Episode 82: Transitioning To Fixed Price Contracts With Lee Ambrose

Professional Builders Secrets brings you an exclusive episode with Lee Ambrose,  Managing Director at Ambrose Design and Construct based in Brisbane, Australia. Throughout this episode, Lee delves into the journey he and his business has went on, his transition into fixed price contracts and the ways in which he’s transformed his business since joining the APB.

 

Inside episode 82 you will discover

• The challenges faced by builders before transitioning to fixed price contracts
• The importance of projecting all of your fixed expenses
• The advantages of using project management tools
• Why it can be so challenging to change your ways as a builder
• And much, much more.

 

Listen to the full episode to uncover exactly what transitioning to fixed price contracts can do for your building company.

 

Lee Ambrose - Managing Director of Ambrose Design and Construct

Lee is the Managing Director and Founder of Ambrose and once upon a time he used to wear every hat in the company. These days, his main role is Managing director and Sales manager, liaising with his sales estimator and managing his department heads to ensure everything is running as smoothly as possible.

Connect with Lee

 

Timeline

1:40 How Lee got started and his business ambitions

3:59 What kind of contracts Lee used before transitioning

7:31 How Lee has transformed his business working with APB

10:06 The importance of fixed price contracts and how secure they are

13:19 The construction software Lee utilises

15:17 Why is it so challenging for builders to change their ways?

22:30 What Lee’s discovered in the process of transitioning to fixed price contracts

 

Links, Resources & More

Ambrose Design and Construct

APB Website

APB Rewards Partners

APB on Instagram

APB on Facebook

APB on YouTube

Join the Professional Builders Secrets Facebook group for builders & connect with professional builders world-wide.

Lee Ambrose:

Mate, I just want to leave a legacy more than anything, for my family and for my community. 

Lee Ambrose:

It became very apparent that there were holes in our organisation. 

Lee Ambrose:

We’d had a couple of bad experiences with cost plus, and we've said, “This is just not working.” Fixed price contracts are the only way to go. 

Lee Ambrose:

And just being able to back myself to say, “That's what you're worth.” 

Lee Ambrose:

If I could go back and know what I know now, it could have worked a lot, lot better. 

Lee Ambrose:

When you actually sit with professionals who know exactly what they're doing, you say, “Oh my God, what have I been doing this whole time?” So I couldn't recommend enough that you jump on board.

Bosco Anthony:

Hello, and welcome to the Professional Builders Secrets podcast, a podcast by the Association of Professional Builders (APB) for building company owners, general managers, VPs and emerging leaders. Here, we discuss all things running a professional building company from sales processes to financials, operations and marketing. 

Bosco Anthony:

We have another exciting episode from the Professional Builders Secrets podcast. Joining us today is Lee Ambrose, Managing Director and owner of Ambrose Homes. Lee, welcome.

Lee Ambrose:

Thanks, Bosco. It’s an absolute pleasure to be here, man. Thanks for asking me on.

Bosco Anthony:

We're absolutely delighted to have you. Tell us a little bit about how you got started and your journey as a builder and what Ambrose Homes specialises in.

Lee Ambrose:

My journey as a builder. I started out as a carpenter, as most of us do. I went along with carpentry contracting for a number of years, then fell into a luxury home builder site manager job. It went really well for a couple of years and then when that started to just dry up, I thought, “I’ll go out and try this myself.” I've been doing that for about seven or eight years now.

Bosco Anthony:

What do you specialise in today, with Ambrose Homes?

Lee Ambrose:

We custom build higher-end homes, around the $1 to $2 million mark and D&C projects, design and construct projects. We do the design, cost manage right through to the tender, and then when we're sticking a tender in front of the client, it's been cost managed the whole way through. So it's usually no surprise at the end. And then we're able to get a lot of those jobs to site.

Bosco Anthony:

And where do you specialise in, geographically as well, out of curiosity?

Lee Ambrose:

We cover all of southeast Queensland, mainly in the city of Brisbane, but we do go as far as the Gold Coast and up to the Sunshine Coast.

