Dustin Elliott

Products and Customer Insights Analyst, Buildxact

With more than 10 years experience in software as a service, and many of that in helping small business owners like you, I’ve seen firsthand how making the leap from old habits to new software challenges us to think and act differently.

Not to mention that making a wrong choice can end up costing you 5-10x more than the annual subscription of the wrong software package. You have to factor in wasted time and a whole host of other factors. So where do we begin?

Step 1: Determine your needs

• What is keeping you up at night?
• What is that thing you have been meaning to do but haven’t had a chance yet
• What is the bottleneck in terms of your business or personal life?
• What part of your process makes you the most anxious to do?

Then write them out as to what you think you need. Write it down in a simple 2 step matrix – What the problem is – what the impact is – and what you think the solution is (don’t worry too much about the solution at this point). Something like what I have below:

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Dustin Elliott

Products and Customer Insights Analyst, Buildxact

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How cost-plus contracts work in home construction

A cost-plus contract provides a straightforward model for home construction and an effective pricing strategy for small builders. It guarantees that your customers cover the incurred costs—materials, labor, and other expenses—along with a fee. The fee can either be a contracted amount agreed upon in advance or a percentage calculated based on the total project cost.

For example, let’s use the latest median home price of $357,000 (according to Zillow) to determine how a cost-plus contract pencils out.

Actual costs

• Materials: $200,000
• Labor: $120,000
• Other expenses (permits, utilities, etc.): $10,000
• Total costs: $330,000
• Fee
• Percentage: 8% = $26,400. Total price is $356,400
• Fee: ~$27,000. The total price is $357,000

As mentioned above, if material prices increase from $7,500 to $10,000 due to tariffs, you will still be compensated and not absorb these unpredictable increases. By displaying the adjustments on itemized invoices, you are being transparent and building trust with your customers.

A percentage—or fee-based structure has its pros and cons. A contract fee offers more predictability, while percentage-based fees provide flexibility and scalability.

Let’s offer some practical tips

Cost-plus contracts help builders navigate economic uncertainty, but not without thoughtful execution. Implementing a cost-plus contract can ensure a smoother experience for you and your customers. Here are four essential tips to assist you in making the most of a cost-plus contract.

Set Clear Terms: Clearly define what the “plus” means. Is it a contracted fee or a percentage? Consider adding a Guaranteed Maximum Price (GMP) clause. This GMP clause will limit the overall project cost while maintaining flexibility. This approach offers peace of mind for your customers while protecting your margin.

Communicate Early and Often: Be clear on why you’ve implemented a cost-plus contract for your customer’s project. While they may be aware of the tariff situation, they may not understand how this may impact their project and your business. It is a great time to inform them with real-world examples to illustrate how cost-plus contracts adapt to rising lumber prices.

Track Costs Diligently: Now is the time to invest in a reliable real-time system to track expenses. Tools like Buildxact create detailed estimates, manage budgets, and log expenses efficiently. Share updates with your customers so they can see them firsthand, supporting the benefits of cost-plus contracts.

Pair with Technology: Buildxact was founded on the principle of simplification. You can generate precise and detailed estimates for a cost-plus contract and adjust project budgets dynamically as costs fluctuate. At the same time, you’ll enhance your overall efficiency, improve communication, and maintain customer transparency.

Cost-plus contracts offer greater flexibility and transparency, making them well-suited for today’s unpredictable economy. Compared to contract-price contracts, which provide upfront cost certainty for budget-conscious customers, they can strain builders in an unpredictable economy.

Choosing between a contract-price versus a cost-plus contract offers advantages and challenges. In a volatile market, contract-price contracts fall short for builders who face economic uncertainty, unpredictable material costs, and labor shortages.

Cost-plus contracts provide a flexible, transparent and adaptable approach to today’s economic uncertainty. Cost-plus contracts ensure that you can complete projects successfully and within budget.

