The majority of people in this world are using tomorrow's deposits to pay yesterday's bills.
Welcome to builder nuggets, hosted by Duane Johns and Dave young. Hey, our mission is simple, build freedom. We're a couple of entrepreneurs turned business coaches who have dedicated ourselves to helping our builder remodel. Our clients create the most rewarding businesses in the Industry. My co host Duane has been a successful builder and remodeler for over 30 years. He's seen the highs and the lows from the beginning though. Duane 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. And 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.
(01:11): If you're a regular listener, then you'll be very familiar with today's guest. In episode two, we tackled chaos in an episode 69, he spoke about the new reality. We all find ourselves in he's back now for a third appearance and joining us today to discuss a topic that many people may find uncomfortable, but if not addressed or, or tackled, it's one of those things that frankly could sync a business. It's my pleasure to welcome fellow podcaster business coach, good friend Scott Bebe, owner of my business on purpose to today's show. Welcome Scott. I'm Duane. Thank you. Thank you, my brother. It's good to be with you again, hot summer right now, trying to stay cool. Oh, it seems like it's pretty much, we are definitely in the throes of summer, everywhere from, from what it sounds like. And yeah, it was a little warm, uh, several weeks ago, you know, you joined us, uh, I've got the pleasure of, you know, one of the things of being a regional partner with the layer, you know, we held a, a wellness event at the Charlotte whitewater center, you know, and the whole point was to get some folks together and kind of disconnect a little bit, just get out there and do some team building, have some fun. I mean, we were jumping off a platform and zip lining and ropes courses and whitewater rafting, all sorts of stuff, business owners, carpenters, trades, you know, it was, it was a lot of fun. And we were privileged to have you talk to us a little bit.
(02:22): And one of the things you talked about, you know, was losing track of time. And at the end of the day, that's really what everybody came to me and said, they were like, man, this event was, was really cool, cuz it gave everybody an opportunity. Just forget about work. You know, I mean, I think work has been the safe place for a lot of people over the last couple years, you know, cuz the world is the world is seen a little bit of chaos and, and you know, work maybe has been that one thing where you can kind of bury your head. But uh, before we dive in at today's topic, that's not where we're really going with it, but just, you know, touch a little bit about that. And the wellness thing, You know, it's funny, the timing just after that event, the very next week part of our family vision was to have proper in, in the upstate of South Carolina. We live in, in South Carolina and the upstate part, we live near the coast and the upstates a lot of mountains and Hills and that sort of thing. It's so beautiful. And, and uh, so we got a small piece of property up there, uh, about a year ago and the very next week, uh, from the time that I was up there at the whitewater center with you all I had rented, uh, now I'm a business coach. I'm not a contractor, but I had rented a skidsteer for a week because I was gonna get in that skidsteer and just go grade stuff, tear stuff down, you know, whatever, just drive around. And uh, and I did. And you talk about again, just losing track of time.
(03:35): And I would come back to the little Airbnb we had rented. I mean, pouring sweat, you know, head hurt, hungry, whatever filled with joy. I was so happy because I had just, you know, you just kinda lost track of time. And, and, and even on the, that was our week off, by the way, we were not working that week. That was a pure week of vacation for, for Ashley and I, our kids all working at a summer camp together and, and all of that. And, and, and people are like, are you really gonna, like, I got buddies going down to The Bahamas and boats and all that kind of stuff. And I, that that's fun for a period of time, but man, it's so nice just in that case, getting a skid steer, put some, uh, headphones on and just sort of lose your, you know, I go back to the M and M quote, I can't, you lose yourself in the moment. And that's what it feels like. And it's something that we've got to get a lot better with because I feel like we're trying to uphold the world with all of our effort and power and we can't do what we know we can't do that. And yet we feel like we have to, but it is so hard and we've gotta make time to where we can just lose ourselves in moments and lose track of time on some things.
(04:39): Yeah, we really do. You and I talk about it a lot when we speak, you know, the headlines can be distracting for people and, and even my own team here at my construction company in Charlotte, you know, our project, manager's just trying to keep morale up because they, you know, they're like, man, you know, it's every day I've gotta deliver bad news. I've gotta say that, you know, the appliances are gonna be another three months late. This trade is just stretching himself thin. He can't get to the job. And that gets, you know, gets people stressed. There's no doubt and carving out some time, as you said to just totally disconnect, turn the phone off, turn, work off, go have some fun. So yeah, thanks again for that. And uh, yeah, we're gonna make it a point to make sure we do more of it.
