EPISODE 90 – How To Guarantee Increased Profit
EPISODE 90 – How To Guarantee Increased Profit |
Hey folks, welcome to episode 90. 90 and another 10 before we get into triple figures, that'll be a bit exciting. There's a couple of exciting things that we're gonna be talking about today.
I'm just looking at the chat, which is why I hesitated, 'cause he's already on live. He's already put #live. So if you're gonna watch this thing live, put the comment in there so we know that you're there and you're watching. Hugh is cleaning bricks again while he is watching or listening to the podcast.
Well done, Hugh, and good luck with the bricks. There's a couple of exciting things, as I said, happening.
One of which is the content of today, and the episode is called How to Guarantee, wow, that's pretty strong, Increased Profit.
The thing is that the big majority of builders don't make any so it'd probably be a good thing to be able to guarantee profit. How do I know that most builders don't make profit is because we talk to a lot of them.
We've got a process that when builders join Blackbelt, they go through a health check, a financial health check.
So we've got a Profit First professional accountant who we put in touch with builders that join Blackbelt and they just go through absolutely everything. We've been doing that for a couple of years now and not one builder has had profit according to the Profit First system, which we're gonna talk about today.
They have been showing profit on the profit and loss sheet, but that's all smoke and mirrors. And again, we're gonna unpack that. I'm sure you've been to the accountant and the accountant said you made X amount of dollars profit this year, but he hasn't thrown a suitcase full of cash at you at the same time.
It's just a notional figure that's in the profit and loss sheet, but it doesn't exist, it's not money that you can spend and you can use as a reward for all of the risk and the sacrifice and the time and the effort and the distress that you've had to put up with by running your own business.
Whereas the profit that we're talking about today is cash in the bank for you as a reward for all of that stuff. And if you don't have that right now, maybe you should listen to this week's episode so you can have it in your bank account to spend on yourself and your family.
So if this is the first time you've listened to or watched the Builder's Business Success Podcast, it's all about the common and often costly problems that most builders experience and solutions to overcome them.
Not just solutions that we're making up and it's a theory, these are proven solutions that are put into practice every day by our builders Business Blackbelt members all over the country and regional areas and in the big city.
So it kind of doesn't matter where you are, this stuff works. All you gotta do is implement it. So the Builder's Business Success Podcast is really a construction business podcast or a builder's podcast. If you've never met me before, my name's Mick Hawes. I'm your host for the podcast, and I'd like to be a construction business coach or your builder's business coach, whatever you prefer.
As I said, that's the topic for this episode. And we'll also be talking about in our idea of the week, a little tool, we've talked about it before, we're gonna talk about it again because it's a very, very useful tool to be able to help with the clarification of your current financial situation.
Because if you don't know where you are and you don't know where you wanna go, the old saying is, if you dunno where you wanna go, any road will take you there. And that seems to be the case with most builders from the financial perspective, they don't really know where they want to go specifically financially, and they most definitely do not know where they are financially.
I should be able to wake you up out of a deep sleep, and you should know exactly what your percentage of profit is and what your expenses are, what it costs you to keep your doors open each day, all of that sort of stuff. And you talk to builders about that and it's like, the feeling is it's all too hard to gather that information.
It's not too hard, we can show you how to do it quite effortlessly, and it will make a big difference. So that is what is on this episode of Builder's Business Success Podcast, so let's get on with it.
Transcription of the show!
As I said, it's all about Profit First in this episode. It's one of the fateful eight. You'll remember some episodes ago, I think this is number five. So six episodes ago, we talked about the fateful eight, and it's the eight mistakes that we've found that builders make in an attempt to solve the problems that are very, very commonly experienced with the owners of a building business.
And so we want to unpack each of those fateful eight mistakes in each episode, and we're up to about number five, and it's Profit First. And it's all about builders who they don't pay themselves first, they pay all of the bills and struggle to pay the bills and the tax and the GST and the bass and all of that sort of stuff, and they don't remunerate themselves effectively.
They may pay themselves a wage, but that's quite often where it finishes, there is no profit dividend from the building company. I don't know what you're doing it for if you're not being remunerated. I'll just put my teeth back in, remunerated properly.
So we're gonna show you the system, unpack the system to be able to do that. I think it's worthwhile just starting with how this all came about because embarrassingly, I was in a situation where I thought everything was going okay financially until I came across Profit First.
