Mark: Today on PowerTips Unscripted, we talked to Chad Vincent, owner of Renaissance Remodeling in Boise, Idaho. Accurately estimating a project is critical to profit, and one of the most challenging components of that estimate is labor. Can you estimate labor simply and accurately? Are you spending too much time estimating labor for each job? Chad thought so. So he came up with a new method, and we’ll hear all about it in just a minute.

Victoria: Hi, I’m Victoria Downing, and welcome to PowerTips Unscripted, where we talk about tips, tactics and techniques to help you build a strong, profitable remodeling company. And I’m here with my co-host, Mark Harari.

Mark: Well. Hello there.

Victoria: Hi. How are you?

Mark: I’m always good.

Victoria: Hey, I just realized I didn’t have my headphones on. I’m thinking, why do you sound so odd? And that’s. That’s solved.

Mark: It. You sound like you’re in a bottle.

Victoria: Yeah. So that’s exactly what it sounded like. So much better now. And so here we are in, the first day of September and with tornado warnings all around, storms are coming.

Mark: It’s the 2nd of September, actually.

Victoria: Oh, it is. It is.

Mark: Well, it’s going to be when this record. You always do that when it goes out. That’s too bad. It’s the second. Yeah. So that’s.

Victoria: True. Well, I’m excited about today’s, topic, because I think it’s unique, I think. Or to get some tongues wagging after this one wagging.

Mark: That’s a first for me, but, yeah, I think you might be right. That’d be good.

Victoria: So shall we just dive right in?

Mark: Oh, yeah, a whole lot.

Victoria: Whole lotta without a whole lot of preamble.

Mark: Yeah, I can’t wait.

Victoria: All right. Today we have with us Chad Vincent. He’s the owner of Renaissance Remodeling in Boise, as you had mentioned. And he has an awesome team. So I was lucky enough to be out there in Boise with Chad and his team recently working with them on a team building day. The and it was it was great. So in between activities Chad and I talked shop right.

Victoria: And he was telling me about his method of accurately estimating labor and how he avoids the problems that so many others have had. So he’s here to share it with us. So Chad, welcome to PowerTips Unscripted.

Chad: Thanks for having.

Victoria: Me. Oh yeah, it’s awesome. Again, as we were talking out there, it just struck me that you’re on to something, dude. I like what you had to say. So I want to. I’m excited about sharing this listening audience.

Chad: You know, I mentioned that your jaw dropped a little, so I’m assuming that others will. I think so, yeah. I was not a big not not understanding what I was doing.

Victoria: Yeah. So, you know, it’s so common. You know, we read emails from hundreds of Remodelers all the time, and there a lot of discussions going on and a lot of discussion about how to improve estimating and that in-house labor piece is so elusive to so many. Why do you think that is?

Chad: Well, I, I think well, in our estimates we really have three components besides markup. We have, you know, subcontractors. We have materials. And then we have this labor column. And I mean, I know people make it more complicated than that, but subcontractors, you can ask each one if you’re accurate on your planning, what you do, and they can give you an exact estimate.

Chad: And nine times out of ten, they’re going to stick to that estimate. So your job your subcontractor cost a lot of times in life. Right. Material. You know, you can, you can do stuff with material or not anticipate something or it can be a little more convoluted than you thought. And all of a sudden you’re over with materials or under, but you’re still guessing.

Chad: You’re still counting sticks and breaks to get estimates for material that you think will be included. But for labor, for, you know, I’ve been in business a long time, and for 18, 19 years I did labor just like everybody else does, just like material. Every single time I look at a piece of material, I try to put a piece of labor to it, you know?

Chad: And so, I would have my estimate with, you know, 26 categories and labor would be sprinkled throughout all over there because I didn’t want to take the chance of missing, part of that. You know, I would I would try to capture every piece by making sure I included some with you know, every subcontractor, because we know we’re going to spend time with every shop, you know, so try to account for that.

