Fixed Price vs Cost Plus with Chris Kerr

Reece sits down with Chris Kerr of White Oak Home to debate fixed price versus cost plus, and what each model really means for risk, profit, and client trust. They get into the real reason fixed price feels simpler for a small team, why missing receipts can quietly kill margin, and how job costing changes the whole conversation. You’ll also hear how to think about overhead, project management fees, and change orders when the client is still deciding mid build. If this helped, share it with a builder buddy and check out Adaptive for tighter job cost tracking.

https://www.whiteoakhomenewengland.com

Show Notes:
00:33 Fixed vs cost plus
05:13 Meet Chris Kerr
08:17 Admin burden is real
14:38 Risk and upside
19:28 Budget vs actuals
22:03 Overhead and profit
26:17 Fixed fee PM
30:59 Trust and ethics
46:13 First draw next

Find Our Hosts:
Reece Barnes
Matt Calvano

Podcast Produced By:
Motif Media

Transcript

0:00

In my opinion, that presents a degree of confidence when you say to an owner, here's what we're going to do. This is what's going to cost, and this is how long it's going to take to do it. Welcome to builders, budgets and beers. I'm Reese Barnes and I started this podcast to have real conversations about money in the building industry, the wins, the mistakes and everything in between. I believe builders deserve to feel confident about their finances, and that starts by hearing from others who've been through it too. This industry can be slow to change, but the right stories and the right tools can make profitability feel possible. Let's get into it. Mice are hot. We're rolling. Mics are hot. I see it. What were you saying? Well, well, you had suggested maybe that I was against cost plus. But you are, yeah, you are. I'm just kidding. I love it, man. Debate makes good for good, good content, right? That's right. That's right. You are more pro fixed price, though. I am pro a man who says what he's going to do and executes on that. So I love that. I sort of live in this world where, like, if you say you're going to do something, you go do it. So between that and it being just me up until, I don't know, month and a half ago, it's been Chris Kerr running white oak home, management, estimating, invoicing, payments, everything, man, wearing every hat. So like, I'm not to sidetrack this, but I'm going through this growth phase right now, but I bringing it back. I always just found it easier to, you know, as a one man shop, run run fixed costs, because it's like, I'd rather spend the time up front. Go on. Go ahead. Question. I always say fixed price. Yep, you're saying fixed cost. I mean the same thing. Okay, so when you So, okay, and I think that's like, actually, like, a pretty interesting way to look at it. I didn't mean to throw you off with that, but you would like, you could argue that fixed price is different than fixed cost, because fixed costs would assume that, like, you're like, signing a contract, suggesting that you're not going to go over the cost of the project, which is different than the price of the project, which would insinuate revenue, including, I just wanted to get that out of the way. That's fair, as long as we're talking about the same thing, that's good. Yeah, we are. And you could also call it lump sum, you know, like you've heard it all heard it was three things, lump sum. Look, lump cars, lump cost, lump price. So the point is this, right? Like, I'm giving you a price, I'm defining this level of scope in detail, and that's what I'm going to do, unless you add something, change something, modify something, it's we're going to deliver on what we're promising. I mean, I'm, I'm going so far as writing, we're using poplar trim, not finger jointed pine, you know, I mean, like we're, we're getting into that level of detail on the price, okay? And the reason is, again, it's just been me, I frankly, don't have time to, like, get behind a computer and bundle all those receipts together, take all the invoices, chase a guy for an invoice, because we're trying to get the bill in for the foundation work we just did, yeah, and so it's just, it's just, I found it just easier to do my my billing and invoicing that way. Okay, so you and your hand on the Bible. That is the reason why you, well, one of the reasons why you choose to do fixed over cost, plus, yes, and now admin work that goes into putting other draws. Go ahead, yeah, absolutely. Hand on the Bible, 100% and, and, like, mix it a little bit of ego there, right? Like, I just, you know, I love to live in a world where we get to shake hands and go do something, right? Like, I just, there's something, in my opinion, that presents a degree of confidence when you say to an owner, here's what we're going to do. This is what's going to cost, and this is how long it's going to take to do it. And we found some success, you know, between me and the subcontractor team in doing that, and it's worked for us now. Here's where I can spin myself in circles and kind of like have the own debate inside my own head here. I think there's a stigma, perhaps with some with the fixed price, fixed cost contractor, where they're trying to do it cheaper, right? And I could be compelling concern. It makes sense Go ahead, for sure, yeah, and maybe this is the boogeyman Chase. I mean, I don't know, but I think there is a bit of a stigma there. And so, you know, I've, as of lately, come to the conclusion that, like, Every job is different, right? Like, if we're, if I'm getting hired to do a job, like we just got hired, we're doing a we're doing a. A cost plus job right now we're doing it. And what does 700 grand get you in? Hang up. What is this like a bathroom remodel? It's a historic barn, but yeah, gonna be awesome. I'm sure. Wait, is this the one with the timbers? Yep, yeah, that's badass. Everybody who listening? You go actually. And before we get too deep into this, Chris, give them a little