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Our guest on this episode is Russ Stephens, the co-founder of the Association of Professional Builders (APB) which is a leading business coaching company dedicated to improving the residential construction industry for both builders and consumers. Join us as he discusses the 2022 State of the Residential Construction Industry. 

Show highlights include:

  • Do you get shoddy leads from your marketing? Here’s a simple way to fix it (without touching your ads) (2:57) 
  • Investing more in marketing actually increases your profit according to a multi-country survey from 720 builders (7:12) 
  • How turning off your marketing to save cash is like turning off your watch to save time (7:38) 
  • What percentage of your revenue should you dedicate to marketing to maximize your returns (12:49) 
  • The insidious “Curse of Knowledge” trap which prevents you from attracting new clients and teammates (15:30) 
  • How this simple, yet profound calculator helps you calculate your fixed costs and get higher margins from every project you take on (17:13) 
  • How waking up at 3 am can take your construction business from $3 million to $60 million in 4 years (or less) (24:34) 
  • Growing too fast can bankrupt your business and leave your family on the streets (25:50) 
  • The “Core Value” secret which enables rapid growth in your construction company (even as business-threatening problems arise) (30:28) 
  • Setting your business up for exit (and how this helps you achieve personal and financial freedom) (36:40) 

If you'd like to check out Russ’s company, the Association of Professional Builders, you can find their website here: https://associationofprofessionalbuilders.com/. And you can download The State of Residential Construction Industry report mentioned on the show here: https://associationofprofessionalbuilders.com/sorci/ 

To get the most out of this podcast, or connect with Duane and Dave, head over to https://buildernuggets.com and join our active community of like-minded builders and remodelers.

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So I sat there and I thought to myself, wow, what an impact, not smiling had

Welcome to builder nuggets hosted by Dwayne Johns and Dave young. Hey, our mission is simple, build freedom. We are a couple of entrepreneurs turned business coaches who have dedicated ourselves to helping our builder remodeler clients create the most rewarding businesses in the industry. My co-host Dwayne has been a successful builder and remodeler for over 30 years. He's seen the highs and the lows. From the beginning though, Dwayne has been on a quest to find a better way to run a contracting business. In 2016, he found that better way. That's how I met Dave, a lifelong entrepreneur and visionary who measures his success by the success of those around him. He reached out one day with a formula on how to transform my business and the rest is history. Since then, we've teamed up to help hundreds of contractors like you build better businesses and better lives. Now we've decided to open up our network and share our secrets so we can start moving the needle with you. It's collaboration over competition. Each week, we bring together industry peers and experts who share their stories so that we can all build freedom together. .

(01:06): Today's guest is the co-founder of the association of professional builders, a leading business coaching company dedicated to improving the residential cons industry for both builders and consumers. Since 2014, he has been helping builders double the size of their businesses through profitable growth. The a P B excels in providing cutting edge systems, world class support and sales and marketing training to the construction industry from Brisbane Australia. It's my pleasure to welcome Russ Stevens to today's show with welcome Russ. Hey, thanks guys. Thanks so much for having me on looking forward to chatting with you both. Well, Russ, my daughter is currently living in the land down under, near Melbourne. She loves it. So tell us a little bit about your background. I want to definitely hear a little bit more about life in Australia and, and the a,

(01:59): Well, I mean, how far do you wanna go back? Cuz I am pretty old, but the quick version is I started my first company in south London in 1984 at the age of 19. And by 2006, we employed 50 staff with annual sales of 35 million. And at that point I sold it to fulfill a lifelong ambition to immigrate to Australia, with my wife and of kids. And so that was 2006 moved over and got involved in the construction industry in, in a few different ways. But in 2010 I discovered co-construct which I'm sure you guys are familiar with. And at that point there was only three builders in Australia using co-construct, you know, it was in the early. So I launched it across Australia, New Zealand and the UK, and signed up over a, a thousand builders over the, the next few years, making that probably one of the most popular platforms.

(02:57): And that led to setting up a marketing agency with my daughter sky Stevens. And we built websites. We had a CRM system, we did Facebook marketing, Google marketing, SEO, all the usual stuff for builders. But we realized from that marketing agency that although we were generating all these great leads for builders, half of the builders were were like, yeah, this is fantastic. And they were doing well, but the other half were saying the leads are rubbish. So we kind of dug into that to see, you know, what, what was different because we were doing the same service for, for both sides of these, you know, two sets of builders, but they were getting very different results. And what we realized the builders that were struggling and were saying the leads were no, they didn't have a documented sales process, a structured sales process. So we set about fixing that.

(03:45): And in 2014, we launched at sales training. So this was dedicated sales training for builders. So that's where we gave them the proven sales process for builders and allowed them to take these lead leads that we were generating all the way through to a contract sale. And that went really well. But what we realized very quickly is a lot of these guys, even though they were getting these leads generated for them and they had the process to turn these leads into contracts. They still weren't really making the money that they should be making. They were stressed, they were time poor. So I became clear that we needed to provide a more holistic solution for them covering everything, which is why in 2015, we launched the association of professional builders. And that's a, a business coaching company, as you, as you mentioned, dedicated to improving the industry for both builders and consumers and, and really that's because as we believe that builders do not, despite the myths builders do not earn what they deserve to be earning, you know, given the the expertise they have and the amount of work they put into their building companies.

