Episode 460: Why Starting Projects Too Soon Is Killing Your Profit

00:00
What if getting a construction project started sooner is actually one of the reasons it finishes late. And what if that decision to let’s just get started, it’s quietly costing you tens of thousands of dollars in profit every time you do it. There’s a type of loss production. There’s a profit bleed that I see inside construction companies that almost nobody tracks. They’re called dead days. And on a company burning $2,000 a day in overhead, just a few of them can get really expensive.

00:30
Really fast. I’m going to show you exactly what a dead day is, what causes them and how to eliminate them in your construction business. But first we need to talk about the mistake, the number one mistake that creates those dead days. Hey, I’m Todd DeWald, founder of Construction Leading Edge from constructionleadingedge.com. My team and I help custom builders, remodelers and commercial GCs systematize their construction business so they can get out of day-to-day operations, build companies.

00:59
that run without them get their life back. So let’s talk about why getting a job started by doing just enough to start can actually be the wrong goal. One of the problems is that construction companies and teams are rewarded for movements, right? Everybody wants to see activity. They just want to see sawdust and they want to smell diesel fumes and they want to see demolition and they want to see dirt getting turned over. Customers want to see activity.

01:29
People want to get started. The owner, the business wants to get that first invoice in. They want the billing to get started. They want cash to start flowing. Everybody’s staring at the start date. Everybody’s in love with getting started. So the conversation usually sounds something like this. Hey, we don’t have everything finished out, but we’ve got enough. We’ve got enough to get started. We’ve got just enough to start. And that sentence alone causes a lot of problems. I’ll explain exactly what that looks like.

01:58
in just a few minutes. The drawings are almost finished. We’ve got enough things selected, got enough selections done to get started. We know the first couple of subcontractors are going to do the work. We could figure out the remaining stuff later. We’ll get the long lead stuff handled and then we’ll catch up. Once we get started, we’ll catch up once framing gets going. And the dangerous phrase is, we’ll catch up. That’s a

02:26
delusional phrase, we’re going to get caught up. But once a project gets started, the production creates its own workload. And here’s what that looks like. This is the just enough to start trap, the JETS trap. 90 % of contractors are stuck in it. They don’t know it. They can’t get out and it’s keeping them stuck. Here’s what it looks like. It’s some combination of

02:49
doing things like free estimates, plugging in allowances and getting started and reconciling them later. Plug numbers for unknown scopes, starting with missing selections, fast tracking projects, even before the design is complete, just in time ordering, just in time selection of subcontractors, then finding out, oh, there are scope gaps, things we missed. This is classic. We’ll figure it out later. This is a controversial take, but cost plus.

03:18
Contracts automatically can put you into the just enough to start trap people have abandoned Big stacks of dusty standard operating procedures that don’t work. They’ve signed up for software hoping it’ll fix it, but it doesn’t Complex schedules and this is the just enough to start trap some combination of this and here’s what it looks like if you were to look at a basic project schedule It’s where you do enough pre-construction to get started

03:47
And then you kick off construction because you need to get started and you continue to do what should be pre-construction during construction and where there’s overlap, there’s chaos. Chasing down selections with clients, light fixtures, countertops, plumbing, flooring, tile, all the way down to the most minute detail like, Mr. and Mrs. customer, do you want the brushed chrome anodized aluminum or the brushed nickel anodized aluminum?

04:16
superintendents and project managers are coordinating with utility companies, trying to drive the architects with their funny glasses and their, uh, maybe their little dogs they bring out to the job sites, trying to drive architects to complete their work, then managing the tornado of changes caused by all of this stuff. And then finding suppliers and trade partners, negotiating pricing and terms, and hopefully managing the budget and the risk, probably not all while building.

04:45
This is the just enough to start trap and when they have questions. Who do they call? They probably call you right? Does that sound familiar? In other words, now your PM and your Superintendent, your lead carboners are trying to build the project while simultaneously finishing up the planning that should have already happened. They see you haven’t eliminated the unfinished pre construction work, alright?

