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Contractor Cuts
The Hidden Reason Contractors Lose Money on Every Job (Part 1)
Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.
You finish the job, look at the numbers, and somehow you're $3,000 short of where you thought you'd be. Again.
That's scope creep — and it's the biggest hole in most contractors' buckets. In part 1 of this two-part series, Clark and James break down why it keeps happening, the four different ways it sneaks in, and why "I'll just eat it" is quietly killing your margins, your timelines, and your relationships with your crews.
They cover:
- The "while you're here" trap that turns into hundreds of unbilled hours
- Why fear of conflict trains your clients to expect freebies
- The four types of scope creep — and why most contractors don't even see them happening
- The assumption game between you and the client that always costs you money
- Why gray-area scope language is your biggest enemy on every estimate
- How client-driven creep builds resentment that explodes mid-project
- The real triple cost of every freebie — money, timeline, and your subs
- The one habit you can start using today to flip the dynamic completely
If you've ever ended a job feeling like you got nickel-and-dimed by your own scope, this is the episode that opens your eyes.
Part 2 drops next week — full systems, CEA language, change order culture, and the bank line item that protects every dollar.
If you're doing $350K–$2M a year in revenue, coaching pays for itself. A 5% efficiency gain alone covers the cost — and that's before we even talk about growth.
We help contractors stop losing money on crews, change orders, and inefficient operations — and start scaling.
Ready to have the conversation? Set up a free call at contractorcuts.com
Contractor Cuts is a weekly podcast for contractors who want to build a better business — covering sales, operations, hiring, finances, and everything in between.
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Welcome And Why Scope Creep Matters
Welcome to Contractor Cuts, where we cover the good, the bad, and the ugly of growing a successful contracting company. Welcome to Contractor Cuts. My name is Clark Turner. And I'm James McConnell. Thanks for joining us this week. So today we are starting a first of two-part series on scope creep. It sounds like a minor topic, but I think it's one of the biggest things where guys have the largest hole in the bucket where uh it's just money falling out constantly. Yeah, creepy scopes. Creepy, creepy scopes. So today we're gonna start why it keeps happening. We're kind of really define the issues with scope creep and where your dollars are going and why at the end of the job you have less money than you thought you would. Um, and then next week we're gonna go a deep dive into kind of systems and processes built around protecting from scope creep. We're gonna cover some of that at the end of this as well, of some things you need to start doing today uh to start uh working towards avoiding this and really patching that hole in the bucket to where the dollars um get more efficient and uh we we stop losing cash. Uh so getting going, uh really the big opening question is at what point does it stop being a customer service issue and start being theft of your margins, right? Everything with with scope creep and to define scope creep for newer contractors is the scope just gets bigger and bigger and bigger, and I'm getting paid less and less and less, and my profitability is one percentage point at a time, just dropping, dropping, dropping. Because the natural tendency is to either do those things at a diminished value or sometimes for free. Yep. Well, and there's and there's two big reasons that you that that people do it. One, I just want to get out of here. I want to get this done. Let's keep going. The guys are there, yep, get that finished, and you don't even think about the extra dollars and time, and it's just an extra day or it's a half a day, it's a couple hours of this. And so you're just, you know, head down. My job is to get this project done. The second reason is customer service. I really care about this client giving me a five-star review. You know, they've been kind of a pain, and she seems like she's gonna complain about no matter what. So I don't even want to deal with that. And I just want to, you know, hide that under customer service when when in reality to your lack of processes and what we're gonna talk about today in the next week as to why it's happening to you. Um, number one, the psychology of what uh of of how this happens and why it happens. I think the first part of the reasons we're doing this is it's the while while you're here trap. It feels small in the moment, and it's like the client you hear we've all heard the client say it. While you're here, would you mind also X? Could you just
The While You're Here Trap
