Transcript:

Today on Conversations that Convert, we’re gonna talk about the biggest builder and remodeler wins of 2021. So let’s get started

Welcome to Conversations that Convert every week, we’ll spend about 10 to 15 minutes tackling relevant lead generation marketing and sales topics for remodelers, home improvement companies, and home builders. Conversations that Convert is brought to you by builder lead converter, your perfect sales assistant.

And now here’s Rick and Daiana. 

Rick: Hey, welcome everyone. Thanks for joining us today, Daiana, how are you? 

Daiana: I’m doing great. Thank you. And how about you? 

Rick: Well, it’s, it’s chilly here. We’re supposed to get some more snow, but it’s beginning to look a lot like Christmas. So Merry Christmas, everyone. We’re gonna be doing a couple more episodes here and we will be taking a break here between Christmas and new year’s while we ring in the new year. Until then we’re gonna continue in our end-of-year planning series. So what are we talking about today, Daiana? 

Daiana: Today, about the wins of 2021 for builders and remodelers. 

Rick: Exactly. So last week we talked about the biggest mistakes of 2021, and just how the craziness of this year was with pandemics and then increased demand and then labor issues, and then supply chain issues. And it just manifested itself into where we had this incredibly high-demand market with the inability to actually produce. So it’s quite frustrating and there were mistakes made and there was profit loss, but this, this, this week is much more fun. Cause we’re gonna talk about, Hey, what worked- What did builders do that really was the win? And this is important because you’re gonna carry this forward into, into 2022, for, for builders and, and, and remodelers. So I like talking about wins better than mistakes. So what do you say we get started Daiana?

Daiana: Yes, let’s get started. And how many wins do we have today? 

Rick: Well, we’re gonna have four. Yeah. And so we’re gonna start off with allowances and escalation contracts. So as we all know what happened with supply chain and labor problems is that all of our production times got extended. And what we thought was a fixed price, no longer became a fixed price. It started with lumber and then it moved on to other materials. I remember a story. I was talking to one of my clients and they said they got some plumbing fixtures delivered and they got real-time pricing, which means that when the plumbing fixtures were delivered, they got an invoice and found out how much they were paying for that. So what a challenge that was when you were trying, you sold a custom home and you may be signed the contract months ago, which you thought was a fixed price on a plumbing fixture, you just found out that it went up X amount of dollars when it got delivered. So very, very crazy. So the win here was the builders that actually took non-traditional items, such as lumber, and made them an allowance. And when you make things in, in allowance, obviously much like a selection is that that allowance allows you to be able to reprice materials. If they, if they go up now, of course, the good news is an allowance too, is if you estimate high and they go down, then, the, your client gets, gets the difference. Escalation contracts were the same thing as escalation contracts. A lot of our, a lot of our clients said, all right, I am gonna put an escalation clause in here that if our prices go up, we go up, we, we go up a certain percentage. So if you sign a contract for 500,000, maybe there was a 10% escalation clause in there. The key thing here is, is that you are able to recoup some of these losses by passing those expenses or at actual costs onto your client, instead of you, it coming out of your profit. 

Daiana: And how about winning number two? 

Rick: Win number two was streamlining selections and change orders. And so this went down to when you were making selections, a lot of, especially in remodeling and custom homes, design-build remodeling, is that normally you say the sky’s the limit. Here’s the catalog: pick whatever you want, but as we begin to figure it out, there were so many supply chain issues that those builders, those were modelers that actually you know, pulled in the reins a little bit and actually pointed their clients towards the products that they knew they could get their hands on were the big winners. Now with change orders as well. We love to change orders. Let’s put it this way. Change orders are a double-edged sword. We love to say yes because potentially changing orders is a good profit center. However, if there’s gonna be a mistake on the job, what’s it gonna be from? It’s gonna be because of a change order. I remember that you know, when we were, when I was managing a custom builder, it’s like, inevitably, I mean, it’s like we could do everything possible to make sure everyone knew about the change order and man alive. I swear it was 25% or more. We would come back with a mistake because that change order ended up costing us money because we had to go back and fix something. But what the, what the win here and change orders was is you said, no, or you severely restricted change orders. And I don’t think that’s gonna change and ignore that it, it should change. It’s so hard to get a job going today. I think you’re still better off by severely restricting change orders or just outright saying, no, we do not do them. They’re too much of a headache. It’s not worth the risk right now. 

