Episode 7: Managing Client Expectations With Sky, Russ and Andy

In this episode of the Professional Builders Secrets podcast, our host, Bosco Anthony is joined by Co-founders of the Association of Professional Builders Russ Stephens and Sky Stephens, along with APB’s Head Coach, Andy Skarda. Throughout this episode, the trio reveal the secrets behind managing client expectations as a builder. 

The Association of Professional Builders is a business coaching company that helps residential home builders across the globe systemise their building companies. Specialised coaching on sales, marketing, financials, business operations and even personal development in order to operate a true professional building company. 

Builders often believe they are delivering a superior experience to their clients, while in most cases, the client does not agree. Professional builders will listen to their clients and communicate the important milestones throughout the build process, while average builders will avoid communication altogether. In order to produce clients that will become raving fans, you need to start by managing and then exceeding your clients’ expectations.

During episode seven of the Professional Builders Secrets podcast, Russ, Sky and Andy reveal everything you need to know about setting client expectations including the best time to start, what you need to do to keep your clients happy and how to build relationships and set boundaries. 

Tune into the full episode to hear the APB trio uncover the best strategies for builders when it comes to setting client expectations.

 

Russ Stephens - Co-founder

Co-founder of the Association of Professional Builders, Russ is a data analysis expert who has introduced data-driven decision making to the residential construction industry. Russ is also a proud member of the Forbes Business Development Council.

Connect with Russ

 

Sky Stephens - Co-founder

Co-founder of the Association of Professional Builders, Sky specialises in taking complex business strategies and converting them into actionable step-by-step guides for building company owners. Sky is also a proud member of The National Association of Women in Construction and the Top 100 Women in the broader construction sector.

Connect with Sky

 

Andy Skarda - Head Coach 

Head Coach at the Association of Professional Builders, Andy specialises in helping business owners in the building industry identify and implement the skills and systems they need to be successful, without needing to go back to school. Or more importantly, without going bust.

Connect with Andy

 

Timeline

1:17 Mismanaged client expectation horror stories.

3:44 When to set your client’s expectations.

5:15 What you need to master to keep your clients happy. 

10:47 Some of the major blindspots when managing client expectations. 

18:25 Where the problem starts.

22:03 Building relationships with your clients. 

25:15 Setting boundaries with clients.

30:07 How to build for clients you WANT to build for. 

34:50 The pitfalls that builders need to be aware of.

39:06 Creating your process.

47:01 The future of managing client expectations.

 

Links, Resources & More

FREE DOWNLOAD: Client Handbook Template
FREE DOWNLOAD: Qualifying Checklist For Builders
APB Website
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APB on Facebook
APB on YouTube

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

Bosco Anthony:

Hello and welcome to the Professional Builders Secrets podcast, a podcast by APB for building company owners, general managers, VPs and emerging leaders. Here we discuss all things running a professional building company, from sales processes and financials to operations and marketing. Hello and welcome. I'm really excited today to have Co-founders Sky and Russ Stephens, as well as Head Coach Andy Skarda for APB. Welcome everyone. I’m excited to be speaking to all of you today as well.

Russ Stephens:

Hey, Bosco.

Andy Skarda:

Hey, Bosco.

Russ Stephens:

How are you doing?

Bosco Anthony:

Pretty good. Thank you for being here. We've all heard of experiences that have gone south because of mismanaged client expectations. I'm sure you've heard stories with all the clients that you work with. Can any of you share some stories from the industry of some mismanaged client expectations?

Russ Stephens:

I've got one that springs to mind years ago when I went to a Brisbane based builder and I was just waiting to see him as I arrived at his house, because that doubled up as his office. He was on the phone and was in deep conversation on the phone when he answered the door and he waved me through into the kitchen. 

Russ Stephens:

Then he left the room and I could just hear him shouting in the back, doing his nut. This went on for about 15 minutes. He was getting into a right state and then he entered the kitchen 15 minutes later. The first thing he said to me was, “That's another $15,000 down the drain.” I looked at him and he went on to explain that this particular client had constantly been going onsite and instructing his subcontractors, and it had happened again.

Russ Stephens:

The client had actually instructed them to do work that they'd gone ahead and done, but he already knew there was no way this client was going to pay for it, because it was a variation. I looked at him; he said, “Yeah, I know, I know. I know I'm not liable to pay the subcontractors either, but I need these guys on site at the next job. So, I'm just going to have to suck it up and pay for it.” He was human. I got the impression that maybe he was a little bit angry at himself for letting this situation occur. 

Russ Stephens:

It really is all about mismanaging the client as to how that came about, because the client wasn't particularly being malicious, but that's the way they'd come to feel, that this is how the job runs. “If I want to get anything done, I've got to organise these subcontractors myself and tell them exactly what I want.”

Sky Stephens:

Yeah, that's a really good point. With a lot of clients, managing client expectations is mainly about setting their expectations. Often, clients think that because it's their home that you are building, that it’s theirs, this is their project. Why can't they talk to anyone? It's right at the beginning, setting the expectations so clients know that this is actually your project, your construction site.