(05:15): So I'm excited for where we're gonna go today a little bit because when you and I talked, we also talked about, yes, we see it in the headlines. Yes, there's inflation. And, and these last couple of years have had some challenges, but I think one thing we've, we've all seen across the board in construction has been growth. You know, revenues are up and project sizes are up, costs are up, but you know what, not all, and not all cases has the, has the bottom line been up? I think without a doubt, we're probably on the backside of, of the current business cycle for residential construction. I certainly don't see any collapse on the horizon, but you know, everything that goes down must come up again. And if we're on that backside, you know, I think with a softening and demand and what a great time to, to, to make sure you're in a, in a financially strong position, you want time to turn the dials and fine tune your business because if you're not set up both process wise and financially, which is where we're gonna talk today, um, you can be in for a world of hurt.
(06:10): The phrase we keep coming back to is, the contractors are notorious. You know, I worked with, started working with a contractor, actually was our first ever client about eight years ago. And he kept talking about the value of being debt free. Like he was so proud that he was debt free debt, free debt free. And I'm of course proud. You know, I mean, if you grew up in the Dave Ramsey era of money management, anybody that's gonna be debt free is that's, that's an awesome place to be, but he kept pushing it, pushing and pushing him. I'm trying to figure out like, why is he pushing this? I'm working on the back end of his business and all that stuff. And, and he's talking about using debt free as sales point and, and sales tool. And, and I finally, a couple years in realized that the reason that him being debt free in his, at that point 15 million annual home building company, custom home building company was because the majority of his competitors were not, they were floating everything through lines of credit or whatever it might be.
(07:00): And then as time has gone on and we've gotten so well versed in the contractor's face and can speak the language fluently. And all of that we've realized that the majority of people in this world are using tomorrow's deposits to pay yesterday's bills. Well, I, I don't wanna be offensive, but that's fundamentally a Ponzi scheme. And the Ponzi scheme always works, ask Bernie Madoff, right? So the music stops and then there's not enough chairs to sit down and then somebody falls and unfortunately, a contractors where when one person falls, the whole thing has to fall at that point because you've lost all your credibility. And so we've even in our little town here, I couldn't believe it right in the middle of COVID when hockey stick growth in all this, this one particular business had to close. We ended up finding out that they had made a pull on their last draw in left town.
(07:46): This was well-respected builder, left town. And, you know, what's frustrating is about a year later, low and behold, 30 minutes away in a bigger town. They'd open up operations again. And you're just like, oh my gosh. And I think what we're gonna see more and more of is so many contractors have been living on customer deposits to fund cash flow and payables and all of that sort of thing. Once those deposits get smaller and smaller and smaller either by, by, uh, contract value or just by raw volume, that's when we're gonna start seeing the defaults of some kind, um, to your point, I, I cannot even understand to imagine how it could mimic 13, 14 years ago when that trauma was there. What I do believe, and this is my own personal conviction. I'm not economist, I'm not a CPA. I'm not an, uh, advisor of any sort that's licensed like that. But I look in a house that was, you know, $200,000, 10 years ago, and is $450,000 today. I don't know that it goes below three 50 in, in certain markets, you know, it'll maybe go down, but certainly not. I don't think gonna go back to what it was a long time ago. And that's why I like what you said on the backside of this. And so the thing that, that I think we've got to have a continual dialogue about is not just how do we know our numbers, but what does it mean to know your numbers? And I think Mike MC Callos, if, if none, if nobody's listened to, uh, profit first and particularly profit first contractors, I think it is a, it is a must read for all contractors. And the idea is just imagine you got a dollar bill that just came in, somebody just paid you.
(09:18): You wanna take scissors to that dollar bill and cut it up and give the fraction of that dollar to everywhere it's owed. So in a new construction business, for instance, it's, if 80 cents of that dollar is owed to, uh, to, to, to labor and materials, then let's cut 80 cents of that out. Let's put it in its own home of a bank account. And now we've got that reserve to pay our 80, 80% cost of goods. If, if, if 10% goes that to overhead, all right, let's cut 10, 10% off of that. $1, put it in its own home, cover overhead. Let's take, you know, a percent put it in capital expense reserves. Let's take another 2%, put it in tax or whatever. And you start to cut that up. Contractors have got to start thinking in a subdivided mind as it relates to their money because the old adage of cash is king cash is not king as it relates to, uh, what rules this world, but cash is king in terms of decision making and having options.