background on yourself. Where to find you first? Oh, sure. Yeah, no. Chris Kerr, we live here in Hingham. Wife, three kids. Been working in the trade since I was, I don't know, 14. I started as a plumber in Syracuse, New Minnesota guy, yeah? Well, yeah, born in Minnesota, yeah. Born in Minnesota, yeah. Father took a job working for a plumbing and heating company in Syracuse when I was, like, in kindergarten. So I grew I really say I grew up in Syracuse, New York. Son of a plumber, rant ran copper water lines said I'd never do this again. I was going to get so far away from the trades, studied some economics, and, yeah, came back to it. So I ended up working right out of college. I worked for like, three of the bigger firms around Boston, which sort of honed the, I'd say, honed the systems in, you know, really, kind of got a real taste of, you know, really, the systems that go into construction. But, yeah, six years ago, you know, I like to say the corporate world spit me out. Got fired. Yeah, did you rejected me? Yeah, I just That's okay. I don't, I don't fit the system. And it just the system. The system told me that. So we found a degree of success here in and around Hingham in Boston for the past six years. I mean, we've left a happy trail of customers. And, yeah, we're we're doing something right, and we're growing. I mean, I mentioned we've got the manager now. We have an office manager, white oak Custom Homes, right? Or why don't construction white oak home? Yeah, it's you guys are you guys are sitting up. I love it. I love where you what you guys are doing, Chris, because it's, I think you guys are on the path that a lot of builders are on and want, or want to be on, because the level of product that you guys are building is incredible, again, that's why I wanted you to tell people who you were. So then go check you out on Facebook, Instagram, not Facebook, Instagram, your website. But point being is like you're in the stage of business where you have a lot of these questions, right? You're building an extremely high end product. Sure, you're starting to have these, like, more business thoughts and back and forth of, like, fixed price, cost, plus why one or the other. I'm scaling, I'm growing, I'm hiring people. I'm building processes like, I don't want to lose the the beauty of a handshake deal, but also know that it can open myself up to some risk. And like, you're starting to have those thoughts. So that's, that's where I think it's good for people to find you, to know who you are, and to go back into, not to deter the conversation, but to go back into the $700,000 project that you're doing, and you're doing cost plus, yeah, yeah, exactly. And, and that's where, you know, like, I'll just, you know, here I am. I'll plug, plug adaptive in this process of scaling. I mean, one of the panic moments was like, how do I handle all these, these invoices and receipts and payments? I frankly, got tired of, I mean, I had some contracts are literally chasing me around in my truck. Like, where are you gonna be shocked? Yeah. And I was like, All right, enough, enough, right? You will, I'm going to hit the button. They know now is the button, they say, I I tell them, I go, all right, yeah, that looks good. I'm gonna hit the button on Friday. So there's a few guys will call me down, like, Hey, you hit the button yet? No, not, yeah, I told you, told you, Friday, do we got to get a shirt made of that adaptive shirts, like we hit the button weekly. Do you pay from your phone? Do you pay from the phone the computer? I mean, it's just wherever? Yeah, I love it. I do like that. You guys are bringing more features over to the phone because, I mean, as you I'm sure, you know, like, it was a bit limiting in the beginning, too. We're like a three year old. We're like a three year old software, oh, three year old software. Like, we're just growing all the time. And so one reason, I don't want this to turn into a big plug, I'm pretty bullish about that. I do appreciate you, you know, sharing an authentic solution that we have provided to you, but we have failed go on in the sense that you don't like cost plus, because of the administrative burden that comes with billing and cost plus, yeah, and that's like our bread and butter. I'm. Offended that we have not shown you the light on cost plus draws in adaptive Yeah, and you're right, like, and that's like, I've said it, like I said it to you at dinner a few weeks ago. I know I'm only scratching the surface of what you guys can do, and I know you have that solution. For me, it still remains a little daunting to me to have to, like, figure that out. So maybe, and I know, like, Daniel's setting us up in a you know, you've got great support. So like, I know we have a call with Daniel next week with our office manager. So my hope is, you know, in that call, we can figure out how we can do this, because you are, we're doing a cost plus job. So, yeah, now's the time for sure, for sure. And I think to pull this back into what I want to chat with you about, because you are bullish, at least for the time being, on fixed price. Yeah. Why are you bullish on fixed price? Is the handshake deal. It's the Say what you do. But when I look at it, I'm not, like, I don't really care, frankly, like, I've talked to enough people about this, yeah. And I'm like, Dude, I do. People are making money both ways. People are losing money both ways. So it's like, it's really, like, kind of a perspective in what you carry. So deeper than just like the Say what you do, like, provide what you say, fixed price. I could argue that with cost plus. But let's go a little deeper on, like, where your conviction and fixed price comes from, lump sum, fixed cost, whatever you call it. Yeah, you can think we have to be fast and snappy. I'm just curious. No, I mean, I So, I mentioned, I mentioned a bit of it is the handshake thing, which, which, you know, admittedly, is, is somewhat ego driven, you