Read the full transcript
Transcript from the episode’s captions, lightly cleaned up. Speaker changes start a new paragraph.
I thought the bird noises be good,
You know. All right, welcome to Quailcast. I am here with my good friend Matthew Cole. Matt, thanks for joining me today.
Happy to be here. It’s the first time on the podcast.
Yeah, it I’m I’m genuinely excited. Normally I start with a question, but today I just want to say I’m genuinely thankful for our friendship. Thankful to be here with you. Like this is just Yeah. You’re you’re a good friend in this moment.
No, no. It’s shocking how awesome our families mesh and how fun our friendship really is.
Oh, it’s it’s a blast. It’s a blast. So, the the fact that you can show up at a studio, you’re you bring your kids in and we’re all hugging each other like
I think you I think you might have the only kids that aren’t in my family that all just like see them and grab them and start hugging them and throw them around like they’re my own kids.
True. I love it.
Well, technically they’re cousins so
Yeah. Yeah. Yeah, that’s my my kids were literally asking that today. They’re like, “So, are we actually cousins with Chloe and [laughter]
Put things together?” Mine are strictly just cousins going.
Well, they’re pulling up the accountability chart and they’re like, “How how does this all connect?”
Yeah. Yeah. Yeah. It was a fun ride.
Yeah. Yeah. Definitely. So, let’s let’s talk a little bit about home building. Let’s do it.
So, MDC Homes, who are you guys? What do you do? Just introduce you to yourselves to to my world.
Yeah. So, we are a custom home builder out of Chattanooga, Tennessee. We build primarily on two mountain tops actually in Marian County, Jasper Highlands, and River Gorge Ranch. Basically, we’re full custom from time you buy the land to time you move in. We’ll handle everything that needs to happen. But we I wouldn’t say the retirement communities, but our market’s closer to the 50 plus type of market or either second home or retirement homes. So they’re coming into Chattanooga looking for kind of that last build and we kind of got them to architects and got them through planning, pricing, all the steps that they need to do.
But you know, we’re getting into our third year of of of of business and it’s been
It’s been a lot to learn.
I heard somebody say trees to keys the other day and I
Trees to keys. That’s a good way to put it because Yeah.
Yeah. There you go. There you go. So now if somebody is, you know, if somebody’s out there looking to build a home, do they go to an architect and then come to you? Do they just go to you and you pull in an architect? How does that work?
Yeah, I you know, I think we always kind of say marry the builder, date the architect. So I would say it makes sense to go to your builder first.
So let’s pause there. Are you advocating for multiple relationship? For sure. Yeah.
We only build one at a time. Okay. Then and then we No.
Yeah. It. So, you know, your architect’s going to be there from the beginning. The way we like to do it, they’re not going to go through the entire build. I know there’s architects that do that, but that’s not how we how we do things. So, really, you’re wanting your plans and what you’re developing to match what your your builder is going to do for you. So, he’s going to want certain things. We want certain things. You know, you want to have that preliminary meeting with the AR with your builder. You may have an architect you want to use.
Yeah. But you also want that relationship between the builder and the architect to go well. So either you need to introduce them or like for us we have three or four that we’ll recommend because we know what they’re going to produce that we know where all the stuff is on their plans and that way it’s just a smoother process versus
Online plans draftsmen someone we don’t know and we’re looking for things and you know a lot of times architects will put things in plans that you never talk to them about and you have no idea that it’s in there but it’s adding cost to your build. So
So I know your background probably more than most because we’re we’re kind of bffs.
Yeah. So, I know you were in project management and and management, people management, project management on on home building for a long time. As you stepped in and started MDC Homes, what were the things that you were saying, “This is what really matters to me.”
Yeah. So, really, it’s it’s processes. It’s not reinventing the wheel. It’s doing the same things. You know, we’re doing custom builds, but that doesn’t mean that everything has to be reinvented. So, you know, the way we do our waterline, the way we do our excavation, the way we have our framer come in, how we’re doing our lumber packages, the the quantities and the descriptions may change, but how we’re laying it all out there needs to stay the same. So, that you always talk about we’re going to build that row for the further old, we’re going to have all the things we’re going to do on all the steps, and then when the variables hit, we’re not rocked because we’re just, you know, we can deal with those, but we know where we’re supposed to be going.
