Episode•March 23, 2026•31 min

EP263: You're optimizing the wrong thing: Why Contractors Struggle to grow

More tools. More systems. More problems. If your business feels heavier instead of better, this episode will make you rethink what “improvement” actually means. In this episode, Brad challenges that idea and shares a different approach: The misconception of needing more estimates vs. optimizing the sales process The dangers of hiring unnecessary staff to solve inefficiencies Identifying and addressing root problems instead of symptoms The importance of having clear systems and processes in place How to effectively reduce overhead without sacrificing quality Link to Resources: This episode is sponsored by iGUIDE — the smarter way to capture, measure, and market your projects. With accurate floor plans, immersive 3D tours, and detailed property data, iGUIDE helps contractors and real estate professionals showcase their work with confidence and precision. Learn more at https://hammerandgrind.com/iguide Grab Brad's tell-all book: The Contractor Profit Blueprint https://thecontractorprofitblueprint.com Help us get the word out to other contractors by leaving us a review or sharing our podcast! Hosted on Acast. See acast.com/privacy for more information.

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Transcript

0:02

Most contractors aren't losing because they're lazy. They're losing because they're optimizing the wrong things. Hey, it's Brad here. It's 2026 and you're still using a tape measure and grid paper to do your drawings. That's why I'm excited to tell you about today's sponsor, iGUIDE. With the iGUIDE Planix R1 camera and laser system, you can capture an entire home in about 45 minutes. all of your measurements, photos, and a detailed floor plan all at once. No hand sketches, no guessing, no more. Was that wall 10 foot or was it nine foot? Or, oh man, I forgot to measure the window offset. You just hit start and walk away. That's it. You're starting the job with accurate as-builds. And you can export straight to DXF, DWG, or RVT files so you and your team can get to work immediately. Miss something? Well, you don't have to worry about that because it's all right there in virtual land waiting for you. This is how you avoid costly mistakes. This is how you reduce change orders. And this is how you run a tighter operation. And more importantly, it's how you protect your margins. If you're serious about operating like a pro in 2026, it's time to upgrade. Go to hammerandgrind. com forward slash iGUIDE. That's I-G-U-I-D-E to order your iGUIDE Planix R1 camera today and start running your jobs the right way. Hey, welcome back to the show. I'm your host, Brad. Thanks for hanging out with me. I want to just tell you right now, I've been sick for the last couple of weeks. You probably noticed that last week we did a replay. I just could not get another episode out, guys. I tried. This thing's been hitting me hard. I'm still trying to recover. So hang with me. This is going to be a quick one, but it's going to be a powerful one. I want to make sure we get through this. So on today's episode, we're talking about... optimizing the wrong things in our business. And the reason for this episode actually came about because of a call I had this morning with the contractor. I was doing a profit audit where we just look at their business and see, you know, profitability wise, is there room to grow, you know, what they can do differently. And when he was telling me about his business, you know, he's a remodeling contractor. He's doing a little over 2 million a year. And then he starts telling me, I say, how many people do you have and stuff? And he's, he's saying, well, I have an estimator. I have a project manager. We just hired a designer and I'm not really for sure what all she's going to be doing. I handle the sales and we're all sub-based, right? We have no employees. So we just, you know, that's the whole people in our team. And I was like, how many jobs do you do roughly at a time? He said, well, anywhere between one and four, usually about two or three jobs at a time. Now, instantly with just that information, I already know that he's hired people that he doesn't need. because he's optimizing the wrong things in his business. And that's what we're getting into. So the first thing that I see people optimize all the time for the wrong thing, and it's the same thing that this contractor is doing, they're trying to optimize their sales process, but specifically the estimating portion of the sales process. Because the problem for them in their mind, and the problem for a lot of you, is that you need a way... to be able to spit out estimates much faster because it's a time-consuming thing. And when you're doing bigger projects, you know, it can take you four, eight hours or more to put together an estimate. So it is time-consuming. I'll give you that. But what's happening is they're optimizing for a poor sales process. They're trying to increase the one thing in the sales process that they should be removing or reducing. So you've heard me talk about this before, or if you're brand new here, you're going to hear me talk about this, is that when you optimize your sales process and you only go out and do estimates for people that are going to hire you, you instantly cut the number of estimates that you're actually doing in half or even more. So I don't need to optimize to be able to do 10 estimates a week if I only need to be able to do four estimates a week. You see the problem here? You're doing 10 estimates a week and you're trying to optimize that problem. But if you just change the way you do things and look at it from a position of how can I make this