EPISODE 86 – Don’t Increase Turnover Till..
EPISODE 86 – Don’t Increase Turnover Till.. |
Welcome to the "Builders Business Success Podcast". This is episode 86. The "Builders Business Success Podcast" is your construction business podcast. I'd like to think that I'm your construction business coach or what you might simply put as your builders coach. And in today's episode, we are talking about why turnover will cause more problems than it will fix unless you understand the process. So last week we identified what we called the fateful eight, and they are eight common mistakes that most builders, almost all builders make when they are endeavoring to solve the problems that they experience with the building business.
And so we outlined each of those eight and what we're doing for the next eight weeks, starting this week, is unpacking each of those fateful eight so we can really understand them and understand how they can impact your business.
So in this episode, we're unpacking turnover and why you shouldn't increase turnover until, dot, dot, dot, until you fix a whole bunch of other issues because simply, if you do increase turnover without fixing these other issues, it will cause a raft of problems and increase the problems that you're trying to solve.
So we've got a great idea that we are gonna share with you to help in that space and it doesn't take any extra time to do it which is very, very cool.
*Transcription of the show*
So today, we are talking about why increasing turnover is going to cause more problems than, that you'll fix by just increasing turnover.
So it's a really common mistake, but the mindset is, and I hear it all the time in my conversations and overhearing conversations with builders and it's not just builders folks, I'm just talking about builders because builders are who we talk to, but most small business people make this mistake.
They think that if I increase turnover, it will fix many problems. One of which is I will have more profit. I'll have more profit if I have more turnover so that motivates them to increase turnover. When I increase turnover, I'll be able to hire more people which in turn will give me more time freedom.
Another thought process is that if I increase the size of my projects, so obviously if I'm doing bigger projects, the turnover will go up, that I will attract more, bigger projects in a way we go.
And then the classic is the solution to my cash flow problems, and in fact, I was just communicating with some new member in the ToolShed just the morning and asking them questions about cash flow because when you enter the ToolShed, I say, "What's a problem that we can help you with?" And often, the answer comes back, "Cash flow," like one word.
It's really, really difficult to help you if you just give me one word because there is so much going on with that one word, cashflow, but the issue is that we're talking about today is people think that an increase in turnover is going to fix the cashflow problem. So what I wanna do is unpack each of those four mistakes, I believe, and so we can identify why they're mistakes and maybe what we need to do about them.
So let's look at each of these, the first one being more profit. We think more turnover will lead to more profit because it makes sense mathematically. In reality, what almost always happens is as turnover goes up in a small business, profit goes down. It almost always happens. And so why does it happen? Well, let's have a look at it.
More turnover often means more expense so if you are doing either more projects or you are doing bigger projects, that leads to more expenses. You need to pay for more materials, you perhaps need to have larger insurances, you need more people, you need more tools, you need more vehicles, all of those sorts of things.
So as turnover goes up, expenses also go up which means profit often goes down, and the reason for that is that there are flaws in the process already. There are flaws in your cost management and there are flaws in what expenses you have, what type of expenses you have, how many expenses you have, and as turnover goes up, the flaws in your process get worse and worse and worse.
So turnover goes up, but expenses go up more than you'd expect which has a negative impact on your profit. More turnover means more expenses, I said, because to have work on bigger projects or more projects, you need more people, and kinda the trouble with more turnover, when more expense, more materials, more people, more moving parts, more mistakes is that it takes longer and it's harder to identify the problems that when you are small, those problems are far easier and faster to identify.
You can see them quicker in a project. And as you get bigger, if you've just focused on increasing turnover, by the time you can identify that there's a problem, it's more often than not too late.
Turnover means that you've gotta hire more people, and well, if we go back a step, I think that what we tend to think is if I can increase my turnover, I can hire more people, and more people means I'll have more time freedom. Just like the turnover and the profit, the turnover and the people and the time freedom works in exactly the same way.