Y? Have you thought about Z? Z. Yeah. So the It doesn't seem like it would be that big of a deal to Delta, Delta, Gamma. Uh so the while you're here trap is one of the big ones that we've all been caught in. Um, because it's five minutes extra here. Can you throw a door handle on on this door and get that switch out? I'm not gonna charge them 20 bucks to do that. I'm just gonna do it while I'm here. But then it turns into three things and four things, and the the line of demarcation between what I'm getting paid for and what I'm doing starts separating the difference of those. And it feels like, I mean, I really I feel like one that happens pretty often for whatever reason is like, oh, you get done with the project and they're like, oh, sorry. Um, oh, we don't have any blinds on the scope. Could could we just I got the blinds here, they're in this room. Could you just hang them? Yeah. Great. And you end up hanging four sets of blind, and you ask your crew the same way the client's asking you. You don't put a work order together. And then at the end of the project, you get another bill for from your guy for $125, $200, hanging blinds. And like there's a laundry list of those types of things. And because you don't have it on the scope and the client asks you in the moment, you ask the crew in the moment, no one's actually talking about dollars. There's no work orders associated with it. Yeah. But then you get hit at the end and you're like, yeah, I should pay them for that. But now you can't really charge the client for it because you already paid. Remember three months ago when you asked me to do Yeah. Yeah. Uh I think I think that's a huge one. I think the part of that too is we're wired to solve problems. Uh, you know, someone asks you, you say yes. Asking for money later doesn't work, like like James was just saying. It's a I don't know how many times I I've been in coaching and I'm looking over scopes, looking over jobs where, you know, on our executive level, I'm tracking profitability on every single on a lot of jobs, kind of treating them as a project manager to train to turn their company and hire a project manager. So we always start by me training them, like I'm the general manager on our executive level. And when I'm doing that, when we're looking at it, I'm like, why is this drop? What happened to the profit since last week? Uh and it's usually a, oh, you know, I was, I didn't even think about it. I was just trying to get this done. I was just trying to get the kitchen was almost done. It needed to be clean. I just sent a cleaner out there. I didn't realize we didn't have that on the scope. Um, they're not working out of the software, they're not working off of the scope, they're working out of their brain of getting the job done. And so that's how we start companies, right? That's how guys get to where they're going. Uh, is I'm I can run fast and do it from my brain. But systemizing it to where there's a software we're working out of, a scope that we live on. And I've I say to get people coming into uh coaching, one of the biggest issues, and we say this to project managers, is I want you to start in the software and work out from there, not use the software as a filing cabinet that I come and update after the job's done or after I'm doing things, right? It's it's not something that I go do the job, then I come back and sit down and look at the software and say, okay, uh, let's update this and tell the client what's going on. Instead, I want to start in the software, look at the job, what has to happen. I need to order that dumpster. Oh, there's not a dumpster on here. Oh, shoot, I need to talk to that about the client with that. Hey, what are we doing about trash? We never really solved that. Uh, are we doing a dumpster? Are you hauling off your own stuff? What do you want to? I'm sorry I didn't make it on the quote. And I can have that conversation on the front end and the client's like, oh, shoot, okay, that's fine. Yeah, just I guess dumpster is fine if that's yeah, right. And so that conversation at that point, easy to have. They might not love it, but it's justifiable because it's not on here and I haven't spent the money yet. Yeah. I think there's certain, there's certain change orders that are gray and it's clear that they're gray once it's like brought to the table. Yeah. And then there's some of them that are like, you need to come hat in hand to the client and be like, don't uh, what's the word? Don't gaslight them. Yeah. I I felt gaslit by how you approach that fake scenario. Like, so are you carrying away the trash? Like, I we gonna burn the backyard. We need a burn permit. We're just gonna burn it all. I'm not charger for that permit though. Yeah, like you definitely should have had a dumpster on there. Yep. Go to them, say, hey, own it, made a mistake. There is no dumpster on here, like we talked about. Everything that is on here is budgeted for. If it's not on here, it's not budgeted for. We need another
Fear Of Conflict And Freebies
$500 for a dumpster. Yeah. So sorry. Yep. That's that's good. I I the next uh psychology of why this happens that we got down here is fear of conflict as well as self-doubt. It's it's crazy when you know, uh I've coached 50, 60 different companies, and when you get down to it, a lot of people just don't have self-confidence. They don't believe that they they can write a scope well, they I don't know what I'm doing. This client almost knows more than I do about this. Or, you know, and the truth of it is the client was on Chat GPT last night and learned a deep dive into you know how to lace in hardwoods better. And all of a sudden I feel like a chump not knowing what they know. Uh, or you just fear the conflict, right? Like I just don't want to, this isn't worth the fight. Well, it you're right. So you're paying a thousand bucks to not have one conflict of a conversation. Uh so I think that's that's one of the reasons we see it happen. Uh, and the problem too is that it starts a pattern. The first freebie is great, but we're training clients that