And if you don’t have those processes in place, you’re going to miss things. You’re not going to be planned. You’re, you know, you’re gonna have to take a step back to take a step forward. So, it just works a lot better if you know this is how we do our lumber package. This is how my framework this is then I’m going to I’m going to call this guy and then this guy.
Yeah. So, really it’s it’s starts with the processes of the build. It starts with the continuity of of what’s my subbase. Do I have do I have enough subs that I can handle the workload we actually have coming up? Do I have one plumber? Do I need three plumbers? So constantly making sure that you have enough people, but also that your subbase knows exactly what you’re looking for. So
So, so I, so as you stepped in and said, “Okay, I’m going to start my own builder here that you want to be a process focused company.” what else matters as far as like how you run the organization, how you show up for your customers? You know, transparency is a big word and it’s kind of a big buzz word in construction, but what what that means for us is that, you know, we’re going to have a detailed spec sheet. We’re going to we’re going to try to lay out here’s what we’re doing, here’s what we’re not doing. You know, here’s your plans.
If you’re unclear on how your back porch is going to look, then we have not made it through estimating yet. Okay?
You know, and that works for you so you know exactly what you’re getting. But also, as your builder, I need to know that. And I’d rather figure it out in the office versus in the field trying to, you know, trying to put things together when it’s actually crunch time.
Yeah. Yeah. So transparency, that one always cracks me up because I do hear that a lot in construction, which is it it’s a flag to me because it’s always like, you know, when you hear somebody and they’re like, so honestly, and it’s like, wait a minute, why are you bringing, you know, if I’m being honest about it, it’s like, huh, interesting.
Well, I wasn’t going to be transparent, but
Sure. Sure. Yeah. Yeah. So
Yeah, it you’re not wrong there. And I think for us it’s it’s when you know trust is the number one thing. It honestly is. So if you can’t trust us, if you don’t think that we’re being upfront or that, you know, there’s some stuff in the spec sheet I don’t really understand or doesn’t list very, you know, it’s pretty gray,
I mean, a we need to iron that out, but you need to trust that we’re we have your best interest at heart. We’re not trying to,
You know, hide some stuff over here or, you know, play games on this side. It’s it’s going to be upfront. And when you walk away, you’re like, I understand exactly what’s about to happen. I know I have a clear process about the next steps, the process, you know, all the way through the end of the build, who who my project manager is, what selections looks like, and if you don’t, then we’ve done a bad job of of setting things up. So,
Yeah, that makes sense. Now, when when let me put myself in because my in in the seat of one of your clients. So, you know, my wife and I, we’ve, you know, we’ve we love our house. We’ve got our home. You know, like everybody, you search Red Fin and you find the different lots and you’re like, “Ah, you know, maybe we maybe we sell our house and build one and, you know, build our dream house.” You know, if I’m if I’m talking to you, I’m a prospective buyer. There’s a lot of builders out there. Like, how do I how do I sus through the good ones versus the bad ones?
Because that’s it’s not like I can just go to Google reviews. You know what I mean?
Sure. Sure. Like, how do you actually sus that as a
My first thing is, do you know someone that’s actually built with them? If you can find an actual client, whether you know them or they’re someone who you you know they recommend talking to this person. Yeah, that’s a great source. Start start there. Finding someone who’s actually gone through the process with them.
Let me let me wedge in here cuz I don’t want I am almost I’m I’m this way when I’m hiring people or you know finding a partner. I don’t want their referrals cuz like you know you know they’re going to give you good referrals. How do you find people that have built with somebody that aren’t the referrals? Can you do that?
So for us it’s pretty easy because with the two neighborhoods we have there’s only about 10 builders in each one and so if you want I mean and a that’s all they talk about. So everyone is going to say oh who’d you build with? So it’s going to come up pretty quickly. So that word of mouth for us I mean I don’t I know not every market is that but
That’s a I mean honestly I don’t really know because that’s that’s the only world I know of is just in that neighborhood.
