A contractor's journey to self-mastery requires discipline, integrity, and respect. Welcome to Hammer and Grind. Welcome to Hammer and Grind, the podcast built for contractors. Real contractors, true stories, real solutions. My name is Brad Hebner, and I will guide you on your journey to mastery of your construction business. You can find Hammer and Grind on all the social media platforms. Just search for Hammer and Grind Podcast. Now, if you're looking for more help, you can check out our free Facebook group called The Contractor Profit Group. I do free trainings in there and it's a great community to be a part of. Now, if you're serious about making more money, saving more time, and creating a business that supports your lifestyle, check out my paid coaching group called The Profit Club. I've put together a proven system for creating a winning business. Now listen, I'm so confident that you will succeed in my program. I'm now offering a 10x ROI guarantee. That means if you don't make at least a 10x return on your investment within a 12-month period, I will refund you the full amount. You can find out more information about The Profit Club at hammerandgrind. com forward slash The Profit Club. So in this podcast, we're going to be talking about why you're not ready to scale yet. I hear this all the time. Contractors are saying, I want to scale. I want to scale my business. I want to make it a $10 million business. I want to scale to $5 million. I want to scale to $1 million. Whatever it is, it's all about scale, scale, scale. And the hard reality is that most of you are nowhere near close to being able to scale effectively. So we're going to dive into what I see contractors doing wrong. And then we can dive into how to scale once you're ready to get to that point. But the main thing that I see happening with contractors, when they say they want to scale, I say, okay, let's look at some numbers. And first off, right off the bat, they're not paying themselves that much. They're paying themselves $30,000, $40,000, $50,000, $60,000, $70,000 a year. And they want to scale because somewhere they got stuck in their head that Whatever cap they're at, let's say it's $50,000, that's the most they're going to make with their current situation. And so the only way they're going to make more money is to scale to get bigger. And that can't be further from the truth. The reality of it is you have to learn how to get what you're doing now perfected before you can scale. Before you can even think about scaling to anything, you have to perfect it first. And I see contractors thinking that in order to scale, they have to add more lines of services. So let's use the example that you're a kitchen remodeler and you focus mainly on kitchens. And when you get started as a contractor, you know, you do kitchens, maybe you do a couple little jobs here and there to get by during the early startup phases, but you get... kind of established and you're getting leads coming in for kitchens and you're doing kitchens and everything's great and you hire a couple guys and it seems like everything's going good and you say you know what I'm going to add bathrooms I'm going to add bathrooms because that's going to allow me to scale and so you start doing bathrooms and then you say well we can do decks too because that's kind of the same thing we already know how to do carpentry so we'll just add decks so We'll do that, and that'll help us scale even more. And then we'll add basement remodels because that falls in that line. So that allows us to scale even more, and then we'll add room additions and so on and so on and so on. And you think that by offering a lot of different services, it's giving you a larger pool, a larger opportunity to make more money. And that's not true at all. Actually, when you... When you add services, you're dividing your time in half. Every time you add services, you're dividing your time in half. So let me kind of take a step back here and regroup and explain basically what I'm talking about. When you start a business, the absolute best way you can start a business is to be very, very, very niche. Like one service. And it can be one service of a trade. So, for example, in my hometown, there is a plumbing company, and the name of the company is Water Heaters and More. It's got a picture of a water heater, a tankless water heater on the side of his van, and it's branded as Water Heaters and More. His main service is replacing water heaters. Now, that's smart because he's narrowing down on one service, which is water heaters. And if you establish yourself and you brand yourself, and you get brand positioning in the market, meaning the market knows who you are and they know of you as the water heater guy, anytime someone needs a water heater, they're going to call you first. When they search online for water heater replacement, his website, by default, will come up because it's named Water Heaters and More. So even the SEO alone is going to allow that company to show up more often. in searches. Okay. So he's specifically digging into water heaters. Everyone knows him as the water heater guy, and he's going to get all of the business, you know, for water heaters. That's an exaggeration, obviously, but he's going to get a lot of business replacing water heaters because that's how he branded himself. He didn't brand himself as a plumber. He branded himself as a water heater. Now, How do you take that and scale it? It's very easy. You take that process of replacing water heaters. You may have to have two processes, one for a tankless and one for a tank. And you write down every single process to do that job. And you put it in there, everything. Like, I mean, everything it takes to do that job. And you document