EPISODE 103 – Do Builders Deserve To Make A Profit?
EPISODE 103 – Do Builders Deserve To Make A Profit? |
Good morning, everybody out there in the builders Tool Shed land. This is the Builders Business Success podcast, where am I looking, up there? There's the camera.
And maybe this is your first time, I don't know, but if it is, the Builders Business Success podcast is a construction business podcast, construction business podcast, it's a building business podcast and I wanna be your construction business coach or your builders coach to help you overcome any and all of the super common and costly problems that the big majority of builders face.
And right now, I think it's tougher than ever.
There's some real challenges out there, and we're really doing our very best to put some stuff in front of you that will make a difference in these challenging times in the building industry.
Today's episode is episode one, oh, three, 103, and it's all about, do builders deserve to make a profit? Now you wouldn't think so, the way that some clients carry on, some prospects carry on, but the other thing that is very concerning, is there is a lot of builders going under at the moment.
It is shocking stuff and we wanna do our best to help you avoid becoming another statistic. And the bottom line is, no business has ever gone out of business because they were making too much money. It's always the opposite and so today's podcast is gonna be focused on things that will help you avoid that.
We generally have a couple of experts that will share some ideas. Today, due to some unforeseen circumstances, we've only got one, and Katie isn't with us today, but Steph is, and what's Steph gonna talk about?
Steph: Do builders deserve to make a profit? Hmm, how much time have I got to answer this question?
In today's episode, I'm gonna be talking about how you can become more profitable by naming the thing and putting some content together. All right, stay tuned.
Mick: Sounds exciting. Some practical stuff that you can do that can impact your, I suppose, ability to be seen. And the more people that you've got lined up around the block, can really have a profound effect on your business.
Now, the other thing I always remind you of is get yourself a copy of this, "The Successful Builders Tool Kit" book. There's a lot of brilliant stuff in there, if I do say so myself.
Now I can confidently say that because I don't think I've ever come up with an original idea in my life, it's all sourced from some other genius somewhere, but put into a format that really makes sense to a building business.
So there is a link in the chat, if you're here live, if you're watching the replay on a computer, there is a QR code, you can just scan that and that will take you straight to the book.
The New Book!
You can get yourself a copy, or there'll be a link in the description, however you wanna do it.
So let's get started with episode 1 0 3.
Transcription of the show!
The question is, do builders deserve to make a profit? The answer is absolutely, like if you are delivering value with your business, if you are delivering value and the people see and experience you are delivering value, you absolutely deserve to make a profit.
One of the big challenges is, how you feel about that, like whether you really feel that you deserve that.
And I think on the surface, most people would say yeah, of course I do, but then you just scratch that surface a little bit and look at people's behavior and actions and choices and decisions, and it doesn't back up that belief that you deserve and, you know, we'll see how we go and see if we can unpack some of those challenges as we go through.
But the question is, do you deserve to make a profit? The answer is absolutely. My question is then, why do so few make real profit? And I'm talking about real profit.
In the intro, and I think I've mentioned it a couple times before, and it's, I heard some news the other day, I haven't been able to verify it, about additional insolvencies, but there was a newspaper article a week or two ago that basically identified that 342 builders had become insolvent in Victoria alone, since April, 2021.
So that was just over a year. And I think there were 40 in March alone this year and they don't go under because they're making too much money, we've talked about that. And so, I believe that the real challenge here is clarity and specificity, and really knowing what your financial situation is.
And the reason that I know that most of you do not know with absolute clarity, what your financial position is today, or your financial position is on that project today, is because we talk to builders all of the time and for instance, one of the things that we do, when somebody joins Builders Business Blackbelt, we personally invest our money in them and we put them through a process of a full financial health check, it's like a financial enema, and we have a Profit First professional, so an accountant, but believes in the Profit First principles.
And we put the new member in front of that Profit First professional, and they just go through everything. And at the end of that, they get a financial health check. So, you know, where are they exactly?
And the reason that we did that, was because in the past, we just assumed because you had your accountant, you would work with your accountant, you would know what your financial situation was.
But over the years we found that that just isn't the case, many builders visit their accountant, maybe once a year, at the end of the financial year and all it is, is a cleanup, there is this mess and the accountant cleans it up and puts it in a way that can be presented to the Australian tax office.
And might even say, you made a 40,000 or $100,000 profit or whatever it is, but there is no money in a bank account anywhere, that gives you access to that profit, it's notional, it's fictional, it's smoke and mirrors.