know, like I do, like being able to do what you say you're going to do and then execute, right? So, like, that's a big motivator for me. We talked about, at least in my mind, like the time saving aspect of it, where it's just, you know that when it was me, the job gets rolling, and, you know, you don't really have time to start managing receipts. Oh, here, here's one, like the thought of missing a receipt. And by the way, like when I, when I listened to adaptive podcasts, I cherry picked all of them that were like, I'm a fixed price guy, I'm a cost plus guy. So I feel I've heard all of the debates because I am so interested in that piece of it. And so yes, I listen to them very intently, thinking, like, Okay, I agree with that. Okay, I don't agree with that, but, but that, like, one of the points, one of the guys made was, like, the lost receipts. And I know, like, your software helps that. So, like, billable, billable items that you know are no longer getting lost because they're in the system, like that, that to me again, like, even with the software, perhaps, like, I was still stressed about that, yeah, yeah, which we can open up a product. Go ahead, yeah, and again, maybe that's different when there's help support a bigger team, but when it's me, you know, I'm not finding every receipt. I don't I don't have them all, so that like, Okay, this is a great point. I'll let you finish. But I do want to add to this. Go ahead. No, go on. I'm just, I'm probably just babbling, okay, you're doing fine. You're just great. Um, with the receipt question, right? And really, what the receipt is, is it's, um, right? It's just, like, tracking billable cost. That's all it is for cost plus guy that's valuable, yeah, track every dollar. And it's like the classic, which I did coin for my ego, you can't plus, yeah, what you don't cost, right? Yeah, like every dollar that I miss, I'm not just missing the cost of that dollar. I'm missing the potential markup, which includes my margin on that dollar. That's what that means, right? So of course, like, yeah, tracking every receipt is great, but it sounds like you're alluding to the fact that because you aren't good at tracking receipts, that fixed price helps you get around that need suggesting. Yeah. I mean, I never like hearing you're not good at something, but yeah. I mean, no one knows. We call it Spain spade, maybe I use the wrong term. Could get better spend a little more positively. So, no, I mean, yeah, you're right. I mean that, but that is what it is. I mean, I wish I was better about it. It's something I know I as I grow, I know that our company needs to be better about knowing what dollar is going where, for sure. But I think the question, and this is where I'm ultimately getting is because when I look at cost plus versus fixed price, with at least, like, the conversations that I've had around it is like, it's really, like a matter of, like, risk, risk and upside is really how these two decisions get made. Is like, if I'm a cost plus builder, I'm shifting a lot of the risk to the client, right? Because I get the open. This of not having to give them 100% committed numbers on the front end before we start doing anything which any good cost plus builder is going to tell you that just because they're cost plus doesn't mean that they're trying to hit within a single digit percentage point of what they estimated right, but they're effectively like shifting that risk. There are overages, right? And then the upside is a little bit more, like, little more calculated on a cost plus, right, because you're typically marking up based on, like, a percentage, and that's just going to be like, it's, there's not as much room for upside or downside for as a fixed price builder, you're shifting more of the risk to the builder because they're committing to a number, and if they blow that number, their margin disappears. That's why I say fixed price is a race to margin. Both of them have an extreme emphasis and importance on tracking cost. I'm a cost plus builder. I need to make my markup, so I need to track every dollar from a fixed price builder. I need to track every dollar because that's telling me how much margin I'm going to margin I'm going to make on these line items. Yeah. So that was where my questions coming from. Is like, how do you perceive this from a risk standpoint, when you think about cost plus over fixed price? I was trying to be such a good listener. There you threw a lot at me. I'm terrible with that. No, that's fine. I can. Well, how about this? No, you brought it back. I mean, God. I mean, I totally know what you're saying, and I know the school of thought here. It's like the risk exists, right? It's just who's holding, the client or the contractor, I suppose, like, I'd rather create my own destiny. I'd rather hold the risk. I mean, and there's, you know, I recognize that I may end up being over on some line items. I may be, end up being under on others, but at the end, like it's gonna, it's gonna average out, and, you know, I got a good enough team where sometimes I gotta say, Look man, like we don't have that kind of money in this budget. I need you to deliver for me here. And I'll, I'm gonna have to take care of you on the next one. I mean, those are, those are conversations we've had before. Because, I mean, they want to see me succeed. I want to see them succeed. We're all in it to make some money. But I just, I don't know, and I mean, there's something that's a good point go ahead. Yeah. I mean, maybe I like the hunt too. You know, I like the hunt. I like the I like knowing that. Like if I saved$3,000 on siding, you know, that, you know, or if I should say I overestimated it. I mean, I might get excited for a second, but then I'm gonna learn I was, you know, $4,000 over on my my trim work. But so maybe it's, it's that ride that I enjoy in some sick way. I think this is great, right? And that's why I say like, I think this is a