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.