Bosco Anthony:

Yeah. I mean, it brings about that question of is the client always right, I guess, is the bigger part here. At what point do you come to a fair compromise? Is it a conversation that needs to be had prior? Or do you have the conversation during the client relationship? Andy, I'm just curious to know your thoughts.

Andy Skarda:

Without a doubt. I think Sky and Russ have both alluded to this. It must happen ahead of the problem becoming a problem. So, right up front, in fact, our recommendation is that it happens as part of the sales process, that we're actually educating clients on how the process is going to run from the time that the job actually gets off the ground.

Andy Skarda:

I couldn't help thinking of a wonderful quote that I saw on the wall of the Dallas Cowboy's Head Coach. On his office wall it said, "You encourage what you tolerate." The reality here is if you don't set the expectation correctly and put a system in place from minute one, your clients are going to be pushing the boundaries on an ongoing basis and that doesn't work for either of you. It needs to be set up in those initial conversations.

Russ Stephens:

To answer your question, Bosco, I don't believe the client is always right, but they are always the client.

Bosco Anthony:

It's a juicy debate, isn't it, Russ? I mean really, if you think about it, and I've been trying to think about this from a character perspective and from a service perspective as well, I guess there are different factors that create this, what we call client escalations when it comes to mismanaged expectations. But I'm just curious, what are your thoughts as to what fuels mismanaged expectations and what causes these problems once the transaction has already occurred?

Russ Stephens:

I think you've got to get off to a strong start in the client relationship. You've got to be the leader in the relationship and take control. I think that's really important. It's just like managing your team members in that respect. But secondly, it's then communication. That's where all the problems come from –  communication. You've got to have a flow of communication to the client, but also a flow back from them as well, because they need to be heard and valued and understood. So, you've got to really take control from the start, but then you've got to have that communication channel in place.

Sky Stephens:

I think that's a really good point. Communication is so important, but there are two kinds of communication. You've got proactive communication, then you've got reactive communication. Reactive communication is exactly what we were just talking about. That's when you are on the back foot, you're reacting to the problems that are happening. That's miscommunication that's happening. 

Sky Stephens:

If you make a decision to be proactive with communication, you're always on the front foot, you're preventing problems and future problems happening. It's a much stronger form of communication. But it's not just to clients; this is managing everyone's expectations. If you can be proactively communicating to your clients, your subcontractors, your suppliers, you can eliminate so many issues.

Bosco Anthony:

Andy, being on the front lines of coaching and leading a coaching team as well, I'm sure you get a lot of stories from builders. Are they natural born communicators on the front lines when you coach them, when you work with them or is it something that you have to instil in them and educate them?

Andy Skarda:

I think the concept of communicating with their clients is where they need the education. The problem for a lot of builders is that they don't consciously acknowledge that the guy they're building for is a heart surgeon. He is a really clever man, but he has never built a house. 

Andy Skarda:

In the same way as you wouldn't go to your local corner store or 7-Eleven store owner to get your heart transplant done, you'd go to a specialist who knows how to do it and knows the sequence it needs to run in and all of those kinds of things. I think for most builders, they need to understand that they are the professional in this situation. Therefore, they need to be the ones, as Russ has said, who take that control and then they explain to the client the best way to do it.

Russ Stephens:

I can't tell you how many times I've spoken to people, friends and acquaintances. When they find out you're in the construction industry, they talk about their build and how that went. They proudly tell me how they were the ones managing the build. They were organising all the subcontractors, they were turning up on site. They're quite proud of the fact that they project manage. 

Russ Stephens:

I always wonder how the builder felt about that. This person coming in and taking over, because like Andy said, these are typically successful people who are having these big, spectacular homes built. They're used to organising and being in control. So, when they see something running not as they would expect it to, they just feel this need to jump in and organise it themselves, which isn't always a great idea.

Sky Stephens:

I think when you step back though, it makes sense. Like you say, the most successful people got there for a reason. So, they like being in control. It's a certain personality type, but it also makes sense what you said before, the client is not always right, but they are always the client. It comes back to communication, but it's almost like the power of influencing people. This is your construction site. This is your process, but you need to bring them on your side and take them on the journey with you.

Sky Stephens:

It's like we've got the curse of knowledge, so we know what needs to be done. We just want to get in there and do it. This is our site. Leave us to it. We know what we are doing, but the client is the client. You’ve got to bring them with you. You’ve got to keep them in the loop. And that's where that proactive communication comes in. It's very much influencing their thoughts and behaviours so you are bringing them with you and they are on board with every call you are doing.

Andy Skarda:

And just to add to that, it's a great point that most builders are good at building; they do it without thinking about it. Therefore, I think for most of us, when something comes easily, we assume it's easy for everybody. A lot of builders, I think, go into the process assuming that the client will understand why they are doing things the way they are. And what are we back to? We’re back to exactly what Sky said; we're back to communication. We're back to what Russ said; we're back to leadership. Don't assume. Step into the leadership role, come up with a process that's going to work for everybody, including the client, and then communicate that process effectively.

