82. Transitioning To Fixed Price Contracts With Lee Ambrose

Mate, I just want to leave a legacy more than anything for my family and for my community. It became very apparent that there was holes in our organization. We had had a couple of bad experiences with Costplus and we've gone. This is just not working. Fixed price contracts are the only way to go and just being able to back myself to go, that's what you're worth. Jeez, if I could go back and knew what I know now, it could have worked a lot, lot better. Until actually sit with professionals that know exactly what they're doing, you go, oh my God, what have I been doing this whole time? So yeah, I couldn't recommend enough that you jump on board.

This is Professional Builder Secrets, the number one podcast to help you grow your building company safely and securely. Brought to you by the association of Professional Builders. Join us every week as we talk to industry experts and your fellow professional builders on everything you need to know to generate more leads, more sales and higher margins while improving the building experience for your clients. 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 another exciting episode from the Professional Builder Secrets podcast. Joining us today is Lee Ambrose, managing director and owner from Ambrose Homes are. Lee. Welcome.

Thanks Bosco. Absolute pleasure to be here man. Thanks for asking me on.

We're absolutely delighted to have you. Tell us a little bit about how did you get started and your journey as a builder and what does Amber's home specialize in?

My journey as a builder. So started out as a carpenter as most of us do, sort of went along with carpentry contracting for a number of years, then fell into a luxury home builder site manager job. Went really well for a couple of years and then when that sort of just to dry up, I thought let's go out and try this myself. And we've been doing that for about seven or eight years now.

And what do you specialize in today.

With Amber's homes custom builds. So higher end around your 1 to 2 mil mark and DNC projects. So design and construct projects. Do the design cost manage right through to the tender and then when we're sticking a tender in front of you, it's been cost managed the whole way through so it's usually no surprise at the end and then we'll be able to get a lot of those jobs to site.

And where do you specialize in geographically.

As well, out of curiosity, all Southeast Queensland, mainly inner city of Brisbane, but we do go as far as the Gold coast and up to Sunshine Coast.

So what have been your ambitions with your building business? You know, you went from carpentry to working for the man and now, now you are the man behind it. What are some of the ambitions with the building business?

We just love it. Absolute, absolutely love it. And I generally only employ people that are on the same page as me. So my construction manager, Austin, absolutely loves it as well. We love and sing carpentry and building 24 7. But mate, I just want to leave a legacy more than anything in for my family and for my community. We're big on sponsorship on local sport and stuff. So yeah, probably providing for the family and leaving a bit of a legacy.

Now, what were you looking for when you started to work with the association of Professional Builders? What were some of the challenges that you were facing?

I was probably not 100% aware of what I was looking for, but it became very, very apparent that there was holes in our organization. Low margins being one of them. Organization realizing how much we could forecast and how far we could look forward and getting all those. Once I sort of sat down initially with Clint Best, who is my mentor now, and he started to plan things out and I just started to realize, holy, I can really make this a professional company.

You talked a little bit about low margins. Were you on a cost plus contract setting before you joined the apb? What type of contracts were you serving to your clients?

We did a bit of both, but the cost plus was probably where we got unstuck a couple of times. Being that cost plus, it seemed to work on paper, but until you get a proper understanding of what your net margin is, which on some of those costs plus projects was negative, and getting an understanding of what your overheads are and APB have helped me with all that sort of stuff, but moving to fixed price contracting has just been so much better. We're basically setting forward, forecasting our overheads for the 12 months ahead, adjusting our margin to suit, and then adding our net margin on top. And all this framework that the APB has given me has been able for us to forecast our margin into the future, which is essential if you want to stick around.

And it sounds like you have a lot more financial awareness as well of what's to come with the contracts as well for yourself from what you're explaining right now.

Yeah, 100. You know what's coming. You know, if you're going to have some tough times Ahead or if you're going to have some good times ahead, you know what's coming so you can plan for it.

So tell me a little bit about how did you discover the APB and what, what has it been like working with Clint? I've had Clint on the show here a few times. You know, he's bragging rights this year is winning the coach of the year at APB as well. Two years in a row. So shameless plug to Clint. But what's it been like working with Clinton? And how did you first discover APB as well?