(10:11): Cash gives you options. The problem is if all we're doing is working on lines of credit at a bank, that's not our cash. Doesn't give us a lot of options, cuz we owe that back. So what we are encouraging people to do is to create your own line of credit. And so we actually have clients now that have set up, you know, set up multiple bank accounts, but one of their bank accounts is actually titled personal LOC. It's my personal line of credit. It's actually my cash. That's in a bank account that I can draw from if I've got a front, a project or something like that. And even more so is any builders that are taking customer deposits. Once you take that deposit, if it's not immediately set for a payable, then you set up another customer deposit account, put all that money in there. Why we've got to subdivide the dollar. Fundamentally, you think of that as an escrow account, it is not your money. And so if you're robbing Peter to pay Paul, we've got to stop that. And it's gonna be an abrupt stop for, for some people, but there's ways to do it. You can start seeing future receivables as a way to, to back fund a lot of that customer draw and deposit. You may have already tried to pay Paul by robbing Peter from. So, but in all of that, Dwayne contractors have to start thinking about their money in a subdivided mind so they can make sure cash goes in their respective buckets because cash gives options in markets that we're about to, or that we're in right now for all intensive purposes.
(11:30): Yeah. I, I have an attorney friend here that, that works with myself and several other contractors that I, I know. And you know, he's, he's seen some of this coming him and I talked several months ago. We've been in that phase where we've well that's frankly people have mostly been order takers. You really haven't needed to. Yeah. Haven't had to do much to, to close a sale, Not much business development, No, not much business development. So we're gonna have to take that order taker hat off and, and put some effort back into, you know, being able to sell these jobs. But yeah, back to your point, what has happened is those and it's has gone on forever, but that ability to get a customer deposit has been so easy that, you know, it's, it's helped to, it it's covered or, you know, distracted people from what has really going on in, in their numbers. We're fortunate, I'm a proponent in my business and with a lot of the builders that we work with, we work on a, on a cost plus model. And, and I mean, these principles can work across all levels, but the, there were a lot of folks out there and that got themselves into some fixed cost situations. And maybe weren't having those conversations with clients on the early end and they just ate stuff.
(12:31): Yeah. And it was okay to eat it. I, I, I think in their minds for a while, because they were making it up, you know, the, the, the deposits were coming in and like you said, they're covering it. They're covering it. Well, man, when these deposits start to slow down, um, and the payables start to Mount up, that's a really uncomfortable feeling. And it, it puts people outta of business. It's just, just that simple. Uh, but to your point, that's what it is. It's not, it is not your money until you've earned it. That's right. Um, and for some reason, this is something else I've talked about with, with several folks. Even I was at the, the NIH B spring sessions in, uh, in June and talking to a fellow that's, he's actually got a pretty neat thing out there. It's, uh, gets into the, gets into the cryptocurrency world. And the conversation was just around who decided that we were supposed to be bankers as builders and remodelers and, and you know what, we're bankers and we're not, we're not supposed to be bankers. We certainly don't make any money on being bankers. That's all we do is transact business. We take in money and dish it out, take in money and dish it out. But the core principles of being able to guard that money are something that everybody really needs to understand to your point. Yeah. So I mean, what, what are, what are some of the things you're talking about with, with the folks you work with around how they can, how they can do that?
(13:41): Well, first thing, go back to what you said about the, uh, the bankers. We, the, the way that we put it is every contractor doesn't realize it, but 80% of your time is spent on financial management because 80% of your money is not yours. It goes somewhere else. You just, somewhere else steward it, you go here and whatever. And so you're, you're actually a financial advisor for free free for all intents and purposes, with a lot of the money that you do. And so having that mindset, the other's a fun little exercise and other people have called it other things. I'm sure I got it from somewhere. We just call it a, dollar's not a dollar. And so the exercise is a, dollar's not a dollar. And what you do is you take a role of a hundred pennies. You give it to everybody on your team and a red solo cup. You roll out, you piled a hundred pennies on the table. It's kind of fun. You feel like you're back in kindergarten again. And, and the owner comes in and says, all right, we just got a contract for $2 million, 2 million contract. Yeah. We're all excited. $2 million. Because when you're not an owner, you hear 2 million bucks and you think, oh my gosh, our owner's so rich. And all I get outta that 2 million bucks is, you know, $60,000 salary or whatever. But boy, my owner's crushing it with this money. And so what we do with the dollar do is not a dollar. The owner comes in and says, all right, out of that $2 million or let's use round numbers, $1 million, a hundred pennies, 80 cents of that goes to cost of goods, hammers, nails, lumber, uh, sub labor, all of that. So I want you to take 80, 80 pennies and put 'em in the red cup.
(15:02): So you take 80 pennies, put it in the red cup. Okay. Whew. Now we're down to 20 pennies. All right. Out of that 20 pennies, I want you to take 11. And once you put in the cup, cuz that 11 cents represents what we pay you and what we pay our rent, what we pay internet and utilities and all that kind of stuff. So go ahead and, and take 11%, put that in the cup. And you look at that and you're like, all right, well, we paid all the stuff and we paid all of us and then we paid maybe marketing or something like that with it, man, you still got 9 cents. That's amazing. Oh, hold on, hold on, hold on. Hey, we gotta pay, uh, taxes outta that, out of that, outta what remains. So let's take another 3 cents outta that. Cause we gotta pay our federal liabilities, not payroll tax.