(04:52): But we also believe that consumers are not receiving the service that they deserve either. So that was the driver behind the, a APB. And we now coach over 540 building companies in five countries. Oh, that's very cool. And we have you know, I know we've talked a good bit. I've talked with few other associates and it definitely aligns with our way of thinking. And I think our audience will certainly appreciate what you guys are doing there, taking this whole industry to the next level. You obviously, for anybody that just listened, you could tell that the build to remodel their group, they need help. You know, I mean this, this industry, it's a tough industry, as you said. I mean, it's you know, for the risk that we take, the things that are out there, there's, it's, it's difficult. So kudos to what you guys are doing. Enjoy learning more about what you guys have cooking over there. So when we spoke oh, week or so ago, bouncing some topics around, I loved it that you had sent me 20, 22 state of the residential construction industry report. That was a very detailed document. I loved it. Is that something that now you guys, as a P do you put that together? You collaborate with folks on tell us a little bit about

(05:58): That. Yes. So this was the second year of compiling this report and yeah, we collaborated with a few of the industry giants, notably builder trend, CB USA build exact. And these industry players helped us with, you know, getting the survey out to more builders. So so we're really grateful for their involvement, but this wasn't like just a high level quiz with a few questions. This, as you've, as you've seen, this was a very in depth survey. We, we got responses from over 720 residential home builders that answered a hundred questions each. So that, that took a fair commitment the time, but it was good for the builders because I think it opened up their mind to a lot of aspects of the bills their business, where there may be gaps, but it also gave us a very, very comprehensive snapshot and insight into what was happening in so residential building companies in different countries, and we were able to compare the stats from different countries as well, because we had builders participating from the us, Canada, Australia, New Zealand. So, yeah, it was great insights.

(07:12): One of the findings that stood out from that is the return on investment for marketing. You noted that builders who spent less than 1% on marketing had lower margins than the builders who made the investment, walk us through that and what it means. Yeah, well, I'm, I'm sure we're singing from the, the same song sheet here, but one of our mentors that we often repeat is margins are linked to marketing. You know, you, I, I, I guess turning off your advertising to save money, it really is like, you know, stopping your watch to try and save time. It really doesn't work. And that's because of the, the laws of supply and demand. So that investment that a business and not just a building company, but any business makes in advertising and marketing, they increase their demand and that allows them to grow their revenue or grow their margins or, or even both. But it is so, so important. And and it's key that we, we see time and time again. I'm sure you guys do too, that the guys that rely on referrals are typically working on the lowest margins and what they may think they're saving through, not investing all that money in a dedicated marketer and spending that money on Google ads and Facebook ads. It actually hurts them in terms of their profitability. And the great thing about a survey like this is, is we've been able to prove with hard facts that the builders that spend more on their marketing, they not only have the higher gross margins, but even after all those expenses are taken into account in their fixed expenses, they have higher net margins as well. So it's, it's, it's golden information, real proof

(09:00): People that listen will know as we talk about attraction, you know, and building a magnet. And I mean, if you're, if you have a comprehensive marketing plan, you're spending some time, money and effort on marketing, you're attracting not just more but better, you know, better, better projects and puts you in a position to be doing and, or focusing more on the projects you, you should be doing and want to do. And that itself is gonna translate into, you know, better results and better, better profits. Absolutely. Yeah. You really get to work in your niche, don't you, your area of expertise and people will pay for that expertise. So that's exactly what you want. And it also gives you choice as well, because when we're desperate for work, we end up accepting any client. And we know, we know before we sign the contract, there's a red flag there and it always comes back and bites us. And they're the ones we actually lose money on. So yeah, we're better off just not dealing with those people, but we don't always have the confidence to do that because we need cashflow. So yeah, when you have more demand than you have supply absolutely golden position to be in, it's where, yeah, it's what we all strive for.

(10:10): We joke around sometimes that no project ever gave a review, but a bad client giving a, is a ho is horrible for your, for your marketing plan. So being, having to be able to pick and choose your clients yeah. That, that align with your core values and value what you do. That's the real sweet spot there. When, you know, you can create a, a raving fan instead of a raging fan. Yeah. You, you can't buy good reviews. Can, you know, a lot of the time when we've, we've got these clients and they're unhappy. Yeah. We, we, we're trying to pay them by doing more and more. And the more we do the more they want it just doesn't work. Yeah. You've gotta be dealing with the right people from the start. They, they likely value the wrong things or you haven't discovered what they value. And you don't know if, what you deliver lines up with that. And that's a real burden for your team to be handed a client that likely they didn't pick, but need to establish a relationship and find a way to make them hap and deliver the, the type of product that you wanna deliver. And that sort of leads me to something I started thinking about in, in reading that 1%, we focus an awful lot on mark to the client, but when Dwayne and I are working with the businesses that we coach, we're helping them put together a comprehensive marketing strategy that is not just focused on the client, it's focused on marketing to potential project managers or staff. This is a key way to win the best people in the industry to market, to the right architects and designers. And even to some extent, sharing, you know, success stories around your trades and elevating them, how much of the marketing budget do you feel is being dedicated to things other than the client?