05:15
You just pushed it off. These are all things that should be done during pre-construction. That’s why it’s called pre-construction, right? And this is where something very predictable happens. You start the project behind, you tell yourself you’ll catch up later and you just never do, right? Because another project starts up and you’re stuck in firefighting. Recently, I was talking to the owner of a construction company doing about $5 million worth of custom building and remodels.

05:45
And when I asked him to grade his handoff in the office to the field, he gave it a D. And he said he had fallen into this just enough to start trap. Their mindset was, let’s get moving. We’ll get caught up by framing. And they just never got caught up. Instead decisions got made later than they should have. As a result, the team lived in nonstop fire drills and the unfinished planning on one project started stealing the capacity they needed.

06:14
properly prepare the next project. So if you think about stacking up multiple projects and you have all this chaos going on, it’s very difficult to plan. And that’s the part I want you to notice. This doesn’t stay isolated to one project. It spreads, it’s contagious, and it gets into all of your other projects. Now, before we go any further, I want you to think about the projects you have running right now. How many of them started with some level of this just enough to start trip? How many of them started with selections that weren’t made? How many started?

06:44
before every subcontractor was committed. In other words, before the project was bought out. How many started with long lead time, still floating around, maybe things falling through the cracks. How many started because the calendar said it was time to start, because the customer said it was time to start, or because your bank account said it was time to start, rather than because the project was actually ready to start. So if you’re mentally counting up and naming these projects right now, then keep on watching because…

07:12
We’re going to put a dollar amount on what that is costing you. Now, if you’re realizing that the buyout phase is one of the places where your jobs are getting loose before they even start, I’ve got something that is going to help you. It’s our free how to buy out a project playbook. It’ll show you how to get your subcontractors committed, how to clarify scope, how to get materials locked in, how to identify long lead items and go into production with a much

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cleaner plan instead of trying to buy out the project while you’re building it. You’re doing this already. You’re doing the buyout. You’re identifying your subcontractors and suppliers. You’re probably just doing it much later than you should. So click the link below, grab your how to buy out a project playbook. You can use it on your next project that you’re planning to hand off because here’s the deal. Incomplete buyout is one of the easiest ways

08:08
that a small pre-construction gap turns into a very expensive production problem. And that brings us back to those dead days that I mentioned at the beginning, because this is where the money starts disappearing. Just disappearing and nobody understands where the money is going. So here’s what a dead day is. A dead day is a working day on an active project when meaningful production could have happened, when you could have done some

08:36
revenue generating activities. could have done some billable work, but it didn’t. Maybe there was a crew on site, but you didn’t actually do any billable work. Maybe no subcontractor actually showed up. Nothing meaningful was installed. The project didn’t move. No revenue, zero billable work, but your company still existed that day. The meter continued running that day. You still paid salaries, insurance, trucks, software, rent, office staff, supervision.

09:04
project management and every other fixed overhead expense required to keep your company alive. Everything that’s required to keep the doors open. That day is gone forever. You can’t sell it again. Time is a non-renewable resource. You can’t get it again. You can’t manufacture another Tuesday and put it back into the schedule, but you didn’t actually do any work. You didn’t have any revenue to put against that day of overhead. And here’s why dead days are so dangerous. They usually don’t look expensive when they happen.

09:34
Right. There’s no line item on your P and L called dead day, $2,000. You’re not getting an invoice. know, it doesn’t show up on your bank account, but it’s there. It’s a hidden profit bleed. You can’t see it, but you’re probably feeling it. So let’s put that number in there ourselves. Let’s take a simple construction company. Their annual overhead is $500,000. Right. And then typical year has about 250 working days per year. That means the company burns.

10:04
$2,000 every working day. Their daily burn rate just for overhead, $2,000 per working day, just to exist, just to keep the lights on. Now imagine the company loses about three days of production per month across all of their projects. In other words, they have three dead days, 2,000 bucks a day times three, that’s $6,000 a month in dead days. They have four dead days, that’s $8,000 a month. That’s $96,000 a year.

10:33
And remember that’s only the overhead daily burn rate. haven’t counted the profit this company could have generated those days. We haven’t counted the additional supervision costs, lost productivity. If you have labor on the jobs, haven’t counted remobilization. We haven’t counted the next project that now starts later. And we definitely haven’t counted what happens when the client starts wondering, why hasn’t anybody been on my job site all week?