process better, you know, without adding things, by removing things, then you can realize that you don't even need to have a better estimating system because you're going to cut them in half. And so this contractor I'm talking to, they go out and they hire an estimator. Guys, I'll tell you right now, if you're doing under $5 million in revenue, you do not need a full-time estimator on staff. You do not need one. This company has now inflated their overhead because they think that's going to solve the problem. Now, when I'm talking to them, are they doing free estimates? Yep. And they're doing bigger projects, like $150,000 plus projects, and they're going out and they're doing free estimates. And they're doing design proposals and they're, you know, having the estimator put together the whole estimate. And then they, if they want to design, then they'll charge for a design. But they're doing this whole, you know, jump through hoops to try and win the customer because they think that's what you're supposed to do. And then they're increasing their overhead to make the inefficient process in the first place be more efficient. I don't know if that makes any sense to you because it didn't make sense saying it. You don't need to optimize for things you shouldn't even do. Now, there was a video, this was like probably a year or two ago, Elon Musk was doing an interview and the guy interviewed him, asked him about something. And Elon said, you know, whenever we're trying to optimize things in our business, the first thing that we do is whatever it is that we're optimizing, we go in and we remove as many steps as possible. We remove so many steps that we're actually forced. We have to put steps back in because we've taken out so many that are vital. And so what they do first, and this is what I'm telling you guys to do first, is you optimize by reduction. You don't optimize by increasing, right? So you want to decrease steps, decrease the friction, not increase the amount that you're doing. So if you look at this and you apply that principle to the sales process, how can I reduce? the number of steps in the sales process. Well, one, I can stop doing free estimates and that will eliminate some of the people right there. So let's just, let's go with the 10 estimate a week number. Maybe you're doing two a week. Maybe you're doing 15 a week. It doesn't matter. We're just going to go with 10. And we're going to say that your closing ratio is half of that. So five, you're closing five. So we're spending on average two hours per estimate. That's 20 hours a week. Okay, we're wasting 20 hours a week. Now, if this was my business, and I'm like, man, I'm spending 20 hours a week doing estimates, my first thought would be, I need to figure out a way to do estimates faster. I need to figure out, you know, create a template so I can just do estimates in one hour or a half an hour instead of two hours, and that would save me time. And logically, that may make sense. But if we use the rule of reduction, where we start taking things out, What can I do to save time by taking out steps? Well, one, I can remove free estimates. And by not doing free estimates anymore, maybe I eliminate three of the five people that are not going to hire me. Because there's still two more people in that list that they may pay me to come out and do an estimate, but then end up not hiring me, right? So right off the bat, we just decide to stop doing free estimates. And I eliminate three of the 10 estimates that I have to do every week. That's six hours saved by simply making a decision, not by hiring people, not by making it more complex, by making a single simple decision to start charging for estimates or stop doing free ones. Okay, so now we got another two estimates of people that aren't going to hire us. Well, if you have a better sales process where you actually learn how to pre-qualify people ahead of time. then you can eliminate the other two people that aren't going to hire you because you're going to confirm with them on the phone whether or not it's going to be a good step for them, whether or not you're going to be the right contractor and they're going to be the right customer. And you're doing all this in the sales process. So now you can eliminate the other two simply by having a better sales process. Okay. That's another two down. That's the five that we didn't need to do. So now we just eliminated 10 hours a week of time. By reducing, by removing, not by adding, okay? We're reducing the other two by having a sales call first, by simply doing a phone call and then pre-qualifying them. Because, you know, somebody may call in and say, hey, can we get an estimate? And you're like, yeah, we'll come out and give an estimate. We charge you, you know,250 bucks is an estimate. And then you go out there, they pay you the 250, you still spend two hours and then they don't hire you. We change it by doing a phone call first. We ask all the right questions. And then we can eliminate that trip to their site. So we're removing that trip. That makes sense? You guys follow me? 10 hours gone right there by reducing, by removing, not by adding. We're not adding a new estimator. We're not trying to find a better software to do estimates. We're not going to try and get this, the latest AI estimating software that can spit out an estimate in two seconds because we're lazy and we don't want to do an estimate the right way. Now, I don't have anything against AI in estimating. Eventually, that's going to be everyone, right? But some of you are trying to solve that problem using AI, which is not accurate, at least not completely accurate to you. And you're going to end up shooting yourself in the foot because you're going to rely on AI to do it quickly because you have so many estimates to do instead of actually, again, making the process better so that you don't have to do as many, right? So for this contractor I talked to doing 2 million. The first thing I would tell him to do is put a sales process in place and get rid of your estimator. You do not need an estimator on staff. Not for a $2 million company. No way. Especially if you're only doing two to three jobs at a time and you're only doing like 15,20 jobs a year. That is not a lot. That is not a lot of jobs. 15 to 20 jobs a year is easy. If you're struggling to do 15,20 jobs a year, you have some major problems in your business. 