Give buyers a number before the first meeting
Buyers ask for “a rough estimate of cost” before they contact a builder. One walked out of a builder’s meeting with no numbers, and never heard back.
That is the job of the estimator we built for Justin Green Custom Homes. Buyers answer a few questions about their build on the company’s website and get a cost range. It brought in about 150 leads in its first month.
Yours can start simple: ask for the size, the style and a few finishes, and give a range. It won’t replace your estimate, and it should say so. The buyers who call after using it already know the range. Answer every one of them the same day.
How to estimate a custom home without starting from zero
A price per square foot is “really only a rough guess,” as one builder put it. It’s fine for a first conversation and dangerous in a contract. The fix is to stop starting every estimate from a blank page.
Build your estimate from pieces you’ve priced before. Break a house into assemblies: the foundation, the framing package, a bathroom, a kitchen, a deck. Price each one from your last 3 jobs, then adjust for this house. Keep allowances for the things the homeowner hasn’t picked yet, and say so in writing. Add a contingency line you can explain.
Know your markup from your margin. A 20 percent markup on cost is about a 17 percent margin on the price: a cost of 100 marked up 20 percent sells for 120, and 20 is about 17 percent of 120. A builder who adds 20 percent to cost and calls it a 20 percent margin is making about 17, and on a custom home that gap is real money.
When the subs’ bids come back, drop them into the same assemblies, so the estimate updates instead of being rebuilt.
Write down what each estimate leaves out, such as the lot work, the permits or the appliances the homeowner buys on their own, so you and the homeowner read the same price.
How to manage change orders without the fights
One builder wrote that they had “gone nuts trying to explain to clients what their changes would cost.” Set one rule and hold it: no change gets built until a change order is signed.
Each change order says 3 things: what changes, what it costs, and what it does to the schedule. Let your foreman start it from the field, because they see the change first. Get the homeowner’s signature before the work, then show the running total every time it moves. Go over the job and its budget with the homeowner every 2 weeks.
A change order on 1 page, to copy:
- What changes, in plain words.
- What it adds to the price, or takes off.
- How many days it adds to the schedule.
- The homeowner’s signature and the date, before the work starts.
Get decisions on time
Late selections push your schedule. One builder said every decision came “a week or 2 AFTER I needed them.” Give every selection a due date tied to the build schedule: the tile is due 3 weeks before the tile setter. Show the homeowner the dates on day 1, remind them a week ahead and again 2 days ahead, and write down what a late pick costs in days.
How to organize a small building company
Give every house one place where everything about it lives: the plans, the schedule, the selections, the change orders, the photos and the invoices. Capture notes in the field, on the phone, instead of carrying them home in your head. Once a week, look at every job’s schedule and budget side by side, and call the homeowner before they call you.
Start a punch list for each house at the first walkthrough and add to it as you go, with a photo and the trade who owns each item. By the final walkthrough, you are checking items off a list you already have.
Keep the homeowner in the loop without the calls
One homeowner described messaging their builder and having “no idea if anyone saw it.” Send the same short update every week, on the same day: 3 or 4 photos, what got done, what happens next week, and any decision you need from them with its due date. Every 2 weeks, send the invoice with the budget next to it. One builder kept clients aware of costs this way.
Your company’s app, and your homeowners’ portal
The estimator is what we have built for a home builder so far. The app is what we’d build for yours: an app for your company and a portal for your homeowners. For you: every job’s schedule, subs, selections, change orders and numbers, from the field and the office. For your homeowners: their quotes, invoices, photos and what’s next. With the Quote and estimate tool add-on, an estimator on your website gives buyers a starting range. The app runs on your crew’s phones and your office computer.
Not ready to start? Have Otis audit your business, free.
