EP160: The Top 5 Business Decisions That Transformed My Contracting Business

overcome your limits?

You want to go out of your way to make the product and experience better. So number four is charging for estimates or consultations. Number three, and this... backs right into charging for estimates. Number three is selling jobs at a 50% gross profit. Now you've heard me preach this blue in the face, but this is a dark and dirty, I shouldn't say dark, this is a, what's the word I'm looking for? Simple, archaic, and easy ways to make money. Is this the best way to be profitable in business? No, it's not. It's just the simplest way. And most of the contractors that I've run across, including myself, we want things simple. And so when you're starting to try and tell me that I got to apply different margins to estimate, I mean, to materials and different margins to labor and different margins to equipment and have all these different percentages and all these crazy formulas and equations to try and figure out how to get my profit margins competitive and all that. You can do that if you want. And there's people that teach that and preach it. And I have people complaining to me about how 50%, you know,100% markup is not good enough. It's not a very good way to run a business. And sure, okay, it's not the best way. But if you look at someone like Dave Ramsey, who has become very successful helping people get out of debt, he doesn't do it by teaching you the best financial ways to get out of business. He does it by combating traits, behaviors that people have. So like his debt snowball, where you pay off the lowest dollar amount first, regardless of the percentage rate, financially is not the best decision. If you have a thousand dollar credit card at a, you know,10% interest rate. and you have a $5,000 credit card at a 20% interest rate, most people would say, well, pay off the 20% interest rate because it's eating you alive. What he's telling you to do is pay off the $1,000 first because it's the lowest dollar amount. You pay that off. You get some movement. You get some energy. You get some excitement around paying that off, right? And then you apply that payment to the $5,000. So financially, it's not the best decision. Getting a 50% gross profit by doubling your material and labor is not the best mathematical way to do it, but it is the simplest. And like me and everything that I've built in my program, I built it for myself and I suck at math. And so I want the simplest way to be profitable. And so the 50% gross profit was the easiest thing to do. And once I started. Doing that instantly doubled all my profit, like instantly, because I wasn't even getting nowhere near 50%. I was marking up my material and labor 50% thinking that that was getting me a 50% gross profit because most people don't even understand the difference between margin and markup, and they are not the same. In order to get a 50% gross profit, you have to mark up your cogs, your material and labor. A hundred percent. You mark that up a hundred percent. It gives you a 50% gross profit. If I have a thousand dollar job of COGS,500 in labor,500 material, that's a thousand bucks. If I mark it up a hundred percent or essentially doubling it, that's $2,000 total. I sell a job for 2000. I produce it for a thousand. That leaves a thousand dollar profit. That's a 50% gross profit. I made 50% profit on the total amount, which was 2000. Okay. If I only market up 50%, then that only gives me, and it's a thousand dollars. And that means I'm only charging $1,500, not charging 2000. And then you end up, you don't end up with the 50% gross. I can't, I don't know off the top of my head, but I think it's 33%. I think a 50% markup is a 33% gross. You can correct me if I'm wrong on that. Do the math. But you only end up with 33% profit. So the simple way of doing it is just doubling whatever your cost is. But when you do that, you instantly add profit to your pocket. Because here's the beauty of this. Most people, most contractors, even though they're not really making any money, like they're kind of breaking even, they're paying their costs. They're paying their overhead. So when you increase your prices, you don't increase any overhead whatsoever. So anything that you increase in terms of profit goes straight into your pocket or your company's pocket. It is a pure profit addition. That's the beauty of it. And you don't have to do anything else. You don't have to do any more jobs. You can do the exact same number of jobs if you're doing 20 jobs a year now and you go from a 30% gross profit to a 50% gross profit. That's a 20% increase in profits. Okay. But you don't have to do any more jobs. You're still doing 20 jobs. It's very powerful. Very, very powerful. When you do that, your business changes overnight. The first time you ever sell a job at a 50% gross profit, you will kick yourself in the butt and say, I cannot believe I've been screwing myself all these years. Because you'll prove to yourself that there are people out there who are willing to pay more for a better quality experience. You just have to find those people. Now when you do this, will you lose some clients? Yes, you will. But you're thinning the herd. You're actually getting rid of the ones that were not really good clients to begin with and replacing them with really good clients. That's just the natural progression. Right. But 50% gross profit is what's really going to change your business. Number two is I was hiring an office manager. I don't even know how I ran my business for so long. Once I hired an office manager, she took over so much information, like so many activities and tasks that I was like, how on the crap did I even do all this before? I don't even know. And to the point to where if I had to like, if I ran out of money or whatever, times got tough and I had to lay off everybody. my office manager would be the last person that I would lay off. I would go back on the tools, work by myself and keep my office manager before