Steve: Welcome to The Tim Faller Show, where production is paramount, and we discuss the tools, time and people associated with getting jobs done and making a profit.

Steve: On today’s episode of The Tim Faller Show, we will be talking about sales change orders with the help of special guest Will Giesey and Ryan Stiffney from Bellwether LLC in Philadelphia, Pennsylvania, alongside Tim Faller. I’m your co-host, Steve Wheeler. Here is the Tim Faller

Tim: Hey everyone, Tim Faller here, and welcome to the show. We’ve been having such great fun doing these podcasts and, you know, there’s a lot of topics that come up that are just sort of ground roots topics. And this is one of those for today. So for a lot of years I’ve been doing seminars and involved with companies, in their offices.

Tim: And there’s been a great divide between the sales and the production teams. So I know there’s some normalcy to this, different ways of thinking, different goals, all kinds of different things that that pop in there. But I’m starting to see a shift in the industry where sales and production are not only talking more to each other, but they seem to be working, more as a team.

Tim: And I think this is an incredibly positive thing. So the idea for this podcast, came about when, I was at a roundtable meeting and we had a bunch of production managers in the room. There seemed to be a common theme of how sales either underestimated the initial ballpark figure for a client, and then when it came time for production to actually put it into into practice, either the client had left because the price just kept going up and up, or they were already sort of disgruntled with the company, and the company was kind of already the bad guy.

Tim: And of course, that makes it hard once you get into a client’s home and start, tearing things up, then, that that exacerbates it. So I remember sitting there, I was supposed to be the facilitator, and I jumped up, threw my hands up in the air and said, you know, we ought to have a sales, change order.

Tim: There ought to be a change order. But everything that happens in sales that goes above and beyond what happens in terms of that initial scope of work. And so then a little while after that meeting, maybe 2 or 3 months, I’m at bellwether and, I’m talking to Will. We’re riding to supper our first night, and, he starts telling me how they’ve been documenting scope creep and the pricing that’s associated with it.

Tim: And I nearly jumped out the window of the truck. I got so excited, I, I literally said, well, I gotta have you on the podcast because it’s such an incredibly good idea and such an incredibly important thing, but I hadn’t really met someone who was literally doing it. Now, I’m sure other people are doing it, but they’re doing it and it’s working out really well.

Tim: So we’ve got both. Will and his production manager Ryan, on today to discuss how this works and the sales process. But also we want to talk about what’s the impact downstream, what what impact does this have on the production team and does it make it easier or is it harder? Does it help? Does it hurt. You know I think it’s going to help.

Tim: Hopefully they say it helps, but it helps. But we want to get some specifics on that.

Steve: Tim. I think one of the first things I ever heard you talk about was, well, it was the lead carpenter system, but it was also that void between sales and production. So, in your experience before this, was this really just a challenge? For most people?

Tim: It’s always a challenge, and partly because they don’t understand each other very well. Sales has a very different personality than production. Typically it’s not always the case, but it’s typical. And so different goals, you know that they’re just different goals or different processes. And so getting people to talk to each other, whether it’s in the sales process or after the sales process, is really, really critical.

Steve: Yeah. Well, I think we should jump right into it. will Giesey founded Bellwether Construction in 2002 after a few other successful businesses and partnerships. He earned his MBA from Temple University’s Fox School of Business and studied fine art at Lawrence College, including concentrations in design and architecture. His knowledge of structural, mechanical, and material applications ensures that all aspects of the project are considered during the sales and design planning of the phases.

Steve: Since 2012, he has been the chairman of the Gloucester City Historical Commission. He holds multiple certifications with the National Association for the Remodeling Industry and other related credentials. Ryan Stiffney became Bellwethers Production Manager in 2017 and handles internal sales to production, project Hand-Offs client communication and trade partner relationships. All the while, he maintains the company’s high quality control standards.

Steve: Welcome to the show, Will and Ryan.

Will: Thank you. Thanks.

Tim: All right, so let’s get this thing kicked off. I think, Will, what I’d like you to do first is just give us a little bit of a rundown on how your, I see I call it a change order in the sales process. You probably call it something else, but give us a little rundown on that. And. And what made you move in that direction?

