December 23, 2025 • 49 mins
Reece sits down with Chris Kerr of White Oak Home to debate fixed price versus cost plus, and what each model really means for risk, profit, and client trust. They get into the real reason fixed price feels simpler for a small team, why missing receipts can quietly kill margin, and how job costing changes the whole conversation. You’ll also hear how to think about overhead, project management fees, and change orders when the client is still deciding mid build. If this helped, share it with a builder buddy and check out Adaptive for tighter job cost tracking.
https://www.whiteoakhomenewengland.com
Show Notes:
00:33 Fixed vs cost plus
05:13 Meet Chris Kerr
08:17 Admin burden is real
14:38 Risk and upside
19:28 Budget vs actuals
22:03 Overhead and profit
26:17 Fixed fee PM
30:59 Trust and ethics
46:13 First draw next
Find Our Hosts:
Reece Barnes
Matt Calvano
Podcast Produced By:
Motif Media
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
In my opinion, that presents adegree of confidence when you
say to an owner, here's whatwe're going to do. This is
what's going to cost, and thisis how long it's going to take
to do it.
Welcome to builders, budgets andbeers. I'm Reese Barnes and I
started this podcast to havereal conversations about money
in the building industry, thewins, the mistakes and
everything in between. I believebuilders deserve to feel
(00:21):
confident about their finances,and that starts by hearing from
others who've been through ittoo. This industry can be slow
to change, but the right storiesand the right tools can make
profitability feel possible.
Let's get into it.
(00:43):
Mice are hot. We're rolling.
Mics are hot. I see it. Whatwere you saying?
Well, well, you had suggestedmaybe that I was against cost
plus. But you are, yeah, youare. I'm just kidding. I love
it, man. Debate makes good forgood, good content, right?
That's right. That's right. Youare more pro fixed price,
(01:04):
though.
I am pro a man who says whathe's going to do and executes on
that. So I love that. I sort oflive in this world where, like,
if you say you're going to dosomething, you go do it. So
between that and it being justme up until, I don't know, month
(01:24):
and a half ago, it's been ChrisKerr running white oak home,
management, estimating,invoicing, payments, everything,
man, wearing every hat. So like,I'm not to sidetrack this, but
I'm going through this growthphase right now, but I bringing
it back. I always just found iteasier to, you know, as a one
(01:44):
man shop, run run fixed costs,because it's like, I'd rather
spend the time up front. Go on.
Go ahead. Question.
I always say fixed price. Yep,you're saying fixed cost. I mean
the same thing. Okay, so whenyou So, okay, and I think that's
like, actually, like, a prettyinteresting way to look at it. I
(02:05):
didn't mean to throw you offwith that, but you would like,
you could argue that fixed priceis different than fixed cost,
because fixed costs would assumethat, like, you're like, signing
a contract, suggesting thatyou're not going to go over the
cost of the project, which isdifferent than the price of the
project, which would insinuaterevenue, including, I just
wanted to get that out of theway. That's fair, as long as
we're talking about the samething, that's good.
(02:26):
Yeah, we are. And you could alsocall it lump sum, you know, like
you've heard it all heard it wasthree things, lump sum. Look,
lump cars, lump cost, lumpprice. So the point is this,
right? Like, I'm giving you aprice, I'm defining this level
of scope in detail, and that'swhat I'm going to do, unless you
(02:48):
add something, change something,modify something, it's we're
going to deliver on what we'repromising. I mean, I'm, I'm
going so far as writing, we'reusing poplar trim, not finger
jointed pine, you know, I mean,like we're, we're getting into
that level of detail on theprice, okay? And the reason is,
again, it's just been me, Ifrankly, don't have time to,
(03:10):
like, get behind a computer andbundle all those receipts
together, take all the invoices,chase a guy for an invoice,
because we're trying to get thebill in for the foundation work
we just did, yeah, and so it'sjust, it's just, I found it just
easier to do my my billing andinvoicing that way.
Okay, so you and your hand onthe Bible. That is the reason
(03:33):
why you, well, one of thereasons why you choose to do
fixedover cost, plus, yes, and now
admin work that goes intoputting other draws. Go ahead,
yeah, absolutely.
Hand on the Bible, 100% and,and, like, mix it a little bit
of ego there, right? Like, Ijust, you know, I love to live
in a world where we get to shakehands and go do something,
(03:55):
right? Like, I just, there'ssomething, in my opinion, that
presents a degree of confidencewhen you say to an owner, here's
what we're going to do. This iswhat's going to cost, and this
is how long it's going to taketo do it. And we found some
success, you know, between meand the subcontractor team in
doing that, and it's worked forus now. Here's where I can spin
(04:17):
myself in circles and kind oflike have the own debate inside
my own head here. I thinkthere's a stigma, perhaps with
some with the fixed price, fixedcost contractor, where they're
trying to do it cheaper, right?
And I could be compellingconcern. It makes sense Go
(04:38):
ahead,for sure, yeah, and maybe this
is the boogeyman Chase. I mean,I don't know, but I think there
is a bit of a stigma there. Andso, you know, I've, as of
lately, come to the conclusionthat, like, Every job is
different, right? Like, ifwe're, if I'm getting hired to
do a job, like we just gothired, we're doing a we're doing
a. A cost plus job right nowwe're doing it. And what does
(05:02):
700 grandget you in? Hang up. What is
this like a bathroom remodel?
It's a historic barn, but yeah,gonna be awesome. I'm sure.
Wait, is this the one with thetimbers? Yep, yeah, that's
badass. Everybody who listening?
You go actually. And before weget too deep into this, Chris,
(05:23):
give them a little background onyourself. Where to find you
first?
Oh, sure. Yeah, no. Chris Kerr,we live here in Hingham. Wife,
three kids. Been working in thetrade since I was, I don't know,
14. I started as a plumber inSyracuse, New Minnesota guy,
yeah? Well, yeah, born inMinnesota, yeah. Born in
(05:45):
Minnesota, yeah. Father took ajob working for a plumbing and
heating company in Syracuse whenI was, like, in kindergarten. So
I grew I really say I grew up inSyracuse, New York. Son of a
plumber, rant ran copper waterlines said I'd never do this
again. I was going to get so faraway from the trades, studied
(06:06):
some economics, and, yeah, cameback to it. So I ended up
working right out of college. Iworked for like, three of the
bigger firms around Boston,which sort of honed the, I'd
say, honed the systems in, youknow, really, kind of got a real
taste of, you know, really, thesystems that go into
construction. But, yeah, sixyears ago, you know, I like to
(06:28):
say the corporate world spit meout. Got fired. Yeah, did you
rejected me? Yeah, I just That'sokay. I don't, I don't fit the
system. And it just the system.
The system told me that. So wefound a degree of success here
in and around Hingham in Bostonfor the past six years. I mean,
we've left a happy trail ofcustomers. And, yeah, we're
(06:49):
we're doing something right, andwe're growing. I mean, I
mentioned we've got the managernow. We have an office manager,
white oak Custom Homes, right?
Or why don't constructionwhite oak home? Yeah, it's
you guys are you guys aresitting up. I love it. I love
(07:10):
where you what you guys aredoing, Chris, because it's, I
think you guys are on the paththat a lot of builders are on
and want, or want to be on,because the level of product
that you guys are building isincredible, again, that's why I
wanted you to tell people whoyou were. So then go check you
out on Facebook, Instagram, notFacebook, Instagram, your
(07:31):
website. But point being is likeyou're in the stage of business
where you have a lot of thesequestions, right? You're
building an extremely high endproduct. Sure, you're starting
to have these, like, morebusiness thoughts and back and
forth of, like, fixed price,cost, plus why one or the other.
I'm scaling, I'm growing, I'mhiring people. I'm building
(07:52):
processes like, I don't want tolose the the beauty of a
handshake deal, but also knowthat it can open myself up to
some risk. And like, you'restarting to have those thoughts.
So that's, that's where I thinkit's good for people to find
you, to know who you are, and togo back into, not to deter the
conversation, but to go backinto the $700,000 project that
(08:13):
you're doing, and you're doingcost plus,
yeah, yeah, exactly. And, andthat's where, you know, like,
I'll just, you know, here I am.
I'll plug, plug adaptive in thisprocess of scaling. I mean, one
of the panic moments was like,how do I handle all these, these
invoices and receipts andpayments? I frankly, got tired
of, I mean, I had some contractsare literally chasing me around
(08:36):
in my truck. Like, where are yougonna be shocked? Yeah. And I
was like, All right, enough,enough, right? You will, I'm
going to hit the button. Theyknow now is the button, they
say, I I tell them, I go, allright, yeah, that looks good.
I'm gonna hit the button onFriday. So there's a few guys
will call me down, like, Hey,you hit the button yet? No, not,
(08:57):
yeah, I told you, told you,Friday,
do we got to get a shirt made ofthat adaptive shirts, like we
hit the button weekly. Do youpay from your phone? Do you pay
from the phonethe computer? I mean, it's just
wherever? Yeah, I love it. I dolike that. You guys are bringing
more features over to the phonebecause, I mean, as you I'm
(09:18):
sure, you know, like, it was abit limiting in the beginning,
too. We're like a threeyear old. We're like a three
year old software, oh, threeyear old software. Like, we're
just growing all the time. Andso one reason, I don't want this
to turn into a big plug, I'mpretty bullish about that. I do
appreciate you, you know,sharing an authentic solution
that we have provided to you,but we have failed go on in the
(09:40):
sense that you don't like costplus, because of the
administrative burden that comeswith billing and cost plus,
yeah, and that's like our breadand butter. I'm. Offended that
we have not shown you the lighton cost plus draws in adaptive
(10:08):
Yeah, and you're right, like,and that's like, I've said it,
like I said it to you at dinnera few weeks ago. I know I'm only
scratching the surface of whatyou guys can do, and I know you
have that solution. For me, itstill remains a little daunting
to me to have to, like, figurethat out. So maybe, and I know,
(10:30):
like, Daniel's setting us up ina you know, you've got great
support. So like, I know we havea call with Daniel next week
with our office manager. So myhope is, you know, in that call,
we can figure out how we can dothis, because you are, we're
doing a cost plus job. So, yeah,now's the time
for sure, for sure. And I thinkto pull this back into what I
(10:52):
want to chat with you about,because you are bullish, at
least for the time being, onfixed price. Yeah. Why are you
bullish on fixed price? Is thehandshake deal. It's the Say
what you do. But when I look atit, I'm not, like, I don't
really care, frankly, like, I'vetalked to enough people about
this, yeah. And I'm like, Dude,I do. People are making money
(11:15):
both ways. People are losingmoney both ways. So it's like,
it's really, like, kind of aperspective in what you carry.