it. And then you create a system of how to do it. And you make it so that you could literally hire someone. They could come in on day one and be able to read the documentation or watch some videos or whatever you have set up and understand how to replace water heaters. That's how documented it needs to be. You need to be able to hand someone a video or a book and they could replace it without your instruction. That's how detailed it needs to be. And then once you do that, You can simply scale that thing because once you're able to teach someone without you being there, once someone can do that task without you being there, you've now effectively systematized that task. And so now what you can do is you can hire another person. You could put them in their own van. And now you have two people that are doing this one task of replacing water heaters. And it's much, much, much easier to scale that way. by taking one thing and niching it down and systematizing it, optimizing it, and making it into this perfect running complete system that can be easily replicated. And here's the thing. If you can't replicate that 10,100,1,000 times in a row without something going wrong, then you got to go back to the drawing board. You need to be able to produce this thing 10,100,1,000 times in a row. without anything going wrong. And I don't mean like things coming up on the job. I mean, not having a process in place to handle it. So even if something does come up in a job, that's not normal. You have a process that handles it and tells them what to do. So without having any issues where they have to call you and say, hey, we ran into this problem. Not sure what to do. How do we handle it? If you can't do that, you are not ready to scale your business. And there's lots of things that have to happen before you get to that level. It's the one thing that contractors don't want to do is they don't want to document because it's not sexy. It's not fun. It's boring, actually. It's monotonous. It's frustrating. It's one of the least sexiest things to do as a business owner is documenting the process. But it needs to be done. That's how you scale. there's a lot more into this that goes into this. And I'll get into it here in a minute. But the main thing I want you to understand at this point is that you have to document it and you have to create the system before you add on other services. Now, once you've gotten to that point where you've documented and everything works perfectly 10,000,100,000 times, now you are in a position that you can scale vertically or horizontally. Vertically would be adding more vehicles. You simply, you hire someone. Buy a vehicle. Maybe it's a $30,000 investment for the vehicle and the tools. And you know by the other ones that you've done that each vehicle is going to produce $120,000 a year in revenue and $60,000 a year in gross. You know that because you've tracked it all. You can literally replicate that process. And so you know that every van you add adds $60,000 of profit to your business. That is how you scale a business. You don't scale it by adding more services. And the reason is because every time you add a new service line, it requires new tooling. It requires new training. It requires a whole different set of processes. Now you have to recreate all the processes for that new line that you've started. So in the case of the kitchen remodeler, If you've documented all that and now you have a kitchen process in place, then you hire another crew and you do more kitchens. And then you hire another crew and you do more kitchens. But let's just say you're like, hey, I want to add bathrooms to the process because a lot of our customers ask us if we do bathrooms as well as kitchens. And you're like, it makes perfect sense to add it on. They're very similar and they are very similar, but totally different processes, right? Now, once you add that bathroom, you have to recreate all of the processes that go into doing that bathroom. And if you don't have the kitchen down paths where it's operating on itself, you know, operating on its own without you, now you've split your time in half because now you're trying to do a bathroom remodels and you're trying to do kitchens and you're trying to manage both of them. Now, I can speak from experience of how chaotic this is. Because one of the things that I made a huge mistake on when I started my business was I started with the handyman model. When I started my business in 2009, I only had $1,000 cash. I had a few hand tools and a pickup truck. That's how I got started. I knew I wanted to eventually get into remodeling because that's what I had been doing before, but I didn't have the money or really the experience to just start off as a remodeler. So I branded it as a handyman business and that's how I set everything up, which is great to stay busy. And it's a handyman business is a great model. If you want to be a one man show, maybe have a helper and you're going to be on the tools for the rest of your life. You can make really good money. You can make a hundred, $150,000 or more a year as a handyman. That's very, very, very possible. However, If you want to scale a handyman business, it's much more difficult to do that because the whole nature of being a handyman is that you do multiple different things, right? You're doing honey-do lists for people. That could be anything from installing doors, windows, roof repairs, siding repairs, decks, deck repairs, drywall, drywall repairs, painting, tile. minor electrical, replacing ceiling fans, minor plumbing, replacing faucets, toilets. I mean, you name it. It can be a multitude of things. Putting furniture together, fixing maintenance things in commercial, like replacing ceiling tiles. I mean, just you