Tim: What was it? What happened? What did you realize that got you doing these things that I’m so excited about?

Will: Yeah. So we call it a design change order. So not too complicated. Yeah. But, but we’re, we’re generally working with clients, in, in a condition where we’ve stripped down their project to a core, a core, essential scope of work, because we’re trying to fit their dreams into a budget. And so the the limiting them to, to exactly what they most want or need is, is, is where we begin.

Will: And of course, you’re going to grow from there, and we end up with, with options and options. Right? So if, if the original scope of work in the design, design agreement stipulates that, that we’re going to, to build a, you know, a kitchen and a bathroom and they end up wanting to do a small addition to expand that kitchen, let’s say, we’re going to charge them, a change order that includes during design, we’re going to charge the amount change order that that includes an additional cost for designing that, that work, anything associated with that.

Will: And then we’re going to also on the same change order, have them, commit to the, to the, the the expanded, cost of that for construction so that, so that they’re not just dreaming with us because we certainly don’t want to just go through the design process for the for the fun of it. Right. And then we also tell them that this is going to have a time impact, as well.

Will: It’ll it’ll delay the design process. It’ll it’ll extend the, the actual construction process of the entire job.

Tim: So just really quickly to, to kind of verify a couple of things. All on the job change orders, need to have a description of the work they need to have like an extension of time, extension of X number of days, making the completion date this or that. And they need to have pricing changes to your sales change orders have all those components as well.

Will: Exactly. So they have we have to make sure that that sales actually signs or design actually signs off on this. on this additional scope of work, we have to make sure that production signs off on the, on the the range that this is likely to cost. So the design, the design increase will be a fixed price.

Will: And we will also stipulate how many hours we’re going to spend on this. and if you know, if the client wants to go down like a big wormhole, then, then we have a limit that the design hours. Okay. and then, and then we’re assuming, you know, we we do. We we have a couple of bullets there.

Will: So if we’re going to design, you know, a five foot extension on the back of the house with these considerations, we might only have like six different items that were, you know, on the, on the list for this, this additional design change, that will help us limit the, the scope of work that we’re that we’re doing that we’re, discussing during design and then most importantly, that we get, production involved at that point before they sign this, so that the production can say yes, I agree that the addition should cost no more than, you know, 50 or $60,000.

Will: So that’s our range. And, and then design also says, that they’re, they’re happy to, to commit to this scope of work for the design portion, for the price it’s listed.

Tim: So let’s bring Ryan into this, because you brought production up. And I just was curious, like, Ryan, what are you looking for and how does this happen? Or are you running around crazy and well goes, hey, I need you to look at this thing. And so you breeze in and you look at it and you go, yeah, it looks good to me.

Tim: What you what’s your process for in this? Because typically, you know, production isn’t involved in these sales kinds of things. And I think it’s a great a great topic. So what what is it that you bring to that when you’re looking at that $50,000 number that will be adding to a sales process?

Will: Well ideally we’re not just breezing in and take a quick look at it. Although that can happen sometimes. We’re starting to develop better systems now for tracking this whole design, sales and design phase. so part of that is making sure that I get an eye on all design agreements. we haven’t had a lot of design change orders at this point.

Will: but yeah, I think that, you know, I would love to have the time to sit and look at the design agreement, maybe even run it through some of our, project managers as well. Okay. so yeah, I think we are talking about ranges here and we’re talking about an early undefined, you know, finishes. And so it is sort of like you look at it and look at the big picture and it’s a little bit of a gut check at certain points as well.

Will: Okay. But there’s the questions of, you know, the costs, but just also the feasibility of it and how that fits into the schedule, whether we really want to take on that extra, you know, extra work as part of it as well.

Tim: So it sounds good. So. Well, what why did you move this way? What were some of the things that were happening that I’m sure people can relate to that are going to be listening to this, that, that you that you woke up one day and went, wow, we got to do something about this.

Will: Yeah, for sure. And I will just, just because it’s on my mind, I wanted to, to make sure that, that, one of the hard lessons I’ve learned is to slow the process down, because the clients are very excited, and they want everything immediately. And, and because we’re all pleasers, worth anything. We try to please the clients, but, but that’s why we have systems, and that’s why we have change orders that define what’s included.

