As a construction business owner, you know change orders are inevitable. But here's the game-changing truth: with the right strategy, the change order process does not have to be a nightmare.
Set the Stage for Success (Before You Even Pick Up a Hammer)
Your change order success story begins long before the first nail is driven. Here's how to lay the groundwork:
- Introduce change orders early: By covering your different processes during the sales meeting, you demonstrate professionalism.
- Make it official: Include a detailed change order section in your contract covering communication, approvals, and consequences.
PRO TIP: By setting clear expectations upfront, you're not just protecting your business – you're building an unshakeable foundation of trust with your clients.
Communication: Your Million-Dollar Skill
Ever had a client go behind your back to request changes from a sub? Kiss that headache goodbye with this bulletproof process:
- Implement a structured communication flow
- Train EVERYONE – from your crew to your trade partners
- Make it crystal clear: clients talk to the project manager, period.
Here's your winning communication playbook:
- Client → Project Manager
- Project Manager → Estimating Team
- Estimating Team → Detailed Proposal
- Project Manager → Client for Approval
Document Like Your Business Depends On It (Because It Does)
Your standardized change order form isn't just paperwork – it's your shield against disputes and your ticket to smoother projects. Make sure it includes:
- Detailed description of changes
- Cost implications
- Schedule impacts (down to the day)
Price for Profit, Not Just to Cover Costs
Changes often disrupt workflow and introduce unforeseen risks. That's why contractors who understand the true cost of running their business aim for margins of up to 45-50% on change orders.
NEVER FORGET: Account for all of the costs associated with the change order. Only including material and labor for the change order is a profit leak. The change order should also include the PMs' time, estimators' time, overhead costs, demobilization, and remobilization costs. Your future self will thank you.
The Approval Process: Your Protection Plan
Follow this bulletproof approval process:
- Present change orders in writing
- Give a specific approval timeframe (3 days works well)
- NO WORK STARTS without written approval
This isn't just procedure – it's your insurance policy against costly misunderstandings.
Implementation and Payment:
Once you've got approval:
- Schedule the work
- Communicate changes to all parties
- Update your project timeline
GAME-CHANGING TIP: Collect 85-90% of change order payments upfront. It's not just smart – it's essential for your cash flow.
The Final Power Move: Flawless Project Closeout
At the project's end:
- Review all change orders with the client
- Ensure every change order is paid in full
- Conduct a change order analysis in your project post-mortem
This final step isn't just closure – it's your launchpad for even more successful future projects.
Ready to Transform Your Change Order Process?
Implementing these strategies can feel overwhelming, but you don't have to do it alone. At the Aspire Institute, we've helped thousands of contractors just like you turn change orders into profit machines. Learn more about optimizing your profit margins at one of our upcoming local Aspire Institute one-day workshop, or set up a consultation to speak to one of our construction business experts Contact Us.