Chad: So, several years ago, my bookkeeper would come down and the job cost reports every, every week and should have a red line or, you know, you’re over or under. And labor was just everywhere. But what I estimated, you know, in my thinking that cheap labor had appropriate rate. The guys on the field wouldn’t change their shirts for talk with the plumber.

Chad: They were still in the siding, right? You know, and I put a lot on site or when they think maybe they’re prepping for a Frank so that, they were all over the place, and it took probably a year and a half where I finally said, you know, I really don’t. It’s it’s important that we’re at all right.

Chad: But I want the bottom line to be right. And I and I really don’t I mean, this is harsh to say. I don’t really care about all the stuff above it. And so it took several times saying that to her before I even realized what I was saying is, if I only care about the bottom piece, did I do that job under or over the labor that I did for it?

Chad: And why am I concerned about everything up above it?

Victoria: Okay, so all that detail around how many hours is it going to take them to to install six windows and you don’t care if they miss that, if they make it up somewhere else, as long as the total labor is appropriate, you know, you’re you’re within a certain couple of percentage points of it. Yeah. In, in combination so that you can mark the whole kit and caboodle up and get the gross profit you want.

Chad: Yeah. So I realize that all that, you know, going through that process for the job cost reports, that really what I’m concerned about is each job coming in on for labor, on budget. And then how about I realize, if I look at my profit and loss statement, it tells me right there how much later I should put in throughout the year.

Victoria: How do you mean? How do you mean it tells you explain that a little bit more for everybody.

Chad: Well, for everybody’s profit and loss statement. Up, up top. You have revenue and all your revenue minus your, you know what you didn’t earn that month, and then you have, below that you have positive. So, so everything in cost of goods sold is about the job right. And and that’s a bigger discussion. But everything above and cost of goods sold is about the job.

Chad: And there’s two categories. When you minimize all the categories there’s a few categories and cogs that show up specifically. And one of them is labor right. So your labor and you, you can have your labor. And then all the the nuances added to that, all the things, you know, if a guy makes $25 an hour, he’s there’s things that the company has to pay him.

Chad: Right. Include all that stuff in there and labor shows up. If you include the percentages, column labor shows up as a percentage of revenue.

Victoria: Right.

Chad: Right. And so looking at my year, my labor was 14%.

Victoria: So 14% of revenue represents the labor that’s needed to produce all the volume you needed for the year.

Chad: Correct. Okay. Yeah. So let’s say we did, you know, two up, $2 million in revenue. And an easy way to do that is you have a little less than $300,000 and labor to do that, you know, 280,000. And, you know, it’s not it’s not as simple as that, but but to teach. So we have designers who are designing, selling and estimating.

Chad: Okay. So we’re design build and our designers design. So an estimate and to the questions that would be coming out of the designers also to teach somebody that’s never swung a hammer. How long will it take to set a window. How long will take us out of our they were so relieved when I said, look, every single job when we started this, make sure there’s 14%, labor to sales price.

Chad: So I have a sales price up on the right. And the estimate that’s popping up every time I add something to it, because we use the same markup all the time is same margins. We don’t move around that. And so they could see their labor total versus their sales price. And if you know that their sales price has gone up there, they have to add up the labor.

Chad: They have to.

Victoria: It seems like it would be a constant adjusting period. Because how do you know how much labor to put in what the dollar amount is? You know, it’s 14% of the sales price. But until you put the labor in, you don’t have a sales price.

Chad: Correct.

Victoria: So it’s just constant adjusting. How do you do that?

Chad: Well, what we’ve been doing is do that first, right? So if they know that they have a kitchen that they normally sell for $100,000. Okay. And, and they’re taking that estimate, they better have. Well, now our labor is down to 12%. They better have 12 to 14% in their. And I put that in first okay.

Victoria: All right. Yeah.

Chad: So that surprised you mean. Yeah. They’ll do it at some point. And what happens with a lot of people is if you’re not paying attention to that ratio, you’re adding, let’s just say the cabinets, right. Come in. And they’re a lot more expensive than you thought. Right now. Were you budgeted 20,000 and they’re 32,000. Well, most people will just put that 32,000 in there.