15 to 20 jobs a year is easy. I hear guys complain all the time about, man, we're doing 10 jobs a year and I can't keep up. I'm like, what are you doing all day? If you're only doing 10 jobs a year, you're not selling that many jobs. You should not be going on that many sales calls. Even if you have a 20% closing ratio, you're doing 10 jobs a year. You're not doing 50 estimates a month. You're doing like three a month. So what are you doing if you're so busy you can't keep up? Because you have a system that sucks in terms of your entire business process sucks because you don't have one and you're just playing off of memory and reaction all the time. So number one is the sales process. You're trying to optimize for speed, volume, instead of conversion and profit per job. If you focus on having a better conversion rate and a higher profit margin per job, then you don't need to optimize for doing more estimates. The only time you would ever optimize for doing more estimates is when you're actually trying to scale your business where you're adding more jobs. You know, you're adding another crew, you're adding two more crews, and you need to sell more jobs. Now you're optimizing for volume. But most of you are optimizing for volume because you suck at sales. And that's why you're trying to solve that problem. Wrong. Stop doing that. Increasing your overhead does not solve problems in your business, especially when you don't need to. So don't hire the estimator. Don't hire the salesman yet. I say yet. There's nothing wrong with hiring salesmen. But again, if you're not optimized for the production side of it and you go sell a bunch of jobs and you hire a salesman, now you're going to throw a wrench in your production side because you won't be able to keep up, right? So we don't need to hire an estimator and we don't need to hire a salesman anytime soon. If you're under 5 million, you don't need an estimator. Now. Number two thing we're going to talk about. You fix problems that shouldn't even exist. So now we talked about, you know, adding things to this, to the problem to try and fix things. Now we're talking about fixing things that problems shouldn't even exist in the first place. So we do things like hire admin people or we hire project managers and we hire these people in order to fix the chaos in our business. But that's not their job. You don't hire a project manager to help you create a project manager system in your business. You have to create the project management system and then you hire the project manager to run the system. Most of you are trying to hire positions and hoping that that person is going to fix the inefficiencies or problems of your business because you haven't taken the time to actually put together an SOP, put together processes, a system in your business that you can run. You're just running out of your head and then you're going to hire someone and hope they can fix it. And basically you're setting them up for failure from day one. Now, I'm not saying that someone can't come in and like have better ideas or have a little bit more experience. You know, you could hire a project manager who has experience using a software like JobTread, you know, and they're going to know, they're going to be able to help you implement that in your business if you're not currently using JobTread. But they can't come in and say, okay, here's how we're going to actually run jobs. Here's how we put together the schedule. Here's how we order materials. Here's how we, you know, procure subcontractors and blah. Like your project manager should not be coming in and telling you what to do in your business. You should be having those things already done. And as you hand off that responsibility, you're training them on how to do that. So you're trying to hire to... control chaos. You have no systems, no accountability, no clear rows. You just say, I need help. That's what you're saying. I need to solve for help. I'm doing everything and I'm so, I'm just so crazy and running around my head cut off. I need help. I need help. I need help. Let me hire an estimator. Let me hire a salesman. Let me hire a project manager. Let me hire a foreman. Let me hire a designer. Let me hire all these people so that I don't have to do those tasks. Well, the reality of it is, is that each one of those people that you're hiring, If you actually sit down for a second and look at it, it only takes about five to 10 hours a week of your time. That's it. But you're assuming that each one of those positions is like a 40-hour or a work week position, and you're trying to solve for that. You don't need to have an in-house designer. This is the second thing that I would tell that guy at 2 million. You don't need an in-house designer. And he literally told me, we're not sure what all exactly she's going to be doing. We just hired her because we're a design build company. And so by definition, we have to have a designer, right? No, you don't. You don't need an in-house designer. You can subcontract out designs.