I realize I'm wrong and I'm gonna pay for it. Uh, or I realize something wasn't part of this and I'm gonna pay for it. Um, and so the issue with those, uh all of these, but especially that one, is when you start the pattern, it's an expectation set. Yeah. And so when I start saying, hey, you know what, I'm just gonna do this for free, I got you, or not even saying that, but just doing it, even though it wasn't on the scope, the client's like, yeah, okay. So subconsciously, James sitting in front of me realizes that the the unset agreement is when he wrote in uh, you know, a new bathroom, I don't care what's on the scope, he's giving me a whole new bathroom for this price. Right. It's like, well, no, just because I quoted a new bathroom and I left the hardware off, or I didn't add replace toilet on here, doesn't mean I'm doing everything for free. But they're assuming you are because they didn't read the scope, they didn't go through it. We talked about it. We want a whole new bathroom, facelift on the bathroom. You said you're doing that. I signed off on your quote for 30 grand. I'm not paying a change order for that. Right. And so there's that pattern of like, he already replaced the toilet. So it all obviously the hardware that needs to go in, the glass door, the mirror, all that's in that should be included, just like the toilet. Yeah. Right. And so it goes from a $500, that's fine, I can eat this, to now I'm, you know, $2,500 in of stuff that we're arguing about because they subconsciously now believe from what I my first actions that I'm gonna cover everything. Yeah.
Four Types Of Scope Creep
So there we're we're really gonna define this down into four types of scope creep. And we're deep diving into this because we've covered scope creep before and how to protect yourself. And it's been kind of a real- And you guys just don't get it. You can't freaking get it into your brains. No, uh it's it's something that comes up, and and this is something that I've had people ask me about over and over again of how to protect themselves from this. Again, this is part of our systems and process that we give in coaching uh of how to protect yourself from this. So these are the four types of scope creep that we see. Number one, we were just saying good intentions. You absorb it to keep the peace, and now it's a habit. I got good intentions. I'm just trying to help. Uh, you know, I want the client to be happy with me. And then all of a sudden, now it's a habit. And the worst part of this, and this is something I've we've talked about in in person, uh, me and you in running jobs, is we can't have expectations that since I did blank for the client, that they owe me now. Right. And that's that's something that we always get in our heads of like, I did that for free, and I did that for free, and I did that for free. And so on my side of the table, I'm like, I did all this stuff for free. Why are you complaining about that? You like you're so unappreciative. Yeah. And on their side of the table, they're like, he did exactly what I've paid him for. We're even. I owe him nothing, and he needs to go back and fix this because I paid him X and he did Y. Yeah. And so that's what we're doing. And so there's this conflict of expectations that happen with good intentions. I'm just trying to do it. I'm gonna make them happy, I'm gonna do this stuff. And on the flip side of it that we don't see, the client says, Yeah, this is I'm I I come a $30,000 check. He's paying this guy a lot of money. Better do that. Yeah. Right. And so that the good intentions end up making everything worse. Yeah. And then you have these resentments that are building. It's like, you know, any relationship that has bad communication. There's all these hidden resentments, these little paper cuts that you're just like, yeah, I did all of this stuff and I'm not getting any credit for it. And not only that, you're not getting credit for it, and the client sees it as your failings. So you're owning it. They're happy with that, but they see it as your failings. Yes. Yes, not as their responsibility to pay for what they're receiving on the house that you're you're doing. Number two, the second you know, the first one's good intention. Second one is assumption driven. They assume it was included, you assume it wasn't, right? We have two sets of assumptions. James uh thinks, yeah, I mean, when when on the scope you wrote um frame out new bedroom in in uh upstairs space. I didn't, I forgot to put in a uh, or I didn't think you wanted a closet. I thought it wasn't actually gonna be a bedroom. We're gonna put like some sort of a wardrobe in there. You assumed, yeah, it needs a closet for a bedroom. I assume that you're putting a uh closet in there. Uh, and so I this assumption that I'm assuming one thing, you're assuming something else, is one of the one of the biggest problems. I think that's assumptions in the next one are the two biggest, but uh having an assumption-driven uh conflict where we have opposite ends that we're assuming is where a month down the road I'm thinking that I'm getting paid for something. You think it was included in what we talked about, and all of a sudden this change order hits tile brick pattern versus herringbone. Yes. We didn't write in, we had our our standard line item that is just what it is, and it's not herringbone. It's brick pattern, blah, blah, blah, blah. That's the template. And the client had the conversation with you at the beginning about how they