And how that happened was we had a podcast years and years ago, and it was called Small Business Smart Solutions. And we were just small business coaches at the time, working with all sorts of different businesses.
We weren't really specialists in the building area. We did have some builders on board, but we weren't building specialists like we are now. And back then, I think the business was called Uncover Hidden Profits.
And in the background of many of the podcasts there would be in foot and a half high letters, Uncover Hidden Profits. But then I met Mike Michalowicz. And how that happened was I was interviewing him for the podcast for one of his books, which is called the "Pumpkin Plan," highly recommend it, go get yourself the copy of the "Pumpkin Plan" by Mike Michalowicz.
It's all about the similarities or the parallels between growing massive small car-size pumpkins, a pumpkin the size of a mini minor or something like that, and how to run a successful small business. It is a brilliant, brilliant book.
So I interviewed Mike about that. Loved the book, loved Mike, he's just such a top guy, you'll see him in the introduction to our podcast. He called me some months after that interview and said, "Hey, we're releasing a new book, it's called "Profit First," can I come back on the show to promote it?"
Absolutely me being studious, I thought I'd best read it so I could ask all the right questions and be a good interviewer. And as I read and went through this book, I just felt sicker and sicker and sicker until I did the process that we'll talk about in the idea of the week here today, and it's called the instant assessment. And then I felt physically sick.
Like I was just about to throw up, I was so embarrassed and felt so awful about how I'd managed the financial situation of our business for the previous 18 years.
The interesting thing is, and the reason I share this story with you is because the road out of financial difficulties or financial distress isn't necessarily fast, but it can be certain if you do a couple of things.
And one first things I realized was that just by having a very, very clear plan forward can make you feel significantly better. Like the instant you've got the plan, and you decide to take action on the plan, you will feel better.
Now, nothing changes financially in that instant, but you will feel better. Like isn't that at least a worthwhile first step, feeling better and getting out of that distress and that fog of, how will I ever get out of this, and will this ever be over?
And it will be over, and I'm gonna give you some stories and some evidence about how things can change by implementing this process.
But as I said, I've been doing it a certain way, the way I thought, the way that everybody else said I should manage the finances. And I was adopting the philosophy, the accepted philosophy of how you should manage your money and tax deductions and leasing cars and equipment, and all of this sort of palarva.
And even the accountant. My accountant is retiring. Michael. He's at work. We're not sure whether it's an April fools joke or not, but he is retiring and handing us over to a younger accountant on April the first. It could be a joke, but we'll have to wait and see, but we've been with Michael for a long, long time.
And because of my philosophy, I was able to convince Michael that this is how we need to buy this, and we need that, and we need that, I was awesome at rationalizing things and spending money when we shouldn't. In 18 years, we still had lots of debt. We had a massive mortgage on the house that seemed to be going backwards.
You know the story because you're probably there. And it took this jolt of reality by learning or reading "Profit First" to really get me out of that normal think, the standard garden variety approach to how you manage and measure your finances in a business.
If you read "Profit First," it basically says that 95% of clients of accountants don't make profit, they make profit on the profit and loss sheet, but they don't make actual profit. And the difference is this, folks.
So in the previous 18 years before Profit First, we would make profit. Michael would say, "Here's the profit," it's on the profit and loss sheet, but we always seemed to be struggling. We never, ever had excess money, we always sort of had to figure out how we would pay for something.
The situation is very, very different now. We own absolutely everything. We just bought, well, a couple of boats. We bought a 55 foot yacht last year and sold it because we didn't want a yacht anymore and we wanted a motor boat, so now we've got a motor boat.
Sometimes you'll see some of the videos that we do are on the motor boat, because we spend so much time on the boat. It's like a floating apartment, it's really comfortable and I love being there.
And I'm not saying any of this to impress anybody, you're probably sitting there going, oh, you wanker. That's fine. I'm not saying this to impress anyone, I'm saying it to impress upon you that you can change your financial situation without necessarily increasing your turnover.
You don't have to build bigger business to start to have actual profit which is in a bank account that isn't earmarked for anything or anybody else other than to reward you for all of your risk and your effort and your sacrifice and your stress of running your own business.
When you decided to run your own business, I'm assuming it was because you wanted more time and you wanted more money than just working for somebody else. But we'll talk about the time thing another day.
