EP25: 5 Reasons Contractors Fail

That's staggering. I mean, that's gnarly right there. And so, but here's what's important is most contractors don't realize that. You know, most contractors think like, you know, oh, I see this one contractor, he's crushing it. I should crush it too. I should be kicking ass. I should be taking names, counting money, laughing the way of the bank. But it's a hard grind. It's really hard.

Yeah. So I'm so thankful that somehow I made it through. Like, I don't know. I feel like an idiot savant. Like I somehow just... navigated my way through and all like things were just falling, you know, maybe there's some luck involved, but I did grind it out. I worked hard. There are no doubt.

I like that.

I probably did, man. I probably did. I've, I've, I've gone through some violent changes along the way. And that's what I love about what you and I are doing right now is sharing that experience. Because ultimately, in my business and in my passion for ponds and my own little pond digger podcast and all that stuff, my goal is to shorten the learning curve in people learning the passion of ponds and meeting you and starting this whole hammer and grind movement that we've done here. It's like, I just want to shorten the learning curve for people that are trying to get into the business. And it's like... I almost feel like I have this crystal ball in seeing these new guys come up. And I'm like, no, no, no, no, no, no, no. You can't do that, bro. Like, you're really going to screw up. And like, I feel like I can literally carve like decades off of people's lives if I can just, if they just listen to me.

Yeah, hold on real quick. So I do want to, I want to let everyone know that Brad and I kind of went through like, you know, the top 10 reasons. And like, we went through a little research to find out like a lot of them are like saying the same thing, but in a different way. And like Brad and I were like, let's... These are the five ones that are really punching us in the face. These are the ones that people need to really pay attention to and then other ones will fall in line. Perfect.

No, I definitely agree. I agree because sales can control and resurrect and drive any business. It all has to do with sales. And if you're not marketing to get the phone to ring, then you don't have the opportunity to create a sale. So a lot of this is going to have to do with sales, organizing sales, charging cash flow, all that stuff. But if you don't... if you don't set the marketing standard correctly and to get the phone to ring, then you don't have the opportunity to make sales. So I'm going to agree with you 100%. I know this is kind of rare, Brad. I know this is rare, but I agree with you 100% on this one.

You know, here's the thing. For me, I started the long game a long time ago. And I really feel like, I kind of knew it was a long game. I don't know how, you know, because I'm old. You know, and I started this journey 25 years ago. I was like, I'll just chip away at this. Eventually, I'll have a brand. Eventually, you know, I'll be a household name in my industry. Like that was like my mentality from the beginning. And I just started to chip away at that. And so, you know, but marketing, we can talk for probably like 10 episodes on marketing, but marketing is critical. Yeah.

That's awesome.

so funny. Well, I have to tell you with 100% transparency, when I started, it was before websites were even... There wasn't even websites when I started. That's how old I am, right? And around 2003, one of my dearest friends, he really helped shape my business and where I'm at today. He's not as tall as you. He's only like 6 '4", German guy. Probably weighs a little bit more than you. Like maybe 280,290. Giant German dude. And he's like, Eric, I build a website for you. Don't charge. I build a website. Give me picture content. I put it together. I'm like, I don't have time for some website. I don't have time for that crap. I'm just, I don't have time. Eric, I build a website. You give me a picture or I kill you. I crush you. You know, I'm like, okay, I'll get you some pictures. Okay. You know? And I mean, that's how ignorant I was. I just had no idea, you know, but that was early on in my career and it was a big deal. So yeah, websites are funny, but the business card, I never even heard such a thing.

No, no, no. I get it. I totally get it. But Lisa wasn't Indian. You know what I mean? Because sometimes I really screwed up. Yeah.

I use it all the time and people tease me. It's hilarious. I don't know.

An important thing right here is marketing is very complex. It's not really simple. It's not really cut and dry. Right? And so most of the... I think I would like to think... I'm assuming most of our audience, I think I have a pretty good perspective. They're craftsmen turned businessmen trying to work this out. They're in that weird spot, right? They don't know marketing. They know that they see a Coca-Cola sign or a Budweiser sign with a girl on it and they know that it inspires them to drink beer or buy Coca-Cola or go to Jack in the Box, right? But they don't know how to apply that to their business. They don't realize the decades of time that's been put into Coca-Cola and Budweiser and Jack in the Box and all that stuff, right? So they don't have a really good understanding of that. And then they just kind of take a stab at it. I have a couple of peers of mine that they asked me for some help. And I'm like, hey, you need to push harder on Facebook, maybe a couple of Facebook ads. He's like, well, I ran an ad once and it just didn't really work. And I'm like, okay, you ran an ad once? He's like, yeah. And it didn't work? He's like, yeah. I'm like, okay. They just have no understanding. It's not that simple. You don't run one ad and then just like your phone's ringing off the hook and you're counting money.