(11:57): It's hard to really break down the budget itself as to how it should be allocated, cuz it really does depend on the actual company and where they're at and where they are in their growth stage. But I hear what you're saying. I, and, and I think what you're alluding to here is the, is the amount of investment in content marketing, which is so, so important because like you say, you know, content marketing it's it's, non-invasive, it's, what's positions you as an expert, not just to the consumers, but also yeah. To the rest of the industry, which allows you to attract the, the best people. But I mean, as a, as a rough rule of thumb, I would probably say in the region of 50%, you know, is what we see from the most successful builders. And and to put that into perspective, the sweet spot for advertising and marketing is probably around about three to 5%, which, you know, I know some people are gonna fall off their chair here and that night, there's no way I can afford to invest that kind of percentage of my revenue in marketing advertising.

(13:04): And the answer to that is if you can't it's because you haven't been doing it already and you margin into too low now you're not, you're not gonna be able to do it instantly. Obviously it is a, you know, it is a pro process that you're gonna have to build up to. But the, the guys that we work with, you know, would be spending that kind of money. And, and these are companies doing six to 10 million as well. So it is a, it's a substantial amount of money, but a large, large percentage of that goes on, you know, what you're alluding to there. Dave is the is the content marketing, it's the creation of that content. It's the filming. It's really getting everything of your, of your brands, you know, improving all the time and keeping that quality control because, you know, typos. Yeah. And

(13:45): It's Cheap logos, that kind of thing, you know, it does work against you eventually Cringeworthy and the passion has to be there too. You know, I mean, we've had a few you guests that are definitely have elevated in this field. We had Spencer Powell on not too long ago, Spencer does a lot of stuff with builder funnel. I mean, Nick Schiffer with Ms. Builders, I think he works. He works with you guys for us and, and AP and yeah, you can see when people are passionate about what they do. And I, and I think that might be what, what does prohibit some builders or modelers from really diving into the marketing thing as they, they just, I think that's what they look at. They just look at it as marketing, you know, whereas they don't really focus on something. I mean, some folks really want to dial it in, on social media. Other folks really wanna, you know, tell the story and capture it in video. All of those things work and not any one is just the right thing for everybody. But I think getting, getting passionate about your, your story, who you are, your message, and then finding ways to get that out. That's the biggest first step. And I don't think people, most people look at it that way. They just look at it as, oh, it's marketing.

(14:45): Oh, that's absolutely right. And you, you can't fake this stuff. Can you people can tell yeah. When you are passionate about yeah. What you're doing and, and what you're saying. And I think Nick is a, is a fantastic example. What, what he's been able to achieve on Instagram is you know, is in, is incredible. And yeah. Spencer as well, does a, does a, a great job, but yeah. In terms of like what you should be doing, you you're right. There's not a particular, one thing that any builder should do, you know, go where your passion drives you, you know start with the channel and the strategy that appeals to you most. And, you know, the, the, the thing that I've really enjoyed seeing is, you know, because no one's born to do this. This isn't easy, is it, it's not easy going in front of the camera. And a lot of builders we talk to, they think, I, you know, I don't have anything to say, but when we kind of sit down with them and break it all down, you know, they're all they're doing is they're suffering from the curse of knowledge. You know, we, we assume that what we, or we, we undervalue the knowledge we have, but people are eager to learn to from professional builders. So it's getting their it down on paper. And then, you know, just encouraging them to, to start going in front of the camera because, you know, very quickly they do pick it up. And and it doesn't take long at all. I think that's the most surprising thing, you know, they'll, they'll go from being, you know, quite awkward, maybe to very natural and confident in front of the camera very quickly. And then they become mini celeb in their area. Don't know they, you know, they walk down the shops and yeah. Approach. 'em like, they, they know them like old friends, which is, you know, fantastic.

(16:20): Well, and then you to a certain degree start to control the message and you get the, you know, you get out there what you want people to hear. And that doesn't mean you're misleading anybody at all, but it just means that, you know, what people understand who you are, what types of business you are, what types, the projects like you do your makeup. And only you can, can really put that and, and get that message out there the right way. Yeah. If you're trying to get a point across, tell a story about a previous client, you know, how that information unfolded And engage the audience for sure. So another thing that I caught my eye going through this was in the, in the report work that you had was, and I guess this was a trend you saw across the board as well, that there was more builders that were understanding their real cost things like fixed cost per job per day. Definitely go into that a little bit. Tell us what that's all about.

(17:05): Yeah. Well now you're gonna get me really excited because when it, we start getting into the nitty gritty and, and numbers. Yeah. Yeah. I start roughing over this stuff that this comes down to a fundamental calculator that we provide our members with, which is the pricing for profit calculator. And this is where we coach our builders to rather than use the traditional approach of pricing, which is to add a gross markup to the cost of sale, and then hope that you cover your fixed expenses. We provide a calculator that then calculates their fixed expenses or their projected fixed expenses for the 12 months ahead. It then allocates on a per job basis based on how long the job is gonna run, because obviously your net profit all comes down to how much of the fixed costs is sucked up by a particular project. And a project that runs for 39 weeks is gonna need to have 50% more fixed costs that allocated to it than one that runs for say 20 weeks, for instance. So that was a, a really important factor in the pricing. But as part of that calculator, we also inserted a a formula which calculated the cost of those fixed costs per project per day. Now that became really important for builders to understand, because whenever they got a delay on site, maybe it was a client variation, which pushed the job back a week. If you just add a margin to cover that variation, you are losing money because you are there, that's a weaker, fixed costs that have now come off your bottom line. Yeah. That needs to be built into the variation, or it should be saying change order. Shouldn't I, but equally when subcontractor doesn't turn up on site and yeah, they push you back two days, if that affects your hand over date.

