In this episode, we dive into the two primary types of construction contracts: Fixed Price and Cost Plus. Whether you're a new contractor or an established builder, understanding the differences can help you navigate pricing strategies, profit margins, and client expectations. We’ll cover the benefits, challenges, and when to choose each model based on project scale and organizational growth.
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Time Stamps:
0:00 – Intro & Review Reminder
0:50 – Overview of Fixed Price Contracts
2:30 – Benefits of Fixed Price for Smaller Projects
5:10 – Challenges of Fixed Price Contracts with Larger Projects
8:00 – Why Scaling a Fixed Price Model Can Be Difficult
9:05 – Transitioning to Cost Plus Contracts
10:30 – Benefits of Transparency in Cost Plus Contracts
12:15 – Client Expectations & Justifying Markups
Key Takeaways:
- Fixed Price Contracts are great for smaller projects with less client oversight.
- Cost Plus Contracts provide transparency and are ideal for larger projects or scaling organizations.
- Transitioning to Cost Plus as your business grows can reduce complications, increase client trust, and streamline project management.
- A detailed scope of work is crucial regardless of the contract type to manage expectations and protect profitability.
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