name it. It could be all over the place. That's kind of the nature of the handyman business. But every single thing that you do, everything that I did in my business, I had to buy a new tool for. So when I wanted to start doing tile, I had to buy a bunch of tile stuff. When I was wanting to do drywall repairs, I had to buy a bunch of drywall stuff. When I was wanting to do carpentry, I had to buy a bunch of carpentry tools. If I wanted to build a deck, I had to buy a bunch of extra power tools to do that and so on and so on and so on to the point to where like right now in my shop, I have like $30,000 worth of tools, many of them multiple sets of tools because I have multiple vehicles. And it's extremely difficult to scale a business like that. You would be much, much, much better off to do the water heater replacement because you would only need, you know, maybe 30 different sets of tools, hand tools and power tools, and that's it. And you could make $150,000, $200,000 a year just doing that with, you know,30 different tools. Whereas in the handyman business, If you're doing a bunch of different things, you have to have all the tools. You got to have all the experience. You got to have all of the different insurance you got to have, depending on what you're doing. I mean, there's just so many things that go wrong with trying to do everything. I started doing decks. After a few years in, I was doing decks. And being a carpenter, you know, doing a deck's not that hard. But I freaking hate doing decks. There was a curse that I joke around about because this is not even a joke. For the last... five years of doing decks, every single time I did a deck, it was the hottest days of the year. Every single time. I remember a couple years ago, I scheduled a deck in September because I'm like, I'm not doing a deck till September because of this curse. And I kid you not, the three days that we were doing this deck, it was like up in the 90s. We had like a heat wave that came in for those three days that we were doing that deck. And then it dropped back down to like 50 degrees. It's the craziest thing I've ever experienced. But when I started doing decks, I wasn't doing a lot of them. I would do like one, maybe two every year. And so what would happen is because I'm not doing them that often. Sure, I knew how to frame and do all that stuff. But I would go and do a deck and I would get there on day one. I'd be like, how the hell do you build a deck again? I got to think through this. Okay, so I know I got to do this. okay, yeah, that's right. Now I remember I got to do that. I had to like rethink about how to build the deck because I wasn't building them every single day. And that takes all the efficiencies that you have out the door. And so I would literally have to like relearn how to do this stuff every single time I would do it because I wasn't doing it every day. I wasn't niching down. And that's what happens when you try to diversify and do a multitude of different things. Just let me ask you a question. How easy would it be? If all you did was install countertops, if that's all you did was install countertops, do you think that would be easier to train someone, an 18-year-old,19,20-year-old? Would it be easier to train a 20-year-old how to install countertops? Or would it be easier to teach them how to remodel bathrooms? Obviously, the answer is countertops. Because there's only so many countertops. There's only so many layout patterns. There's only so many things that can go wrong. And once you understand all these and once you teach these, then it's a simple process of replicating them. Right. That's what I'm trying. That's the point I'm trying to make here. When you scale your business, you have to start with one thing and then get really, really, really good at it and then scale that thing. And then if you want to add more services, you can. There are other benefits of doing it this way because. If you want to do decks and you want to do bathrooms and you want to do kitchens, you have to market each one of those separately. So now I would have to maybe have ads running for decks or content around decks. And then I have to have ads or content around kitchens. And then I have to have ads or content around bathrooms. Now I've effectively tripled my marketing budget because I have to do, I have to market to three things instead of one, right? Whereas if I was just doing kitchens, I could put all of my marketing, all of my effort into marketing kitchens and I can get really freaking good at it so that people know in my town, I am the guy to hire for kitchens. And when you get that type of level, that brand positioning where people know you're the guy, it becomes much, much easier to sell jobs. It becomes much, much easier to hire people because you start. to attract those people to your business because it's an effective business that everyone knows about and wants to come and work for. You're going to have to trust me on this when I tell you, you simplify to multiply. You may have heard that term before and it has many different meanings. Simplify your product offerings, niche down as low and as small, as tight as you possibly can. perfect that so that you know every penny to every second of what it's going to take to do that job, when you have all of that stuff tracked, when you have it all processed, when you have the most effective way you can do that, and you can't make it any better, there's literally nothing you can do to make that process any better, then you're ready to start scaling. And only then. So, let's assume that you've done all that. You are now at the pinnacle of this one niche that you're in and you're ready to scale it. What do you need to be doing next? Well, one of the things