EntreLeadership - Rising Costs: Real Business Owners Respond

Starting point is 00:00:05 There's one thing affecting almost every business out there right now. Rising costs. Wages, material, fuel, it's all up. And that doesn't just impact your bottom line. It impacts your team, your customers, your ability to grow your business. So if you're getting squeezed by higher costs, you're not alone. But what do you do about it? Entree Leadership's head coach, John Falcons,

Starting point is 00:00:30 recently sat down with real business owners for an honest conversation about how they're handling higher costs and how to lead your business well through this challenge. Let's get to it. Tell me about your business, who you are, what y'all do, how big the business is, and just whatever comes to mind. My name's Renee Rangel. I'm the CEO of BSK Associates.

Starting point is 00:00:53 I think our biggest claim to fame is we're 100% employee-owned firm. Okay. We have about 240 employees and over 10 locations throughout California and one little small location in Vancouver, Washington. Okay, very cool. And what do y'all do? So we are a geotechnical and environmental engineering firm. We have construction services, special inspection on one division. Okay.

Starting point is 00:01:20 And our other division of the company is our analytical laboratories that do environmental testing on soil, water. All right, and you, sir? So my name is Donnie Fabian. I am the managing partner at Camine Axel Construction. We are family-owned and operated concrete shell construction company. Since 2020, I've been managing the business. My father's since retired, and it's been wonderful, having worked with them all those years and now taking our business to the next level.

Starting point is 00:01:51 That's fantastic. And it's Meredith? Yes, Meredith Concer. Our company is Tri-Tech Fall Protection. We are a specialty design-build engineering construction firm. Okay. We work all over North America. Anyone who works at height, we are helping them to be able to go home every day safely.

Starting point is 00:02:17 We have headquarters here in Orlando, Florida, and also in Calgary, Alberta. so U.S. and Canada operations. 65 in our team right now and looking to grow and do a little bit more. My background is in engineering, but have been with the company for 10 years now and have moved into this role about two years ago of CEO. That's awesome. That's exciting. Are you liking that role? It's tough.

Starting point is 00:02:51 It's a tough role, but it is a good role. Yeah. Very cool. So you probably know this, but what we're hearing is that 77% of business owners are reporting higher costs over the last year or so. Does that ring a bell? I'm surprised it's not higher, honestly. Yeah. Yeah, well, you're not crazy. Almost every industry. Now, we're kind of all in the construction industry, right, in this conversation, one way or the other. But it's hitting every industry out there. And we see it, we see it all over the place. It can come from the utilities. I'm just going to read some stats here. Utilities are up around 8.5% for both service and manufacturing companies. Cost of goods are up 8% for manufacturers and 5.5% for service businesses and then wages,

Starting point is 00:03:43 which of course is like the biggest line item in every business, right, are up 3.4% for both type of businesses. So it's a supply chain, it's inflation, it's wage and labor pressure, government policies and interest rates are what are driving. And it's not only, you know, everyday businesses, main street businesses, as I like to call them, it's the big businesses, too. I was just reading some headlines. BMW is raising its prices on some models up to $1,500. Sony has raised prices on the PlayStation by $50. So that's ringing, I can tell from all of the nodding. That's ringing a bell for y'all. Does it really impacted your business also in those same ways or in different ways?

Starting point is 00:04:28 I would say in the same ways. Just about anywhere on your P&L that there's an expense, we've just have now been pre-programmed to make those adjustments more budgeting. We know they're going to go up and we have to adjust our fees accordingly. For the longest time, we tried to absorb the increases as much as possible because we have such wonderful relationships with our clients, which a lot of times are municipalities. And so those things transfer to even ourselves and our homes and our communities,

Starting point is 00:05:01 and we're there to support them. So it's hard when you're needing to raise your prices and you're giving your employees raises and then by way of their utilities go up or the community expenses go up. And so it's a delicate balance that you want to be. respectful of our clientele, but also my employees need to make a living wage. And we want to keep going another 60 years.

Starting point is 00:05:31 Yeah, absolutely. Donnie, how are you being hit the hardest? I would say wages, the cost of attracting great talent, good talent, right? And that also impacts the team members that are already tenured and part of your your crew, because their wages need to go up, is if you're bringing in individuals that are making more than they are, then so it brings all wages up. And the problem is not so much that the wage is going up is the productivity. It's kind of remaining the same, right?

Starting point is 00:06:08 So it's not like productivity is increasing. It's just the cost of doing business. You're paying more, but you're getting the same production. Getting the same output. So part of the reason, you know, we try to do. develop ourselves in leadership and we're here is for that to see if we could increase our productivity and therefore maybe not have to pass as much because we also have great relationships with our clients and you want to remain competitive.

Starting point is 00:06:35 And so we're trying to do the best we can to be more productive to offset that. But the reality is that wages are going up. That is something we are seen across the board. And I would say also the cost of growth of business. That's a big one for us, that we're in that trajectory right now, growing our business. And one of the things that us business owner failed to anticipate is that before you grow, you're actually seeing a lot more expenses go up. It doesn't, you know, profits don't kind of match in the same timing.

Starting point is 00:07:13 So you hire a salesperson and an estimator, you've got to wait some time to start seeing the results of that. They got to fill that pipeline, right? Correct, correct. So that's also just the cost of growth. Yeah. So those are two main cost drivers for us that we're seeing right now go up. Meredith, are you passing costs down to your customers, too, like Renee was talking about, or how are you handling that? Yeah, we are.