liked herringbone. They assumed that you would have changed that on the scope. They saw the tile on the scope, they didn't read any further. They say, Yep, that's there. And then you get to where you're actually laying it out and they say, Hey, big problem. There's you installed the tile wrong. Well, in the scope, it says brick pattern. Yeah, but we talked about it. We knew I we don't you remember. Yeah, I remember a Friday afternoon. I do, yes, you're right. We did talk about it, but it wasn't on the scope. And when we reviewed the scope together, we talked through the tile. You never mentioned anything. So that's why it is currently brick. And you know what? I don't know the difference of brick versus you though, because you requested something different. So that's assumption driven. The third one, which is similar but different, is gray area, uh, unclear scope language on the estimate. When it's um paint the house, where we talked about the main area and I didn't realize they had a basement. And I wrote paint the house, paint the interior of the house, full interior paint. And for me, it was in all the areas we were already renovating on the main level, and I didn't even think about your basement. For you, or it's like great, I wanted the basement painted, it's a full interior, and so it's it's this unclear language, or or even you're very uh similar, but full interior paint, and you even put the square footage. Yeah. And so it says full interior paint, but then your square footage doesn't include the basements. No, it's very gray because you both have a point. Yep. What happens? What happens? Yeah, or you know, something breaks while you're working on it. Um, is that you know, the uh what or let me go back from breaks. Something of like with uh flooring. Um, you know, I'm a or uh let's go back to paint. That's the best thing. Let's go back to paint. Let's go back to paint. So when I put in there paint walls uh in living room, well, it's already a white, I've budgeted for one and a half coats to keep it white, and they come in and they're like, actually, we want it purple. And it's like a dark purple. Well, that's gonna be three plus coats for me to get it that dark of a deep of a color on these white walls. And so for them, I never specified this is one and a half coats, this is the paint it white. I didn't specify on on that the paint job is for one and a half coats to where we're keeping the color. For them, they want a color change, which I need to charge extra for, but it doesn't say that anywhere in the scope. It's true. I did say paint the walls, and this is the color they picked, and we just went ahead and did it. And now my painters are like, Clark, I can't, I'm halfway through this, and there's no way I can finish this for how much you're paying me. This is insane. And so that those gray areas where we haven't defined it on the scope really are are the spots where we get stuck in the middle between the client not willing to pay and the crew not willing to do it unless they get paid. So we have to eat that. And I think a lot of guys struggle with um specificity in their scope, not just because it's hard to put all of the details in there, yeah, but also you don't want to get nickel and dimed by the client. And so some people, their process is to be more ambiguous about the scope because they don't want to get nickel and dimed throughout the estimation process. But the details never make it into the scope. So if that's kind of your if that's your process, like your sales process, where I don't want to get nickel and dimed, I don't want them to take my scope and chop it out to every person that's bidding on this because that's my legwork, that's my brain. I don't want people getting a chance to bid me apples to apples. At some point, the detail needs to be in there. Yeah. At some point, the client needs to see a very explicit, detail-oriented, this is exactly what's happening because of these ambiguous things, because of these gray area type deals. Yeah, the only way to protect yourself is to be super detailed. And along with that, I think the the truth, the reality, if we were, if we were real with ourselves on let's do it, on what you just said, is we write a scope and it's pretty broad because I've got five scopes to write, and I got an hour and a half before I gotta be at dinner with my wife. And so I'm just buzzing through five different scopes, knowing I'm not gonna land most of these. Um, so I bid five different projects in one afternoon. The scope is very, very broad, just so I can get it out there. They say, let's go, let's do it. And I don't take the time to go back and revise it. I just, okay, cool, they're ready to go. Let's on to the next like it's a time management issue and it's a detail issue of like, cool, we're good to go. I've checked the box that the scope's written and it's approved. Let's keep going. And so you write it in conditions of I'll come back and fix this if they want to move forward or I'll refine it then. But then you you're ready to move forward. And I got guys that want to start on Tuesday. So let's go, let's run. And so there's not the pre-construction phase and some other stuff we're gonna talk about uh that allows you to really refine and define uh the scope. So the last one of our four types of scope creep is a client-driven scope creep. And let me explain this one. There are been so many times that I've had a client that has a budget. Let's say the budget's a hundred thousand