Bosco Anthony:

Let's talk a little bit about the builders. Let's put the microscope on them a bit here. It sounds like time is a valuable currency as well from everything that you guys are talking about. The more time you put in, the less time you have to then manage those expectations as well. But a builder has got so many different responsibilities, got so many moving pieces, running a business and being a leader. What are some of those common blind spots that really cause the problems when it comes to managing client expectations?

Russ Stephens:

We've already touched on communication with subcontractors. That leads to a loss of profits and an absolute nightmare. But another one which really does leave builders vulnerable is site access. This is a big red flag, because clients believe that it's their site – and it isn't. The moment they signed that contract, they handed over control to the builder. The builder now controls that site. 

Russ Stephens:

The builder not only determines who goes on that site and who can't go on that site, but they are responsible for every person on that site. That's their responsibility and they have to take it extremely seriously, because the consequences are dire. Site access, for me, is one of the biggest blind spots, because I often hear about builders, not only allowing clients onto their sites unsupervised and even their children, which is a big no-no, but they're allowing subcontractors engaged by the client to come onto their sites as well.

Russ Stephens:

And that's another big no-no, because you are responsible for the health and safety of all those people. It's something you cannot take lightly at all. But clients don't understand this. You've got to give them the why. You've got to explain to them why you are being so rigid on this. “You do not take one step on site until I arrive to meet you at that site and no, you cannot do the electrical through your brother-in-law and have him turn up on site when it suits him.” Apart from the workplace health and safety liability, that is going to impact the whole timeline of the job anyway, so all of a sudden, your timeline is out of your control. That’s why it’s so important to explain the why to the client in the first place.

Bosco Anthony:

The thought of having a child on a work site, Russ, is a bit scary. It makes me feel a bit uncomfortable when you think about it or for that matter, having someone unsupervised. That just opens up a whole can of liability issues.

Russ Stephens:

For sure; big liabilities and it never goes wrong until it goes wrong. And when it goes wrong in that area, it goes wrong big time.

Andy Skarda:

I think this is the other reason that we very strongly recommend an online project management portal as part of the client expectation management process, because the reality is that for a lot of people, in most cases they're spending a lot of money, which puts them in a place where they feel they have a right to know what's going on – and they do. 

Andy Skarda:

But the beauty of running an online project management system is that it allows you to show them progress, if you like, on a daily basis. We recommend at least on a weekly basis so that there is a constant update for them to see that the job is moving ahead. And that then takes away the need for them to physically be on site other than prearranged and obviously supervised and led site meetings. That's another part of let's call it ‘the APB mix’ that helps them solve this kind of problem.

Sky Stephens:

I like that. And I think to add to that, because we're talking about blind spots at the moment, I think the biggest blind spot for builders is how many methods, channels and avenues of communication there are for clients and they're going to hit them all up unless you are proactive and put something in place. Just as Andy was saying, have some form of a dedicated portal that your clients can log into and know that is how you communicate. Everything is logged in there from all the photos from the site to update the clients on, exactly as Andy was saying. 

Sky Stephens:

You can do that on a daily or weekly basis and include all of the decisions they need to make and how they ask questions. It’s actually channelling it all through the one spot, because the blind spot is going to be the one phone line you didn't check that day, and then the client kicks off because you're not getting back to them. You want to be able to deliver such an amazing experience, but you need to be able to channel it through one spot. 

Sky Stephens:

I think to add to that, something else we recommend is ensuring that your clients each have a dedicated point of contact. You don't want your clients channelling communication through multiple people, just like Russ said, instructing the subcontractors on site and then telling one thing to your site supervisor and then someone else in the office hears something else. And suddenly like this telephone game, you're all hearing different versions. It gets into a massive mess. You just want to ensure all of your clients, all of your staff and all your suppliers and subcontractors are aware of how things get channelled through what the correct protocol is.

Russ Stephens:

If you don't have a client facing portal in place, you will experience a lot of problems with client variations. That has to be one of the biggest areas of miscommunication and dispute, I'd say, when it comes to builders and clients. A lot of the time, what's going on in the client's mind is that it's only just a little adjustment there. 

Russ Stephens:

They have no idea of how much work is involved in that change and the consequences, the cost of delay, et cetera, from changing a tile, that's going to put a one week delay on the project. They've got no idea of the consequences of that. The reason they don't have any idea is because the builder doesn't communicate to them exactly what those consequences are, which again comes down to communication. But a lot of that, like Sky and Andy have said, can be resolved through a client facing portal where everything is documented, and that's when expectations get managed.

Sky Stephens:

I'll tell you what else it solves. How many times have we heard from builders and they're talking about maybe their most difficult clients, they're getting calls on their mobile late at night or on the weekends? It's actual harassment. There are no boundaries, because no boundary was put in place. If you get something like a portal, train them on how to use it, make sure everything's directed through there. You get that boundary and you get that respect of how things are supposed to work, because that difficult client would be an absolute nightmare.