So deeper than just like the Saywhat you do, like, provide what
you say, fixed price. I couldargue that with cost plus. But
let's go a little deeper on,like, where your conviction and
fixed price comes from, lumpsum, fixed cost, whatever you
call it. Yeah,you can think we have to be fast
(11:36):
and snappy. I'm just curious.
No, I mean, ISo, I mentioned, I mentioned a
bit of it is the handshakething, which, which, you know,
admittedly, is, is somewhat egodriven, you know, like I do,
like being able to do what yousay you're going to do and then
execute, right? So, like, that'sa big motivator for me. We
talked about, at least in mymind, like the time saving
(11:59):
aspect of it, where it's just,you know that when it was me,
the job gets rolling, and, youknow, you don't really have time
to start managing receipts. Oh,here, here's one, like the
thought of missing a receipt.
And by the way, like when I,when I listened to adaptive
podcasts, I cherry picked all ofthem that were like, I'm a fixed
(12:22):
price guy, I'm a cost plus guy.
So I feel I've heard all of thedebates because I am so
interested in that piece of it.
And so yes, I listen to themvery intently, thinking, like,
Okay, I agree with that. Okay, Idon't agree with that, but, but
that, like, one of the points,one of the guys made was, like,
the lost receipts. And I know,like, your software helps that.
(12:43):
So, like, billable, billableitems that you know are no
longer getting lost becausethey're in the system, like
that, that to me again, like,even with the software, perhaps,
like, I was still stressed aboutthat,
yeah, yeah, which we can open upa product. Go ahead, yeah,
and again, maybe that'sdifferent when there's help
(13:06):
support a bigger team, but whenit's me, you know, I'm not
finding every receipt. I don't Idon't have them all, so that
like,Okay, this is a great point.
I'll let you finish. But I dowant to add to this.
Go ahead. No, go on. I'm just,I'm probably just babbling,
okay, you're doing fine. You'rejust great. Um, with the receipt
(13:28):
question, right? And really,what the receipt is, is it's,
um, right? It's just, like,tracking billable cost. That's
all it is for cost plus guythat's valuable, yeah, track
every dollar. And it's like theclassic, which I did coin for my
ego, you can't plus, yeah, whatyou don't cost, right? Yeah,
like every dollar that I miss,I'm not just missing the cost of
(13:48):
that dollar. I'm missing thepotential markup, which includes
my margin on that dollar. That'swhat that means, right? So of
course, like, yeah, trackingevery receipt is great, but it
sounds like you're alluding tothe fact that because you aren't
good at tracking receipts, thatfixed price helps you get around
that need suggesting. Yeah.
(14:10):
I mean, I never like hearingyou're not good at something,
but yeah. I mean,no one knows. We call it Spain
spade, maybe I use the wrongterm. Could get better spend a
little more positively.
So, no, I mean, yeah, you'reright. I mean that, but that is
what it is. I mean, I wish I wasbetter about it. It's something
(14:31):
I know I as I grow, I know thatour company needs to be better
about knowing what dollar isgoing where, for sure.
But I think the question, andthis is where I'm ultimately
getting is because when I lookat cost plus versus fixed price,
with at least, like, theconversations that I've had
around it is like, it's really,like a matter of, like, risk,
risk and upside is really howthese two decisions get made. Is
(14:53):
like, if I'm a cost plusbuilder, I'm shifting a lot of
the risk to the client, right?
Because I get the open. This ofnot having to give them 100%
committed numbers on the frontend before we start doing
anything which any good costplus builder is going to tell
you that just because they'recost plus doesn't mean that
they're trying to hit within asingle digit percentage point of
(15:14):
what they estimated right, butthey're effectively like
shifting that risk. There areoverages, right? And then the
upside is a little bit more,like, little more calculated on
a cost plus, right, becauseyou're typically marking up
based on, like, a percentage,and that's just going to be
like, it's, there's not as muchroom for upside or downside for
as a fixed price builder, you'reshifting more of the risk to the
(15:37):
builder because they'recommitting to a number, and if
they blow that number, theirmargin disappears. That's why I
say fixed price is a race tomargin. Both of them have an
extreme emphasis and importanceon tracking cost. I'm a cost
plus builder. I need to make mymarkup, so I need to track every
dollar from a fixed pricebuilder. I need to track every
(15:59):
dollar because that's telling mehow much margin I'm going to
margin I'm going to make onthese line items. Yeah. So that
was where my questions comingfrom. Is like, how do you
perceive this from a riskstandpoint, when you think about
cost plus over fixed price?
I was trying to be such a goodlistener. There you threw a lot
at me.
(16:20):
I'm terrible with that. No,that's fine. I can. Well, how
about this?
No, you brought it back. I mean,God. I mean, I totally know what
you're saying, and I know theschool of thought here. It's
like the risk exists, right?
It's just who's holding, theclient or the contractor, I
suppose, like, I'd rather createmy own destiny. I'd rather hold
the risk. I mean, and there's,you know, I recognize that I may
(16:42):
end up being over on some lineitems. I may be, end up being
under on others, but at the end,like it's gonna, it's gonna
average out, and, you know, Igot a good enough team where
sometimes I gotta say, Look man,like we don't have that kind of
money in this budget. I need youto deliver for me here. And
I'll, I'm gonna have to takecare of you on the next one. I
mean, those are, those areconversations we've had before.
(17:03):
Because, I mean, they want tosee me succeed. I want to see
them succeed. We're all in it tomake some money. But I just, I
don't know, and I mean, there'ssomething that's a good point go
ahead. Yeah. I mean, maybe Ilike the hunt too. You know, I
like the hunt. I like the I likeknowing that. Like if I saved
$3,000 on siding, you know,that, you know, or if I should
(17:27):
say I overestimated it. I mean,I might get excited for a
second, but then I'm gonna learnI was, you know, $4,000 over on
my my trim work. But so maybeit's, it's that ride that I
enjoy in some sick way.
I think this is great, right?
And that's why I say like, Ithink this is a perspective and
a conversation that is worthhaving, right? Yeah, and from
(17:50):
multiple different buildersperspectives, because I refuse
to believe that, like Chris Kerris, like, on his own island,
right? And, like, own, yeah,there. There are builders will
listen to this andbe like, dude, right? There's no
way we're all thinking the samethoughts, exactly.
And I think, like, yeah, oh, didI lose? Yeah, are we here? Yeah,
(18:15):
okay, that was the first Okay,we're good. We're stable. Um, I
think, to your to your like,like the hunt, right? I think
the the the ride of the project,yeah, I think that's like a fair
way to look at it, if that'swhat you're trying to build,
(18:35):
right? I think that yearningbecomes a lot less palatable
when you start to grow anddevelop as a business. Sure,
yeah, it's like, no, I've got,I've got project managers on
salary, I've got team membersadmin on salary. I've got this,
that and the other. I might 1099point being like, I'm
(18:57):
responsible for branding work.
Yeah, I think that's where,like, the calculated nature of
whichever pricing model you havebecomes a lot, yeah, I don't
know it's, it's a lot lessabout, like, just trying to,
like, find that deal, or, like,get the guy taken care of, or,
like, get that, like, rush from$3,000 savings, right? Because,
(19:19):
like, to your point, you'regoing to find a loss somewhere
in that budget, right? That'sgoing to eat it up and
essentially wash out. Go ahead,what?
Um, like, how does, how wouldadaptive support a fixed cost
contract? Or do you even want tooffer that you can do that, do
100%we've got tons of fixed price
builders on adaptive. And itgoes back to that logic of,
like, it doesn't matter whetheryou're fixed price or cost,
(19:42):
plus, it all comes down totracking cost, right? That's
such a strong componentadaptive, yeah, and really,
like, when I see like, fixedprice builders that are really
getting excited about adaptive,is they, they? It was actually
one of our first episodes.
Episodes talked about MisterMartin, talked about how he's,
(20:06):
like, literally reviewing, like,line items on the budgets daily,
and like tracking costs daily.
And that's where I think, like,a big part of adaptive is
helpful for these guys, becausewe cut out and shorten that
timeline to understand what mycosts are, my actuals are so
that then I can see those lineitems start to bleed or win much
more quickly. And that's where Ican start, like making better
(20:27):
decisions that could save orkeep a project on track. The
other one is web, so youcan so adaptive, and I know I
need to get to this feature, butlike, I'm assuming you have the
ability, or adaptive has theability, to set a budget and
then compare it to actuals, andthen I can see it, yeah, yeah,
yeah, dude, Chris, we arefailing you, yeah? I know. No,
(20:50):
you're not failing. I just meanYeah. All right, so that's,
that's one thing we're gonna goover. Yeah? That would be
helpful.
That's a huge part of it,though, and that's where, again,
like, I think you're raising afantastic point, because I think
there's a lot of builders thatthey're like, Okay, I know I
(21:10):
need a budget, but that's likeme saying, like, I know I need
to be on a budget, right,personally, right? It's like,
you know, being on a budgetsounds fun. It's not being a
budget, you know, yeah. It'slike, sometimes you get this,
like, little rush. But the pointbeing is, is, when you are
running a fixed price model,like knowing your those are the
guys that are, like, hyperfocused on numbers, is at least,
(21:30):
what I see is that, right? I seea lot of fixed price guys, yeah,
because, again, it's like, justan example. I'm going to build a
million dollar product, not theprice on it. Okay? And let's say
that I won the job, and I'mgoing to have 800 grand and cost
wrapped up into this thing withessentially a 20% markup. Most
(21:52):
companies that I see, when theystart to get a little bit
bigger, they're going to berunning about a 10% overhead,
right, like their static cost,labor, rent, fuel, stuff like
that.
Let's break this down. ProjectManager is a cost of the job,
right? I'm just gonna sidetrackyou for a second.
Yeah, you should be like, Youshould be billing back project
management. Yeah, that's acost of work. And then you have
(22:13):
your overhead, which we'resaying is 10% sure, and then
we're saying profit is 10% and Ijust, I think, like, that's one
thing I've been fishing, likefishing for, and I thought it
would come out more clearly inany one of these podcasts. But I
don't think anybody really isopenly talking about that.
There's a nugget. There is anugget in the will King episode.
(22:37):
Listen to the will King episode,because he's from high cotton
homes down in Alabama. Supersharp dude, yeah, um, and
there's, there's a legitimateequation to, like, essentially
back into your numbers in aproject. It's, and this is
where, like, I'm just not a mathguy. It's like, a, like, take
(22:59):
your cost divided by one point,whatever, and then our times,
he'll go over in the episode.
