In a slowing market for single-family homes, custom builders are reducing home prices to attract the fewer potential buyers that can afford today’s mortgage rates. As prices fall, home builders of all sizes find they can guard against money-losing projects even as the cost and complexity to build in the current construction industry remains high. They are getting the job done by strengthening how they identify and address construction risk management within their business.

Each stage of the build requires a different focus

Manage your construction risks early to protect profits 

For the client, building a custom home is a very emotional experience. Custom builders like you know that the most successful home construction project begins with clear expectations as to how long it’s likely to take and the costs that the homeowner pays along the way. Working with the homeowner as a trusted advisor makes decision making and the risk management process easier.

The best advice to provide the homeowner comes in the form of a clear and detailed quote at the very beginning of the build. This ensures that the homeowner understands the scope of work and the associated expenses because the detailed quote serves as the basis for the written contract. The contract is the common starting point when discussing any future disputes over variations.

Yes, homeowners are more likely in today’s economy to negotiate upfront materials to reduce construction costs, but you should always have processes in place when the homeowner changes their mind and asks for more expensive options on materials and appliances.

Document customer communication for greater risk control

Variations in particular present a significant project risk in an inflationary economy where material costs can widely fluctuate during the course of your project. Clearly documenting the impact of a variation on both the timing and budgeting of a home build is a great step toward mitigating risk and fostering greater client loyalty. Also, complex projects run more smoothly when financial documents are clear and easily referenced.

Accurately documenting costs does more than help you with potential homeowner disputes and strengthen your construction risk management. Upfront planning helps you ensure that you make money on your build. Clearly outlined costs help you manage your material and labor budget and calculate the right amount of markup to manage the financial risk your home construction business must confront in today’s economy. As you consistently document these expenses, you also learn to spot future opportunities for profitable projects.

As a project proceeds from the preconstruction phase and enters the build phase, you also should track your actual costs against your estimate to better understand how material costs can change over time. Using the right budget documentation, you will spot areas of future project risks—whether it be lumber, equipment rental or a labor cost associated with one of your tradies. 

Evaluate the safety of your team working at your construction sites

The health and safety of your team should be a primary concern when you think about risk assessment. Home builders like you constantly worry about the potential for injury or death. The list of trouble spots to look out for should be thoroughly reviewed on a regular basis with your team. As you know, a simple fall from a ladder can cause injury. Of course, the best way to face any safety risk is head on.

There are many online resources available to help you plan and prevent job site injuries but don’t forget—to begin planning against any type of safety risk, you must know who will be on your job site and when.

To understand this, adopt a clear schedule of job tasks as early on in your project as possible. Over the course of a build, you can have up to 20, 30 or more tradespeople on site at different times. It’s up to you to know when these different people will be at the job site and inform them of your risk management plan by having them attend regularly scheduled safety meetings. 

Include material management as part of your risk assessment

While employee safety at your construction sites is of paramount concern, proper scheduling also brings you benefits that help you reduce financial risk. By having a set, clear schedule you can ensure that the right materials are on site when your work team needs them.

Having to reschedule a subcontractor due to material delays or shortages can wreak havoc on your schedule. Subcontractors are often spread thin across multiple construction projects and can’t always quickly return to your project to finish a task on time. Also, unpredictable material prices could bust your budget if you have to make too many last-minute purchases and rushed deliveries. 

Software improves how you implement risk management for your business

Today’s economy of high interest rates and rising costs leaves little room for the errors that project managers can make when using pencil and paper. And when it comes to spreadsheets, and who has time to build or to copy all the custom formulas needed to estimate and quote your custom projects?

Top performing construction risk management software provides a single platform that tracks your projects from the earliest material takeoff to the final customer invoice. Administrative tasks that may have kept you pinned behind your desk take far less time using software, and it stores your documents in a single, online environment that keeps you organized and on track.

And today’s modern software also integrates your project budgets seamlessly with top accounting software like Xero so that keeping up with your financials has never been easier.

Ready to improve your risk management plan?

Have confidence that you can improve how you manage your home construction risk. Learn more how software can improve your construction risk management by visiting Buildxact. There you will find information about pricing and how you can sign up for a 14-day risk-free trial or book a demo of Buildxact. Speak to one of our expert team members and improve your risk management plan today!

