth from within the portal and it keeps that communication process going. It kind of goes with like daily logs. And I think that a lot of the time when you're trying to communicate with a client, they might not know exactly what you mean, or they might have have a question about something. And you can send something either to a subcontractor or to a client and just circle on the physical photo what it is you're talking about and write a little note about it. And I feel that it's not the same thing as a client handbook, but it's the same mindset as a client handbook. Which is clearly communicating expectations, clearly documenting everybody's role, and clearly staying in touch throughout the entire build process, from the lead all the way to the final walkthrough.

Thank you. That was very helpful. Well, we're almost out of time, so I want to just touch on one final question so that everyone that's still in the room, we've still got over 80 people here, which is awesome to see everyone stick around the whole time. If there was one thing you would say to all the builders attending today, and anyone listens to this in the future, around how they can start running tighter, more profitable projects, what would that advice be? Russ, do you want to go first? Yeah.

I think in real simple terms, at a high level, builders need to transition from managing their business by feel to managing it by data, because that is the only way you can scale safely and securely. So just to explain what I mean by that, we're talking about financial visibility, fixed expenses per job per day. You gotta understand what that figure is to be all across your business. Pricing your jobs using the pricing for profit for pricing for profit calculator, which means you're adding a net profit to your jobs rather than gross profit. Very, very important. And even planning construction slots. Construction slots allows you to spread your start dates across the year. And what it also does is it caps your supply, which plays into the demand and supply formula. It's very, very systemized approach. A lot of builders will start jobs whenever someone signs. The best builders are working on a 12 to 18 month backlog or delay to start because they've built out their construction slots. Not only does that give them scarcity and urgency in their sales funnel, it gives them a balanced construction funnel. And operating your construction funnel at 100% or as close to 100% all year round, that is how you become or you is how you optimize profitability. Because when your capacity drops, your fixed expenses don't. And this destroys net profit. So to be more profitable, profitable, you've got to be operating 100%, which means you've got to use construction slots to plan that out.

I would say very, very much agree with what Russ is saying very passionately. And I think it comes down to know your numbers, know your numbers, know your numbers, and sort of have those KPIs and have your team know the numbers as well. I think a lot of project managers want to deliver bad news. They don't want to interact with the budget perhaps as robustly as they should. Perhaps they don't understand where some of the profitability lives in the budget. And I think it's super important to get everybody aligned. One way to do that is to have everybody have, like, a dashboard of what their personal numbers should look like. Right. So you have one master custom dashboard as a company leader leader, and then you have other people on the team with dashboards with their personal KPIs on them. Easy to set in job tread. Really, really important to be able to drill down into those numbers. I think that clarity is the number one differentiator, if there is one that is the number one differentiator between profitable, very profitable, sort of profitable and not profitable home builders.

Amazing. Well, it sounds like we're. We're all aligned. The numbers and the data are critical to running profitable projects. Thank Russ and Erica very much for sharing their expertise today. It's been a phenomenal conversation. I've learned a ton, and I know based on all the chatter in the. In the conversations with the builders and the amount of people that have stuck around, there's been a lot of value here. So very appreciative of both of you coming today. Very appreciative of all the builders that have taken an hour out of their day to listen in today as well. So thank you for coming wherever you are in the world.