Will: That’s why we have agreements that are defined, what’s included, in the scope of work. So that so that we can really set expectations for the client and so that we can look towards a, something that’s, that’s clean, as clean as it can be, so that when we go outside of that, we can look to these, this paperwork to say, hey, you know, you understand this is what’s included.

Will: And what you’re asking for is not included. We’re going to need some time to come up with this scope of work. And so what I’ve the pain that I’ve, you know, seen so many times in my business is that is that we often jump at trying to solve the problem or the, or the requests that the client has, and we don’t take the time to really develop a, a real carefully thought out and vetted, answer to their questions, something that we can really live with.

Will: And, and also something that ties them into not just a bunch of free research for us, actually, a, a real defined scope of, of design work, because they often will ask questions that, that require quite a bit of, of legwork to answer properly. And, and we want to make sure that we’re getting paid for that.

Tim: Yeah. So is this is this like a process that you lay out for them during your very first meeting? You talk about how you’re going to handle this process and then as you know, because you know, they’re going to add things, and, and so is this something this is part of your sales process, I assume?

Will: Yes. So, so we have in our design agreement, we have a list of work that’s included and a work that’s it’s, adoption, meaning it’s not included in the, in the design range. It’s not included in the design budget or in the, in the, in the budget for, for the ultimate production end of things. And then we have a list of things that are or simply exclusion.

Will: So there’s three parts to the, to the scope in that design agreement. Okay. We make sure that, that the client understands that anything that is an add option is necessarily going to to expand the design work and is also going to expand the budget, for the project. So that’s really how we prep the client. And we, we talk a lot about throughout the design process, especially early on, we really try to get them to to get excited about, signing design, add options, for which we write and if it’s a small thing, of course, you know, if it’s if it’s just, you know, maybe an hour worth of calculating and

Will: then it really doesn’t require any design work, we’re not going to charge them a, an additional design fee like a change order. Right. But clearly, you know, clearly can you lose a lot of time. And Ryan was just when we were talking just before, getting on the call, we were talking about a set of cabinets that he was.

Will: Yeah, designed for a client. And, and he spent quite a bit of time doing the, shop drawings for because the client was so excited about it. And of course, they never went forward with it because in the end, they they changed their mind. And so that was that was a waste.

Tim: So let’s talk a little bit about the positive impact that this changes had for you guys. What what have you seen in the sales process. Well, has it been people that said, you know, we only have 50,000. And then as they get to dreaming and enjoying it and, but they see the number increase. And so by the time the job hits 100, they’re not shocked.

Tim: I’m assuming that’s at least one of the benefits. And then maybe we can switch over. Then that will after you give us your ideas on this, maybe Ryan can give us some ideas about like what’s been the positive impact in terms of production, maybe with the project managers, maybe with some others out in the field. So we’ll go ahead.

Will: So I’d say that, that we really have a, from the client’s standpoint in terms of expectations, we really strive at every single level to make sure that the client knows what’s coming up. especially if there’s if there’s anything that, that’s a cost issue, which are, there’s constant cautious cost issues. Right. And that’s really how we protect our, our margin is to make sure that anything that we can charge for during the design process that’s outside of the original scope that we do, and same thing goes for all the change orders and, setting those expectations during production as well.

Will: But the, the client really bringing the client back to the scope of work that was that was stipulated in the design agreement and making sure that they, that they understand that we were able to get the budget that they requested, by cutting down the scope of work and saying, what is your what is your principal scope?

Will: And, you know, in Philadelphia, we don’t have, you know, we don’t have a lot of three and $5 million. so we really have to work within, you know, what’s what’s sensible to put into a 4 to $600,000 house? Well, it may not be this. The half $1 million renovation that the client originally approached us with. Maybe something a little more, you know, conservative.

