64. How To Avoid Pricing Mistakes With Darren Wallbank

When our builders own our software, they will not have to process supplier invoices manually. I absolutely believe the future is about more fully integrated solutions, incentives to do the same thing again and again. Because builders intuitively do understand pricing, they understand jobs, they understand what they're doing. If you can understand other players in your industry, you can learn from that. You've got to keep nimble because if something's working, let's just keep working it and work out how to improve it and just grow there.

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Hello and welcome to the Professional Builder Secrets podcast, a podcast by the association of Professional Builders for building company owners, general managers, VPs and emerging leaders. Here we discuss all things running a professional building company from sales, processes, financials, operations and marketing. We have got another exciting episode from the Professional Builder Secrets podcast. Joining us today is Darren Wallbank, co founder for Builder Price. Darren, nice to have you here today.

Oh, it's great to be here. Yeah, yeah.

Let's start off with you telling me a little bit about builder price and how does it assist builders.

Builder price we use the byline that it's about giving family time back to builders. So it's about putting in processes and system to enable the builder to get some of that time back. We find that builders tend to use night times and weekends to do a lot of process stuff. And so we're focused on getting solutions that give that back and give that time back. So build a price. We work on a solution that takes us, takes the whole building process and so we have everything from a quantifying or estimating team. So we do take offs for builders right through to pricing, job tracking, back costing, scheduling, gantt charts, timesheets, even bringing out, releasing health and safety at the moment. So we're bringing together a full integrated solution which is where we see our difference in the market. Not uncommon for us to replace another product in the market, but we end up replacing three or four products because we're putting everything in one solution. So builder price, we're really focused on getting a single solution for builders because that's what we found they're looking for. So we come out of New Zealand, we've got hundreds of builders here, pretty strong here, and we're now working through into Australia as well.

So that's really exciting. What is your role at Build A Price and how did you get started in this industry?

There's a big question. So I'm a co founder, one of the directors. I actually head up strategy for the business and I head up the development team but I'll also do demos because I really want to be close to the builder. I want to hear what they're saying, where their issues are so we can respond very quickly. And that's why I hit those two areas up. But my. Yeah, I suppose this industry is in blood. My dad was building and ever since I was a kid I seem to be building, building with them and I've got three younger brothers, one's a builder, two are painters. So it's just. That's the industry. I'm actually an accountant by background so don't hold that against me. But that's, that's what I have done. But I ended up working for Placemakers and Carters for 15 years, which are two of the big supply merchants here in New Zealand, similar to the Bowens Dawson's type situation in Australia. And I was in the executive team, I looked after 30 stores for them. I was ended up being marketing and IT manager in Karter. So I could see the strength of putting the marketing, the technology together and I actually ended up writing a strategic plan for placemakers and for some of the other groups in New Zealand. So done quite a bit of corporate role work to know the industry really well. But when I got out of corporate I then actually ended up owning an accounting practice where I looked after builders and I looked after sub trades and got to the point where I found that they just were not making the money they should for the risk and the stress that builders take on, which frustrated me. I could see the sub trades making a lot more than the builders and started to look at some of the issues that were going on and as a result of that ended up getting into software and I had been in it previously in corporate roles and starting to buy and build software. So we've now got several companies in the group and we, we have quite a range of software and services that we provide. So really I've been in the industry for probably a long time.

It sounds like you've been around it for sure. Do builders struggle with pricing in your opinion? You talked about having the tagline about putting some family time back. You alluded to that at least. So I'm assuming that builders do struggle with pricing? I guess.

Yeah. Look we have a lot of builders using our software. What tends to happen is it's not unusual for builders to be pricing jobs at nighttime when they're finished, and running jobs during the day or pricing in the weekend. And we can see a builder could take 20, 25 hours to price a reasonable sized job. And we've really focused on trying to get solutions so they could price a job in two to three hours in our software now and get a lot more comfort. We like to call the pricing part of what we do the sleeping pill for the builder. Because normally if a builder's not going to sleep, it could be after he's just put a big price together, he's putting it into his customer and it's have I got this right? Have I, have I got everything in here? Have I missed anything? And what we find when we're dealing with builders, there's quite a comfort in being with them and helping them through that pricing process where they need it. So they do struggle generally. Some are really good at it, but a number do struggle in that area.

How do you see the future of the building industry when it comes to efficiencies like pricing and improvement in automation? Do you feel like this is a place that is going to take off even further, especially with the product that you've brought to market?