dollars, and then almost every single time I have a client with a budget. I don't mean to be cocky. Danged. Yeah. So the the client has a budget of $100,000 and they can't go spend over that. And then all of a sudden, the husband really wants that cool little feature on his bar set up. And so we're gonna go to $108. And so then the wife needs to upgrade those countertops, and so we're at $115, and they've stressed themselves beyond their scope. And then the inspector comes in, and the inspector says, Hey, this electrical failed. We need this, this, and this done, and you're gonna need to run new blah, blah, blah. We need arc fault breakers. Yes, and so now we need a $12,000 change order for the amount of electrical work to do. So their max budget of $100, and then they spend an extra $15 on their credit cards just to get what they wanted. And now we're up to, you know, $125, $130. And they're selling their plasma. They're they're getting they're freaking out. Literally, what are we gonna sell? How are we gonna do this? Can you talk to your parents? Would they loan us money? And there's that conversation happening. So we've gone 30% above their original budget, and it it was legitimate change orders and stuff that they requested and got it over there, and they spent more than they could afford. And they're already stressed out, and everything is stressful. And then all of a sudden, oh shoot, I forgot to add replace the shower in the bathroom reno, so I don't have a line item in here for a shower pan and tile uh replacement of that bathtub. And because of, and going back up to the psychology, the fear of conflict, yeah, the trying to trying to keep everything kind of on the level because their anxiety now is super high. And even though it's very clear that this hasn't been your doing, you're gonna feel obligated in certain ways to make this a better experience for both of you. Because they're gonna say, you're gonna be embarrassed during that conflict. They're gonna be like, wait, you were renovating my bathroom and my kitchen, and you didn't, you forgot the most important part of the bathroom. Like, literally, we picked out tile together. We talked through the tile pattern, we did this. I like this is construction 101, man. This is this should be included. Like, how do you miss the actual shower in the bathroom as we're doing like, you know, and so that you get that conversation with them, and you're like, you're right, you're right, I'm an idiot. Yeah, you're right, you're right, you're right. And and so you're getting beaten down, but I'm not gonna eat $8,000 and they don't have $8,000. And so what are we gonna do? Because we've already put the deposit on the upgraded countertops, and we've already installed the upgraded barrier. Like, what are we doing now? And and so there's this the client be like, Well, I don't have the money for it. You gotta figure out how to do it, and you gotta say, we can't complete this renovation without you finding $8,000 more. And so there's that tension right there that the client driven is they have change orders first that they want to spend over their budget, and then other change orders that they might not want but are justified by the city. And then we figure out we miss something on the scope or we or something wasn't written. And so what do we do about that? Um, so those are really the the four types of scope ring. Good intentions, assumptions
Why Scope Creep Blocks Scaling
driven, gray area, and client driven. I think one thing with these, uh, when we start dissecting how to solve this, the first thing I want you to think about is it's not just a thousand bucks that I'm eating on this job. Right now, you're running jobs, you're doing one at a time, two, three at a time by yourself. You're making a thousand, you're, you know, you're you got to eat a thousand dollars on this job. And every single job it feels like I'm eating 800 bucks, 1200 bucks. And it's it is what it is. I'm just trying to get get on to the next job. Cost of doing business. Yeah. And every single job, I'm just gonna lose on this one, and then you've lost on every single one. And so, because it's it's the habit and it's the system that you're in. And so one thing I always want to shine a light on is some guys are like, you know, that's just cost of doing business. But you look at it and say, okay, I'm gonna build to have two or three project managers one day at this company. We're gonna be doing 150 jobs a year one day at this company. And if I set up my systems to lose a thousand bucks per job, I'm literally losing $150,000 a year. This doesn't work on scale. Yeah. And you're not gonna be able to scale until you get it solved on uh the small picture. So where you're at today is where we have to be really tight on this. Not like, you know, those professional companies that are giant, they they have all this stuff locked in. They don't get there and then lock it in. They start locking it in at your size of your company, and that's how you start growing to the next level and be able to provide cash that you can then grow with. So the scaling issue is is one of the big things that I always try to harp on. It's in the moment, it's like I'm just gonna lose on this one thing and let's keep going. But that it's a bigger picture than that. Yeah. Uh something else you're losing, time. Uh, you can't start the next job. We gotta, you know, the the timeline slips. Every freebie is time stolen from the next job. And so I need to get paid for