perspective and a conversation that is worth having, right? Yeah, and from multiple different builders perspectives, because I refuse to believe that, like Chris Kerr is, like, on his own island, right? And, like, own, yeah, there. There are builders will listen to this and be like, dude, right? There's no way we're all thinking the same thoughts, exactly. And I think, like, yeah, oh, did I lose? Yeah, are we here? Yeah, okay, that was the first Okay, we're good. We're stable. Um, I think, to your to your like, like the hunt, right? I think the the the ride of the project, yeah, I think that's like a fair way to look at it, if that's what you're trying to build, right? I think that yearning becomes a lot less palatable when you start to grow and develop as a business. Sure, yeah, it's like, no, I've got, I've got project managers on salary, I've got team members admin on salary. I've got this, that and the other. I might 1099 point being like, I'm responsible for branding work. Yeah, I think that's where, like, the calculated nature of whichever pricing model you have becomes a lot, yeah, I don't know it's, it's a lot less about, like, just trying to, like, find that deal, or, like, get the guy taken care of, or, like, get that, like, rush from$3,000 savings, right? Because, like, to your point, you're going to find a loss somewhere in that budget, right? That's going to eat it up and essentially wash out. Go ahead, what? Um, like, how does, how would adaptive support a fixed cost contract? Or do you even want to offer that you can do that, do 100% we've got tons of fixed price builders on adaptive. And it goes back to that logic of, like, it doesn't matter whether you're fixed price or cost, plus, it all comes down to tracking cost, right? That's such a strong component adaptive, yeah, and really, like, when I see like, fixed price builders that are really getting excited about adaptive, is they, they? It was actually one of our first episodes. Episodes talked about Mister Martin, talked about how he's, like, literally reviewing, like, line items on the budgets daily, and like tracking costs daily. And that's where I think, like, a big part of adaptive is helpful for these guys, because we cut out and shorten that timeline to understand what my costs are, my actuals are so that then I can see those line items start to bleed or win much more quickly. And that's where I can start, like making better decisions that could save or keep a project on track. The other one is web, so you can so adaptive, and I know I need to get to this feature, but like, I'm assuming you have the ability, or adaptive has the ability, to set a budget and then compare it to actuals, and then I can see it, yeah, yeah, yeah, dude, Chris, we are failing you, yeah? I know. No, you're not failing. I just mean Yeah. All right, so that's, that's one thing we're gonna go over. Yeah? That would be helpful. That's a huge part of it, though, and that's where, again, like, I think you're raising a fantastic point, because I think there's a lot of builders that they're like, Okay, I know I need a budget, but that's like me saying, like, I know I need to be on a budget, right, personally, right? It's like, you know, being on a budget sounds fun. It's not being a budget, you know, yeah. It's like, sometimes you get this, like, little rush. But the point being is, is, when you are running a fixed price model, like knowing your those are the guys that are, like, hyper focused on numbers, is at least, what I see is that, right? I see a lot of fixed price guys, yeah, because, again, it's like, just an example. I'm going to build a million dollar product, not the price on it. Okay? And let's say that I won the job, and I'm going to have 800 grand and cost wrapped up into this thing with essentially a 20% markup. Most companies that I see, when they start to get a little bit bigger, they're going to be running about a 10% overhead, right, like their static cost, labor, rent, fuel, stuff like that. Let's break this down. Project Manager is a cost of the job, right? I'm just gonna sidetrack you for a second. Yeah, you should be like, You should be billing back project management. Yeah, that's a cost of work. And then you have your overhead, which we're saying is 10% sure, and then we're saying profit is 10% and I just, I think, like, that's one thing I've been fishing, like fishing for, and I thought it would come out more clearly in any one of these podcasts. But I don't think anybody really is openly talking about that. There's a nugget. There is a nugget in the will King episode. Listen to the will King episode, because he's from high cotton homes down in Alabama. Super sharp dude, yeah, um, and there's, there's a legitimate equation to, like, essentially back into your numbers in a project. It's, and this is where, like, I'm just not a math guy. It's like, a, like, take your cost divided by one point, whatever, and then our times, he'll go over in the episode. But the point being, that's how you should be finding your margin. That's how you determine if these are good jobs or not. Yeah. The thing I struggle is, yeah. Where I struggle is like, I don't want to just say 10% profit, because I feel like at a at more volume, so like, a million dollar project maybe shouldn't be getting 10% or maybe it should be getting more, I don't know. I just it's we all. I think every builder who listens kind of is anxious to hear like, am I charging enough? Am I charging too little? Am I charging too much? And it's, it's hard to really get it like a real temperature on the industry. I mean, I think we're, we're all generally right around there. I don't know, am I? Am I fishing for an answer right now? No, no, we can this, dude. This is the episode. This is the episode. I love it. I so a First off, it is not like, Countrywide, this is the markup, yeah, okay, or, like, this is what you should be making. I just did a podcast, however, which was