(18:56): Yeah. That's two days of hard costs that have come straight outta your bottom line. It and, and these costs could be between three and $500 a day, and that isn't revenue that isn't even gross profit that is net profit. And understanding in that really does help change a builder's mindset about having these jobs run on time and finish on time. And seeing in the sourcey report, the increase, which was, I think off the top of my head, I think was about 43% more builders. And now aware of this number and tracking it, that just shows how much more industry it's getting every year. Now, software has played a big part of that as well. That was another big shift that you're seeing is that more and more builders are embracing it and U and utilizing it. Yes, that was a, that was a big a big increase in the, the usage of of software over the last year. And, and by software, I'm talking about dedicated project management software, like builder trend co-construct build exact et cetera. And I, and I think that might have been largely driven by the lockdowns, which gave builders a lot more time to then work on their business. And also it was probably driven by the huge spike in demand as well, that we saw as a consequence really of, you know, the, the effects of COVID then leading to an absolute boom in the industry, which I don't think anyone kind of saw coming at the beginning, but a combination of those two things has really led to more builders, you know, seeking help with running their jobs and using this fantastic software that is out there to become more professional and more efficient. And again, I think it just, it's, again, it's another big indicator of just how much more professional this industry is getting and the speed with which it's becoming more professional as well, which is just fantastic to see

(20:50): Some of the best investments you can ever make are in learning and coaching and collaborating both as the business owner and any team members. What sort of trends are you seeing around personal growth development within the businesses? Because with the amount of people that you've influenced, you must have seen some incredible growth stories, not just out of a business owner or out of their numbers, but out of their team and what they're able to do, maybe share with us some of the things that you're noticing about that. Yeah, sure. Well, we're, we're certainly seeing an increase here in year on awareness of people like yourself and us that are out there and are able to help businesses and particular building companies with their growth. Because I always say in this industry, you cannot learn from your mistakes. You will go out of business before you learn everything you need to learn from your mistakes. You know, this industry is brutal. Builders lose a lot of money through what they don't know. So you've gotta, you've gotta shortcut that process and you've gotta learn from other people, not learn from your own mistakes, but in terms of the success stories. Yeah. I mean, we've seen some fantastic growth from builders. One of our builders that joined back in 2017 Springs to mind a guy called TA Thai aro, who at that point he had one other person in his team and, and he was doing about three or 4 million at the time.

(22:21): And just last month I went to visit his offices where he's now got a team of probably in the region of 30 or 40 people. It was quite breathtaking to walk into his offices and see all these deaths laid out and he's on track for 60 million. But you know, it's not about the, the revenue. Well, it is mean to a, to a certain extent about the revenue. It's about profitability, because you gotta be very careful. You cannot, or you should not attempt to scale a unprofitable building company or a building company that doesn't have the margins to sustain that growth because the economies of scale for a $3 million building company, they simply don't work when you, when you grow. And that's because of the effect of owners influence. So you've gotta get your margins in place first, before you attempt to grow. Just put that kind of warning in there. Yeah. One of our most popular podcasts, one of our early podcasts was titled you can't kill chaos.

(23:21): Ty's story sounds fantastic. We should probably look him up and get him on the show and share our builder to build there. Some of the steps that he went through in his own personal growth. I mean, it, it's so amazing when you have somebody who is willing to be raw of the mistakes that they made, or the triumphs that they've had to share that with other builders. So like, like you said, you know, they benefit from the mistakes of others, but also from the successes of others too, because they're, they're awfully inspiring. So we may have to look 'em up. Yeah. Ty has become a, a bit of a celebrity in Australia in particular, in Queensland, which is the state that we're, we're based in. And Ty's based in, and when we do an event, builders are always asking, Isty coming, you know, they all wanna, they wanna make this guy, who's become a, a bit of a legend in the industry. And, and the, the great thing about Ty is he is so open and freely given his time to other builders as well, too. Like you say, inspire them, answer their questions. It's it's a lovely quality about tie that yeah, there's no arrogance. There's nothing conceded about what he's achieved. He's just there to help and inspire other guys. And and he's, he's brutally honest as well. I mean, you, you can't go from 3 million to 60 million without doing something expect exceptional and what Todd did and what a lot of people were not prepared to do was he got up at three o'clock in the morning to work on his business because, you know, he was working flat out just like, you know, a lot of builders do there, isn't time to work on their business or, or so, yeah, people might believe you have to make time.

(24:56): And that means it's gonna get harder before it get easier. And the entire case that meant getting up at three o'clock in the morning to work on the business,He must have collaborated with others consult. I mean, he must have just soaked that stuff up like a sponge.

Yes. He's look, he'd previously, you know, worked with, with other other coaches, but as I'm sure you guys see as well, this industry is very different to a lot of businesses. And certainly what we see is there are a lot of generic coaches out there that know a great do about business. And I've got a lot of great information to share, but if they don't understand our industry, a lot of what they share is actually dangerous. We, we went to see a, a very well known marketer, very well known both in Australia and the us actually. And we went to see him in Australia, one of his events, and this, this place was packed at the rafter. They were like standing room only. And he was a great entertainer. He put on a, a fantastic show, but one of the things that really ground our gears that we didn't like at all was, he was very big on Instagram and social media.