Daiana: And I remember we spoke about the blind change last week and the yeah.

Rick: Yeah. Blind change orders. Exactly. Was where you just, you don’t know if you can get the product, you sign the change order you give ’em a price. And then all of a sudden you find out the product’s not available, and then by the time it is available, what happens, the price goes way up. So it’s just man, it’s, it’s a can of worms, Daiana. So, I know you did a change on your, on your project yet at that window, but you know, the guy was smart. I think he had the window, didn’t he?

Daiana: Yes. Yes. I was lucky actually. 

Rick: Yeah. He had the window and he had the labor as well. I think his, his guys were still there so they could, they could put it in. So you requested that change at the right. 

Daiana: Yeah, it seems that they’re resourceful. So it’s good to have a resourceful builder. 

Rick: We have to be resourceful. Exactly. 

Daiana: Right. And what’s the winning number three? 

Rick: So number three was production slot schedules. And this is the big one, part of our revenue and profit package. This is really what we wanna teach you guys. And we’re working with the association and professional builders, but teach you guys to actually let your production drive sales in that, in that we can, we can create a lot of urgency through scarcity. So production slot schedules are simply where you look at your ability to start a specific amount of jobs per month, as an example, or per week. And then you actually put the names in, of those clients before you ever start them. So two biggest frustrations for clients this year was it took forever to get a job started. Well, why? Because of you, we signed a contract, and then we tried to run things as normal. But those builders that actually went to slot scheduling where they said, okay, we’re, you know, it’s December right now as an example, we’re gonna start you in may, man. That’s six months away, but I set the expectation. And then I know that I can, I can follow a process of getting my selections done and even con-confirming my pricing well, before I ever started the job. So very, very important to look at production slot scheduling your margins are gonna go up. Your efficiency is gonna go up. Everything is better using production, slot schedules, and the bottom line. It’s easier to sell. 

Daiana: Yes, that’s true. And the last win for 2021?

Rick: Well, we’re talking home builders only, but by far the biggest winter winner of 2021 was spec homes. Now, last week we talked about some of the mistakes that you made with spec homes, which was selling them too early. But the biggest winner of 2021 spec homes was because of the profitability of spec homes. And it was one of those things that the delayed construction schedule just helped us. Many markets saw some right around a one and a half 0.1 to one and a half point increase, appreciation every single month. So if it took you a year to build a spec home, the longer you waited to put it on the market, the more it was worth. And so if you did it right, you put it on the market where the appreciation level of your market outpaces your increased costs, worse. You’re able to identify your costs. You’re able to take advantage of an appreciating market. And a lot of times you got multiple offers. And so you got even. More money than you would’ve sold it for if you, just putting it on the market for what you thought the current value was. So spec homes were hands down the biggest winner. I heard something I thought I would never hear before, which was some of my clients were saying they had to sell spec homes to make up for the losses of the pre-sold. Normally it’s another way around, right? We always have lower margins on specs and higher margins on pre-sold. It was the opposite. So it was definitely a bizarre world here in 2021, but those are your, your big four winners end of or excuse me, allowances and escalation contracts, streamlined selections and change orders, productions, slot scheduling, and then spec homes. And Daiana, I don’t see any of that changing here for 2022. I think these, these winners are gonna carry right over to the new year. 

Daiana: I’m looking forward to, seeing and finding out and having our conversations about that. So now…

Rick: In, in 2022, exactly. 

Daiana: Yeah. So what do you recommend us to do before Christmas?

Rick: Before Christmas is, you know, take advantage of our 30-day leading booking challenge, you start selling an extra one to three jobs every month. You don’t have to lift a finger. We talked about a little bit with our revenue and profit package. We’ll come in, we’ll book all the appointments for you. You pick and choose the leads that are best for you, and maximize your revenue and profit with every single sale using production-based selling. So next week, what are we talking about, Daiana? 

Daiana: How to crush it in 2022. 

Rick: So yeah, we’re gonna, we’re gonna put to, what’s that?

Daiana: That’s part one.

Rick: Part one. Exactly. So part 1 of 2, we’re gonna wrap up the year with this and just give you our takeaway from what you should be doing and position yourself for success here in 2022. So for my brothers and sisters in Christ, me, the grace of the Lord, Jesus Christ, the love of God, and the fellowship of the holy spirit. Be with you all. We will see you next week. Bye-bye.

Daiana: Talk to you soon. Bye.