I think the APB tried to discover me at one point, but. And my wife put it in front of me and said, this looks like a really good firm, and I think I couldn't really help you. And to her credit, she was probably two years ahead of her time. And I just said, look, we're not ready for that. I don't need that. I know what I'm doing. And then about two years later, I decided to jump on board. And then I went, holy hell, I wish I jumped on board with these guys two years ago because I wouldn't be where I am right now if I hadn't. But, yeah, got in meeting with Clinton, and then after that meeting, I just knew that this was the path for us and this was the path forward. And the framework that they put in front of me, they've just 100% delivered on. And there's Clint. I mean, I'm sure all the, all the coaches, but I can't speak for them, but Clint is just incredible. He's fantastic. He's there when you need him. And yeah, been on the show a couple of times, as you said. So, yeah, I can't fault him.

Why did you pick this coaching program? Your wife was looking for different coaching programs. She landed on the apb. Why did this one speak to you? And is it the case of one of the decisions that, you know that led to you working with apb? Is it not knowing what you don't know and that's why it took so long for you to come on board? I guess there's that old saying, if you know better, you do better.

Yeah, 100% Bosco. The sole reason was because I thought I knew better and I didn't know better. So I thought charging, just charging a blank gross margin on my contracts was, was going to work. No idea what my overheads were and what those margins were. And for many years it sort of worked. But geez, if I could go back and knew what I know now it could have worked a lot, lot better.

So basically, basically it looks like you've left some dollars on the table all those years ago, I guess. Is that safe to say?

I look back, I look back at some of those builds and the prices that I built them for is criminal, criminal to myself. But yeah, the reason we landed on APB was the fact that they are custom home builder, coaches, specialists. Exact field that we're in. This is the exact reason that we jumped on board with them because everything that they said they would do, they have done. Yeah. Just can't fault them.

So tell us how you've transformed your business since working with abb. You know, obviously you had all these systems in place, things started to change, obviously and you start to get more awareness. You know, if you look back now, memory lane and the time that you've worked with apb, what are some of the areas that, that have changed completely? You talked about transitioning to fixed price contracts. What are some of the impacts to your business?

Definitely, I think, I mean managerial wise, being able to sort of replace myself as head of the operations, Austin, my construction manager now does that gives me time to spend more time with Clint and do more APB related activities and so which just benefits the whole company. But essentially it probably comes back to the margins. Bosco, if I had to pick one thing, just knowing what the benchmark is for guys that are doing the sort of work that I'm doing and just been able to back myself to go, that's what you're worth. And going down that route now, what.

Are some of the systems that you really liked with apb? You know, everyone talks about the WIPO calculator, the sales process, the contract face, contract pricing, construction slots, margins. What are some of the things that you really loved that you were easily able to adapt within your business?

I do love the construction slots. That was absolutely fantastic. Implementing that is just being able to. Because as you know, it comes with all forecasting and everything like that, forecasting revenue. So you know what you're looking at for the year. You know, if you can hire, if you can't hire, if you can buy things, if you can't buy things. So construction slots is really important and being able to tell people, yep, look, we do have a slot in X amount of months. If you want to jump on with a prelim and start the designs, we can set that slot aside for you, et cetera, et cetera. But that's giving you the power of knowing what your funnel is and sort of knowing okay, well, we have start dates booked out for the next nine months. That's great. And being able to control that and.

I guess even for your buyers, I'm sure they appreciate knowing timelines. I recently had to get some upgrades done to my house with electrical outlets and stuff, and I called a couple of electricians and, you know, they didn't either have a timeline or just didn't get back to me. So the fact that you can give a consumer, you know, an accurate timeline of when you guys are available would probably work really well for your market as well, I would assume.

Yeah. And they appreciate that. Man. There's only probably. It's probably when people type in custom home builders, Brisbane. There's probably only a handful that people really want to work with. Whether they manage to get on with us or another one is beside the point. But hopefully all of us are offering that same feedback. To say, this is when we can build it. We're not just, we're not a volume builder. You can't just come walk in the door and start building tomorrow. That's not how it works. If you want to sign up to services of this quality, you're just going to have to wait and people do.

So let's talk a little bit about the fixed pricing contract. Were you a bit hesitant when Clint first brought this notion to you, or did you? I guess the financial awareness kind of brought some sort of understanding like you needed to do this. And how did it help with the business today?