(26:03): And he was boasting about how his strategies could grow any company so fast. And one of his examples he used was how he bankrupted a building company because they were too or so successful. So he bankrupted six family members because they grew so fast. And this is the danger with people that don't understand our industry. You can't just bolt a front end onto a building company. Like you guys say you can't scale chaos. You've got to understand, you've gotta get all the components in place first because it will ruin your life. If you, if you scale up an unprofitable company, You have to be able to deliver, and you need the infrastructure in place in order to be able to do that, the team, the mindset, the support, and that means investing in a whole breadth of different things and people and services within your company. Wanna level up, connect with us to share your stories, ideas, challenges, and successes. The building nuggets community is built on your experiences. It takes less than a minute to connect with us@buildernuggets.com, Facebook or Instagram,

(27:10): Want access to the resources that can take you and your team to the next level. One call could change everything. What do you see as the most important investments emerging? Because when you talked about to I getting up at three o'clock in the morning earlier, you talked about being time poor, and there's times where he was probably time poor. But what he committed to do was investing his time in an intentional way into key areas of his business. So if somebody out there is listening and wants to work on those key areas of their business, what are some of the nuggets that you can share with them around that, where they should be focusing their time? And I know that some of it depends on, Hey, what are they already doing well, but in general, are you seeing any trends where the best business owners have shifted their investments, whether it be team members or marketing or, or whatever it may be? Yeah, well, I, I think one of the most important things to get, right, first of all, before you embark on this journey of of growth and scaling is to ensure you've got the right mindset. Now there's a, a scene in the matrix where Morpheus sits down with Neo and he apologizes for freeing him from the matrix. He says, we never free a mind over a certain age. It's dangerous. And we find a in the building industry, because when we launched the association of professional builders in 2015 and did live events and started telling builders that they needed to be working on 33.3% markup for new homes and achieving a 10% net profit, we had people falling off their chairs, laughing. Yeah. We had other people standing up in the audience and arguing, but they were generally the older guys that were just battle scarred, battle weary.

(28:52): You know, it was 55 plus they'd been in the industry all their life and they could not accept what we were saying, because to accept what we were saying would be to accept that they had wasted 20 or 30 years their life, you know, to be where they were in life at that point, and still not have anything to show for it to still be struggling with cashflow it. Yeah, it was a very, very difficult situation for them to be in. So their instinct was to kind of rebel against it and to counter that what we saw in comparison, young builders come into us at the age of 25 that would literally listen to everything. We said, absorb it like a sponge, go out and do it. And then come back with the results. It was quite staggering. We were even amazed. You know, we, we knew these strategies worked, but the speed with which these guys got success. And this was because they had no preconceived ideas, they would just execute Russ in my office, we call that unlearning someone, you know, the effort you have to put into unlearning somebody is I don't think people really, it put into perspective. It, it is, it drains you of tons of time and energy. If you have to undo all that stuff, like you said, preconceived conception. So I totally, yeah, totally resonate with what you're saying there.

(30:12): Yeah. So yeah, fir in the first instance, there is mindset that that's so, so important because yeah, we can't spend half our time trying to convince want as to why they should be doing something, you know, you know, for them to get a good return on investment, they need to execute. But the next thing I'd probably say is a very like low cost investment. And it's so, so impactful because it, it really will help your operations is invest some time setting up core values and do this in conjunction with your team as well, because, you know, procedure manual systemization, this really is the basis of any successful company. If you wanna build a company of value, you've got to develop systems and have a, a comprehensive systems manual, a company manual that everyone can follow, but you know, wanna stuff that manual full of thousands of dos and don'ts, and, and we know in this industry, wow.

(31:09): I mean, you could, you could have a, a whole encyclopedia range couldn't you of all the things that you, you know, every time a mistake comes up, we write a procedure to, to cover it. Yeah. That's simply not gonna fly. You know, there's not enough time. It's no, one's gonna read it. Whereas a core value, you know, you can establish maybe half a dozen core values. You can eliminate thousands of of these procedures. And let's just give you an example. When I talk about core values, I'm not talking about one word, you know, integrity, honesty, and you know, some of these things people like to, to write up and then forget about you week later, you know, an example of a core value for us for instance, may be that we never make assumptions. We always ask more questions and whenever maybe we end up with a situation, you know, internally that we're, you know, that shouldn't have happened.

(32:00): We take the team member back to this fundamental principle that we work by. Did you make an assumption, or did you ask more questions to get down to the, the real problem? Because invariably yeah, a lot of the time, maybe in terms of a builder, for instance, the they might hear something from a, from a builder make an assumption and then go off and do something. Maybe give them something for free in order to appease them without, you know, getting to the root of what the real problem was and, and unnecessarily thrown away money. And, and even at the sales process, you know, you can't make assumptions that just cuz someone comes in and says, they've got a $400,000 budget and they show you plans for $600,000. You know, you, you don't turn them away and make an assumption. They can't afford to build this home. You ask more questions, you know, how did you arrive at that budget? You know, it's it's a very, very important principle and, and understanding where the blockages are and the frustrations are in your own business, then establishing a core value that will not just cover those, but, but hundreds of others of similar ones that will save you a lot of time,

