There was a day when all you needed to enter the building trade was a hammer, a saw and a bag of nails. But to be a successful builder in today's hard-scrabble economy, you need to maximize all aspects of your business, including your subs, and the best way to do that is through automation. While some subcontractors -- and let's face it, even some builders -- might fight you kicking and screaming when you mention technology, those who have embraced it have garnered numerous benefits.

Sure, there might be some subs out there who still don't even have a fax machine -- let alone a laptop or PDA with a wireless connection to stay connected in the field -- but if the sub is worth keeping, there are ways to work that out. Builders who have automated their companies have found that not only does their business run more efficiently, but their bottom line grows as their cycle time decreases.

Automation can help your company by not only helping you focus on areas you are trying to improve, but by getting your subs to become a fully functional part of your team to boost everyone's bottom line.

Benefits of Automating

How to get subs automated was the subject of a seminar at the 2006 International Builders' Show in Orlando, Fla., in January. The panelists included software developer William Allen of William A Allen Consulting; software provider Rick Corry, CEO of BuildLinks; builder Brad Ervans, COO and vice president of Cypress Homes in Fort Myers, Fla.; and moderator Maggie Geoffroy, vice president and director of sales and marketing at Construction Data Control, Inc. Each agreed there are many benefits to incorporating technology into the building industry. It helps facilitate communication, reduces cycle times, streamlines back-office functions and creates happier homebuyers.

One of the keys to ensuring a productive construction site is communication. Schedules, purchase orders (PO) and change orders mean nothing if they are never received. Having an automated system to not only deliver, but also acknowledge receipt of these crucial documents is one of the best ways to help a job run efficiently. "Not having to handle and re-handle paperwork makes for a better cycle time, which equates to more money," Allen says. "Electronic devices help you know the other person received the information you sent out. If you need to acknowledge a contract, give a bid, or know a PO was received to start a job, you get right to work instead of wasting time waiting for an answer. It just makes everything go faster."

Automating the operation also helps subcontractors understand expectations from the get-go and holds them accountable. It provides the sub an opportunity to evaluate the schedule prior to having a face-to-face meeting. "They aren't sitting in front of the builder seeing the information for the first time," says Corry. "It helps them identify problems beforehand and helps take some of the waste out of the system.

"The subs can be notified of new projects or schedule changes right away and are more likely to adjust their schedules to accommodate them. It takes a lot of waste out of the system."

By keeping the subs up-to-date about all aspects of the project, they tend to work better with the homebuyer. Confusion is minimized, and the homebuyer feels secure knowing that all aspects of the project are understood and being tended to. "The subcontractors are informed about what is going on with the project, and the buyer can see that," Corry adds.

But automating a company and bringing subcontractors on board isn't an instantaneous process and is best undertaken in steps. "You must spend a lot of time on your PO system and automating your back office before you can even think of automating your subs. You have to do it one step at a time. A number of short victories add up in the long term," Ervans says. "It improves efficiency by reducing construction time, or what we call profit erosion."

Ervans should know. He's seen a number of benefits to his company since it became automated. "We've improved our gross profit by 10 percent," he says. "We've increased our cash flow. We have gone from 60 days between draws to 15 days to 18 days. That has allowed us to pay our subs quicker, which keeps them happy and keeps them wanting to work for us. The process has definitely decreased our stress while increasing our profits."

Where to Start?

When the decision has been made to add technology to the automation process, where is the best place to begin? Corry says an "autofax" schedule is an ideal first step. "This is an interim step until the builder goes completely paperless. The sub still gets a real piece of paper without turning on the computer or figuring out how to work a Palm Pilot," he says.

"The next step would be to have the sub be immediately notified of a change. With the 'autofax' system, the sub still has to go someplace to get the fax. We are seeing sophisticated subs using Web sites where they can place bids, review schedules and do POs that are very successful, especially those that tie in with back-office systems that allow working in real time. In that environment, everyone is working as a team. That changes the dynamics of an organization."

What if you have a subcontractor who might be interested in trying to automate his operation but doesn't even have a fax machine? "If there is a sub you want to keep working with, you do what you need to," Ervans says. "Spending a few hundred dollars to buy them a fax machine is not much to sacrifice. If we have subs who have a computer but no email access, we have set that up for them using our server. That's good because they will only get email from us. It also makes them more open-minded about other technology."

Ervans says the most successful aspect of automating his operation started at home when the company automated its back-office systems. "With this process, our subs realized the benefits just by how they were getting paid. It used to take us 20 days to 30 days to pay. That has gone down to four days to five days," he says. "We don't take invoices anymore, we pay from the 100 percent completion point. That is verified by phone or hand-held. Just that one change has made our subs much more receptive about the entire automation process. The process has also allowed us to go from having a cycle time of 180 to 200 days down to 90 to 110 days."