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This meeting—typically among you, the homeowner and architect—provides opportunity for the project team to ask questions and address concerns. Taking time to thoughtfully plan and prepare your home construction project saves you from numerous change orders and last-minute material substitutions and orders.

This meeting should take place soon after the homeowner and designer have drafted a scope of work and budget. As a builder, you want to discuss these two important documents to avoid signing on to an unprofitable project or committing to a schedule that you cannot meet.

You should also be careful when agreeing to jobs that have a lot of gaps in design detail. Negotiating projects like these often requires a cost-plus contract that carries a lot of administrative time for you to manage. 

With all this in mind, it may seem obvious to hold preconstruction meetings, but many builders neglect them. Let’s review why you should prioritize them.

Know the basics of preconstruction meetings

When planning your next preconstruction meeting, keep in mind three fundamental goals – review the job scope, define the job schedule, and optimize the budget and associated costs. 

Scope review

You need to review the project scope with your project manager, tradies and suppliers. This includes an onsite inspection of the construction site and confirmation that drawings have the detail necessary to determine what you can affordably build at the site. Additionally, you also need to ensure your dealer can supply all materials included in the specifications when needed.

Scheduling review

Accurate material deliveries depend on a detailed schedule. The project manager or general contractor needs to ensure the schedule maps out the availability of each subcontractor and trade team so that major components like trusses arrive to the construction site when needed.

This involves reviewing both internal project deadlines and project aspects as well as any external constraints. As a builder, it’s critical that you plan material deliveries with your dealer. Material shortages can cause you to miss the times when your tradies plan to be on your job site. You must remember to properly sequence work. No team should wait idle while material or equipment arrives to the job site

On average, material delays cost builders up to $5,000 per project.

Budget management

Having a preconstruction meeting will help your overall budget management. Expectations and dollar limits set beforehand ensure that all stakeholders remain informed of major milestones and their funding. This ensures proper cash flow to complete the project, and you lose no time to last-minute material substitutions. And remember, make sure the homeowner knows to approve all cost and material decisions for the entire project.

For example, it may be many weeks before interior work begins, but you and the homeowner must be clear on materials, associated costs and budget. You and the homeowner need to clearly itemize choices about doors, windows, flooring, paint.

When you do have to make changes, you raise your customer service when you use a system that easily incorporates costings, change orders and customer communication. Modern construction management software offers these capabilities typically at an affordable monthly cost.

Other benefits of a preconstruction meeting

Once you’ve agreed on the scope, schedule and budget, you have still other topics you can cover in your preconstruction meeting to boost productivity.

Set job site expectations

Throughout the job, you will be working with many different trades. Before a project starts you want to clearly establish quality expectations and explain to how your job site will run. You can discuss what time work crews should arrive and depart, safety procedures, and what clean-up should be done before a team leaves each day. Take the time to explain things clearly. Make sure everyone feels like engaged with the process.

Have transparency and clarity

It is important to be transparent with your team about your expectations and how they communicate to you. This means communicating your vision for daily operations as well as telling your team how they can provide regular feedback. Modern software designed for quick adoption by you offer features—like note tracking, online schedules and client portals—that make constant communication easy.

It is also important to be proactive in your communication and to keep everyone updated on the project’s progress. To be productive, it is important to have meeting minutes and notes that everyone can refer. Client portals make it easy to store notes and project photographs from a central location that everyone can access via laptop at your job site.

Avoid re-working jobs and costly delays

No one wants to constantly revise and re-do their work. This, of course, wastes time and money. As a builder you need to be on the job site supervising work, ensuring the right materials arrive as promised. Many builders like you use cloud-based construction software to cut down on administrative tasks that keep you pinned behind a desk. For example, integrated material supplier pricing, speeds up the time needed to submit orders with your preferred suppliers, and when needed, can the builder can place research orders from anywhere that has an internet connection.

Identify potential issues

Avoiding complexities and expenses during the construction process saves you money in the long run. Many builders find that learning how to use software tools like Buildxact makes them better builders.

Ready to learn more?

For more information about how construction management software can help you run preconstruction meetings, try Buildxact. Book a demo or free 14-day trial today!

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Imagine a situation where the more you work, the higher chance your business goes bust. The problem becomes even more pronounced in periods of high interest rates, slowing activity and rising construction costs.