Will: Right. So that’s that, making sure that the client constantly is, is aware that we were really going back to this core, core amount of work and, and that, that, that they appreciate that effort that we, that we put into, into making this work for them with their budget and saying that, okay, now, if you want to if you’re feeling more comfortable with this whole process of design, of course, they’re at their most excited point for the entire project when they’re doing the design work and they see the perspective views and all this digital, you know, beautiful fantasy.

Will: And so so that’s when you really want to say, okay, now, now do you have the confidence to put some money in this? Is this, you know, going beyond what you can recoup when you when you sell your house in five years, would you really like to have, you know, would you like to take this risk to be to design something that’s beautiful that, that you can really enjoy with your family?

Steve: So. Well, if someone’s listening to this, is this more. Do you think this is as much a value add as it is? Yeah. The cure to a problem or cure to a symptom that’s happening. And what would be one of those things that are happening that this process could solve?

Will: Right. So, I think, I mean, I come from a design background and, and I think the, the process of designing does not really lend itself necessarily to, to a holding budget and, and holding back and holding, you know, the timing.

Tim: I just heard a whole bunch of events way, way out there across the board. And we know that’s a great point.

Will: So, I mean, if you’re going to hold your production team accountable for the for the timing and the budget and the clients, you know, happiness, their expectations during the project and after, you know, and those margins are sacred. Then, then you really have to set them up with, with making sure that design is indoctrinated into those same requirements, even if you’re not even if you you hit, you really can’t blame production for something that they had no control over.

Will: we want to make sure that everybody is really communicating between the two and that, and that we set those expectations constantly in writing and verbally with the clients so that they really there’s no surprises that that we’re we’re saying the same thing throughout the entire process.

Steve: And real quick follow up, who needs to be involved when you’re putting this when you guys put this kind of process in place, are you involving subcontractors or other trade partners for sure.

Will: Yeah, yeah. So I mean, clearly there’s there’s a lot of standard, square footage cost that we can bring into this. So it’s rare that we would need more than 1 or 2 specialty contractors to, to help us with the pricing, but, but but absolutely. Especially when we’re we’re doing something a little bit out of our norm.

Will: So case by case basis, whether we bring subcontractors through, like we’ll say, and if it’s a special item, something, something unique that we haven’t done much before or it’s particularly large or it’s a, you know, new foundation addition, we might bring somebody in to get specific pricing for that.

Tim: So. Well, I think what you were saying was, is it’s mostly about controlling expectations. And I think, most everybody understands that if you can control expectations, you really win the game in many different areas. So I’m just wondering, Ryan, as we shift a little bit to the production side of it and maybe, maybe you, you reference that maybe this is fairly new, for you guys.

Tim: And so maybe, maybe you’re seeing that the expectation control in the sales process is helping, out on the production. I think the downstream effect is what we can call it. What are some of those things? What do you anticipate some of those things being, if you haven’t really seen them exactly yet, just want to see like how does this impact the production team.

Will: well, I think yeah. The defining scope seems to be a recurring theme here, and I think that we’re getting much better at that. And these, you know, these design change orders are definitely part of that. I think not allowing the scope to kind of creep without some serious attention to it. Right. and also that the client really understands that we’re fairly serious about defining that scope, from the outset.

Will: And I think, yeah, that that definitely is helping us down the road because we’re not only getting better projects out of sound design that are defined better, but I think the client has a real understanding that, you know, this is our scope of work. We’re doing X and Y, but we’re definitely not doing Z. And I think them understanding that from the start is inevitably going to, you know, limit the expectations that we’re just going to, oh, well, you’re here.

Will: Why do you jump into this bathroom and just record this tub as well? Because you’re here.

Tim: Yeah, that sounds very subtle, but I can really see how right up front sales are saying, no, you can’t just have that and that impacting that. When they get to that point with production, it’s like they’re not maybe not expecting to just have that, you know. So I think that’s really subtle, but I think is really important. Go ahead.

Will: And I think also just the expectation that, you know, if, if they even want to discuss something outside of our scope of work, there’s a chance that we need to charge for that because it is our time. and I think, you know, a lot of clients would just think that a, you know, a conversation about something or, hey, we want to do this built in.

Will: Can you.

Tim: Give me.

