These three issues keep contractors consistently stuck, broke, and on the tools. Hey, welcome back to the show. I am your host, Brad, and today is part three of our three-part series on the three most common issues that contractors have. Now, we've already talked about marketing. That was episode one. Episode two was on sales. And this episode is going to be on business, general business issues. And these, in my opinion, are the three biggest things that keep contractors stuck. But if you haven't gone back and listened to one or two the last two weeks, make sure you go back and do that because there's a ton of information in there as well. So let's talk about these three things that keep contractors stuck, broke, and on the tools. Now, what we've done, if you haven't listened to the other episodes yet, what we've done is I've taken all of our coaching calls. Every one of our coaching calls are recorded. And then we upload those into AI. And AI goes in and just analyzes, crunches numbers, analyze, analyze, analyze. And these are the three biggest issues that keep recurring within the coaching calls that we're having. And I agree with him. Like, you know, I always go back and... Just because AI says this doesn't mean I agree with it all the time. But we do go back and look at it and see if it makes sense, if it resonates, if I agree. And these do resonate and I do agree with them. So what's number one? Number one is you don't know what language your business is speaking. And you're like, what are you talking about? My language doesn't talk. It's not a person. It is like your business is speaking a language. It's trying to communicate with you, but you're not listening. Because you don't understand the language. And the language that your business is speaking is numbers. Your business speaks to you in numbers. And if you don't understand the code, if you don't have the cipher, the decoder ring, you don't have the information in order to process the numbers, then you don't understand what's going on in your business. So what are some very basic things that are... you know, that we use to understand the language of our business. Profit and loss is the most common basic level thing that we should be doing to understand our business. And I would, if I was a betting man, I would bet probably over 80% of contractors, probably higher, but over 80% of contractors, one, don't even look at their P &L and two, don't even understand how to analyze the information in the P &L, the profit and loss. This is again, one of the single most important pieces of data. And it's also, once you set it up, it's like one of the easiest things to look at and have a complete snapshot of what's going on in your business. If you don't even understand the simple things like your profit and loss, your balance sheet, and your cashflow projections, then you're going to struggle all the time in your business. It's one of the most basic things that you can do. And it's actually one of the easiest things to use to get a snapshot of your business. Once you have it set up correctly, the problem is most people with their profit and loss, is they had their sister or their neighbor or some aunt who did bookkeeping 20 years ago set up their QuickBooks or whatever accounting software, if they're using any. And it's all the default settings. It's not set up specifically for a contracting business. And then it doesn't help you any because information is not in the right location. You don't have the right subaccount set up. It's just when you look at it, it just looks like some kind of secret decoder ring or... code breaker from the World War II and you don't even understand it. You see numbers, you see line items, but it doesn't translate into anything useful. Okay. But if you actually like hire a bookkeeper or CPA who knows what they're doing and they have, they set up your accounts for you, then it makes it much easier. And I tell my clients all the time that if you have to do math, so in other words, if you look at your profit and loss and you have to do math, to figure out information or key information, then it's not set up correctly. If you don't have your materials and your cost of goods sold, then you have to do math and your gross profit is going to be off. It may say, oh, we did 1.5 million in revenue and our cost of goods sold was only $300,000. So we made a crap ton of money. However, you scroll down into your business expenses and then there's a line item that says job materials, you know, $350,000. Well, I have to take that $350,000. I have to add it to the gross profit, you know, the cost of goods sold. And then that gives me a real gross profit number. So like I have to do math to get the real information. So make sure your stuff is set up correctly. Spend the time, the energy, the money, whatever it takes to get it set up correctly. You cannot run and grow a business on instinct. Now, instinct will get you so far. Operating out of your brain and out of your head will get you so far, but you're not going to be able to scale your business that way. You're not going to be able to bring in other people. They're not going to be able to read your mind. And when you do try to do this without having this information already set up, then you're just going to be running around with the chicken with your head cut off. You're stressed out. You're just always constantly trying to figure things out, putting out fires. That's the result of not having the proper information set up in your