I guess that I was about to say I'm fortunate, but it took effort and it took change and it took a refined philosophy to get to a situation where we had enough money to buy the boat and own everything in the first place, but then being able to have the time to use it. 'Cause I know other business owners that own holiday homes and boats and all of that sort of stuff but they really don't get the time to use them.
You need to be able to do both. So this conversation today is, let's get our financial sheet together. So you've got the wherewithal to buy the things that you want for your family and the experiences that you want for yourself and your family.
In future episodes, we'll talk about how to have the time to be able to use it. But 95% of accountants clients aren't profitable, they are profitable on the profit and loss sheet, but not in the bank account, in the profit bank account, and I'll want you to be profitable in the bank account.
As I said, 100% of builders that we put through our financial health check when they join Builders Business Blackbelt make no profit. They do on the P&L but not in the bank account.
So that's why I jump up and down and constantly talk about Profit First, because it's a real problem, it's a genuine problem. And we said in previous podcasts that there was a 90-day period some time ago, maybe a couple of months ago, a friend texted me and he said, "we just realized that 106 builders went out of business in that 90 day period."
And I can guarantee you, none of them went out of business because they were making too much money and thought, well, a bag of this, so I've got that much money I'm just gonna stop.
I don't reckon any of the 106 went out of business because of that, I reckon they went out of business because they didn't have enough money, it just wasn't worthwhile, it wasn't working for them financially. And there's a bunch of common reasons as to why that happens.
And the other reason we wanna talk about this is that money stress is the worst. Like money stress, when you've got financial stress, it amplifies the consequences of every other problem you've got. If you've got health problems, if you've got relationship problems, if you've got time issues, overworked, and all of that sort of stuff. If you've got financial pressure as well, it amplifies all of those problems.
If you take away the financial problem, the financial stress, a lot of those other problems either disappear or at least reduce in intensity, which should be a good thing.
So let's get rid of the financial stress and start to implement this proven system that absolutely works.
So how do you do that? Well, I think you need to buy the book, buy "Profit First" or what would be even better suggestion, sorry, Mike, is to buy Katie's book.
So Katie has been trained by Mike. Katie Crismale-Marshall in Australia, she's written a book called "Profit First for Tradies." She's been on the podcast before, she came and spoke to our Blackbelt members in our intensive, our two-day intensive, couple of weeks back, it was brilliant.
Because the Profit First system as Mike created, it just needs a bit of massaging and a bit of polishing to work with the trade space business effectively, and Katie has nailed it. Like she's created this system from Mike's system that works beautifully for tradies.
So go buy the book to start with, "Profit First for Tradies" and go through the process. But I just wanna share my experience about that because everything you need to know is in the book.
But my experience is this, that a big majority of people will buy the book, they'll read about the processes, the parts about implementing Profit First, but there's a couple of things that are a little challenging.
Like to stick to the disciplines to make this work, they're a little bit challenging. So guess what people do. They modify the system to make it feel better. And I've been doing this for a long time now. It was a long time when I first spoke to Mike and started to implement this and started to teach it to our members myself.
And what I've noticed through that time is when people modify it to suit how they would prefer to do things, it does not work.
If you want it to work, you've gotta follow the system absolutely. You've gotta follow the process absolutely. 95% won't cut it. There are so many people, so many members, there are current Builders Business Blackbelt members, in fact, I spoke to one just yesterday who hadn't been implementing the Profit First system.
Had they implemented the Profit First system when we first started talking about it, they wouldn't have a massive tax bill. They told me about a massive tax bill yesterday. "Had you implemented the Profit First? "No, we hadn't," they're starting to do it now.
That could have all been avoided, and we're talking six figures, you know. So you've gotta implement it and you've gotta implement it 100%. The good thing about that member is the system's gonna be implemented, the plan is gonna be in place, things will change fairly rapidly.
Some of the things that I've seen, I've seen people come in to Blackbelt with a quarter of a million dollar debt to the ATO. Quarter of a million dollars. 18 months later that had been turned around from a quarter of a million dollar debt to six figures, over 100,000 dollars of cash sitting in their profit account.
Not earmarked for anything or anybody other than to reward themselves for implementing the Profit First system. That's a big shift in 18 months. And it wasn't a huge, big building company, it was your standard garden variety, husband and wife-run building business.
So please understand it's got not a lot to do with your turnover, it's got everything to do with how you manage and measure your finances, and it's an emotional system. So go ahead, get the book.