Will: You know, give me a ballpark price or give me a quick, quick mockup of it? you could very quickly a slippery slope into spending a lot of time that ends up not getting not getting covered.

Tim: Yeah, that that’s incredible. That’s great.

Will: I was going to say the, the the surprise to me, in, in every time I, I go back to the client and say, and clarify that these things are not included. is that if you if you’re if you’re diligent about it, then the client is never upset. I mean, I really haven’t had the client, push back and say, no, I want and, you know, I think that you included that because it’s documented.

Will: And so the only time that we’ve had problems and we and the reason that we have every single person, you know, every single division, production, sales and design and, and then, and then one of our office staff as well, just, you know, go through these contracts and, change orders before they get sent out is because we want to make sure that, that we can go back to a very clearly written, agreement that says what is and what is not included so that we can all hold each other accountable and especially hold the client, accountable for the.

Will: For what, what we can expect.

Tim: So just for fun, well, if you can, think about it, what are what’s maybe the largest scope creep in terms of dollars. And I know dollars are different all over the country, but it might help us get a grasp that you’ve had that this process actually helped you land the job, because I can hear a lot of contractors going like, hey, if I did that, I’d never get the sale, you know?

Tim: And so I’m kind of interested. Like what? What’s the what’s the biggest creep that you’ve had? And, and you still got the job.

Will: Yeah. So in you’re talking about change orders during design.

Tim: Yes. That’s right.

Will: I would say that that we’re, we’re probably I mean we had a project that started out during, you know, during design at 160 and and you know, and ended up at 265 most recently. Okay. So, you know, and and I think what I, what I was seeing happened prior to say, a year and a half, two years ago, before we really started to realize that design change orders were a possibility, is that we would simply design this, this core project that would fit their, their budget and then the design, I mean, the change orders would happen entirely during production, and that’s much bigger mass, of course.

Will: Yes. And, than getting them resolved during design. And so we wouldn’t even bring up these options. We just wanted to get it, you know, we would just throw it as fast as we could into the, into production and let them hash it out. and if it had to be kicked back to design, then we would do that.

Will: So, I mean, we had a number of jobs that started out at 50 and went to 400.

Tim: So Ryan, that’s got to be a big a big thing for you and your team to be able to get a job and realize that it’s not going to have that explosive change order impact. And so you relatively certain that unless you find some damage or some other opportunity that you’ve got the job when you start, is that a real thing?

Will: Yeah, I think so, definitely. and I think there’s just as we’re like Will was saying, stretching out the time frame as well. I think that’s allowing the clients the real opportunity to think through these things. You know. Yeah, if we if we’ve got 12 weeks instead of five weeks, they’ve got time to think about it. We’ve got time to think of options for them.

Will: Right. I think an interesting result of this too. We have it a couple of jobs that we lost recently. Oh, okay. and not necessarily because of design change orders, but if it is partly because of that, maybe it’s an okay thing that we lost those jobs. Okay. May have been very difficult clients mid project when they want more than they can afford.

Will: Okay. so I think it might also just help the vetting process to get us the projects that we should be doing.

Tim: Right, right. So we’ll in that project, I’m kind of curious, was there a point where the client said, well, what about if we had a fireplace and you said, okay, that will add, you know, 25 hours of design and 16, you know, $100, you know, $20,000. And they said, okay, that’s enough. Did they ever get to that point where they said, okay, that’s enough.

Tim: Just stick with what we’ve got?

Will: Yeah. And honestly, during the design process, we start out with a with project A without even being asked, we, we sort of feel out what, what the, what some of the discarded dreams were and it goes into an option B, even though we were asked not to not include them. And so we end up with, with option A, which has everything well within their, their budget.

Will: Right. And we give them an option B saying just so that, you know, this is, this is what the most extreme, you know, version of your project would be. And these are the 6 or 7 line items, bullets that would cost these amount of money. If you were to add these into the option A, it’s an ala carte.

Will: So if you wanted to pick a few things from option B, you’d feel free to do that. And you could, you know, they might be able to pick a few small things without blowing their budget. But clearly if they if they go with everything, they’re they’re going to be, ballooning their budget. So they have the they have the control.