Bosco Anthony:

So what have been your ambitions with your building business? You went from carpentry to working for the man and now you are the man behind it. What are some of your ambitions with the building business?

Lee Ambrose:

We just love it; absolutely love it. I generally only employ people who are on the same page as me. So my construction manager, Austin, absolutely loves it as well. We love and sing carpentry and building 24/7, but mate, I just want to leave a legacy, more than anything, for my family and for my community. We're big on sponsorship and on local support, so my ambition is providing for the family and leaving a bit of a legacy.

Bosco Anthony:

What were you looking for when you started to work with APB? What were some of the challenges that you were facing?

Lee Ambrose:

I was probably not 100% aware of what I was looking for, but it became very, very apparent that there were holes in our organisation, low margins being one of them, and organisation was another hole. We realised how much we could forecast and how far we could look forward and get all those holes fixed. Once I sat down initially with Clint Best, who is my mentor now, he started to plan things out and I just started to realise, “I can really make this a professional company.”

Bosco Anthony:

Tell me a little bit about low margins. Were you on a cost plus contract setting before you joined APB? What type of contracts were you serving to your clients?

Lee Ambrose:

We did a bit of both, but the cost plus was probably where we got unstuck a couple of times. Cost plus seems to work on paper, but it doesn’t work in practice until you get a proper understanding of what your net margin is – which on some of those costs plus projects was negative – and get an understanding of what your overheads are, and APB has helped me with all that stuff.

Lee Ambrose:

Moving to fixed price contracting has just been so much better. We're basically setting forward, forecasting our overheads for the 12 months ahead, adjusting our margin to suit, and then adding our net margin on top. All the framework that APB has enables us to forecast our margin into the future, which is essential if you want to stick around.

Bosco Anthony:

It sounds like you have a lot more financial awareness of what's to come with the contracts as well for yourself from what you're explaining right now.

Lee Ambrose:

Yeah, 100%. You know what's coming. You know if you're going to have some tough times ahead or if you're going to have some good times ahead; you know what's coming so you can plan for it.

Bosco Anthony:

So tell me a little bit about how you discovered APB and what it has been like working with Clint. I've had Clint on the show here a few times. His bragging rights this year came from winning the coach of the year at APB two years in a row. That’s a shameless plug for Clint. But what's it been like working with Clint, and how did you first discover APB?

Lee Ambrose:

I think APB tried to discover me at one point and my wife put it in front of me and said, “This looks like a really good firm and I think it couldn't really help you.” To her credit, she was probably two years ahead of her time and I just said, “Look, we're not ready for that. I don't need that. I know what I'm doing.” And then about two years later I decided to jump on board and I said, “I wish I had jumped on board with these guys two years ago because I wouldn't be where I am right now if I had.”

Lee Ambrose:

I got into a meeting with Clint and then after that meeting I just knew that this was the path for us and this was the path forward. The framework that they put in front of me they've just 100% delivered on. And there's Clint. I'm sure all the coaches are great, but I can’t speak for them, but Clint is just incredible. He’s fantastic. He’s there when you need him and he’s been on this show a couple of times, as you said. I can't fault him.

Bosco Anthony:

Why did you pick this coaching program? Your wife was looking for different coaching programs, and she landed on APB. Why did this one speak to you? Is it the case that not knowing what you don't know is why it took so long for you to come on board? I guess there's that old saying, if you know better, you do better.

Lee Ambrose:

Yeah, 100%, Bosco. The sole reason was because I thought I knew better, and I didn't know better. So I thought just charging a blank gross margin on my contracts was going to work. I had no idea what my overheads were and what those margins were, and for many years it sort of worked. But if I could go back and know what I know now, it could have worked a lot, lot better.

Bosco Anthony:

So basically it looks like you've left some dollars on the table all those years ago. I guess that’s safe to say?

Lee Ambrose:

I look back at some of those builds and the prices that I billed clients for them is criminal, criminal to myself. But the reason we landed on APB was the fact that they are custom home builder coaches, specialists, the exact field that we're in. This is the exact reason that we jumped on board with them because everything that they said they would do, they have done. We just can't fault them.