Russ Stephens:

There are so many channels now, aren’t there? Years ago, communication was quite straightforward. Pick up the phone, maybe send a fax, who knows what else? Mainly it was the phone. But now some people prefer a phone, other people will not speak on the phone. Some live by text messaging, others, Messenger or on Facebook. People tell me, “Don't send me an email. I don’t live on my email.” They can be very anti-email. But as a builder, you are controlling multiple projects. You've got to be across all the channels, because you don't know what's going to be their favoured tool. So, you've got to be ready to interact.

Bosco Anthony:

I think I was alive during the pager era, too. I'm starting to date myself, but yeah, I remember the time when you had a pager. So, we still talk about having this need for the client facing software. Andy, I'm just curious, how did you first hear about the problem? Was this through the coaching side of things? It sounds like this is a common problem that most builders face. Let's go back to the roots of this. Is this a problem that you identify through the coaching? Is this a problem that they come to you with? Where did this problem start?

Andy Skarda:

It manifested in builder frustration. I'm not exaggerating when I tell you that I have been in coaching sessions where builders, both male and female, are in tears. They’re literally beside themselves emotionally, saying, “I don't know what to do anymore. I just cannot wrangle this client into a place where I can deal with them.” 

Andy Skarda:

The reality here is it goes back to the fundamental reason that we exist. We believe that clients deserve a better experience. Well, then we need to make sure that we set that experience up correctly at the beginning. I'm tempted to say to you that Russ told me about the problem, which he probably did, but certainly in terms of it manifesting, we see it on an ongoing basis from builders directly.

Sky Stephens:

It's not light either; this goes so deep. This isn't just, we had a coaching session and they were in tears. This runs so deep. This is a topic we've gone into in a lot of depth lately. It's the mental health and wellbeing of the owners of the building company, because this industry is tough. I remember being at an industry event not long ago, just a few months ago now, getting to meet not just clients, but other builders that we've been in touch with over the years, either subscribers or whatnot. 

Sky Stephens:

I remember having conversations – and it's been a particularly tough 12 to 18 months – and more than one, literally a good handful of people who I was talking to that evening were just in a completely different place. It really took a toll on their mental wellbeing. This is what makes builders want to pack it all in. The worst kinds of clients, the worst kinds of experiences. This is what makes them think it's not worth it. “I'm done. I will leave this industry,” and that's really sad.

Andy Skarda:

I just want to back Sky up, a hundred percent on that. I mean, in the last six months, just in the clients who I look after, I've had two builders leave the industry. One was approaching retirement age and he just said, “It's too hard.” If I think back to what really was the straw that broke the camel's back, it was the fact that he was dealing with a series of difficult clients. The other builder is probably the most recent one. Fortunately for him, his wife runs a separate business. He just said, “When I look at the way her life runs compared to mine, I'm going to go and help her run her business rather than do this. It's just too hard.”

Bosco Anthony:

It sounds like a lot of the builders are sharing the same experiences with you as well as, as Sky pointed out. Is it because of the times right now, where builders feel like you have to be that nice person to accommodate everyone or you're going to lose the business to your competitor? I'm just trying to understand a little bit about the characteristics of builders. As business owners, we all wear our nice guy or nice lady hats, as they call them. But it sounds like that also causes the problems.

Sky Stephens:

It's always going to be hard. I don't think you can blame any point in time. It's always hard.

Russ Stephens:

It's always been that way, hasn't it? And I think it's probably got gradually worse over the years. Clients' expectations have increased, which is a good thing really, because we want them to increase, because we want this to be a more professional industry, for sure. But it's nothing to do with recent times. It's always been there. I think we've got plenty of examples of guys that have gone through this three, four or five years ago.

Andy Skarda:

Just to maybe add to their comments, we've got to understand we're not selling a commodity here. When somebody walks into a retail store to buy a new mobile phone, you only need to be nice to them for 11 minutes and they either buy or they leave. I often say to my clients, they need to understand that they're not only building houses, they're also building relationships. 

Andy Skarda:

Often, to build a house, the time that you're involved with a client from the time you first meet them until the time you hand over that finished home is longer than some Kardashian marriages. So, it's important that we understand that what adds another layer to this, is there has to be consistency in that relationship across a much longer period of time than what would happen in, say, a commodity-based customer relationship scenario.

Sky Stephens:

Yeah. You've got to qualify them well. It's twofold. You've got to make sure your marketing and sales process are down pat so you are attracting the right kinds of clients and you are qualifying hard. If you see the red flags in the beginning, remember that you're going to spend at least another 12 to 18 months with them, so you do not want to take them on. You want to make sure the clients are good; but we all know people can change as soon as they sign on the dotted line; there's a lot of money at stake. So, then it's about making sure you can proactively manage these kinds of people, because it's exactly right, like Russ said, expectations are high; and it's worth pointing out, expectations are only going to get higher. 