That could be a business for us to launch. I don’t hate it
Because you’re I mean we’re unique though. We give you a list of basically here’s all of our current builds and all of our our past builds and we don’t So it’s, you know, here’s 15 or 25 names that you can go through and pick one.
Oh, interesting. You know, so it’s not three, you know, that’s that’s a big difference of like, yes, here’s our top three. Don’t call four. Yeah.
No, here’s all the names.
This is embarrassing for me because you all might not know this, but we’ve been I’ve been doing some consulting, some work with your organization. I didn’t realize we did that.
Yeah. That’s awesome. Yeah.
Okay. So, if if I’m a prospective client, one, you’re going to hand me, hey, here’s all of our builds. Okay, I like that.
So, how else, you know, how do I differentiate between, you know, of course, talking to people that have built with them. What are other things that I can be on the lookout for as a potential buyer?
I mean, I always say if their car is wrapped and they have all the all the gimmicks that it’s probably not a good fit. You know, there’s a reason they can afford all all the bells and whistles. But, no, I think, you know, it’s because it’s all about trust. It’s about that relationship. So really, do they get back to you quickly? Do they seem upfront? Do they have a process? Do they feel like you’re bothering them or are they happy to talk to you? You would be surprised how some builders don’t want to actually have new clients come and and ask them about building. So,
You know, it I would say it’s really easy to lose a client on the front end because there’s not a whole lot to go by. You know, I can I can show you a house, you can say, “Look at the quality and it’ll check out,
But that’s one build. There’s 10 other ones that you don’t have time to go see. There’s other clients, but you know, it’s really as you’re going through it, what does their process look like? Do you feel comfortable with like are they pushing you or are they letting you kind of you know what when do you want to build? What we do is we start like when do you want to move in and [clears throat] let’s work backwards and then we’ll kind of lay out a general schedule.
You know, it like I said, we’re not reinventing anything. So, if they’re if it if they don’t seem like they have a process in place where they don’t know, here’s how we’re going to walk you through to the end of your build, that’d be kind of a red flag. So, I’m putting on my prospective client hat again, and I I worked in commercial construction for about three or four years, and it was for a design build firm, and what always just murdered people. What they hated was it we really had to get really far into the process before we could actually give accurate pricing because it’s like you’ve got to get through permitting.
You’ve gota you’ve got to have all the eyes dotted and tees crossed before you know what you are going to be allowed to build before you can go price that out. And it it was really it it it was really hard for clients because you know it it’s what I want to know like what’s the cost of this like what is that journey like for in home building like when when is it like a like an educated guesstimate when can you actually get like informed pricing as a buyer? So we’re again a little different because we know that what the permitting looks like. We know kind of the parameters of what you can build, what you can’t build.
So just because the the two subdivisions we’re in,
You know, if you want certain features, we know that’s that can work or that can’t work. So for us, you know, if you show me a plan, we can give you a ballpark. It’ll get it’ll be minimal onepage information with a price. What we have our clients do is they’ll they’ll go to the architect, they’ll go about 75% through of their plans. At that point, I want to see the plan. We’ll do basically an initial estimate where we’re going to put
A decent amount of work into it. We’re going to go through all the numbers. We’re not getting real quotes and we’re not sending it off because there’s just too many plans floating around for for that to work. But
We’re going to go through of okay, it’s a 2500 foot house. It’s similar to this. Here’s here’s an average allowance for cabinets and windows and it’s double hung. So that that should be about this. So, and we’re gonna air on the side of the higher end because I want I want what I want is when we do that ballpark for it to be closer to the higher end of your budget so that when we get the real plans, we can tighten things up that you know you’re well within where you need to be. But at that 75% mark is where we’re going to be able to provide you a pretty accurate number.
There’s there’s variables and so it depends on what you what appliance package you want and what features you really want to do. But we like to do that so that as you’re finishing your plans, if you’re $100,000 over, you know that before you finish them, you send it. When we go through all these other steps.