the extra three days that we're gonna be out here. Even if it's an uh one 30 minutes of work, it might be, you know, we've used this example before. I uh I'm framing out a house, the client, you know, my sheet ruck comes tomorrow. We're walking it at 9 p.m. the night before the sheet ruck comes. And the client says, Hey, this one little uh little kick out at this wall, can you move it like six inches back? Yeah, they'll take me 30 minutes to do it, framing wise. My framers will come tomorrow. I I don't have the tools, I don't have the wood, but my framers can do it tomorrow. Well, I got to push my sheet ruck, guys. And now that pushes the next week. Well, they already have a job next week, so they're gonna have to skip and wait till that job's done before I can get. So now we've lost a week on the job because you wanted a 30-minute change in the wall. Yeah. So who's paying for that? Because the client's like, you want me to pay how much? Well, you know, I need to make a thousand bucks a day. I need your $5,000 change order for that 30-minute fix. Clients, no way, I'm not doing that. And so when we look at a 30-minute fix here, just give us an extra $100 on my framework, come do it, not a big deal. But I've lost a week of my time for a hundred dollars. And when I say my time, it's I can't start the next job. And this job going a week longer isn't able to invoice a week more's worth of work. Which is why when you do these things and you're trying to be good and you do it at no cost to the client, it's hurting you double. Yeah, triple because the opportunity cost of that next job, like you're not accounting for any of that. So the the the triple hit is I lost
Time Loss And Sub Relationships
money because I just ate it. It took extra time, and so I lost opportunity cost of not being on the the next the next job. And the third thing it's costing you is your relationship with your subs. Because when I'm getting squeezed, guess what I'm doing? I'm squeezing my subs. And if I'm forgot something, I'm going to my subs saying, hey, listen, I miss this on the scope. Can you just get this done for me? I'll get you on the next one. Like, yeah, I can be at, but like, would you please stop squeezing me? Uh the strained relationship with subs when scope creep happens is probably the most damaging part of this because you your subcontractors, and we're talking about this in a couple weeks, but your subcontractors are your partners in your product and the thing that creates a really good final product that your company is giving. And the long-term relationships with these subs are what keeps you growing because I gotta to grow, I gotta keep these relationships and add new into it. Yeah. And if you are in the if you're in the coaching, if you're in the executive level or any of the other levels, one of the things you'll look at is the how do you negotiate with your crews on the front end? Yeah. And part of your deal and part of the way that you're gonna get the better pricing is that's your job. You're supposed to be dealing with the client and managing that relationship. So when you make a mistake and you or you're not willing to have that hard conversation and lean into the conflict, and your crew's paying the price, that's only gonna happen so many times before they're just like, all right, this guy's not holding up his end of the bargain, and I'm still giving him the pricing that I'm giving him. Yeah. And they, and more times than not, I've had guys shake their hand, like, yeah, I'll just do it. I'll get it done. Throw me 200 bucks, I'll do it. And then I know they're going home saying, Why am I working with this dude? Yeah. And so it's it's uh yeah, the your subs will help you out half the time, but it's more about the abuse that that's that they don't, they shouldn't. They shouldn't eat stuff. They, they, your mistake or your inability to to refine a scope or have a hard conversation or manage your client shouldn't be on them. And so, yeah, I'm gonna call in favor, see if they can get me on this one, but I also got to get them on the next one, which means I'm gonna lose money on that job. Right. And so it it's it's this domino effect of dollars, timeline, and sub burning that um your your mistakes in this scope creep are hurting all across the board. So we don't fix this issue because it feels petty to charge for small stuff. That's that's one of the biggest things that the guys will say like it's just a hundred and fifty dollar change order on a hundred thousand dollar jobs feels very petty, right? It's like you're right, but it's also uh cash out of pocket and you're not making a hundred thousand dollars because you've mismanaged this right now. You're making about 18%. And so you're at 18,000. And so once you give 150 away, then another 500, and then like you're gonna start really chipping into your profits because you're not making a hundred grand on this job. Yeah. Um, so it feels petty to do it. I'll make it up somewhere else. This is what I always hear. I'll make it up somewhere else. I'll make it up somewhere else. We're just gonna charge extra for this. Well, if they're willing to pay the price for that other thing, they should pay you for that. You shouldn't have to lose money on something else to make it up here. And so it's uh it's not a it's all gonna be good in the wash. This is why we track financials. This is why we do uh what we call our PAL meetings or PAL tracker, which is our project manager action list tracker that we do with