Sky Stephens:

It's actually only going to get harder. So, you don't want to rely on the fact that you or maybe you have someone on your team who's actually very good with people and it's not been an issue up to this point. You want to make sure that you've got systems, very robust systems and protocols in place. So, as a company, you are managing and setting their expectations well, not just relying on one person.

Russ Stephens:

We always hear, don't we, when you're talking to a builder who's got a particularly tough client it always comes out: “I saw the warning signs. I knew I should never have signed this one up.” So, they always kind of know, they weren't religious enough with their disqualification and for whatever reason they decided to press on. But rarely do you hear from a builder saying it’s a complete surprise. “Yeah, they’re all wonderful … to begin with.”

Sky Stephens:

I think actually it's the other way around. I think we've heard those stories when clients are a bit of a nightmare in the beginning and you can do a very good smack down and set the law and say exactly how things are going to run and then they can turn into the perfect client. But that’s the result of having the right systems and conversations.

Russ Stephens:

Yeah, we've seen that happen a few times and I think you've assisted a few guys with that, Andy, haven't you? Coaching them on how to take a firm grip. I think they've been amazed at how it's transformed the relationship and respect has come in.

Andy Skarda:

Yeah, and they're often quite tentative and nervous to do it in the beginning. It goes back, Bosco, to what you said earlier. We have this drummed into us. ‘The client is always right. The client is always right.’ The comment that Russ made earlier, I think, is a hundred percent valid. The client is often not right when it comes to their building site, but they remain the client. So, it's managing that tension, really.

Russ Stephens:

I think what we've seen as well is that being nice and giving things to the client does not work. That is counterproductive, isn't it? If you try to look after a client by giving them a variation for free or being overly helpful, that just compounds and works against you constantly.

Sky Stephens:

I was literally just about to say that. That's exactly where you were going, Bosco. We all want to be Mr. Nice Guy, but the second you do that, is when it really starts going downhill, because people don't value things for free. People value what they pay for. So, if you start doing all of this extra work, you bend over backwards, you start replying at night and on weekends, that just creates an expectation. It's exactly what Andy said. You're teaching them. We teach people how to treat us as humans, so we encourage what we tolerate, the more we lean into it and do what they're wanting, when it's not necessarily our process. Oh, it can just go downhill.

Russ Stephens:

A builder gives a variation worth a thousand dollars for free, thinking he's going to get a nice referral at the end of it. What's happening in the mind of the client is, “Crikey, how much extra margin did he put on that job? What else should I be getting?” They just want their money's worth and they want more and more. And the builder's thinking, “I just can't do enough for this person. They're never happy.”

Andy Skarda:

Yeah, and Bosco, just to balance this, because I think this is important to anybody listening, we are not suggesting that a builder becomes a tyrant with their client at all. What we're actually saying here is there are absolutely wonderful ways to run this relationship, but you have to decide to do it. It's not going to happen on its own. You're not going to end up in that beautiful, everybody's happy world by just thinking it'll get there. You literally have to lead it from the word go and find the things that work, capture those, turn them into a process and then rinse and repeat, rinse and repeat, rinse and repeat.

Sky Stephens:

Totally. I think that's a really good point. The most successful builders we have, the second that contract is signed and that construction slot is scheduled and they know it's starting, they will have a very formalised, structured client onboarding meeting where they get to lay down this law. But everyone forgets; everyone. So, it needs to be documented. 

Sky Stephens:

What they can do is give out a new client handbook. It's a beautiful little handbook for their new clients, with everything that was covered in that onboarding meeting and everything they need to know. How to communicate, what is and isn't acceptable, what's their responsibility, what is our responsibility. How things are going to work. It's exactly what Andy said, you're not the tyrant, you are being professional. And that's the name of the game, it's trying to make the industry better because we are professional building companies.

Andy Skarda:

I'm thinking about Haven Builders in Canada who turned that into a coffee table book, a hardcover book that literally they gave to every single client who signed a contract with them. It was a beautiful, glossy exposé of how the relationship was going to work over the next, six, eight to 10 or 12 months. 

Andy Skarda:

In my mind, that's the epitome of taking it to that kind of level of professionalism. It reminds me of the saying that some people are sufficiently diplomatic that they can tell you to go to hell in a way that makes you look forward to the process. This is not quite that, but it's building that excitement in people by saying if we stick to these rules, we are going to have a fantastic experience throughout this process.

Sky Stephens:

How exciting would that be? You have a meeting, you've spent all this time designing your dream home; that's exciting. And it gets to the point, it feels like it's dragging on, but then you get to sign the contract. It's finally going to start. You get given a glossy book of what's going to happen. You get details on every upcoming milestone, what it means, what you can expect, what you get to do, and the schedule for all of your site meetings. That would be so exciting for clients. That's how you can just keep it light and happy. But again, set those expectations.