Yeah. So that’s that’s really
That’s kind of where we’re unique. We can get pretty accurate on, you know, just with the 75% mark of of your four plan.
Okay. Like pretty accurate like plus – 5% accurate like
Two 3%. Okay. Okay. Do you guys measure that?
I do. Okay. All right. I should say do we measure that? I know it’s it’s it’s a funny thing.
Yeah. And and because really the reason I know we measured it is because when we would kind of like it should be this but let me lower it just kind of like make sure we’re you know kind of competitive.
Yeah. Then when it comes time for me actually do your estimate.
Yeah. Now I’m $100,000 over what I said in your ballpark. Your plan hasn’t changed and you’re sitting there like, well, what was that first number about?
And so, you know, that’s why we’re trying to be on the higher side of that, you know, and then there’s certain features that we need to have, you know, conversations about, but we can get pretty accurate with with, you know, that way you’re it just goes a lot better when we actually do the estimate as we take it, you know, a half step backwards, John, your pricing versus adding a lot to it. So,
Yeah. So, one of the things that I I saw a lot on the commercial side, I assume you that that you see this on on your end, just very wildly different pricing. Like sometimes there can be, you know, if you’re doing a a build that’s, you know, $800,000, there can be 150k delta between one bid and another. How how does how does somebody kind of why does that happen? And how does somebody figure out like what is accurate? Because like we’re friends. I love you. Like, our families love each other. If I’m gonna save $150,000, I mean, like, I’m still gonna build with that guy, right?
Taking bread out of Chloe’s hand as she’s trying to eat.
Well, when you put it that way, I feel
Paid the extra I’ll buy her $1,000 worth of bread.
I’m getting somewhere, you know.
Yeah. No, it’s it’s actually shocking how wide that range is. And I mean, I don’t know all the industries, but it seems like there’s not too many other industries that you get two or three quotes and it’s going to be $100,000 different, $200,000 different. I mean, some of that’s just how people price things. You know, there’s definitely going to be builders who want to be on the highest end and that’s where they’re going to land no matter what.
There’s also like what it feels like is it’s just pure margin. Like you’re just
That’s what it feels like. I don’t know.
There’s definitely that I would say that’s one aspect of it where you’re going to have a builder who if he doesn’t want to build a 2,000 foot house, he’s going to price it to not build it or it’s going to be a super home run for him. Yeah. Be honest, we do not do that because that’s I don’t know that seems on the not transparent side. How about that? But really what happens is if you want your appliance package could be 10,000, it could be 50,000. You start doing that across the board where your plumbing package could be 10,000 or 50,000.
It you know you need an apples to apples comparison first of all. Are they starting with utilities? Are they doing site work? Are they doing a concrete driveway or a gravel driveway? Yeah. So if you you know if you have two bids that are are completely the same detail-wise
Then you’re looking it should be pretty close then then it is going to need to be margin. Allowances are usually what plays a you know plays a role in that or they’re not apples to apples comparisons. That’s really because
I used to love going against other builders when they would give a one or two page estimate and then I have a 15-page estimate.
Yeah. And in my mind it’s like how are you building off of this two pages anyway? Like as the builder I want a lot more detail so we know what we’re actually doing.
Yeah. And then as a client, you’re looking at this thing and thinking, I hope they included mirrors. I hope they included the closets. And you know, there’s nothing in there or it says miscellaneous or
Yeah. You know, and then it’s just, you know, I mean, you can Google some stuff and probably get relatively close on a few things, but you know, when you have a builder who gives you 10,000 for Windows and then one gives you 40,000 for Windows.
Yeah. You may not want to spend 40,000, but you got to start questioning what brands they’re using and what quality they’re really putting in.
Okay. Interesting. Interesting. So, there’s selections is a piece of it. I know we do. Can you just explain the whole concept of the hybrid fixed price?
Yeah. So, you know, where we build is it’s on the mountain top. You have stone. There’s rock underneath all that. How much rock? We can’t tell unless we’re going to literally do probes every 10 feet. We’re not going to know what’s underneath it other than we’re on a mountain and the rock is there.
