Custom building is about producing fine homes and making a living, not about chasing clients to get paid or risking your personal assets in the process. That is a point that Mike Holmes makes in his speaking engagements, in the construction management courses he teaches, and in the way he does business. By operating as an independent building designerand construction manager, Holmes has off loaded the lion’s share of risk he was subject to when he ran a conventional custom building company.
Holmes made the change five years ago, after tangling with a client who withheld a final payment of more than $150,000. “It became a very rude awakening, he says. “I started to look at ways to limit the liability and exposure. His answer was to fashion himself as a consultant. Clients who hire him act, legally, as owner/builders, with Holmes as their agent. “They open a bank account and name me as a signatory on the account, says Holmes. From that account he pays the subcontractors, who execute the construction under direct contract with theowner. The owners also buy their own construction insurance and indemnify Holmes for construction defects. Being listed as an “additional insured party on trade contractors’ general liability policies gives him an additional layer of protection.
“Everything is a fee-based, open-book system, Holmes says. “I’m basically the same as a CPA or attorney. If [clients] want to meet with me, they pay me. Under this scenario, I’m just the agent, and they own the consequences. In addition to being safer, “it’s a much cleaner process internally. With no crew to keep busy and negligible overhead, Holmes can oversee two design/build custom home projects, teach 16 hours of courses at a community college, serve as an expert witness in construction litigation, and still have time for speaking engagements. His presentation at this year’s International Builders’ Show, “Cover Your Assets with Contracts”, met an enthusiastic response. And it is no wonder. With his own contracts, Holmes says, “I’ve just taken that big bowl of risk out of my lap and put it back on the table, where it belongs.
San Sebastian Construction Management Reno, Nev.; Type of business: design/build custom builder; Years in business: 5; Employees: 2; 2007 volume: $1.1 million; 2007 starts: 2