Bosco Anthony:

I have a question for you. You talked about qualifying clients and picking the right clients so that you could teach people how to treat you as well. For builders out there who are starting out, how do they collect this intelligence? How do they get that milestone client so that they are marketing to the right clients? I feel like sometimes we let our guard down and we'll take anything that comes through, because we want to fill our pipeline. But sometimes that can cause a lot of problems. You brought up a really good point that I thought we really want to home in on here. Where does a builder go to qualify the right client? And what type of intelligence are they looking for?

Andy Skarda:

The process we work with, with every one of our members and particularly in the mentoring program, is that this is the front end of what we do. The cascade has got to go from getting all of your marketing correct so that you're attracting the right people with the right mentality, the right amount of money, et cetera, et cetera. 

Andy Skarda:

In terms of you saying, where do they start? Russ mentioned it; they can reverse engineer this from the clients they think back on as their nightmare clients, those guys that in their gut, they knew they shouldn't have taken on. They can work out everything that went wrong and make sure that's not in the clients that they start working with now. You've raised a valid point that I think most builders when they start out will literally take anything that comes across their desk because they want to get going.

Andy Skarda:

But the truth is most of the guys that we work with always wanted to be builders and became business owners almost by mistake. Their first couple of jobs are referrals and they are referrals from people that enjoyed the experience. So, actually there's already a wealth of information available if the builder takes the time just to sit down and ask themselves what made those people right. That's the starting point for them to develop. 

Andy Skarda:

You can go down this rabbit hole for a week. We can take people through an 85 data point breakdown of what that ideal client looks like, but that's unnecessary at the beginning stages. It's literally having it clear in your mind: those people for whom it's worked – what were their characteristics? And then making sure that none of those nightmare characteristics are part of the process.

Sky Stephens:

I think as well, qualifying in itself is a whole other conversation. That's going to take at least an hour for us to break down and chat about. But to add a little bit of salt and pepper for five minutes, it’s that law of supply and demand again, because if you are just trying to take anyone that comes across your desk, that's the biggest mistake. 

Sky Stephens:

You want to be marketing your building company so well, and have such a robust sales process that you can actually manufacture such a large amount of demand for your services so that you can be super picky and qualify each and one of them, because you've got such a limited supply. You know you only want to build 12 or 20 or even four homes a year, but because of all that demand that's coming through, you have way more demand than you're actually going to supply. So, if you can manufacture demand, you will get to be more picky, you will be able to choose your clients. That's something we are really big on.

Russ Stephens:

If a builder was to look back over the last 24 months or so at all the projects they've done and rank them in order of net margin, and then just look at the revenue of the jobs and the net margin on those jobs, they'll probably find that the biggest earning jobs that they've been doing are the most enjoyable. And that will typically help them to identify their niche as well.

Russ Stephens:

It's when you start mixing up builds that it becomes very hard to make a decent net profit across the board. If you've got big, new home custom homes and small renovations for instance, you’ve got to set your building company up in a completely different way to do those operations, which does affect the profitability. So, looking at what you've done, big profits normally mean they're the biggest fun.

Andy Skarda:

The truth is, if you're going to have to take pain, make it worth your while. In other words, the absolute worst place to be in is having a terrible client and no margin. If I'm going to have to have pain, then making it worth my while is part of that process.

Russ Stephens:

That's always when we take on jobs for cash flow, isn't it? We'd rather not have had the cash.

Sky Stephens:

That's the problem; that's the demand and supply. If only you had way more people lining up, you don't make those desperate decisions. It always traces back to that in every client's case.

Andy Skarda:

Yeah.

Bosco Anthony:

We talked about profitability here and a lot of this really leads to a profit or loss. What are some of those pitfalls and traps that cause a lot of problems for builders and they end up either losing out or having a lot of problems that impact their business? Let's get into a little bit of those things that we should be looking out for as builders.

Russ Stephens:

I think builders typically start out with a best case scenario when they're communicating with clients. They're always erring on the best side. That starts right at the beginning, when they're talking about budget. “Well, it's going to be $750,000 to $1,000,000.” The builder’s thinking $1,000,000, the client's thinking $750,000. So, they put themselves on the back foot there. 

Russ Stephens:

If they're talking about a timeline, “Yeah, we should be in the week before Christmas.” In the builder’s mind he's thinking, “Well, as long as it doesn't rain in the next three months, we'll be okay.” They're always erring on the best side, and that really does get them into a lot of trouble. It’s much better to take the pain early on, really. And that is how you manage expectations, isn't it? By being realistic and being honest.

Bosco Anthony:

Yeah. It's interesting you say that too, Russ. I mean, I think builders go in with a lot of optimism, but sometimes that optimistic sort of response can also get you into a lot of trouble as well.

Russ Stephens:

I think they're maybe trying to avoid the difficult conversation early on, aren't they, in a lot of cases? “I think I can get through this conversation without too much flack, if I just err on the side of what they want to hear and I'll take the pain a bit later on.”