Yeah. So, as we’re doing excavation, essentially, if we were to do fixed cost all the way, for us to be able to do that, we would just need to assume we’re going to hit rock the entire way and we’re going to be adding tens of thousands of dollars to your build just in case. Well, that’s, you know, that makes no sense. So, what we do is it cost 15 on the excavation side and then we treat your your foundation as an allowance. And we do that for a couple different reasons. You know, we were building on actually a different mountain, but we started digging the footers and what do you know?
There’s a 1970s trash pile under your house. So all of a sudden we have to dig out all of that. Your footers go deeper. Your foundation wall is now like instead of four feet or about 8 feet. Those are things you can’t see coming until you start digging. Yeah.
So that’s where basically our our our hybrid comes into play. And then as soon as we kind of start basically framing everything goes to fixed cost because those are things where now we’re just building off plans and the variables are you know we’re taking that risk from that point on. But it’s just you know how many trees you have, how many trees you’re taking out at the especially in the estimating side. There’s all these details you need to go over and you can do site visits but you may want to take out a couple more trees you want you know so if you don’t have that as an allowance item you’re just going to have to add a lot more money on the front end so to me it’s more of a fair way of and we show our invoices on excavation of here’s what I’m paying here’s the cost
This is what it is this is for the scope and we try to be accurate we use historical data and what I really think is going to happen but you know it’s also one of those things you hit rock and is it sandstone or is it limestone are we hitting
Do you see more variance on the excavation in rock or do you see on the foundation.
100% excavation. I mean, we we’re pretty accurate with our foundations just because,
You know, you’re not hitting a lot of trash piles.
Yeah, that was a one time. That was a one-off, you know, but yeah, excavation it’s it’s actually I mean, if I had a better way to do it, I would love to because it’s just I don’t like having to tell the client, hey, I you know, I thought it was going to be 50,000, it’s 70,000. Which shocks me because we ran into this a lot. The commercial builder I ran and I I wound up calling rock just the Tennessee tax.
Yeah. We don’t have we don’t have state income tax.
Yeah. Yeah. Here’s here’s where we make it up for.
This is where they get you.
I was just listening to Bob Seager’s Solid as a rock
On this this morning. Actually, that said, it shocks me that like, and correct me if I’m wrong here, there’s not like there’s not technology yet to really figure that out ahead of time. Is that
I mean, I guess there’s LAR, but is that going to be less than what you’re spending in rock? I doubt it. You know, like in the commercial or in the residential world, you can do like a geotech study.
Yeah. Yeah. But they’re taking core samples and all it’s going to take for them to hit a boulder instead of a rock shelf. And the boulder could be something we could just pluck out and it takes 10 minutes. Sure,
A rock shelf is going to take a half a day, you know. So, it
It’s wildly, unless you’re just going to scrape everything down, you’re not going to see it. And that’s, you know, you’re playing this kind of a weird game of like, what are we doing right now?
That makes sense. That makes sense. What’s the what’s what’s kind of a like if you hit a bunch of rock like is that a is that like a I know this is general, but is that like a 25k? Is that
So, now you’re you’re like every client.
Yeah. Yeah. How much sitting in the client seat right now? Like what is the risk there? Like I just have no idea.
So this is this is a conversation we have from the beginning of what type of house do you want? I I think I want a basement. It has a good slope to it. Okay.
If you have a basement, we have less options of what happens when we hit rock. So that’s where if we need to go down 7t on the front because we’re hitting rock,
We have to go down for your basement. There’s no buildup. There’s no, you know, let’s avoid it and bring in soil.
That’s where you’re kind of locked in. Have to take that off. If you have a crawl space, then we have a lot more options of like, do we need to take it off everywhere or just on the footings? Yeah.
So, that’s that’s one where like immediately your house can change dramatically just like, hey, let’s assume or if we see there’s rock everywhere,
A basement’s a terrible idea. Or if you don’t have any fall on your on your lot, let’s not do a basement unless you do. So,
Those are the things that like let’s start there.