Yeah, look, I absolutely believe the future is about more fully integrated solutions for pricing right through the business we're finding builders are looking for the nirvana for the one scenario that that solves this, rather than have multiple specialist apps, because it's not unusual for a builder to have four or five apps to try and solve these problems. Whereas we say, actually no, we'll give you a fully integrated solution to solve this cloud based. So I think you're going to see more and more integration happening and the smart players will be heavily into that space. So that'll be between all the stakeholders in the project. So it could be from the architect through the builder, through the sub trades, through to the end client is actually smoothing that process of pricing and having those parties being able to be involved in it electronically as the job gets priced. And I believe that's where the future's going into.

Where do you see builders making, let's say, pricing mistakes or where do you find the errors typically when it comes to pricing and specifically.

Yeah, well, it's that quote that says insanity is to do the same thing again and again. And part of what we see is you're probably seeing a thousand spreadsheets out there where builders will use multiple different ways to price a job. But we know with spreadsheets, we know with that, that you could be making the same mistake again and again. So I think the common pricing mistakes are one, not checking that you got the pricing right through good back costing and process. Two, not checking what people are giving you. So if you're using a estimator or you're getting a takeoff done, or you're using formulas to do takeoffs, what are your check processes around that to make sure you've got quantities right, you've got everything in the job. And that's something we really focused on. Our pricing software was to put self checks in place so that we can give you a formula, a set of things to calculate what this job's going to cost. But we also, what we call common sense, tests through the software to say, okay, what's your gut feel say about this? Let's compare that to what we have. And then that raises an issue if there's a big gap, because builders intuitively do understand pricing. They understand jobs, they understand what they're doing. But getting that into a formula that speeds it up and makes sure they've got everything in there is key. So I think not checking what they're doing and just getting a process and then just running with that all the time is one of the common areas. I think one of the other common areas is that builders don't value their own time or their project manager's time. So we quite often see that time not recovered for a project. And when people start using their timesheets and back costing jobs versus how they price them, those two areas we find are really under recovered is project management time and cleaning, like cleaning time, something simple like cleaning and maintaining the site. Areas that aren't necessarily included in the price or in the overhead percentages well enough to cover the cost. So it's just not valuing time. And one of the biggest frustrations, as I mentioned earlier for me, when I was doing the accounting for a lot of builders, I was doing a lot of management accounting. You do that, the year end results, you do coaching with them and they would not be making the returns if they made a salary. That was about it. And it's because they weren't recovering these areas well enough. And that frustrated me because you got all that risk, you got all that stress of running a job or project and you're just not getting the return on it. So it's about pricing, but making sure, you're testing and checking that all the time to make sure you've got everything in there.

How can builders learn from post project reviews? Do you tend to ask them to or recommend that they look back on post projects?

Look, I think the key to that and one of the things I'm really passionate about is having good back costing within the project. And one of the things we're focused on really clearly is there is back costing projects, there's spreadsheets that people use, but you've actually got a back cost to how you price the job. If you price the job into a number of categories, then let's make sure you back costing to that source information so that we can understand there's as a building, understand which jobs you're making money on, which you are, which jobs within which categories within the job are you making or losing money on? Because I found in a lot of builders is a number of cases they didn't know if they made money or lost money on jobs and they'd be using the cash flow for the next job to fund the job they just finished or if the job had lost money, then understanding within the job which parts of the job were losing money. So they could be making good profit on parts of the job but losing their shirt on another part. So our software, particularly our back costing, we give real back costing as the project moves in real time and we give it a position at the end of the job as to where this job ended up, where you were up and where you were down. And that particularly becomes useful as you start to get more and more history because we start to see our builders understand actually these jobs are better for me because I'm making money on these sorts of jobs versus these other types. So we do see changes in business practice occur or business focus as to what customers to look at because they start to understand what their niche is and what works for them.

So how can you know when we look at these different projects and we look at a post project review and everything else, what can cause a cost overrun or time blow typically where do you see a lot of that time going and how could you prevent that?

Yeah, it's interesting. I think what can cause it is not managing it, just poor project management, poor task management. And I remember putting the software into one of our builders and he basically kicked off the job and they back costed well, they backdated the data into the software because it was a reasonable size job, they wanted to understand it. And he rings up after a couple of days and he said actually we're already blowing the budget on a couple of these Categories because we hadn't been timesheeting against the categories about versus how we priced it. And what he did immediately was put at a staff incentive and straight away to say, look, can we recover this? I'll give you a percentage of the recovery. So I think, yeah, coming back to the fact of tailoring and measuring, I think where people don't project management, they don't manage the task, or I think more importantly where they don't measure what's going on. To me it's critical to know today, based on my timesheets, based on my supplier invoices, how is my job, how is it versus how I priced it and where is it going to end up based on everything I've got today, where's the forecast position? And we've just released forecast position because I know Russ, that was one of the areas he's pretty keen on is to understand where's this job going to end up based on everything I know today. And if you've got that sort of feel and touch on your business as a builder, I think you can respond quickly, you can react quickly and you can fix things before you even get to the end of the job, rather than get to the end of the job and work out, I lost my shirt, but I don't know. Yeah, I can't fix it now.