(15:39): We had to pay that too. And then you start paying that, oh, we gotta take some depreciation, uh, decrease off of that. So let's take another couple pennies out that and you just keep going down until you finally realize we're at, you know, five pennies. Now you might think, well, five pennies, you know, times 10 million worth of business. I'll take that. I'll take that. Well, hold on, hold on. What about the material that, that superintendent and didn't return set on the job site now it's ruined and we can't bill for it and we can't return it. We just eat it. Or what about that home that we miss framed just happened two days ago in one of our clients, huge misframing that one of their other superintendents had to find and they're gonna have to eat about a $15,000 reframing cost. Well guess what? They're on a fixed cost to your point.
(16:20): Nothing they can do about it. And that comes out of that six pennies. And before you know it overhead mistakes, callbacks, et cetera. We take another penny or two out of that. And this is what I'm left with. And I have to ask myself if 10 million worth of headache and financial management is worth these three pennies that I have left over. And so it's a great little exercise to do what we call financial literacy for your team. We've got to as owners stop, assuming that our team thinks the same way that we do. They don't, they don't think the fractional dollar mind, they think with a whole dollar mind, a million dollar project is a million dollar in my owner's pocket. And he just happens to pay me $50,000 out of it. Right? And we need to help it's our, it's our duty to help them understand how the dollars work so that we can lay those things out. So I would start by saying, what are we working with people on first is the mindset to help owners understand that you have to speak to your team the way they need to be spoken to in order to understand what true financial realities look like. And that job costing has everything to do with what we call Elmo, right? Labor materials, overhead and margin. But what comes out of those things to help them understand that a dollar is not a dollar.
(17:28): Let's be honest too. I see it. Cuz I get a chance to dive into the books of a lot of people and I'd see, I'm sure you see it as well. There's a lot of business owners out there, contractors out there that they might tell you, they've got five pennies left, but really Well, that's what the PN L says. That's what the PNL says. That's when you really take a look. Yeah, they might have two or three pennies left. Never Once. Have I ever walked into a bank with a P and L and asked my banker, Hey, can I withdraw this money? This amount that's on the bottom of my P and L. Yeah. You know, it's not real money. It's a number on a Sheet. And if you get down to two or three that's, if everything goes Well, that's Right. So there's no, you, you gotta have the margin there. There's gotta be room for those errors and there's gotta be room to put some away the rainy day fund, whatever you wanna call it, to keep that business healthy. Yeah.
(18:13): We had a meeting with our CPA two weeks ago and she was really excited. She showed us our bottom line on our P and L and, and then cuz we practice the subdivided bank accounts. I looked at my bank account in my profit account. I'm like, wait a second. I only have a third of that in cash. And so we kind of look at it that way. Whatever's on your net income statement. You may be running real good to grab max 50% of that in real hard cash that you can do something with. But typically most people actually can be far less than that. But typically you're running about 30 or 40% of that. If you're diligent in discipline and have everything segmented that whatever's on your net income, when you look and go well, where's the money. A lot of times people don't have any more than 20, 30, 40% of whatever that number is, but we gotta help our team. That's that's not their responsibility to know that that's our responsibility to help them understand that.
(19:00): Yeah. And then they become, we had, uh, we had Steve baker on not too long ago when he's from the great game of business, you know, and that's one of the things they really talk about is getting your, getting your team involved, to understand, let 'em be part of the game. You know, let 'em understand how this stuff works so that they don't feel like they're just, you know, they're, they're just doing their job so to speak. Yeah. You know, they have a place in us. They can help make some decisions. Somebody in the field might be able to make a decision on things as simple as when things get delivered or Hey, if we order this ahead of time, we could save, you know, X amount, all of those things add to this bottom line, which is gonna help. Yeah. Which is gonna help the dollars, which ultimately helps the team. Well. And that, that leads into Duane. The other big thing that we're talking about right now, um, with everybody. Now, this goes without saying, anybody's listened to our message at all. It's the back end systems, process and purpose that we're articulating. So there's a broad scale framework here. But when we talk about it from a micro level, Wanna level up, connect with us to share your stories, ideas, challenges, and successes.