But the point being, that's howyou should be finding your
margin. That's how you determineif these are
good jobs or not. Yeah. Thething I struggle is, yeah. Where
I struggle is like, I don't wantto just say 10% profit, because
(23:21):
I feel like at a at more volume,so like, a million dollar
project maybe shouldn't begetting 10% or maybe it should
be getting more, I don't know. Ijust it's we all. I think every
builder who listens kind of isanxious to hear like, am I
charging enough? Am I chargingtoo little? Am I charging too
much? And it's, it's hard toreally get it like a real
(23:42):
temperature on the industry. Imean, I think we're, we're all
generally right around there. Idon't know, am I? Am I fishing
for an answer right now?
No, no, we can this, dude. Thisis the episode. This is the
episode. I love it. I so a Firstoff, it is not like,
Countrywide, this is the markup,yeah, okay, or, like, this is
(24:08):
what you should be making. Ijust did a podcast, however,
which was yesterday with MillerBradford. He does. He runs
builder bookkeep, also inAlabama, yeah. Like, he also
works with will King point beingis we talked about whip, and I
had gone through this, like, 10%overhead, 10% margin, and that
when I say margin, that shouldbe like, net margin, right?
(24:31):
Yeah, he was like, Yeah, thatshould generally shake. Like, if
you're doing a million dollarsin revenue, you should be making
100,000 net like, essentiallywhat they had talked, what we
had discussed, there's going tobe guys that will be like,
there's no way that'll work inmy market. There's no way that
this will happen. There's no waythat that I get it, because
there's nuance. You got to becompetitive, right? But I think
(24:51):
going back into this is like,knowing if you're going to be
making the money that youinitially thought you were going
to be making is the biggerconversation. And knowing what
that number is before you gointo a job is where you really
start to, like, get on that lineof thinking more so of I am
spending my time, investing myefforts and cost into making
(25:12):
outcome right should be profit,and that's where I think, like,
when we're talking about fixedprice builders and tracking cost
and how important that is,that's where a lot of fixed
price builders get excited aboutadaptive, because that's what
they're looking for. They knowgoing into a job, and they have
determined that I'm going topick up this client, or I'm
going to build this product onthis piece of land, and I'm
(25:34):
going to do so because I'm goingto make X dollars or percentage,
which is worth my time. Yeah.
And if I'm not tracking my cost,then I have it's way easier for
me to bleed into my margin oroverrun on cost, and chew up my
margin, chew up what I thought Iwas going to be making on that
(25:54):
project.
Yeah, no, that's Was it toomuch? No, that was great. No, it
was well said. I don't, I don'tknow that I have much to respond
to on that you don't have to,you don't
have to. And this is just, like,kind of a good conversation,
because I think, like, reallyhighlighting here, like, what
builders are thinking about whenit comes to fixed price and
(26:17):
cost, plus, there needs to bemore
conversation around it. Yeah.
And I love, the debate like I doappreciate and just genuinely
enjoy debating it, like, I thinkit's cool. And I think I started
this with I think Every job isdifferent and every client is
going to be different. I'm notopposed to it, but it's not
like, if I had my choice, likethe job that I'm doing cost,
plus they asked me, and I waslike, I prefer to do a fixed
(26:38):
price, but I obviously don'twant to lose the job, so I'm
open to doing it however you,however you'd like. So I will
say this with with thisparticular cost plus job that
I'm doing, I did ask that wekeep the overhead in the project
management. I'm sorry. I think,no, I just did the project
(26:59):
management. I wanted a fixedprice for the project management
because I didn't, did not wantto get into and I don't know how
other cost plus builders do it,like, are they building their
PMS time for every hour thatthey're on the site or working
on the job? I didn't even wantto get into that debate, so I
just said, Look, we're gonnahave a fixed price to manage
(27:20):
this job for this goal, and I'mgonna fill it as a percentage of
work progress. And that's that,to me, was pretty common, yeah,
from my understanding, thatwould be more of a fixed fee
situation, okay, and a fixedfee, and that's, that's from my
understanding. Again, peoplethat are listening would love to
(27:40):
hear some chatter about this,but when it comes to fixed fee,
it's a way to like a remainlike, extremely transparent with
the customer, but even more so,like, become like, more
competitive when it comes topricing. Yeah, my only like,
taper this expectation. Goahead.
I hear the fixed fee argument,but I'm also just like, geez, if
(28:01):
they like, I don't know, now, ona chevron pattern or some crazy,
like, high level of managementthing, there is a piece of me
that's like, there's a littlemore risk here for everybody,
yes and yes. With that riskought to come the appropriate
level of fee, so that that'swhere I have a hard time just
(28:22):
committing to one fee.
Chris kind of sounds like you'restarting to understand cost plus
a little bit here. No, I'm justkidding. And I say that because,
like, I will also bring up BradRobinson, yeah, awesome dude out
of Atlanta. I don't know he'sactually quite available on
Instagram. Do you know of BradRobinson?
(28:43):
I will look him up right now.
He's on Instagram. He was on thepodcast. He was on the initial
the great debate, cost plusversus fixed price. And I think
this nomenclature that luxurycustom home builders are
typically cost plus thatactually might be generally
(29:04):
true. But what Brad is doing ishe's building like an elite
product in Atlanta, okay, and heis all about fixed price. I like
probably you guys share a lot ofsimilarity in how you view like
the client experience. Actually,I know that because Brad's all
about client experience. Hugepre con guy, huge selections
(29:28):
design up front, like, knowwhat's going on before?
Is he the guy that, like, won'tstart a job until all selections
are made,I believe so I would have to
confirm to just yeah, be 100%positive good friend, if I
remember correctly. That's hismotion, but also like he is a
businessman like Brad Robinsonbuilds homes, but his product
(29:53):
and how he views what he does isa business. Business. It is, it
is a I have these inputs, and itis my fiduciary obligation to
the consumer to make sure thatwhat I am promising them, I will
give them, I am giving them,yeah, and I am making money for
(30:14):
the business, yeah? So again,like, I don't think that there's
like, Oh, I'm a custom homebuilder. I have to do cost plus,
no, I think that theconversation is more broadly
about shifting risk and riskappetites for the individual who
is committing to the work beingthe business owner.
You know, are you saying thatthe client and builder?
(30:37):
I think yeah, for sure, likeclients definitely have an input
in that, because there arecertainly, like, people that
have built in the past, or getadvice on how to go about these
conversations. You hear it allthe time, they'll be like, I
only work with I only want tofix price builder. And there are
guys that are like, truly costplus, and they're like, nope,
not going to do it. Not yourbuilder. And that's where they
kill the that's where they killthe sales cycle.
(30:59):
So answer me this, just because,you know, I live in the world of
construction, and you know I, Iwould never do this, but I mean,
there is an opportunity for anybuilder to take a take an
invoice, certainly unethical,and ask a subcontractor to put
another $2,000 on that. And thenpresent it to the client. I
(31:22):
mean, I just sure, like, I feellike there's an elephant in the
room here with that. Like, isthat not going through the mind
of a client and and look likehuge caveat here. Never, this is
me just speaking objectively.
Like that thought resonates, Istill think, in people's minds,
right? So like, like, to me,that's that that would be a
(31:47):
reason for a client not to wantto do a job cost, plus, just for
fear of that, and maybe it getsback to a level of trust and,
you know, understanding themarket and all that, or getting
three prices and going with alow one, like, it maybe a little
more emphasis on that. Like,have you come across that at all
where clients have expressedthat concern, or, as a builder,
(32:10):
expressed that concern of aclient?
Um, so no, I haven't, and that'slike, I think it's valid. Um, I
think it's totally insane. Oh,it's,
it's illegal, it's, it's all thewrong jokes,
and that's where like, and so Ifrankly, like, I'm more on,
like, the B to B side, businessto business, meaning I sell
(32:33):
software to the business, and Iam less involved with the
consumer being the builder'sclient, right? So I think that
fear, which is why I say it'sprobably valid that fear
probably exists with a consumer.
It's like if I get into a costplus contract, and there's no
definitive number of what thisthing is going to cost me, just
a ballpark. Who's to say thatgeneral contractor Bob isn't
(32:56):
going to be colluding in thebackground with Phil the
plumber, to be tacking on anextra couple grand on these
invoices, I get fleeced, right?
Yeah, I think, to your point,totally illegal. There's like,
multiple businesses at stakethat would just be a totally
(33:19):
wild way to build a fraudulentcompany, right? If you were into
fraud, like there are otherbusinesses to get into that, you
could probably make more moneybeing fraud.
And I will say it's sort of Iwant
to say that my fixed price side,but go ahead. I want to just
show just for the record. I dowant to say the alternative to a
(33:41):
fixed price? Ever go ahead?
Okay?
I would say with cost plus. Imean, you still have the
inherent responsibility ofmanaging a budget, like I I do
anyway, like, I wouldn't wantcost plus to come off as an open
book, because it's not right,like it is still your sorry.
(34:02):
It should be. But go ahead, itshould be open book if you're
cost plus, yeah, go ahead.
But I, and I use my currentexample, like I still feel the
responsibility to track thebudget, and when I see walnut
get selected for ceilingsinstead of poplar. Like, it's my
responsibility to say, you know,look, Mr. And Mrs. Client, we
(34:26):
give you a budget for x, butlike, your designers just picked
walnut, like, that's gonna costyou another 10 grand. Like that,
I feel is my responsibility toshow them that and manage the
budget. It should be, yeah,that's a part of the cost plus
model. That's why we've likeemphasized so much on the cost
plus side.
(34:46):
How do you do a challenge model?
How do you manage any changeorders?
Again, you got to listen, haveyou? If you haven't listened to
will King episodes, you should,because we talk about this, and
he even struggles with it. Oflike, defining a change order
and a cost plus job is like,what is pretty difficult, and we
(35:07):
kind of talk through a solution.
I think the like the situationwas is like, if I'm dealing with
a client and help me with thephrasing, I'm pretty good at it
generally, but let's say I'vegot drywall in and I'm getting
ready to do I'm getting ready toput lighting fixtures in.
It's kind of what, dry wall. Adry wall. How are you saying it?
(35:29):
Dry walling.
Dry wall. A great All right,go on. I was thinking more of
like roughing, but that's notroughing. That's like for
plumbing, like pipes to thewalls. I digress. Point being
the example was, is that if yougot a client and they're like,
(35:50):
like, yep, recess cans all theway, we want recessed cans.
Recess can lights, recessed allthe way. And then before you
install, they're like, actually,wifey was on Pinterest, and she
saw track lighting, and shereally likes what that does to
the room we want to put tracklighting in. Should that be a
change order? And, like, minewas, like, I mean, it could, if
(36:11):
the cost is different, I thinkthat's like, reasonable. Like,
if track lighting is going to bemore expensive than recess cans,
you should want 100% changeorder that. But if we're talking
about, like, really the cost ofa change order, which is the
planning, the scheduling, theadmin that goes into generating
what that's going to cost,that's really where, like, in my
(36:33):
opinion, change orders become asuck, because it's not as easy
as just saying whether it'sfixed price or cost, plus, like,
yeah, you changed your mind, soI'm going to bill you for it.