yesterday with Miller Bradford. He does. He runs builder bookkeep, also in Alabama, yeah. Like, he also works with will King point being is we talked about whip, and I had gone through this, like, 10% overhead, 10% margin, and that when I say margin, that should be like, net margin, right? Yeah, he was like, Yeah, that should generally shake. Like, if you're doing a million dollars in revenue, you should be making 100,000 net like, essentially what they had talked, what we had discussed, there's going to be guys that will be like, there's no way that'll work in my market. There's no way that this will happen. There's no way that that I get it, because there's nuance. You got to be competitive, right? But I think going back into this is like, knowing if you're going to be making the money that you initially thought you were going to be making is the bigger conversation. And knowing what that number is before you go into a job is where you really start to, like, get on that line of thinking more so of I am spending my time, investing my efforts and cost into making outcome right should be profit, and that's where I think, like, when we're talking about fixed price builders and tracking cost and how important that is, that's where a lot of fixed price builders get excited about adaptive, because that's what they're looking for. They know going into a job, and they have determined that I'm going to pick up this client, or I'm going to build this product on this piece of land, and I'm going to do so because I'm going to make X dollars or percentage, which is worth my time. Yeah. And if I'm not tracking my cost, then I have it's way easier for me to bleed into my margin or overrun on cost, and chew up my margin, chew up what I thought I was going to be making on that project. Yeah, no, that's Was it too much? No, that was great. No, it was well said. I don't, I don't know that I have much to respond to on that you don't have to, you don't have to. And this is just, like, kind of a good conversation, because I think, like, really highlighting here, like, what builders are thinking about when it comes to fixed price and cost, plus, there needs to be more conversation around it. Yeah. And I love, the debate like I do appreciate and just genuinely enjoy debating it, like, I think it's cool. And I think I started this with I think Every job is different and every client is going to be different. I'm not opposed to it, but it's not like, if I had my choice, like the job that I'm doing cost, plus they asked me, and I was like, I prefer to do a fixed price, but I obviously don't want to lose the job, so I'm open to doing it however you, however you'd like. So I will say this with with this particular cost plus job that I'm doing, I did ask that we keep the overhead in the project management. I'm sorry. I think, no, I just did the project management. I wanted a fixed price for the project management because I didn't, did not want to get into and I don't know how other cost plus builders do it, like, are they building their PMS time for every hour that they're on the site or working on the job? I didn't even want to get into that debate, so I just said, Look, we're gonna have a fixed price to manage this job for this goal, and I'm gonna fill it as a percentage of work progress. And that's that, to me, was pretty common, yeah, from my understanding, that would be more of a fixed fee situation, okay, and a fixed fee, and that's, that's from my understanding. Again, people that are listening would love to hear some chatter about this, but when it comes to fixed fee, it's a way to like a remain like, extremely transparent with the customer, but even more so, like, become like, more competitive when it comes to pricing. Yeah, my only like, taper this expectation. Go ahead. I hear the fixed fee argument, but I'm also just like, geez, if they like, I don't know, now, on a chevron pattern or some crazy, like, high level of management thing, there is a piece of me that's like, there's a little more risk here for everybody, yes and yes. With that risk ought to come the appropriate level of fee, so that that's where I have a hard time just committing to one fee. Chris kind of sounds like you're starting to understand cost plus a little bit here. No, I'm just kidding. And I say that because, like, I will also bring up Brad Robinson, yeah, awesome dude out of Atlanta. I don't know he's actually quite available on Instagram. Do you know of Brad Robinson? I will look him up right now. He's on Instagram. He was on the podcast. He was on the initial the great debate, cost plus versus fixed price. And I think this nomenclature that luxury custom home builders are typically cost plus that actually might be generally true. But what Brad is doing is he's building like an elite product in Atlanta, okay, and he is all about fixed price. I like probably you guys share a lot of similarity in how you view like the client experience. Actually, I know that because Brad's all about client experience. Huge pre con guy, huge selections design up front, like, know what's going on before? Is he the guy that, like, won't start a job until all selections are made, I believe so I would have to confirm to just yeah, be 100% positive good friend, if I remember correctly. That's his motion, but also like he is a businessman like Brad Robinson builds homes, but his product and how he views what he does is a business. Business. It is, it is a I have these inputs, and it is my fiduciary obligation to the consumer to make sure that what I am promising them, I will give them, I am giving them, yeah, and I am making money for the business, yeah? So again, like, I don't think that there's like, Oh, I'm a custom home builder. I have to do cost plus, no, I think that the conversation is more broadly about shifting risk and risk appetites for the individual who is committing to the work being the business owner. You know, are you saying that