Bosco Anthony:

So tell us how you've transformed your business since working with APB. Obviously, you had all these systems in place, things started to change, and you started to get more awareness. If you look back down memory lane now that you've been working with APB, what are some of the areas that have changed completely? You talked about transitioning to fixed price contracts. What are some of the impacts to your business?

Lee Ambrose:

I think management-wise, being able to replace myself as head of the operations has been one of the biggest impacts. Austin, my construction manager, now does that and gives me more time to spend with Clint and do more APB related activities. That benefits the whole company, but essentially it just probably comes back to the margins, Bosco. If I had to pick one thing, it’s just knowing what the benchmark is for guys who are doing the sort of work that I'm doing and just being able to back myself to say, “That's what you're worth,” and going down that route.

Bosco Anthony:

Now what are some of the systems that you really like with APB? Everyone talks about the WIPAA [Work in Progress Accounting Adjustment] calculator, the sales process, fixed contract pricing, construction slots and margins. What are some of the things that you really loved that you were easily able to adapt within your business?

Lee Ambrose:

I do love the construction slots. That was absolutely fantastic. As you know, it comes with forecasting and everything like that, forecasting revenue, so you know what you're looking at for the year, you know if you can hire, if you can't hire, if you can buy things, if you can't buy things.

Lee Ambrose:

So construction slots are really important and being able to tell people, “Look, we do have a slot in X number of months and if you want to jump on with the prelim and start the designs, we can set that slot aside for you,” et cetera. But that's given us the power of knowing what our funnel is and knowing, “Well, we have start dates booked out for the next nine months.” That's great, being able to control that.

Bosco Anthony:

I guess even for your buyers, I'm sure they appreciate knowing timelines. I recently had to get some upgrades done to my house with electrical outlets and stuff, and I had called a couple of electricians and they didn't even have a timeline or just didn't get back to me. So the fact that you can give a consumer an accurate timeline when you guys are available would probably work really well for your market as well, I would assume.

Lee Ambrose:

Yeah, and they appreciate that, man. It's probably when people type in “custom home builders Brisbane,” there's probably only a handful of builders that people really want to work with. Whether they manage to get on with us or another one is beside the point, but hopefully all of us are offering that same feedback to say, “This is when we can build it.” We're not a volume building company. You can't just walk in the door and start building tomorrow. That's not how it works. If you want to sign up to services of this quality, you're just going to have to wait, and people do.

Bosco Anthony:

So let's talk a little bit about the fixed pricing contract. Were you a bit hesitant when Clint first brought this notion to you or did the financial awareness bring some sort of understanding like you needed to do this? And how did it help with the business today?

Lee Ambrose:

I didn't need any convincing, Bosco. It was pretty clear. We’d had a couple of bad experiences with cost plus where we'd run the reports on it once I’d finished and we'd said, “This is just not working.” Unless we can sit down with a client and charge a margin that they wouldn't be comfortable with for a cost plus, then that's the only way it's going to work. Otherwise, we were going to have to go back and really get our estimating nailed down. Fixed price contracts are the only way to go.

Bosco Anthony:

Are there any risks or anything that keeps you up at night with the fixed pricing contracts or are you happy where you're at with it?

Lee Ambrose:

To be honest, it's been a tough couple of years for price increases. Queensland doesn't have any cost escalation clauses. In Australia, there are other states that do have them and other countries that do have them, where their builders are probably listening to this podcast. But Queensland doesn't have any escalation clauses, so that's the only thing that's a real issue. That's caught us out a couple of times in the past 24 months with the pandemic, but with material prices starting to plateau, we're pretty comfortable that fixed price contracts are the way to go.

Bosco Anthony:

Because Queensland doesn't have those clauses, do you just bulk buy or do you make sure that you have the materials planned for in advance or do you buy at wholesale rates? How do you go about making sure that you protect the cost of the materials for yourself as a builder?