We're motivated to increase our turnover because that will allow us to hire more people. More people means I will have more time freedom. The reality of the situation is the exact opposite of that. As you get more people, you will have less time because you have more people, that means more mistakes.
It means you need to invest money and time and effort into more training. More people will show up the flaws in your communication systems and your ability to effectively communicate. You will spend more time managing because there are more people to manage.
So the more people you have in there, again, it shows up the flaws in your system and it strips more time out of you. The other thing that we always forget about is the more people that you have, the chances of people turnover increasing goes up as well, and people turnover is a massive cost for a building business.
It costs so much to find somebody, to train somebody, to get people in your flow and understand your processes and get to know how you do things and they become more and more experienced and more and more valuable to your business, and bang, then they're gone, and now we have to start again, and the cost of replacing people in the team is absolutely massive, and the more people you have, again, it will show the flaws in your team building ability, your leadership, your communication, all of that sort of stuff, and it causes more cost in money as well as time.
It shows up the issues or the flaws in your communication. There will be more miscommunication with more people.
You also will find that it gets into this as the team gets bigger, there will be more blame. People will be blaming other people and you start to get into this, "Well, that's not my job, that's Joe's job."
You know, you start to get into that sort of thing, which is a really, really bad culture that will cost you, and if you haven't got that sorted before you start to increase your team and turnover and so forth, it just amplifies the flaws and the problems that you have.
And basically, you know, more people just means more expense for all of the reasons that I mentioned above. The third thing I talked about was more projects or bigger projects attract bigger projects. Now, that's kind of true. So if you tend to do bigger projects, the word gets around that that's the sort of stuff you do and people who are looking to get a project like that done will look to you, and so yes, that is kind of true, but if you have flaws in your systems, in your procedures, in your quoting, in your communication, it's real easy to lose a lot of money and maybe even lose your business if you aren't prepared before you take on bigger projects.
So, as I said before, turnover can, you can increase the turnover, the income of your business by either doing more projects, more smaller projects, or you can increase the turnover of your business by starting to take on larger projects, and both of those ways of increasing turnover have differing, or will present differing problems to your business but the bigger project one, I think the biggest pitfall of that if you are not prepared for it, is that you can lose everything with one project.
I've seen it happen before. And in fact, Scott Carson, who you may know of, you may not know of, he's a friend of Builders Business Blackbelt. We've known him for quite some time. He's a very, very valuable supporter of Builders Business Blackbelt. He's got a group called The Business of Smiles.
If you haven't heard of it, go check it out on Facebook. He's a fantastic guy and he helps us, the Builders Business Blackbelt, with mental health so he he's created a fantastic environment for our guys to go into and talk about things from a mental health point of view and it's so, so valuable.
We recognized it was such an important area that we needed to address, and Scott was gracious enough to help us out with that and it's going gangbusters, and we just love it and we love Scott for helping us out with that, but the reason I mentioned Scott is he texted me the other day and he was doing some research about a few things, and he basically said, "In the last 90 days across Australia, 106 building businesses have gone under."
106 businesses have gone under in the last 90 days. And everything that we are talking about contributes to businesses going under because they make these mistakes. Now, businesses very rarely, if ever, in fact, I've never heard of it, businesses close their doors because they're making too much money.
I haven't heard of that. Generally, it is because it just becomes too hard or the big one is financial issues, "We just can't pay the bills." And that is because too many builders make these common, common mistakes. And that last one, and this is probably the biggest contributor to what Scott was talking about is, "Increasing turnover will fix my cash flow problems." So that new member coming into the ToolShed and, "What's the problem I can help you with?" "Cash flow," right? It's such a common issue with building businesses and the thinking, the common mentality is if I get more money coming in, that will fix the cash flow problems. The issue here, and I love the way Mike Michalowicz frames this, and he is the author of "Profit First".
If you haven't got a copy of "Profit First", go get a copy of "Profit First" and teach yourself the principles. We teach it to all of our Blueprint members. All of our Blackbelt members implement the "Profit First". It is an absolute savior when it comes to the financial challenges of a building business.
