If you’ve ever found yourself wondering whether to price your projects as fixed fee or cost plus, this episode of Builders, Budgets, and Beers is a must-listen. We sat down with Jake Bruton, second-generation builder and founder of Arrow Building in Columbia, Missouri (now also in Kansas City), to talk candidly about what pushed him to leave behind the fixed fee model he’d used for over 30 years.

Spoiler: it wasn’t theoretical. It was a $180,000 loss.

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Jake’s story is gripping, honest, and full of practical insights for any builder trying to run a tighter, more financially resilient business.

A Loss That Changed Everything

In 2015, Jake’s company (doing about $1M in revenue at the time) took a staggering $180K hit on a project. The core issue? Poor documentation, misaligned client expectations, and a reliance on verbal agreements and handshake change orders. The result wasn’t just a financial loss. It tested his business, his marriage, and his mental health.

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"It took years for me to not want to drive my truck through their house. That’s how personal and painful the fallout was."

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That experience pushed Jake to re-evaluate everything: pricing model, documentation standards, and ultimately, how to protect his company from future risk.

Why Arrow Switched to Cost Plus

After comparing a fixed fee and a cost plus estimate side-by-side for a remodel, Jake realized something fundamental: with cost plus, he could be more competitive, more transparent, and still profitable... without padding jobs with risk premiums.

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Instead of hiding contingencies inside bloated fixed bids, Jake now helps clients set realistic contingency budgets outside the contract. His cost plus model covers both overhead and profit (not just a vague "markup"), creating a cleaner, more honest conversation.

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"It’s not just ‘cost plus markup.’ It’s cost plus overhead and margin. When you break that down clearly, clients understand it better."

Documentation, Transparency, and the AWA

Jake also shared how moving to cost plus changed how his team communicates with clients. Gone are the handshake change orders. Today, his team issues detailed invoices- with backup, and processes all changes through what they call AWAs (Additional Work Authorizations).

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It’s a small but powerful language shift. As Jake puts it, “The term ‘change order’ has baggage. AWAs help clients see additions as part of the process, not a penalty.”

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Every invoice now includes:

• A project status summary
• Itemized costs mapped to categories
• Receipts and documentation for every line item

"Since we started invoicing this way, I’ve never had a client say, ‘I don’t owe you that.’ Not once."

The Real Tradeoffs of Cost Plus

Yes, cost plus is more work. You have to track every penny. But for Jake, the added accountability pays dividends:

• Fewer client disputes
• Higher project transparency
• More competitive bids (without compromising profit)

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It’s not the right model for everyone. But if you’re committed to running a financially healthy, relationship-driven business, it might be worth exploring.

Builders Under Pressure: Tariffs, Rates, and Risk

The conversation also touched on broader economic uncertainty—from tariffs and material cost spikes to interest rates and labor shortages. Jake’s advice? Price risk into your business. Track everything. And communicate with clients early and often.

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"Your markup isn’t just profit. It’s risk coverage, warranty coverage, and peace of mind for the client. Explain that, and the conversations go a lot smoother."

Final Thoughts

This episode is full of gold for builders at any stage. Whether you’re fixed fee, cost plus, or somewhere in between, Jake’s experience is a masterclass in how to protect your margin, your reputation, and your sanity.

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