Lee Ambrose:

It's just about locking in as soon as that pen goes to paper, grabbing that deposit, locking it in, paying deposits and getting purchase orders sent out to suppliers. Unfortunately, there are some suppliers that won't hold costs for materials that are needed later in the build; that’s the big one. Structural steel and timber framing are quite early in the build. Quite often you can take that deposit, make your deposits, and then at least it's only two or three months away that those materials are required. So there’s a little less risk on those bigger items as opposed to some of those tiles and other things that come at the end.

Bosco Anthony:

With your time being freed up a little bit, do you negotiate the supplier relationships now or do you have someone who handles all the suppliers as well when you're doing this?

Lee Ambrose:

It's a little bit of both. It's a little bit me and my estimator, but I try and build the relationships and he can keep his finger on the pulse.

Bosco Anthony:

What type of technology do you use at your building business today?

Lee Ambrose:

We have a pretty large stack of tech. We have a program called Slack, which is an internal messaging system, which also takes care of our client portal. Some people will probably be a little bit surprised by this, but we have monday.com as our scheduling tool and that's because it integrates with so many other things. We've spent a lot of work templating that to have it as our job schedule and it just integrates so well with everything, so we're really stoked. We’ve been using that for about a year. It's the best scheduling tool. It just gives you all your Gantt charts and all that sort of stuff the clients want to know. But on top of that, just the standard Gmail houses all our emails and also Google Calendar and that pretty much wraps it up.

Bosco Anthony:

Do you use any of the construction automated software like Buildertrend or any similar software?

Lee Ambrose:

Yeah, we have Buildxact. We use it as standalone estimating software. It's not really integrated with the clients or anything. We grab what we need from Buildxact and export it and put it into templates for our tenders. We just use it as an extract, basically. We don't really use it for its full service, but it's just because we manipulate and change things a little bit to suit the information that we want people to see.

Bosco Anthony:

It sounds like you're pretty tech-savvy internally with your business as well, and it's probably impacting your sales process a lot faster and better in efficiencies as well, I guess.

Lee Ambrose:

Yeah, definitely. On the sales front we use HubSpot, which I think APB is familiar with as well. So HubSpot's really good, and it's imperative to have that.

Bosco Anthony:

What are some of the other impacts that you're seeing in the business since you started working with APB? Have you taken advantage of the rewards program, for example?

Lee Ambrose:

Yeah, we're massive advocates of the rewards program. We're working with about three or four people out of the rewards program from insurance brokers to solicitors to a mob called System Hub in Melbourne. Dave Jennings runs System Hub, and he does a great job. It keeps all our processes and systems in there so we can do a one button share and we just share that into monday.com or into Slack and this is the system for that. So that program's really good. 

Lee Ambrose:

But we're infiltrated in the APB Rewards program. We're using lots of their stuff. And honestly, they only use programs and affiliate themselves with people that are the real deal. So you'll find every single thing that you use there is well worth it. It’s been tried and tested already.

Bosco Anthony:

Yeah, it sounds like they vet them. And there's also obviously the rebate side of things, which is great for builders as well when it comes to costs.

Lee Ambrose:

They're definitely vetted, man. They're all fantastic. I can't really think of any that we've actually sat down with and haven't gone ahead with. So they've all been really good quality.

Bosco Anthony:

Now why do you think it's so challenging for builders or building companies to change their ways? I ask this because, again, you've gone through a lot of changes. You've taken the leap of faith, you've jumped off the cliff and said, “I'm going all in.” It sounds like you've gone all in, but for the builders out there who are humming and hawing or on the fence, why is it so challenging to make these big decisions and is there fear of the change or is the change actually just daunting in general?

Lee Ambrose:

Yeah, I think it's a combination of all those things, Bosco. I think it's not knowing what you don't know. So the fact that people might know that they're charging the right margins. They might know that they're forecasting their financials well, but it’s only when you actually sit with professionals who know exactly what they're doing, you say, “Oh my God, what have I been doing this whole time?”

