Mark: Today on PowerTips Unscripted, we talked to Chris Landis, owner of Landis Architects Builders in Washington, DC. Jobs are won or lost during the design process. So with that much on the line, why would anyone not commit to doing whatever it takes to ensure their design department is running at its peak potential? Chris is here to share how he structured his design department and to what metrics he holds them accountable.

Mark: And we’ll hear all the juicy details in just a second.

Victoria: 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. Hi, there. How are you doing today, Mark?

Mark: I am well, and you?

Victoria: Good. You know, this podcast is sort of exciting because it comes on the heels of a master class that we just completed with 18 designers and design managers here in our offices.

Mark: Yes, it was a huge success. Yeah.

Victoria: Part of that, a big portion of that is because of our guest today who was super generous and came and talked to the attendees for quite some time about the design process and how to overcome some of the hurdles. I mean, it’s there are so many ways that the design process can be hijacked, right?

Mark: You know. Yeah, I like that word hijacked.

Victoria: Yeah. Because, you know, clients not doing what they’re supposed to do. It’s just there’s so many moving pieces to it. And I think the other thing that Chris really stressed when he was here talking to the attendees, was that he, like many of our business owner members, are motivated by make money that this department needs to be a thorough part of that.

Mark: I hear.

Victoria: That. Yeah. And, you know.

Mark: I didn’t sit in on the class. I’m looking forward to hearing at least a piece of what he shared today. Yeah.

Victoria: That’s great. And we’re doing it again in June I think.

Mark: Is June the next.

Victoria: One? I think.

Mark: So. Great. Well, so if anyone out there listening who likes what they hear from Chris today, make sure you check out our masterclass. We’ll put a link to that in the notes.

Victoria: All right. Cool beans. So let’s jump in it. Yeah let’s do it. So today our guest is Chris Landis. He’s a partner with his brother Ethan in Landis Architect Builders, based in Washington, DC. Chris. And has been a member of roundtables for a long time. And we’ve learned so much about how to build a successful company. That has to do with both the way they run their design department, the quality, of course, of their work, the way they’ve hired people and manage them.

Victoria: And I’m just really excited to have him here with us. So welcome aboard, Chris.

Chris: Well, thanks, Victoria, and thank you so much for all the years of knowledge that we’ve been able to share through, all of your, your hard efforts. Oh, thanks. We we’ve learned that. We’ve learned a lot. And it’s great to be able to share some things that we do.

Victoria: So can you describe your company just a little bit to our listening audience? Give a little bit of a rough idea of the kinds of work you do and how long you’ve been in business, that sort of thing.

Chris: Yeah, we we started in 1990. So we’re just celebrating our 30th anniversary. We’re about a $15 million company looking to go, to 16 or 17 next year. We have about eight designers, and we have a design director, and, we have about 55 employees. Wow.

Victoria: All right. Great. So let’s dive into talk specifically about the design department. Why did you develop this department? And what does it what does it look like within your company?

Chris: Well, design build I think you know, everybody when you get that first call, it’s I’ve got a project, I’ve got some scope of work. And initially you’ve got to find out what the scope of work is. And then generally unless it’s, you know, small projects or handyman stuff, you’ve got to you’ve got to have some, you got to have a contract.

Chris: And usually a contract needs to have some drawings. So somebody has to put some intellectual property together showing what’s going to happen and how much it’s going to cost. And those drawings have to specify finishes, all the ingredients that go into that project. And usually if you’re a small firm, it’s, it’s the owner and you do everything, you sell it and you might even go out and start working on it and that’s the way we started.

Chris: We started very organically. It was my brother and myself, two people. I happen to have been trained as an architect and then working as an architect for many years. So that’s the kind of thing that I would do, initially. And then once you get big enough, you have to hire somebody to do it because you’re so busy doing all the other things and wearing the many hats.

Victoria: So how did your design department develop? What did you do first, and how long did it take you?

Chris: Well, I mean, I hate to admit this, but we’re back in the day of the mainline and the p square and, triangle. This is before computers. Really? And the software. So, that’s that’s where we started. And then as we grew, we had to hire people, and then computers came on board and then email became available, remember back and pagers.