So you need to know, and every single person that's gone through that health check has come back making zero profit. And that is profit based on, the criteria that measures profit in the Profit First system, if you haven't read "Profit First", go get a copy of "Profit First", as I said, Katie's normally got a short training session on the podcast, not today, but Katie wrote the book, "Profit First for Tradies".
Mike Michalowicz wrote the original book, and with Mike's blessing, Katie wrote, "Profit First for Tradies", because the Profit First system needed a little bit of massaging to work for a trades based business, it doesn't work straight out of the box for a trades based business, but when you read Katie's book, absolutely, you've got the steps that you need to take.
But according to Profit First, profit is money that exists in a bank account, could shove it in a tin under the bed, or, you know, however you wanna do it, but it exists.
It's not notional, and it's only purpose is to provide you with a reward for your effort, for your sacrifice, and for your risk of running your own business. When you start to put that criteria to it, there have been no builders that we've measured their financial health that were making profit.
They showed profit on the profit and loss sheet, but that money didn't exist and if it did exist, it would have to be used to pay bills and pay expenses and things like that, so it wasn't profit at all.
Profit only exists after everything else has been paid. And it doesn't require that profit to be put into other expenses or bills to be paid. Why are so many builders not profitable? Why are so few builders genuinely profitable?
Well, here's what we've found, since we've been doing Blackbelt, we're constantly learning and constantly looking at the common problems, and obviously profit is one of them like, what the hell are you doing if you are not making a net profit? Just before I go on, I just wanna check to see that we've got some live participants.
We've got Matt, we've got Steph, we've got Ingrid, we've got Anthony, and Hugh thus far, so welcome to the live version of the podcast. And please, if you are here live, make a comment, ask some questions.
Steph has put a comment in, that says, "Most accountants are about compliance, not progress or profit management". Hundred percent, that is so, so true.
I think most accountants are historians. Like I said, they just come in and clean up the mess after you've made it, but there is no conversation about what needs to happen to avoid that mess happening again next year.
And if you haven't got cash in a bank account that is just earmarked for your pleasure, the only purpose of profit is to put a shit eating grin on your face. That's the only purpose of it. You don't need to use it intelligently .
The whole reason, you've gotta get some of that profit and you've gotta do something that gives you joy. There was a great post in the Tool Shed, I'm not sure whether it was just Blackbelt, or it might have just been in the Blackbelt dojo, I'm not sure whether it was in the Tool Shed, but one of the guys holding up a brand new, jet black snowboard that he just paid for out of the profit account.
But in the photo, he had a shit eating grin on his face, he was very, very happy about it. Well done, Josh. So the reason, or what we've found, the contributing reasons as to why most builders don't have genuine profit, is profit isn't properly calculated.
And I've given you a whole bunch of reasons how it's not properly calculated, but it's not also calculated for in the pricing of a project. I'll hear builders talking about markup and margin, and I put this on it and all of that, and they assume that that is their profit, but I cannot tell you, to this day, I'm still amazed that there are builders that do not consider their costs, the costs of running a business, in their price.
Like if you look at every single cost you incur over a 12 month period, and you divide that into the number of days that you work, that your business is open, that is a cost of keeping your doors open, on a daily basis. Does that figure get added into the project pricing?
I hope it does, I hope you are sitting there saying, "Mick, that's not me". I hope that for you, but I cannot tell you how many times I've had conversations where the cost of the running the car and the electric light bill and the phone and insurances and all of that sort of stuff are paid for out of the profit, or out of that margin or the markup or whatever word people use, to put some sort of additional money on the cost price of material and labor.
It's just craziness, and so they then pay all of that out of what they believe is the profit, and then there isn't any profit. Project management is another one. Nice big pregnant pause, which isn't really good for people just listening to the audio, like, has it stopped working? I apologize, I won't do that anymore.
Steph also said, "I only know, 'cause I fired them", talking about the compliant or the compliance focused accountant. And Hugh says, "Morning, Baggus". It's because Hugh's nickname is Hugh Bags.
So good morning, Hugh, good to have you here on the podcast. Project management, here's another one, project management costs generally aren't considered either. It might be just the normal hourly rate if it is considered. So, you know, what I would call your nail bag rate.
So whatever you generally charge when you're banging nails into wood, is what you might charge for project management. But I don't think all of project management is considered in most projects, the hours that you put in to manage the project, what is managing the project?
That's speaking with the clients, it's wrangling the trades, it's wrangling the suppliers and just in your office, putting things together and working out timelines and schedules and so on, and all of that, that needs to be paid for and the cost of that is far greater than the onsite cost, right?
