By John Hinman, Managing Director with Nexus 5 Group
These are uncertain times. We receive pricing from vendors and subcontractors that say, “Good for 5 Days” or “Pricing will be updated at time of acceptance”. The good ole days of “good for 30 days or good for 60 days” seem to be behind us.
How do you discuss these uncertainties with your clients?
Steel pricing is up 91% since January 2021. Lumber prices have skyrocketed. For instance, a sheet of 7/16” OSB, pre-covid was around $6.78/sheet. And now it's going for $46.00/sheet. On top of pricing uncertainty (if you can even lock down pricing) the challenge becomes, material availability. From wood, drywall, metal studs, drywall mud, aluminum, glass, HVAC equipment, insulation, fasteners, to roofing... Basically everything and everywhere, there are shortages. What used to be off-the-shelf items are now 10-12 weeks to get or longer.
You may be asking, how are we supposed to deal with these uncertainties? How do you make money in these times? Do we pass the increases on to our clients? Do the suppliers eat the increases? Do we eat the increases? How do you hold people accountable and maintain relationship?
I have a few answers for these questions, but the solution starts and ends with communication and trust.
Communication and Trust
Being up front with our clients and vendors strengthens the foundations of trust. When challenges come, hit them head on. With candor comes respect. When people know the challenges that are lurking, they can adapt and adjust. Not knowing causes issues all around. Often, the response is good and there is a sense of relief because you're being honest. This only works when trust exists, and trust is built with this kind of honesty.
Today, the issues are commodity availability and pricing, tomorrow it might be a mistake that your team or subcontractor has made. The same goes for every scenario. Honesty and integrity go a long way.
A quote from a client, who I have worked with for over 15 years said, “I know things happen, this is construction, there are a lot of moving parts, what I remember is how you handle the issues as they arise”. I have repeated this quote many times over the years as I encourage team members and colleagues around me to live with honesty and practice candor. Plan for the worst and hope for the best, typically things will work out.
Absolutely, we need to be smart about how we are wording our contracts with clients and subcontractors, that’s simply good business. But relationships and trust will carry you through the rough waters.
So where are my windows???
Just recently we had to have a tough conversation with a client regarding aluminum frames for the fronts of all their offices. We had done everything within our power. We ordered the aluminum prior to having a contract. And our subcontractor was informed by the manufacturer that the material was in fabrication and would be delivered on time. At the last minute, we received a call telling us the manufacturer could not get the raw materials to be able to start fabrication and that the aluminum “might” get delivered in 10-12 additional weeks (after originally scheduled).
The issue: The client is moving into their beautiful new space in 4 weeks. Ouch is right.
So, here is what we did: We called an emergency meeting and discussed this issue with our client and informed them of the situation. We talked and brainstormed what this could look like and how they might function until the aluminum and glass on the fronts of their offices arrived. At the end of the call our client simply said, “Thank You”. This response came from a history of trust that had been built over time with honesty and candor.
Don’t skirt the issues, tell it like it is…. This is the Nexus 5 Group way. This is what Serve Well is all about, and this is the foundation of the N5 Experience.