Episode
235
Feb 20, 2024
Want high-end construction projects that unfold like clockwork, without unexpected hiccups?
It's not a fantasy; it's the world of luxury pre-construction agreements.
So, let’s explore it with John Gioffre, owner of Revent Builds in Austin, Texas.
John's expertise extends beyond luxury construction to in-house videography and coaching.
With a construction enterprise worth millions, John shared how to use pre-construction agreements to build luxury homes.
The advantages of pre-construction agreements
Before we dive into how to move up the market let’s briefly touch upon why pre-construction agreements are beneficial.
First, you avoid getting taken for a ride by clients who want free estimates.
It’s frustrating to spend hours on free detailed bids, just to find clients running off to your competitors.
Second, pre-construction agreements protect your time invested in consultations and bid preparations.
They help you get paid for the value of your expertise (not just the homes you build).
They allow you to set a tone of seriousness and professionalism, fostering mutual respect between you and your clients.
Going from $30,000 projects to million-dollar jobs requires more than just solid building skills.
Here's an intentional roadmap to accelerate your road upmarket:
1. Make sure your team can handle bigger projects
Before gunning for bigger projects you have to know you can actually deliver.
When building a team, test workers with smaller projects first.
Assess their ability to handle challenges, meet deadlines, and maintain professionalism.
This approach lets you surround yourself with reliable team players, so you can take on more extensive ventures.
2. Embrace the 'Fake It Till You Make It' Mindset
While you may not have experience with larger projects, make bids and express your unwavering belief in your abilities.
There's a fine line between dishonesty and projecting confidence.
Be transparent about your experience, but also highlight your strengths.
Don’t exaggerate, and again - make sure you can get the job done right.
3. Leverage Your Cost Advantage
You might think larger companies have the upper hand - and in many ways they do.
The experience and higher operational capacity is an undeniable advantage. But it also comes with a significant overhead, so they can’t price as competitively.
Being a smaller player in the industry comes with a cost advantage.
Emphasize that without the burden of massive overheads, you can offer competitive pricing.
Convey that your focus is on delivering top-notch quality without the hefty price tag.
4. Grow Your Portfolio Incrementally
Seek opportunities to handle mid-range projects that demonstrate your ability to manage complexity.
Keep delivering superior results.
Gradually go for bigger projects until you routinely work on high-end construction.
5. Know Your Worth
Don’t stay in the lower price range forever.
Be selective with the jobs you take on. Say 'no' to smaller opportunities to make room for ''whale'' projects.
Establish a reputation for delivering excellence. Eventually, clients will seek you out for larger, more lucrative projects, so don’t stuff your schedule with smaller jobs.
All of this might seem scary.
If you’re worried about potential mess-ups while hunting for larger projects - don’t!
Mistakes happen.
In fact, you can be 100% sure they will.
But while mistakes are inevitable - willful negligence is not.
So they’re NOT going to ruin your reputation if you foster a culture of accountability within your team.
Clients appreciate honesty. Show effort in fixing mistakes, and you'll build trust for future work.
Now that you’ve got a way to move up the market, let’s explore the nitty gritty parts of pre-construction agreement negotiation.
First, you need to set the right tone during the initial consultation stage.
You can do it by introducing a retainer fee.
Even if it's a nominal amount, it requires clients to put ‘’skin in the game’’, so they are serious about working with you.
This initial investment also shows that your expertise and time are valuable.
While the pricing of pre-construction agreements varies based on project complexity, John provides a range from $10,000 to $50,000 or more.
This cost doesn't cover architectural or design aspects.
But it includes the coordination of various construction experts and consulting.
Second, you need to communicate what’s in it for your customer…
One unique advantage John offers:
Being the client's advocate when working with other professionals like architects or designers.
He holds subs and trades accountable for timelines.
For example - designers often have visions that do not align with structural or budgetary considerations.
His expertise PLUS network adds value and shields clients from potential issues down the road.
Third, encourage clients to be transparent about their budget
You need to discuss the customer’s budget upfront, so there are no surprises later.
Get clarity on their financial boundaries.
That way you can create a masterpiece that meets both their dreams and budget.
Discussing profit with clients can be a delicate matter, especially in the luxury market.
John takes an open approach.
He explains that the end price reflects the total investment, including materials and labor.
He doesn't think it’s appropriate to discuss what he personally makes. As long as the client is fine with the total price the profit shouldn’t matter.
At the same time, he communicates that he takes 50% upfront to procure materials and labor.
He also conveys that he doesn’t cash out until the project is done. This lets customers know he is incentivized to stick to the timelines and deliver high-quality work.
Now you might be wondering about managing client expectations and boundaries...
...especially when it comes to higher earners who are notorious for their A-type personalities.
The number one mistake contractors make is falling into the People-Pleaser Trap.
It’s tempting to give in to client demands.
But clients should not dictate the construction process.
Instead, contractors should assert their expertise and set the rules for a successful outcome.
So you need to establish non-negotiable procedures.
For instance, John firmly asserts control over material procurement, delivery, and handling warranties.
Let customers know that every aspect of the project goes through you, so you can avoid potential disruptions.
He insists on evaluating and approving any subcontractors involved in the project - including the ones proposed by the customer.
That way every individual involved meets your standards and expectations.
Maintaining control extends to job site access.
High-profile clients may feel entitled to drop by unannounced, but John sets clear expectations here as well.
Access to the job site requires an appointment.
John implements a zero-tolerance policy for breaches of trust, in any of these areas.
By being upfront about expectations and consequences, he establishes a foundation of transparency and accountability.
If you’d like to hear a more in-depth breakdown on how John uses pre-construction agreements to build luxury homes I highly recommend listening to the full episode 2 - 8 on The Profit Toolbelt Podcast.
Tune in for a wealth of knowledge that can reshape the trajectory of your business.
Show Notes:
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