But Mike basically says, "You don't have a cash flow problem. Stop think that you have a cash flow problem because thinking that you have a cash flow problem is pointing the finger of blame outside of yourself. It's something to do with the flow of cash. It's not your fault. It's the cash's fault, it doesn't flow properly, right?
You do not have a cash flow problem. You have a cash management problem. You are not managing your cash properly." And the answers are completely in "Profit First", if you can continue to think that you have a cash flow problem and put the blame out there, nothing will ever change.
You will always be under financial pressure, but the moment that you take responsibility and look at "Profit First", and we are more than happy to help you to implement the "Profit First" system into your business. There needs a bit of massaging and refining and polishing to make it work in a trades-based business like a building business, but when you do that, it's amazing.
The thing is if you expand your turnover, I guarantee your cash flow problems will get worse because of your flaws in your cash management strategy. And as I said, we teach the "Profit First" to our Blueprint members and our Blackbelt members are all implementing the "Profit First".
You've gotta make sure that when you are quoting, you include everything. We had a conversation just the other day about this and how simple it is to miss things. There's so many things that builders miss in their quoting, and the difference between a builder who manages, understands that they don't have a cash flow problem, they have a cash management problem and they something about it, they eliminate the distress, and they start to feel that they are in control of the system.
Like when you believe you have a cash flow problem, it's out there. When you have a cash management problem, it's just the decisions that you make so you can change those, you can manage those. And for instance, like with our Builders Business Blackbelt members, we will teach them how to ensure that profit is achieved and received and kept.
So it's guarded and it's kept for its proper use which is to reward you for your risk, your sacrifice, the challenges that come with running a business. What most builders use is a hope strategy, and if there's some money left over at the end of a project, that's profit, we don't teach you that.
That's a very, very flawed system which contributes to your cash flow or your cash management problem. If you manage it correctly, you understand exactly how much profit there is all the way through the progress payments and the profit is taken out of those progress payments as you go, you receive it, it's put away, it's guaranteed that you got it at the end of the project.
And I can hear a lot of you screaming, "But, but, but, but. You know, I can't do that because I have costs, and this, and that," all of those mindset, all of those thoughts that you are having right now are part of the problem and we'd love to help you flip those, flip the script on on that thinking because we have that much evidence and that much proof that when you do it, things change.
So, you know, we've had so many members come into Blueprint and then go through to Blackbelt that were really on a knife's edge financially, and now, they're in a situation where they're probably too comfortable, you know?
They've got the boat and they've got the holiday home and they've got time freedom and all of that sort of stuff, and that, believe it or not, creates a whole another raft of problems, but they're much better quality of problem to have, but you've gotta get past that cash problem and that turnover focus before you can have those better quality problems.
So just remember that what Scott said, 106 members, 106 builders have gone. Those businesses have gone in the last 90 days, and think about the flow on effect of that, like who else gets hurt other than the builder? Like their team loses jobs, there's, probably suppliers that have remained unpaid, there's a whole bunch of clients out there that have had, have paid money and have got a half finished project.
So there's just pain everywhere, not just the builder because the builder has had this mentality of increasing turnover with a flawed system, and if you do that, eventually, it will break. If you've got holes in your bucket, eventually, the system will break if you keep ramping it up to try and fix something or expand something when the system is fundamentally flawed.
So we've gotta fix all of these little flaws first, then you can go for the turnover. And as I said, you know, please reach out. There's a number are ways to reach out so we can help you with your specific issues around this. I mean, it's a little bit different for every business, but we've been around for a long time and we can identify and help you identify it really, really quickly.
So if you've got questions and you need a hand to overcome any of the things that we've talked about in this episode so far, you, you can reach me in the chat, more than happy to chat with you or you can reach out for some personal help.
So in the navigation section in the ToolShed, it just says, get personal help, click on that, fill out a form, we'll be talking before you know it and helping you eliminate these issues. All right, I hope that was helpful.