Exactly. 100% right.

Right. Right.

Yeah, it's a multi-pronged approach. And I love how you like the symphony. Imagine all those musical instruments working together, coming at the crescendo. I mean, that's exactly what marketing is.

I believe it, yeah.

And it's a moving target. The economy changes. You move to a new area. Different things are happening in your climate. Seasonally, things are changing. So the marketing is a constant and constant moving thing. And so you have to constantly be moving. I mean, why do you think all these companies... have a marketing department. It's a full-time job. I mean, it really is that important, right? And so, hiring someone to help you in that if you're so busy and you don't have the time to like... Or if you don't have the energy to stay up late at night to get it done, that's... I mean, marketing is really a full-time position in your business.

Marketing is heavy. I just... Mainly what we want to do on this podcast is just shine light on that. Just like to shine light on the fact that... I mean, literally, we could talk for hours on marketing. But the reason a lot of construction companies fail, why they're in the 96 percentiles is because they don't understand marketing. So if you don't understand marketing, get a Gary Vaynerchuk book. Start thinking about it. Watch some YouTube videos. Lean into marketing because you're probably not doing it well enough. I know I'm not doing it well enough. I've been doing it for 25 years. I could do it better.

Yeah, dead horse.

I agree with that.

I mean, it's available funds to you. So many contractors are living paycheck to paycheck. So many contractors are selling a job and collecting a deposit and using that money to fund and fulfill. the project that they're on currently. This is a vicious cycle. This is one of the reasons why in California, for example, you can only collect so much money when you sign a contract. You can only collect enough money that amount of work that you've done. I mean, that's really one of the things. This is a long, long line of history of things that have happened. So imagine, this is going to go deeper than I thought, bro. Listen. In California, I can collect $1,000 on a $100,000 job. $100,000, sign a deal. I collect $1,000 to secure a construction date on the board. And then if it's six weeks away, when I start the project, I haven't received any money towards their project to secure materials or resources or anything I need for the project. I break ground on the job, then I can ask for 30% or 25%. But I have to come into that job really hard. I have to show up. I have to mobilize. I have to get involved in that job. Then I can pull 25%,30% from the project and use that money towards resources, right? So if I don't have the money to fund that job ahead of time, then there's this little delay to get going. But the reason that that law is even in place... for California and Florida and a lot of other states across the union is because contractors for decades and decades and decades, and still to this day, will go in and say like, hey, it's 100 grand, give me 50 grand as a down payment and I'll get your job done, I'll be here in a few weeks. And people would just pay it. But then the contractors would blow it, they'd buy cars, they'd buy strippers, they'd buy booze, and then they'd fund the last job and then they'd go to the next job. It's a total, total cluster. And that is still a problem today.

Brutal.

I mean, the level of unethical crap is like, that's gross.

I mean, there's, there's proof right there.

Your integrity was on the line right there. Yeah.

Well, I mean... If you have cash flow and you get stuck like... So that cabinet maker, he didn't have cash flow. And that's why he went under. He couldn't sustain that hit. So if that cabinet maker had some cash flow, he could have sustained it. And then he would have dusted himself off, licked his wounds, and gone out and got some other profitable projects and moved forward. But that was why he failed. And because of the person you're describing, it's horrible. I'm curious if that guy... ended up failing in business or he screwed enough people to figure it out and he's still doing okay.

The one that said he would pay but didn't.

Failed. Horrible. I mean, these are real scenarios we're talking about, people. This is real problems, decades and decades and decades of stuff that we're talking about. And it can be overcome with some thought and some careful planning and some consideration, some integrity, some ethical background and stuff. So I want to talk about cash flow in regards to that. I remember the first public works project that I bid on. It was a tricky one. Public works are tricky for me as far as water features go. I remember the project I was bidding on was $160,000. And they had, I don't know, eight or 10 different contractors bidding on that project. And in order to even submit a proposal for that project, I had to put up 10% money to the city. So literally, I had my proposal for 160 grand written up. And then I walked in with a check for $16,000, gave it to the city, and they took everything up. And then the next day, I went back. So they opened up all the bids and picked whoever they're going to choose, right? So you have all these different contractors bidding on this project, paying the city 10% of what their bid is. So I mean, I had to come up with $16,000 and give them to them just to say, hey, I'll do this for $160,000. And then I lost the job because I was too expensive. They went with someone with less money. And then they held my $16,000 for 30 days before they gave it back to me. I mean, think about that. That's crazy. But because I had the cash flow, I was able to even bid on a public works project like that. And that's when it comes to being able to scale, expand, grow, those kinds of things. But I think the city's got some kind of crazy racket.