11:01
Why is there nothing happening? Why is my job behind schedule? Now, before you write this off as theoretical math, let me give you a couple of examples from some actual construction companies that we’ve evaluated. One remodeling company that I evaluated a few months ago was doing around seven or eight million dollars a year. And when we dug into it, it became clear that their handoffs were inconsistent. When they graded it, it was like a B minus or a C level.

11:30
They described a lot of project questions coming up in the middle of the project. Subcontractors didn’t fully understand what was expected. Didn’t have clear scopes of work. Materials were being reordered. Projects were getting delayed and customers were starting to lose confidence. And when we went through a profit bleed analysis, they estimated that their dead days alone were costing them $40,000 a month. $40,000 every month.

12:00
Not because they needed more leads, not because they couldn’t sell work. They already had the work. They had the team, they had the customers, they had the subcontractor base. The problem was converting that backlog into profits. That was the problem. $40,000 a month was the cost of dead days. Another custom builder told us his homes were taking twice as long to build as they were previously. As we dug into it, schedule delays had become one of their biggest problems.

12:30
When we dug into why that was happening, their handoff was about a B minus and they acknowledged that projects sometimes, maybe usually started with important details and owner decisions still hanging out there, still unresolved. So here’s the deal. A few dead days on one project can look annoying. A few dead days multiplied across your entire backlog becomes a profit problem. And here’s the thing, as it is with a lot of things, it only adds up

13:00
when you add it up, right? It only adds up when you add it up. So if you’re doing this math right now you’re thinking crap, this is happening to us. These dead days are kicking our ass. Then this next part is for you. So if you’re hearing this and you’re thinking we have way too many dead days, too much just enough to start trap, this is probably bigger than a scheduling problem. All right. So as I told you, some of these companies that we’ve evaluated,

13:26
They’re starting projects before they were truly ready. Their handoffs were incomplete. Selections were still open. Buyout was happening too late. And as a result, the field was forced to figure things out as they went. This resulted in delays, rework, frustrated clients who lose confidence and start to pick apart everything. And they pull out their microscope every time you send an invoice in. And then there’s a massive amount of profit bleed just bleeding out of the business. And that’s exactly what we look for.

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on our free 45 minute business evaluation calls we do with qualified companies. We’ll grade your office to field handoff. We’ll identify how much hidden profit there could be in your business. You may be thinking we need to grow so we’re profitable, but what if you just need to keep more of the profit that’s already in your company? That’s what we’ll do. We’ll show you the systems that need to change to get your projects and your business running more predictably and get your business running

14:25
more profitably without you. Wouldn’t that be great? And if we can help you implement this, we’ll show you how. If not, we’re going to leave you better than we found you. You’ll leave still knowing what’s broken and what to fix first. So if you’re a custom home builder, remodeler, or a commercial GC doing at least $2 million a year, click the link in the description or in the show notes to book your free business evaluation call. Or you can go to constructionleadingedge.com forward slash apply and book your business evaluation call.

14:54
Hey, Todd here. Let me know if this sounds familiar. Your phone never stops ringing. Every subcontractor question, every supplier issue, every schedule change, every customer request lands on your desk. Instead of leading your business, you’re spending all day managing the details of putting out fires. Sound familiar? And you probably want your business to grow, right? But when you’re already stretched thin, the gaps in your business start to grow too. And that’s when things start to fall apart. Here at the Construction Leading Hedge podcast,

15:24
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15:52
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16:22
text the word EDGE to 55123 or click the link in the show notes or the description to take the first step. Now, here’s where most owners misdiagnose the problem. They see an empty job site, they see schedule delays happening, and they blame the superintendent saying, our superintendents need to get better at time management. We need to get them Franklin Covey planners from 1995. they’ll do blah, blah, blah, whatever. They blame the subcontractors. They blame the customer for being indecisive and not

16:51
being able to make decisions, they blame the supplier, they shrug their shoulders and say, eh, construction is chaos, right? Which is horse s**t. Construction is not chaos. Chaos is a choice. But a lot of those dead days were actually created long before the day the job site went quiet, sometimes months earlier. The dead day shows up in production, but the cause usually lives in pre-construction.