I mean, I know it sounds a bit full on, but I mean, if we don't address it like it is, we can sugar coat it and try and motivate you and inspire you and all of that sort of stuff, but it just doesn't fix the problem. We've got to understand that there is a problem and we need to start to accept that it's our mindset, our thinking, our perception, that is the cause of the problem.
The problem isn't out there, the problem is in here, and we've got lots of people and lots of evidence to be able to prove to you and help you turn that around real quick. This is one of the areas of a building business that can be turned around really, really quickly.
Idea of the Week
We are going to go to idea of the week because we've got a floating light bulb and we like to get a shot of it. I still like the floating light bulb. It amazes me, look at that.
Oh, I made it wobble. So the idea of the week, and we spoke about this just the other day in, I think it might have been a blueprint to Black Belt group conversation.
And there are a bunch of problems that occur in a business that can be avoided by doing one thing. And then it's just taking a moment to figure out what my purpose is for this next interaction.
So if you're about to walk onto site and have a chat with the team or some subby's or whatever, just stop for a moment and go, what is my purpose here? What is my purpose with this conversation?
Only takes about a moment and then figure out am I in the right mindset and am I bringing the right energy to help me get that outcome? So have you ever walked on site and started talking to a client or started talking to a team member and it's all turned to shit and it ended up in an argument.
The reason that that may have happened is how you brought yourself to that situation. You didn't have the right purpose in mind, and you didn't bring the right energy to get the outcome. Unless the purpose of walking on site was to get into a shit fight.
Then job done, you did it perfectly. If that's not your purpose, stop and think about what's my purpose and what is the best energy that I can bring, the best emotion that I can bring to this conversation to gimme the best chance to get the outcome I want.
So if you're gonna be talking to a client and a prospect, what they want, the thing that creates the connection between you and they is that subconsciously they just want to feel understood. They want to feel good, that's your product, okay? They wanna be supported and guided by you, but for that to happen, they need to feel understood first.
So if that is your focus and purpose, when you walk there, what's the better energy to make that happen. You will find that you'll have much better discussions, far less problems, better quality clients. It's all gonna be good.
If you're going on site to talk to a team member or a subby or whatever, they need to feel appreciated, even if they've made a mistake or whatever, they need to feel supported and safe and appreciated.
That needs to be your focus as you're having this conversation, whether it's on the phone face to face, whatever. And we've gotta remember, particularly if they are team members, that the conversation is vision focused.
So you need to have a vision for the team, and they need to be made to feel like they are part of a team. And if you've got the right focus before you start every single conversation, whether it's face to face or on the phone, you'll eliminate a whole bunch of problems. So that's the idea of the week for this episode.
Idea Of The Week & Get Personal Help
So idea of the week. So I can get a shot of our floating light bulb.
It's the only reason we do it, but we thought we might as make it, try and make it as valuable as possible as well. And the idea of the week, which I kind of said at the start was... And Hugh's in the chat and he says, "I am the problem, Micky." That's right, you are, Hugh.
We're here to help you, Hugh, but yeah, sometimes you gotta get out of your own own way. You gotta work on yourself which is sort of plays into this idea of the week and you are quite aware of it, Hugh.
Maybe you need to ramp it up a bit, but mindset impacts everything. Mindset influences your decisions, what you think is possible, what you think isn't, and I heard... I don't know who it was, I don't know whether it was Stephen Covey or whether it was Jim Rohn or, I don't know who it was, but I'd like to remember so I could give them credit, but they basically said, when we're hungry, we know what to do.
We go to the fridge and we eat something, right? But when there is hunger in the mind, like when things aren't going right, and when we don't, when we're distressed, that's kind of like feeling hungry that there is a problem and we just don't where to go for the solution, we don't seem to know what the fix for that problem is, but if your mind is hungry, you just simply need to feed it. And people, you know, I speak to heaps of builders and not many builders like reading.