you need to do to scale your business is you need to have an organizational chart. It blows my mind that most contracting companies don't even, first of all, they don't even know what it is. Second, if they do, they don't have one. They don't have an organizational chart, an org chart. All that is, is a chart. You've probably seen it where it has like a person and lines and boxes and it says, you know, here's the owner and here's the office manager below them and here's the assistant below them. And then you have a foreman over here and you got two people underneath him. It just shows where the people in your office, in your business, how it's set up, how the structure of your business is set up. And the reason you need to do that is because every position needs to have a name and face behind it. This is very helpful to see like how many hats you're wearing. When you start out, by yourself and you know that you want to become a larger business, you should have an org chart when you first start out. When I started out, I had an org chart and I had, I don't remember off the top of my head now, but I had like eight different spots. I had a service side and I had a remodeling side and I had like a sales manager, office manager, all these different things. And my picture and my name were in every one of those spots because that's how you start out. It's a great eye opener into how many different hats that you're doing in your business. You can get super detailed if you want and underneath them or attached to each one of those roles, you can have the responsibilities of those people. And then you really know how many different hats you're wearing. And it allows you to visually see what you need to do to grow your business. Because if you're doing the apprentice job and you're doing the foreman job, and you're doing the project manager job, and you're doing the office manager and the sales, and you're doing every job, you can clearly see like, oh, I need to start replacing myself on this chart. If I ever want to get to where my name is only at the very top as owner, I got to replace all these people in the business. So I better get busy. You got to have that to start because you got to know where you're going. It's the blueprint for your business. And it doesn't have to be perfect and it can change, but you need to have something on paper to outline. the target and where you're going. Now, the next thing, I'm not really going to get into numbers because if you have it so perfect that you can't make it any better, you should know all your numbers already because it takes knowing numbers and tracking numbers to know if you're doing it right. So I'm not going to get into the numbers aspect on this podcast, but just know that you should have all your numbers figured out. So that part is a given that you need to have your numbers figured out. The next thing you need to be doing is having a mastery ladder. If you don't know what a mastery ladder is, it's simply an outline of what each position does, what skills are required of them, and it can also include what skills or abilities are needed to move to the next level. So this is super helpful for hiring people so that they know what you expect of them in that position. Now you can go and search online for mastery ladders and you can see different variations of it. But it's just, I like that it looks kind of like the ingredients on a, you know, food. Like if you go to a grocery store and you grab a box of cereal, it's got like that little white box with FDA and it says like how many grams of sodium and protein and all that. That's what it kind of looks like. But it lists out all of the different things that are required for that position. So if I'm hiring an apprentice for my kitchen remodeling business, it may say things on there like you need to, you know. have basic power tool skills. You need to be able to use power tools. That's one skill. You need to be able to read tape measure. That's the skill. You need to be able to finish drywall. That's another skill. You need to be able to do tile backsplashes. You need to be able to set countertops. Whatever it is that you need that position to be able to do, you put those skills in there so that when you hire that apprentice, you can literally hand them this paper and say, this is what I expect of you. These are the abilities and skills that you need to have for this position. And here is the skills that you need to move up to the next position because it allows them to see themselves growing in your business. If you show them the org chart and you say, this is what I have. These are all the positions that you can move into. Here are the required skills of what I need from you to do this entry-level position or whatever position you're hiring for. And here are the skills that you would need to be able to move up to the next position. You've now given them the framework for what they need to work on. It's no longer just, oh, we'll just show up every day and we'll teach you. Yeah, we'll just teach you how to do it on a job. That's still going to happen. Don't get me wrong. But now they know what they're looking for. Now they know that you expect them to know how to do drywall finishing. Now they know. you expect them to know how to install countertops or whatever. There's a second part to that, which you can do as a incentive. And that is with these different skills, you can actually apply raises to them. So for example, let's say once they know how to finish drywall to a level that you deem, you know, whatever, whatever, however you set that up, that's up to you. You know, whether they got to be like, It's got to be perfect or it just has to be to an acceptable level or whatever. You can say once you know