I mean, it's tied up in overhead.

Payroll.

Cash flow. Right?

New boats are awesome though, bro. A bass boat, come on now.

True.

Well, let me, let me close this one up if that's cool with you. Go ahead. So if you are having cashflow problems or maybe you don't think you have cashflow problems, but you think you're okay, there's a great book by Mike Michalowicz called Profit First. It talks about cash set-asides and all those things. You can find that in our Tools of the Trade on the Hammer and Grind website. It's a book that we recommend. It's a great book. I mean, literally, it transforms contractors' lives, saves their businesses. So that's a good resource that you guys can look for. So let's move on to number three.

It's, it's, it's paramount. I mean, paramount. So number three, I'll jump onto that one.

Charging too little. It's about margins, man.

Well, this is all programmed into sales. So marketing was the number one thing we talked about. You got to get the phone to ring, got to have people want you, and then you have to be able to charge the right amount of money. And if you charge the right amount of money, your cash flow problems will be solved. And so it comes down to sales and being confident. not negotiating with yourselves. I mean, a lot of the podcasts that we've already pre-recorded here and put out all have to do with knowing how much to sell, how to communicate with the client and not selling yourself short. Too many contractors over and over and over again get desperate and then discount and they just, it's a terrible cycle.

Yeah, multiplying.

Well, a lot of... So this is what's so confusing about business. This is what's confusing about contracting. These really large, big construction companies, they work on lower margins. You have these guys doing bridges on the freeways and things like that. They might be working on 25 points or somewhere low like that. And so... The specialty contractors, the niche contractors coming up, they kind of have a perspective of that and they think that that's commonplace. And even when I talked about that public works project that I was talking about, the public works things, they have some already numbers kind of pre-factored. They expect that you're going to land in certain percentages and things like that. So for a specialty contractor to step up into public works and crush it, they have to really go to a different level. So I think... I think the smaller contractors, the craftsmen to businessmen, specialty niche contractors are maybe getting some influence from these larger companies and they think that that's where they need to land and that's what they need to charge. And it's 100% wrong for those specialty contractors. They actually need to charge more to be able to have a sustainable and profitable business.

That's how the specialty contractors, the niche contractors, the craftsmen going into... That's why marketing is so important. If you market as a specialty contractor, as a... expert in your craft and an expert in your trade, you actually can charge more. And that's where the symphony comes into play. If that music is being played correctly in the marketing department, then you can charge more in the sales department. And then the symphony hits and then the cash flow is suddenly there and you're able to buy things correctly and you're able to be able to sustain a hit from someone if you're a subcontractor and you get screwed around. I mean, it's all... it's all ties together.

I wish I had the statistic. I wish I knew, but I know a lot of my, a lot of contractors in my peer, my like local peer group, water features specifically, you know, I'll have some heart to hearts with them. I'll like hit them up. I'll be like, Hey, how are you doing? What's going on? I'm asking, hey, what kind of margins are you making? I'm telling my competitors, dude, you are not charging enough. I'm charging double that. And I'm not trying to get them to raise their price so I look better because I'm already busy. I got plenty of work. I actually legitimately care about my competitors. I really want them to do okay. I want them to do well. Because when they do poorly, it actually reflects poorly on my... in my specialty trade because that specialty contractor doesn't have the funds. It doesn't have the cash flow to respectfully take care of the clients like they should. And they start to cut corn. And like, it's just, it's just a total mess. So I have plenty of contractors that are below 30%. Like in a specialty, like water feature, take care of fish and they're making in the twenties. Like this is ridiculous.

Yeah, that's a tricky one. You know, scaling, I mean, a lot of companies go under because they scale too fast. I remember I was 17. I was like a long time ago, Brad. I remember I was 17 and I was working with my father actually on a project. I was working for his boss. And they scaled really quickly. And I remember that guy ended up going out of business because he scaled too fast. He probably didn't have enough cash flow. to manage the scale and then got hit by a subcontractor. And then that was part of his problem. And I still remember, I won't mention the name of the company. I remember it vividly from all that many, many, many, many years ago. But it's like, I can reflect that these things we're talking about, this is not something we just made up. This is like history right here.