You still have an answer.
Hold on. This is a long-winded answer. I got to lay all the foundation here for So, if I’ll give you an example. We had one house that was 4 feet from the garage to the where the back of the basement should should be. That’s all the fall we had. Yeah.
Which means we needed to dig down about, you know, 6 feet, let’s say.
We hit rock after 2 feet. So we then that had to take about 4 feet down for the entire 2,000 that’s like 2400 ft of basement.
Yeah. That probably that build because here’s the other part. It’s not just your foundation. It’s your utility lines. It’s your propane tank. It’s your septic tank. So whenever we had to go down more than a foot, we’re hitting rock. It’s your power line.
Yeah. So I I mean I would say honestly that cost about $30,000 extra.
Okay. Okay. So that’s Is that the worst that you’ve seen?
No. No. We did a $20,000 power line that went 200 ft extra than what it should have been. Okay.
If we didn’t hit rock. So
Now thankfully his water line we didn’t hit rocks. So and I was
So happy because I was like I cannot believe how expensive this power line actually. But you know there’s you need power.
Yeah. Well and I will say from personal experience bury the power lines.
Yeah. There’s there’s some benefits.
For historical record, my we just had the ice storm a month ago and my power line weather had got ripped off of my house.
Yeah. So, yeah, I’m I’m I’m a big advocate now for burying those power lines
And and it’s one of those things know where you’re building, you know, if you’re by the river, there might not be as much rock. If you’re on top of the mountain,
Yeah. There’s rock. So, you need to kind of factor in
That, you know, and and I don’t I don’t get into people’s finances, but if you’re getting a loan, maybe you and you know you don’t have a basement, maybe you add a little bit for that or you have some money sitting aside. Just
I mean, I would I’d rather not use it, but I’d rather you not be stressed out overly because we’re hitting ground because there’s really nothing we can do about it at that point.
Sure. But that’s kind of the the biggest variable once you start building. Yeah. And a way to lessen that variable if needed is a crawl space.
Yeah. Yeah. Yeah, that makes sense. That makes sense.
So, so kind of coming back to like, you know, let let’s let’s put you in the seat of a a buyer knowing what you know now.
Be the worst client.
You really would be this rough. Well, like what would you be what how would you sus out? How would you assess a home builder like if you couldn’t build it yourself? Well, that’s a different world. I think it all it all starts with the willingness to communicate and are they answering your questions or are they giving you a long-winded answer around how much the foundation rocks going to cost, [laughter] you know? I mean, that’s honestly the first thing to go by and I would, you know, there’s boxes to check like do are they giving you references. Yeah,
You go with them, ask them, you know, just because if they may have one one or they may give you one that doesn’t have a great thing to say, but that’s all they have. So, that’ll tell you a lot right there.
But that communication of does it take him a week to get back back to you? Does it take them two days to get back to you? When you call them, is it always a struggle for them to do anything?
Now, builders are busy and you know, but do they have there’s builders who are building and there’s builders who own the company? Yeah. And have people who, you know, have people who handle things. We have a sales lady. She’s going to call you back in 10 seconds because that’s her job and that’s she and she’s very passionate about communication. And as a company, we’re very passionate about communication. So, that’s where it starts is how willing how willing are they to engage with you? You have questions, are they getting back to you or does it seem like it’s just pulling teeth every time you try to contact them?
Yeah. Yeah, that makes sense. What about would you do job site drivebys?
I probably would. I would. Yeah, especially if it’s unannounced and you don’t have to you don’t have to stop and go on it, but if you
If you look at their job site,
I’m not recommending breaking and entering.
Yeah. [laughter] And for the record, neither am I.
Yeah. No, it because you can tell a lot by if they’re finishing a house, but they still have foundation block.
Yeah. That to me means you just don’t care to get that off your site, which means you’re probably not treating the finished materials great either.