17:20
It lives somewhere else. If you’re trying to fix your dead days on the job site during production, you’re barking up the wrong tree. The root cause is somewhere else. So let’s trace these dead days backwards. I’m going to go over our five root causes of dead days. I’ve spoken with close to a thousand construction business owners over the past 10 years. I spent over 20 years managing projects and teams and companies. And I can tell you, these are the five root causes of dead.

17:49
So if you want to eliminate these dead days, take some notes. This is where you need to look. Root cause number one, late selections. You start the job with selections still open. Everything looks fine until production reaches the point where it needs that answer. Hey, we need your tile selection. Tile guys showed up next week. We need your plumbing fixtures, cabinet details, appliances, flooring, hardware, whatever it is. Suddenly the job comes to a screeching halt because production reached the decision.

18:17
that pre-construction never finished. Production didn’t create the delay, production just discovered it. The second root cause of dead days is incomplete or late buyout. The project starts, but subcontractors and suppliers haven’t been locked in yet. They’re not fully committed. The scope isn’t clear. The pricing hasn’t been finalized. The purchase order or subcontract agreement hasn’t been issued. Materials haven’t been locked down. Long lead times have not been accounted for.

18:46
And for a while, production stays ahead of this problem that’s hiding in the project. And then eventually production catches up to procurement. And when production catches the unfinished buyout process, something has to stop. Root cause number three is missed scopes of work. Something falls through the cracks. Something gets overlooked during the estimating or the pre-construction process. Maybe the responsibility was unclear. Maybe they assumed it was owner furnished. Maybe they hoped.

19:16
That the subcontractor picked it up. Maybe everybody assumed that somebody else had it. Maybe it was discussed verbally. Maybe somebody said they told you it was going to be in their scope of work, but it was never documented. Now the field team discovers that net creates phone calls, questions, pricing, rework, yelling, profanity, change orders, rescheduling and remobilization and potentially very likely more dead days.

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Root cause number four, long lead materials. This one gets blamed on vendors constantly, right? We can’t get our window package for eight weeks. That wasn’t a surprise. They didn’t change the lead time suddenly. You just didn’t know about it, right? All right. When did you know you needed the window package? The lead time itself may not be the real problem. The real problem may be that nobody worked backwards from the installation date and determined when that material had to be released.

20:14
They didn’t think backwards and think, okay, we need to order the window package on this date, which means we need to have approval by this date. We’re going to have to build a mockup to get approval. And then we’re to figure out all these other details. Nobody did the scheduling and worked backwards. So the real problem could be that nobody worked backwards from the installation date and determine when that material had to be ordered. Right. That eight week lead time didn’t surprise you. Your planning process allowed you to discover.

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to discover it too late. Root cause number five, late client changes. Clients are going to change their minds. That’s construction, right? But here’s the part that a lot of contractors miss. When a late client change stops production for two or three days, you need to, you may charge for the material and the labor, the subcontractor cost, maybe you add markup, but did you charge for the dead days?

21:14
Right? Did you account for the overhead burn created by pushing the schedule? Did you account for the downstream disruption? If not, the change order may look profitable on your job cost report, but it could still be costing you money. Right? So all five of these issues look different, but they all have one thing in common. They all come back to how the project enters production. How is the project handed off to production?

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There’s a thinking pattern underneath all of this. call it left to right thinking. Left to right thinking is if you think about a schedule, you’re operating from left to right. And left to right thinking says, we’re just going to get started. We’ll do the best we can with what we have. Here’s what we know. Here’s what’s ready. Let’s start. I’m excited to start. I love to start things. We’ll figure out the rest later.

22:08
We’ll work around the problems. We’ll cross that bridge. We’ll burn that bridge. When we get there, we’re going to make it happen. We’re get shit done kind of guys, right? We’ll figure it out. And construction people are really good at getting shit done, really good at making things happen. But that strength can become a weakness because we get so good at rescuing poorly planned projects that we start treating poor planning as normal. That’s the left to right thinking. Let’s just get started. We’ll hit an obstacle. We’ll figure it out.