15:48

Hey, just a quick time out from the show. If you're a frustrated contractor who's dealing with low profit margins, stuck working on the tools every day, or doing free estimates for people who are never going to hire you in the first place, I invite you to my private contractor community. the profit club where contractors just like you are adding two to three times more profit each year without producing any more jobs and finally getting completely off the tools to never do another free estimate again. So if you're ready to increase your profits, stop doing free estimates and get off the tools, then all you have to do is click the link in the show notes to learn more about the profit club. and see how it can easily two to three times the cash in your pocket, give you a proven sales process that will convert more jobs with ease and get you off the tools once and for all. And the best part is you can do all of this without having to produce more jobs than you currently are. Click the link to learn more. Now let's get back to the show.

16:43

You can do designs yourselves if you want, but you can subcontract out designs. You can have a partnership with a local designer. You don't need to hire an in-house designer when you're under 2 million. You just don't. Right. You can have that as you as you grow your business, but you don't need it right now. You're trying to solve for inefficiencies. Basically, you're building bloated teams to solve self-created problems. You know, the I need help usually means I have I lack clarity and leadership. Whenever a contractor is like, I'm just so busy, I need help. And I'm like, what do you need help with? And they say everything clear. I mean, it's just clear as day that. You lack systems, you lack clarity, you lack leadership. You should know exactly what it is in your business that you need to fix. You shouldn't be, I don't know, I'm just doing everything I need help. Now, I mean, obviously that can happen, but that shouldn't be the situation that's going on. You should have a pretty good idea of where you need help in your business. All you got to do is say, what fires are you putting out over and over every day? That's the easiest place to start. If you're putting out fires for the same thing over and over every day, that's a system problem. You don't have a system or SOP or you haven't let, you know, gave accountability or you haven't given clear roads, whatever, but it's a leadership slash system problem. And that's a you problem. It's not a I need to hire someone to fix it problem. So the crunch line here for the second thing is we don't need to hire more people. You just need fewer problems. And the way you have fewer problems. is by making sure you have a tight system. One of the most common problems or mistakes that contractors make, they don't charge enough to begin with. And so they're limited by the profit they have. So the only way they think they can make more money is by volume. Again, it's the volume game. Guys, let me tell you, playing the volume game, especially in like remodeling and custom stuff, is going to cause you to lose. You can't play the volume game at... a high level with custom and remodeling and custom stuff. It's very difficult to do. Less than 1% of companies can even pull that off, right? And so hiring more crews, selling more jobs, hiring more people is not going to fix the fact that you're simply not charging enough, period. You're just not charging enough. So if you have a business that's not making enough money when it's small, it's going to make less money when you grow. You may say, well, that doesn't make any sense, Brad, because you're hiring more people, you're doing more jobs. That's true. But your inefficiency, when you try to scale a business that's not efficient, you actually double or triple the inefficiencies of the business. So if you can't run three jobs by yourself as a project manager, and it's already chaotic with three jobs. and you think you're going to hire two more crews and then maybe hire a project manager, you're going to take that chaos you have now and make it a multiple of three. It's going to make it three times worse. If you have a turd business now and then you try to scale it, you're going to have a bigger turd business. Scaling your business does not solve problems. It never does. And you shouldn't scale your business until you have your business figured out. This is why a lot of people get in trouble. They go out and they buy a ton of capital. They buy equipment. They buy all this crap because they're going to, quote, scale. And then they, you know, three months, six months, a year later, it catches up to them because they optimized the wrong thing. And now they're in trouble. Fix your business when you're small. Don't bloat your overhead. Don't add people because you have a systems problem. Okay. Number three that we're going to talk to you, the last thing we'll talk about is solving for symptoms instead of the root problem. Okay. So a lot of times you're diagnosing things in your business that are incorrect. So sometimes people come to me and say, man, I need more leads, Brad. I just need more leads. I'm not getting enough leads. So we dive in and look at their process and realize