(33:07): We find that some of the, the best sales developers in the business are the ones who are inquisitive like that. They don't make the assumptions, they ask the best questions that open up the client. So they know what problem or issue or opportunity they're solving. And it's such a huge, competitive advantage to have that detective mindset and don't try and solve too soon because it's, it's the commo, the old commoditized way of thinking that I already know the right way. I'm going to tell you what I, you, you need to hear, but you have no idea what's important to that client when you're trying to solve the problem. So the core values, I think that is so huge. I mean, we're big proponents of EOS here. There's all sorts of different, you know, systems and, and programs you can get involved with to try to help you guide you through that stuff. But the, the concept of core values is fundamental to, to every business, you know, and I think the power of it that a lot of people don't realize, maybe people that haven't taken the time to really go through a, a very well done core values exercise, you know, is it becomes your, the goal that, you know, the, the guidelines, the rails for everything that you do, you know, as a team, it helps you make every decision, you know, is this the right decision? Is that the a right person to hire? Is that the right client we wanna work with? Is that the right trade we wanna be associated with? I mean, I think you're spot on Russ that the core values, one of the things you need to do very early on, you have to have 'em established and it just makes every other decision you make in the future that much easier.

(34:37): Yeah. And, and you become comfortable with your decisions as well. Yeah. Maybe it's letting a team member go a core value violation by a team member, you know, is, is unacceptable. And it shows you you're not a good fit and, and this situation will, will never be resolved. And unless they agree and abide by, you know, the company core values because you're just alienate the rest of the team, if if allowed to continue and People have to go through and exercise and come up with their own core values. Because I, I also agree with what you said. I think most people just borrow core values from what they see O otherwhere, you know, honesty, integrity, high quality, you know, all the things that are assumed. If you're in custom construction, now you need to go a little deeper than that. Yeah. It's, it's a phrase isn't that? No, a word, you know, explains the core value.

(35:26): It's so helpful too, not just in the decisions that you're making, but in the voice you use for telling your story, we call it the polarity of the magnet. It's really a guideline where you can say, Hey, well, when we're, when we're filming on site, when we're talking wi featuring a, a subcontractor, are we featuring those core values? Are we showing those core values? Are we sharing those core values? And, and it really becomes a lot easier, especially if you're working with a third party marketing agency to get the essence of your company and what you're trying to achieve over to them. And that's how you get other people to go on your mission with you is you have to have it clearly defined amongst your own team. And then you find that you have an army of storytellers, because I would wager that the people who work for Thai are also elevating themselves and telling the stories about how great it is to work there and the exciting projects and the meaningful things that they're getting to work on. And it's all driven from that intentional focus on core values.

(36:27): Yeah. AB absolutely right. The core values epitomize your brand. They become your brand, don't they, it's not about the fancy logo, you know, core value. Is this what your brand is all about? Hey, Ross, I'm looking at a page in this report that you sent out and it's, I mean, I'm not surprised by it. I actually think the number might be higher, but it, you know, the question was, do you have a succession plan, 78.1% said, no, that's the 78.1% that admitted it. And yeah. You know that number's not changing a lot in this industry. I mean, what are you, what are you seeing that way? That's a, for us, it's a big thing. We talk about whether it's exit, exit strategies, succession planning, you know, it's man, this industry struggles with that. How are you seeing any trends? You seeing anything change towards that, where people are starting to maybe plan earlier really starting to put together? What, what are you seeing? Actually, that was a new question that we put in for this year. So we we don't have any data from last year to compare it to, but I would say I do. I do agree with you, Dwayne. I think that number probably is a lot higher. The reason I think it maybe looks a little lower than we would expect is, is don't forget. This survey went out to the most professional builders in the industry. So, you know, probably the, the top 10% builders, I would say. So, you know, the, the 22% that do probably are distorting the, the overall yeah. You know, view we might have of the entire industry.

(37:58): The really interesting, the number to look at, if you could ever survey around this is what percentage of builders have successfully exited and implemented a plan like that, because it's one thing to have one, but it's another thing to successfully exit or transition out. We work with people who are, we, we found lately that they don't want to be out. They want to do a slower, you know, three to five year transition out and still be involved and work on transitioning relationships and those sorts of things. It would be really interesting. Do you have any metrics around successful sales Only from talking to a consultant that we've worked quite closely with over the, the years. And one thing that I've picked up that he's always said to me is most of the businesses that come to him, like, cuz he's a business broker. Most of the businesses that come to him looking for a sale, they're not saleable. They don't have they're systems in place, so they then need to be working on their business for another, you know, probably 18 months, two years in order to create something that, that can be sold because you know, if you've got everything in your head, you've been running by the, this, see your pants and you've got very little net profit. Yeah. Unfortunately you've got a job rather than a business and not many people wanna buy your job. Unfortunately. I mean, yeah, this is a tough, tough industry. Why would you, so yeah. In order to get your business to a saleable position I certainly haven't seen many building companies sold, you know, I, I can tell you that much from yeah, we have, we have about 15,000 builders on our database and we see a lot of builders exiting the industry and shutting down their companies, but are very rarely see a company that's that's been sold. Yeah. But it would be interesting to what those it's a big

(39:57): PA we're, we're very passionate about that. It's something we talk about a lot on the show, you know, is really changing that, that mindset, you know, and, and getting, because all the parts are there. I mean, every, you know, we're, we're business owners, this is a great industry. Start to get people thinking the right way, doing the right things. I'm involved with folks like yourself and your group, you know, there's lots of channels out there. If you really start collaborating and thinking on a high level, you can totally flip that script and set your business up to be valuable and sellable, but just, We really don't know how to do it in this industry. You know, we need to work more on that. So yeah. We're big, big proponents of that. Yeah.