(20:00): The builder nuggets community is built on your experiences. It takes less than a minute to connect with us@buildernuggets.com, Facebook or Instagram. Want access to the resources that can take you and your team to the next level. One call could change everything. The other big thing we're really hammering on right now is the recruiting, hiring, onboarding, and retention process of people. Now I wanna be very cautious about this. What I'm about to say is not strategic. This isn't a hiring Strat, Hey man, hiring's tough right now. How do we find the right people and people who wanna work? I was at the build expo last week speaking and I made this statement. I think I offended a couple people, but I made this statement. We all look around and we look at the millennials in the gen Zers and we go, God, they don't wanna work. They're so lazy. They're constantly staring at their phone. And my response to the room was, it's not that they don't wanna work. They just don't wanna work for you. They don't wanna come into your chaos and your crookedness and your whatever and work in that environment because they want something substantive, repetitive, predictable, and meaningful.
(20:58): That's what they want. And so the thing that we've really been drilling in on, it's a great question for all owners to ask of themselves is do I have a recruiting process that is not titled indeed.com or Craigslist or something? Right. Do I have a recruiting process where I leverage my own network to go out because I've done a great job of articulating writing down the role, articulating, writing down the gap that that role is gonna fill and working through a performing and in a healthy way, understanding what the compensation for that role needs to be. Have I done that work and then taken that to my network right now, we're about to hire two full-time coaches in our business. We have not once posted publicly that we're hiring, not once. And the reason now we may get to that point by the way, but we start with our network and our network produced.
(21:45): And so we talked to people that we knew told 'em what we were doing. They put us in touch with their network. And so that's where we've gotta start. Once we've got that, then we pivot into the hiring process. Now, unfortunately, Duane, the strategy for hiring for most people is a pulse check and an eyeball test to make sure they're upright and breathing, you know? Oh great. Have you ever done a construction project before? Yeah. Built a Playhouse when I was eight. Great. Come on in. Right. And instead slowing putting a parachute on slowing that process down, making it multi-stage and not starting with the job role and not starting with compensation. What we're gonna start with instead is culture, vision, mission values. Duane, if you called me up and said, Scott, I have got the perfect job for you. Perfect job for you in Minneapolis, Minnesota, be like Duane.
(22:34): That's awesome. I love people from Minneapolis. I don't wanna live there. And so I there's really no reason it's talking about the job. If it's in a place that I don't wanna be right. And why don't I wanna be there? You don't like Minneapolis? No, no, no, no, no. It has nothing to do with that has everything to do with the vision that we have for our family, where we wanna go and it does not go through Minneapolis. And so before we, we jump straight into comp and role and what's it gonna take and what am I gonna do? And wait before we ever get there. Can I tell you what you're coming into? Can I tell you the vision of where we're headed? Can I tell you the mission of what we do every day? Can I tell you the values that we use in making decisions every day?
(23:11): Can I talk to you about the people you're gonna be working with? And then you go stew on that a little bit. If that entices you and we still like the conversation that we had, then let's move forward on the other things that we've got there. So really stepping that process out so that we can truly understand. And our typical hiring process is anywhere between three weeks and six weeks, which is tough, cuz I know people are gonna hear this and go, I don't have that time. That guy could get hired away. And if they're jumping for money, they're jumping for money. It's not worth you getting them off the street. Yeah, no doubt. And I mean with that, we Talk a lot about recruiting and you've heard Dave say it before the goes, Dave's not with us today, but I mean, you know, building the magnet, what are you doing to attract these people and attract that kind of talent. Yeah. And we see it also that attraction mindset spreads across everything. It spreads across to the clients. You're gonna attract the different types of trades that you're gonna attract. And you know, getting back to the point of being financially sound, I mean that, that's a great opportunity to leverage your network as you were talking about. I mean, if you, as a business owner can really get your head around how to truly understand your numbers, get your team, to understand your numbers, what a great opportunity to go out and help some of these trades that you work with. Cause you know, a lot of them are struggling with the same source of things.
(24:23): Mm-hmm what can you do to help them become more financially sound? Whether it's all the way down to the way they're pricing projects, you know, how, how, how are they, are they being profitable? What can they do? Because all of this is if you're creating a better business, you're ultimately creating a better value for your clients, for everybody around you. Yeah. But with that may come some additional cost, you know, maybe you do have to charge a little more because you know, you're paying for better talent. I mean all these things, but you, you're not gonna be able to address that and get ahead of it if you don't really know your numbers. Yeah. So what are you seeing again, when you talk to some of these folks around knowing the numbers, what are you doing with them? As far as you know, yes. We're in phases of inflation now, uh, labor rates are going up. What sorts of things should they be thinking about financially and on the book side to, to get ahead of that, you know what I mean to say, Hey, where do I need to be? Or, or frankly, don't just think that, well, my competition's charging X amount markup. That's what I should do. Yeah. It doesn't work that way. You've gotta know your numbers.