they're actually getting plenty of leads. They're just not following up with their leads. Like if they're calling them three days later and the client's not answering, they're leaving a voicemail and that's it. That's the end of the trail. And so they're looking for more volume of leads. And in their mind, they want the perfect client that's going to call. By the way, this is what every contractor thinks. If I say, what's the perfect lead? Oh, the perfect lead is somebody that calls in and says, Brad, we want you to do the work. We're not going to hire anybody else. You have a blank check. We're going to give you full control over the project. You just tell us when you're going to do it and what you're going to do and how much it's going to cost. That's what everybody wants. And that's like. That's the unicorn of clients. Okay. Most of your leads, most of your sales are in the 70% of people that aren't buying right now. So this is a, this is a situation where you're trying to solve a lead problem. When you actually have a follow through problem, you have a sales follow through problem. You don't have a lead problem. You're also trying to solve for time. I don't have enough time, Brad. Again, you try to hire someone to do a job and then you hire that person and realize that person only has 10 hours a week worth of work. You were doing that task before, but you were so inefficient and you were so all over the place that it was taking you 15,20 hours to do this task. And now you hire someone who knows how to do that task and it only takes them 10 hours a week. Well, what are they going to do for the other 30 hours? So now you, again, you inflate your overhead to compensate for a problem that you have. Right. Employee problem. Brad, people just don't want to show up and work. I can't get people to show up on time. You know, no one wants to work anymore. Everyone wants to get rich. You know, all these things I hear. That's a leadership problem. That's a you problem. You can blame the staff and employees all you want. That applies to everywhere. You're going to have bad, you know, bad people everywhere. Like it's not that you that they're necessarily bad at what they do. You either just tolerate certain things. You don't set a standard that they have to follow. You're just looking for warm bodies. You're not actually looking for A players. And so you hire a B or C player and they kind of suck at what they do. And so then again, you're trying to optimize your business to solve for that problem of that person who sucks at what they do. I'll give you a perfect example. You hire a carpenter and he's a C player, right? Now. See players come in all different forms and fashion. Maybe he's really good at what he does. Like maybe he's really good at carpentry. But he's not so great at doing paperwork, right? He usually doesn't fill out his timesheet. He's usually not taking notes every day. And so you're constantly hounding him. Hey, John, John, I need your timesheets. John, I need your timesheets. John, I need your daily report. John, I need your daily report. And you're just thinking all the time, man, employees suck. John sucks. I don't know what the problem is. So what do you do is you create this system because Brad told me I needed a system. So you go out and you create a system that's going to like hold them accountable. And you create this fancy profit sharing system where like if he, as long as he fills out his daily report and clocks in every day, after a month, he gets a bonus. Like now you're trying to incentivize him to actually do his job, right? And you're creating all of this unnecessary solutions. When the root problem is you hired the wrong person, you just need a different employee. You don't need to have an entire system built around incompetent or C players. You just need to learn how to hire B and A players, right? So that's what I mean by like, you're trying to solve a symptom of a problem that's not even the root problem. So now you're creating all of these checklists and all this stuff. And it's like, I need a checklist to make sure that they show up in the morning. You know, did you show up on time? Yes. Did you turn in your hours? Yes. And you're like creating all these checklists because you think that checklists are systems and that's going to solve all the problem. But really, you just hired bad people. If you hired good people, you wouldn't need all those checklists that you're creating. So you're trying to solve a problem you don't need. You know, that stuff was like tools and equipment, right? I did this. This is definitely me. I'm guilty. Thinking that if I hire or not hire, if I buy more equipment. It's going to make me more efficient. It's going to make me better and faster. And, you know, I can do more and produce more. Again, it's the mindset of more quantity. So I buy an expensive tool that's going to save me, you know,30 minutes a day using that tool. Well, great. I saved 30 minutes. But the reality of it is I should have just charged $5,000 more for that job. That tool is not going to make up the difference of me not charging enough for that job. So we try to use tools and things like that to make up for inefficiencies in our business, not charging enough, things