As I said, many people get the book, get Katie's book, "Profit First for Tradies." But if this is important to you, what I would suggest to you is to reach out and have a conversation with us about it because I've seen so many people just get the information.
And because of this issue where we try to modify it to suit ourselves, it doesn't get properly and fully implemented. If we jump on a conversation, we can show you and help you and support you and guide you to make sure that you are implementing this process properly.
In fact, it's part of a course that we do, the course is called Blueprint the Blackbelt. It's got the three pillars in it, so it's got how to the manage the time thing that we just talked about a little bit earlier that we'll unpack in future episodes as well. But the first thing you get shown is how to get more done in less time.
So it opens up your day to either get more of the really important stuff done, or go and enjoy yourself doing the things that you have always wanted to do but you can't. The options open up to you, the second pillar, it shows you how to eliminate the poor quality customers from your business and have great quality customers in your business and have people not waste your time.
Like get rid of the tire kickers and the price shoppers and the bargain hunters out of your week and out of your month. And then the third pillar is how to implement this Profit First effectively for a building business.
So if that is something, if you're genuinely committed to turning your financial situation around, all you need to do, you just reach out to me in a chat and we'll start the ball rolling and point you in the right direction to make sure this becomes a reality in your business.
And it's like, if you're hesitating about that, I'm not sure what else to say to you. If we can show you how to get rid of that financial stress, how to turn the financial situation around, put a plan in place, like it's not an instant thing.
Please don't misunderstand, it's not magic. It takes discipline, it takes effort, but it will work, it will work. Every single time it's implemented as instructed, it just bloody works.
So if this is something that you wanna do, get the book, reach out to us, let's have a conversation so we can help you implement this for your business. Just reach out to us in the chat, maybe in the comments from this episode, either way is fine.
But we'd love to help you and it will make a massive difference guaranteed if you implement it.
Idea of the Week
Let's switch to idea of the week, because the idea year of the week, not only is a great idea, but it gets you to a big close up shot at your floating light bulb, which that's gotta be the highlight of your week.
The idea of the week is something that is in the "Profit First" book, Mike put it together, but his was a fairly useless version. It was just a sheet that you had to work things out and write stuff in.
Whereas what I did, I created a little Excel spreadsheet that does all of this stuff for you, because based on the figures that you put in the spreadsheet, it automatically changes the targets. And the targets are absolutely essential.
Well, first of all, the instant assessment, it gives you clarity of your reality. We should write that on the toilet wall, like clarity of reality. That's what it gives you because your profit and loss does not.
That is smoke and mirrors, and it's bullshit. It's a massage diversion of your financial situation that is necessary to give to the tax office, that's what that is. But it's not the reality of your situation.
The instant assessment gives you the reality, clarity of your reality. And why is it important to get the clarity is because what gets measured gets managed. And the reason that I am putting my hand up for this, folks, the reason that I did such a shit house job for the first 18 months was, I just didn't like profit and loss sheets. I used to glaze over looking at them and go, oh yeah, yeah, yeah, yeah. But it really didn't mean anything to me.
So I wasn't motivated emotionally to do anything about it. I didn't see a problem, so I didn't fix the problem. When you use the instant assessment, that's what caused me to feel sick. When I filled that out the first time, I nearly threw up, I was that awful. And you might think, well, I don't wanna do that.
Well, nothing changes if nothing changes. You've gotta understand the reality of your situation. And if it's really bad, well, it's really bad, but it's a starting point and it can be fixed. I don't think your situation could be any worse than what ours was. Like that was the reality of the awful job idea of managing that.
So it's important to understand what gets measured gets managed, and we've gotta set targets. In this instant assessment, we'll set the targets for you based on the revenue figures and the cost of your materials and sub contractors.
You put that in the system, we'll show you how to do that. And then it will put targets up for you for how much you should be being paid, how much profit you should be putting aside, what you should be putting aside for tax, and what your expenses should be.
And part of the reason I felt sick when I first learned this was our expenses were up around 80% of our real revenue, and they should have been under 40%. That were twice as much as what they should be. And now they're where they should be, and it took a while, and it took some discipline and it took some pain. But now they're where they should be.
And the upshot of that is you can get rid of the financial stress and you can buy some toys and if you learn how to manage the time stuff as well, you'll also have the time to be able to enjoy those toys, not be under constant time pressure and wanting to go on holidays, but not being able to and all that sort of stuff.