business. So the numbers is what's telling you. Your business will tell you exactly what's going on. Exactly. At all times. It will tell you what's going on. It will tell you if your business is healthy. It will tell you if your business is sick. It will tell you if there's something coming up that we need to be aware of. There's a potential problem coming our way. It does all this through data, through numbers. And there's different types, right? So we have like, you know, sales information. We have production information. We have financial information. All of these things work together and they give us different pieces of information. If I don't track my leads, as an example, and let's say for us to be able to hit our goal, we need 20 leads a month because of our closing ratio, because of our ticket price, average ticket price, blah, blah, blah, all this stuff. We need to average 20 leads a month to be able to hit our financial goals. But you're not tracking it. You're not really tracking how many leads you're getting. And then one month. you get 16 leads. Well, that's not the end of the world, but you didn't hit your goal. And the next month you're getting 12 leads and you still don't really track it. So you don't really understand what's going on. You know, you're not making sales. You're not hitting your financial goals, but you don't really understand why. And then the next month you're, you get eight leads, right? If you were tracking leads, which you should be doing, you would know by the next month that your leads are down. Oh, wait, we're four leads short of where we need to average. Now, four leads is not going to make or break your business. But if the following month, there's another two or three leads less, there's a trend starting. It's we're trending down. We're trending down in leads. Maybe something happened in the marketplace. Maybe AI now, people are because they're searching AI and you don't have any friendly AI SEO on your website. You're not showing up in AI search. And so before you were killing it with SEO, regular Google SEO, but now with AI, you're not even showing up. And so all of that organic traffic you were getting before, you're not getting now. And if you don't, you know, you don't, again, you're not tracking your data. You're not tracking your leads. So three, four months goes by, you're losing money. You're not getting leads. You finally decide to look into it and you realize your leads have dropped off. And then you're like, oh crap, I need to go find some more leads. Well, you just wasted three months because you weren't on top of it. So now you implement this and it takes another three to six months for it to start working. And then you, by then you either run out of money or you get so far behind and now you got to claw your way out. Like your business is telling you, it's giving you the information. You're refusing to look at the information, refusing to look at the data. So you have to start tracking data. I tell my clients all the time, your job is to be a data scientist. Like you should be collecting data. And again, there's all types of data. Referrals, you know, are data. Reviews are data. Like all of this information is data. Closing ratio, all of it's data. Your ROAS, what's your return on ad spend? How much, if we spend $10,000 on ads, how much money are we making in return? Like all of this information is what you have to track and look at. And honestly, like I said, over 80% of them, people that I talk to, people that are brand new into the club, people I talk to on social media, they don't do this. Guys, this is number one. You have to know the numbers of your business. You have to. It's not optional. You have to. And it will tell you what's going on. Your business will tell you all the time. You know, a lot of times we'll look at revenue. Oh, I did. I sold 50,000 this month. You know, we were on track to do 2 million this year. That's great. You're, you know, you're making money, but revenue is a lagging indicator. Like when you look at your profit and loss and it says revenue, you know, a hundred thousand dollars that month, that's a lagging metric means that it's, it's reporting data from the past, which is good because it lets us to see, you know, what's going on. We look at our expenses. We see a hay of our expenses out of line, blah, blah, blah. Lagging indicators are good. But then you have your leading indicators. That's going to be your sales activity. That's going to be your marketing and sales type stuff. So we use sales as a leading metric. If I sold $20,000 of work this week, and my average that I need to sell is $15,000 every single week to hit my goal, and I sell $20,000 this week, then I know right off the bat, that I'm $5,000 over my goal. That's a good thing, right? That's a leading metric. It's telling me that, hey, as long as I consistently do this, I'm going to be in good shape. I'm going to hit my goals. If your sales are low, you need $20,000 a week and you only sold $5,000 this week. That's telling you, hey, you're $15,000 in the hole. You have to make it up. You have to sell an extra 5K over the next few weeks or you got to have a big week where you sell 50K or whatever. But you have to know this. Also, it's seasonal. What you sell in the summertime may be three times what you do in the wintertime. So knowing the seasonality of your business also is important to know. Again, that's data. If you have your profit and loss and you look at the first quarter of the