Interview by Jim Gialamas for Coastal Contractor
Above, the power behind ESB Contracting: (front row, from left)
Luis Vasquez, John Hoenings, Ed Gerretz; (top row, from left) Bob
"Cosmo" Kidd, Perfecto Valles, Robert Rawl, Eric Borden. (Photos
courtesy Eric Borden)
Eric Borden of ESB Contracting has been building high-end second
homes on the Jersey Shore since 1986. Accepting two to three
clients annually, the range of his work varies from major
renovations priced between $300,000 and $1 million to new homes
priced between $1 million and $1.8 million. New homes average 5,000
square feet and require a construction period of approximately 11
months.
With a staff of two in the office, one field supervisor, and
another eight workers on site, the scope of ESB Contracting
includes framing, exterior trim work, wood siding, and interior
trim and cabinetry. Subcontractors perform all other work.
Like many coastal contractors serving vacation markets, Borden
works on a reverse construction cycle — work begins the week
after Labor Day with completion targeted for the following June 1.
His clients are based in the New York metro area and beyond.
Because their contact with the construction process is often
limited to monthly site visits or discussions via phone or email,
Borden refers to these homeowners as "absentee clients," and
because they typically aim for a June 1st completion, he refers to
the days approaching the deadline as "the summer crush."
With 18 years of coastal contracting under his belt, Borden has
learned to guide anxious clients through a demanding construction
schedule, all while home insurance pressures in recent years have
completely transformed the way he does business.
WHAT'S THE DRIVING FORCE BEHIND RECENT CHANGES IN YOUR
BUSINESS?
The big one is FEMA regulations, which have led to a stiffening of
codes in our area (see "The ABCs of Flood Insurance," below). When
you get beyond 50% of the value of the home, you must bring it up
to current regulations. So, if the value of the house according to
tax rolls is half the value of the structural loan, then current
codes apply. So, for example, if we've got a house that's listed at
$120,000, and the cost of renovations is $300,000, then we have to
bring everything up to code. This could include changing all the
windows to impact-resistant units, upgrading all electric,
plumbing, and fire-protection systems, and ensuring the foundation
meets current structural requirements. Often it's cheaper to knock
the house down, especially with the houses we're working on, which
were built anywhere from 50 to 100 years ago.
DOESN'T STARTING FROM SCRATCH MAKE THE JOB
EASIER?
Sometimes it does, but there are jobs where we cannot do a
scrape-and-build because of the location of the house in reference
to the dune line. Sometimes zoning laws require us to keep the
house. We did one house, for example, where we had to rebuild the
porches, but because of the location of the porches and how close
they were to the dune line, we literally had to leave the roof up,
tear everything else out from underneath, put in screw piles,
rebuild the foundations, rebuild the decks and the floors, and get
it all ready to stand the walls. Then we took the roof down, stood
the walls, and put the new roof on it. At all times we had to
maintain the building line without disrupting it; otherwise we'd
have to move the house to comply with the current setback.
OVERALL, WHAT'S CHANGED THE MOST IN YOUR BUSINESS IN THE
LAST 10 YEARS?
Demolition has become a much larger part of our number. It's
lengthened our time frame. Now, all of a sudden, instead of doing a
gut and then going in and renovating, it may take us a month just
for the demolition because to get a permit we need disconnect
letters for the water, sewer, gas, electric, etc. The actual
take-down takes only a day or so. We can demolish a
3,000-square-foot house in six hours, and in another day load up
all the garbage and get rid of it.
HAVE THE EXTENDED SCHEDULES BEEN DIFFICULT TO SELL TO
CLIENTS?
It becomes much more important to talk schedule with the owner on
the first meeting. We can selectively choose clients we want to
work for. I'll do a phone interview with the client to determine
what the scope of the work is: Whether it's something we would be
interested in, and whether it fits within our schedules. Then I'll
consent to meet with the client. It usually takes me two to three
hours and involves showing some of our projects, going over their
schedule, and explaining off the top of my head how much time it
could take to complete. I won't bid the project; they have to work
with me on a negotiated contract.
WHY A NEGOTIATED CONTRACT?
Because the level of quality and detail is so involved. It could
easily take me 100 hours to do a detailed and concise bid on the
actual cost of that house. If I have to bid out five projects to
get one, that's essentially one month of work. I'll be more than
happy to work with clients once they sign on the dotted line,
agreeing to hire me to put together a clear and detailed
budget.
