An Illuminating Idea

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Several years ago, Jim and Ann McLaren watched a neighbor's house undergo an extensive renovation that included an addition. They liked what they saw, and when it came time to update their four-bedroom, three-bath, brick colonial home, the McLarens called Kirkwood, Mo.-based Riggs Design & Construction — the same company that had worked on the neighbor's project.

April 01, 2005

Sidebars:
The Financials
Budget History
Snapshot
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Several years ago, Jim and Ann McLaren watched a neighbor's house undergo an extensive renovation that included an addition. They liked what they saw, and when it came time to update their four-bedroom, three-bath, brick colonial home, the McLarens called Kirkwood, Mo.-based Riggs Design & Construction — the same company that had worked on the neighbor's project.

The McLarens, who live in the St. Louis suburb of Chesterfield, had a large but dark and dated kitchen with an eat-in area. Becky Fisk, Riggs' kitchen and bath designer, helped them devise a plan to turn the space into a bright and modern kitchen.


A kitchen overhaul and sunroom addition added more usable space to the McLaren’s home in suburban St. Louis. The coffered ceiling in the sunroom (above) lends to the bright and airy feel of the addition.


The McLarens’ original kitchen (below) was dark and dated. The new, bright kitchen (above) features stainless steel appliances and modern conveniences like a handy prep sink and state-of-the-art, built-in coffeemaker.


The original kitchen had a breakfast nook that was eating up valuable square footage (below). By moving the breakfast room to the addition (above), the project’s designer was able to devote more space to counters and storage and improve the flow of the new kitchen.


As part of the addition, the new breakfast room adjoins both the kitchen and the sunroom.

Fisk changed the overall shape of the kitchen from a rectangle to an L by adding a walk-in pantry to the plan. A double oven would occupy the space of the previous pantry, and Fisk specified adding a cooktop and prep sink on the new island. Hand-finished cherry cabinets, black granite countertops and stainless steel appliances completed the kitchen update. In Fisk's design, the new kitchen would open to a separate breakfast room with plenty of windows to let in the view of the patio and backyard along with abundant sunlight. The original plan was to add a sunroom as a connected but separate space.

The McLarens, who have offices in their home, were always available and easy to work with, according to Fisk. "They asked a lot of questions," she said. She, in turn, gave them a lot of advice during the design process.

After the initial design, the McLarens came back to Fisk with additions and changes totaling more than $20,000. They elected to open the sunroom so that it flowed from the home's existing family room. To the sunroom addition, they added a coffered ceiling and a wet bar with a granite countertop. With the changes in place and the final contract signed, the project began in late July 2003.

Not long after construction was underway, a few unexpected issues popped up. First, hidden behind the old double oven was a big, round vent for the furnace. Fisk redesigned the area on the spot, rerouting the vent so that kitchen design did not need to change in a major way.

Then, as the cabinets were going in, the McLarens made another change. Although the option to add a built-in coffeemaker had been addressed during the design phase, the McLarens had declined. Then they fell in love with one that they had to have.

In her many years of designing, Fisk had never had to work around such a large coffeemaker during a change order. "We had to figure out what to do with it. It was not one of those things that could easily be built in." Fisk reconfigured the kitchen's design to accommodate the behemoth coffeemaker — 27 inches wide by 30 inches high, and the cabinet company made a new box, doors and trim. Thanks to the company's expert trim carpenters, the appliance fit as if it had been part of the original plan.

"It just happened to work out perfectly," said Fisk, "and they were thrilled because she did not want to give it up." The McLarens gladly gave up the cabinet space in exchange for the coffeemaker.

Small hiccups like these are addressed with quick solutions. Then there are those problems that require a re-evaluation of the way a company's systems work.

An electrical shock

On every Riggs Design & Construction project there is a walk through with the electrician.

"We have found that our clients are much better off seeing the real thing as opposed to [just] the plans," says Tom Riggs, president of the company.

As usual, the electrician came to the McLaren jobsite and did a walk through with the owners, the designer and the project manager. At that point, the Riggs team had laid out the cabinets on the floor so the McLarens could see where the island was going to be, why the electrical was there, and picture how they would use it. Though Fisk had gone through the electrical and lighting with the homeowners in the design phase, making sure they knew why and where, the McLarens had changes.

While the homeowners were OK with the amount of lighting in the kitchen, they wanted extra switches. The addition of the coffeemaker required extra electrical as well. In the breakfast room, the McLarens added two outlets. Then, because the homeowners wanted to see how the lighting would look with the finished coffered ceiling in the sunroom, the electrical plan was tweaked again during the walk through. And after the wet bar was built, the McLarens changed their minds about where the lighting should go.

It's typical for clients to have this reaction when they have tangibles in front of them rather than one-dimensional blueprints, according to Riggs. "When people see it when it's built, they say, 'Oh I'd like to add a can there. This should be a three-way switch.' So there's always added things. No matter how many plugs they put in the kitchen, they always want a couple more. It used to be that the electrician would have a guy there nailing up boxes as we did the walk through. We'd get the price back the next day, but the electrician would be halfway done wiring, and it caused a lot of problems because the owner said, 'Wait a minute, I don't want to spend that kind of money.'"