the client and builder? I think yeah, for sure, like clients definitely have an input in that, because there are certainly, like, people that have built in the past, or get advice on how to go about these conversations. You hear it all the time, they'll be like, I only work with I only want to fix price builder. And there are guys that are like, truly cost plus, and they're like, nope, not going to do it. Not your builder. And that's where they kill the that's where they kill the sales cycle. So answer me this, just because, you know, I live in the world of construction, and you know I, I would never do this, but I mean, there is an opportunity for any builder to take a take an invoice, certainly unethical, and ask a subcontractor to put another $2,000 on that. And then present it to the client. I mean, I just sure, like, I feel like there's an elephant in the room here with that. Like, is that not going through the mind of a client and and look like huge caveat here. Never, this is me just speaking objectively. Like that thought resonates, I still think, in people's minds, right? So like, like, to me, that's that that would be a reason for a client not to want to do a job cost, plus, just for fear of that, and maybe it gets back to a level of trust and, you know, understanding the market and all that, or getting three prices and going with a low one, like, it maybe a little more emphasis on that. Like, have you come across that at all where clients have expressed that concern, or, as a builder, expressed that concern of a client? Um, so no, I haven't, and that's like, I think it's valid. Um, I think it's totally insane. Oh, it's, it's illegal, it's, it's all the wrong jokes, and that's where like, and so I frankly, like, I'm more on, like, the B to B side, business to business, meaning I sell software to the business, and I am less involved with the consumer being the builder's client, right? So I think that fear, which is why I say it's probably valid that fear probably exists with a consumer. It's like if I get into a cost plus contract, and there's no definitive number of what this thing is going to cost me, just a ballpark. Who's to say that general contractor Bob isn't going to be colluding in the background with Phil the plumber, to be tacking on an extra couple grand on these invoices, I get fleeced, right? Yeah, I think, to your point, totally illegal. There's like, multiple businesses at stake that would just be a totally wild way to build a fraudulent company, right? If you were into fraud, like there are other businesses to get into that, you could probably make more money being fraud. And I will say it's sort of I want to say that my fixed price side, but go ahead. I want to just show just for the record. I do want to say the alternative to a fixed price? Ever go ahead? Okay? I would say with cost plus. I mean, you still have the inherent responsibility of managing a budget, like I I do anyway, like, I wouldn't want cost plus to come off as an open book, because it's not right, like it is still your sorry. It should be. But go ahead, it should be open book if you're cost plus, yeah, go ahead. But I, and I use my current example, like I still feel the responsibility to track the budget, and when I see walnut get selected for ceilings instead of poplar. Like, it's my responsibility to say, you know, look, Mr. And Mrs. Client, we give you a budget for x, but like, your designers just picked walnut, like, that's gonna cost you another 10 grand. Like that, I feel is my responsibility to show them that and manage the budget. It should be, yeah, that's a part of the cost plus model. That's why we've like emphasized so much on the cost plus side. How do you do a challenge model? How do you manage any change orders? Again, you got to listen, have you? If you haven't listened to will King episodes, you should, because we talk about this, and he even struggles with it. Of like, defining a change order and a cost plus job is like, what is pretty difficult, and we kind of talk through a solution. I think the like the situation was is like, if I'm dealing with a client and help me with the phrasing, I'm pretty good at it generally, but let's say I've got drywall in and I'm getting ready to do I'm getting ready to put lighting fixtures in. It's kind of what, dry wall. A dry wall. How are you saying it? Dry walling. Dry wall. A great All right, go on. I was thinking more of like roughing, but that's not roughing. That's like for plumbing, like pipes to the walls. I digress. Point being the example was, is that if you got a client and they're like, like, yep, recess cans all the way, we want recessed cans. Recess can lights, recessed all the way. And then before you install, they're like, actually, wifey was on Pinterest, and she saw track lighting, and she really likes what that does to the room we want to put track lighting in. Should that be a change order? And, like, mine was, like, I mean, it could, if the cost is different, I think that's like, reasonable. Like, if track lighting is going to be more expensive than recess cans, you should want 100% change order that. But if we're talking about, like, really the cost of a change order, which is the planning, the scheduling, the admin that goes into generating what that's going to cost, that's really where, like, in my opinion, change orders become a suck, because it's not as easy as just saying whether it's fixed price or cost, plus, like, yeah, you changed your mind, so I'm going to bill you for it. It's like, No, you need to be thinking about it in terms of, if my Pm is walking a job site, and the owner says, I want pocket doors here, and we didn't frame for pocket doors. You need to get somebody out there, which is going to take your Pm planning and calling to get a bid on, what is it going to cost to, like, convert this into a pocket door, what's the labor and material that's going to go into it, and then is that going to