like that. So basically, you're building solutions on top of a foundation that's cracked. If you have a cracked foundation and you're trying to build a house on it, it doesn't matter how much stabilizing and what all the framing and anchors and all the stuff you do, if the foundation is cracked, it's still going to sink or crumble or fail. And that's what's happening in your business because your foundation is your people, as an example, that you're hiring. You're hiring the wrong people and you're trying to solve the problem by, you know, creating all these systems and checklists and stuff. So listen, that's the three things, really. You don't have, you know, we're trying to optimize for something we need to reduce, i. e. sales position or sales system. We're trying to hire people to solve problems that we shouldn't, right? We're talking about... trying to solve problems that shouldn't even exist. And then we're trying to solve problems that are symptoms of the root problem, right? They're symptoms instead of the root problem, sorry. Those are three areas where people try to solve when they actually don't need to solve those problems in that way. You need to take a look at your business. You need to understand where the bottlenecks are in your business. This is exactly why you need someone like a business coach, a mentor. Someone outside of your business that can come in unbiased, look at your business and tell you where you're spending money and where you should be doing differently. I'll give you the perfect example of this. Last year, I went and did an on-site consultation. I visited a contractor down in Georgia, and it's a remodeling contractor. And when I was there, because when I do on-site consultations, I come to your location for three days, and I look at your entire business from... You know, the first, the first, uh, from marketing, the first contact to sales, to estimating, to production, all of it, the whole nine yards from start to finish. And it really allows me to see what's going on in your business. And the second day I was there, we were talking about, uh, some of the estimating production stuff. And it was revealed during the second day that they were doing just in time material ordering. So they were going and picking up the materials. because there was a local company that stocked the materials. It was like it was cabinets. They were going the day of or the day before to get all of the cabinets and all the materials they needed. And half the time there would be out of stock of something. And then instantly that required a return trip later on to fix that, or it would slow up the job by a day, or they had to do some kind of workaround, which costs more money and more time. So the only thing they had to do there. to make that problem go away is order the materials like two weeks in advance and then store them either at the location where they're earmarked for them and nobody else can take them or store them on site. But by simply just ordering the materials further in advance, they would have eliminated like 30% of their overruns just because of that. Like that solved a 30% overrun problem in their, jobs and they're doing like four or five jobs a week. This is a larger company. That's what I mean by like looking at something in your business and trying to figure out where is the main problems and the benefit of having someone else come in and look at it because they can look at it objectively and I have no, no, there's no emotional tie to it. You know, you may have your, your wife doing the books because it's, she can do it. If your wife doesn't know how to do the books, your wife shouldn't be doing the books just so you can save money. That's the other kind of dumb stuff people do. Hire a professional. Free up your wife to do wife things or whatever, whoever it is. These are all things that you need to look at your business. Okay? So before you try to grow, just ask yourself this. Am I fixing the real problem or am I just making a broken system bigger or better? Am I fixing the real problem or am I just like putting a bandaid on and trying to make a broken system better? Right. Bigger or better. We don't want to do that. We want to take away first and then add back what we have to. All right. So if you're tired of guessing on what's actually broken your business, let me know. You can go to the website. You can go to the links, sign up. I'm happy to do a little audit of your business. Just a quick little 20,30 minute audit. Look at your business. Look at your structure. Look at your profitability and then give you some feedback on where, you know, what things you can do differently. Put together a little bit of a strategy for you. on how to move forward. Happy to do that. All you got to do is raise your hand and say, hey, Brad, take a look at my business. Happy to do that. Guys, that's all I got for this episode. I appreciate you hanging out with me. I am going to take a break because I am hurting right now. We got some more interviews coming up. Appreciate you hanging out with me and all of your, you know, for listening for all the shows. Thanks again, guys. Remember till next time, you know where to find me at the Hammer and Grind podcast and profit is not a dirty word.