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We’ll hit the next obstacle and we’ll just be get shit done kind of people, right? The alternative is right to left thinking. Right to left thinking says, we’re going to start with the end in mind. We’re going to start at the right side of the page and we’re going to work backwards and we’re going to ask questions like, what would it take to make this happen? In other words, we will create the plan and then we will compel events to meet the plan. We will create a plan.

23:08
We will establish the desired outcome and then we will compel events to meet the plan. We’ll start with the production outcome, finish dates. The start dates could be what a complete handoff looks like. And then we’ll work backwards and ask questions like, what would it take to do this? What has to be true before we get there? What has to be selected? What has to be ordered? Who has to be committed? What scope has to be clarified? What information does your superintendent need?

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to have a fully handed off project. Let’s give them everything they need to finish the job. What would it take to give them everything they need to finish the job at the handoff? What decisions need to be made now so production does not have to stop later and figure it out? And this leads to the big idea, all right? You need to start slow to finish fast, right? The goal here is not to delay projects intentionally.

24:08
All right, the goal is to stop confusing starting with progress. All right, a lot of people confuse starting with progress. They think starting fast is the key, but the key here is if you want to finish fast, you need to start your projects slow, right? Because a fast start with a slow middle is not a fast project. Okay, so if you want fewer dead days,

24:35
The key here is to start slow to finish fast. And if you want to start slow, what that looks like, the solution is to nail the handoff. Think about handing off your projects from the office to the field and giving your field teams everything they need to finish instead of just enough to start. And there are three major pieces to nailing the handoff. Number one, step one, finish the selections before handoff. The superintendent, your project manager should not be doing pre-construction from the job site.

25:04
They should not be chasing down selections. The goal is simple, right? When production needs an answer, that answer should already exist. It should be in the system. It should, there should be a single source of truth where everything is already selected and their job should be to execute the project. So get the selections made, document them, make sure the field team has access to them. This does not mean that customers will never change their minds. There are some things you can do to lock in that expectation.

25:31
But it means that you’re not intentionally starting projects with preventable uncertainty. So think about this, when your field team needs a client decision today, how often was that decision supposed to have been made weeks or months ago? Right? That number tells you something. Step two is fully buy out the project before you hand it off. Before production begins, subs should be committed. All scopes should be clear. Pricing should be agreed to.

26:01
Long lead materials should be locked in, ordered, purchase orders or subcontract agreements should be ready. Your field team should not have to find subcontractors to pour the driveway or decide who’s going to do the HVAC on this project. If you begin production while you’re still buying the project out, production will eventually catch up with the buyout process. And when it catches it, you guessed it, dead days. That’s exactly why I gave you that buyout playbook earlier.

26:32
Click the link in the description of the show notes if you want to get your hands on the how to buy out a project playbook step three. This is the key that a lot of people don’t think about, but this is what we’ve seen a lot of changes with step three is to create clear accountability for pre-construction. Right? This is the part that a lot of companies miss. They have a checklist, they have builder trend, job, tread, co-construct or some other system. They have a pre-construction process, but nobody.

27:02
is really accountable for the final outcome or the wrong person is accountable for pre-construction. So if everybody is responsible for getting a project ready, then nobody’s responsible. There’s an old saying, the best way to starve a horse is to have two people feed it. So if everybody is accountable for pre-construction, then nobody is accountable for pre-construction. Here’s the thing. One person needs to own the question, is this job ready for production?

27:32
Not, can we get started? Right? Not, can we keep the client happy by getting somebody on site? Can we just get some guys out there and get started? The question is, have we completed the right things that need to be completed so production can flow? So the key, this is an organizational design issue, create clear accountability for pre-construction. And that needs to be somebody who is not on your production team. One of the biggest levers you could pull.

28:01
is to separate accountability for pre-construction from accountability for construction. Our clients have seen great results when they create a team that is accountable for pre-construction. So they create that handoff. So the question is who should be accountable for pre-construction? And the answer is somebody separate from production and it’s probably somebody separate from sales.