Will: And that’s I think that’s critical is to give the client as much control and fit their budget as possible. And certainly we’ve, you know, had some clients where they were insisting that, that they wanted, you know, to get everything for that. That’s what Ryan was referring to. They wanted to get, more than we really promised in the design agreement, for for that same budget.

Will: And so we had to part ways, but that’s okay.

Tim: Yeah, I think all of us have experience that in some form where maybe we should have parted ways. But, and then there are certain ones that we did part ways and with them we consider that a blessing. So as we’re we’re wrapping things up, I’d like for each of you just to give us a little, maybe one little nugget that would kind of wrap things up as far as you’re concerned, with this idea of the change orders and how it impacts, your, your work.

Will: Yeah, I would say that, that, clearly having I’d say there’s three different phases to get these change orders out and, and there’s the design, there’s, there’s, pre-construction, meaning they’ve signed the design contract, but we haven’t started the project yet. And then there’s construction change orders. So, so those three phases, you would obviously really prefer to, to give the client every opportunity to try to sign, add options and change orders.

Will: earlier, because once you’ve gotten into production, it’s actually very disruptive to have substantial change orders. And you, you know, you can charge as much, you know, you can charge as much as you can try to get for these, change orders in production, but they’re very disruptive. And, and they, they’re not planned for, at all.

Will: I would second that. definitely feeling the pain of a couple of change orders now, but we’ve also got a couple of projects that I think, because of the design, you know, process being drawn out a little bit and a little more attention to the initial scope definition are running absolutely smoothly. which is great. And one of them did have one of our projects now had a, you know, decent sized change order potential, but it was easier to resolve, I think, because of the initial conversations in design, wasn’t ever clarified whether that was going to be in the contract or not.

Will: But I think those first conversations, you know, six, eight weeks before, inform the client well enough to make an easy decision. so.

Tim: Very good. Thank you so much.

Steve: Awesome. Well, well. And, Ryan, we want to thank you once again for joining us on the Tim Faller Show. And we wish you continued success and look forward to having you back on the show in the future.

Will: Thank you.

Steve: Take care. So this was another great show. What were the things that really stood out for you?

Tim: Well, the first thing I want to say is I kind of made the joke of hearing millions of almonds out there in the universe. That’s the truth. I think there were 4 or 5 things that Will said. and Ryan said that production people will just, grab on to and really appreciate the fact that some people are doing this.

Tim: So I think there’s just so many great things in this process. The the question that you asked about the value added, I just got a lot out of that. I think one of the things that Ryan said about the client realizing they were serious about the detail of the scope is huge, because they’re always looking for that little bit of extra when you get into production.

Tim: So that was a a big, big part of it. and then even that point of, you know, every conversation costs money. I think that point was was amazing that the clients understand that just having the conversation about change, changing something is going to be part of that sales change. Well, the same thing’s going to be true out there in the field.

Tim: So I thought those two points were just big, big, points in terms of production for me.

Steve: Yeah, that really speaks to the level of their company. They have a very evolved way of thinking. And, and, you know, as much as you can get rid of the I thought it was included type of things during production.

Tim: And so the other thing, Steve, that I really like was basically the design change order has all the same components of a production change order with the time frames and things like that, but Will made a specific point of saying the stipulated hours for design would be included in this change order. In other words, we’re going to do this design and we’re going to spend 16 hours on it.

Tim: Yeah, anything above that extra and then below that, you get back. But there’s a stipulated amount of hours as opposed to we’re just going to do this and leave it open ended one more time.

Steve: Yeah. Setting expectations and communicating thing. Always good. Well once again we want to thank Wil and Ryan for joining us. We want to thank you for listening to another episode of The Tim Faller Show.

Tim: And remember, we’re helping the bottom line through production training.

Steve: I this has been another episode of The Tim Faller Show. Want to hire Tim and fast track your growth? Visit remodelers. advantage.com/consulting to learn more. And if you’d like more information about roundtables, our world class peer advisory program, please send me an email at Steve at remodelers. advantage.com. And of course, don’t forget to subscribe to the show and comment on iTunes.

Steve: Thanks for listening. We’ll see you next week.