EP295: Contractor Business Challenges: Find the Bottleneck Stalling Your Growth

Most owners recognize the symptoms, long hours, cash shortages, missed deadlines, but don't necessarily understand what's causing them. You can be booked out six months, have crews working overtime, and be generating more revenue than ever before, but still feel like your business isn't getting anywhere. That's because every business has bottlenecks. And until you identify what's actually holding you back, working harder, hiring more people, or selling more jobs might just make things worse. Today I'm going to introduce you to my 4M framework, which helps you evaluate the four essential functions of your business, understand how well each one is performing, and identify what's preventing you from getting to the next level. Hey, welcome back to the show. I'm your host, Brad Henry. I'm a licensed general contractor, author of the Contract Your Profit Blueprint, and business coach to overwhelmed and stuck contractors who want to regain their freedom and boost their profits by teaching them how to charge what they're worth. So here's the thing: every business has bottlenecks. Everyone's trying to get to the next level, but a lot of times the bottlenecks can be disguised, and we we think we're fixing the right thing in our business, but we're actually not. We're working on the wrong thing. So the first thing we have to do is understand what are the business bottlenecks. Every business has constraints that limit its growth, profitability, or efficiency. Think of a four-lane highway that's narrowing down to one lane. Everything backs up at that bottleneck. We've all frustrated, we've all experienced the frustration. You know, everyone thinks the zipper method is the great savior of this exact problem. And in reality, it is the best, but nobody follows the zipper method, right? Everyone gets over like a mile up, and then you end up having this five-mile long, you know, uh backup of everyone trying to get down to one lane. This is exactly what's happening in your business. If you have uh four different functions, which we'll get into here in a little bit, but the four different functions, if you're trying to uh you know build your business and you have one function that's not working, or two or three that are not working properly, you're gonna have this bottleneck. So more leads won't fix poor sales conversations, and more sales won't fix broken operations. Your business can only perform as well as its biggest constraint allows. So most owners recognize the symptoms, long hours, cash shortages, missed deadlines, but don't necessarily understand what's causing them. And that is what the 4M framework actually does. Now, working with over 100 contractors one-on-one and having thousands of conversations with contractors through social media, email, text, you name it, the same problems kept coming up. And I wanted to figure out how we can, how can I develop a system that's easy to understand, that covers all areas of business, and that gives you a performance rating based on certain criteria or competencies. So, what this framework does is it measures your business in the four functions, and then it gives you different performance levels based on those functions. So the 4M framework gives the four functions, which are management, right? And management is leading the business. So leadership, people, delegation, accountability, culture, responsibilities, expectations, that all falls under management, right? Does the owner have to make every decision, or do you have a team in place that can do it for you? So an example bottleneck would be employees can't move forward without the owner's approval, right? You're you get those texts all day long. Hey, Brad, we're over here at the Johnson job. Uh, what are we supposed to do with the the drywall, right? Like this framing's not done. Like they're they can't do their job without you interjecting everything or telling them what to do, right? You're the taskmaster, you're just giving tasks. That's not a high performance function within management. There's some things there under the management function that need to be addressed, right? So that's a low, that would be an example of a low performance uh function in a business, right? So the next thing is money. The next M is money, and that's going to be your financial performances. So pricing, profitability, cash flow, financial controls. Do you know your numbers? Do you understand where your profit goes? Are you making decisions based on reports or bank balance? You know, are you just looking at your bank account and being like, How much money do I have? Okay, let me go buy this new piece of equipment. The last episode, if you haven't listened to it, go back and listen to it on um, you know, calculating ROI before you purchase equipment. But a lot of times it's like, how much money do I have in a bank? Okay, let me go do it. That's a low performance function, right? Under the money. We we gotta make sure that we're making sound financial decisions based on real money um data, like real data, right? So an example bottleneck here would be like revenue increases, great, but cash flow and profit don't improve. How's that possible? Well, there's lots of things that can go into that, and that's what the uh the foreign framework will help you figure out. The next thing is markets. Now, market is a large one because it includes both marketing and sales, essentially generating business, right? So market positioning, lead generation, sales, customer acquisition, all of that goes under market. Are you attracting the right customers consistently? Do you have a repeatable process for converting opportunities into sales, right? Do you have a good follow-up process? Do you have a good sales process? An example bottleneck might be you have plenty of leads coming in, but too few become profitable jobs. Why is that? What's causing that? Are you getting lots of leads from the wrong type of customer because you haven't clearly defined what your ideal customer avatar is? Is your marketing matched up to that avatar? You may know your exact avatar, but all