So they say that prevention is better than cure in most cases. So where could the builders potentially prevent this from happening? What are some of the common things that cause these mistakes to happen in the first place?

I think it just comes back to not having good process, not having good systems, just not having things working well together. Again, not uncommon for us to see when we put our software and we're replacing stuff is there's a myriad of solutions, there's spreadsheets used, there's maybe some odd apps used, but there's not a good process between them all. And if you can get that process right, it means that you've got stuff in front of you today that you can react and work to. So it is about having a process and system and whether it's your Gantt chart, your project management, your relationship with suppliers, customers, and some of these is just good process, good communication and responding as you get that information highlighted.

What's the holistic impact of not properly back costing items to a job? I mean, yes, it impacts the revenue side, but what are some of the other things that it impacts from a business scale?

Well, I think, I don't think I know that where you are back costing, you are probably Constantly making the same mistakes and you could be losing money on the same type of job every time, but you don't even realize you're doing it or, or you think you're making money on that job and you could be making money, but you could be making a lot better money because you actually fixing the areas or the tasks within the project that need to be fixed. One of the things I enjoy is when I get run by some of our customers accountants saying that they are surprised how fast the margin improvements happened in their customers as they put the software in because they suddenly are reacting quick enough. And if you can get that margin improvement happening because you haven't got an efficiency that really starts to put bottom line on for a builder.

Should builders do take offs themselves or should they pay someone else to do it? What's your thought process around that?

Look? I think that comes back to individual builder. Some builders have got that background, they've got that skill set makes sense. They can do it quickly. Other builders, it's like. Or actually maybe they're better time spent running jobs or even in some cases being on the tools with the team and outsource that sort of functionality. We probably last month had the biggest month we've had where we did builders takeoff. So without product you can do your own quantities. We can read it from a QS or you could use us to do the takeoff. And we're finding more and more builders are using us for that service because they're recognizing where their time spent is that where is my time spent. One of the biggest areas that we have in our software that still surprises me that gets builders excited is our invoice processing system. So when our builders on our software they will not have to process supplier invoices manually. So we actually read all their supplier invoices through our technology. We process into the system back cost to the job so we can show the profitability and then we feed that straight through to zero, basically. So we actually save a lot of hours. And I remember getting rung by a builder on a Saturday afternoon and he said I just spent three hours on processing supplier invoices. What's that system you got? Because I never want to do that again. Almost said, and so we, we put the system in and now he doesn't do it. And so we're saving admin time, saving builders time.

And it sounds like what you're really saying is that you really want builders to be on top of the things that they're really good at. Do you believe that being a Specialist at certain jobs for builders is a good way to go or should they be a generalist?

I actually think specialist is the way to go once you understand what you're good at. And you won't understand that until you're measuring it. Well, it's like if you don't measure it, you can't improve it. That's what we tend to see. What I'm seeing with more and more of the clients we're dealing with that have been on the software for a while is they might have 20 or 30 jobs in there and they're starting to see actually those five or six jobs work really well for me. And that happens to be this sort of job versus that sort of job. Therefore, let's focus our energy into that area. I think the other benefit is, is what I tend to see is that they then start to be known for being specialists in an area. So customers are actually will be more attracted to them because they've got a reputation in that area. So it's more than just efficiencies and profit. It's actually it's building the business, building the brand. So I think there's real advantages in IT and efficiencies in just the way they run their business.

How do you measure what jobs are the most profitable long term? You know, when you talk about measurement, do you use the tools, do you use programs or can you assess that in a different way?

No, we like for us, because of my accounting background, that's one of my passions of that area is we want to be able to show a builder where they are making the losing. So we absolutely do that in our software. We do it like you could price your job two months ago. We can tell you in our software today where you are versus what you priced, what your cost was, what you quoted your customer. So we can show you that right now based on everything that's in the system. But we can also show you where it's forecast to finish. And at the end of the job we'll actually show you where you are up or down on that job. So you'll absolutely understand all the financials around it. So there is no excuse for maintaining a common problem. And what we also do with that now is we enable that to be opened up based on what the builder wants to do for the builder's client. Because one of the areas we find is as you get to the end of the job and it's quite common to have that disputed invoice as to why. Why have I suddenly got an invoice for all these extras, all these variations. At the end, when my budget was this and I'm suddenly 50 grand over getting paid, that last invoice can be quite difficult for builders. So having a customer portal and having that forecast position available to show the customer so they are aware that this is where the job's heading for and there's not a surprise at the end, it suddenly it's blown out. So I think having. Having your finger on all those financials just vital for. For builders.