Chris: And then there was the palmpilot and then there were cell phones. And, you know, now the computers have gotten faster, and now you’ve got software. Now you can do rendering. So all this stuff has transpired in the 30 years since we started business.

Victoria: At what point did you hire a design department manager?

Chris: So as you grow, you had add on designers and they all need to have similar best practices. Ideally, they work in similar softwares, but at some point you start to realize that you need and I would say it’s around the three to 5 or 6 designers. You need to have somebody who can manage them. And as as an owner you have to step back.

Chris: And there are lots of other hats that I wear as well. I’m also the sales manager and the marketing oversee marketing as well. So there’s lots of things. So I did hire a sales manager who is also an architect who also does sales, but can manage the designers and set standard drawing types, make sure that schematic design and all the phases are followed.

Chris: Review drawings, review best practices, review detail so that the final product all looks relatively similar and also has another set of eyes. I ultimately check things as well because ultimately I have to stamp the drawings.

Victoria: Okay. All right. Great. So when you when you’re building, you’re you’re department, you’ve added designers until you got to the point where you needed a manager, you hired the manager. All that’s going smoothly. How are you measuring the success? What are the metrics that you look at to tell you that your design department is running efficiently, effectively, profitably?

Chris: Well, that’s another thing that we’ve run into. You know, as long time our our members, I mean, obviously, your recommendation to everybody in business is is a 10% net profit. And so whatever you do, you should expect or your goals to be to expect and to devise ways of achieving that 10% net profit. So that was always our goal.

Chris: So that’s what we measure. We obviously keep track of hours. We keep track of hours on jobs. And at the end of the day, we know what our overhead is and we know what our net profit is. On design versus construction. Now we have a two step process where you sign a design contract, we charge money for design, and then we have a second step process, where you sign a construction contract and you collect money for construction.

Chris: Sometimes people will not charge for design because it’s a loss leader. They want the construction. You know, we really always advocate against that because, you know, that’s the most important thing you can do is thinking about a project that you’re not getting paid for it. You’re not going to do it as early as you might. And the people that do it are going to appear to be undervalued.

Chris: So you run into a lot of issues that way.

Mark: What about crediting back if the job, if you do get the job.

Chris: And that’s fine. And some people do that, a lot of times they don’t really measure what it cost them to do design. So whatever they’re crediting back is less than the cost of what it really cost them to design. Yeah. So they’re they’re either they’re either breaking even or they’re actually losing money on design. Which, you know, if it were a plumbing department or electrical or a subcontractor of some sort, you just you wouldn’t put up with that.

Chris: But why they do it is because they don’t actually measure it.

Victoria: So what’s a typical process? Let’s say that somebody signs a design agreement with you. What’s the first phase? What do you call it? The first contract.

Chris: Well, there are three phases. There’s schematic design and then there’s design development and then there’s construction documents. So it’s SDD and CD okay. And the three the three phases are pretty distinct. And ideal. You get a set amount of money upfront to start the project. So you always want to stay ahead of the client. And at the end of SD you want to collect another draw to start.

Chris: And then at the end of CD, when you’ve got all the drawings complete and you’re ready to go for permits, you want to you want to charge them to and permits generally are part of the construction process. So a lot of times you’ll want to separate separate permit permitting because in a lot of jurisdictions it takes a lot of time.

Chris: So you may want to get that really started before you’ve actually finalized the construction contract and signed that. But you want to get that ball rolling.

Victoria: So how do you measure or track or push the timeline? I mean I’ve heard over the years many people talk about how the design for a project to get bogged up in design, they can’t get it to move fast enough. How do you avoid that? What what are the steps you take?

Chris: Well, I’m not sure that we do avoid it. I mean, clearly a lot of clients can’t make up their minds or, you know, life gets in the way. They have to travel. They have other things that are going to happen to them. Usually they’re pretty upfront. Ideally, what you do is you put together a schedule and you you ask them if if this is mutually agreeable.

Chris: I mean, clearly you’ve got let’s say it’s three months to to design. So you’re putting like a construction schedule, you’re putting in when you’re going to finish, when you’re going to finish, that’s your goal. You ideally set up some meetings within within that schedule. And also you tell them when the draws are going to be, do so as far as when you’ve walked in the floor plans and they’ve signed off on it and you’ve given them a preliminary estimate.