Some do. I think Phil, Phil's out there. Phil's down in Tasmania where we are, never read a book in 35 years or whatever and he's just devouring books now, feels a bit of a freak of nature though, that doesn't happen all of that much with builders. So how else can we consume? And one thing that I use is Audible.
So you can just go to audible.com.au. It's an Amazon company. You can subscribe to it, it's an app on your phone and you can go and there's just truckloads of really, really cool and valuable stuff. If you want any suggestions as to what to listen to, reach out, I'm more than happy to give you some suggestions based on what you're trying to fix. You know, we could certainly help you that way.
It's just a chat message and we can get you going in the right direction, but the secret with this is that you can feed your mind and you can listen and consume this sort of stuff, and it's really interesting and fascinating any time when your hands are busy and your mind isn't, you know?
It could be mowing the lawns, you could be driving the car, you could be sanding something, you could be banging nails into wood, you know, you could be doing a whole lot of things where your hands are busy and your mind's not, and you can be consuming content and refining your thought processes which changes how you decide things and it changes your action which gives you your results.
So it's basic input determining your output. So jump onto audible.com.au. We're not affiliated in any way. I don't get a commission by you doing it. It's just something that I use and it's fantastic.
I mean, for that matter, if you're in the ToolShed, the Builders ToolShed, there's a section there, podcast, and there's just a ton of, well, what are we up to? 80 episodes, 86 episodes today, so there's another 87 that you can go back and you can just have them going in the background. You can just be listening to them, you don't need to watch me.
You know what I look like, you don't need to be staring at me so you can just listen to me in the background and there's a ton of good stuff on those past episodes. So jump on it, and Hugh is driving right now and consuming content. He's just put that in the chat so well done.
What I'd love you to do if, obviously, you're in the ToolShed 'cause you're hearing this, you're watching this right now, it's the only place you can get it, to get more for you out of the ToolShed, I want you to put post and ask questions, engage. You can even put a poll together in here if you wanted to, share your wins, share your lessons that helps everybody in here.
There's a suggestion box, jump in the suggestion box and let us know how we can make the ToolShed better for you and as I said, there is link in the nav section on the left where you can get personal help. There it is there, that's what it looks like. Get personal help, click on that, and we can be talking before you know it. Also, I'd love you to share the Builders ToolShed with your team.
Like if you want your team, get them into the Builders ToolShed so they can start to consume this stuff, hear this stuff. Your subbies, get them in here, other builders who you're mates with, who can get value from this, get them in here so the more people we've got here understanding this stuff and eliminating the problems within the building industry, the better it's going to be for everybody.
So I've put a link in the chat. It's a Bitly link and it's The Builders ToolShed. If you can copy that and just paste it out in texts or emails to your buddies and get them into the ToolShed so they can start to ask questions and consume this stuff, the better it's gonna be for everybody so please, please, please share that link.
And now, I hope that today's episode was thought-provoking. It was a little heavy, little heavy in spots, but sometimes, we need to get a bit serious and we need to address the elephant in the room rather than sugar coating it and saying, "It will be all right," because it won't be all right. 106 builders went broke in the last 90 days.
We don't want you to be one of them in the next 90 days or the next 12 months, but it happens with monotonous regularity so the way around it is to implement this stuff that we talked about in this episode.
If you need a hand with it, you know what to do, reach out through chat, reach out through get personal help. We'd love to talk to you, and we'll be back next week.
Hopefully, the tech will be up and running properly and we won't have the hiccup that we had today, but we'll be back again with a second episode on the fateful eight.
So we'll be talking about that in our next episode, unpacking that in great detail and that'll be super helpful. So we'll talk to you again next week, 10 AM, Eastern Daylight Saving Time or basically, Sydney time every Tuesday morning inside the ToolShed.
If you want other people to listen to the full podcast, invite them into the ToolShed so they can jump in and maybe ask some questions themselves. I'm Mick Hawes from Builders Business Blackbelt. That is episode 86 of the "Builders Business Success Podcast". Bye for now.