28:30
All right, now let’s talk about growth because growth gets dangerous if this just enough to start trap lives, right? If you’re dealing with the this just enough to start trap, the this can get dangerous as the company gets bigger. So if you’re inefficient at a million dollars a year, three million dollars a year, and you grow to six million dollars a year, you haven’t solved the inefficiency. You may be thinking we need to be more profitable. Therefore we need more leads, more sales. We need to hire more people.

29:00
But if you throw more people, more sales at an inefficient company that’s already dealing with just enough to start trap the inefficiency and the chaos grows exponentially. You may have just doubled the problems because more jobs or customers means more selections, more trade partners, more purchase orders, more handoffs, more material releases, more unhappy customers to deal with and more opportunities for something to slip through the cracks. Growth.

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doesn’t fix inefficiency, it amplifies it, right? Sort of like if you come up to a small fire and you throw gasoline on it, you’re not going to put that fire out. It’s going to explode. And that’s what happens. Unfortunately, when a lot of companies, they try to outgrow, they try to use growth or sales to eliminate inefficiencies. It just makes it worse.

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That’s why so many contractors grow revenue dramatically and they grow their team and they think, why aren’t we making more money? Why aren’t we actually making less money than we did before? Right? Revenue increased, but complexity increased, payroll increased, overhead increased, the daily burn rate increased, but production efficiency did not. It actually gets worse. Now the same weak pre-construction process is feeding twice as many projects. And that’s

30:21
how a company can get busier, they can grow revenue, they can work harder, and still feel like the money is disappearing. Now want you to think about the opposite. Imagine a scenario where your superintendent starts a project with everything they need. There’s a good handoff. They have everything they need to finish instead of just enough to start. The selections are made. Trade partners know the scope. Materials are coming in when they’re supposed to. The project is fully bought out.

30:50
They have subcontract agreements. have purchase orders issued. have pricing locked in long lead time. Issues and materials were handled months ago. Permits were handled months ago. Your PM isn’t spending half the day figuring out things that should have already been figured out. Jobs move. They start slow, but they move fast. The dead days decline. Schedules get tighter. Margins improve. And there’s another important benefit. The customer sees momentum.

31:21
They don’t keep driving past a project and wondering, where is everybody? It seems like people are only here like two or three days a week. They aren’t emailing what’s going on with my job site. They aren’t beginning to scrutinize every invoice and every decision because they’ve lost confidence. They see a company that has the project under control because consistent production creates profit and client confidence. Right? That’s what we want. Those are two things we want. So.

31:50
Here’s the idea I want you to remember. Starting sooner, as tempting as it may be, does not necessarily mean finishing sooner. In fact, in many cases, the faster you start, the slower you’re going to finish. When you start before the project is fully ready, the unfinished decisions don’t disappear. They just get kicked down the road. They follow you into production. Eventually production catches them and that’s where you get dead days. And those dead days burn overhead. They drag out your schedule. They push back.

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the next project, they eat into your profit and can eventually start eroding the client’s confidence. So if you want to finish your jobs faster and more profitably, start slow. Nail the handoff, finish the selections, buy out the project, make it clear who is accountable for pre-construction, who’s accountable for handing off the project because the goal

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is not to get started. The goal is to finish profitably. So if you’re recognizing this is your company and you’re thinking that is, and that sounds familiar. These dead days are killing us. The just enough to start trap is killing us. You don’t have to just keep living with it. The key is to nail the handoff. We’ve helped hundreds of companies do this. If you want our help, go to

33:14
constructionleadingedge.com forward slash apply to schedule a business evaluation call with my team. It’s for companies doing at least $2 million in revenue a year and you have a team. We’re to help you identify where the profit is bleeding out. How much hidden profit could there be in your business and what needs to change so your business and your projects can run more predictably. So you can have more freedom, more profits or both.

33:43
or make your business run without you. I’m Todd DeWalt from constructionleadingedge.com. If you get some value from this, me a favor, hit like, subscribe on whatever you’re watching this, leave a comment and let us know how we can help. And I will see you next time.