Four Steps to Eliminate Change Orders and Grow Business

Since 2015, Fabian Videla has doubled the size of his business using a system that produces almost no change orders. He’s become so confident in the system that he now offers customers an on-time, on-budget guarantee.

“We have become very good at this,” said Videla, president of Smarter Remodeling, a 2018 Remodeling Big50 honoree. “Now customers know that if we sign a contract for $50,000 ,it’s going to be $50,000 unless they change things.”

Videla, who’s been in business for nearly 20 years, said too many remodelers rely on change orders to increase budgets rather than telling customers up front what things will cost. “I particularly hate change orders,” he said. “I don’t like hitting customers with things we know we’re going to deal with later in the process. So we go ahead and price everything up front so the customer doesn’t have any surprises.”

He said giving customers an accurate budget is also good for his business. “Before we started using this system customers didn’t have realistic budgets. We were putting out too many bids and getting too few jobs,” he said. “We talked to some of these customers and the typical answer was, ‘Well, I didn’t know how much it would cost.’ So I said, ‘Why don’t we take the time to gather all the bids?’”

While that sounds good in theory, many contractors struggle with achieving the goal of accurate upfront cost estimates—let alone no change orders. Here are the four steps Videla uses to eliminate change orders—and why they work.

Establish a Paid Design
Once Videla does his initial visit and offers a ballpark estimate, he asks customers to pay for a preliminary design to provide a detailed estimate. Videla settled on paid designs after realizing he was “chasing too many ghosts.” Paid design work is both a good way to value his team’s work and qualify customers. “A lot of customers aren’t ready to do this project. But we have limited time and can’t afford to spend it on customers who aren’t ready,” he said. “When they spend money on a design, it shows they’re serious.” Depending on the complexity of the job, design fees can range from $500 to $4,000. If customers continue with the job, the design fee is subtracted from the final cost. And most of the time that’s the case, as up to 90% of customers who sign a design agreement move on to the final job.

Bring in the Trades
After the design is drafted and the customer has signed off, Videla brings in all the trades the project will require to work up a detailed estimate. He said this step is crucial to eliminating change orders. The trades spend considerable time— hours, not minutes—at the site looking for any issues that will affect the cost, such as power lines that might be in the way of an addition. “I don’t know how people think a contractor can price a job in two or three hours,” he said. “It’s extremely hard to come up with an accurate number that way.”

Then the whole group goes back to the office to discuss the different issues. “I’ve seen other projects where the trades are like, ‘That’s not my problem,’” Videla said. “We work together as a team.” All the trades are paid for their time and Videla has long-term relationships with all of them. “A lot of contractors don’t have established relationships with trades. We don’t work with trades that we just got acquainted with,” he said. “They’re trained in all our procedures and systems.”

Write up a Detailed Cost Estimate
Detail is the key word in this step. Once the trades have submitted their reports and pricing, Videla’s team makes a detailed list of all job specifications right down to the color and style of the hinges for the doors. “It’s everything the job is going to require from the foundation to the roof,” he said. Once that spec sheet is completed, Videla can confidently tell the customer what the project will cost. “If I decide a project is going to be $60,000, it’s going to be $60,000. It’s not going to be $100,000.” While this guarantee makes the customer more comfortable, it also helps the job run smooth for Videla, since his teams know in advance everything they’ll need at the job site. “We don’t have to guess when we get to the jobsite. It’s all on the proposal,” he said.

Create a 3D Rendering of the Project
With the specs in place, Videla now creates a 3D rendering, complete with all the specifications the customer agreed upon. This step allows the customer to see what the project will look like and make any last minute changes they might want to make. While Videla is happy to make changes during the job, he’s careful to remind customers that any changes they make will affect the final cost.

In the end, Videla said using this detailed estimating system is just a better, more efficient way to do business. “This allows us to get the projects we really want, and the ones we do are done right,” he said. “The customer is happy. The trades make money. And we move on to the next one.”