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Transforming construction project budgets with construction management software

Let’s take a look at some of the more common problems with spreadsheets as identified by others who study business processes and efficiency. No doubt you’ll find some of these familiar.

1. Spreadsheets are not connected – the data within each does not easily flow together, forcing you to create connections by jumping back-and-forth into different files to pull together a big picture of your project costs.

2. Spreadsheets introduce human error – the more you and your team use spreadsheets, the more likely user errors will crop up in the different formulas hidden behind each cell. How will you know when a figure has been mistakenly calculated? What happens when you pass that bad data from one spreadsheet to other existing documentation?

3. Spreadsheets are not scalable – the more you grow, the more you need admin tools specifically designed for your business. The last thing you need is to be chained to your desk constantly fiddling with spreadsheets and figuring how to share them with your team. Who has time for that?

Competitive builders are increasingly turning to home construction management software to create online templates for both estimating and budgeting.

Because this project management software is designed specifically for home construction, builders find that software speeds up the entire process of planning and managing a construction project. And because it’s a cloud-based platform, all phases of a construction project can be managed from anywhere there is an internet connection.

How Buildxact benefits your residential construction project

Let’s take a look at how Buildxact speeds the creation of an estimate and construction budget.

With Buildxact, you can create an estimate from a template in multiple ways:

1. Create your own

2. Use a Buildxact premade template

3. Import an Excel spreadsheet with a prior estimate

4. Use an existing estimate from an existing Buildxact job.

We have a small sample here to quickly illustrate a few points.

Here, we have a task for a window installation that includes line items for labor costs and material costs. The line items allow you to define the costs based on counts you calculated using a digital takeoff tool that comes included with Buildxact. You also can include markup to cover overhead costs and local tax rates. Buildxact has all the details for you in one place, and Buildxact lets you decide how much of this detail shows up in the final customer bid. 

You can save this entire task as an assembly to reuse in other estimates you create, or you can use the entire estimate as a template for your next construction project. You choose how much or how little you automate your estimating. 

Now, let’s illustrate the point made about connecting estimating to construction budgeting: 

Here you can see that Buildxact’s actual costings report shows the same line items that were in the estimate. The same $3,600 task now has actual costs applied against that estimated budget and shows with color-coded tiles whether the task is under or above budget. In this example, the window task is in the green on budget at 76% spent, but the Electrician tasks below it are over budget as indicated by the 109% red tile.

All the expenses are displayed for the user as the user records purchase orders within Buildxact. There is no need to create manual budget reports by double-handling data.

Try Buildxact today!

This is just an introduction to the power of Buildxact budget reporting.

Forbes has listed Buildxact software as the best overall construction estimating software for the past three years. Forbes editors considered pricing, general features and customer reviews when compiling their list of the best construction software solutions in the market. 

Ready to learn more? Schedule a demo today with a Buildxact team member, or if you are ready to jump In and try it, sign up for a free trial today!

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Builders know that demand for home construction projects remains. The global shortage of new housing units remains high, according to Goldman Sachs.

Also, builders like you have noticed, in response to recent developments, many homeowners now opt for a renovation instead of a new build. In fact, 79% of homeowners say they would renovate before buying a new home, according to a recent Discover Home Loans survey of the construction industry as reported by Better Homes & Gardens.

With new home builds and renovations still in demand, builders need to be ready to estimate and quote jobs to a project owner as quickly as possible. Successful builders know that to maintain responsiveness to the customer requires them to act as an efficient project manager that has a keen sense of the project timeline. They must improve their overall efficiency and focus on specialized areas such as subcontractor management.

Builders need their labor networks to be ready and able to accept work and have the agility to steadily move from job-to-job. When doing so, you keep your subcontractor relationships fresh and avoid scrambling for skilled workers amid ongoing labor shortages. 

Subcontractor management processes and benefits

There are many tasks involved with building a home. Framing, hanging drywall, painting and installing flooring are just a few of the jobs that benefit from a specialist. 