Chad: Right. And not associate that with the need for more labor.

Victoria: Well, what would be the need for more labor? I mean, the expense in the cabinets, if it’s the same number of cabinets, wouldn’t that wouldn’t they be right to say we don’t need to increase labor because there’s no additional labor needed. It’s just different kinds of boxes.

Chad: You think that would be true, right? I’ve been mulling over this before. This before? I have you guys call me. But at the end of the year, labor doesn’t. The labor percentage, not in your profit loss statement does not like. And how about it just does not do that. Wow. It goes like an undulating small hill. That’s it.

Chad: All right. You know, because you’re you’re trying to produce or you are producing similar amounts each month. Right, right. And your labor is pretty constant. Right? So we have a mix of subcontractors and our own labor. Right? We do a lot of in-house stuff with, with some, a lot of stuff. So we don’t have seven guys one month and 13 the next.

Chad: We have seven guys one month and seven guys.

Victoria: Right, right.

Chad: I say the same, okay. If we we’re not doing peaks and valleys in our production either. And so the labor staying pretty pretty similar percentage wise. Right. And so when we when we look at our profit loss statement the next month, it might go from 12.7% to 12.6. Right. Yeah I look at percentages a lot of times the versus numbers.

Victoria: I’m just very smart.

Chad: It’s deceiving. Yeah. Yeah. So so when you have that piece, where do you have the cabinets of 32,000 versus 20 and you’re, and you’re market up 1.7 or you have a 40% gap, right. Your price went up $12,000 for the cabinets and $8,000 worth of markup. You saw that job for $20,000 more. Yes. That job will take longer whether you like it or not.

Victoria: Okay.

Mark: Right. Because of the cabinets.

Chad: Because the cabinets and the other things that you’re putting in there. So if you if you think you can do it, I’ve made this mistake a thousand times. If it’s a kitchen that cost 80,000, in the kitchen that costs 120,000, don’t get them. At the same time.

Victoria: They just don’t.

Chad: They’re not.

Mark: You know. But okay. So I’m so I’m curious. So OSB shut up to like $90 a sheet. Right. So so there’s that ridiculousness of of that offsetting it which in a in a situation like that it can only benefit you because you’re, you’ve got more Cogs, you got a higher number. But what when the inverse happens, you know, it goes from 90 bucks a sheet down to eight.

Mark: And, and the costs are suddenly so much more shrunk down. Are you underestimating labor?

Chad: Yeah. So this is not a hard, fast rule where there’s a there’s not there’s not a cell in this estimate that says 14% or 12%. Right. You’re looking at it with your eyes. You’re looking at this job as it’s by itself, as if this is the only job that the guys are producing in their life. Right? You can’t say this is near another job.

Chad: So we’re going to share a cost or this is downtown where we have a lot of other jobs. Should should cost less than to say, you know, made a lot. So each individual job you look at it and, and here’s here’s the thing for a kitchen that we can do all day long for $100,000, we know by and large the dollar amount that we can produce that with, with labor.

Chad: Right. But an 80 you addition, in a, in a, in a, in a dense area with an alley difficult to access, 14% won’t do it. Right, right. So we have to look at each individual job and to say, look, we need to add a month to that. How much is a month of labor for three guys? Let’s just at $7,000.

Chad: Right. It’s an easy situation where the designers have estimated it. They put the proper amount of labor in there and then we look at the job by ourself.

Mark: So this number so this number is your starting point. And then you’ll make an adjustment based on this specific situation.

Chad: If we need to. Yeah. So yesterday we have a job that’s a small bathroom remodel. But it’s it’s outside of our area that other jobs will be done in. And by design or had 13 or 14% in as labor. And she said, but this is a pretty easy project. Can we drop the labor down to the ground?

Chad: And I said, you know, it’s this by itself, it’s ten miles away from all the other jobs that we’re doing or, you know, whatever it is, we need to leave it out there. Just we can’t share any labor on that, so we just leave it there. We had a 20, 32nd conversation about labor on that job and that’s it.