Right? Yeah. And then they fail to market. They fail to set aside some cash flow. And then they go to their next job. They charge a little too little. And then they're in trouble. These are facts.

Maybe they get the new building. They go out and rent a place and they haven't set aside the cash flow. One of the things that I usually recommend to someone coming up is to like, if you want that building, pretend like you already have it. Start setting aside the money right now. Can you pay for it tomorrow? Oh, yeah. I'm like, pay for it for six months and set aside that money for six months. And now you have your, you know, like a nice entry point and like, like scale it that way. I mean, there's like a cash and carry scale and then there's like loan scale. Like there's different ways to do that, but I get what you're saying.

But you see, it's interesting. I don't know that we laid them out this way on purpose, but I like the flow that it's going because... It's kind of going down the line. The only thing I would have changed is number three would have been number two. Marketing, charging too little, not reserving cash flow, and then going straight to excess of overhead. I mean, that's how I would kind of lay it out, I think. Yeah, I agree with you. Yeah, so the interesting part of excessive overhead is when you get to a certain spot, like having an apprentice and then having an office manager, you got three people. that's pretty easy to manage. But then hiring a journeyman and then another apprentice and then having an assistant for that. So the more you scale, the more you need to focus on the business than in the business. And in the beginning, you're working in the business and on the business simultaneously and probably about equally or actually probably less on the business. You just kind of let it happen. When you start to scale and add those employees, the more employees I add, the less I work in the field. And actually, I don't like that that much. I actually like building ponds. I like actually getting my hands dirty and throwing down. I just find the more people I add, the less I do so I can manage. So I think personally for me right now, I'm like, I want to hire this management position to be where I'm at now so I can go out and do whatever the heck I want to. But it's fun. I mean, that's the moving target. That's not the target. That's not the way I was running my business 25 years ago or even a little bit ago.

That's an interesting perspective. I don't know that I've heard that one before. And I don't know if I... I actually don't know that I want to agree with it 100%. But I like the way... I like that thought process. I do.

a good metric for sure. That's why it's really interesting to me. Yeah.

It's interesting because this is probably the one I struggle with the most, honestly. I agree. Yeah, I know you agree. So this is really a double-edged sword again because you can be, if your production is not organized, They don't have the right tools to get the job done. They don't have their sequencing correct to get the projects done. If that's not organized, then you're not getting the jobs done on time. So you're making less margin. You don't have the cash flow. And then that also can go in onto the business side where marketing comes in, phones are ringing, you're not organized, capture the flow, and then you're not calling people back. You look like a jackass. And then so people stop calling you. It can happen that way as well.

I mean, that's exactly what I said. It's in the production side. I mean, if your sequencing is incorrect, I mean, you didn't get the cabinets ordered in time. You know, you order the materials too quick and they land on the job and now you have to move them so you can get something else done. The sequencing, you're wasting time and over and over and over again. So lack of organization is a pretty big deal. And I see it all the way down to like the simplest of things. Like, where do you park your truck? How close to the, you know, how close to the job are you? Or like, which way you turn the wheelbarrow? That's organizing me down to the... I hate to sound like a control freak. I know you think I am, but if I can get the guys to turn the wheelbarrow in the right direction when they're loading it, that's organizing your flow of installation. And so that can play a big effect on your profitability. But for me, that's easy. For me, I can see it like a chess game, like Bobby Fischer playing chess. For me, the office and the computers and the technology, that's a little harder for me to see. I feel like I'm playing checkers with Bobby Fischer. And that's where I put a lot of focus.

Nobody's going to know. They're going to know. Nobody's going to know.

Listen, I want to say, like, I mean, those five are pretty much... I mean, I would think that probably a large percent of the 96% that fail is somewhere in these five, some lining of this, right? And so I think that one of the things that was good for me that helped me through this, and I know I said, I can't believe I made it. I worked hard for it. I was grinding all those years, but I was looking for help. One of the things that I did as far as looking for help, was like, I leaned into some of my competitors and not everyone was open arms to me. Some of my competitors didn't want to talk to me. But then suddenly I was looking for people that did similar work to me outside of my area. And so it's almost like that was my first stab at coaching. But it's almost like getting coached and coaching them, just sharing ideas. I started doing that 25 years ago, a long, long time ago.