In spite of all of this, and no matter the urgency, for many home builders construction cost forecasting proves too time consuming. Others find forecasting difficult and don’t know where to begin. This doesn’t have to be you. Today, tools exist that make forecasting a simpler, more predictable process.

What is construction cost forecasting?

A construction forecast, or construction cost estimate, lies at the foundation of a profitable construction project. It contains project design, labor and material costs, while also outlining job schedules and any indirect costs that arise.

To create an accurate construction forecast, you must break down the project into individual tasks. These tasks have associated labor and material costs that you line item based on a takeoff. Once done, you have a forward view of costings and associated milestones. From this, you can create material deliveries and schedules for tradies.

With this information in hand, you now can consider the risks and associated indirect costs that often go unseen when a project first begins. For example, often the rising cost of living, inflation and associated pay rises are forgotten when costing. Working this out in advance gives you time to prepare. Now, you have an accurate construction forecast that you can clearly communicate to your client. More upfront client communication means less surprises and less change orders.

Further benefits of construction cost forecasting

Imagine knowing the profit margin of all the jobs you have planned and have under way. This can inform you on what additional jobs to take on and the ones to avoid. Picking the right projects for your business is critical to managing long-term financial risk. Other benefits include:

Cost control, not cost spirals

Making sure your project costs are under control and on track throughout the construction process is vital to keeping a budget. With cost forecasting, you can quickly spot overspending and make immediate changes. Very often, a basic lack of planning leads to going over budget. Whether they are direct (like labor costs) or indirect costs (like insurance or rent), you need to know your limits in advance.

Plan more, react less

Having a cost estimate makes for better-informed decisions. You may determine that the project plans are too ambitious or that the client’s preferred materials prove too expensive. With construction project forecasting and risk assessment, you also can determine if specific projects need to start at a particular time of the year—perhaps due to weather or the geographic location of the job. Well-constructed cost estimates will guide you in making the best decisions for you, your clients and your employees.

Cash flows, not cash crunches

Very few construction jobs, especially for builders like you, give you an unlimited amount of money at your disposal. With real-time data, you can pinpoint potential budget blowouts quickly. By ensuring milestones are met, you can be sure projects proceed as plan and their associated revenues come in as they were planned. The last thing you need for proper cash flow is to have payments withheld from dissatisfied clients.

Digital forecasting for construction projects

By now, you probably understand why forecasting is important. Today, modern tools are making this critical step easier than ever before. Here are a few examples:

1.    Let’s say you have an estimate for a small residential community. Because all 10 of the units are the same, you can prepare one detailed estimate and multiply that by 10 to calculate the overall cost. Today, you can use modern cloud-based software to help you create that estimate. The best software on the market integrates with your favorite material suppliers who can assist you. Your suppliers can ensure no critical items are missed because, in this case, mistakes are multiplied. Imagine having an estimate where you forgot to include interior doors. With five doors to each house, that is 50 doors that haven’t been budgeted. And because you missed the order, they may not be available when you need them. With modern software, you can avoid pitfalls like this.

2.      At other times you will have a single job that actually repeats something you did months or years ago. With modern software, you can easily use historical data to quote for the new project because software allows you to create templates from past jobs. The templates save you time because you don’t have to build a forecast from lost notebooks or a faded memory. The templates also give you the flexibility to make adjustments based on current events. Say, you realize you hadn’t considered how higher fuel prices have impacted material delivery costs or that labor shortages require a shift in your material choices. With modern software, making those changes to your original template are no trouble.

With this mind, take a look at Buildxact. The software makes estimating quick, easy and accurate.

Construction management software eases cost estimating

A good platform like Buildxact offers many benefits for small builders, construction companies and tradies. In one place you can:

• Perform your cost estimation 80% faster and more accurately;
• Communicate and collaborate with suppliers;
• Centrally store all project documents, information and change orders;
• Track job progression, tradies and laborers;
•   Integrate your accounting software and manage project budgets;
•   Access your projects from anywhere that internet connection is available.

With Buildxact, you will finish your construction cost forecasting much quicker. If you are not sure how the software can help you, why not try a 14-day free trial and see how Buildxact can help you develop better forecasts?

Good data, entered into good construction estimating and management software, propels your building business into the future. Don’t waste your precious time or money and get in contact with Buildxact today.

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