Working With Designers
Building or remodeling homes are big projects that require a collaborative effort between homeowners, architects, designers, and builders. Effective collaboration requires open communication between each stakeholder so they can do what they "do best" to ensure a successful overall outcome.
But sometimes, those lines become blurred. It's not uncommon for a designer or architect to get involved in the budgeting conversation with homeowners during the "getting to know you" phase. It's good for them to be involved in this part, but very often, when the builder gets involved at that early stage, the results are much better for all stakeholders.
This is because architects and designers hold a very important position in the project success team in terms of design work - but often not from a budgeting perspective. This is where the builder offers the most value to the project's success.
The ultimate goal is to align the client's vision for each particular project into a tangible form that meets their level of financial investment.
Designers Help Craft the Vision
Designers are really good at getting people to spend money. I've always said this, and it's important to recognize that homeowners rely on a design professional's ability to pull everything together so it looks exactly how they imagined by the end of the project. That's because their part of the project focuses on all the pretty things that people see inside the house. So, they can be extremely beneficial in helping you get a client on board with the project's estimated total cost.
But when it comes to building a complete and accurate estimate, there's a lot that designers don't factor into the equation, leaving a client "price anchored" to an unrealistic build cost for their project if they present to them before the builder is involved. This sets a poor alignment for the client, and the builder often ends up being the bad guy when reality sets in about what their project will actually cost.
This is because a designer creates an estimate for a remodeling project based on the materials they need to purchase, typically referred to as the "Furniture, Fixtures, and Equipment" (FF&E), but they don't factor in the base building work to prepare the project for the installation of the FF&E.
Not including those crucial base building costs upfront in the first estimate review with a client can lead to a breakdown of trust, which doesn't benefit any of the project stakeholders. The designer then feels the pressure to competitively bid the project with the client, often looking at the bottom line of a builder's construction costs, markup, and project management fees for the construction phase. This creates the wrong type of analysis when the real focus should be on the overall scope of work and how this drives the project's cost.
FF&E Is Only Part Of The Estimating Process
Design partners should provide allowances for FF&E based on the design plan and intent. This is what they do best, and it's a part of the process that most general contractors don't want to be involved in.
But even with a designer taking the lead on this part of the process, remodelers should collaborate with them to ensure that all the selections and specifications are reviewed alongside the client's intended financial investment BEFORE the information is presented to the client for the first time This is how you avoid setting a poor price anchor.
Disconnected Partners Means Frustrated Clients
When there's a disconnect between the FF&E cost estimates the designer presents to a client and the total estimate the builder produces for construction projects, it strains the relationship early on and leaves the client doubting who to believe.
Clients don't see the behind-the-scenes construction contractors do to prepare for installing the pretty things. Not seeing it means it doesn't register as "real" to clients—unlike flooring, cabinets, mirrors, or wall sconces that they chose and will look at and interact with every day.
So if a designer tells the client the project costs X and then the builder comes back with a price of Y, which includes the base building costs the designer didn't account for, clients will often push back on the builder to reduce their price for building materials, overhead costs, site super hours, labor costs and other base building costs they don't understand are necessary. What they tend not to do is to scale back on the FF&E items because that's the stuff they want, not insulation, site protection, and miscellaneous labor that seem unnecessary to them.
Integrated Project Delivery
So, how do you get ahead of this problem early enough to ensure your estimate doesn't end up in a three-way tug-of-war? You start by building a solid working relationship in your construction business with all your professional partners before the project begins and focusing on finding ways to collaborate during the design phase and construction process, making the project outcome the ultimate goal. This is otherwise known in the commercial, institutional, and public sectors as Integrated Project Delivery (IPD).
I recorded a webinar on this topic during the pandemic a few years ago, and it's linked right here for you. I recommend watching it at 1.5x speed!
Find Common Ground
One of the first things to do is establish the project's overarching goal: achieving the client's dream. Make sure you and the design team are aligned and working together to ensure you can deliver the best outcome possible for the homeowners based on their available investment level. This involves checking your ego at the door, and it's critical for this IPD approach to work.
Discuss Pricing Models
One key issue for builders when working with interior designers is when the designer wants to procure materials or control trade partners in the process. This approach is difficult for construction companies because it removes the builder's ability to control all moving pieces in the project and ultimately creates confusion about liability, delays, and added costs.