(25:18): Yeah. So no, look into the right to the left, right? We're not gonna look to the right or to the left. We're gonna look at our world. We'll get insight and advice from people that we trust and have great wisdom, which are usually people who are way farther ahead of us. If you want a good template for what a good wisdom mentor looks like, make sure they're more mature and farther ahead of you than you are in the right direction. Right? And so that's a good way to find a mentor, but here's a K here's a couple of key things that we're looking at. Number one, let me go back to my statement. Cash cash gives options. What are you doing to subdivide your receivable? So when the dollar comes in, you have it parked on what's going out and what you can retain so that you can build that up and buy you some options what's going on.
(25:57): All right. So that's, that's one of the things, um, that we're really, really pushing to get cash heavy, uh, recommend three to six months of cash on hand to cover immediate expenses. If possible, now you could listen to that and go cow. We're not even close. I don't care start. That's all I'm asking you to do is just start second thing scheduling. Oh my gosh, we have so undervalued the schedule in construction. We kinda laugh at it and we move it. We, you know, whatever in the same way. I think I mentioned this when we were in, in, um, in, at the whitewater center, the old Ted lasso or the new Ted lasso show, they've got this guy, Danny. He steps up to kick a ball on the goal. And he says football in his life. Football is life. And in construction schedule is life.
(26:38): Like if you don't live by schedule, you go broke over time. And there's a, there's a very simplistic reason for it. So if I sign a new contract for a million dollar home, get all excited billion dollar home million dollar home, the world thinks you just grabbed a million bucks. They don't know that that's staged out or whatever. They think you grabbed a million bucks. They don't know that 800,000 that's going right back to the local lumber yard and local subcontractors and everything else. So all they hear is a million dollars. Well, that million dollars is spread out over. Let's just say a build cycle's 12 months, right? I know for so many it's longer right now, but for 12 months that million dollar gets staged out. Well, all of a sudden you forgot to order windows that 12 months goes to 14 months. So now that same million dollars just got stretched out over 14 months.
(27:22): Now the people who don't know, look at it and go, well, we still get the million dollars. What's the, what's the, what's the big deal. The big deal is your overhead never stopped. That machine keeps running month after month after month schedule is life set, appropriate schedules. It does not mean that you have to set a 12 month schedule. What it does mean is you have to set an appropriate schedule, 14, 16 months, and then work your rear end off to beat it. And every day beyond the due date of that schedule, man, it needs to be menacing. It needs to bother everybody in the business because the machine of that overhead keeps churning while the schedule keeps getting extended. And so the schedule now let's marry the other element that goes on with this, let's get real practical job costing job, costing job costing.
(28:08): Now most of you go, well, builder trend told me they could job cost or job trend told me it could job cost, but man, that software stinks. No you're just not using it. Right. It's great. Saw all of these softwares are really, really good. What it usually means is we I'll include myself into this. We are not being diligent enough to stop at the end of the day and plug in solid numbers because it's garbage in garbage out, right or positive in positive out whatever numbers are, go into a builder trend or whatever software. I'm not a builder trend spokesperson by the way. But whatever number goes into that tracking software, that's what number's gonna spit out. And so if we're not putting good data in, we're gonna get bad data out, but job costing, if we cannot schedule appropriately and we cannot job cost our jobs, we will not know forecasting budgets. And we will not understand if we're truly profitable. Well, Scott, I put a margin on it. I don't care what margin you put on it at the end of the day. I wanna know what the margin is when you're done with it. And if we don't know what that margin is, uh, I'll tell you this. I don't know that enough people truly understand the difference between a markup and a margin. And so really beginning and just go watch a YouTube video on that. I think it's really helpful.
(29:15): Or if you look, if you, you know, if you're a regular subscriber, if you followed anything like, you know, JLC, remodeling magazine pro builder, I there's, there's an article every three months on the difference. Yeah. Between markup versus margin. Cause for forever, it's been confusing and people, people just don't fully understand It. Yeah. And so understanding that. So if we, if we, if we go back and look, cash, heavy schedule schedule, schedule, uh, you, you oughta every business ought to have a deep scheduling meeting at least once a week, if not a schedule huddle once a day, but a scheduling meeting once a week and job costing before you can move on to your next task job costing must be complete. Or that task is not complete because once we have those thing in place, okay, now we've got some cushion with cash. We've got proper forecasting with budgets. So we know what jobs to bring in or go after or whatever. And now we know job costing so that we understand what jobs are actually profitable. So we know to say no to those in the future, if they're not and yes to them in the future, if they are,
(30:12): It's so powerful to understand, understand the numbers. And cause as you said, if you don't understand the numbers as the owner, there's no way you're ever gonna convey it to the team. So they're not gonna see the value in it. No. And then this can also be taken all the way to, I look at it as the way you have to present this to clients as well. You know, cuz you can't just, as you said, you can't just like look left and right. Well this guy's charging that. Well, that seems like what everybody's charging here because any one company is gonna go through phases. If you're a $500,000 a year company, it's different when you're a $3 million year company different when you're six or 10 million, the principles are the same. Yeah. But the size of your operation, what might be overhead, what you need to charge, you constantly have to be monitoring that and make adjustments to it, to stay healthy.