Chad: So this this works. So at the end of the year, we didn’t make any of those adjustments, like you said, like this job is harder to do. So let’s have labor this jobs easier so we can back off a little bit. If we didn’t make any of those adjustments. Not one. And you just stop. That’s your number for 10% or whatever it is at the end of the year.

Chad: You’d be right.

Mark: Yeah. Because it that it’s yeah, it averages out.

Chad: I mean unless, unless you just started doing some jobs that you don’t normally do. You would be right.

Mark: Well so how much, how much history. I mean you, you didn’t just one day look at your year’s numbers and say okay this is it. Did you look at like multiple years of history when this kind of had this moment.

Chad: Oh yeah. I looked at like 5 or 6.

Mark: So you look at like 5 or 6 years and then you just saw this consistent number and said, what am I doing.

Chad: Right. How much. So yeah.

Victoria: Go ahead.

Chad: Well, so the first year you look at today I’m doing 12.7%. So I’m doing 13%. I wonder what I did last year and like that’s why I said labor year over year I’m up over a month doesn’t have a spike and it doesn’t have a valley. It has a slight rolling hill to. So we’ve averaged between 15 and 12% for the last like eight years.

Chad: Wow. So this year prices go up. Like you said. Things cost more. Our labor percentage went down and or the sweet spot, the guys in the field being able to produce more and we change our percentage. Probably not just leave it at 13, 14%. And then let’s talk about new words. And is it do we do those jobs consistently within that mark.

Chad: You know that number.

Mark: How far back did you say like six years or so.

Chad: When I started I was about six years. Yeah.

Mark: And over that six year period was your revenue annually consistent or where you’re growing or growing. Growing. So it carried regardless of the growth and all that.

Chad: Regardless, you know, we were doing work chart each year with, you know, how we’re going to grow 300,000 from 1.5, 1.8 to doing work chart and figure it out before the year started. Can we keep the same guys doing and Adama and honestly, that’s this way of doing. Estimating is also a way of can we afford another guy in the field?

Chad: Right. It’s a very easy calculation. Can we afford another guy in the field? We’re gonna do $1 million more 23 guys to do that. And if we hire three guys, one at 51 at 40 and one and two at 40, we’re let’s just say we’re doing $130,000, $1 million. You and I both do the calculations at 30%, right?

Victoria: Yeah.

Chad: So when we do $1 million more, the previous, you know, we do our chart for the next year, we can do a really easy, quick guesstimate on can we afford to do this for the guys we have or how many guys we we need to have. So it helps in a lot of areas.

Victoria: So not only does it add an accuracy and really gives you the year’s picture and keeps it where you want it to be, how did it positively affect the time it used to take to estimate.

Chad: Oh my gosh, it goes like I said, it goes from a three day ordeal, but diving into all the pieces and parts to a, at most a ten minute thought.

Victoria: Wow.

Chad: So I’ve been, you know, I’ve been in remodelers of for a while. I’ve been in other people’s offices and to learn from them and you hear the estimate or, you know, all over the office if you’re there three days, 20 times, asking questions, how long does it take to restore? Well, how long does it take to do that or exacerbate it or how long does it take to do this?

Chad: And you can tell what they’re doing. They’re struggling to make sure that one house later during this process to the project.

Chad: And I and and if you look back at your job cost reports for jobs that are similar to what you’re doing for this estimate of is accounting for, you can look back if it’s relevant and say look the that I knew that kitchen for $8,000 all day long. Let me ask about you know so I and and while saying all this stuff, I realize I have said this to a lot of people over the last couple of years.

Chad: And the amount of people who think, talking straight and accurate is very few, that hurt.

Victoria: Well, what are their arguments against it? To me, it’s like, dang, why didn’t we why didn’t we think of this 25 years ago?