It's like, No, you need to bethinking about it in terms of,
if my Pm is walking a job site,and the owner says, I want
pocket doors here, and we didn'tframe for pocket doors. You need
(36:57):
to get somebody out there, whichis going to take your Pm
planning and calling to get abid on, what is it going to cost
to, like, convert this into apocket door, what's the labor
and material that's going to gointo it, and then is that going
to impact future schedule? Like,that's the cost of a change
order. Most no doubt,in like, that cost, gets that
(37:19):
cost in a Cost Plus model, likethe overhead. Well, I don't know
if it does, yeah. Well, Isuppose it does. The overhead
and the fee get carried there,but in that change order, I
would probably put a couplehours of management time on
that. I mean,you should, yeah, I'm very pro
this, and you should mark it up.
You should be making money onthat, because you as the owner
(37:43):
are employing and managing andcoaching people to perform work
in the way that is valuable toquite a
customer, no doubt. Yeah, man, Ilove it, and so, like, here's a
scenario in cost plus whathappens in the event where the
builder did something wrong,like, who, who? Like, I'll use
(38:05):
your pocket door example. Say,say, the design always showed
pocket doors, and the buildermissed it, so now they got to
redo framing. What does thathave
to do with cost plus or fixedprice? I mean, I feel like
that's just like, you're goingto eat it either way. You got to
use, yeah, on fixed price orcost plus, right? That's like,
that's the, that's the I mightnot have gone to college, but
(38:28):
I'm paying for my educationconversation, right?
Sure, right. But it does amazeme that subcontractors will
audit who are getting paid on atime and material basis, will
sometimes try to charge you forthat. And it's like,
this is subs you're saying,Yeah, you know,
not often. I mean, our, our guysare pretty good, but yeah. I
(38:53):
mean, if it's not crystal clear,I mean, there is a feeling about
some people that maybe theyshould be getting paid to do it
twice. I mean,that that's totally Well,
that's the dirty laundry of thebuilder that I'm airing out
right now Well,and I think that's fair, because
I think, like, that's where,like, you try to get business as
rigid and binary and nonemotional as possible, right?
(39:16):
Yeah, like, that's how you,like, start to scale, as you
start to scale as you startthinking about business a little
bit more rigidly and like, well,if this happens, then this but
when we're talking about asubcontractor that you've worked
with for 10 years, yeah, misseda detail on plans that we can
all agree with. Wasn't superclear, right? And there's a
relationship there, and they'relike, Dude, I missed that. It
(39:39):
was a pocket door. I need tocome back and do this. I'm like,
I'm gonna send you an invoice. Ithink you have a decision to
make as a business owner withall variables considered. To
say, Okay, I will have thisconversation with the client. I
will pay you for this. I willget you paid for. This, but to
(39:59):
prevent this from happening inthe future, we need to run
tighter precon and go over thestuff in the beginning to make
sure that this doesn't happenagain, and then when it happens
again, it's like, are you takingme for a run, or did we miss
something? Yeah, that's myopinion. That's my opinion of
the matter.
(40:20):
Yeah, I think you're right. Isuppose that's another reason
why, as a client, you might beopposed to the Cost Plus model.
I mean, if you're not, like,truly locking subs in.
But here's the other thing,here's the other thing is, like,
in this, is this the devil'sadvocate of fixed price, and
this is why it's such aconversation, because you're
(40:41):
100% right with a cost pluspercent right with the cost plus
side. Is like the clients in atthe end of this, and they're
like, Okay, what? I'm gonna havea general contractor coming to
me and saying, Hey, you'repaying me for a service to
manage subs to get my home builtthe way that we had decided, and
now you're asking me to pay fortheir mess up, which really was
your mess up, because youweren't managing the project
(41:01):
right, doing 100% a reason to bemaybe skeptical of cost plus,
but I think inversely fixedprice has those similar
situations, in the sense thatthere's a lot of like, okay, if
I'm if I'm bidding out a home asa consumer, as a client, to a
bunch of general contractorsaying I've got a million
(41:22):
dollars, and I'm looking for afixed price builder who can get
me what I want for that number.
Yeah. And we go through and weinterview three general
contractors, and they all say, Ican get you the million dollar
home that your dreams of, or,blah, blah, blah. And there's
one builder that has hookups orknows, like, hey, I can slip a
cheaper material in here, andthey'll never know or really
(41:44):
care. And that's where I'm goingto make a 15, 20% margin on this
thing that happens all the time.
And I think this is where it'slike, maybe not an ethical
conversation, because it can beargued both ways, but it's like,
and I understand both ways,which are the fixed price
builder is it's like, if, if Ican run a project more
(42:06):
efficiently, and I can get theclient the product that they
want that's cheaper, faster,better, then I should get
rewarded for a higher margin,because I'm able to do this
right. But that also creates astigma of like, okay, if the
client has to spend a milliondollars, is a million dollars,
is a million dollars, that'sfine. But then you start to
build this like, how fast can Ido it? How? Where can I cut
(42:26):
costs? Can I get cheaper subs?
Can I get subs that are faster,right? And so that's where it's
like, it's not a binary cost,plus is better than fixed price,
because you could argue gaps inboth. And frankly, I think the
gaps that get argued aren't ascommon of issues as you might
think. I think it's a lot of itcomes from, like, fear based
thinking, frankly.
(42:50):
And that's like, I mean, listento every point I've laid out to
you of why I'm opposed to maybegoing Cost Plus, they're all
fear based. They're all so,yeah, I'm I'm not totally
against it. I'm just morecomfortable with the with the
fixed price right now. And looklike you got to make a business
(43:12):
decision too, and you said itearlier, like ultimately, you
want your client to have a goodexperience, right? So if it
feels like they're going to getchanged ordered a million times
over because they haven't quitemade up their mind or the
selections, and it's gonna feellike a change order every two
minutes. Then you know what?
That lends itself to a costplus, because then, then it's
not so much a change order as itis, like, okay, like, we're
just, like a kind of a runningtally here of what you want. And
(43:35):
I'll just, I'll effectivelymanage a budget for you and tell
you where I think the costs aretracking. But we're not gonna
call them change orders well.
And I think that's like,probably where you see a lot of
like, custom guys leaning inthat cost post. Yeah, I'm
thinking, because they're like,like, dude, how am I? I just saw
(43:56):
a stat, and I wish I paidattention to it more. It was
something insane. It was like,Oh no, it was a build show live.
And I think it was Jake BrewtonMay. There was some stat that
essentially boiled down to onany there's X number of
decisions that get made whenbuilding a custom home. And then
he boiled it down to the numberof decisions that need made in a
(44:17):
day. And it was something crazy,like 20 or 40 decisions a day
over the course of that right?
So it's like when you'rethinking about that from a fixed
price standpoint, and trying toget everything locked at the
beginning and make all thosedecisions on the front end to
insulate yourself, to preventthis change order craziness.
That's where guys are like,Dude, this is the first time
(44:37):
I've ever built this home. Isthe first time this home has
ever been built. This could be acompletely custom set of plans,
like, right? You don't know whatyou want. We have, like, a, we
have a floor plan of what youwant, right, yeah. But you want
a really custom product, andyou're gonna be making these
decisions over an 18 monthbuild. Like, we're gonna run
cost plus, so that we're notinsulating. But that's where.
(44:58):
Share budgeting, draw packageswith reporting, all of that
comes in to provide an open bookexperience. And that's where I
see the best builders run theseprocesses, and they essentially
insulate themselves from a riskof legal standpoint by sending
invoicing their draws every twoweeks or month at the latest,
(45:20):
and that's where I completelyagree with your initial concern,
which is I stay away from costplus, because the administrative
burden, and that's why I say wefailed you as as adaptive,
because that's like our breadand butter. And you should be
looking at this as an empoweringmoment to say I can now open up
my market to people that aredoing fixed price and cost plus,
and I can start making thesebusiness decisions internally.
(45:41):
Not scared that cost plus isgoing to wreck me from an admin
standpoint, but I have asolution that will allow me to
do it much better for myselfinternally, as well as providing
clarity to the client. So that'swhere I think, like as a cost
plus builder, you should besending every cost over, showing
where you're making your moneywith a log of change orders
(46:05):
every two weeks to managehealthy cash flow every month at
the very minimum. Well, look,man,
stay on me. I mean, I've got asix month venture here of this
barn in Hingham.
So Dude, we got to run it. Wegot to run it through. When's
your meetingwith Daniel? Gosh, next Tuesday.
I want to saynext Tuesday. So a week out, how
(46:26):
many draws Have you put togetheron this thing?
So far, none. I'm getting readyto do one shortly,
dude, you I will holler atDaniel and you guys should,
like, look at building yourfirst draw and adaptive.
Now that would be great. Like,that's how we should kick off
the meeting. Like, show me howto do a draw. Yeah, yeah.
(46:47):
I agree. Because, dude, I'mtelling you, like, Na, this is a
killer conversation. I lovethis. This was, like, there's
like, a true banter with theboys. This was good dude.
The same way, I don't minddebating political not to get
into that, but like, I don't,I'm not looking I'm not right or
wrong, man. I just like, I justwant what's best for the client,
you know, and I want what's bestfor a project. And I think if
(47:09):
you can go afteryou, your family, the people
that are involved in yourbusinesses, family, your subs,
your trades, yeah, that's, Ithink we need to keep, keep
pulse on that, because that'swhy we're all here. Small
business owners, if they fuelcommunities. I'm a huge
advocate. We just want to makeyou guys make more money. Make
you guys make more money, getclients more or more clear
expectations and understandingsof what they're doing. Hold
(47:32):
everyone accountable. Do itaccountability. That's success.
That's right. That's why I doChris, okay, you were down to
Texas, yeah. I was in, yeah. Iwas in Texas. What December of
(47:53):
20 was 2025 Yeah, I was inDecember 2024 until April of
2025 and I was actually justdown there. Is that what you're
talking about? I was just inTexas
for build show, the builder,builder Expo, right? Is that
what it was?
Yeah, it's build it's buildshow, live. It's put on by Matt
(48:16):
reisingers. Build show, yeah,yeah. I think there's a little
lag. I think we're catching alittle lag, but, yeah, I think
we all know I was down therethat, yeah, yeah, I had it on
the calendar.
(48:36):
If we couldn't make it,you're all good, you're all
good. It'll be there next year.
I know we need to take breaks.
We need to take breaks so wedon't talk over each other. Now
it'll be there next year. I willsay that it was extremely high
value show for the for theparticipants, the people that
join,yeah, that'd be interesting.
(48:59):
Thanks. Joe, yeah,you should do it. You should do
it. Um, but okay, dude, well,I'll let you get back to it.