how to do drywall and you set the terms of like how you measure for this to see if they're, you know, if they've actually passed it. But once they've passed that skill or acquired that skill, they now get a 50 cent raise,50 cent an hour raise. And each one of these different skills that you require has its own dollar amount associated with it. And it should be tied directly to. how valuable that skill is. So if you're a kitchen remodeler, being able to set cabinets, level and plum, square, all that stuff's pretty important, right? Screwing the face frames together, like all these things that are really important that if you don't do it right, it's going to screw up the whole job. You know, being able to set cabinets, that might be worth a $2 an hour raise. That may be the top of the line. But now your people know, oh. If I want to get a $2 an hour raise, all I got to do is learn how to set cabinets. Now, that may be a six-month. It may be a year or two-year journey to get there. But now they know what they have to do to get to the next level. So you can use the mastery ladder to incentivize your team and also help them stay focused on what's important to them. They may think that having a minor electrical is important because you got to take cover plates off and a couple things when you're doing remodel. That has no value to you whatsoever. So they may be, you know, trying to learn electrical stuff because they think it's going to be valuable. And you're saying, no, I have an electrician. I don't need you to do that. That's why that stuff's important to have a master ladder so they can see what's important. So that kind of covers the hiring process, the org chart and the master ladders that helps to establish those things. And it also helps to see what it's going to take to scale, right? Because every time you need to buy another van and put a person in there, you know what skills are needed for that person. And you know what the price is going to, how much it's going to cost you and all that. So that's why tracking your finances is super important. The other thing that you have to be tracking is the marketing aspect because you need to know how much marketing it's going to take to keep the schedule busy of the next vehicle that you're buying. So going back to the water heater example, you know, if you know that your target revenue for the year is $500,000 and you know that your average job size is, say, $6,000 to do a tankless water heater. So you can backtrack that, right? You can take your $500,000, divide it by $5,000 or $6,000, whatever your job, your average job price is. It's going to tell you how many jobs you need to sell a year in order to make that money. And then you can look at your effective close rate on your sales and you know that you get a 50% close rate on your sales. So now you've got to have double the amount of leads so that you can close the amount that you need at the average job size that you need to hit that revenue go. And so if you figure all this out and you know, I haven't done the numbers here, but let's say you need 200 leads. You need 200 leads a year. Well, if you're tracking your marketing and you know what it costs you, then you will know that in order to get 200 leads, on average, you have to spend $300 a month to get 200 leads a year. Okay? Well, when you add another vehicle to do the same amount of work, you have to increase your leads by 200 to 400. And if it's costing you $300 a month now, it's going to cost you $600 a month to double that. Does that make sense? So tracking your leads and understanding your marketing and where all that number comes from is important. Because when you want to scale, you don't just scale by referrals. You don't just say, oh, I'm getting a bunch of referrals now. I better hire someone else and go buy a new vehicle, spend $30,000, hire a new person, get them trained up, and then all of a sudden the leads stop coming in. You can't scale like that. When you want to get to the point of scaling, you have to be able to turn on and turn off your marketing. You have to be able to know what you can literally know that if I do X, I'm going to get Y results. That's what it takes to scale a business and do it healthily. So you have to understand marketing. You can't just, I get so frustrated when I hear contractors say, I've been doing it for 30 years and all I rely on is referrals. Well, good for you. I mean, that's great. If you're wanting to scale a business, you can't scale a business on referrals unless you just get so many referrals and you just turn down 90% of your referrals and only do 10 of them. Then maybe you got me. Egg on my face, you're able to scale. You can add another vehicle or two and you don't need any more marketing. That's not the case for most people. Most people don't even know where the leads come from. They just wake up like, oh, I got three leads. That's nice. They don't know how they got them, what they did to get them, how much it costs to get them. They don't know any of that stuff. So in order to scale, you have to be able to know what marketing works. Again, you got to track it all. You got to know that if you run this specific ad, it results in this specific number of leads. If you do this specific type of marketing, it results in this percentage of return calls or whatever it is. You need to be tracking all of that stuff. Guys, this is the nitty gritty things that it takes to scale a business. When you get to the point of wanting to scale, it's really no longer about you swinging a hammer. You've gone past that point. You're past the swing and the hammer. You're now a numbers nerd and you're sitting in the office crunching numbers all day. So that brings me full circle back to why do you want to scale