our project managers. When you're in the executive, like I was talking about earlier, I'm doing that with you. And I'm looking at your one or two jobs with you and saying, okay, this is let's track from first signature to final invoice your profitability on this job. And let's look every single week. And oh my goodness, your pattern is you start at 38% and you end at 28% on almost every single job. And so you're losing 10%, which is 30% of your profits uh that you're losing and it happens every single job. And so let this is where I start getting super efficient with guys of let me we'll make up the cost of coaching from these efficiencies we can build in. Let's start tracking this stuff, let's start looking at these things. And it really does it really does add up in the long term. You just don't see it because it's paper cuts throughout the week, over the over the month, over the three months of doing this project, and all of a sudden you look back and you you could have charged an extra five to six thousand dollars and you should have, and you did it and you work for free. And there's a reality to this that's like you are no one's gonna do this perfect, yeah, but at least don't lie to yourself about it. Yep. Recognize when you're making that decision and when you're making that call and own it. Yeah. And if you're gonna do it, do it. But like don't keep putting your head in the sand about oh yeah, it'll be fine, it'll be fine. Chalk it up as a mistake. Know that that's not something that you want to continue to do and change your processes
Systems Beat Emotional Decisions
in minor ways to make sure that you're not falling into that same trap. One of the one of the things we're gonna dive into next week about solving this is why these systems are so important that we want you to put in place. And the main big overarching reason of that is every decision made emotionally in the moment is going to usually be a bad decision or at least come across in a negative way to the client. And so if I'm just making decisions as they go and like, oh, we need to charge for this, oh, I need this, oh, also we need to, at number one, your customer service is absolutely floundering. Number two, you're not, you, your every single decision is different. And so if we set some processes in place, conversations we have during this client engagement agreement before we start the all of that stuff, and to have some pre-written rules about how the operations happen. When the change order comes up, there's a decision already made that I don't make it emotionally in the moment. Sorry, that's that's that's how it is. That remember we talked about it, that's part of how we do things. And so if we have these systems, it takes the emotional part of this out of there of like, I don't want to sound that way, I don't want to do this, oh, they're gonna be pissed at me. We've already had those conversations. And so one of the big things uh that guys don't get this fixed right away is we don't have those systems in place yet. And as soon as we get some of these systems in place for the structure of how we run these projects, it's very difficult
Write It Up Every Time
to have these conversations. Yeah. So ending today's podcast before next week's going into solving all this, there's one take-home, one kind of a free starting rule that we want you to do uh of documentation and how to do this. So if you're doing nothing else after listening to this podcast, uh, anytime a client asks for something not on the estimate, no matter how small, you're gonna say this great. Let me take a look at this and write this up real quickly. What do you mean, write it up? Well, let me let me figure out how much it's gonna cost to do that. Oh, I thought that was part of your quote. It isn't if you look at my estimate, it's not right. And so going in and starting to write it up. Number two, if it's too small and you just want to eat it, that's okay. Write it up. We're going to write it up. You don't have to charge them, you don't have to make it a big deal. Just get in the habit of naming it and putting a price next to it and saying, hey, doing that, you know, replacing those door handles you want, that's about $150 worth of work. I'm looking at my scope, uh, at my profit margin right now. I've I think I can spare $150. I'm gonna eat this one for you, but I'm gonna put on the scope as a zero dollar line item and I'm gonna put in the description $150 comped per Clark Turner. Right. And so we're gonna document it, we're gonna put it on the scope, we're gonna price it, and then we're gonna eat it purposefully. Nom nom nom. And there's a reason for that. And we're gonna talk about that a little bit more next week. But the the main reason that why that works is a, we're not, we're not a pushover. We're not just doing stuff for free. We're we're agreeing conscious, subconsciously, that the scope is what we're living off of. And so I'm gonna add it to our scope and eat it. And I'm also showing them that that wasn't on the scope, and therefore I'm losing money. So the next time it happens, I do charge them for it. So I can't say, hey, remember, I already ate that other thing. I got to charge it for this. I can't keep eating stuff that wasn't on the scope. Um, you know, and so the ammunition that we want to use against them later to protect ourselves, we actually have. We started this podcast out earlier saying there's so many times that I think I'm owed all this, and they think it was part of the