You need a lot more experience and a lot more knowledge to be able to manage a project effectively. So you gotta make sure that that cost is considered. Progress on projects is not measured with a degree of accuracy.
They just get it done, you know, and know that when they get up to here, we'll get a progress payment and then we get it up to this stage and we get another progress payment. But the progress, day to day, based on a time budget, isn't measured.
You guys, you should know exactly what you've budgeted for a specific part of the project, and that project, a part of the project should be managed and the conversation should be happening with the team and the team should be presented with a viewable scoreboard so they know that what we're doing today, like we're hanging all of the doors or we're fitting all the arcs and skirts, or we're putting up the roof trusses or whatever that part of the project is, I suggest that you have a time budget for it and that time budget is known on site and you create a scoreboard, so the team can see whether they're in front or behind.
If they're behind, we can have a conversation about it and try and get back on track again, because when you're behind, it is sucking the profit out of the project.
And you'll be amazed because a number of our guys do this, they have viewable scoreboards, and they know what's needs to be done and there are budgets, time budgets for activities and that's communicated to the team, and when they see that they're in front, on the viewable scoreboard, guess what they wanna do?
Most people will go, oh well, they'll probably take it easy. Bullshit, they wanna go harder. It just taps into the competitiveness of the team and if you give them the structure and the environment where they can improve how they do things, they will improve how they do things, particularly if they can see an improvement on the scoreboard.
It's very, very powerful, but one of the reasons builders lose their profit is because they don't measure accurately enough, on a daily basis, the progress of projects. And in relation to that, another thing is numbers aren't measured soon enough.
We had a session in the Tool Shed last week, and we were discussing, you know, measuring the performance, the financial performance and ways that you can measure the financial performance of a project, and we basically said that, you need to have systems and processes, so you need to have measurement, using things like Zero and your builder software, and better communication between the team members and yourself about the progress and at the very worst, you should know at the end of a week, what your financial position is on that project.
And ideally, at the end of a day, because a week is far too long. Too much water goes under the bridge, and the opportunity to fix things before they get out of control, can disappear.
Whereas if you are working on this every day, there's a little bit of a leak in the boat, you can fix it that day and you can get back on track and you can learn from it, and there's this constant communication and recognition of effort, and appreciation of effort.
And they get to see and experience the value of constant quality communication on site and it can make a massive difference. So you need to have that sort of thing in place.
And then the last thing, is this whole self-belief thing. We need to be able to genuinely believe that we are worth it, and you will find that many of us self-sabotage when it comes to our own remuneration.
I can't tell you how many times I've spoken to builders and said, you know, "What is the financial objective of your business, let's say in a year, or maybe five years? What sort of revenue would you like to be at? What sort of personal income would you like to be deriving from the business?"
You know, if your wife's working with you, or you got a business partner, what do you wanna be earning as a wage plus? What do you wanna be earning as a dividend from pro? And I ask that question.
And so many of them, you know, "I don't wanna make a lot of money". And I'm just flabbergasted by that, like, why not? Like I can understand that you don't wanna rip people off and you don't wanna sell them snake oil and swamp land, but why don't you want to make a lot of money?
If you've got a cause, if you've got something you wanna change in your environment, in your community, in your world, if you've got more money, you've got more leverage to do that stuff with, it's not about just being selfish and getting a bigger car and a bigger house and a bigger boat and all of that sort of thing, it gives you more choice.
It gives you the opportunity to contribute when you earn more money. So I encourage you to do everything you can to be earning more money. And if you wanna have a conversation about that, where you are now financially, where you wanna be financially, what you think is in the way, you can get some personal help, there's over on the nav section, there's a place there. It just says, "Get personal help", click in it, fill out a little form, we can have a conversation. But you can also just reach out on the chat. You can just ask questions in the Tool Shed, guys, you know, ask questions, you'll find that there are people that are in the Tool Shed that wanna help you, I'm one of them, but there's a bunch.
But what you need to do is, put your hand up. Hugh has asked, "What is owner's remuneration again?" question mark. What do I immediately think when Hugh asked that question?
So, I hope that makes sense. I hope it has stimulated you to start to figure out what you need to do, to overcome any of the money stress, the money pressure that you have, because it is in your hands and there are solutions, all you need to do is reach out for those solutions, ask some questions, there'll be people there to have your back, to help point you in the right direction to eliminate many of these challenges.
So, as I said at the start, we've also got Steph with us today. And Steph has put together some ideas on her thoughts about, should a builder be profitable, and her thoughts on what you can do to start to move in that direction from a marketing point of view, so let's hear from Steph.