(30:53): You know, one thing that we've found that we, we try to with the folks that we work with, we always, we always try to get them to, you know, educate the client around. We're big proponents of, you know, we're going to build this project with your money, you know? So let make sure you're putting yourself in a position where you, you're not the bank. You shouldn't be in a position where you have to fund stuff. You can set things up properly to where the money's coming in. You're a good steward of that money, but at no time, do you have to be the one funding it?
(31:20): If we could ever get the majority of contractors to understand that it may actually be bad for the contracting business. Cause I think you'd have more of a flood of people coming in to the, to the world. But the reality is if we could, there is such a glitch in the mind of this contracting world that it has to live on debt and lines of credit. And it does not. It does not. It does not does it right away. I, it depends on what kind of cash availability you have access to. But over time, if you're discipline and peel off a percentage, peel off a percentage peel, offer percentage, next thing I we've, we've got a couple of guys in the Texas market and they are a, they're now a four person show, but there were a two person show for a long time. They're doing a couple million bucks a year, obviously subbing out a, the majority of their work in, in doing it.
(32:04): Uh, and the majority of it was in commercial as well. But they had run into a buzz saw over six month period where they had, I don't remember the exact figures, but it was right at two and a half million, basically the whole year's worth of revenue that they were gonna have to complete. Wasn't six months, excuse me. It was five between February and June. And you're just like I, and you look at that and go, man, that's awesome. You're just gonna be busy. No, no, no, no, no. I'm worried about that. They don't have any cash for prepurchase materials, but you know, fronting labor and doing all of it stuff. So what we had to do is we actually had to build a spreadsheet that specified the exact date. They could bill on that item and the anticipated date, they would receive that check from that item and they had to stay on top of it.
(32:46): Stay on top of it, stay on top of it. Well it worked, they did it, they did it, they did it. And they ended having a nice multi six figure dollar amount of remain near leftover. What we did is we parked the money and now they've got a significant multi six-figure, uh, dollar account that they pull from for startup project and they reimburse it and they pull from it and they reimburse it, pull from it, reimbursement. They are now their line of credit. I'll say this. They had to borrow money to get through that initial thing and the amount of money they had to borrow, they now have more than that in liquid cash in their own account that they never have to go borrow money again and it can be done. And they're, and they're they're good dudes. They would not tell you that they're Harvard grads or supermen or any of that. They're just normal guys who are great guys that you'd get along with, but because of discipline and process, they were able to follow that. And now they've got, well, we talked about cash gives options. So now they have options.
(33:39): Well, yeah. And the, and in the world, in this world of uncertainty, numbers are always certain. Yeah. Can't they work, man. Can't maneuver 'em unless you wanna try to cook 'em but that's your own risk. Right. But if you can get, if you can get your head around and understand the numbers that they're not gonna lie. Yeah. Um, then there's a level of confidence as well. And it's back to my point earlier of once you get your head around it and start to get yourself to be healthy, have a little bit of cash on hand, take that and share that with, with your trades. Because I, I hear it for so many times from builders. I try to get him on, like you said, you you've gotta have structure structure to your schedule structure, to your payable structure, to everything. Yeah. But my roofer, he's a great guy, you know? And he comes in on Friday. He needs a check. Yeah. Well, yeah. I, I get that, but you know what, if you continue to give him that check every Friday, he's gonna keep asking for the check every Friday. So why not take some time and work with him and ask him, how are you, how are you billing? You know, maybe you need to front load the first draw a little different, or, you know what I mean? There's things where work with them so that they can become better. They Can do it At finances. And you've just, you've solved two
(34:40): Problems. Well, I think there, the, the, the good news Dwayne, and this is probably the biggest takeaway. There are simple things that can be done to do this. It's not, it's not complex things. It's simple things, but I go back and this is a good acronym to remember, it's not scientific RPS, repetition, predictability, meaning repetition, predictability, and meaning. We can bake those three ingredients into anything that we do. And the good news is about, if we go back to the hiring conversation, you know what people want more than anything you want the gen Zs, the millennials and all that want more than anything. They don't wanna cush job where they don't have to work. Cuz it's not meaningful. They want repetition. So they're not in chaos. They want predictability. So they've got clarity moving into their next day and they want meaning they want meaning not money. They obviously, they want a base level of money, but I've not found this group to be overly money hungry. Like maybe my generation has been, but what they want is they want repetition, predictability and meaning. And even if you gotta pay a lower amount, if you give a longer runway to those three elements, for the most part, they're in,