HOW LONG DOES IT TAKE TO CLOSE A SALE ON THIS TYPE OF
PROJECT?
We work with clients anywhere from six months to a year in advance,
depending on how far they've gone previous to contacting us. The
current client I was just talking with was looking for a September
start, and I consented to talk to him only because he'd done the
leg work: He's got plans drawn up, and he'll have construction
drawings done within the time frame we need.
IS IT DIFFICULT TO MARKET TO ABSENTEE
HOMEOWNERS?
It's all based on referrals. Advertising would be a waste of time.
Clients usually know other people in town or they've asked around.
Many clients spend time or will spend time in the area. Real estate
agents are always happy to give references. There's enough
construction going on that they know who the architects and
builders are in town.
On the Jersey shore, this is your average $1.5 million summer
home on a $4.5 million lot facing the ocean. (Photo courtesy Eric
Borden)
HOW DO YOU HANDLE MATERIALS SELECTIONS AND
PURCHASING?
That becomes a little more difficult with the absentee homeowner.
The client that I'm dealing with right now did not want to deal
with it at all and didn't mind spending $400,000 for a New York
City interior design firm instead. Some people just don't feel they
have the ability to handle it. Other people have a concise idea of
what they want and feel they don't need an interior designer. Then
it's up to me to bring it all together. Then I'll require the owner
to do a design book with various ideas by room. We go through it
during our construction meetings, which usually run once a month.
The majority of our clients use top-of-the-line fixtures, like
Kohler, because of cost and quality, but they don't necessarily go
to the designer ends, like Waterworks. Of course, some do, but for
a shore house, they usually want good quality for a reasonable
price.
IS IT EASIER TO MANAGE AN ABSENT CLIENT?
The trust factor has to be huge. They're handing you over this
house and saying, "Build it for us." They have to trust you enough
to send you large amounts of money on the faith that you're
actually going out and doing the work. So much is based upon your
previous track record, how you've treated your past clients, and
the references that you receive.
HOW DO YOU COMMUNICATE THAT TRUST OVER THE COURSE OF A
JOB?
We use progress billing. That is, we bill the percentage of what we
have completed on the job. For us, we're not waiting until we've
completed a whole phase before we get paid. It also gives the
client something to gauge the project on. The schedule actually
gives them a real way to check the progress. The billing should
match our schedule. So if we're billing on the 15th of the second
month, when we should have completed framing, but if we're only
billing 75% of the framing, then that's telling the client we're
behind. It helps us manage the client and their expectations as we
go through the job. That way they're not so focused on the end
date. For most people, if they haven't gone through the
construction process before, they have no idea how long something
should take.
WHAT'S THE BILLING CYCLE?
We usually have clients on a rotating monthly billing schedule. If
we're working three jobs, then I really like opening my mailbox. A
lot of time when we're running multiple jobs, we'll run a rotating
billing schedule on the jobs so we're basically invoicing one
client a week and we should be receiving a check a week. It's not
like at the end of the month when you have three invoices that have
to be out and you're waiting for all your payments to come in on
the tenth.
WHAT HAPPENS TO BILLING IF YOU HAVE WEATHER
DELAYS?
We put "float" in the schedule to account for rainy days. In the
contracting business, you can never have enough float.
Unfortunately, the clients don't always want you to have as much as
you need. You have to try to find a balance, but it doesn't always
work. Between trying to schedule 30 different subcontractors and
materials deliveries from 5 or 10 or 20 different suppliers, you
always seem to have some hold-up, something's late, something's
forgotten. The progress billing that we use is basically an AIA
bill without retainage. It's not an AIA form, but it's basically
the total amount, and what the current invoice percentage is, and
what was previously billed out, then what the amounts are. This way
the client has a running total of how much he's paid
percentage-wise on each phase of the job.
WHO HANDLES THAT ACCOUNTING?
We work it right off of QuickBooks, the Contractor Edition. I
pretty much do all the billing myself. It's not my favorite part of
the job, but I don't know anyone who really likes paperwork. If you
don't invoice the client, you don't get paid. And if you don't get
paid, you don't have any money to do the work. It's all part of the
same business.