I'll let you know when I'm backdown in South Shore. And also,
I'm gonna be starting happyhours and stuff here in our
office.
Go ahead. Let me know I'm ahappy person. Enjoy and enjoy
that hour. So just let me knowyou're a great addition. Chris
(49:20):
Kerr, happy hour. Happy Hour.
Chris Kerr, all right,man, hey. Thanks a lot. Great.
You bet great being on man,thanks for having me. I really
appreciate it.
Of course, we'll see you, dude.
In my opinion, that presents adegree of confidence when you
say to an owner, here's whatwe're going to do. This is
what's going to cost, and thisis how long it's going to take
to do it.
Welcome to builders, budgets andbeers. I'm Reese Barnes and I
started this podcast to havereal conversations about money
in the building industry, thewins, the mistakes and
everything in between. I believebuilders deserve to feel
(00:21):
confident about their finances,and that starts by hearing from
others who've been through ittoo. This industry can be slow
to change, but the right storiesand the right tools can make
profitability feel possible.
Let's get into it.
(00:43):
Mice are hot. We're rolling.
Mics are hot. I see it. Whatwere you saying?
Well, well, you had suggestedmaybe that I was against cost
plus. But you are, yeah, youare. I'm just kidding. I love
it, man. Debate makes good forgood, good content, right?
That's right. That's right. Youare more pro fixed price,
(01:04):
though.
I am pro a man who says whathe's going to do and executes on
that. So I love that. I sort oflive in this world where, like,
if you say you're going to dosomething, you go do it. So
between that and it being justme up until, I don't know, month
(01:24):
and a half ago, it's been ChrisKerr running white oak home,
management, estimating,invoicing, payments, everything,
man, wearing every hat. So like,I'm not to sidetrack this, but
I'm going through this growthphase right now, but I bringing
it back. I always just found iteasier to, you know, as a one
(01:44):
man shop, run run fixed costs,because it's like, I'd rather
spend the time up front. Go on.
Go ahead. Question.
I always say fixed price. Yep,you're saying fixed cost. I mean
the same thing. Okay, so whenyou So, okay, and I think that's
like, actually, like, a prettyinteresting way to look at it. I
(02:05):
didn't mean to throw you offwith that, but you would like,
you could argue that fixed priceis different than fixed cost,
because fixed costs would assumethat, like, you're like, signing
a contract, suggesting thatyou're not going to go over the
cost of the project, which isdifferent than the price of the
project, which would insinuaterevenue, including, I just
wanted to get that out of theway. That's fair, as long as
we're talking about the samething, that's good.
(02:26):
Yeah, we are. And you could alsocall it lump sum, you know, like
you've heard it all heard it wasthree things, lump sum. Look,
lump cars, lump cost, lumpprice. So the point is this,
right? Like, I'm giving you aprice, I'm defining this level
of scope in detail, and that'swhat I'm going to do, unless you
(02:48):
add something, change something,modify something, it's we're
going to deliver on what we'repromising. I mean, I'm, I'm
going so far as writing, we'reusing poplar trim, not finger
jointed pine, you know, I mean,like we're, we're getting into
that level of detail on theprice, okay? And the reason is,
again, it's just been me, Ifrankly, don't have time to,
(03:10):
like, get behind a computer andbundle all those receipts
together, take all the invoices,chase a guy for an invoice,
because we're trying to get thebill in for the foundation work
we just did, yeah, and so it'sjust, it's just, I found it just
easier to do my my billing andinvoicing that way.
Okay, so you and your hand onthe Bible. That is the reason
(03:33):
why you, well, one of thereasons why you choose to do
fixedover cost, plus, yes, and now
admin work that goes intoputting other draws. Go ahead,
yeah, absolutely.
Hand on the Bible, 100% and,and, like, mix it a little bit
of ego there, right? Like, Ijust, you know, I love to live
in a world where we get to shakehands and go do something,
(03:55):
right? Like, I just, there'ssomething, in my opinion, that
presents a degree of confidencewhen you say to an owner, here's
what we're going to do. This iswhat's going to cost, and this
is how long it's going to taketo do it. And we found some
success, you know, between meand the subcontractor team in
doing that, and it's worked forus now. Here's where I can spin
(04:17):
myself in circles and kind oflike have the own debate inside
my own head here. I thinkthere's a stigma, perhaps with
some with the fixed price, fixedcost contractor, where they're
trying to do it cheaper, right?
And I could be compellingconcern. It makes sense Go
(04:38):
ahead,for sure, yeah, and maybe this
is the boogeyman Chase. I mean,I don't know, but I think there
is a bit of a stigma there. Andso, you know, I've, as of
lately, come to the conclusionthat, like, Every job is
different, right? Like, ifwe're, if I'm getting hired to
do a job, like we just gothired, we're doing a we're doing
a. A cost plus job right nowwe're doing it. And what does
(05:02):
700 grandget you in? Hang up. What is
this like a bathroom remodel?
It's a historic barn, but yeah,gonna be awesome. I'm sure.
Wait, is this the one with thetimbers? Yep, yeah, that's
badass. Everybody who listening?
You go actually. And before weget too deep into this, Chris,
(05:23):
give them a little background onyourself. Where to find you
first?
Oh, sure. Yeah, no. Chris Kerr,we live here in Hingham. Wife,
three kids. Been working in thetrade since I was, I don't know,
14. I started as a plumber inSyracuse, New Minnesota guy,
yeah? Well, yeah, born inMinnesota, yeah. Born in
(05:45):
Minnesota, yeah. Father took ajob working for a plumbing and
heating company in Syracuse whenI was, like, in kindergarten. So
I grew I really say I grew up inSyracuse, New York. Son of a
plumber, rant ran copper waterlines said I'd never do this
again. I was going to get so faraway from the trades, studied
(06:06):
some economics, and, yeah, cameback to it. So I ended up
working right out of college. Iworked for like, three of the
bigger firms around Boston,which sort of honed the, I'd
say, honed the systems in, youknow, really, kind of got a real
taste of, you know, really, thesystems that go into
construction. But, yeah, sixyears ago, you know, I like to
(06:28):
say the corporate world spit meout. Got fired. Yeah, did you
rejected me? Yeah, I just That'sokay. I don't, I don't fit the
system. And it just the system.
The system told me that. So wefound a degree of success here
in and around Hingham in Bostonfor the past six years. I mean,
we've left a happy trail ofcustomers. And, yeah, we're
(06:49):
we're doing something right, andwe're growing. I mean, I
mentioned we've got the managernow. We have an office manager,
white oak Custom Homes, right?
Or why don't constructionwhite oak home? Yeah, it's
you guys are you guys aresitting up. I love it. I love
(07:10):
where you what you guys aredoing, Chris, because it's, I
think you guys are on the paththat a lot of builders are on
and want, or want to be on,because the level of product
that you guys are building isincredible, again, that's why I
wanted you to tell people whoyou were. So then go check you
out on Facebook, Instagram, notFacebook, Instagram, your
(07:31):
website. But point being is likeyou're in the stage of business
where you have a lot of thesequestions, right? You're
building an extremely high endproduct. Sure, you're starting
to have these, like, morebusiness thoughts and back and
forth of, like, fixed price,cost, plus why one or the other.
I'm scaling, I'm growing, I'mhiring people. I'm building
(07:52):
processes like, I don't want tolose the the beauty of a
handshake deal, but also knowthat it can open myself up to
some risk. And like, you'restarting to have those thoughts.
So that's, that's where I thinkit's good for people to find
you, to know who you are, and togo back into, not to deter the
conversation, but to go backinto the $700,000 project that
(08:13):
you're doing, and you're doingcost plus,
yeah, yeah, exactly. And, andthat's where, you know, like,
I'll just, you know, here I am.
I'll plug, plug adaptive in thisprocess of scaling. I mean, one
of the panic moments was like,how do I handle all these, these
invoices and receipts andpayments? I frankly, got tired
of, I mean, I had some contractsare literally chasing me around
(08:36):
in my truck. Like, where are yougonna be shocked? Yeah. And I
was like, All right, enough,enough, right? You will, I'm
going to hit the button. Theyknow now is the button, they
say, I I tell them, I go, allright, yeah, that looks good.
I'm gonna hit the button onFriday. So there's a few guys
will call me down, like, Hey,you hit the button yet? No, not,
(08:57):
yeah, I told you, told you,Friday,
do we got to get a shirt made ofthat adaptive shirts, like we
hit the button weekly. Do youpay from your phone? Do you pay
from the phonethe computer? I mean, it's just
wherever? Yeah, I love it. I dolike that. You guys are bringing
more features over to the phonebecause, I mean, as you I'm
(09:18):
sure, you know, like, it was abit limiting in the beginning,
too. We're like a threeyear old. We're like a three
year old software, oh, threeyear old software. Like, we're
just growing all the time. Andso one reason, I don't want this
to turn into a big plug, I'mpretty bullish about that. I do
appreciate you, you know,sharing an authentic solution
that we have provided to you,but we have failed go on in the
(09:40):
sense that you don't like costplus, because of the
administrative burden that comeswith billing and cost plus,
yeah, and that's like our breadand butter. I'm. Offended that
we have not shown you the lighton cost plus draws in adaptive
(10:08):
Yeah, and you're right, like,and that's like, I've said it,
like I said it to you at dinnera few weeks ago. I know I'm only
scratching the surface of whatyou guys can do, and I know you
have that solution. For me, itstill remains a little daunting
to me to have to, like, figurethat out. So maybe, and I know,
(10:30):
like, Daniel's setting us up ina you know, you've got great
support. So like, I know we havea call with Daniel next week
with our office manager. So myhope is, you know, in that call,
we can figure out how we can dothis, because you are, we're
doing a cost plus job. So, yeah,now's the time
for sure, for sure. And I thinkto pull this back into what I
(10:52):
want to chat with you about,because you are bullish, at
least for the time being, onfixed price. Yeah. Why are you
bullish on fixed price? Is thehandshake deal. It's the Say
what you do. But when I look atit, I'm not, like, I don't
really care, frankly, like, I'vetalked to enough people about
this, yeah. And I'm like, Dude,I do. People are making money
(11:15):
both ways. People are losingmoney both ways. So it's like,
it's really, like, kind of aperspective in what you carry.
So deeper than just like the Saywhat you do, like, provide what
you say, fixed price. I couldargue that with cost plus. But
let's go a little deeper on,like, where your conviction and
fixed price comes from, lumpsum, fixed cost, whatever you
call it. Yeah,you can think we have to be fast
(11:36):
and snappy. I'm just curious.