Lee Ambrose:

I couldn't recommend enough that you jump on board, even if it's just to work out where your margins are sitting versus other people who are in your field. It’s important just having a growth mindset, just understanding and opening up your eyes. I'm probably at the tail end of that age gap; I'm nearing 40, so I welcome having to open up my eyes, but I guess some of the older guys probably aren't really as welcoming as I am to change. All I can say to them is just until you know, you don't know. So just jump on board.

Bosco Anthony:

What is your business transitioning into and who are you becoming? You talked a little bit about the fact that you've got time now to work on the business. So where do you think your business is going in the future? What are you focusing on and who are you becoming, long term?

Lee Ambrose:

Well, who am I becoming long term? Hopefully I can continue to be a mentor to the whole team. Currently, my main role is sales manager, looking after all the sales. I'll pick up clients right from the very start. I'll note them right through till they go to site, at which point they'll be handed over to my construction manager. I love that. Putting people through. I've got a fair bit of experience with the plans and the designing and the engineering and trying to get the most cost-effective solution so people can move through that initial phase cost-effectively. I'm handing them a tender that's what I told them that it would be when they first started. So I'm happy in this position.

Lee Ambrose:

Clint would love for me to transition myself out of this even more so I could spend more time on APB so I could improve the business even more. But I just really enjoy it and I really enjoy working with people and clients and bringing people's dreams to life. So it's going to be hard to transition out of this position one day, but that's where the company's going and my role in it.

Bosco Anthony:

Do you feel that the company's going to grow with more people? Obviously there's so many different outlooks right now, economically, the market potential for crisis or whatever other thing that's going out there. Do you feel that you are in a position right now to grow, despite all the market challenges that are happening in the industry?

Lee Ambrose:

This will be our biggest year yet, not from job size, but from job value, and I think that will continue to grow. We have no ambitions to become the biggest builder in town or anything like that. We just want to be the best in our field and produce the best quality builds in our field. So as long as we're banging out 10 to 12 homes a year around that $1 to $2 million mark, we are very happy. I don't have any ambition to grow beyond that number of builds.

Bosco Anthony:

Everyone, when they look back at their careers, looks at a few defining moments, then they'll say, “This is when things started to change a little bit.” It sounds like you've had a few of those changes.

Lee Ambrose:

You're cornering me, Bosco. There's only one answer here.

Bosco Anthony:

I'm just curious, if you look back at your illustrious career, which has been really cool because you've been on the tools, you've grown the business, you've worked for people, you've done it now yourself. If you look back now, when was that critical time, that success factor that changed everything and has allowed you to grow? What was the one thing, if you could label it, or if there's a few things, what are some of those critical things that you can look back on and say, “This really changed my business”?

Lee Ambrose:

Yeah, I'll say there's two things and that's just so I don't sound incredibly biased to all the listeners. The first thing is 100% APB. We would not be here if it wasn't for those guys and the systems that we put in place and the forecasting and the margins. Especially through the pandemic, a lot of those margins were eroded quite dramatically. But if we didn't know what we know now, we wouldn't even be here having this conversation, Bosco, and I'm sure there's a lot of builders out there who didn't make it. So that is definitely whole heartedly the number one thing.

Lee Ambrose:

The second thing is just the support that my wife gives me all the time. When I say, “I need to do X, Y, Z,” she just says, “You go and do X, Y, Z.” So understanding that the business supports everything else around it. As we grow, it supports the family and the people around it. But APB has definitely helped us get where we are.

Bosco Anthony:

It's interesting you say that too, about having an alignment with the family as well, because we've had some successful builders who I've had the pleasure of interviewing, and all of the husband and wife teams are so aligned. They divide and conquer and they support each other during the hard times as well. So it sounds like you have a good lady out there who's got your back as well.

Bosco Anthony:

I've got a couple more questions. My next one for you is what are you seeing as a trend in the industry today? Obviously you operate in the Queensland area, but holistically in Australia, what are you seeing as a future trend that other builders and our listeners should be ready for and be prepared for coming up now?