So why is it important from a benefit perspective to specialize rather than generalize in a pricing perspective?

I think what it enables you to do is a couple of things. One, you're going to get efficiencies, probably in your purchasing and the way you get quotes in your subbies, because you're going to get that economy and improvement by just knowing what you're doing in those areas. Two, you're going to have your finger on the way you price. You're going to know, actually, based on my history, because of the way I've measured it, these jobs work for me and I know which parts of the job have got risk in them or where I should be allowing maybe more buffers or contingency in this. So you just have a better feel for how that job is going to work and you focus your business around that.

So when you talk about focusing your business around the jobs that work, should builders then find out what their most profitable jobs are and then tend to stick to it? Is that something that you recommend?

Yeah, I mean, I would. That would be my recommendation. Because if something's working, let's just keep working it and work out how to improve it and just grow that. And part of that also comes back to what's their view on where they want to get to. And having dealt with lots of builders over the years, if they want to grow, then you've got to have a clear understanding of what works for me, what doesn't, good processes and put that in place. And so it just comes down to what their outcome and view is. And I think if you've focused, you've got specialists, you've got good systems, you can scale that. And it's really interesting. I've seen over the years, builders, as an owner of the building business, they can get to a certain size, but then they've got to make a decision as to whether we grow or not. And that's whether I put a partner in the business, because there's a certain milestone that you have to actually make those choices and decide, yes, I'm going to go for this, I'm going to go for the next level, or no, I'll stay where I am because I'm comfortable with that. But to make those decisions, you do need to have an overview and a feel for all your, all your financials in the business. And what we try to do is to make that as easy as possible for the builder, because builders aren't trained accountants that let's put all this information and process in a way that is easy to use and not complex. And that's one of the things I believe we do really well versus our competitors is in a number of cases, we've simplified the processes, understood what is critical, rather than try and get into a whole lot of depth. And we do that by working with our builders. We've got hundreds of guys on the software, they give us the feedback and we react very quickly because if it's not simple, they just won't use it. It's got to have what they need, but it's got to be kept in a way that they can do it right.

Do you end up limiting yourself if you focus on a specialty for the critics out there that might say it could lead to limiting your business opportunities?

I think like any strategy, having done a lot of strategic planning, you've got to keep nimble. Like if you're specializing in an area and the market's moving away from you, then you better react to that. You need to have your finger on it. Or if that part of specialization is down at the moment because people aren't doing earth round walls homes, then okay, can I move into another area? So I think you have a focus, but you constantly review what that focus is and you have your plan around the business to react to how the market and everything's moving around you. Again, it comes back to that definition of insanity. I'll keep doing this as long as it's doing well for me, but I better know it's doing well for me. But if it stops doing well, then let's not keep doing it, let's change. And every good strategy should be doing that and being reviewed constantly.

Now, I could talk to you for hours around pricing, but I'll ask you one final question. And it's around builder price. What can builders expect coming down the pipeline from builder price? And what are some of the things that your team are focusing on for the future?

We got some pretty exciting initiatives because I come from industry play at the supply head right through we've got some stuff that we are going to bring out over the next year or two that will be surprising to the industry. But I think the key we're focusing on at the moment is to make our product what we call a single solution. We want to make it smooth. We're releasing a lot of stuff so we just need to know that that's working well and we rely on our feedback from our builders. What we will be moving towards is just adding more and more to the solution. So everything from whether you One of the exciting things we'll be looking to bring through with some of our product is the ability for a builder to understand not only his own jobs but but understand how he ranks or how he looks compared to other builders in these areas. Because one of the things I've learned over the years, if you can understand other players in your industry, you can learn from that. And what I seen with builders, which probably still surprises me, is they will work together. One of our biggest sales techniques is builders referring other builders to us. They're not scared to help their mate down the road. And I think in the financials we can bring information there that will enable a builder to understand actually how do I rank against my friend down the road? What's he doing better than I should I go and chat to him about these areas. So we're going to bring some exciting stuff through in that area and that'll come out pretty quickly. And we are dealing with a number of suppliers and working a lot on the integration. Now we one of the things we heavily focus on is our integration. Xero so we only back zero. We didn't back mild because we saw 95% of the builders we had coming on was zero. So we're working heavily to make sure the products work well together seamlessly and we're doing that with some other bits of software as well. So what you will see from us is more and more the ability to have one solution that will do what you need in your business as opposed to having four or five specialist apps trying to do it well.

Darren, that was very insightful. I hope our listeners out there, and builders specifically, will have some tips on how to prevent pricing mistakes. Pleasure having you and I look forward to having you back on the podcast in the near future.

Awesome. Thanks for the time. It's great.

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