Designers usually do this not because they lack trust in the builder to manage the procurement process but mainly because they want to add revenue to their interior design firm. Like you, designers receive discounts from vendors for things like tiles, plumbing, electrical fixtures, etc. A way to increase a designer's bottom line is to procure these materials and keep the discounts by billing their clients at retail pricing.
In addition to this, designers might also have agreements with trade partners, such as millwork companies, that provide them with a financial incentive for using them. I'm not here to debate the ethics of this approach but merely to call out that this is often a motivation for a designer to want to control a specific trade, such as the millworker.
Having open conversations with them about why they feel they need to control parts of the job that might not relate to them, like ordering and controlling millwork, and explaining what happens if they do is an important step in ensuring we're all rowing in the same direction.
One way to avoid this scenario is to have frank discussions about pricing structures and see if you can find some symbiotic relationships. Perhaps you give the designer 1% of your markup in return for controlling all of the project's components. This ensures the best possible outcome for the client, gives you control over the schedule, allows you to warranty everything, reduces finger-pointing downstream, and helps the designer manage their revenue streams.
Set Appropriate Boundaries
This is a delicate conversation, especially when the client-designer relationship already existed before you were brought on to the project.
It's not uncommon for designers to feel like it's "their" project, and we want to show that we respect and appreciate their contributions and their design process. However, from an overall perspective, the design portion isn't nearly as big as the building process—but it certainly can't be done without them.
For example, the other day, I walked by a jobsite that had a skid of tile sitting at the curb after being delivered by the tile vendor. As general contractors, we know this is how tile gets delivered to the site. When we include the tile cost in our estimate, we also include labor to haul the thousands of pounds of tile into the house, distributed among the various areas where it will be installed.
If a designer carries the cost and invoices their client, who is responsible for receiving the shipment, inspecting it to ensure there are no broken boxes, loading it into the house, and dealing with any issues found in the process?
There are so many components of a residential construction project that need to be managed, and this is where you, as a general contractor, have the most experience based on all your past projects. I've always said that many builders lose money in the "in-between jobs," such as the tile example above, because it's not the tile installer's job to carry in the tile from the road nor distribute it among the floors of the house where it is to be installed.
So, when faced with this dilemma with a designer, it's important to tactfully call out that you need to control the entire process, which is not that dissimilar to managing the client relationship. Explain to them why you need to facilitate the overall schedule, material purchasing, and hiring of trade partners. For more on that, click here.
Collaborate on Creating Project Estimates
One of the easiest ways to fracture client trust is to present a divided front between yourself and the other professional partners attached to the project. If a designer presents a budget to the clients that only includes the FF&E parts but doesn't include the base building and management components, it's guaranteed to create tension and distrust and force you into a position where you're asked to lower your costs.
Take this opportunity to review the designer's estimate and ask what they would like you to carry as allowances for the FF&E items within the construction estimate you present to the client. This shows a united approach and ensures the designer's vision is respected.
Amalgamate your construction estimate with the designer's feedback and then review it with the designer before it is shown to the client. This way, you can show the designer how you took their numbers and added the base building elements based on your trades' input so they better understand the entire picture, not just their portion.
The Bottom Line on Working with Designers' Estimates
Designers are an integral part of any residential construction project. They offer design services to help homeowners realize their remodeling or new home-building vision and ensure that the parts they see are beautiful and exciting.
As a remodeling contractor, it's your job to help them see how their work fits into the bigger puzzle. That's why fostering a collaborative relationship is important to ensure everyone is working towards a common goal: a successful client outcome.
You can do this successfully by sharing:
How you create your estimates using your construction estimating software
Where their components fit into the overall picture
Insight into how you need them to provide their information to you
Why collaboration is key to ensuring a successful client outcome
It's important to remember that none of this will happen in one meeting but that you're curating a relationship without dismissing their work. Being tactful, not overtaking the situation, and acknowledging that this is a fine balancing act is critical because you do need to be in control of the project, but you don't want to be overbearing because if it does become adversarial, they won't want to bring you into the next project.
Mastering partner relationships starts with fully understanding how to manage the estimating process. I created the BUILD AND PROFIT SYSTEM to teach construction industry professionals how to properly estimate their work so they can avoid cost overruns and be profitable on every project.
If you're struggling with estimating projects accurately, click the button below to join the BUILD AND PROFIT SYSTEM now.
