Updated: Feb 9
Construction Warranty Management: The Financial Reasons
The financial reasons for working with a warranty management partner will vary depending on the size of your construction business, although of course there is some overlap. In this post, we’ll look at two different types of construction businesses. The first is a small home builder, who builds a handful of homes each year and is managing all warranty work him- or herself. The second is a growing company, which has a few employees. The owner is thinking of adding staff to create an in-house warranty department. Partnering with a warranty management company is financially beneficial in either of these situations.
Financial Benefits for a Small Home Builder
At the moment, you’re doing it all. You’re answering customers’ phone calls, you’re educating homeowners, you’re traveling out to homes to make warranty determinations, you’re scheduling defect repairs — and you’re probably fixing anything and everything your homeowners ask for. How can working with a warranty management partner help you financially?
1. Customer phone calls
Time is money. And when you answer the phone to address customers’ warranty issues, that’s a cost — it’s time you’re not spending making money. You’re not moving forward, you’re being held back. The more hours you spend on previous builds, your hourly rate for that build plunges. Answering the phone is not a good use of your time because it’s not a way you can add maximum value to your company.
Every third party warranty management company will answer the phone — but some of them simply redirect the calls to you! We don’t see the value for money in that. When you work with a true warranty management partner, we not only answer the phone, we respond to homeowners’ questions, we triage any problems they’re having, and ask them to take photos of anything they think should be fixed under warranty.
2. Homeowner Education
Similarly, the hours you spend educating homeowners is not an efficient use of your time. (But if you don’t educate them about how to operate and maintain their furnace, for example, that may result in even more phone calls to answer!)
When you work with a construction warranty partner, we’ll take the time to educate your customers — both on home maintenance and also about which issues are covered by warranty and which aren’t. We do this in person at the walkthroughs, and on the phone too. On our website, we also have how-to videos and home maintenance tips for new homeowners.
3. Warranty determinations
When you take the time to travel to make warranty determinations, you’re also not moving forward in your business and you’re eating into your hourly pay and gradually reducing your profit for that build. (Not to mention your gas expenses and vehicle wear and tear.) We understand that you don’t like to say no to your customers. We know how it goes — when you arrive at a customer’s home, they’ll mention all these other ‘little things’ that they’d like fixed. You want to keep them happy because referrals are the life blood of your business, so you get them fixed — whether they’re covered by your warranty or not.
When you partner with a warranty management company, we get your specific warranty written down, and your customers sign it. (Warranties are customizable to each builder’s homes.)
This written warranty officially documents what’s covered and what’s not, so you don’t have to continue to feel obligated to do costly, unnecessary work. But we know you don’t like to refuse to do what your customers ask. So we help you maintain a positive customer relationship by acting as the neutral party who delivers disappointing news to your homeowners.
At the moment, after you’ve been to a customer’s home, you get on the phone again to schedule a subcontractor to go out to do the repair work. More time spent on a previous build, and not moving forward. If you’re paying a subcontractor to do ‘good faith’ repairs for a customer, you’re not paying them to work on your next build. (Not to mention you’ve got the headache of keeping track of which defects have been taken care of, and which are outstanding.)
When you partner with a construction warranty management company, we take care of scheduling your subs and keeping track of repairs.
Financial Benefits for a Growing Construction Business
5. Admin staff costs
You have admin staff already, but you now have so much construction work that they have enough on their plates without adding even more warranty management. But, as you know, adding in-house warranty management staff costs far more than their hourly wage. For example, among many other things, you have to factor in:
· Travel expenses (to make warranty determinations)
· Vehicle cost and depreciation (if you provide a vehicle)
· Payroll taxes
· 401K or company benefits
· Workers’ comp insurance
· Training (e.g. on warranty details, walkthrough procedures, software, etc.)
· Overtime pay for answering customers’ after-hours calls
· Additional office space and/or equipment
Some of these costs are also variable, depending on how many warranty calls you get. For some builds, you might have very low travel-related expenses, for others you might have a staggering amount. When you partner with a warranty management company, you have a one-time fixed fee at escrow, which is easy to budget for. No matter how many calls you get from a customer, your warranty call costs for that home are the same.
If you’re debating whether to go in-house or to outsource your warranty management to a partner, be sure to take into consideration all the costs involved with an in-house warranty department. We’re confident that working with a warranty management partner will cost you less than an in-house warranty department.
6. Your construction manager isn’t helping you make money
If you’re paying your construction manager to go out to make warranty determinations, you’re throwing more money after a previous build and gradually reducing your profit on that project. It also means the construction manager can’t be onsite for your new builds.
When you partner with a warranty management company, we take care of making warranty determinations so your construction manager is available to come onsite — to help you make more money by moving forward on a new build.
7. IT costs
As you grow, a paper filing system for keeping track of warranty work just won’t cut it. You’ll need to invest in specialist software (and keep it maintained with the latest updates).
If you choose to work with ProHome as your warranty management partner, you’ll use the software that we developed especially to handle warranty management. (And our tech team maintains the software so it’s always working well.) Your customers can access the software to make claims and get updates; your subs can access it to upload photos of completed work; you can access it to stay up-to-date on what’s going on.
To learn more about the benefits of construction warranty management, see What are the benefits of home builders’ warranty management?
If you’d like to talk about the benefits of working with ProHome as your construction warranty management partner, please contact Matt at (316) 706-0368 or email@example.com today.
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