I didn't need any convincing, Bosco. It was pretty clear we had had a couple of bad experiences with Cost plus where we'd sort of run the reports on it. Once I finished and we've gone, this is just not working. Unless we can sit down with a client and charge a margin that they wouldn't be comfortable with the Cost plus, then that's the only reason it's going to work. Otherwise we're going to have to go back, really get our estimating nailed down. Fixed price contracts are the only way to go.

Any risks or anything that keeps you up at night with the fixed pricing contracts or are you sort of happy where you're at with it?

I mean, let's be honest, it's been a tough couple of years for price increases. So the fact that Queensland doesn't have any cost escalation clauses in Australia, there is other states that do have them and other countries that do have them that probably listen to this podcast. But yeah, Queensland doesn't have any escalation clauses. So that's the only thing that's real issue. So that's caught us at a couple of times in the past 24 months with the pandemic. But with material prices starting to plateau. Yeah, we're pretty comfortable. The fixed price contracts are the way to go.

And do you prepare for. Because Queensland doesn't have this clause, do you just bump by or you make sure that you have the materials planned for in advance or you buy in wholesale rates? Like how do you go about making sure that you protect the cost of the materials for you as a, as a builder?

Yeah, it's just about locking in as soon as that pen goes to paper, grabbing that deposit, locking in paying deposits, getting things, purchase orders sent out to suppliers. Unfortunately there is some supplies that won't hold costs for materials that are sort of later in the build. But being that sort of your big one, structural steel, timber framing is quite early in the build quite often you can sort of take that deposit, make your deposits and then at least it's only two, three months away that those materials are required. So a little less risk on those bigger items as opposed to some of those tiles and that sort of stuff that come at the end.

With your time being freed up a little bit. Do you negotiate the supplier relationships now or do you have someone that handles all the suppliers as well when you're doing this?

It's a little bit of both. It's a little bit me and my estimator, but yeah, I try and build the relationships and he can sort of keep his finger on the pulse.

So what type of technology do you use at your building business today?

Yep, we have a, we have a pretty large stack of tech. We have a program called Slack which is like an internal messaging system which also take care of our client portal we have. And some people will probably be a little bit surprised by this, but we have Monday.com as our scheduling tool and that's because it integrates with so many other things. So we've spent a lot of work templating that to have it as our job schedule and it just integrates so well with everything. So we're really stuck. We've been using that for about a year. So it's the best scheduling tools. Gives you all your gantts and all that sort of stuff the clients want to know. But on top of that just your standard Gmail houses, all our, all our emails and also Google Calendar that pretty much wraps it up.

Do you use any of the construction sort of automated softwares like buildertrend or any of the okay, yeah, we have.

Buildxact, but it's basically we use it as standalone estimating software. It's not really integrated with the clients or anything. We sort of grab what we need from BuildXact and export it and put it into templates for our tenders and we just use it as an extract, basically. We don't really use it for its full service, but it's just because we sort of manipulate and change things a little bit to suit what the information that we want people to see.

So it sounds like you're pretty tech savvy internally with your business as well and it's probably impacting your sales process a lot faster and better in efficiencies as well, I guess.

Yeah, yep, definitely. On the sales front, we use HubSpot, which I think APB is familiar with as well. So HubSpot's really good, so. But yeah, it's. It's imperative to have that. Right.

What are some of the other impacts that you're seeing in the business since you started working with apb? Have you taken advantage of the rewards program, for example?

Yeah, we're massively massive advocates of the rewards program. We're probably working with about three or four people out of the rewards program, from insurance to solicitors to a mob called System Hub in Melbourne. Dave Jennings around. System Hub does a great job. It keeps all our processes and systems in there so we can just sort of one button share and we just share that into Monday or into Slack. And yep, this is the system for that. So that program's really good. But yeah, we're infiltrated in the APB reward system. We're using lots of their stuff and they honestly, they only use programs and affiliate themselves with people that are the real deal. So you find every single thing that you use there is well worth being tried and tested already.

So, yeah, it sounds like they vet them. And there's also obviously the rebate side of things, which is great for builders as well when it comes to costs as well. Right?

Yeah, no, they're definitely vetted, man, they're all fantastic. I can't really think of any that we've actually sat down with and haven't gone ahead with. So they're all been really good quality.