Chad: Well, I think a lot of them have estimate or so. They’re like, no, I’ve, I works all that works eight hours a day. There’s only there’s no way we could replace that. And I’m not saying that. Right. Yeah. Just real labor. Right. But the if if they think it won’t be accurate. So they think because you’re looking at big picture, you’re not you don’t understand the details of labor and all the burden that goes with it and how you deal with the shop.

Chad: That that’s I think the thought but then most people slip.

Victoria: Right? Right. And some of them amazingly large slippages. Right? Seven, eight, 10%, sometimes.

Chad: Yeah. $4 million. Every 1%. 40%. Right. That’s a lot of money.

Chad: And so that’s our Saint mark at the end of the year, even if I was wrong, on seven projects out of 30, the end of the year, I would be right. That’s not the way to look at it. But that’s how we all judge each other on our books. Yeah, right. And look at that. And they look at, oh, you were out there.

Chad: Down there. Why did you charge so much for that? You didn’t charge enough for that. But they all look at the end of the year. Oh, you must be doing something right. Because right numbers you’re pretty accurate.

Victoria: Yeah.

Mark: So has anyone that you’ve explain this to or. Todd gone back and looked and said, hey, I see the same trend. Whatever that percentage is for them, or do they not even do they think you’re just crazy?

Chad: Most of them think I’m crazy. I know one person in California that we’ll go visit this fall that admitted last meeting, that he was going to give it a shot. Oh, I don’t know if he’s done that or not, but, so what I did in my last meeting, in my last hours in that meeting was because everybody’s poking at me about this theory that I have that how this works is they were I did all the percentages and I said I could come in and estimate your labor today, or if you just want to take this number and then ranged from 23% to slightly under 10%.

Chad: Wow. So you can watch and you can see that high number, you know, even without looking at our organizational chart. Either they were the most likely they were doing a lot of in-house labor.

Victoria: Right, right. Now what do you think the positive effect has been on your designers who also have these other responsibilities.

Chad: Oh it’s such a relief to them. They never really understood it anyways. Right. They, they looked at it and they punched the numbers in like that cost them to do that. But there’s always questions. There’s always how long. The same questions that I had heard in those offices. How long does it take to do that. And then eventually I would just take and just let me grab that estimate, and then I’m gonna plug some numbers in for you, and then their estimate would jump up.

Chad: You know, they’re thinking they’re selling us kitchen for 80 grand. And then I get involved and put all the numbers in there that I think there should be in the labor. Now they’re 92 and they’re like, wait a minute. You know. So it’s been so positive. It’s been like I said it at most it’s a ten minute conversation.

Victoria: You know, that could be a huge boon to anyone who is thinking about hiring a salesperson. And they don’t know how they’re, you know, they’re all like, we have to hire somebody, has tons of construction experience, or they’re not going to be able to estimate it. They’re not going to know. Right. But with this method, you can really shortcut a lot of that.

Chad: Yeah, I’ve been thinking about this because I knew I was gonna have to explain it to more than you. Right? Yeah. So when we go into a house as a salesperson or a representative of your company, and, and somebody has a project that they’re talking to you about, they are going to ask you what you think it cost.

Victoria: Yes.

Chad: And you don’t go through. Well let me see. There’s 32,000 worth of cabinets and they’re sheetrock. Now you go to a big number and say this is Smith. We’ve done this kitchen three times the last year and you’re giving me a 120 to 140. If you say open these parameters, you’re not. Think beyond that. You didn’t dive into the weeds.

Victoria: Right.

Chad: And in that one 2140 you place all the things you’re going to put in an estimate. They didn’t think about it because you knew you did that before. Right. Yeah. Now if you do the same. Wow labor I can’t ever be the same.

Victoria: Yeah. Yeah.

Mark: Just chat I love the simplicity of it. It’s great. So I got one thing that we did is very very simple here. It’s the lightning round.

Chad: Oh.

Chad: And now here’s a reminder.

Mark: It’s lightning round. It’s a trap. All right. We’re gonna put 60s on the clock. Here we go. What is your favorite business book and why?