Yeah. So, you know, if you have the worst site in a in a subdivision, that’s one to avoid. Like those those things actually do mean a lot. If you go by a site three times in a month and you never see someone there,
Yeah. Now, there could be some good reasons, but if you you know, the more you kind of go by and there’s no one there,
Well, why? You know, there’s certain there’s certain times where maybe they’re doing cleanings, but if it seems like they should be doing the roof or finishing framing and no one’s on site. Yeah,
That’s a good sign.
Yeah. Yeah. The other thing that pops into my mind and you know I know on the mountain that you that you build on it there’s there’s you know it’s all of the builders there are approved and they’re legitimate companies and all that stuff but like I know there’s general contractors licensing and like things that you could set and check with the state and everything. You know really doing
Due dill. Yeah. I mean those are things that you want to check it and make sure there’s no red flags. Yeah. Don’t put, you know, that’s not your top.
That’s not going to tell you if they’re a good builder or not. That That’s going to tell you if they know how to fill out paperwork and get
Yeah. Which is still part of running a good business.
It It is. We There are some builders who couldn’t get their septic because they let their building contractor’s license expire, which is
The one license that you need. Yeah.
And thankfully we got
Yeah. Yeah. It’s true. Well, this has been great. Is there anything else that you would that you would want to add for people looking at MDC homes, people looking at building a a home that they should know?
Yeah. You know, I always say I’m really biased, but you have cost 15 and you have fixed cost.
Yeah. And they’re going to be two dramatically different building experiences. Okay. Not that the builder is not going to be, you know, they’re not going to be, you know,
Hold on, what’s the word? They’re not screwing you over, but you have no idea what’s coming over, what’s coming back. They might show you the quotes for the electrician at the front end, but that electrician quote in two months is going to be different. Your plumbing is going to be different. The, you know, the HBAC is going to be different. Those things, especially now with there’s tariffs, there’s, you know, uncertainty.
Yeah. If CO taught you anything, things can go up and they can go down and they can happen very quickly. You know, even I think four months ago, our our garage doors went up 25%.
That was not a small, you know, jump in price. So, when you have, you know, when you have a estimate at the front end, your build is going to look like you looking backwards. You’re going to be looking at those costs and hoping that they stay the same or you
I have a hard time believing they’re ever going to go down and so it’s more like if the plumber said 30,000 it’s probably gonna be 32,000.
Yeah. And that’s you know that’s one way to do it but that’s a very stressful time. Let me wedge in on this because one immediately that comes to mind is I feel so sorry for and you know there was like you know 5,000 people in the US that signed a cost plus contract like right before co and they didn’t start building for like 9 months.
Yeah. And then they were just you know the cost tripled.
Yeah. There’s a pocket of like from 21 to 22 that if you have a lumber package in that time you lost 50,000 immediately.
Yeah. Yeah. It’s it’s insane. But so one I feel bad for that but I ran into this a lot at the the commercial builder that that that I was at where you know the cost plus thing there’s two things that always drove me nuts about it because we did we did design build and we did we called it lump sum pricing very similar minor nuanced differences but we didn’t do cost plus
And we would often go up against companies that were doing cost plus work and the the two things that always drove me nuts were one the incentive is actually higher cost.
Yep. Which like I can’t get my brain past that.
I always give that example because it’s like if I go to Lowe’s to buy your, you know, tile mortar,
It’s going to cost $10 a bag. If I go to the supply house, it’s $5 a bag. Same product, no difference. Yeah.
It’s in my best interest to go to the place that’s closer and cost more money versus going to the place that’s going to save.
Cost plus 15. I get to add a $150 to the load bag.
And there’s nothing, you know, there’s nothing deceptive about that. No,
But that’s just human nature. Like, where am I going to go with something that’s going to take me longer to make less money or but for us as a company, we’re we’re going to go to the place that’s going to save us money because we’re taking that risk.
You know, your your cost saves the same whether we buy at Lowe’s or buy it at the supply house. Yeah.
But that’s just that just seems like that’s going to happen.