Now, why do you think it's so challenging for builders or building companies to change their ways? And I ask this because, again, you've gone through a lot of changes as well. You've taken the leap of faith, you've jumped off the cliff and said, I'm going all in. It Sounds like you've gone all in. But for the builders out there that are humming and hawing or on the fence, why is it so challenging to make these big decisions? And you know, is there fear of the change or is there. Is the change actually just daunting in general?

Yeah, I think it's a combination of all those things, Bosco. I think it's not knowing what you don't know. So the fact that you just. People might know that they're charging the right margins, they might know that they're forecasting their financials well, but until you actually sit with professionals that know exactly what they're doing, you go, oh my God, what have I been doing this whole time? So I couldn't recommend enough that you jump on board and at least just. Even if it's just to work out where your margins are sitting versus the people that are in your field, because that is. Yeah. And just having a growth mindset, just understanding and opening your eyes up. And I'm probably at the tail end of, of that age gap. I'm nearing 40, so I could sort of. I'm welcome my eyes up. But I guess some of the older guys probably aren't really as welcoming as I am to change. All I can say to them is just until you know, you don't know. So just jump on board.

Now. What are, what is your business transitioning into and who are you becoming? Because, you know, you talked a little bit about the fact that you've got time to now be on the business. So where do you think your business is going in the future? What are you focusing on and who are you becoming long term?

Well, who am I becoming long term? Hopefully I can continue to be a mentor to the whole team. Currently my main role is sales manager, looking after all the sales. I'll pick you up right from the very start. I'll nurture you right through till you go to site, at which point you'll be handed over to my construction manager. I love that, putting people through. I've got a fair bit of, fair bit of experience with the plans and the designing and the engineering and trying to get the most cost effective solution so people can move through that initial phase cost effectively and come out to hand. I'm handing them a tender. That's what I told them that it would be when they first started. So I'm happy in this position. Clint would love for me to transition myself out of this even more so I could spend more time on APB so I could improve the business even more But I just really enjoy it and I really enjoy working with people and clients and bringing people's dreams to life. So it's going to be hard to transition out of this position one day, but that's sort of where the company's going and my role in it.

And do you feel that the company is going to grow with more people? Obviously, there's so many different outlooks right now, economically, the market potential of crisis or whatever other thing that's going out there. Do you feel that you are in a position right now to grow despite all the market challenges that are happening in the industry?

Yeah. So this will be our biggest year, not from job size, but from job value. And I think that will continue to grow. We have no ambitions to become the biggest builder in town or anything like that. We just want to be the best in our field and produce the best quality builds in our field. So as long as we're banging out 10 to 12 homes a year around that 1 to 2 mil mark, we are very happy. And I don't have any ambition to grow sort of beyond those amount of builds.

Everyone, when they look back at their careers, they'll look at a few defining moments, then they'll say, you know, this is when things started to change a little bit. It sounds like you've had a few of those changes.

Obviously, you're cornering me. You're cornering me, Bosco. There's only one.

I'm just curious. If you look back at your illustrious career and it's really cool because you've been on the tools, you've grown the business, you've worked for people, you've done it now yourself. If you look back now, when was that critical time, that success time for you, where it was a success factor that changed everything and it's allowed you to grow. Like, what was that one thing? If. If you could label it to one thing, or if there's a few things, what are some of those critical things that you can look back and go, this really changed my business.

Yeah, I will. I'll say there's two things, and that's just so I don't sound incredibly biased to all the listeners. The first thing is 100% the APB. I can't even. We would not be here if it wasn't for those guys and the systems that we put in place and the forecasting and the margins, especially through the pandemic, a lot of those margins were eroded quite dramatically. But if we didn't know what we. What we know now, we wouldn't even be here having this conversation, Bosco. And I'm sure there's a lot of builders out there that didn't make it. So that is definitely whole and heartedly the number one thing. And the second thing is just the support that my wife gives me all the time. It's just when I say I need to do xyz, she just says, you go and do xyz. So understanding that the business supports everything else around it as you grow and supports the family and the people around it. So. But yeah, the APB has definitely helped us get where we are. Yeah.