Sky Stephens:

I think that's a really interesting point. Everyone's trying to avoid confrontation early and all they're doing is just prolonging it. It's going to become a worse confrontation and you're actually building a worse situation for yourself. So, you have that confrontation, just like we talked about before, by setting those expectations, doing the smack down, if you need to do a smackdown, or just at least laying down the law. That initial confrontation can set you up for a much better project, whereas you don't want the opposite. If you delay it for so long, it just gets worse and worse and a bigger and bigger problem.

Russ Stephens:

Andy has a great saying, doesn't he; we've heard him talking about this a lot lately. ‘Words become things.’ When we're in that conversation with a client and the client might be giving their expectations out, which don't quite align with reality. If we don't address it, words become things and we're on the back foot. So, even though we may never have agreed to what they're verbalising, we have to bring it out and address it.

Andy Skarda:

Yeah. I had a conversation this morning with a client actually, where in the mentoring program, we will go as deep as helping them script the manner in which they explain that scenario. So, we've literally reverse engineered this to the point that we can help them develop the way to tell a client something that makes sure there's no misunderstanding and make sure that the expectation is properly set up.

Sky Stephens:

That reminds me of some training we recently did with all of our members and it was all on negotiation and a book that every member ended up reading. It’s by Chris Voss, ‘Never Split the Difference’, and it's all about negotiation. He's an ex-FBI hostage negotiator, but we're essentially relaying it and interpreting it for builders. 

Sky Stephens:

Builders are negotiating all day long, not only in sales conversations, but in every situation. Something that Chris Voss teaches is bending their reality or being able to shape their reality, because everyone has their own version of events, and I think that's the most dangerous thing. If we can understand everyone has their own reality, then words become worlds, exactly what Andy says all the time, the client has their own perception of what's happening.

Sky Stephens:

They've got their expectations, they've got their perception, they've got their own reality, but the builder also has theirs. You need to be able to fuse the two together, but ensure that it works for your building contract. So, you need to constantly understand their version of reality. It's that ‘seek first to understand then to be understood’, that Stephen Covey teaches. You need to thoroughly understand. 

Sky Stephens:

It's that whole discovery process again, even on onboarding. What is it they're actually expecting? What are their expectations? What do they think is going to happen? Then let us address it. Let's tell them what's going to happen so we can actually shape their reality ourselves. This is a negotiation and we're trying to influence the outcome.

Andy Skarda:

If we go back to what we said earlier about how this starts with your marketing, we quite openly teach that a marketing process or a marketing system needs to do two things simultaneously. It needs to not only be attracting the right people, but it needs to be repelling the wrong people. So, ideally if we bring all of this back together again, part of what we're wanting to do is to make sure that our marketing is that clear, our messaging is that clear that the Richard Craniums of the world aren't even going to phone us. They're literally going to see in the way that we present what we are going to offer, “This is not for me. I can't work with this guy.” That's a far better situation to be in.

Bosco Anthony:

Andy, what you're talking about is that old saying ‘prevention is always better than a cure’.

Andy Skarda:

Sure.

Bosco Anthony:

I'm just curious, with all the coaching and the different types of builders that you deal with on a day-to-day basis, if there are any techniques on how builders can avoid the problem before it even begins, other than the ones that you've talked about? We've talked about that client facing software and communicating expectations as well. But what are some of the techniques that you give out to builders that they can apply in their day-to-day businesses?

Andy Skarda:

Well, it's really developing a process that is repeatable. We talked about systemising the building business to the point that it becomes rinse and repeat. When we find something that works, we optimise that process until it absolutely works for both sides of the equation. Then we do it over and over and over. 

Andy Skarda:

Sky has touched on this already. We want to make sure that across our team and our subcontractors and the clients that we're all singing from the same hymn sheet. That everybody understands exactly the role they play in delivering that final outcome. I think Russ has mentioned in a couple of earlier podcasts that we don't have the red pill or the blue pill, because obviously everybody's business and everybody's situation is slightly different, but the fundamental protocol is to find what works, capture that, systemise it and train it, because that's the reality. We've got to train ourselves, our team, our subcontractors and our clients, and then make sure that the system is constantly and consistently being implemented.

Russ Stephens:

There's a few tactics you can use when you are talking to prospects and clients as well that can really make a huge difference in getting you to the outcome that you want. One of the techniques is anchoring, which is bending your client's reality by simply anchoring their starting point. What I mean by that is before you talk about anything, you emotionally anchor them by saying how bad it's going to be. 

Russ Stephens:

So, in the case of numbers, you might be talking about a variation. You don't touch on the lighter side; you might go the extreme worst. Then when you talk about this variation and what cost you could get it down to, that then sounds a lot more reasonable. When you're talking to a prospect, maybe, in terms of what the budget might be, by using ranges, it sounds more reasonable and less aggressive than going in with a big number.

Russ Stephens:

The real value of anything just depends on the vantage point that you're looking at it from. It's all about perspective. I know a lot of people might think, “Well, that's really simple. I wouldn't fall for that. That is way too obvious,” but we all do. It's the way we are built, and it's why we see this technique being used in plain sight all around us. Just have a look when you are looking at any adverts or going shopping, we're seeing anchoring being used on us all the time.

