RDB MAGAZINE ARTICLE - "Order from Chaos"

Please see below an article on one of our preferred builders, Scott Jerald. This article was featured in RDB Magazine and written by Rob Heselbarth. All credits go to RDB Magazine and Rob Heselbarth.
Order from Chaos
Like many custom builders a few years ago, Scott Jerald was struggling to keep his business, ASJ Development (asjdevelopment.com), afloat. He searched for leads while finding ways to meet payroll each month. In October 2008, business slowed dramatically and three cancelations came within one month’s time. Layoffs soon followed, including the release of Jerald’s colleague who moved from out of state to work with Jerald in Georgia. The staff shrank from five to one.
As a builder averaging three to five homes a year, three cancelations was devastating to Jerald’s business; it was time for action. The military veteran recalled his Ranger days and thought, “A soldier always has a plan, a good soldier has a plan B and a great soldier has plan C,” he says. “So I started developing my course of action. I needed to retool my business.”
Jerald looked at his customer base and realized many of them were entrepreneurs — business owners — so he created an advisory board and asked a few of them to become members. “They told me I needed to invest in software, my processes, and logistical systems and combine them if possible,” he recalls.
Execute solutions
The solution to Jerald’s problem involved many sub-solutions, so he drew up plans for executing them. He invested in his business as suggested by his new advisers, beginning with accounting software, which he realized was not designed for a home builder.
“I looked at the ease of use, what my accounting costs were, and the fact that at year-end I still had to hire someone to go through my books to get them right. It was inefficient.
I put my criteria together and did a search.
A big item on my wish list was the ability for my accountant to spend no more than one hour to do my tax return. We ended up buying new software that accomplished it,” Jerald says.
The local university provided a critical part of the solution to Jerald’s accounting problems — an intern. He asked for a student chasing a CPA or master’s in finance degree. In exchange, he allowed professors to use his company information as material for a class project. “Now I have a bookkeeper who tries harder and comes to the table with no preconceived concept of how accounting software works. This way, the software is used how it’s supposed to be used,” he explains.
For other staff positions, Jerald took a line-item approach to putting people in place. For example, his quality control manager is a former client who retired from corporate America and needed something to do. As a line item on the budget, the part-time quality control manager ensures subcontractors adhere to agreed-upon performance standards. “He came in without much construction experience, which is good because he goes by the book and you can’t get anything by him,” Jerald notes.
The project manager is a former full-time employee who Jerald converted to a per-project line-item employee. Jerald even helped him establish his own business. He says, “This does a few things for me. It gives me arm’s length should there be an immigration issue. It also meets our IRS standards.”
Systemize everything
Most builders think they have a process, but not like the one Jerald established, which brought legitimacy to what he had been doing, he says. After seeing a presentation by Nate Schoen of Custom Builder Management Solutions (cbmssystems.com), Jerald was convinced he needed to implement the CBMS system full-bore. It improved his profits and increased his sales effectiveness.
“Most of my competition builds 3,000- to 5,000-sq.-ft. homes in eight to 10 months. With my new processes, I tell clients that if they go through my process, including how we make selections, I can guarantee delivery two months ahead of schedule from a construction standpoint,” he says. “I tell clients if the project cost is $800,000, take a look at the last two months of construction interest; I can save you that much money or I’ll pay it for you. A lot of that success comes from providing clients an initial questionnaire. And if the plans are in the design phase or they already have a set of plans, we go through each line, spec it out and put it in the contract,” Jerald explains.
Selection at Jerald’s company is an online process in which the client can drive the bus. Clients can ask a question about products, and vendors can upload information to the site where the client sees it automatically.
Schoen explains: “The homes [Jerald] built were complicated and the homeowners were often overwhelmed in the decision-making process. Even with the best set of construction drawings, there is obviously a ton of options and changes during construction. [Jerald] really didn’t have a way of tracking any of it. As a result, he and his staff were spending a lot of hours simply trying to track down decisions, quotes and other paperwork. Most businesses assume this chaos is just the way the building business is, but [Jerald] knew from his time in the Army that even amidst chaos, some sort of organizational structure and standard operating procedure could and should be implemented.”
The homeowner manual was the most effective tool CBMS provided, Schoen says. The goal of this tool is to provide a job description to the homeowner. In addition, it was intended to make sure ASJ Development’s SOP was clearly defined and in black and white for everyone to follow. “Our homeowner manual outlines the various meetings we would have, what homework was due at those meetings, and what the agenda was for those meetings and walk-thrus. We also made sure [Jerald’s] subcontractors understood the process we created for ASJ and would follow those rules if they wanted to work with ASJ,” Schoen says.
CBMS devised a decision-making schedule that allows homeowners to focus on choices one at a time before moving on to the next selection. By getting the homeowner organized, the entire operation became more efficient, Schoen notes.
Get it online
Web-based residential construction software for selections, scheduling and client communication, Co-Construct (coconstruct.com) is another system Jerald incorporated. “It makes me two hours more efficient in a day,” he insists. “It keeps things centralized in one location and avoids numerous e-mails and back-and-forth between me, subs and clients. Every action is logged and categorized in one spot. Vendors like it because, for example, my hardwood floor lady runs monthly specials and sometimes has leftovers. She can load that information and the client can see it and get access to a vendor early on, and have direct communication with them. It saves me time. I can still quarterback it and take control, however,” he says.
Co-Construct’s clients have been running successful businesses for a decade or more before implementing the software, but much of the operational detail is still in their heads, says Donny Wyatt, founder of Co-Construct. “Getting builders to document their clients’ selections can be a bigger task than they realize, since they never think about just how many details are between their ears and not on paper. Once they have it in the system, it’s obvious why it’s so easy to forget a detail out of what can be 100-plus decisions.”
The Co-Construct system works first through training videos to get started. For 80 percent of clients, the implementation steps work. For the other 20 percent who have different time constraints, different business models or some other extenuating circumstance, Co-Construct helps them create a different game plan. Wyatt then checks in on his customers as they get rolling to catch any little issues before they balloon.
Supporting clients is an open door to field questions from those who might need help. Weekly group webinars are held, Wyatt says, during which best practices are shared and questions are answered. “We help with everything from how to deal with vendor quotes on selections to larger issues about what level of detail to use on a schedule. Ultimately our clients walk away with their questions answered and more ideas to help them run their businesses better,” he adds.
“WITH my new processes, I tell clients that if they go through my process, including how we make selections, I can guarantee delivery two months ahead of schedule from a construction standpoint.” Scott Jerald, ASJ Development
The result of this restructuring and system implementation is record performance for Jerald in 2010. Margins are better and Jerald’s pricing is less than his competition without sacrificing quality. “In fact it has become better. You only have one chance to lose your word, and that’s it, and we’re constantly getting better from a quality standpoint,” Jerald says. “We have five homes under construction and one about ready to start, and four plans getting ready for 2011.”
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