39 Years of Learning the Hard Way. Mark A Etrheim, Mastercraft Homes Inc

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2 39 Years of Learning the Hard Way Mark A Etrheim, Mastercraft Homes Inc

3 Marketing- You need to tell the world how good you are! Clear and consistent message. What makes you unique? Sales- You must be able to tell a compelling story and be able to convey you are worthy of being trusted with the customer s largest investment. Estimator- This either is right or too high to get the job or even worse too low and you get the job and pay your customer to work! This is Critical, this determines your success more than any thing else!

4 Accountant- If you don t understand accounting you will have a difficult time in any business, but in building you must be able to estimate the price and then compare that estimate with what it actually costs. How do you figure your indirect costs (Overhead)? Purchasing agent- Ordering the right thing at the right time from the right vendor for the right price Scheduling- Putting the right resources in the right place at the right time

5 Architect- You need to know how to interpret drawings and plans into reality Designer- Most customers will look to you for guidance in making the many decisions involved in building a home Engineer- You need to understand how a building works including structural, HVAC, Plumbing, Electrical, concrete, glazings, etc

6 Lawyer- Pay one to get a good contract or use the WBA one. It must meet the letter of the law, file your lien notices on time, write clear change orders, get your licenses, insurance, get your Employer ID number, workman s compensation, liability insurance, unemployment insurance, sales tax certificate, etc. Employer- Employees are your greatest asset, but can be a source of great difficulty if you are not fair or lack the ability to keep them productive. Safety Coordinator- Do it right, do it safely, a single injury can cost you your business if you are at fault. Figure out the OSHA rules that apply and then comply with them.

7 One step at a time- Organize, develop systems, figure out an estimating system that works for you, start with what you know, small jobs, new home, etc Keep costs as low as possible, don t go buy a new truck because you think it will make you look successful. Low Overhead does make a difference. If you are at 8% overhead and your competition is spending 11% of revenue on overhead (indirect costs) that gives you the ability to beat them by $9000 on a $300,000 home and make the same amount of money. Take courses, find mentors, ask questions, read, borrow liberally, most of this has already been done.

8 Lots of things can go wrong in construction, protect your personal assets by forming a legal entity that is your business Form an LLC- Cheapest, least amount of paperwork, good protection from personal liability Find a name, tell them who the owners are and pay $130. If just you or you and your wife, good enough, if others involved then develop an operation agreement and get everything in writing, who gets paid what, percentage of ownership, how you are going to split it up. Sign it before you start! Apply for an Employer ID # ml Find a good insurance agent who can help you determine what insurance you need and nothing more than what you need Sign up for Unemployment Insurance with the state

9 Learn how to do it yourself or find someone who can develop plans while working with your customer You are going to need to find someone or learn how to do it yourself ResCheck calculations, structural wall bracing plans, plot plans, erosion control plans, well permits, septic permits, driveway permits, zoning permits, dumpster permits, building permits, sidewalk, etc. A permit for everything it would seem?. Learn the code, it is complex but manageable in Wisconsin, it is available online at rm_dwelling_code

10 Buy QuickBooks Pro $184 Find a good accountant that understands construction, most do not. Set up the chart of accounts using the NAHB chart of accounts as a guideline, this will enable you to make comparisons with other builders easier. If you have employees, set up payroll so you can job cost the labor, add a payroll burden for non direct costs. Use QBP to create a Budget (estimate) vs Actual Job Cost that includes all costs. This is the single most important thing you can do to stay in business. KNOW YOUR COSTS VS ACTUAL! You can set up QBP to do estimates, but I think most construction is too complicated for the simple estimating system of QBP. All checks print directly from QBP, all deposits get tagged for each job, and generate all invoices. You need to spend an hour a week looking at the financial statements, Profit and Loss, Balance sheet, Job Costs, and Cash Flow projections. UNDERSTAND THEM! Notice what categories you underestimate and where you are over consistently and adjust the pricing. Notice which jobs you do well on and focus on getting those type of jobs.

11 Develop a 3-part NCR form that covers everything needed for a change order. What is changing, how much it will cost, how much longer it will take. Include the date it must be signed by for the price to be valid. Be specific and clear as possible. Get it signed before you do the work or don t do the work! NO EXCUSES. No verbal changes. s work great but remember all of the details above. When they return the with a go ahead, print it out and put it in the job folder. Adjust your Budget in QBP to reflect the increase in costs. Charge for them, most of the mistakes on a construction job is a result of not remembering everything the change will affect. Mistakes are where you will lose money.

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13 Develop a written scheduling system, look at online systems that help you communicate with your customer and keep them updated and making their selections on time. Try these Each job needs a job file with multiple sections, one for the signed contracts and change orders, one for the working contract, one for permits and inspections, material orders, one for the preliminary work, the quotes and the pricing. Keep all the job files up to date in one place in your office. Ideally all documents, pictures, selections, plans, changes, quotes, and communications go into this file. This will save you time and money, you will be able to find what you need. Saving everything electronically in a dropbox means you can use your smart phone to look at any of the documents you might need while in the field.

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15 Back up your computer using an online service, it is automatic, cheap (<$150/year) and will save your company the first time your hard drive fails. USE an online service to sync and back up all of your files, you can then access them from any computer. Try- Mozy, Google Drive, Carbonite, Dropbox, Quickbooks Use proven technologies, be the second one to use something new, smart phones, computers, CAD, ResCheck, Spreadsheets, , PDF s, etc. These are not difficult - do not be intimidated. They can give you a real advantage over your competition. Have regular Office hours, a dedicated phone line with voice mail, a company logo that is used on any vehicles, equipment, signage, ads, letterheads.

16 Develop Systems, forms, standardize as many things as you can. As you grow you want consistent quality. Forgetting is expensive! Assign primary responsibility for each aspect of the job to someone. Checklist for talking with Customers Professional services agreements for preliminary work Checklist for complete plans Checklist for Complete Estimates Checklist for a complete Permit applications Selection check List with final commitment dates Field crew reports Purchase order forms Warranty request forms The goal is to create a smooth running company that creates consistent profits, happy employees and trade partners, and Satisfied Customers without losing your hair. Spend less than you make and you will be successful.

17 Find the trades that match your style and quality level. Sit down with each one and tell them what you need. Create a standard contract that details all of the expectations, specifications and what happens if? Then use it every day. Include who cleans up, smoking policy, cussing policy, service expectations, warranty procedures, Scope of work, specifications, etc. Build Your Home With Confidence

18 Everyone claims to have high quality, but what makes you special? Great price with good quality, fast and on time, green and energy efficient, excellent craftsmanship, etc. Remember the four parameters, Quality, Service, Price, Speed. You can probably get 3 out of 4 to be who you are, but it is rare to be able to claim all four. Who are you and why should someone do business with you?

19 Tell your potential customers who you are in the least expensive way possible. Mass media marketing is expensive, probably too expensive for most small businesses. Social media, being involved in the community, job signs are cheap. Best marketing in the world is happy customers telling their family and friends about you. It takes time but word of mouth is by far and away the best marketing you can get.

20 Get organized, tell your customer the good and bad of what is going to happen during their home building experience with you Document what you are going to do for them and make sure they understand what that includes and does not include. Keep them on budget by finding out what they are expecting and pricing it right. Give them what you promised. Take care of the problems quickly

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