No, I mean, ISo, I mentioned, I mentioned a
bit of it is the handshakething, which, which, you know,
admittedly, is, is somewhat egodriven, you know, like I do,
like being able to do what yousay you're going to do and then
execute, right? So, like, that'sa big motivator for me. We
talked about, at least in mymind, like the time saving
(11:59):
aspect of it, where it's just,you know that when it was me,
the job gets rolling, and, youknow, you don't really have time
to start managing receipts. Oh,here, here's one, like the
thought of missing a receipt.
And by the way, like when I,when I listened to adaptive
podcasts, I cherry picked all ofthem that were like, I'm a fixed
(12:22):
price guy, I'm a cost plus guy.
So I feel I've heard all of thedebates because I am so
interested in that piece of it.
And so yes, I listen to themvery intently, thinking, like,
Okay, I agree with that. Okay, Idon't agree with that, but, but
that, like, one of the points,one of the guys made was, like,
the lost receipts. And I know,like, your software helps that.
(12:43):
So, like, billable, billableitems that you know are no
longer getting lost becausethey're in the system, like
that, that to me again, like,even with the software, perhaps,
like, I was still stressed aboutthat,
yeah, yeah, which we can open upa product. Go ahead, yeah,
and again, maybe that'sdifferent when there's help
(13:06):
support a bigger team, but whenit's me, you know, I'm not
finding every receipt. I don't Idon't have them all, so that
like,Okay, this is a great point.
I'll let you finish. But I dowant to add to this.
Go ahead. No, go on. I'm just,I'm probably just babbling,
okay, you're doing fine. You'rejust great. Um, with the receipt
(13:28):
question, right? And really,what the receipt is, is it's,
um, right? It's just, like,tracking billable cost. That's
all it is for cost plus guythat's valuable, yeah, track
every dollar. And it's like theclassic, which I did coin for my
ego, you can't plus, yeah, whatyou don't cost, right? Yeah,
like every dollar that I miss,I'm not just missing the cost of
(13:48):
that dollar. I'm missing thepotential markup, which includes
my margin on that dollar. That'swhat that means, right? So of
course, like, yeah, trackingevery receipt is great, but it
sounds like you're alluding tothe fact that because you aren't
good at tracking receipts, thatfixed price helps you get around
that need suggesting. Yeah.
(14:10):
I mean, I never like hearingyou're not good at something,
but yeah. I mean,no one knows. We call it Spain
spade, maybe I use the wrongterm. Could get better spend a
little more positively.
So, no, I mean, yeah, you'reright. I mean that, but that is
what it is. I mean, I wish I wasbetter about it. It's something
(14:31):
I know I as I grow, I know thatour company needs to be better
about knowing what dollar isgoing where, for sure.
But I think the question, andthis is where I'm ultimately
getting is because when I lookat cost plus versus fixed price,
with at least, like, theconversations that I've had
around it is like, it's really,like a matter of, like, risk,
risk and upside is really howthese two decisions get made. Is
(14:53):
like, if I'm a cost plusbuilder, I'm shifting a lot of
the risk to the client, right?
Because I get the open. This ofnot having to give them 100%
committed numbers on the frontend before we start doing
anything which any good costplus builder is going to tell
you that just because they'recost plus doesn't mean that
they're trying to hit within asingle digit percentage point of
(15:14):
what they estimated right, butthey're effectively like
shifting that risk. There areoverages, right? And then the
upside is a little bit more,like, little more calculated on
a cost plus, right, becauseyou're typically marking up
based on, like, a percentage,and that's just going to be
like, it's, there's not as muchroom for upside or downside for
as a fixed price builder, you'reshifting more of the risk to the
(15:37):
builder because they'recommitting to a number, and if
they blow that number, theirmargin disappears. That's why I
say fixed price is a race tomargin. Both of them have an
extreme emphasis and importanceon tracking cost. I'm a cost
plus builder. I need to make mymarkup, so I need to track every
dollar from a fixed pricebuilder. I need to track every
(15:59):
dollar because that's telling mehow much margin I'm going to
margin I'm going to make onthese line items. Yeah. So that
was where my questions comingfrom. Is like, how do you
perceive this from a riskstandpoint, when you think about
cost plus over fixed price?
I was trying to be such a goodlistener. There you threw a lot
at me.
(16:20):
I'm terrible with that. No,that's fine. I can. Well, how
about this?
No, you brought it back. I mean,God. I mean, I totally know what
you're saying, and I know theschool of thought here. It's
like the risk exists, right?
It's just who's holding, theclient or the contractor, I
suppose, like, I'd rather createmy own destiny. I'd rather hold
the risk. I mean, and there's,you know, I recognize that I may
(16:42):
end up being over on some lineitems. I may be, end up being
under on others, but at the end,like it's gonna, it's gonna
average out, and, you know, Igot a good enough team where
sometimes I gotta say, Look man,like we don't have that kind of
money in this budget. I need youto deliver for me here. And
I'll, I'm gonna have to takecare of you on the next one. I
mean, those are, those areconversations we've had before.
(17:03):
Because, I mean, they want tosee me succeed. I want to see
them succeed. We're all in it tomake some money. But I just, I
don't know, and I mean, there'ssomething that's a good point go
ahead. Yeah. I mean, maybe Ilike the hunt too. You know, I
like the hunt. I like the I likeknowing that. Like if I saved
$3,000 on siding, you know,that, you know, or if I should
(17:27):
say I overestimated it. I mean,I might get excited for a
second, but then I'm gonna learnI was, you know, $4,000 over on
my my trim work. But so maybeit's, it's that ride that I
enjoy in some sick way.
I think this is great, right?
And that's why I say like, Ithink this is a perspective and
a conversation that is worthhaving, right? Yeah, and from
(17:50):
multiple different buildersperspectives, because I refuse
to believe that, like Chris Kerris, like, on his own island,
right? And, like, own, yeah,there. There are builders will
listen to this andbe like, dude, right? There's no
way we're all thinking the samethoughts, exactly.
And I think, like, yeah, oh, didI lose? Yeah, are we here? Yeah,
(18:15):
okay, that was the first Okay,we're good. We're stable. Um, I
think, to your to your like,like the hunt, right? I think
the the the ride of the project,yeah, I think that's like a fair
way to look at it, if that'swhat you're trying to build,
(18:35):
right? I think that yearningbecomes a lot less palatable
when you start to grow anddevelop as a business. Sure,
yeah, it's like, no, I've got,I've got project managers on
salary, I've got team membersadmin on salary. I've got this,
that and the other. I might 1099point being like, I'm
(18:57):
responsible for branding work.
Yeah, I think that's where,like, the calculated nature of
whichever pricing model you havebecomes a lot, yeah, I don't
know it's, it's a lot lessabout, like, just trying to,
like, find that deal, or, like,get the guy taken care of, or,
like, get that, like, rush from$3,000 savings, right? Because,
(19:19):
like, to your point, you'regoing to find a loss somewhere
in that budget, right? That'sgoing to eat it up and
essentially wash out. Go ahead,what?
Um, like, how does, how wouldadaptive support a fixed cost
contract? Or do you even want tooffer that you can do that, do
100%we've got tons of fixed price
builders on adaptive. And itgoes back to that logic of,
like, it doesn't matter whetheryou're fixed price or cost,
(19:42):
plus, it all comes down totracking cost, right? That's
such a strong componentadaptive, yeah, and really,
like, when I see like, fixedprice builders that are really
getting excited about adaptive,is they, they? It was actually
one of our first episodes.
Episodes talked about MisterMartin, talked about how he's,
(20:06):
like, literally reviewing, like,line items on the budgets daily,
and like tracking costs daily.
And that's where I think, like,a big part of adaptive is
helpful for these guys, becausewe cut out and shorten that
timeline to understand what mycosts are, my actuals are so
that then I can see those lineitems start to bleed or win much
more quickly. And that's where Ican start, like making better
(20:27):
decisions that could save orkeep a project on track. The
other one is web, so youcan so adaptive, and I know I
need to get to this feature, butlike, I'm assuming you have the
ability, or adaptive has theability, to set a budget and
then compare it to actuals, andthen I can see it, yeah, yeah,
yeah, dude, Chris, we arefailing you, yeah? I know. No,
(20:50):
you're not failing. I just meanYeah. All right, so that's,
that's one thing we're gonna goover. Yeah? That would be
helpful.
That's a huge part of it,though, and that's where, again,
like, I think you're raising afantastic point, because I think
there's a lot of builders thatthey're like, Okay, I know I
(21:10):
need a budget, but that's likeme saying, like, I know I need
to be on a budget, right,personally, right? It's like,
you know, being on a budgetsounds fun. It's not being a
budget, you know, yeah. It'slike, sometimes you get this,
like, little rush. But the pointbeing is, is, when you are
running a fixed price model,like knowing your those are the
guys that are, like, hyperfocused on numbers, is at least,
(21:30):
what I see is that, right? I seea lot of fixed price guys, yeah,
because, again, it's like, justan example. I'm going to build a
million dollar product, not theprice on it. Okay? And let's say
that I won the job, and I'mgoing to have 800 grand and cost
wrapped up into this thing withessentially a 20% markup. Most
(21:52):
companies that I see, when theystart to get a little bit
bigger, they're going to berunning about a 10% overhead,
right, like their static cost,labor, rent, fuel, stuff like
that.
Let's break this down. ProjectManager is a cost of the job,
right? I'm just gonna sidetrackyou for a second.
Yeah, you should be like, Youshould be billing back project
management. Yeah, that's acost of work. And then you have
(22:13):
your overhead, which we'resaying is 10% sure, and then
we're saying profit is 10% and Ijust, I think, like, that's one
thing I've been fishing, likefishing for, and I thought it
would come out more clearly inany one of these podcasts. But I
don't think anybody really isopenly talking about that.
There's a nugget. There is anugget in the will King episode.
(22:37):
Listen to the will King episode,because he's from high cotton
homes down in Alabama. Supersharp dude, yeah, um, and
there's, there's a legitimateequation to, like, essentially
back into your numbers in aproject. It's, and this is
where, like, I'm just not a mathguy. It's like, a, like, take
(22:59):
your cost divided by one point,whatever, and then our times,
he'll go over in the episode.
But the point being, that's howyou should be finding your
margin. That's how you determineif these are
good jobs or not. Yeah. Thething I struggle is, yeah. Where
I struggle is like, I don't wantto just say 10% profit, because
(23:21):
I feel like at a at more volume,so like, a million dollar
project maybe shouldn't begetting 10% or maybe it should
be getting more, I don't know. Ijust it's we all. I think every
builder who listens kind of isanxious to hear like, am I
charging enough? Am I chargingtoo little? Am I charging too
much? And it's, it's hard toreally get it like a real
(23:42):
temperature on the industry. Imean, I think we're, we're all
generally right around there. Idon't know, am I? Am I fishing
for an answer right now?