Steph: Hey, it's Steph from Tradies Go, and you do deserve to be the most profitable version of you, in the world. And if you don't take ownership of that, and just let it slide, well, then it's never gonna happen.
Now, the one key thing that I always share with my customers, is that you need to name the thing that you do. So when I talk about kitchen renovations or bathroom renovations, those two sentences, or words, they're key words, they're key phrases in Google, there are thousands of people searching for a bathroom renovations expert right now.
When someone puts in kitchen renovations or bathroom renovations into Google and they get you and they get two other competitors, right, they're looking for three, they're looking for the hot three, they wanna fill in three forms, see who comes back to them, see who has the best process, time management, outreach, touch points, like who's got the best management, who's got the best systems, and then I'm gonna take action with that person I dare say.
Now, if you are all calling your thing, kitchen renovation specialists, bathroom renovation specialists, and the guy next to you is also calling it a kitchen renovation specialist, well, then it's like, it's apples and like apples, they basically think, oh, well, the kitchen specialist that I spoke to at 10 is only quoting us 10 grand, and you're another kitchen specialist and you're charging us 20 grand, but it says the same thing, so why are you 10 grand more expensive?
Like you do not wanna get down the path of that conversation and how you get out of that conversation is actually to name your thing. So I got it, if you are a kitchen renovation specialist, hundred percent, you need to be ranked for that key term.
But I want you to put together a product page on your website, where you can send clients to show them exactly what you do, like your core offer. It's more important than your contact page, your about page, your homepage, your SEO pages, it's the sales page, it's your product page.
What I want you to do and what I would love to actually do is if you could set yourself a challenge, name your thing, okay? The thing you are doing, the feature, or whatever, is a kitchen renovation, but the benefit of buying that from you is? I get to cook more in my kitchen, I get to have my family over in my kitchen, I get to entertain more.
So let's go with entertain because that is bringing up all sorts of emotional stuff for me as a buyer. So you're a kitchen renovation specialist, right?
Well, what if you were building the entertainer's dream? And I just made this up, so please go with me. So, "Hey, I'm John from JD Building and we will build you the kitchen", I've already forgotten the name that I called it, "The entertainer's dream kitchen".
Now, there are certain parts to building a kitchen dream, oh my god, an entertainer's dream kitchen, I need to write that thing down. There are key points to delivering this, okay?
It's got beautiful bench tops that are spacious. We make sure that the sink is out of the way, so it's not getting in the way when you are entertaining. There's a little door off to the side that hides your pantry.
We always like to make sure that the fridge is in line with all the joinery and the cupboards and the pantries and everything, so that it just all looks nice and flush because that's what makes a core entertainer's dream kitchen, and if that's what you want, then come and talk to us.
Now, can you see in my very, very raw pitch, how that can get someone across the, you know, across that, taking that leap with you much faster than just saying, "Oh yeah, we're kitchen renovation specialists".
Like all of a sudden, the other guy that's still quoting the kitchen renovation looks boring compared to you, who is going to develop the entertainer's dream kitchen.
So this is what I mean, when I say name your service, you wanna name your thing and you wanna put that on your website.
I wanna see more builders have this core service page, where it talks about the core thing that you deliver.
It's not specifically for SEO, but it could definitely be used for AdWords because you can bid on kitchen renovation, you can get to the first page at Google for that, someone can click on your page, and then they can go to the entertainer's dream kitchen, you know, development page.
So that page is the most important, but I would actually put home, and then the entertainer's kitchen, you know, dream kitchen, that would be the next one. And then, you know, contact and about and all the other crap can come after that.
But this is actually the most important page, because it's gonna make you stand out from all the rest, and for you, it's going to define the exact one thing you do and then when a new lead comes in, you can go, does this person want a kitchen? Yes.
Does this person want really nice joinery that's gonna hide all their appliances? Yes. Does this person wanna get started today? Yes. Well then guess what? They're an ideal customer.
Now, if you don't define those things, then you can't sit here and look at my imaginary notebook and go yes, yes, yes or no, no, no. So defining what you do and naming your thing is so important, from a sales perspective, because then you can go to market now, you can share on Instagram your entertainer's dream kitchen and what makes an entertainer's dream kitchen.
You point people back to the web, like the main URL on your Instagram little bio there could be the link to your entertainer's dream kitchen, you can see me kind of thinking about it in my head here.
So yeah, this is the one thing that I wanted to put forward, like do builders deserve to make a profit? Hell yeah, you deserve to be the most profitable builder in the world, for you, whatever that needs to be, because everyone has a different, you know, what is profit? What is revenue? What are the numbers?