And this was precisely what happened when the McLarens received the bill for their extra electrical. "They said, 'How could it be this extra $1,100 for what we talked about,' recalls Riggs. "We went uh-oh. We had goofed."

Dan Kayich, the project manager, explained the costs to the McLarens and talked them through it. In the end, the clients accepted the charges, but they weren't thrilled.

After this, the project managers came to Riggs and requested a system to avoid future problems like those experienced with the estimate for the McClaren's electrical change orders.

Riggs had been looking for a solution to these small, but troubling, change orders for some time. "It can cost [customers] more [money in the end] to wait for [the change order] to go through all the channels — get estimated, get the official work order from the office, have the homeowner sign it, have them cut a check before work can proceed start." But getting a verbal go-ahead from homeowners without firm pricing wasn't working either.

Riggs went to the electrician and worked out a price chart for his project managers. Now as they do walkthroughs and the clients make changes, the project managers can mark the number of extra outlets, switches and can lights, add them up very quickly and give clients an accurate estimate on the spot. The project managers then write up the estimated price in a field work order, the customer signs it, and the electrician can continue working without interruption. Since the McLaren project, it's automatic. Nothing is done without a field work order signed by the homeowner.

Riggs has expanded the price charts to include other trades. "[The project managers] have in their books more or less our item list and they have the hourly rate, or the footage rate for drywall, or whatever it may be so they have a real good picture."

Though the work orders states, "This is an estimated price. The official work order may vary from this price," the project managers have the tools on the job to work out the figures and come in very close. "They're usually within 1 percent," says Riggs. "We very rarely change what they come up with."

Though the McLarens received a bit of electrical shock, they were pleased with the project's end result. They have referred friends to Riggs Design & Construction. And their neighbors, who had previously completed the renovation and addition with Riggs Design & Construction, have contacted the company about a kitchen renovation. "Not all of our clients and projects have come out as smoothly as the McLaren's over the years," says Riggs. "The key is that we learned from each one of our mistakes."

 

The Financials

Located in Kirkwood, a suburb of St. Louis, Riggs Design & Construction contends with a confusing — and potentially costly — permit process on each job. The St. Louis area — the city and surrounding cities that make up the county — is composed of more than 100 municipalities, according to Riggs. Each one of those municipalities has its own building department. "Every one of those cities has its own little quirks, and it makes it a real challenge to know what they expect," says Riggs. "Every one of them picks a part of the book of code that they are going to focus on. One inspector might be really picky about the plates that go over wiring and pipes when they're drilled through the studs. Another one might not even think about it."

Because the company has been around for 46 years, Riggs has learned to keep up with the requirements of the 15 municipalities they work in. On the McLaren job, as with all projects, the company checked in with the inspections department of the correct municipality for any changes in code or protocol before the design phase.

Contracts: "Ninety-nine percent of what we do is a fixed-bid contract," says Riggs. The company has a separate design contract and charges a fixed design fee whether or not customers sign a construction contract with his company.

Cash flow: The company manages cash flow one of two ways: If it's a really large project (more than $500,000), draws are scheduled on a percentage basis per month. But typically, the company ties payments to project milestones.

  • Upon scheduling — 25 percent
  • Upon completion of rough-in — 35 percent
  • Upon rough-in inspection — 30 percent
  • Upon substantial completion — 10 percent

Profitability: Rather than shoot for a certain gross-profit percentage, Riggs focuses on net-profit percentage. "We're real happy with 7 percent net profit, which typically comes up to about 33 percent gross profit," he says. The company bid the McLaren project at 7 percent net profit, or 33 percent gross profit, and came out ahead at 35 percent.

Budget History

Initial estimate: $165,420

Changes: $24,491

Final estimate: $189,911

Change orders: $11,215

Final price of job $201,126

Cost to produce $129,098

Gross profit $72,028

Budgeted gross profit 33%

Actual gross profit 35.8%

Snapshot

 

Tom Riggs, Becky Fisk

Riggs Construction & Design

Location: Kirkwood, Mo.

Type of company: Full service design/build remodeling

Staff model: 9 office, 10 field

Sales history:

2001 $2,651,644

2002 $3,176,770

2003 $3,504,090

2004 $3,661,908

2005* $3,800,000

*projected

Annual jobs: 72

Workweek: 44 hours with Fridays off

Software: QuickBooks Pro 2004, Microsoft Excel, ACT!, Microsoft Outlook

Contact: 314/821-7646

Products List

Cabinets: Markus. Ceiling fan: Emerson. Countertop: Cambria and granite. Faucets: Delta, Grohe. Fixtures: Grohe. Grout: Spectralock. Lighting: Kichler, Tech. Sinks: Kohler. Tile: Seneca. Exterior doors, Windows: Pella.



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