Chris: That’s when you go into the finishes phase, which is finishes reflected ceiling plans, electrical plans, structural plans, that kind of stuff. That’s the next phase. Generally, we’ll do a trade day, sort of somewhere in that phase as well, so they know what they’re going to get with in each phase. And they can see the the value of it moving forward.

Mark: How do you how do you determine if the department is is successful? What what metrics are you holding them accountable to? What are you what are you tracking.

Chris: So every yeah, every design letter is not only do we tell them where we think their project, what their project is going to cost. So if they have a number of pieces, let’s say there’s a kitchen and a bathroom. And in addition we’ll tell them, arrange for each piece of their project. We’ll tell them what the construction budget should be within that range, and then we’ll tell them pretty much specifically what their design piece will cost.

Chris: And then if they want to do all all the different pieces, it’s additive. Sometimes they’ll value engineer right up front and say, well, this is what I can afford. I won’t do that piece, and I’ll do that later. We revise the design letter. Generally, we’re charging a percentage of construction, but we’re also relating it to ours so that we can tell them, you know, hey, you’ve got so many hours in each phase, and we can tell them when they’re getting to the end of that phase and where they’re where their hours are at.

Chris: And we also we also in our contracts were reserve the right to, if the scope of the project increases or whatever, we get to come back and charge the percentage that we originally talked about. So we’re against the new the new work.

Mark: What do you have a goal like how many should convert into a to a construction project.

Chris: Well, so for us about 80% of design converts into a construction project. Good. So and one out of I would say one out of five initial prospects who you go out and visit and actually write a proposal to convert it into, into was a design contract.

Mark: And was that a goal that you set, or was that just based on historical data that you’ve come to terms with?

Chris: No, that’s that’s sort of historical data. And that’s what I’ve seen through R.R two. Obviously there’s some salesmen that close have much higher close ratios, but I’d say if you have a large team that would be a healthy, healthy, percentage. That’s after you vetted. So some may be, you know, too far away. So I mean, they have budgets that don’t, don’t fit with the scope of work you want or do.

Chris: They are asking for work that you don’t actually do. Some firms may have minimum size projects. So once you determined that the client is worthy of going to see and their project fits within the scope of the work that you like to do, that’s when we start counting counter thinking in terms of what our close ratios are.

Mark: So just to clarify, do you do you guys are you willing to take on design projects if there could never be a construction project tied to it?

Chris: We do sometimes. Okay. Sometimes, you know, it may be a sizable design project. It may be tens of thousands of dollars. In terms of design, it really depends on where our design department is. And sometimes, you know, it will be.

Mark: From a capacity.

Chris: Actually. Yeah, it’s about capacity. It’s keeping everybody busy. And since we’re making money on design, it’s not that we’re not making money. It’s we’re making money on obviously a, a smaller number than the construction value of it. So obviously we’re more interested in the construction value because at the end of the day, the construction part of your budget is about 90% versus 10% of what your design budget is.

Victoria: So now, Chris, how do you feel about a three step process that you know, some design build companies use, such as like feasibility study, then design contract or design development and then construction. Why do you not use that for your thoughts?

Chris: Well, we we do we do use feasibility studies. But I tend to discourage them. Really a feasibility study is, is designed for somebody that doesn’t quite know what they want or they have too many options. Let’s say they could put the addition on the left side of their house, on the right side of the house, back of the house, so they could pop it up.

Chris: So that’s when you can explore all the options and narrow it down. Sometimes we’ll use feasibility studies when people have a really tight budget, and they generally want probably a little bit more than they can afford, and they want certainty, they don’t want a range. So we can recommend a feasibility study. So we can do some of that valuable engineering upfront.

Chris: Say maybe we’re going to figure out what you need to take out of the scope of work to make it work for you. The problem with the feasibility study, and we charge a reasonable amount of money for a feasibility study, so they’re not loss leaders, but we find that it tends to stretch out the whole design process.

Chris: If you do a feasibility first, and then a higher percentage of feasibility studies will not go forward or go into construction. So if you’re busy and you want to prioritize, you might as well prioritize that which is going to get you get you to construction fastest and and do the most likely to succeed.