(40:33): And, and, and, and I just echo what you said there that, you know, like it, it can be, not only can it be done, I'd say if you are a new home builder, a little bit more difficult for a remodeler, but if you are a new home builder, it's not, I won't say easy. It's going too far. But as a new home builder, you've got one of the most important components sorted out for you because new homebuilding is cashflow positive. So you can scale this business as much as you can systemize it, you can scale it and you don't have to borrow money or anything like that. It will be self-funding the growth as long as it's profitable. Of course. So having ticked that box, that that is massive. That is what holds back so many industries, isn't it it's the, the cash. It isn't the profitability, it's the cash. But as a new home builder, you've got that box tip. So yeah, if you understand your margins and how to systemize, yes, you, you can create a very profitable business that can be sold for a multiple

(41:29): The irony too. And, and I'm glad that you brought up younger builders, the irony, and, and I guess a recommendation to them is when you build one of these businesses that becomes attractive as an investment. Ironically, you've also built an acquisition machine for applying your principles, taking your core values. We call it the Sherman thank principle, where you, you roll into the next X market. And you can absorb a builder who is struggling with that. Looking to exit, doesn't have a strategy, but you have the systems and infrastructure and everything in place. So it's really a, a no-brainer for a younger builder to say, okay, I'm gonna build this thing with a liquidity event in mind, but while you're doing that, the magic that happens is you, you become an acquisition machine and you can just open additional offices and be a bailout for, or a beacon. I shouldn't say bailout, but you can go in and take that builder that may not have their runway left, to do it on their own partner with them in the interim, help convert them over and then buy them out at the end and, and write the exit strategy or the transition strategy for them, because you've got the, the pieces they need. It's, and that's not easy either, but it's a real irony that we discovered. And we've, we've been working on

(42:46): Yeah. A hundred percent. That is a fantastic opportunity in an industry that is full of opportunities like that for, yeah. Once you've got the blueprint for your business, you know, you can rinse and repeat, and there are so many people out there. I mean, it's why there's so many building franchises there. Builders are, they get frustrated, you know, they're looking for the answer. So, you know, they'll, they'll buy into a franchise looking for the, the solutions, you know a lot of builders close their company down and go work for other people because they just can't earn the money that they need for that hourly rate. So yeah. To approach those guys and yeah, you, you not only buy their company, but you can bring them on as an employee as well in a lot of instances.

(43:30): And the other thing we've talked about a lot too, is, you know, think of the, just the opportunity in this industry, because it's, it's not historically, it's not an industry that the outside world looks at as something that they want to invest in. Like, oh, I'm gonna go out there and diversify my portfolio and buy some custom construction or remodeling businesses. That's just not, but again, why not? Why couldn't, you know, as, as the industry starts to get better at this starts to solve it, you start to get groups out there that really are start to put together some rock solid, profitable businesses. It will become an attractive area for people that are looking to get into that, you know, and just that I think that I think builders have to, and ology, you have to think about that. We have to be thinking of the opportunities that are out there in an industry that generally doesn't think that way, my buddy or Rob and Dwayne knows him as well, refers to that as creating an investment grade opportunity. It's something that hasn't really been done before, where people are investing in it because there's a really good way to do it. And their asset is protected. The, the, the individual businesses are too volatile and there isn't enough standardization. So it's, it's tough to do, but if you could ever get to that stage, it would be incredible as an exit or a liquidity opportunity.

(44:42): Well, I, I, I totally agree. And, and really, it's amazing that there are not more investors in building companies because the model is a very attractive one for an investor because a building company to set up correctly and hitting the right benchmarks will produce a 10% net profit that is incredibly attractive for an investor. And it's in terms of different industries, you know, that is pretty high. I mean, there's a, there's a lot of industries where the return is two or 3% net, you know, that's not quite so appeal for an investor. So a 10% net on a building company. Yeah. You get to that point, you become very, very investible And it's much more than a 10% net because the value of your asset is increasing as the, is the value of the company grows as well. So it becomes far more than that, that 10% is your, you know, your return, your annual turn, but your overall growth is, is, is tantalizing. What else in this report stood out to you? Was there anything else that really kind of stood out to you, especially I'm, I'm intrigued by, across all, you know, the, the different countries that you're operating in. Was there one thing there that was kind of a, wow, you know what, that's pretty, that's pretty common across all areas. There

(45:50): Was one thing that really stood out and surprise me. I'm not sure if there's like too much, like we can read into it, but it was funny. My head coach mentioned it to me as well. And that's the, the builders that belong to a national association. Now, I was always under the impression that almost every builder belonged to a national association. So, you know, in the us, the N a H B in the, in Canada, you got the Canadian home builder association in Australia, we've got two, we've got the hi and the master builders, New Zealand have got two as well. And what really surprised me was in Australia, I think it was north of 80% of builders belong to one of the two national Associa. So we excluded ourself yeah. From this belonged to, yeah. One of the two, but in the us only around 50% of builders belong to a national association, it was same in Canada. So it was this big difference between north America and Australia, New Zealand. So I can't explain its interesting, But

(46:54): Related to value, what does the association offer? That's valued by the builders. And we've had a few discussions with other guests around, you know, in north America, what they value, it's getting a deal on insurance. And I, and I don't, you know, spread this across the board for everyone because there are people we, we work with to put a huge amount of time and investment and, and take away an incredible amount of value from that. But the, there seems to be a prevailing mindset as that it's, what does this thing do for me instead of what can I do with it? And you've probably done a better job in Australia and New Zealand of positioning the value, the power of collaboration. You have work, people working together more, you have more franchises that have that type of mindset, shared services, a higher general level of collaboration and understanding of value of what these organizations deliver.