Well, it's funny that you say mentor because I remember when I read the Tony Robbins book 25 years, maybe 30 years ago, he was like, find someone who's doing what you want to do. reach out to them, get to know them. And like, that was, that was probably my first like push out. But I mean, dude, like literally like reading a Tony Robbins book was like getting a coach like 30 years ago, you know, like there was no social media. You couldn't just like call up Tony Robbins and like hook up with him. He was doing coaching back then, but for like the normal person, I was freaking 21 years old. I couldn't afford to chill with Tony Robbins. Yeah.

for sure. Well, I mean, so I mean, the reality is, I think a lot of contractors are just macho dudes. Like, I mean, I'm... I know what I'm doing. Yeah, I'm speaking for my... I'm speaking like in a mirror right now, right? You know what I mean? Like, I'm macho. I don't need anybody's help. I got this. I'll get it figured out. And like, dude, and today, today I talked to some guys sometimes. They're like... like, Hey, I'm going to break into this new market and I'm going to do this and I haven't done a lot of it, but I'm going to figure it out. I'm going to get in there and grind it. I'm like, dude, like, why don't you get a coach for what you want to do? Like, I don't need no coach. I'll just figure it out. I'll just grind it out. I'll carve my own way. I'm like, sometimes that's cool, but sometimes it's cool to just, you know, hire someone who can help you with that. You know, and it's, it's funny too. Cause I also, I also listen to contractors that are, that I'm like, hire a coach in what you're at, you know, like. to help you. And they're like, well, that coach is not making as much money as I am, not doing as well as I want to do. Right? I'm like, well, dude, Tim Grover wasn't as good as Michael Jordan, but Michael Jordan still paid Tim Grover a lot of money to help him figure out the nuances of how he could become better. And so the thought process behind like, oh, I'm going to hire someone who's better. I mean, you definitely don't want to hire a fat guy to teach you how to get healthy in the gym. Right? but Tim Grover can help Michael Jordan. You know what I mean? It's like there's coaching programs that can work like that. I don't even know how to dissect that. Can you help me?

It's like, it's perspective.

Sometimes if you're, if you're so into it and you're so like involved and you're surrounded by it, you know, you can't see it from the outside. You just can't, you know, so someone who's maybe not where you, you know, where you're planning on landing can help you like, boost you up and help you up a couple levels. Maybe that coach is not like your long-term coach, but that's your intermediate coach. Just like you talked about, I went to this coach, I learned from him. It wasn't perfect for me, but I learned. And then I, you know, I scaled and I went to another coach and I moved and like, so again, it's a moving target. You're changing, you're evolving and you just got to be open.

Quit it right now. And if you need help, what do they got to do?

Chew your ass out. The hammer. No, like really, like really, there's a lot of coaching groups out there. So, you know, we have a coaching group. It's the Profit Club. You know, we'd love for you to come and be involved in it. But I don't care if it's like go to lunch with a competitor. Read a Tony Robbins book like I did 30 years ago. Just get on a YouTube video, whatever. You have to start looking outside of yourself to have someone else look inside of your business and kind of get an idea of what's going on and just give you a different perspective. I mean, I think that's really critical. And that's the big takeaway I want people to go home with is to reach out for help. Don't be so macho. Life's too short. Life is way too short. Why would you not? look to shorten the learning curve and get to where you want to be faster with a little bit of help.

Yeah. Elon's a legend, bro. Like, I mean, that, that quote weighs on me. It's like sitting on my shoulder right now for exactly what you and I are doing right now. I just want to get there faster. I'm old. You know, you're young. Like I want to get there right now. I want to help as many people as possible.

You want me to do that already?

All right. Well, thank you so much for paying attention to us today. We're hoping that some of the content that we're throwing down is helping you get a different perspective in your business. We're hoping that you're going to make the world a better place by sharing the podcast with some contractors that you know that can help make their self better and help everyone's projects do better and everything. If you want to find out more about our group, The Profit Club, we have a new webinar that we just dropped and it's out on hammerandgrind. com. What is it? Forward slash The Profit Club? I don't even know the link. It's so new. That's it. Yeah. You got it. That's it. Hammerandgrind. com forward slash The Profit Club. You can jump on there and see our free webinar and you can put in your email stuff and we'll get in touch with you. You can even schedule a call with Brad or I. You can actually probably request if you want to talk to me instead of Brad because he's kind of a hard ass. Right? Is that true?

I think you've got more requests than me. That's kind of hurting my feelings right now.

So yeah, I'm pretty excited about it. So anyways, we really appreciate your time today. Please smash the five stars and rate and review. And of course, subscribe if you want to catch some more stuff. We'll catch you on the next time.