year, January, February, March, for most people, if you're using a calendar year, it's probably going to be the lowest, right? In terms of revenue, because that's when you typically are the slowest. But if you don't know that information and you don't look at it, you just keep trucking along. You just keep trucking along, hoping you sell enough work, hoping you get enough leads. You have no control, no idea. You're just guessing every day. That's what's going on. Guys, you have to know the numbers. Not knowing the information of your business is literally just guessing and gambling every day. You're gambling with your business. So when you start out and you're on production, you're swinging the hammer. You're so close to the information, you know it instantly. Like, you know, if I'm the one answering the phone, doing sales, doing the estimating, doing the production and doing the, you know, like I said, production, swinging the hammer. I know like instinctively, I know what's going on because it's so close to me. But the further you move away from production, the more information you need to be able to operate your business. You know, if a company has 50 employees, Let's say you have 35 field people and the rest are all support, then you're not going to be able to know what all 35 people are doing. There's not enough time in the day to go out there and check and find out. You have reports. You have managers who report to you. They're giving you information. But if you're not asking for the information, if you don't even know what information to look for, it's useless. So the further you get away from the production side, the more information that you need and the more blind you are to what's really happening. So you have to start when you're small, you have to start using your numbers now. And then as you grow, it's just going to naturally, you know, transition and make it so much easier. So much easier. You know, my guys, they, you know, I hate looking at numbers. I've said it before. I hate looking at numbers. I hate math. I hate looking at finances. I look at my profit and loss every single day, every day. I look at my bank account every day because I want to know what's going on. And I want to know right now what's going on. I don't want to know two weeks from now. I don't want to know a month from now what's going on. I want to know what's going on right now. And I always compare it to my previous year to see how I'm doing. Your comparisons are always good, by the way, guys. If you're not doing comparisons, when you look at your profit and loss, you should be. What did we do this month compared to? you know, June or whatever, April, May of last year. You know, last year in May, we sold $50,000. This year in May, we sold $80,000. That's good. Like we're $30,000 up, but we have to have that history and know what's going on, right? So you have to know your numbers. So if you aren't tracking close rates, production efficiency, profitability, you're operating blind. Okay, here's the key takeaway of number one. The bigger your company gets, the more you need dashboards instead of instincts. So you have to start relying on data and looking at it. And if you don't like it or you don't want to do it, then hire someone to do it for you. Big companies have controllers who come in and control all the financial aspects and decisions of the business. I mean, small businesses don't need that. It's you. You're the controller. Maybe your wife does it. Maybe your accountant helps you a little bit. But you're the ultimate controller in your small business. All right, number two. Number two is you have to create systems in order to have freedom. So systems create freedom. Now, this is a buzzword. Systems, systems, systems. I will tell you right now, there is no perfect system ever. This never existed. Every single business that I've ever looked at does things a little bit different. Because I've looked at, you know, creating entire operating systems where we can just plug it in. Like you just come to us and we just plug in the entire system and then you just implement it and you're good to go. Almost like a franchise. But what I discovered quickly is that every single company is different. You know, everybody is totally different. I could tell you, hey, you need to use this particular type of software, you know, for your project management. And they go, oh, we're already using a different one. We're using a different software and we really like it. So we don't want to switch. That's fine. But, you know, this one software doesn't have a specific feature that this other one does. So then if you want that feature, you're going to have to augment it with something else, like another piece of software. Right. And so every business has a different operating system and you have to create it. Like I said, unless you buy a franchise, which has the entire operating system in a binder, then you as the owner have to create the operating system. You have to create the franchise. I believe it was the E-Myth. It's been a while since I read that book. I'm pretty sure it was the E-Myth who said, you need to set up your business as if you're going to franchise it. You're going to create a franchise for your business, even if you have no desire to franchise it whatsoever, even if you never franchise it. You need to set up your business as a franchise, meaning you need to create all the systems that a franchisee would need, even if you don't actually decide to franchise it. So that's how