John Leggett | Crain's Houston

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

John Leggett

Background:  

Founded in 2005, On Point Custom Homes is a Houston-based luxury homebuilder and remodeling company.

The Mistake:

I tried to do things on a budget when we started building the first houses.

Lumber is a very big expense in the construction business. I went with the cheapest lumber vendor I could find. They guaranteed they’d beat anybody’s price and they did. They cost about $1,500 less than its competitors.

We committed an entire order for $50,000. After signing the paperwork, we found out they only had one truck. The quality of the lumber was good, but all of a sudden, when I needed the lumber, they told us they only had one truck and couldn’t deliver it to us for another eight more days. Other lumber vendors could have had it there the next day.

I was so focused on the price, I didn’t think to ask those questions about the delivery and how I’d receive it. We just assumed they would drop the lumber off the next day, which is the norm, but not for them. Getting lumber can be spaced out during a 60-day period, but they took around 90 days. We were two to three weeks behind schedule and it ended up costing about $2,500 more to do business with that vendor.

It's a fine line to walk between quality and cost.

The Lesson:

Learning how to properly vet everyone has been a big learning curve for me. Back then, I didn’t know any better.

The lumber vendors weren’t very forthcoming with the information, so you have to learn to ask the right questions. “You get what you pay for” is also a lesson I learned early on. Sure, they had a better price, but there’s a reason that price is so much better.

We’re not going to go out there and pay the most for everything, but we need good quality vendors and subcontractors to do a good job. When I go to a meeting, I need to think of all the aspects of what they’ll be doing for me. My timeline and the ability for them to deliver was one thing I should have thought of.

This also extends to any trade – a plumber, an electrician, anything like that. You always want to think about service, especially after the fact, especially in the building industry. If you’re in one day and gone the next, then you have an issue a year later and they’re nowhere to be found. Shame on me for picking the cheapest guy just to save some bucks if we knew that it was a risk.

As a business owner, I have to eat this cost. It's a fine line to walk between quality and cost.

Follow On Point Custom Homes on Facebook at https://www.facebook.com/OnPointCustomHomes/.

Photo courtesy of John Leggett

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