impact future schedule? Like, that's the cost of a change order. Most no doubt, in like, that cost, gets that cost in a Cost Plus model, like the overhead. Well, I don't know if it does, yeah. Well, I suppose it does. The overhead and the fee get carried there, but in that change order, I would probably put a couple hours of management time on that. I mean, you should, yeah, I'm very pro this, and you should mark it up. You should be making money on that, because you as the owner are employing and managing and coaching people to perform work in the way that is valuable to quite a customer, no doubt. Yeah, man, I love it, and so, like, here's a scenario in cost plus what happens in the event where the builder did something wrong, like, who, who? Like, I'll use your pocket door example. Say, say, the design always showed pocket doors, and the builder missed it, so now they got to redo framing. What does that have to do with cost plus or fixed price? I mean, I feel like that's just like, you're going to eat it either way. You got to use, yeah, on fixed price or cost plus, right? That's like, that's the, that's the I might not have gone to college, but I'm paying for my education conversation, right? Sure, right. But it does amaze me that subcontractors will audit who are getting paid on a time and material basis, will sometimes try to charge you for that. And it's like, this is subs you're saying, Yeah, you know, not often. I mean, our, our guys are pretty good, but yeah. I mean, if it's not crystal clear, I mean, there is a feeling about some people that maybe they should be getting paid to do it twice. I mean, that that's totally Well, that's the dirty laundry of the builder that I'm airing out right now Well, and I think that's fair, because I think, like, that's where, like, you try to get business as rigid and binary and non emotional as possible, right? Yeah, like, that's how you, like, start to scale, as you start to scale as you start thinking about business a little bit more rigidly and like, well, if this happens, then this but when we're talking about a subcontractor that you've worked with for 10 years, yeah, missed a detail on plans that we can all agree with. Wasn't super clear, right? And there's a relationship there, and they're like, Dude, I missed that. It was a pocket door. I need to come back and do this. I'm like, I'm gonna send you an invoice. I think you have a decision to make as a business owner with all variables considered. To say, Okay, I will have this conversation with the client. I will pay you for this. I will get you paid for. This, but to prevent this from happening in the future, we need to run tighter precon and go over the stuff in the beginning to make sure that this doesn't happen again, and then when it happens again, it's like, are you taking me for a run, or did we miss something? Yeah, that's my opinion. That's my opinion of the matter. Yeah, I think you're right. I suppose that's another reason why, as a client, you might be opposed to the Cost Plus model. I mean, if you're not, like, truly locking subs in. But here's the other thing, here's the other thing is, like, in this, is this the devil's advocate of fixed price, and this is why it's such a conversation, because you're 100% right with a cost plus percent right with the cost plus side. Is like the clients in at the end of this, and they're like, Okay, what? I'm gonna have a general contractor coming to me and saying, Hey, you're paying me for a service to manage subs to get my home built the way that we had decided, and now you're asking me to pay for their mess up, which really was your mess up, because you weren't managing the project right, doing 100% a reason to be maybe skeptical of cost plus, but I think inversely fixed price has those similar situations, in the sense that there's a lot of like, okay, if I'm if I'm bidding out a home as a consumer, as a client, to a bunch of general contractor saying I've got a million dollars, and I'm looking for a fixed price builder who can get me what I want for that number. Yeah. And we go through and we interview three general contractors, and they all say, I can get you the million dollar home that your dreams of, or, blah, blah, blah. And there's one builder that has hookups or knows, like, hey, I can slip a cheaper material in here, and they'll never know or really care. And that's where I'm going to make a 15, 20% margin on this thing that happens all the time. And I think this is where it's like, maybe not an ethical conversation, because it can be argued both ways, but it's like, and I understand both ways, which are the fixed price builder is it's like, if, if I can run a project more efficiently, and I can get the client the product that they want that's cheaper, faster, better, then I should get rewarded for a higher margin, because I'm able to do this right. But that also creates a stigma of like, okay, if the client has to spend a million dollars, is a million dollars, is a million dollars, that's fine. But then you start to build this like, how fast can I do it? How? Where can I cut costs? Can I get cheaper subs? Can I get subs that are faster, right? And so that's where it's like, it's not a binary cost, plus is better than fixed price, because you could argue gaps in both. And frankly, I think the gaps that get argued aren't as common of issues as you might think. I think it's a lot of it comes from, like, fear based thinking, frankly. And that's like, I mean, listen to every point I've laid out to you of why I'm opposed to maybe going Cost Plus, they're all fear based. They're all so, yeah, I'm I'm not totally against it. I'm just more comfortable with the with the fixed price right now. And look like you got to make a business decision too, and you said it earlier, like ultimately, you want your client to have a good experience, right? So if it feels like they're going to get changed ordered a million times over because