You can have it all, all you've gotta do is have a plan. So if you want a copy of this instant assessment, just reach out to me in the chat, just say, you know, jump into the toolshed, go to chat, find me, just put in search for me, Mick, and then ask me through the chat.
You can do it through the comments on this podcast, if you'd like. However you want to, but just reach out to me and we'll get you a copy of that instant assessment.
That is it for this episode. Just in wrapping up, I want to just share with you a couple of things.
One is the book. If you've been following the podcast for a while, sometime ago we started to do an episode on each part of the book, and the book has arrived.
I've got a copy of it. I should have bought it with me so I could show you instead of just holding up a pretend book like that. But it actually exists, which is really, really exciting.
And over the next couple of weeks, we'll be showing you how you can get a copy, maybe even get a free copy, that would be exciting.
But if you just wanna purchase a copy, we'll show you how to get that, and that's got absolutely everything in it that we talk about from soup to nuts with Blackbelt, from the start to the end. Everything that we cover in Blackbelt is in that book, it's called "The Builder's Toolkit."
And we'll be showing you how to get a copy of that real soon. Another thing that's really important because we are absolutely desperate to help you, help you run and build a more resilient, a more profitable, a more enjoyable, a more rewarding building business.
And if we have to do it one builder at a time, I'm good with that. And so we just need to have that conversation, to find out where you are, where you wanna go, what's in the way so we can point you towards the resources that can help you overcome the what's in the way bit.
The other thing I really encourage you to do, and when you come into the builder's toolshed, we ask you a question, are you prepared to engage? Are you prepared to get into conversations? Post, ask your questions, all of that sort of stuff.
Not just sit there and lurk in the background. There is no value for you lurking in the background. You might be a bit shy, get over it. Let's have a conversation, it's the best way, and it's the fastest way forward. And so we want you to get into the toolshed and post, what are your questions? What are your wins? What are your lessons?
Let's help each other. Let's get into a conversation so we can find out what the things are that you need, or you feel you need to overcome the challenges that you've got in your business.
So we can put them in the toolshed for all to enjoy. The more that we can learn from you, the more direction, the more valuable, the more specific we can get with the resources we put in the toolshed so everybody benefits.
But I need your input for that so jump on the chat, post, do whatever you need to, to let us know what that is. Because don't say you weren't warned. We talked about this earlier and it is going to happen, and it's going to happen soon.
People who aren't engaging in the posts aren't asking questions, aren't getting involved, there's no point you being in the toolshed.
So you are going to be removed from the toolshed. If you don't want to get booted out of the toolshed, we wanna start to hear from you, we wanna start to hear what your problems are, what your questions are, what you need as far as resources. And those people are going to get looked after.
The squeaky wheel is absolutely gonna get the oil. If you're silent, you will be removed from the toolshed. There's no point having you there, there's no point us annoying you with posts if you're not gonna get involved.
So please get involved. The other thing, if you want some personal help as we've talked about, you can go across to the Nav area.
It says, get personal help, you just click that, fill out a form, tells us a little bit about where you are now and so forth so we're better prepared for the conversation so we can help you out and start to get you moving in the right direction.
Also if you're watching the replay in the description, at the bottom of the description there'll be a link that I'd love you to share. If you've got other builders or maybe your subbies that you want to have exposed to these messages and get access to the resources in the toolshed, all you need to do is shoot them that link, and they can join in the toolshed and start to watch these podcasts as well.
So please, please, please share the link, please ask your questions, please get involved. Get engaged, because if you don't get engaged, you won't be here. Sounds like a threat? It's not a threat, it's a promise, that's what's gonna happen.
So we wanna help everybody we possibly can, but you've gotta be willing to help yourself, get involved in some conversations with us, tell us what you need so we can find it, build it, create it, and put it in the toolshed.
I hope you've enjoyed this episode, episode 90, and only another 10 ago before we've got episode 100. I'm sure we'll do something crazy to celebrate the 100th episode. Not sure what it is yet, but we'll figure it out.
That's it for this episode, I'm Mick Hawes from Builder's Business Blackbelt. Please, please, please talk to us through the toolshed and come and join us next week for another episode of the Builder's Business Success Podcast. Every Tuesday, 10:00 AM, that's Sydney time.
So when the times changes and all that sort of stuff, when we lose daylight saving, you'll still know what time to come sit with us. That is it, talk to you next week. Bye for now.