One key to remember while undergoing this process is that you aren't in it alone. If you approach it from a "team" aspect, you are more likely to get some solid input from your subs and make them feel they are a part of the process. "There are three things the subs like to see," says Allen. "'Can this make me money? Can it make me more efficient? Will it make my life easier?' The subs should be able to help you come up with money-making ideas. You need to bring the trades into the discussion."

First Steps

As with any business plan, you have to know where you are to know where you're going. Goals and benchmarks need to be established. The same holds true for automating your company. "You have to note the areas you are deficient in and where you want to ultimately be. You have to understand what you want to get better. Do it first internally and bring in your subs for input," says Allen.

Ervans concurs, "We have a goal to reduce time of construction. But to do that, we need to know how long it currently takes us to build a house and we need to identify what we'd like that time frame to be. That's the only way to know if the system is benefiting your company.

"Along with time of construction is gross profit. That is our No. 1 indicator of success," he continues. "You have to know where you are today and where you want to go tomorrow. I have seen builders sell themselves right out of business by not being able to keep up with demand."

Ervans' first step was to identify the biggest chunk of construction time. He identified his mason as the trade that took the most time and was able to cut his cycle in half. "Our mason went from a cycle time of 30 days to 32 days down to only 14 days to 16 days. We benchmark how long all of our subs take. This allows us to better educate our buyers on when they'll close on their new home," he explains.

In fact, this process allows Ervans' company to offer homebuyers a six-month guarantee. If the home doesn't close within that time, his company will pay the loan interest, find alternative housing and offer other benefits. "We haven't paid that once in the past year. We can tell to within two weeks when we will close," he admits.

Because of the constant need to track the construction time, Ervans has seen resistance from subs and his field management staff. "They think it's more work," he adds. To make all involved stay on-board, they have to see benefits to their daily lives. "If you can pay subs faster, they'll be more responsive to your needs and get things done in a more efficient fashion," says Corry. "You need to show them how you can make their life better by automating them. Some subs will jump right on board, others will think they'll never get it and will just walk away from working with your company. You need to introduce the technology in a non-threatening way."

Ervans' company is still not completely automated. "Our subs get a two-week look ahead at the schedule," he says. "We release all POs at the start of construction. And we have a verification process. We send out a scheduling fax then do phone calls, faxes and emails daily for redundancy. For email, if we don't have a 'read receipt' by 4 p.m., we will make a phone call to make sure they received the message."

Ervans instituted a guaranteed six-day scheduling window and $250 payment if his company misses it. He has all subs relay how much time is necessary and when critical work is complete. Having the subs pay attention to critical timing not only guarantees the job runs more smoothly, but helps assure his subs put jobs for his company on their schedules before they schedule other builders they work with. "It's a huge motivator," says Ervans.

Avoiding Pitfalls

Incorporating technology into your operation may seem like a daunting process -- and it can be. Finding the right system that will work for your company and your subcontractors can take a lot of time and trials. Ervans' company initially took the "cheap" route and found that to be pretty expensive.

"When we first started the process, we looked at a few software companies," he says. "We chose the cheapest one and figured we'd just grow from there. We didn't look at how many homes we were building, how many we wanted to build next year or in five years. When we tried to upgrade the system, we found there was no successful way to do that. When we built that system, it failed. It is easy for a $2,000 software program to wind up costing you $20,000 or $30,000.

"Our old system would send the subs out when the project was supposedly ready, but it wasn't. It also didn't have anything to do with our PO system. We realized we needed a new system -- to go 'big' and provide a long-term framework. I'm pretty sure we have the smallest company with the most technology. We closed 42 homes last year and spent close to $300,000 in technology. But we paid for that over and over in one year."

When trying to decide what type of software will work best for your company, don't assume what works for the guy down the street will work for you. "Also, you can't assume that if the software will work for the builder, it will work for the subcontractors," cautions Corry. "You need to get rid of the builder bias and make sure to test the product on a group of your subs. You need to get that feedback and keep up communication. Try setting up a focus group where you have multiple subs sitting around at the same time discussing it. That will save you in the long term. It is also important not to surprise people. Give your subs lots of warning about what you are planning to do. Different subs learn at different rates. Give them all time to come up to speed."

Allen advises taking time to test and tweak the system. "Map out the process and how you want it to work. Bring subs and let them contribute," he says. "Don't let the cat out of the bag until it is ready or it is too hard to try and contain the damage. Have a standardization of procedures. Make your documents simple and start slowly."

When choosing the right software program for your company it is important to do your research. "Talk to other builders you respect. Figure out what you are trying to do and what growth opportunities you want. Go Web-based for communication and scheduling programs. Back office systems should be based on how sophisticated your company is. In a small organization, you also need one person who will take care of the system. If you have a tech-savvy employee, get their input," Allen says.

Ervans adds, "What works for one company won't necessarily work for another company."

One resource for finding software providers is the technology solutions directory at www.NAHB.org. Ultimately, with everyone working together, builders and subcontractors will benefit and make more money, and homebuyers will close on homes sooner.