No, no, we can this, dude. Thisis the episode. This is the
episode. I love it. I so a Firstoff, it is not like,
Countrywide, this is the markup,yeah, okay, or, like, this is
(24:08):
what you should be making. Ijust did a podcast, however,
which was yesterday with MillerBradford. He does. He runs
builder bookkeep, also inAlabama, yeah. Like, he also
works with will King point beingis we talked about whip, and I
had gone through this, like, 10%overhead, 10% margin, and that
when I say margin, that shouldbe like, net margin, right?
(24:31):
Yeah, he was like, Yeah, thatshould generally shake. Like, if
you're doing a million dollarsin revenue, you should be making
100,000 net like, essentiallywhat they had talked, what we
had discussed, there's going tobe guys that will be like,
there's no way that'll work inmy market. There's no way that
this will happen. There's no waythat that I get it, because
there's nuance. You got to becompetitive, right? But I think
(24:51):
going back into this is like,knowing if you're going to be
making the money that youinitially thought you were going
to be making is the biggerconversation. And knowing what
that number is before you gointo a job is where you really
start to, like, get on that lineof thinking more so of I am
spending my time, investing myefforts and cost into making
(25:12):
outcome right should be profit,and that's where I think, like,
when we're talking about fixedprice builders and tracking cost
and how important that is,that's where a lot of fixed
price builders get excited aboutadaptive, because that's what
they're looking for. They knowgoing into a job, and they have
determined that I'm going topick up this client, or I'm
going to build this product onthis piece of land, and I'm
(25:34):
going to do so because I'm goingto make X dollars or percentage,
which is worth my time. Yeah.
And if I'm not tracking my cost,then I have it's way easier for
me to bleed into my margin oroverrun on cost, and chew up my
margin, chew up what I thought Iwas going to be making on that
(25:54):
project.
Yeah, no, that's Was it toomuch? No, that was great. No, it
was well said. I don't, I don'tknow that I have much to respond
to on that you don't have to,you don't
have to. And this is just, like,kind of a good conversation,
because I think, like, reallyhighlighting here, like, what
builders are thinking about whenit comes to fixed price and
(26:17):
cost, plus, there needs to bemore
conversation around it. Yeah.
And I love, the debate like I doappreciate and just genuinely
enjoy debating it, like, I thinkit's cool. And I think I started
this with I think Every job isdifferent and every client is
going to be different. I'm notopposed to it, but it's not
like, if I had my choice, likethe job that I'm doing cost,
plus they asked me, and I waslike, I prefer to do a fixed
(26:38):
price, but I obviously don'twant to lose the job, so I'm
open to doing it however you,however you'd like. So I will
say this with with thisparticular cost plus job that
I'm doing, I did ask that wekeep the overhead in the project
management. I'm sorry. I think,no, I just did the project
(26:59):
management. I wanted a fixedprice for the project management
because I didn't, did not wantto get into and I don't know how
other cost plus builders do it,like, are they building their
PMS time for every hour thatthey're on the site or working
on the job? I didn't even wantto get into that debate, so I
just said, Look, we're gonnahave a fixed price to manage
(27:20):
this job for this goal, and I'mgonna fill it as a percentage of
work progress. And that's that,to me, was pretty common, yeah,
from my understanding, thatwould be more of a fixed fee
situation, okay, and a fixedfee, and that's, that's from my
understanding. Again, peoplethat are listening would love to
(27:40):
hear some chatter about this,but when it comes to fixed fee,
it's a way to like a remainlike, extremely transparent with
the customer, but even more so,like, become like, more
competitive when it comes topricing. Yeah, my only like,
taper this expectation. Goahead.
I hear the fixed fee argument,but I'm also just like, geez, if
(28:01):
they like, I don't know, now, ona chevron pattern or some crazy,
like, high level of managementthing, there is a piece of me
that's like, there's a littlemore risk here for everybody,
yes and yes. With that riskought to come the appropriate
level of fee, so that that'swhere I have a hard time just
(28:22):
committing to one fee.
Chris kind of sounds like you'restarting to understand cost plus
a little bit here. No, I'm justkidding. And I say that because,
like, I will also bring up BradRobinson, yeah, awesome dude out
of Atlanta. I don't know he'sactually quite available on
Instagram. Do you know of BradRobinson?
(28:43):
I will look him up right now.
He's on Instagram. He was on thepodcast. He was on the initial
the great debate, cost plusversus fixed price. And I think
this nomenclature that luxurycustom home builders are
typically cost plus thatactually might be generally
(29:04):
true. But what Brad is doing ishe's building like an elite
product in Atlanta, okay, and heis all about fixed price. I like
probably you guys share a lot ofsimilarity in how you view like
the client experience. Actually,I know that because Brad's all
about client experience. Hugepre con guy, huge selections
(29:28):
design up front, like, knowwhat's going on before?
Is he the guy that, like, won'tstart a job until all selections
are made,I believe so I would have to
confirm to just yeah, be 100%positive good friend, if I
remember correctly. That's hismotion, but also like he is a
businessman like Brad Robinsonbuilds homes, but his product
(29:53):
and how he views what he does isa business. Business. It is, it
is a I have these inputs, and itis my fiduciary obligation to
the consumer to make sure thatwhat I am promising them, I will
give them, I am giving them,yeah, and I am making money for
(30:14):
the business, yeah? So again,like, I don't think that there's
like, Oh, I'm a custom homebuilder. I have to do cost plus,
no, I think that theconversation is more broadly
about shifting risk and riskappetites for the individual who
is committing to the work beingthe business owner.
You know, are you saying thatthe client and builder?
(30:37):
I think yeah, for sure, likeclients definitely have an input
in that, because there arecertainly, like, people that
have built in the past, or getadvice on how to go about these
conversations. You hear it allthe time, they'll be like, I
only work with I only want tofix price builder. And there are
guys that are like, truly costplus, and they're like, nope,
not going to do it. Not yourbuilder. And that's where they
kill the that's where they killthe sales cycle.
(30:59):
So answer me this, just because,you know, I live in the world of
construction, and you know I, Iwould never do this, but I mean,
there is an opportunity for anybuilder to take a take an
invoice, certainly unethical,and ask a subcontractor to put
another $2,000 on that. And thenpresent it to the client. I
(31:22):
mean, I just sure, like, I feellike there's an elephant in the
room here with that. Like, isthat not going through the mind
of a client and and look likehuge caveat here. Never, this is
me just speaking objectively.
Like that thought resonates, Istill think, in people's minds,
right? So like, like, to me,that's that that would be a
(31:47):
reason for a client not to wantto do a job cost, plus, just for
fear of that, and maybe it getsback to a level of trust and,
you know, understanding themarket and all that, or getting
three prices and going with alow one, like, it maybe a little
more emphasis on that. Like,have you come across that at all
where clients have expressedthat concern, or, as a builder,
(32:10):
expressed that concern of aclient?
Um, so no, I haven't, and that'slike, I think it's valid. Um, I
think it's totally insane. Oh,it's,
it's illegal, it's, it's all thewrong jokes,
and that's where like, and so Ifrankly, like, I'm more on,
like, the B to B side, businessto business, meaning I sell
(32:33):
software to the business, and Iam less involved with the
consumer being the builder'sclient, right? So I think that
fear, which is why I say it'sprobably valid that fear
probably exists with a consumer.
It's like if I get into a costplus contract, and there's no
definitive number of what thisthing is going to cost me, just
a ballpark. Who's to say thatgeneral contractor Bob isn't
(32:56):
going to be colluding in thebackground with Phil the
plumber, to be tacking on anextra couple grand on these
invoices, I get fleeced, right?
Yeah, I think, to your point,totally illegal. There's like,
multiple businesses at stakethat would just be a totally
(33:19):
wild way to build a fraudulentcompany, right? If you were into
fraud, like there are otherbusinesses to get into that, you
could probably make more moneybeing fraud.
And I will say it's sort of Iwant
to say that my fixed price side,but go ahead. I want to just
show just for the record. I dowant to say the alternative to a
(33:41):
fixed price? Ever go ahead?
Okay?
I would say with cost plus. Imean, you still have the
inherent responsibility ofmanaging a budget, like I I do
anyway, like, I wouldn't wantcost plus to come off as an open
book, because it's not right,like it is still your sorry.
(34:02):
It should be. But go ahead, itshould be open book if you're
cost plus, yeah, go ahead.
But I, and I use my currentexample, like I still feel the
responsibility to track thebudget, and when I see walnut
get selected for ceilingsinstead of poplar. Like, it's my
responsibility to say, you know,look, Mr. And Mrs. Client, we
(34:26):
give you a budget for x, butlike, your designers just picked
walnut, like, that's gonna costyou another 10 grand. Like that,
I feel is my responsibility toshow them that and manage the
budget. It should be, yeah,that's a part of the cost plus
model. That's why we've likeemphasized so much on the cost
plus side.
(34:46):
How do you do a challenge model?
How do you manage any changeorders?
Again, you got to listen, haveyou? If you haven't listened to
will King episodes, you should,because we talk about this, and
he even struggles with it. Oflike, defining a change order
and a cost plus job is like,what is pretty difficult, and we
(35:07):
kind of talk through a solution.
I think the like the situationwas is like, if I'm dealing with
a client and help me with thephrasing, I'm pretty good at it
generally, but let's say I'vegot drywall in and I'm getting
ready to do I'm getting ready toput lighting fixtures in.
It's kind of what, dry wall. Adry wall. How are you saying it?
(35:29):
Dry walling.
Dry wall. A great All right,go on. I was thinking more of
like roughing, but that's notroughing. That's like for
plumbing, like pipes to thewalls. I digress. Point being
the example was, is that if yougot a client and they're like,
(35:50):
like, yep, recess cans all theway, we want recessed cans.
Recess can lights, recessed allthe way. And then before you
install, they're like, actually,wifey was on Pinterest, and she
saw track lighting, and shereally likes what that does to
the room we want to put tracklighting in. Should that be a
change order? And, like, minewas, like, I mean, it could, if
(36:11):
the cost is different, I thinkthat's like, reasonable. Like,
if track lighting is going to bemore expensive than recess cans,
you should want 100% changeorder that. But if we're talking
about, like, really the cost ofa change order, which is the
planning, the scheduling, theadmin that goes into generating
what that's going to cost,that's really where, like, in my
(36:33):
opinion, change orders become asuck, because it's not as easy
as just saying whether it'sfixed price or cost, plus, like,
yeah, you changed your mind, soI'm going to bill you for it.
