You’re caught between progress claims that work for your business and banks that don’t understand custom home construction.
This clash over progress claims is quietly destroying good builders like you. But what if the solution isn’t compromise, but taking control?
Every day you’re forced to fund someone else’s project with your working capital, you’re:
- Risking your business’s financial stability
- Limiting your ability to take on profitable work
- Creating unnecessary stress that affects every part of your life
- Essentially working as an unpaid bank for clients who should be securing proper financing
Most builders think they have no choice. They believe saying ‘no’ means losing the job, so they accept the risk and hope it works out.
When you know your numbers and communicate your standards clearly, everything changes. You’re walking away from projects that don’t meet your payment terms and thriving because of it.
Here’s exactly how Amelia and Duayne help ELEVATE members take control of this situation and protect their businesses.
Watch the video now, or read the transcript below. Be sure to also subscribe to the Live Life Build YouTube channel.
Amelia
We know that one of the challenges in the industry is that when builders are working with their contracts, and particularly in the custom residential industry, they’re trying to structure their progress claims with more detail, more regular payments, so that they can manage the cash flow and their projects more effectively.
If their client is financing their project with a bank, they’ll take that contract to the bank, and the bank can often say,
“No, we need to see less progress claims. We need to see this chunked down into bigger stages, similar to how a project home builder or a volume builder would do it.“
And then the builder has to deal with the fact that they’re potentially going to be cash flowing this project, or they’re not going to be able to get it financed for the client.
Duayne
We’re definitely at Live Life Build, in our ELEVATE program, we really encourage our members and teach our members to push back.
At the end of the day, it’s your business.
You’re the builder, and it’s completely up to you to run the business the way you need to run it for you to run a sustainable, profitable business. And if that means pushing back on the bank, then that’s what you have to do.
So many banks and clients don’t understand the financial situations that builders are in, and 9 times out of 10 don’t understand the structures and the payments.
So when we get work done on site, or we get material delivered, especially if it’s a custom order or a smaller business that’s contracting with us, a lot of those people are paid straight away or within 7 or 14 days.
It’s really, really important for you as a business owner to structure your draws or your progress claims during your projects in a way that allows your business to have a healthy cash flow.
Clients and banks shouldn’t be expecting you as a builder to fund the project.
Amelia
What’s amazing is that when we actually start working with our ELEVATE members on this kind of solving this puzzle in their business and dealing with this challenge, is they start to realise that it’s actually more worthwhile to walk away from jobs where they can’t get this across the line.
Because if you’re constantly hitting this wall of a bank saying, No, you just need to structure it differently, it’s going to inevitably mean that you actually have to find the way to cash flow that project, and that can be a huge risk for a builder.
We’re seeing our members realise that it’s actually just worth walking away.
And what’s amazing then is it gives an opportunity for the client to realise how important this is,
- that it’s not the builder’s responsibility to cash flow this job,
- that the client and the bank have to work it out.
And oftentimes I see that clients will go and look for another lender, they’ll speak to a different broker, and they’ll figure out a way that this can work, because our contracts and the bank system don’t work for custom residential builders unless they’re educated about how a custom residential business actually runs.
Duayne
Everything is all focused around the larger volume builders.
I know from my own building business that we still run very successfully and so many ELEVATE members now, when you change your mindset, and probably more importantly, when you understand your numbers and your cash flow and what your business needs to operate, it makes it very easy for you to take control and push back.
A lot of builders feel that they can’t push back because they’re in a situation they need that project to fund the next lot of bills, or whatever the case may be.
We’ve found that when you actually include this as part of your pre-construction process, and you inform your clients that you set up an example, or you might give them a document that sort of explains how you do your progress draws.
Give that to your broker, give that to your bank very early on, so that you’re setting a clear expectation with your clients and get them to check that with their bank, because we make it very clear in my building business, if you won’t accept our payment draws, we will not do the project.
And literally, that’s how blunt you have to be with it.
Clients and banks shouldn’t be expecting you
as a builder to fund the project.– Duayne
Amelia
Think about how you’re onboarding your clients in their projects, when you think about how they’re going to finance their projects, and understand if this is something that you should get ahead on, actually have the conversation.
Show them a template of how you’re going to structure your progress claims, so that they’ve got the opportunity to speak to their bank ahead of the contract being signed.
And you can ensure that the contract and the progress claims are going to be structured in a way that’s going to work for the cash flow of your business, so that you’re not carrying all of the risk for the project in cash flow.
Duayne
The other really important part of this is, if you’re not setting these expectations and setting these standards at the start of the project, you’re basically giving the client to push back on everything that you want to do during the project.
So this is a perfect opportunity right at the beginning to set the standard of how you run your business and work with the client to come up with a solution that suits you.
Remember, it’s your business.
Stop Funding Other People’s Projects
This isn’t just about progress claims, it’s about running a business that works for you, not against you.
When you implement this approach, here’s what changes:
- Your cash flow becomes predictable instead of a constant gamble
- Clients understand your value from day one
- Banks adapt to your terms or clients find ones that will
- You work with people who respect your expertise
- Your business funds growth, not other people’s projects
Every successful ELEVATE member has had to make this shift from hoping clients and banks will be reasonable to setting clear standards and sticking to them.
You know your business better than any bank officer. You understand construction cash flow better than any client. It’s time to act like it.
Your business. Your rules. Your choice.
Discover how our builder members are taking control of their businesses, setting profitable boundaries, and creating the success they’ve been working towards.
Learn more about the ELEVATE here.