In most cases, as a home builder, you don’t pay benefits to a subcontractor to complete this type of work done. However, you still have job management issues to consider. You need to have clearly written terms and conditions that govern scope of work, safety standards, variations, compensation and worker protections for your construction project. 

You will also likely need to discuss with an attorney any subcontractor agreements that govern payroll taxes, liability, insurance and overall subcontractor performance. It’s important to get the negotiations right because subcontractor expenses often total three-fourths of the cost of a home build.

Also, in today’s market you need to properly plan and schedule the work done by subcontractors. You need to confirm subcontractor availability, and project materials need to be onsite when the subcontractor needs them. Any delays in one subcontractor task can throw off the schedule for subsequent contractors and work teams. It’s also important to remember that rushing to catch up on a schedule can compromise safety standards.

That’s why it’s important to always have a high-level view of the progress each subcontractor is making on the jobs assigned to them. You need to offer timely and constructive feedback. The sooner you know a job is slipping from the agreed schedule, the quicker you can solve the problem so that it doesn’t impact all the subcontractors on your job site.

Finally, you need a centralized place to track and store subcontractor agreements, documentation of a subcontractor’s performance and subcontractor invoices. This is vital as you track costs against your budget. Keeping subcontractor costs under control is critical to maintaining your profitability.

Use the right software to improve subcontractor management

Document control

Today, builders like you need to spend more time on the job ensuring quality work proceeds as planned. You have less time for critical administrative tasks like takeoffs and estimating. Modern software helps cut administrative time because there is less paperwork 

Imagine not having to thumb through stacks of paper and files looking for important documents. With modern software, important subcontractor management documents can be stored centrally online for easy reference. Builders can also assign work orders to specific subcontractors to document expectations and deadlines. Work orders also can be used when it comes time to review a subcontractor’s work.

Job management

Once you’ve won a job and arranged for material and labor, it’s time to schedule your project. Keeping track of multiple subcontractors and the associated subcontractor agreement can be difficult and is particularly important as the length of time it takes to complete a home increases. Because of current labor and material shortages, it takes more than eight months to complete a home.

But modern software can help you manage this. Advance software allows you to create custom schedules directly from job estimates so that nothing is forgotten and all third party vendors are considered. You can store schedules for all tasks in one place where dependencies and progress can easily be monitored at both a high level and in detail using graphical software tools.

The best software also allows you to schedule jobs to specific subcontractors and notify those subcontractors contractors by email or text from the same tool.

Cost tracking

Of course, a critical part of your subcontractor management beyond scheduling is ensuring your supplier delivers quality materials to your job site on time and under budget. In this way, you are acting as the general contractor for your home build.

Modern software again helps you and project managers like you have more effective subcontractor management. You can access software tools today that create budgets straight from your estimate so that you can compare actual costs to your estimates. A single tool allows you to create work orders and receipts that directly connect to your budget so that you can have real-time updates as your project progresses.

Using the right software also saves you the time and hassle of importing data into different spreadsheets by connecting to widely used accounting software such as Quickbooks or Xero.

How to quickly improve your subcontractor management process

Whether just starting out or a seasoned veteran, builders like you need to constantly reassess your relationship with subcontractors and the tools you are using to manage these important resources.

Today, builders, project managers and construction subcontractors like you are more frequently turning to modern software to assist with their construction project. Buildxact offers an all-in-one platform for performing takeoffs, estimating material and labor costs and generating project schedules.

Learn more about pricing or begin working today with our friendly team at Buildxact. Book a demo or start right away with a 14-day free trial.

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This meeting—typically among you, the homeowner and architect—provides opportunity for the project team to ask questions and address concerns. Taking time to thoughtfully plan and prepare your home construction project saves you from numerous change orders and last-minute material substitutions and orders.