Chad: I, I recently read, tips from entrepreneur. A client of mine wrote it, for his kids because he was an entrepreneur and sold his business, and it was fantastic sort of books. And I will send that to you so you can buy it from my past. Com.

Victoria: Oh, awesome.

Mark: If you weren’t a remodeler, what do you think you’d be doing?

Chad: I love carpentry if I would give out oh, if everything went to heck, I would put my bags on and enjoy the heck out of.

Mark: What are you not very good at?

Chad: Organization, right? So I’m not a detail guy. I’m a big picture guy. I’m not detail.

Mark: Your room, your desk or your car. Which would you clean first.

Chad: And my car.

Mark: Have you ever been told you look like someone famous.

Chad: That never, in a nice way or.

Mark: In any way?

Chad: I tell my wife that I’m that Tom Selleck is my doppelganger. New house. So.

Mark: What’s your biggest pet peeve?

Chad: Oh, the driving, the driving knowledge in the world. I could go into that, but I want to try to control my anger that way.

Mark: Name something you refuse to share.

Chad: Don’t. No, I won’t share my shoes.

Mark: Okay. There you go. There you go.

Victoria: Like bowling shoes. You okay? So thank you so much. This has been awesome. I cannot wait to hear some of the comments we’re going to get, but I make so it just seems so simple. I love it. So, now before we let you go though, and we do appreciate your time. Before we let you go, we want you to share with our listening audience your five words of wisdom and why they resonate with you.

Chad: I think. Three the the turtle. That’s a strange thing, but so many people in this industry, go towards the shiny object and, and instead of always going towards their goal. And so I consider myself a turtle, I’m just slowly walking towards my goal and, and the people who do that will probably arrive sooner than the others.

Chad: So I’m constantly looking at all the things that that, that we’re doing around here. Is that pointing towards the goal would be that that’s great. It’s not let’s let’s not do it.

Victoria: Yeah. That’s great.

Chad: Or part of ours is work life balance. And that’s estimated and works fantastic. And our work life balance, we don’t not we’re not the overtime. But this is this is your job, not your life. Yeah. So be the turtle.

Victoria: That’s awesome. Great. Thank you so much Chad. We appreciate you being here. It’s it’s been great.

Chad: So thank you guys for thanks.

Mark: Bye. All right.

Victoria: Man, that was interesting wasn’t it.

Mark: Well it’s I can I can see maybe 1 or 2 people, but I just drove off the road.

Victoria: But you know, I mean streamline, right. It fits into lead. If it’s if it’s if it’s indeed accurate. And his explanation makes perfect sense.

Mark: Well, you know, you can’t you can’t argue against the numbers. If you look at seven years of company history and it’s always like 14%, you know. Yeah. How can you ignore that? The numbers are telling you something. It’s telling you a story. Why not shortcut it? Yes. Very interesting.

Victoria: Yeah, very much so. And if it can help avoid that slippage, which is such a curse to so many remodelers. Oh my God.

Mark: And you know, it’s funny because, with the, the lightning round questions, I thought Chad looked like, rep you know, if you’ve seen Yellowstone, the Kevin Costner.

Victoria: Yeah.

Mark: That’s there. He definitely he looks like Rhett for putting cowboy hat on him.

Victoria: Yeah. No kidding I.

Mark: Don’t think he’s is as tough or mean I guess one would say. But yeah. Anyway this that was good. I think his, his five words, we, we can see they kind of get creative if they’re not going to do if they’re going to do like that, be the turtle and you could do, just be the turtle.

Mark: Seriously? Yeah. There you go. Five words. Right? I mean, so for anyone else out there that’s going to be on the show, get creative, because it’s got to be five words. It’s got to be five. If you want to make it into the five Words of wisdom book that we got planned, you got to I got five.

Mark: That’s right, that’s right. So just be the turtle. Seriously. And like, all right, well, we want to thank Chad for sharing this very, very, controversial topic with us, maybe. And, we want to thank you for listening. Week in and week out, I’m Mark Ferrari.

Victoria: And I’m Victoria Downing. See you next time.