of your marketing is attracting the wrong avatar. Those are all functions of uh under market. The last one is machine. So machine is the operation of the business. And this is going to include systems, processes, production, operational efficiency. Can your team consistently deliver what you've sold? Does the business operate through documented processes or constant firefighting? An example here would be more sales actually creates more scheduling problems or mistakes and callbacks. So it's not always like, hey, just sell more. Well, you have to produce it. And if you don't have a good system for producing it consistently every time without your input, all you're doing is creating more chaos in your business. So these functions are all interconnected. Improving one won't necessarily improve the business if another one is restricting the performance. So within the 4M framework, there's actually four levels of business performance. And so the 4M framework doesn't just identify the functions of a business, it evaluates how effectively each function operates across four levels. So level one is going to be foundation. This is going to be the basics, right? If you're just starting a business today, you're going to be under foundation. So you're establishing the fundamentals and creating consistency within how you run your business. And a lot of times when you're new, you're figuring stuff out, right? You're just trying to see what sticks. You're throwing stuff at the wall, what sticks. Okay, that works okay. Let me keep doing that. And that's where a lot of times you develop inconsistent or inefficient operations because you're struggling and you throw whatever you can at the wall. And if it sticks, you keep doing it. But you've never actually gone back and evaluated is this the best way to do it? Is it the easiest? Is it the most profitable or the most efficient way of doing it? I don't know. We've just done it this way this long because it's worked, right? And that's where a lot of dysfunction comes because things were just figured out on the fly and never really evaluated and seeing if that's truly the best way to do it. So at foundation level, you're establishing the fundamentals and creating consistency. The owner is heavily involved in the daily operations, like heavily. And basic processes, financial controls, and accountability are still being developed. Like you don't at foundation level, you don't really have a documented business. Like you, it's just you trying to figure stuff out for the most part. You may have a few employees, but you're really just, you know, every day is kind of a grind and you're just trying to fly by the seat of your pants, right? That's that's what would be considered foundation. So level two is going to be build. And so build is where you start developing repeatable systems and dependable employees. You're establishing clear responsibilities and performance expectations. You're moving from doing everything yourself to building an organization. At the build level, you you still may have some inconsistencies. You still may have some bottlenecks that you're trying to work through. You still may have things that need to be improved, but you're not the business doesn't rely on you 100% for everything. Like if you were a solo entrepreneur, right? You're doing everything. So at the build level, you're starting to develop some of these uh core functions in your business. Level three is scale. And leadership is in place at scale, and it's beginning to run the business. You've you've been able to put together systems, you've been able to hire key personnel, you've been able to really develop this to be uh a business that can run somewhat without you, not 100% without you, but you may have one or two key personnel. You may have an office manager or a VA, you know, assistant or a project manager or something like that that's that's running part of the business, and you have leadership that's in place and it's beginning to run that part of the business, right? So you have good systems support, growth without uh everything going through the owner, uh increasing capacity while maintaining profitability and consistency. This is a this is a little bit of a misconception uh about scaling. But people think of scaling a lot of times, and that word is thrown around a lot and it's it's misused a lot. When you scale a business, it's you're actually making more money. You're growing without growing your overhead. When you grow a business, you're actually growing your overhead. You're actually growing the physical size of your business. You're hiring more personnel, you're buying more vehicles and tools, you're actually growing the size of your business and the cost of the business. When you're actually scaling your business, you have the majority of infrastructure in place. Now you're just doing things to actually make more money with minimal growth that's happening. Now you may, you may be adding like a van and a team, but because you have the infrastructure in place and you have it dialed in, every time you add a van or a team, you know, you're just adding three to four hundred thousand dollars worth of revenue to your business. You're not really like having to figure out how that works. You know, you go from like one crew to two crews, there's a lot of logistics that has to happen, right? If you have one crew and you're the foreman, that's different than having three crews with a project manager. Like there's a lot of information that has to be passed on through you to the project manager, to the teams, to where you can get consistent output. And so scaling can sometimes be deceiving. What you're really scaling is your profitability, not so much the size of your business. So you're increasing capacity while maintaining the same level of profitability and consistency. When you're growing, a lot of times you're actually losing money. Your profit goes down because you're making tons of capital investments and trying to uh get to that level to where you can start to scale your business. So there's a lot of confusion around that.

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.