your business? Because it's not for the reason that you think it is. It's because you're probably just trying to get more money. You're probably just trying to make more money and you think the only way to do that is to scale your business. And I'm here to tell you it's not. The way you make more money is by charging more. It's literally that simple. You charge more money and that allows you to make more money. You actually do less jobs per year. It allows you to actually work on things in your business. It allows you to spend time creating the efficiencies, right? A lot of people believe, myself included, that another way you can make more money is to be more efficient. And I believe this lie for probably eight years in my business. I did everything I could. I'm a pretty efficient dude. And my favorite word is effective. I like to be effective. Because you can be efficient at doing something wrong, right? But effective means you're doing it right efficiently. So I try to do everything I could to be effective, to be efficient. I'm almost OCD in trying to be efficient. And I would spend a lot of money because I saw a new tool that I thought would save me 20 minutes of execution. every time I used it. And so I would go spend $500 on that tool thinking it was going to save me. And it would save me 20 minutes of execution, but I only use that tool like four times a year. Case in point, I have an $1,800 tile saw that I've only used probably, I don't know, five times in the past three years because it was going to make me more efficient. And again, it does. But the thing you need to know about efficiencies, efficiencies are a bottom of the funnel activity. So if you think of the funnel, the very top is selling the job. If you think about in terms of where you make profit, at the top of the funnel, the wide mouth of the funnel is selling the job, what you sell the job for. At the bottom of the funnel is the profit. And the efficiencies are a bottom of the funnel activity, which means that I don't care how efficient you are, you may only save 1% of the total. it may only be $200. If you're so efficient, and obviously it scales depending on the dollar amount, but if you do a $10,000 job, through efficiencies, you may only save $200. And I'm not saying $200 isn't a big deal. It is, but you're not going to make yourself become so efficient that you're saving $1,000, that you're saving 10% of the total sale price. But if you raise the sale price, If you make it instead of $10,000, it's $12,000 and you're efficient. Now you've effectively just, and you save $200. Now you've actually made $2,200, not $200. You see the difference in how it's a bottom of the funnel versus the top of the funnel. When you make the top wider, it makes the bottom wider by nature. When you make the top the same and you try to make the bottom wider, it doesn't get much wider. You can't have like a straight line. It doesn't work like that. So efficiencies are not what make you more money. Efficiencies are what you need to do before you scale your business. It's a requirement to scale your business, but it's not going to make you more money. So the bottom line is, why do you want to scale your business? Is it because you think it's going to make you more money? And you're at the point now where you're not making enough money, even though you should be? That's not a scaling problem. That's a pricing problem. If you are where you need to be on price, let's say you're at $100,000 a year and you simply want to get to the point to where you can pay yourself $200,000, $300,000, $400,000, $500,000 a year, then yes, you will need to scale your business in order to achieve that. But every time you scale, every time you add a new vehicle, every time you add a new line, You're adding that much more responsibility, that much more stress, that much more requirements of your time to do that. And a lot of people, after being in the construction for 20,30 years, get to the point to where they downsize to where it's just like them and maybe two people or a three-person team or a four-person team. And that's where they like to be at. That's the sweet spot. So this podcast is really... The purpose of this podcast is to really make you focus on why do you want to scale your business? If it's because you think it's going to make you more profit and you're not making enough, that's the wrong reason to scale. If you have everything else in place and you just want to make even more money, then that is a good reason to scale. Look at your business and see where you need help. If you need help in any of these things, reach out to me. I can help you out. But at the very minimum, no matter whether you want to scale or not, you need to have an org chart. You need to have mastery ladders. You need to be tracking your marketing. You need to be tracking your sales. You need to be tracking all that stuff. That's what it takes to grow a business. And one last thought on this. If you scale and you don't have any of this stuff figured out, what you've done is now multiplied the problems that you have to put out. So if you put out 20 problems on a kitchen project on average, And then now all of a sudden you add bathroom remodeling. Now all of a sudden you're putting out 30 problems instead of 20 because you've effectively created more problems for yourself because you don't have it all figured out yet. So think about it like that. That's the end of this podcast. You know where to find me on all the social medias, Hammer and Grind podcasts. Check us out on TikTok. We've got a ton of stuff coming out on that. And always reach out if you're interested in the Profit Club and that 10x ROI guarantee. That's it, guys. Until next time, you know what to do. Be the best you.