you create the systems, right? I mean, that's not how you do it, but you have to create the systems in order to create the freedom. Freedom doesn't happen by hiring more people. Now, you could delegate some things. You could abdicate some things. Abdication means you just hand off a task to someone and you never check in. You just assume they're doing it. Delegation is when you give someone a task or a responsibility, but you're still checking in. You're still making sure they're doing it. Abdication is like you completely wipe your hand of it. A lot of contractors abrogate their financial responsibilities, the numbers of their business to their office manager. And then, oops, six months later, guess what? Your office manager gets arrested for embezzling $2 million out of your business. And you go, I didn't see that coming. Well, yeah, that's because you're stupid. You didn't see it coming because you weren't actually looking at it. Now, if you want to give your office manager responsibilities, that's great. But then you're going in behind every single day, every single week, and you're looking at the information, right? You're not giving your office manager full check writing privileges. Okay. And then full bank account access. That's how you get embezzled. People embezzle money out of your company. You don't do both. You have checks and balances in place. So like, again, abdication is just giving away everything to someone else. Delegation is, you know, giving it to someone else, but you still have processes in place and you still check on it. Okay. But you have to create these, these, these systems. You know, creating customer welcome packets to improve the client experience is another aspect of it. Like you create a system that's repeatable that creates a great customer experience. So for some people, it's like giving out gifts. It's for, you know, giving out little knickknack things as far as customer experience goes. It can be customized. It can be standardized. It just depends. But you have a system that allows you to do that. You know, building SOPs for marketing. in operations. We use what I call the top five priority board. Everyone should have a top five priority board in their business. It allows you to see these are the top five priorities that we want to work on in our business. And it helps keep you focused and your team focused on creating these high impact activities. And usually most of those are around some type of creating systems, you know, in your business. And there's hundreds of different systems. Many people think a system is like an entire thing. Your whole system, Even if it's a franchise, even if you buy into a franchise and they hand you three binders full of information, that's not one system. That's like 200 systems rolled up into one. So you have all these micro systems in your business. You have some that are very simple and they just do one simple thing. You have others that are more complicated and they do more complicated things. But your business is made up of hundreds and hundreds and hundreds of systems. And most people overcomplicate this. A system can be as simple as writing on a piece of paper. Here are the three steps that you should do whenever you get to a job site. Step one, park your vehicle. Step two, walk to the front door and knock on the door. Step three, introduce yourself and have the client show you the space. Like write it on a piece of paper and you like stick it in their van or something. That is a system. It can be something as simple as that. But most people think a system is like an entire operating system, like comparing it to Windows or Apple, where it runs your entire computer, where you have hundreds of code, hundreds of folders, hundreds of different apps. And then the entire thing is your operating system. That's not how it is. And by the way, even your Windows is like that. It has multiple folders. It has multiple codes. It has multiple apps. It's the same exact same exact thing you're going to have in your business. You build multiple systems. Systems are what give you the freedom, though. Right. My son and I today, we went and filled up our vending machine because him and I own a vending machine and mainly there to help him with business. He's nine. And we were talking and, you know, we have on the way back, we were talking about creating systems. So we have a system within our vending machine business. It's very simple. It's very raw. It's very easy. He understands it, right? So at nine years old, he understands the system, the way we create our reports, the way we run our inventory. We call them pick lists where we go and we pick all the materials to put in our tubs that we're going to take and refill the machines. Like that's a system that we have in place. And at nine years old, he understands it. So I can hand him the piece of paper. He can go out because we keep it in our garage. I mean, we're not a big company. We're tiny. We go out in the garage and he can pull out the product off the shelves and put them in the box. At nine years old, he understands the system. It's not complicated at all, but you have to create a system. If he's just following me around and I'm looking at a piece of paper and I say, okay, buddy, go and get five Cokes. Now go and get this and go on to get this. He's just listening. He's following orders, but he doesn't understand the system. You show him the system, you teach him the system, now he can do it. That's what it is. That gives me freedom.