(35:43): They're in, yeah, this is good, man. This is good stuff. Um, as always. So, you know, like we like to ask of every guest that we've asked you this before. I mean, what are you, what are you excited about? What's coming, uh what's oh, mans coming up over the next six months or so. Yeah. So this is easy part of our vision. We have we, and all of our clients write down a, a multipage vision story. And one of our, uh, elements in our vision is eight coaches. By December 20, 23, you can hold me accountable to this. So eight coaches by December, 2023, right now we have four. And in the next month we are actually bringing on, uh, two more. It's really cool. Cause one of these is actually an alumni of our coaching they're client. They were former client of ours and they own a multi-location business and the business is literally running without him. And he's, he's 38 and bored. And he's like, I so badly want to do what you all took me through to other people. And so he's one of them. We got another guy that we're gonna be bringing on. And then in the next, uh, in the, probably in the next six, seven months, we're gonna be bringing two or three more on, uh, to, to help us live out this vision or this mission to, to liberate business owners from chaos.
(36:49): So Duane, I'd be lying if I didn't tell you, I was puckered up and scared to de like, now I'm not saying that just to be like, oh, that's cute. And no, I'm, I'll wake up at three in the morning, like sweating, cuz I'm like, I cannot believe, but we reserved our cash just for this. And so we're gonna reinvest it. We're gonna plow it back in because there's more business owners that need what we do. And uh, and we do it very well. And we feel like our training is fantastic. We're gonna get these, these folks up and running and, and be able to serve people. So that's, that's what we're really, really excited about. Well, that's great, man. And why don't you let everybody know? You know, if they wanna learn a little bit more or tell 'em how they can find you. Yeah. Yeah. Easy. Just go to our website, my business on purpose.com. Um, my business on purpose.com and then we've got a podcast while you're up on the builder nuggets podcast, you can hop on over to the, my business on purpose podcast. So we just passed or we're close, I think to 600 episodes or something like that. So it's been going for a while.
(37:45): Good man. Yeah. It's fun. It's a lot of work, but it's A lot of fun, lot of work, a lot of fun. Yeah. So how about that property in, in the upstate is what's going on there? Are you gonna be, Yeah, so we Working on it, building anything like that, so yeah, we're Gonna, we're gonna do something on it. We're not sure yet. Um, but the other thing that we're probably gonna do is, uh, I think, I think my wife and I wanna get in into a little bit of, uh, potential like real estate Airbnb stuff. So I think we're gonna dabble with that a little bit, uh, as we're growing this, but what we want to try to do is merge it into our business and make it a place, uh, for clients and owners and their spouses and families and stuff like that. And then also for our team as well, uh, that we can leverage at times. So we're gonna try to merge those two things together. And so we're, we're evaluating some of that right now as well.
(38:28): That's very cool, man, best of luck with that. And as always appreciate you coming on the show and we will talk again soon. Duane. Thanks. Hey, I, I, I do wanna publicly say, you said it's a lot of work. It is a lot of work, what you do and have built. And I I'm impressed, man, that you've stuck with this and uh, just a remarkable little community that you've built. So great job. Yeah. We're having fun with it. Um, we're, you know, lots of engagement. Uh, I think it's, it's striking a chord with people. Uh, are you heading off to IBS this year and national builder show? Will you be there? I think so. I'll follow up with them. Uh, I think this month or next month to talk about some workshop layouts and different things like that. So actually heading to a builder 20 club next month in Vail or in September in Vail and got a couple of those, got the build expos coming up in Los Angeles in September and in Charlotte in December, by the way, it's in Charlotte, they just announced it. I forgot to tell you that they just announced, uh, build expo coming. I think the first week of December right there. So anyway, yeah, they've got some cool stuff coming up and we'll be there speaking and hanging out.
(39:25): Yeah. I saw that. I'm sure I'll probably connect we at some point, so yeah. Thanks again, Scott talk soon. All right, Duane. Great work. Be sure to check us out on Instagram and leave us a comment. Let us know what you think about today's show and what we could be doing better. Your feedback is what helped build this community. So make sure to give us a review on building on a stock com
Hey, thanks for listening, Duane 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.