Everyone's got a different scenario. But some people are living on acreage, some people are feeding six horses and they also need money for their horses.
Like some people have six cars and they need money to feed all their six cars and their rejos, so, don't look at anybody else, look at you, look at your situation and then think about right, how many jobs do I need this year?
Okay, what's it gonna take? What do I need? Like, you know, the Profit First thing with Katie, you know, what do I need to actually get so that I can actually be profitable and I can actually have some cash.
So yeah, I would love to see more builders, especially in this community, designing up their core thing, their one thing webpage, that goes on their website, it goes on their foundation for everything that they do. And then all your other marketing comes back to that one core piece.
That's my challenge to you. I hope that you take my challenge up and if you do then DM me or if you're thinking of names for your core thing and you're not sure, then I am in the Tool Shed with Mick and crew, sorry, I'm opening it up over here.
I am in the Tool Shed. You can comment at me, you can say, "Hey Steph, are you in here? What about this name?" I would love to help you. So, let me know if you need help . All right, bye.
Mick: Thanks Steph, great stuff from Steph. Like I'm riveted with that, I've made a bunch of notes myself, listening to that.
And I just want you to think about this, if you've just watched what Steph just said there, and you're going, yep, yep, all makes sense, but you know, I'm really busy at the moment, you know, I don't need anymore clients.
What I would suggest to you, is that you start to do and think exactly what Steph just told you to do and start to contemplate because the worm will turn.
Currently, there might be a bunch of work, you might be busy, but the building industry always goes in cycles, we know that the interest rates are going up, we know that there's all sorts of things that are happening, that will affect how customers will feel about building and spending money and so on and so forth, and so, you need to be that builder, that, you know, if you're being found on the interwebs, that your message resonates with the kind of client that you want, and I always believe that marketing is a slow burn.
And what I see all of the time are builders, when they find that they don't have enough work that they start to get desperate with their messaging and all of that sort of stuff, and without fail, almost always end up with the race to the bottom, discounting, you know, and talking about free quotes, and we'll do this for free and we'll do that, and we'll give you one of those and all of that.
And it's the absolute wrong thing to do for a business if you want it to be profitable, what you need to do now, now, now, is start to think about your messaging, your positioning and even if you're really busy right now, that's when you need to be doing this sort of stuff.
So, Steph is in the Tool Shed, so you can just find her in the chat, so you just jump into the chat, hit, you know, in the search bar, you can just type in Steph or Stephanie and it'll come up, and start a chat with her, you can reach out to her there, if you've got profit questions, you can reach out to Katie Crismale-Marshall.
So you can again, reach out through the chat to either one of them. We're so, so fortunate to have them on the podcast and in the Tool Shed, as resources and experts that you can reach out to and get some really, really good quality guidance for your financial management and your marketing as well.
So I hope today was valuable, I hope it got some thought processes going, asked some questions in your mind, and we'd love to help answer those questions with you. And I have a question for you, and I want you to put it in the comment section if you're watching the replay.
If you're watching the replay, put this answer in the comment section, what is the biggest thing that eats into your profit? If you're here live, you can bang it into the comment section, and you know, we'll reach out and see if we can help you with that. But I want the answer to that question for you.
What is the biggest thing that eats into your profit currently? Because profit shouldn't be eaten into. Profit is yours, you deserve it, and you should be able to keep it.
And if you're doing this stuff correct, you will have profit and you will be able to keep it, and you'll be able to spend it on yourself and put a shit eating grin on your face. Just gotta learn the way to manage our thoughts about it and our processes and our systems and our measurement.
Okay, I hope this has been valuable and we'll be back again next week with another Builders Business Success podcast, live in the Tool Shed at 10:00 AM on Tuesday. You can also watch the replay, you just need to go over to the nav section, if I put that up, you can see just above "Get personal help", is "Podcast".
If you click on that, you can go and watch all past episodes, since we've been doing it in this format so I think there's now 102, and then the next day or so this one will be up as a replay as well, so 103, there's lots of information there, you can jump in there and go crazy.
But make sure you ask questions, put your hand up for help, because the one thing that I learned many, many years ago is some Wombat said, "Knowledge is power", and it's just not true. Knowledge is not power. Applied knowledge is power.
So if you get the knowledge through the podcast and you're not applying it, that's not giving you the power. And if you dunno how to apply it, reach out to us and we'll help you be able to apply that knowledge into your business.
That will give you the power.
Okay, I'm Mick Hawes from Builders Business Blackbelt, this has been the Builders Business Success podcast, and we'll be talking to you again next week. That is all, bye for now.