It's like, No, you need to bethinking about it in terms of,
if my Pm is walking a job site,and the owner says, I want
pocket doors here, and we didn'tframe for pocket doors. You need
(36:57):
to get somebody out there, whichis going to take your Pm
planning and calling to get abid on, what is it going to cost
to, like, convert this into apocket door, what's the labor
and material that's going to gointo it, and then is that going
to impact future schedule? Like,that's the cost of a change
order. Most no doubt,in like, that cost, gets that
(37:19):
cost in a Cost Plus model, likethe overhead. Well, I don't know
if it does, yeah. Well, Isuppose it does. The overhead
and the fee get carried there,but in that change order, I
would probably put a couplehours of management time on
that. I mean,you should, yeah, I'm very pro
this, and you should mark it up.
You should be making money onthat, because you as the owner
(37:43):
are employing and managing andcoaching people to perform work
in the way that is valuable toquite a
customer, no doubt. Yeah, man, Ilove it, and so, like, here's a
scenario in cost plus whathappens in the event where the
builder did something wrong,like, who, who? Like, I'll use
(38:05):
your pocket door example. Say,say, the design always showed
pocket doors, and the buildermissed it, so now they got to
redo framing. What does thathave
to do with cost plus or fixedprice? I mean, I feel like
that's just like, you're goingto eat it either way. You got to
use, yeah, on fixed price orcost plus, right? That's like,
that's the, that's the I mightnot have gone to college, but
(38:28):
I'm paying for my educationconversation, right?
Sure, right. But it does amazeme that subcontractors will
audit who are getting paid on atime and material basis, will
sometimes try to charge you forthat. And it's like,
this is subs you're saying,Yeah, you know,
not often. I mean, our, our guysare pretty good, but yeah. I
(38:53):
mean, if it's not crystal clear,I mean, there is a feeling about
some people that maybe theyshould be getting paid to do it
twice. I mean,that that's totally Well,
that's the dirty laundry of thebuilder that I'm airing out
right now Well,and I think that's fair, because
I think, like, that's where,like, you try to get business as
rigid and binary and nonemotional as possible, right?
(39:16):
Yeah, like, that's how you,like, start to scale, as you
start to scale as you startthinking about business a little
bit more rigidly and like, well,if this happens, then this but
when we're talking about asubcontractor that you've worked
with for 10 years, yeah, misseda detail on plans that we can
all agree with. Wasn't superclear, right? And there's a
relationship there, and they'relike, Dude, I missed that. It
(39:39):
was a pocket door. I need tocome back and do this. I'm like,
I'm gonna send you an invoice. Ithink you have a decision to
make as a business owner withall variables considered. To
say, Okay, I will have thisconversation with the client. I
will pay you for this. I willget you paid for. This, but to
(39:59):
prevent this from happening inthe future, we need to run
tighter precon and go over thestuff in the beginning to make
sure that this doesn't happenagain, and then when it happens
again, it's like, are you takingme for a run, or did we miss
something? Yeah, that's myopinion. That's my opinion of
the matter.
(40:20):
Yeah, I think you're right. Isuppose that's another reason
why, as a client, you might beopposed to the Cost Plus model.
I mean, if you're not, like,truly locking subs in.
But here's the other thing,here's the other thing is, like,
in this, is this the devil'sadvocate of fixed price, and
this is why it's such aconversation, because you're
(40:41):
100% right with a cost pluspercent right with the cost plus
side. Is like the clients in atthe end of this, and they're
like, Okay, what? I'm gonna havea general contractor coming to
me and saying, Hey, you'repaying me for a service to
manage subs to get my home builtthe way that we had decided, and
now you're asking me to pay fortheir mess up, which really was
your mess up, because youweren't managing the project
(41:01):
right, doing 100% a reason to bemaybe skeptical of cost plus,
but I think inversely fixedprice has those similar
situations, in the sense thatthere's a lot of like, okay, if
I'm if I'm bidding out a home asa consumer, as a client, to a
bunch of general contractorsaying I've got a million
(41:22):
dollars, and I'm looking for afixed price builder who can get
me what I want for that number.
Yeah. And we go through and weinterview three general
contractors, and they all say, Ican get you the million dollar
home that your dreams of, or,blah, blah, blah. And there's
one builder that has hookups orknows, like, hey, I can slip a
cheaper material in here, andthey'll never know or really
(41:44):
care. And that's where I'm goingto make a 15, 20% margin on this
thing that happens all the time.
And I think this is where it'slike, maybe not an ethical
conversation, because it can beargued both ways, but it's like,
and I understand both ways,which are the fixed price
builder is it's like, if, if Ican run a project more
(42:06):
efficiently, and I can get theclient the product that they
want that's cheaper, faster,better, then I should get
rewarded for a higher margin,because I'm able to do this
right. But that also creates astigma of like, okay, if the
client has to spend a milliondollars, is a million dollars,
is a million dollars, that'sfine. But then you start to
build this like, how fast can Ido it? How? Where can I cut
(42:26):
costs? Can I get cheaper subs?
Can I get subs that are faster,right? And so that's where it's
like, it's not a binary cost,plus is better than fixed price,
because you could argue gaps inboth. And frankly, I think the
gaps that get argued aren't ascommon of issues as you might
think. I think it's a lot of itcomes from, like, fear based
thinking, frankly.
(42:50):
And that's like, I mean, listento every point I've laid out to
you of why I'm opposed to maybegoing Cost Plus, they're all
fear based. They're all so,yeah, I'm I'm not totally
against it. I'm just morecomfortable with the with the
fixed price right now. And looklike you got to make a business
(43:12):
decision too, and you said itearlier, like ultimately, you
want your client to have a goodexperience, right? So if it
feels like they're going to getchanged ordered a million times
over because they haven't quitemade up their mind or the
selections, and it's gonna feellike a change order every two
minutes. Then you know what?
That lends itself to a costplus, because then, then it's
not so much a change order as itis, like, okay, like, we're
just, like a kind of a runningtally here of what you want. And
(43:35):
I'll just, I'll effectivelymanage a budget for you and tell
you where I think the costs aretracking. But we're not gonna
call them change orders well.
And I think that's like,probably where you see a lot of
like, custom guys leaning inthat cost post. Yeah, I'm
thinking, because they're like,like, dude, how am I? I just saw
(43:56):
a stat, and I wish I paidattention to it more. It was
something insane. It was like,Oh no, it was a build show live.
And I think it was Jake BrewtonMay. There was some stat that
essentially boiled down to onany there's X number of
decisions that get made whenbuilding a custom home. And then
he boiled it down to the numberof decisions that need made in a
(44:17):
day. And it was something crazy,like 20 or 40 decisions a day
over the course of that right?
So it's like when you'rethinking about that from a fixed
price standpoint, and trying toget everything locked at the
beginning and make all thosedecisions on the front end to
insulate yourself, to preventthis change order craziness.
That's where guys are like,Dude, this is the first time
(44:37):
I've ever built this home. Isthe first time this home has
ever been built. This could be acompletely custom set of plans,
like, right? You don't know whatyou want. We have, like, a, we
have a floor plan of what youwant, right, yeah. But you want
a really custom product, andyou're gonna be making these
decisions over an 18 monthbuild. Like, we're gonna run
cost plus, so that we're notinsulating. But that's where.
(44:58):
Share budgeting, draw packageswith reporting, all of that
comes in to provide an open bookexperience. And that's where I
see the best builders run theseprocesses, and they essentially
insulate themselves from a riskof legal standpoint by sending
invoicing their draws every twoweeks or month at the latest,
(45:20):
and that's where I completelyagree with your initial concern,
which is I stay away from costplus, because the administrative
burden, and that's why I say wefailed you as as adaptive,
because that's like our breadand butter. And you should be
looking at this as an empoweringmoment to say I can now open up
my market to people that aredoing fixed price and cost plus,
and I can start making thesebusiness decisions internally.
(45:41):
Not scared that cost plus isgoing to wreck me from an admin
standpoint, but I have asolution that will allow me to
do it much better for myselfinternally, as well as providing
clarity to the client. So that'swhere I think, like as a cost
plus builder, you should besending every cost over, showing
where you're making your moneywith a log of change orders
(46:05):
every two weeks to managehealthy cash flow every month at
the very minimum. Well, look,man,
stay on me. I mean, I've got asix month venture here of this
barn in Hingham.
So Dude, we got to run it. Wegot to run it through. When's
your meetingwith Daniel? Gosh, next Tuesday.
I want to saynext Tuesday. So a week out, how
(46:26):
many draws Have you put togetheron this thing?
So far, none. I'm getting readyto do one shortly,
dude, you I will holler atDaniel and you guys should,
like, look at building yourfirst draw and adaptive.
Now that would be great. Like,that's how we should kick off
the meeting. Like, show me howto do a draw. Yeah, yeah.
(46:47):
I agree. Because, dude, I'mtelling you, like, Na, this is a
killer conversation. I lovethis. This was, like, there's
like, a true banter with theboys. This was good dude.
The same way, I don't minddebating political not to get
into that, but like, I don't,I'm not looking I'm not right or
wrong, man. I just like, I justwant what's best for the client,
you know, and I want what's bestfor a project. And I think if
(47:09):
you can go afteryou, your family, the people
that are involved in yourbusinesses, family, your subs,
your trades, yeah, that's, Ithink we need to keep, keep
pulse on that, because that'swhy we're all here. Small
business owners, if they fuelcommunities. I'm a huge
advocate. We just want to makeyou guys make more money. Make
you guys make more money, getclients more or more clear
expectations and understandingsof what they're doing. Hold
(47:32):
everyone accountable. Do itaccountability. That's success.
That's right. That's why I doChris, okay, you were down to
Texas, yeah. I was in, yeah. Iwas in Texas. What December of
(47:53):
20 was 2025 Yeah, I was inDecember 2024 until April of
2025 and I was actually justdown there. Is that what you're
talking about? I was just inTexas
for build show, the builder,builder Expo, right? Is that
what it was?
Yeah, it's build it's buildshow, live. It's put on by Matt
(48:16):
reisingers. Build show, yeah,yeah. I think there's a little
lag. I think we're catching alittle lag, but, yeah, I think
we all know I was down therethat, yeah, yeah, I had it on
the calendar.
(48:36):
If we couldn't make it,you're all good, you're all
good. It'll be there next year.
I know we need to take breaks.
We need to take breaks so wedon't talk over each other. Now
it'll be there next year. I willsay that it was extremely high
value show for the for theparticipants, the people that
join,yeah, that'd be interesting.
(48:59):
Thanks. Joe, yeah,you should do it. You should do
it. Um, but okay, dude, well,I'll let you get back to it.
I'll let you know when I'm backdown in South Shore. And also,
I'm gonna be starting happyhours and stuff here in our
office.
Go ahead. Let me know I'm ahappy person. Enjoy and enjoy
that hour. So just let me knowyou're a great addition. Chris
(49:20):
Kerr, happy hour. Happy Hour.
Chris Kerr, all right,man, hey. Thanks a lot. Great.
You bet great being on man,thanks for having me. I really
appreciate it.
Of course, we'll see you, dude.
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