This meeting should take place soon after the homeowner and designer have drafted a scope of work and budget. As a builder, you want to discuss these two important documents to avoid signing on to an unprofitable project or committing to a schedule that you cannot meet.

You should also be careful when agreeing to jobs that have a lot of gaps in design detail. Negotiating projects like these often requires a cost-plus contract that carries a lot of administrative time for you to manage. 

With all this in mind, it may seem obvious to hold preconstruction meetings, but many builders neglect them. Let’s review why you should prioritize them.

Know the basics of preconstruction meetings

When planning your next preconstruction meeting, keep in mind three fundamental goals – review the job scope, define the job schedule, and optimize the budget and associated costs. 

Scope review

You need to review the project scope with your project manager, tradies and suppliers. This includes an onsite inspection of the construction site and confirmation that drawings have the detail necessary to determine what you can affordably build at the site. Additionally, you also need to ensure your dealer can supply all materials included in the specifications when needed.

Scheduling review

Accurate material deliveries depend on a detailed schedule. The project manager or general contractor needs to ensure the schedule maps out the availability of each subcontractor and trade team so that major components like trusses arrive to the construction site when needed.

This involves reviewing both internal project deadlines and project aspects as well as any external constraints. As a builder, it’s critical that you plan material deliveries with your dealer. Material shortages can cause you to miss the times when your tradies plan to be on your job site. You must remember to properly sequence work. No team should wait idle while material or equipment arrives to the job site

On average, material delays cost builders up to $5,000 per project.

Budget management

Having a preconstruction meeting will help your overall budget management. Expectations and dollar limits set beforehand ensure that all stakeholders remain informed of major milestones and their funding. This ensures proper cash flow to complete the project, and you lose no time to last-minute material substitutions. And remember, make sure the homeowner knows to approve all cost and material decisions for the entire project.

For example, it may be many weeks before interior work begins, but you and the homeowner must be clear on materials, associated costs and budget. You and the homeowner need to clearly itemize choices about doors, windows, flooring, paint.

When you do have to make changes, you raise your customer service when you use a system that easily incorporates costings, change orders and customer communication. Modern construction management software offers these capabilities typically at an affordable monthly cost.

Other benefits of a preconstruction meeting

Once you’ve agreed on the scope, schedule and budget, you have still other topics you can cover in your preconstruction meeting to boost productivity.

Set job site expectations

Throughout the job, you will be working with many different trades. Before a project starts you want to clearly establish quality expectations and explain to how your job site will run. You can discuss what time work crews should arrive and depart, safety procedures, and what clean-up should be done before a team leaves each day. Take the time to explain things clearly. Make sure everyone feels like engaged with the process.

Have transparency and clarity

It is important to be transparent with your team about your expectations and how they communicate to you. This means communicating your vision for daily operations as well as telling your team how they can provide regular feedback. Modern software designed for quick adoption by you offer features—like note tracking, online schedules and client portals—that make constant communication easy.

It is also important to be proactive in your communication and to keep everyone updated on the project’s progress. To be productive, it is important to have meeting minutes and notes that everyone can refer. Client portals make it easy to store notes and project photographs from a central location that everyone can access via laptop at your job site.

Avoid re-working jobs and costly delays

No one wants to constantly revise and re-do their work. This, of course, wastes time and money. As a builder you need to be on the job site supervising work, ensuring the right materials arrive as promised. Many builders like you use cloud-based construction software to cut down on administrative tasks that keep you pinned behind a desk. For example, integrated material supplier pricing, speeds up the time needed to submit orders with your preferred suppliers, and when needed, can the builder can place research orders from anywhere that has an internet connection.

Identify potential issues

Avoiding complexities and expenses during the construction process saves you money in the long run. Many builders find that learning how to use software tools like Buildxact makes them better builders.

Ready to learn more?

For more information about how construction management software can help you run preconstruction meetings, try Buildxact. Book a demo or free 14-day trial today!

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