So, that that was the one. And the the other thing that was illuminating for me that like you know I my background is is in technology and it’s just it’s just different worlds but like I remember talking to the owner of that company about gross margin gross profit and I was like well what’s our gross gross margin? He was like well you know what do we want to show? I was like well we want to show what our gross margin is. He’s like, “Yeah.” So, and and he kind of taught me. So, like as example, if you’re if you are a builder that builds Starbucks, like you have to you you are not allowed to work beyond I think it’s like 8% gross margin.
So, you have to be at or below that. So what builders do is they get really good at charging for everything like putting all the employees to build cost.
You know charging for pencils and paper like everything is a job cost.
And that’s the other part that that always kind of blew my mind with that is you know you can you can show 8% net margin to Starbucks if you need to. It’s just, you know, let’s put let’s put a whole bunch of overhead stuff to the to drop cost.
Yeah. And it’s it’s kind of a shell game in in a sense. So, those are the two things that always kind of drove me nuts with the like it’s it’s too gamey
For me. Well, and I mean there’s also the concept of when you go to the selection or when the plumber submits a quote and it has $10,000 on it, was it actually eight and did they add $2,000
And then and the builder’s just pocketing that 2,000 or they’re splitting it? Yeah,
That’s that’s where you start getting into you’re more susceptible for the the fraud side of things essentially. And we’ve had a builder who got kicked off the mountain because that’s exactly what they were doing. Really?
Yeah. They were basically taking invoices, changing them, giving the client as cost 15, and then splitting the money, taking the money, whatever it looks like. So that’s like the nightmare part of it.
I don’t say that all the builders are doing that at all, but you’re like
There’s no risk of that on our end. Like we can’t do that. You know the price, I know the price, we agree on the price, that’s it. We don’t talk about the price again. Yeah. You know, versus you’re looking back on every single time there’s a, you know, an invoice.
Sure. And then, you know, there’s suppliers who like, how much am I putting on this invoice for you?
Yeah. And when for us, and I was like, and I would tell our team, they’re going to love us because we’re going to say, show them the exact quote that you’re sending us. Show the client that you don’t need to mark it up. You don’t need to change it. You don’t need to hide the price. Yeah.
It’s all going to be transparent. It’s all going to be in the open.
And everyone and that makes it so simple. Yeah. And and that’s that’s part of the transparency, too, of like you see what we see. We have you sign that. We are not changing numbers.
I I feel like I should know this. I feel like I’m learning about our company,
You know, as I it’s the office side versus the field [laughter] side.
It’s true, right? The the builders on the mountains that we we build on, are are most of them fixed cost? Are most of them cost plus?
If there’s 10 builders, I think I think there’s probably two other ones that are fixed cost, maybe three.
Okay. So, it’s mostly cost plus.
Mostly cost. Okay. I didn’t actually.
And I mean, I think they do that because of excavation. I think they do that because it’s it’s easier. Like you don’t need to be on on top of your pricing. Yeah.
If it doesn’t really matter. Yeah. You know, because I mean I I know our pricing because if I don’t know our pricing, we will not make it because if I think that
Like especially, you know, in 2020 when other things should cost about $200 a square foot and then six months later, do I not realize that things have gone up 30%. So I mean we’re constantly looking at where did that quote come in? What’s drywall at? What’s Lowe’s pricing things at? What you know what’s going to happen in the next three months? What tariffs are coming? Yeah.
So, I mean there’s there’s constant like, “Hey, change this. The plumber is now charging 605 for a fixture.” Yeah. Whatever it is. So,
Yeah, that that makes sense. Now, all that’s stuck in my head. You said excavation. All I can hear is the rancid song. Expectation. And now I think we need to make a excavation version of that song.
You know, I think we can use like AI. And do you do you have like any studded leather beds?
Ah, you know, it’s been a while. My leather collection is pretty lacking these days [laughter]
And I don’t think the world needs to see that. Honestly,
I I think it could be gold. So, I I want you
Gold is in the eye of the beholder, right? You know, like
I want to ask you to consider this as a friend.
This podcast is over.
All right. Well, all of that said, thank you for joining me. This has actually been great and Yeah. Yeah. I I really appreciate this.
Happy to do it. Awesome. Thanks.