scope. And there's that animosity when I'm when I'm like, what the heck, man? You keep trying to do this and that's not fair. If you do this, you're taking all that away. Because it's like, oh, he knows that that's on the scope, that that or that wasn't on the scope, and that it should be extra. And he's not gonna argue it because I'm doing it for free. And so it's a win-win flipping it to where now psychologically he knows anything more will be charged. And you're right, Clark, it wasn't on the scope. Yeah. And that there's a fine time right there to stop and say, hey, I'm gonna eat this one, I'm gonna write it up, put it in there, I'm compying it. Would you do me a favor, look through the scope again and make sure there's not other little small things like this that are gonna pop up because our our job together is to make sure that this scope, before we started it, everything was included. There's only gonna be so many, like, I need your help in doing that because yes, I am the construction professional, but I also can't read your mind. Yeah. And I need your help making sure that everything that you're expecting to see here is included in the verbiage. Speaking of gaslighting, uh, what you just said, I've done before where I've looked at the scope myself, but like, oh, and I've found other things that were missing. Yeah. I'll print the scope out. I'll go meet with the client at their house and be like, hey, let's look through this, make sure we have all this on here, and we'll find the things together. Instead of me saying, Hey, we got another change order for you. I'll say, Hey, I don't want that to happen again before we get too deep into this. Look over the scope, let's go through this. Okay, so the bathroom we're doing this is, and it says brick pattern, we're doing brick. And I know that they want herringbone, but I'm gonna point that out here and gaslight a little bit, yeah, but be like, oh shoot, you're right. You did say herringbone. Now, let me talk to you about why we charge extra for that because this is how much time it takes. We need extra tile and the patterns, you got to cut them a certain way, like all of that conversation. Like, listen, I'm gonna talk to my tile guy, see how cheap he can do it for. I'm just gonna pass that cost on to you. Like, I'm not marking that up or making a profit on it, but let me let me go talk to him. Let's see what we can do for the hairbone. Usually it's about eighteen hundred dollars extra, but let me see what I can do. Let's see what I can do. Let me see if I can let me see if I can grease these wheels a little bit. I've already talked to my my uh tile guy and he's willing to do it as part of it. Yeah. And so I've already set the bar of $1,800 change order for this side's bathroom, and the tile guy's like, oh yeah, I already heard, I thought that was part of this. So I can go back to the company like, hey, you know what? I'm just gonna cover this. It's uh I've talked to my, I'm pulling him a favor with my crew. I I can't have him do anything extra for me for free, but I'm gonna cover this out of my pocket. He owes me a big one. I DJ'd his bar mitzvah a long way back. So yeah, there's there's an art with some of this. I don't want to lie, but I also want to, if I find that out, I want to find out with them and us discover that together. Um so writing it up. That's all I want you to do this week. If you find something that happens on your job sites, a client asks you to do something, even if you're gonna do it for free. I'm gonna look at the scope, I'm gonna write it up, I'm gonna put it on there. I'll give a zero dollar line on if I'm gonna do it, but I'm I'm going to name the price. That's setting the client's expectations, setting subconsciously how this job's gonna run. Next week, we keep pitching it. This is this is kind of the feeder into there, but we needed to cover this before talking about how to solve it. We're gonna do the full system CEA language, change order culture, the bank line item. You like the change order culture? Change order culture. I don't know, I hit me. I'm sick of this change order culture. That's why I voted. Yeah. Uh change order culture. Uh, the bank line item. I don't know if we've talked about this before, but it's something that the that we do internally a lot. But having a bank line item is something that uh we'll discuss next week. And then exactly how to hold the line without blowing up the relationship.
Next Week Preview And Coaching Offer
So tune in next week for that. If you want to understand some of this stuff, we will walk you through personally, James andor myself, or both of us together holding hands, uh can walk you through this stuff. Uh, we've got very affordable coaching. Uh, if you go to contractorgust.com, check out the coaching page, uh, or go to Pro Truck360, there's a drop down and find the coaching line. We will give you these processes. We will give you the paperwork. We will walk you through it. We will set your company up for success and and help guide along the path uh as you move forward and implement some of these systems. So we'd love to talk to you. Free 30 minutes, understand, see if we'd be a good fit for each other, hear more about what we do, and we'd love to hear about what you do. Um maybe have a couple of laps along the way. Who knows? Who knows? Who knows? Uh so yeah, go to contractgust.com, hit us up, uh, and join us again next week as we cover the second part of scope. Great hook. All right, see you guys. Bye.