Lee Ambrose:

A future trend? What I'm seeing right now, Bosco, and I hope I'm answering your question correctly here, but people are really monitoring what they're spending. Even if it is a beautiful luxury home worth $2 million, when they sit down for the first time, they say, “This is what I want to build and this is my budget.” They want to be able to control that. There have been so many people come to me who have said, “Oh look, I went and sat with X, Y, Z architect. Our budget was $1 million. When I sent it out to tender, it was $1.5 or $2 million.”

Lee Ambrose:

People are happy to invest a bit of time on the front end, find a builder they really like, sit down and have that conversation and get it off their chest. And then they know, “I've got $1 million dollars to spend. I want to work with you. Let's make it happen. This is what I need. Can you do it?” “Yep, we can do that. Let's go.” So that's trending massively. So I'm seeing a lot less of, “Hey Lee, can you quote this for me? It's all ready to go.” 

Lee Ambrose:

Even architects are coming and sitting with us saying, “This client would like to work with you. Are you happy to give us a bit of a price indication as we work through the design phase?” We're happy to do that. We've got a template that does that and can provide a fair bit of information on the concept side. So hopefully I answered your question okay there, Bosco.

Bosco Anthony:

Yeah, you've given me a trend about the market, about the audiences, which I can appreciate as well. So I guess the advice for builders is to really pay attention to the needs of the consumer and really cater towards honouring what they're looking for in some cases.

Lee Ambrose:

Yeah, for sure. I agree.

Bosco Anthony:

So in this transition and this transformation process and transitioning to fixed price contracts and the systems and working with APB, what have you discovered about yourself in this process?

Lee Ambrose:

That I'm not as organised as what I probably thought I was. It's about putting systems in place, Bosco. You'll find probably half of my calendar is full of recurring things like reports checking on things, checking on the financial status of different documents. I have found that I wasn't as organised as I thought I was, but I can definitely train myself to be that. APB's taught me to just be on the front foot a little bit more with things I’ve got to do every month. Clint says, “You need the report every month.” Okay, let's go. Then we can work on those figures or work on the data and backtrack to get a result.

Bosco Anthony:

My last question is about your coaching ability. Obviously you're working with Clint, who’s an amazing coach, and he has a wealth of knowledge. What is your coaching love language? How does it work with you and Clint? Is it one of those scenarios where you go through the numbers first? How does every coaching call look like when you work with Clint? Or does he check in on your homework? I'm just curious.

Lee Ambrose:

I would say everybody would be different. Clint and I are pretty attached emotionally. We hit it off pretty well, and if something's not done or I haven't got on top of something that I was supposed to, he'll be gentle about letting me know that. But I will know that it needed to be done. But he'll check in with me. He can log into my workbook where it's got everything that I need to know to run the company, and he'll just gently tag me in things and send me emails and say, “Man, how's this going? How's this going? We need this; we need that.” I already know that I need to do that. So he's just reminding me and keeping on top of me.

Lee Ambrose:

We connect on a level, but it's not necessarily numbers. He does all that in the background and checks on all that in the background, but it's more emotional and he'll pull on me, “Man, we need to get that done, for this reason.” “Yeah, I know. I'm on top of it. I'm getting on top of it.”

Bosco Anthony:

It sounds like you have a really good relationship with him. Lee, I wish you all the best in your future journey and potentially getting yourself out of the client process so that you can spend more time on the systems. Hopefully when we bring you back here again you'll have some more fun stories to share. But thanks for sharing your stories, your knowledge, your energy and just being really transparent about your transition as well.

Lee Ambrose:

Cool, Bosco, mate. It’s been an absolute pleasure. Thank you very much for having me.

Bosco Anthony:

It’s been a pleasure having you on the show. Cheers.

Lee Ambrose:

Cheers.

Bosco Anthony:

Thank you for listening. Remember to subscribe to Professional Builders Secrets on your favourite podcast platform and leave a review. To learn more about how the systems at APB can help you grow your building company, visit associationofprofessionalbuilders.com. See you next time.