(47:42): And wouldn't be, it would probably be worthwhile to learn more about it. And some of it too, I think, is just an extension in of the fragmented industry that you're in. I see, I know a lot of these, these associations can have some fragmentation, whereas, and I know myself, there's, you have the national and you may have the NB and then you have individual chapters to where you can have some very, very strong, very active, you know, chapters that people find value in. And then you could go to another chapter that for whatever reason has struggled and just doesn't get a patient. So I think that probably has a lot to do with it as well. So Another, another one that was quite interesting was mark up a margin because yeah, this is a big challenge, not just in the construction industry, but in a, in a lot of businesses as well with the business owner, not clearly understanding the difference between mark up a margin and using the terms in interchangeably, which of course, as we know, they're not. And when you do that, it's very dangerous as well because it leads to a very chaos view on your accounts, chaos, chaos. Yeah. So

(48:43): I think mark up at margin, I, I think since, I mean I'm 53 years old been in this industry for 30 plus years. I don't know that there's a, that goes by in one of the construction publications that you don't see an article on markup versus margin. Yeah. It just never ever goes away. Well, what, what didn't help in Australia is I, I saw a helpful booklet that was put out with the contracts that builders were using to the consumer and it actually talked about margin and then the formula, it used to explain it was actually markup. So it's something, what can you do if the Associa, the contract can't even explain it? You, what hope do builders have? But what has been interesting is there, there has been an increase in the number of builders that do understand it. And what we did in the source report this year was we asked them if they knew the difference between markup and marching. Cause a lot of people say they do, but yeah. In, in truth, they, yeah, they don't. And I put myself in that category not so long as ago. Yeah. One time in business.

(49:45): Yeah. I, I must understood it. So yeah, it's something, yeah. It can happen to us all until we learn it. But what we then did with the next question was we asked them, you know, the, the calculation we actually, you know, gave them a calculation, then asked them what the number was to actually test if they truly knew. And and the number, I can't remember the exact number off the top of my head. I think it might have been about 80% actually said they knew the difference between markup a margin, but 80% of those that said they did actually gave the correct answer to the calculation as well. So that was very encouraging because that is definitely an improvement on you know, on, on what we've seen over the last seven years. Really. yeah, that was, that was way, way lower.

(50:28): That's that's a big one. If you have, if you wanna remain profitable, that's something you need to know. But the good news is that 64% of builders now know it. So maybe they don't have to publish it every month. Yeah. Well, Russ, I definitely wanna respect your time. I wanna ask you just like we do every guess we have on here, what excites you personally, professionally, you know, coming up over the next six months to a year, what, what have you got going on that you wanna share with your listeners? The most exciting thing for us coming up over the next six, 12 months is live events. Now that the COVID restrictions are over, we will be back out on the road, holding live events for both our members and our non-members. So getting out and meeting builders, having a beer with them. Yeah, that is awesome. And yeah, when we run these live events, we always find the best hotel in the area and we bring all of our members along for yeah. For a nice quality evening. So we, we treat them, you know, as professionals which they, you know, deservedly are so really looking forward to getting that kicked off again and traveling around the country and getting to meet the builders face to face again.

(51:42): And if it wasn't first thing in the morning, we would, we would have a beer with you right now. Yeah. Well have a virtual beer later. Absolutely. So you also mentioned that this report that you put out will be able to share it with our listeners. Certainly appreciate that. We'll go ahead and put up a, a link to that on our show notes and all that, so that, that everybody can get access to that. But for the listeners out there that wanna learn a little bit more about you and the a and what you do, how can they find you? If you put association of professional builders into Google, that will take you to our website. The best way to find out about us would be to have a look behind the, the scenes and click on the demo. And and that will allow your listeners to see the, the systems that we're sharing with builders. We have our own podcast as well, or professional builders secrets, where we interview leading players in the industry, such as yourself, Dwayne. And yeah, that's always not only to listen to leaders in the industry, but also other builders as well, listening to their stories. So it's yeah, it's somewhere you can learn, listen to, to Ty's story for, and we have a book on Amazon as well, professional builders secrets, which was launched towards the end of last year. So we reveal some key strategies in our book, but yeah, I'd certainly start off by Googling the association of professional builders going to the website and yeah, checking out the resource is there, but like you say, I'll also make sure that you have a link for your listeners to download this comprehensive report as well, free of charge.

(53:18): I certainly appreciate that. Appreciate your time. It's been fun with you. You can definitely tell you're passionate about it. You enjoy what you're doing, which is great. That always helps. Thanks again for taking some time to be with us. Ah, thanks so much for having me on guys and we really appreciate it. And then love chatting with you both as well.

Hey, thanks for listening, Dwayne and I love hearing from you. Your stories are inspiring and your challenges can be overcome. Got a cool tip idea for a show problem that you haven't been able to solve, or maybe just struggling to figure out what you need next and where to get it. We can help hit us up@buildernuggets.com and start building freedom.

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