Victoria: What do you feel? I mean, your company now is quite large. And what’s your average job size, do you think?

Chris: Well, right now it’s I, it’s about 400,000. And that’s obviously been going up every year. It’s, you know, part a great deal has to do with the economy.

Victoria: Okay.

Chris: And the low interest rates of course.

Victoria: Okay. Great. So your company’s pretty large.

Chris: Now that the recession. Yes.

Victoria: Yeah. Really. So you have developed this design department, right. Nine people in it at the moment and growing I imagine. But what do you think about companies that are smaller that do design, build, but outsource to a small cadre of talented architects and or designers? They still control the process.

Chris: That yeah, that’s certainly feasible. And and we, we, we, we still have design subcontractors. So we get too much. We can we can sub out CDs to people. We can. So about different phases of of drawings. Usually construction documents are the easiest thing because it’s a known quantity. And we have a set of standards. And if they can meet those then they can do it.

Chris: And we’ve done we’ve done the, the SD and the, the D part. When we, when we first started out we did try the overseas thing to. Oh wow. So, so though I could, I could talk to you a lot about that in this in this session. But anyway yeah they’re, they’re, it’s just like anything else.

Chris: I mean, if you’re going to contract out framing or plumbing or electrical, why not contract out? Design services, I mean, it does it does have there’s some issues with it, but I mean, as you can imagine.

Victoria: Now, tell me a little bit about the designer’s role in your company. It sounded like they do not sell. Exactly.

Chris: Well, I mean, I always say every designer sells because obviously everybody in the organization sells, right? They’re selling they’re selling us in our services. Plus, you know, they have opportunities to say, hey, look, I’ve discovered a scheme here. I think it’s going to cost a little bit more, but I wanted to show it to you so that that is, you know, upselling is not necessarily the goal, but it’s these things happen.

Chris: But no, the salesman sells and we call them team leaders. And then the designer is involved and clearly goes through all the design meetings. The team leader is supposed to go to all or most of the design meetings as well.

Victoria: Okay.

Chris: And the team leader writes that, writes the initial design letter.

Victoria: Okay. So then does that, go ahead. No. After you.

Chris: Well, the the designer is very responsible, becomes responsible for the budget and also for the timetable. And helps drive that and works with the estimator at the end when everything’s together, just make sure that the estimator understands the drawings and but it’s a very it’s very much of a team effort at the end of the day. So even the team leader stays involved from the initial sales all the way through construction.

Victoria: Wow. Okay. Great. So the designers are not estimating they’re getting it. They’re coming up with the ideas and so on the creative side and the estimators working with them to do those preliminary rough, ranges and that sort of thing, and then narrowing it down.

Chris: Exactly.

Victoria: Okay. So tell us, where are you finding your designers once you want to hire them?

Chris: Well, in terms of media that you’re using or.

Victoria: Yeah, like, how are you how are you finding.

Chris: Yeah, yeah. Well, we’ve got a, we’ve got a number of architects on staff. So we have done that. Sometimes it’s the competition. Obviously resumes come our desk across our desk from all over. You know, we’ve used LinkedIn, we’ve used Glassdoor, we’ve used, a bunch of other places to advertise. So, you know what you do that, Craigslist and the air has a as a job board as well.

Victoria: Okay.

Chris: Obviously you’ve got to sort through sort through all that and decide I then the first thing is really to come up with the job description, and understand what kind of person you want, what their strengths of skills need to be. And then then you then you need to obviously advertise for that. And hopefully you get enough residencies that fit that that job description.

Victoria: Yes. Okay. Great.

Chris: Thank you. There’s one more thing I wanted to mention which that design build is really a critical part of sort of a business approach, a business structure, because it enables you once you sell into design, very few people, as you saw with 80% closing a construction, very few people even shop once. Once you’ve developed a level of trust with them in design.

Chris: And I think that’s a really important, aspect to make clear to your members, because a lot of people have their bid build, they’ve got their bidding on a lot of stuff, spending a huge amount of time. A lot of times not getting compensated for it. Or they’ve got to develop that list, that sense of trust with whoever job they’re bidding on so that they know there’s a high likelihood that they’re going to get.