I got rid of, you know, I would do that instead of getting rid of her or, you know, he, the office manager, I would get rid of my field guys first every time. But when you hire one, it's scary for the first time. So hiring one really changed and allowed me. to work on the business on more important, higher level tasks. And the easiest thing to do is like figure out what your value is per hour and anything that's underneath that dollar amount per hour. If you can hire someone to do that, you should, you should absolutely hire someone to do anything that's less than what you can charge for your services. So if you're like, if your hourly value for your business is, let's say it's a hundred bucks an hour. If I can hire someone at 50 bucks an hour, to do my job or part of it, then that's a savings. If it's more, if mine's an hour, a hundred dollars an hour, and I got to pay someone $120 an hour to do a certain thing, and that's not worth it. But most people, I mean, you can hire an office manager for like 20,25 bucks an hour or less. And you can even do it part-time. There's ways around this guys. And it's very, very valuable. They will give you so much freedom in your business. It's, it's like, I just can't even describe it. It's crazy. Make sure you find a good one. Don't hire your niece that just graduated high school because she needs a job. Find someone who knows what they're doing and you will see the difference. Number one, the number one best decision I ever made for my business, and I already know what you guys are going to say, was hiring a business coach. You're going to say, but Brad, you're just trying to sell your services. No. I have multiple business coaches right now in my business. Once I hired a business coach, it allowed them, it gives you an outside perspective into your business and allows them to tell you your blind spots, what you suck at, what you need to do better at, what you need to outsource. When you have the experience of someone else who works with other people in your industry. They know what kind of industry standard things are. They know what works. I have just over 60 clients that were in the profit club. And so that's 60 different businesses that I can look into and say, well, this is how so-and-so did this and it worked really well. This is what so-and-so is doing in their business and it's not working. They had to change it up, right? So you have the data. I have the data to be able to share with you what works and what doesn't work. I also have a constant feedback loop with my clients. So if somebody's trying a new marketing technique in Florida and it's, you know, it's killing it, it's working really well, I can take that information and share it with my other clients. Hey, so-and-so in Florida has tried this. It's working great. Why don't you try it? Or the opposite. They try this. It didn't work. You guys shouldn't do it. That's one aspect of it. The other part of it is it's the shortcut, the learning process. Because when you learn organically, the only thing you can do is learn everything that you can possibly learn. And then you have to decipher what you think is the best information. So I can give you. If I was learning, I go on YouTube and I watch a thousand different videos or listen to this podcast or whatever, and I get five different opinions about stuff. Let's just pick like charging for estimates. I get five different opinions. Three of them say you should charge. Two of them say you shouldn't. And they're opposing opinions. You personally have to decide which one you think is the correct way. And then you have to test that in real life. But when you have a coach. They can just tell you, look, this is what works. We already know all this. We've already deciphered all this information. We've already experienced it in our own business. You don't need to go out and learn that. So you literally are shortening the learning curve of this information. I will never, as long as I own a business, I will never not have a business coach or a mentor or be in some kind of program as long as it's possible. I mean, I keep elevating. I keep joining higher level programs and masterminds because I'm elevating my knowledge and I'm getting the shortest route possible. That is the benefit of hiring a business coach. It's not to just tell you the information that you can learn on YouTube. That's what people think it is. It's not. The other side of hiring a coach. is if they have some kind of community available, now you're getting the benefit of all the contractors in that community to share back and forth. I'm very proud of the community that I've built and the community that we have and how that all works together because you get so much more soundboarding. You get so much more support. When you have a community where everybody genuinely wants you to succeed. I can't describe to you the feeling of that. You're no longer going at business alone. You have a corner behind you. You have a group of people that actually there to support you. And that is what your business coach should do for you as well. So hiring a business coach was the best decision I ever made in my contracting business. Guys, I got to end it here. I hope this was helpful. Shoot me a message if you want to learn more about how the Profit Club can help you. Also, if there's anything else I can ever do for you, please shoot me a message. I'm very open, very welcome to help in any way possible. Some people think I'm like unapproachable. It's not the case. If you see me out in the wild, please come up, say hi. We can chat. I'd love to get to know more about you and your business and just really just have a conversation. So always feel free to message me if you need help with anything. I'll do my best. And until next time, guys, remember, you can find me on all the social platforms, Instagram, Facebook. What does say? Instagram, Facebook, YouTube and TikTok. Just search for the Hammer and Grind podcast. Until next time, remember, profit is not a dirty word.