they haven't quite made up their mind or the selections, and it's gonna feel like a change order every two minutes. Then you know what? That lends itself to a cost plus, because then, then it's not so much a change order as it is, like, okay, like, we're just, like a kind of a running tally here of what you want. And I'll just, I'll effectively manage a budget for you and tell you where I think the costs are tracking. But we're not gonna call them change orders well. And I think that's like, probably where you see a lot of like, custom guys leaning in that cost post. Yeah, I'm thinking, because they're like, like, dude, how am I? I just saw a stat, and I wish I paid attention to it more. It was something insane. It was like, Oh no, it was a build show live. And I think it was Jake Brewton May. There was some stat that essentially boiled down to on any there's X number of decisions that get made when building a custom home. And then he boiled it down to the number of decisions that need made in a day. And it was something crazy, like 20 or 40 decisions a day over the course of that right? So it's like when you're thinking about that from a fixed price standpoint, and trying to get everything locked at the beginning and make all those decisions on the front end to insulate yourself, to prevent this change order craziness. That's where guys are like, Dude, this is the first time I've ever built this home. Is the first time this home has ever been built. This could be a completely custom set of plans, like, right? You don't know what you want. We have, like, a, we have a floor plan of what you want, right, yeah. But you want a really custom product, and you're gonna be making these decisions over an 18 month build. Like, we're gonna run cost plus, so that we're not insulating. But that's where. Share budgeting, draw packages with reporting, all of that comes in to provide an open book experience. And that's where I see the best builders run these processes, and they essentially insulate themselves from a risk of legal standpoint by sending invoicing their draws every two weeks or month at the latest, and that's where I completely agree with your initial concern, which is I stay away from cost plus, because the administrative burden, and that's why I say we failed you as as adaptive, because that's like our bread and butter. And you should be looking at this as an empowering moment to say I can now open up my market to people that are doing fixed price and cost plus, and I can start making these business decisions internally. Not scared that cost plus is going to wreck me from an admin standpoint, but I have a solution that will allow me to do it much better for myself internally, as well as providing clarity to the client. So that's where I think, like as a cost plus builder, you should be sending every cost over, showing where you're making your money with a log of change orders every two weeks to manage healthy cash flow every month at the very minimum. Well, look, man, stay on me. I mean, I've got a six month venture here of this barn in Hingham. So Dude, we got to run it. We got to run it through. When's your meeting with Daniel? Gosh, next Tuesday. I want to say next Tuesday. So a week out, how many draws Have you put together on this thing? So far, none. I'm getting ready to do one shortly, dude, you I will holler at Daniel and you guys should, like, look at building your first draw and adaptive. Now that would be great. Like, that's how we should kick off the meeting. Like, show me how to do a draw. Yeah, yeah. I agree. Because, dude, I'm telling you, like, Na, this is a killer conversation. I love this. This was, like, there's like, a true banter with the boys. This was good dude. The same way, I don't mind debating political not to get into that, but like, I don't, I'm not looking I'm not right or wrong, man. I just like, I just want what's best for the client, you know, and I want what's best for a project. And I think if you can go after you, your family, the people that are involved in your businesses, family, your subs, your trades, yeah, that's, I think we need to keep, keep pulse on that, because that's why we're all here. Small business owners, if they fuel communities. I'm a huge advocate. We just want to make you guys make more money. Make you guys make more money, get clients more or more clear expectations and understandings of what they're doing. Hold everyone accountable. Do it accountability. That's success. That's right. That's why I do Chris, okay, you were down to Texas, yeah. I was in, yeah. I was in Texas. What December of 20 was 2025 Yeah, I was in December 2024 until April of 2025 and I was actually just down there. Is that what you're talking about? I was just in Texas for build show, the builder, builder Expo, right? Is that what it was? Yeah, it's build it's build show, live. It's put on by Matt reisingers. Build show, yeah, yeah. I think there's a little lag. I think we're catching a little lag, but, yeah, I think we all know I was down there that, yeah, yeah, I had it on the calendar. If we couldn't make it, you're all good, you're all good. It'll be there next year. I know we need to take breaks. We need to take breaks so we don't talk over each other. Now it'll be there next year. I will say that it was extremely high value show for the for the participants, the people that join, yeah, that'd be interesting. Thanks. Joe, yeah, you should do it. You should do it. Um, but okay, dude, well, I'll let you get back to it. I'll let you know when I'm back down in South Shore. And also, I'm gonna be starting happy hours and stuff here in our office. Go ahead. Let me know I'm a happy person. Enjoy and enjoy that hour. So just let me know you're a great addition. Chris Kerr, happy hour. Happy Hour. Chris Kerr, all right, man, hey. Thanks a lot. Great. You bet great being on man, thanks for having me. I really appreciate it. Of course, we'll see you, dude.