Chris:

Victoria: Did you ever consider not doing design build.

Chris: Not really because I’m obviously at my with my design background. It’s great. It’s it’s what we wanted to do. And obviously so much of how something turns out is, is all about the design.

Victoria: Do you feel that there’s a specific land US company, esthetic or style?

Chris: You know, I would say, and this is I get asked this by clients all the time. Like I say, our portfolio represents the tastes of our clients. Clearly they have existing houses. They have existing interiors that, they’ve worked on. So we have a very good sense, unless you’re doing a whole house makeover or something, you don’t get the chance to really redo everything.

Chris: And generally people want, something that fits in with their style and their taste, and usually they want something that’s contextual so that it looks like it was never added. So that’s ultimately our goal.

Mark: Chris, one last question for you. Are you ready for the lightning round?

Chris: Okay.

Mark: Let’s do it. Oh.

Chris: And now here’s the Remodelers advantage lightning round. It’s a draft.

Mark: All right, 60s on the clock. Here we go. What’s your favorite business book and why?

Chris: Good, great.

Mark: If you weren’t the owner of a remodeling company, what do you think you’d be doing?

Chris: I guess running an architecture firm.

Mark: What do you not very good at?

Chris: I guess, asking what their budget is. Gotten a lot better at it over the years.

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

Chris: Always my car.

Mark: What was your favorite sitcom growing up?

Chris: Wow, I guess it so Hogan’s heroes or Stalag 13?

Mark: Name a movie you’ve seen more than ten times.

Chris: And I don’t think there is a movie that I’ve seen more.

Victoria: I don’t think that’s why I have either. Hey, Chris, this has been great. Thank you so much for sharing your insights on building this design department. I think you really shared some great stuff. Now, before you go, before we let you go, I want you to share your five words of wisdom with our listening audience and tell us why they resonated with you.

Chris: Okay, well, it’s really ten words, but the first five or that which cannot be measured, I done.

Victoria: Okay, got it. And why that?

Mark: I like how you did that.

Chris: Because if you can’t measure it, you can’t improve it.

Victoria: That’s right. Yeah.

Chris: That’s why you need to measure your design profitability. All right? You can always improve it.

Victoria: That’s very true. And I think that is something that way too few people do. So just plugging that, putting that in their ear, putting that bug in their ear and getting them to do that would be, tremendously, helpful. So thank you so much for sharing your expertise. Appreciate it.

Chris: Okay. Well, thank you.

Victoria: And we look forward to having you back again.

Chris: Okay.

Victoria: Thanks, Chris. Bye, Chris.

Chris: Bye.

Victoria: You know, one of the things that Chris mentioned near that is he stressed, especially there at the end, was that design should be a profit center and not just a loss leader to capture the construction. It’s a very, very valuable, service that these design build companies are providing.

Mark: Yeah. And you should absolutely at least know how much you should be charging for it. You know, if you’re going to do it for free, if that’s your strategy, if that’s what your goal is. Hey, you know, far be it for me to tell you not to do it. But I’ve always said let the client know what they’re getting.

Mark: Yeah. You know don’t just because you devalue what you’re getting right. If it’s, if it’s $5,000 worth of work, let them know you’ve given them a $5,000 freebie so that it goes a long way as well.

Victoria: Yeah. That’s that’s very good point. So I think you shared some good some good strategies building the design department and, and designers measuring the schedule, keeping track of that, the different phases a different deliverables and the way they explain it to the clients. That’s great.

Mark: Yeah it’s good. And I also like the use of ellipses in order to get out of the five words of wisdom.

Victoria: Yeah.

Mark: That was that was a good way to do it. Right.

Victoria: It’s very creative around here. Around your rules. I like it.

Mark: Yeah. So, yeah, if that sounded good to you and you want to learn more and you want to really get in, do you want to dive deep into how to run a, design process for your company? Should definitely check out our masterclass on design. I will put a link to that in the show notes.

Victoria: Yeah, it was pretty awesome.

Mark: Well, as always, we want to thank you for listening week in and week out. We certainly want to thank Chris for taking the time out of his busy, busy day to talk to us. I am Mark Harari.

Victoria: And I, Victoria Downing. We’ll see you next week.