And, you know, it's interesting you say that too about having an alignment with the family as well, because some of you know, we've had sort of these successful builders that I've had the pleasure of interviewing and all of the husband and wife teams, they're so aligned, they, you know, divide and conquer and they support each other during the hard times as well. So it sounds like. It sounds like you have a good lady out there that's got your back as well. I've got a couple more questions. My next one for you is around, you know, what are you seeing as a trend in the industry today? You know, obviously you operate in the Queensland area as well, but, you know, holistic either in Australia, what are you seeing as a future trend that all other builders and our listeners should be ready for, be prepared for?

Coming up now, a future trend. What I'm seeing right now, Bosco, and I hope I'm answering your question correctly here, but people are really monitoring what they're spending. Even if it is a beautiful luxury home worth $2 million. When they sit down for the first time, they say, this is what I want to build and this is my budget. They want to be able to control that. There's been so many people come to me that have said, oh, look, I went and sat with XYZ Architect. Our budget was a million dollars. When I sent it out to tender, it was 1.5 or $2 million. Right. People are happy to invest a bit of time on the front end, find a builder they really like, sit down and they just want to have that conversation, say, and get it off their chest. And then they know, okay, I've got a million dollars to spend. I want to work with you. Let's make it happen. This is what I need. Can you do it? Yep, we can do that. Let's go. So that's trending massively. So I'm seeing a lot less of. Hey, Lee, can you quote this for me, it's all ready to go. It's all ready to go. And even architects are coming and sitting with us going. This client would like to work with you. Are you happy to sort of give us a bit of a price indication as we work through the design phase? And we're happy to do that. We've got a template that does that and sort of can provide a fair bit of information on the. On the concept side. So hopefully I answered your question okay there, Bosco.

Yeah, no, you've given me a trend about the market, about the audiences, which I can appreciate as well. So I guess the advice for the builders is to really pay attention to the needs of the consumer and really cater towards honoring what they're looking for in some cases.

Yeah, for sure. Agree.

Okay, so in this transition and this transformation process and transitioning to fixed price contracts and, you know, the systems and working with apb, what have you discovered about yourself in this process?

That I'm not as organized as what I probably thought I was. It's about putting systems in place. Bosco. You'll find my calendar has probably half of my calendar is recurring things that reports, checking on things, checking on financial status of different documents. So it's. I have found that I wasn't as organized what as I thought I was, but I can definitely train myself to be that. So the APOB has just taught me to just be on the front foot a little bit more with that and just sort of. Okay, you got to do that every month. I need Clints like you need that report every month. Okay, let's. Then we can work on those figures or work on those. On that data and backtrack to sort of get a result.

So, yeah, my last question is about your coaching ability. So, you know, I mean, obviously you're working with Clint. Clint's amazing coach, obviously. And he's a wealth of knowledge. What is your coaching love language. Like, how does it work with you and Clint? Is it sort of, you know, one of the scenarios where you go through the numbers first? You know, how does every coaching call look like when you work with Clint or does he check in on your homework? I'm just curious.

Yeah, no, he's. I would say. And I'd say everybody would be different. Clint and I are pretty attached emotionally. We sort of. We sort of hit it off pretty well. And he'll. He'll. If something's not done or I haven't got. Haven't got on top of something that I was supposed to. He'll be gentle about letting me know that, but I will know that it needed to be done, so. But he'll check in with me if he can. He can log into my. My workbook where it's got everything that I need to know to run the company, and you'll sort of just gently tag me in things and send me emails and say, man, how's this going? How's this going? You know, we need this, you know, we need that. I already know that I need to do that. So he's just reminding me and keep it on top of me. But we connect on a level. But yeah, it's not necessarily numbers. He does all that in the background and checks on all that in the background, but it's more emotional and he'll pull on me, you know, man, we need to get that done for this reason. Yeah, I know, I know. I'm on top of it. I'm getting on top of it.

Sounds like you have a really good relationship with them. Lee, I wish you all the best in your future journey and potentially getting yourself out of the client process so that you can spend more time on the systems. Hopefully when we bring you back here again, you'll have some more fun stories to share. But yeah, thanks for sharing your stories, your knowledge, your energy and just being really transparent about. About your transition as well.

Yeah, cool. Bosco, mate, absolute pleasure. Thank you very much for having me.

Pleasure having you on the show. Cheers.

Cheers.

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