Bosco Anthony:

This is a question that I'm always curious to ask, because you have builders from different parts of the world. Do they all have some of the same problems when it comes to client expectations? What are some of those key teachings and learnings that you have attained in working with builders from all over the world? I'm just curious if it's the same answer, or if it's different perspectives at different parts of the world.

Andy Skarda:

It's a great question. The fundamentals would be the same. There's certainly nuance depending on the cultural implications of where the builder is and where the client is. So, even in North America, for example, where we work with people across the entire country, the way you do things in the south is different to the way that you do things in California, just because of your clients. 

Andy Skarda:

But again, we're back to what we said earlier, it's understanding that this is largely an exercise in communication. If we are clear on what our ideal client looks like, we go into the psychographic side of their world as much as the demographic side of the world. So, what are their interests? What are their hobbies? What sort of education do they have? Those kinds of things will then inform the way in which we communicate with them and the kind of nuance that comes into that.

Russ Stephens:

One thing I've seen work particularly well when dealing with clients as they progress through a project is a technique of getting them to know. What this involves is again maybe an extreme anchor, or you could even call it a label. We've seen recently, haven't we, that COVID is pushing the prices of supply up and those allowances have gone up tremendously. 

Russ Stephens:

Of course, the finger gets pointed at the builder. He's the one to blame. It's not the suppliers, it's the builder's fault, but he has to deliver that very difficult message in conversation to the client. So, by getting them to know, can help the builder move the conversation forward. An example of that might be, “You’re going to think that I'm just out here ripping you off and I'm making an absolute fortune out of this build.”

Russ Stephens:

The more extreme you go, the more likely the client is to come to your aid and say, “No, I don't think that at all. That's ridiculous.” Because when we verbalise these things, they do sound crazy. So, once we've got the client to know, what we've actually done there is put them in a position, maybe not so much of power, but they feel comfortable. They feel like they're being heard. Once you've got them to know, now you can move the conversation forward. So, that's a very important technique that's worked well for a lot of builders we work with.

Bosco Anthony:

It's interesting, because a lot of these techniques can be applied in different parts of the world and you can get that same narrative as well, which I think is really a blessing in disguise. So, I think Russ, you bring up a really good point that these are little things, and that it is about taking on the conversation and having it ahead of time before it gets even further escalated. So, I think it's a really good insight.

Russ Stephens:

I was tempted to jump in and say, “Yes, it is different in every country, and that's why we have a different portal for every country around the world, because it's all different.” But that's simply not the case. We like to think we're different in our particular city or state or country, but fundamentally the problems that builders are faced with are the same across the world. And the way we deal with those problems is very, very similar as well.

Bosco Anthony:

Looking forward, how does this get better for builders? What is the vision for builders and what do they need to do to become even more accountable and responsible for managing client expectations?

Andy Skarda:

I think the first word that you've just used there that is important is ‘accountable’. The builder needs to understand that he is the authority in the process and as the authority, he needs to step into that leadership role and determine the process that's going to work best for everybody. 

Andy Skarda:

It's being on that front foot Sky mentioned earlier; we can either be reactive or we can be proactive. We need to be proactive. We need to literally do what Russ said. Look back over the last 24 months, look at the jobs that worked, analyse what made them work, convert that into a process and then step into that process as the authority, as the leader in the relationship.

Bosco Anthony:

We're at that time where I'm going to ask you guys for some final words of wisdom. I'm just curious, we'll start off with Sky, any final thoughts and words of wisdom for the builders out there listening in?

Sky Stephens:

I think just to summarise the whole conversation, client expectations are high. They're only going to get higher. If it's hard now, it's only going to get harder. If you're great at it now, it is only going to get harder. So, the bottom line of it is, it is 100% our responsibility. We made the decision to take on those clients. So, whether that was the right or wrong decision at the start, now we need to keep going with the decision. Keep going with the decision we have made. 

Sky Stephens:

It's 100% our responsibility, so we need to take responsibility, be accountable to it, exactly like Andy said, and ensure that we're not relying on a couple of good people in the team. This is a completely systemised approach for how we don't just meet our client's expectations, we exceed them. We deliver such an amazing experience with our building company. I think step number one is taking that responsibility, owning it and then making that process and going forward.

Bosco Anthony:

Russ, any final words on your answer?

Russ Stephens:

Yeah. Act as a professional. We never want to hear a builder say to us, “I'm just a builder.” No, you're not just a builder. You are a professional service provider. So, act as a professional. Be a leader and dictate the path.

Bosco Anthony:

Andy?

Andy Skarda:

What they said.

Bosco Anthony:

Well, it sounds like we all have a learning experience for managing expectations and we'd love to hear our listeners’ learning expectations as well. I want to thank everyone for your time. I’m really, really appreciative of all of your insights. I feel this is a very insightful interview and thank you so much for your thoughts.

Sky Stephens:

Thanks, Bosco.

Andy Skarda:

Thanks, Bosco. Bye.

Russ Stephens:

Great chatting.