Starting point is 00:07:35 This is, for me, a unique time because there are so many increases happening so widely. In times in the past, we've all grown. moaned over insurance premium costs going up 10% every year over the last few years. But at this time, when there are so many increases, like you mentioned, from raw materials and fuel and freight shipping and labor rates, just the impact of that is so significant. If you don't want to dilute your profitability, you have no choice but to pass the cost. along to the customer. It's been a lot of difficult conversations, really, with the team in how do we do this, how do we message it, and with our customers, unfortunately, that this is just the reality of what's

Starting point is 00:08:36 happening right now. We're not doing it because we want to. We're doing it because that's the market, and we are all dealing with this together. Yeah, we're all in this together. That's for sure. Well, in addition to just passing costs down to your customers, and I'll pose this question to all three of you ever wants to answer. Are you doing anything else? Have you come up with any other ways to deal with the rising costs? Maybe that would be helpful to other people that are watching. Well, certainly we're looking at software implementation to gain efficiencies there, mostly on the administrative tasks. Are you using AI at all for any of that?

Starting point is 00:09:15 Yes. Okay. So we're rolling out some pilot AI programs, and we have some innovation teams that are looking at it on how we could use it effectively. I want to be clear in the sense when everybody's talking about AI, it's our business, our people in relationships. Sure. And so we're looking at how we can use AI to actually increase the face-to-face and client engagement on a human level. And so we don't want to lose employees. Sure. Certainly. And then on our analytical laboratory side of the business, we have a lot of

Starting point is 00:09:51 automation and instrumentation that we invest in. And again, it's just so we can increase volume. Sure. Get your production up, right? Yeah. Yeah. That's awesome. How about y'all? Have you found any ways to get more efficient or anything else besides adding or passing the cost along? So certainly increasing productivity is the big one. So for us, we've done some auditing of our processes in the field, reuse of material, as well as just better ways of improving productivity. Some of that is also training. So just training our people to do a better job.

Starting point is 00:10:32 So there's less rework. There's less having to, you know, perhaps even find themselves, empower them to find themselves ways in which things could be done better. Okay. So that's something we're having constant conversations with our field crews about how they can help as well. So that pressure is not just on the back office where it's a little bit easier for us to to trim.

Starting point is 00:11:01 And the back office, the administrative side, using technology and it's a smaller crew. Our biggest expense is there in the field. So having that conversation, top of mind for them. And we have identified, as I said, a few ways of just doing things, even if it's 1% better. Yeah. You know, it makes a difference. Yeah, absolutely. How about you all, Mariner?

Starting point is 00:11:24 Yeah, I agree with both of those two comments. I think one caution to that, though, is it does put stress on the business when you're trying to be very innovative. Yeah. When you're in a pressure-type environment where... the profitability is, you know, changing, the pressure in the business then can cause unintended consequences if you're trying to do too many things too quickly is what we have found. So, yes, great to find new efficiencies and do new innovative things, but also have to temper that with some reasonable expectations and positive attitudes and be willing to get through that as a team.

Starting point is 00:12:15 Yeah. Yeah, it sounds like, well, that sounds like a lot of intentionality, right? Not just being reactive. Yeah. But in some ways, what I'm hearing kind of across the board is it's an opportunity to get better. You know, I mean, it's kind of forced upon us. But when you think of attitudes, I think it sounds like, at least from y'all's perspective, that you're leading your teams to look at.

Starting point is 00:12:37 at it say, how can we get better? How can we trim things and how can we be more productive? So I think that's fantastic. I think that's fantastic. It's a good job. We'll get right back to our episode, but first, as your business grows, everything gets more complex. There was a time when we had too many disconnected systems and not enough visibility across the business. We wasted time chasing information instead of making decisions. That's why we got NetSuite. NetSuite brings your financials. inventory, CRM, and more together in one place. More than 43,000 businesses run on NetSuite, including Ramsey Solutions.

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Starting point is 00:14:07 In this season of rising costs, there's instability to it, right? There's a lot going on, a lot of moving pieces. How does it compare to other times when we've had volatility in the business markets? You know, I'm thinking COVID, massive disruption, 2008 housing financial crisis, massive disruption. How has it been similar or different for y'all? I feel like since I've been working with BSK, it's about 17 years. It is one of those things where it is a little cyclical, and I feel like we know something's coming typically, and you try to be as proactive as possible. How it's going to happen is you don't always know.

Starting point is 00:14:53 I think the best force against any of that is to have a solid team. It's really, I think, that simple. Yeah. You have people who are nimble who can have the ability to learn and kind of learn something. something new, that's phenomenal. Like, I feel like businesses can be unstoppable. Absolutely. I love that.

Starting point is 00:15:15 Yeah, just knowing that it is cyclical. One, it allows you to prepare. So we try to prepare a bit that retained earnings, you know, build it up a bit. Because unfortunately, some of those, like you were mentioning expectations, have to be that maybe the profits are not going to be what they were at one point in time. That way all that pressure doesn't fall on just finding efficiencies and on your team. So just having the expectation that it is cyclical, that is like a passing cloud, like we just had a couple minutes ago, it's eventually we're going to bounce back. And not every job is going to be a banger where we're going to go out there and make a huge profit.

Starting point is 00:15:55 So maybe what we don't make right now is something that we can make up later on. Yeah. But I want every job to knock out. I would love that. I would love that as well. job to knock out of the park. I think that's really, it speaks to the importance of the health of your business. Yeah.

Starting point is 00:16:11 If you can have a healthy, strong business that can sustain something like this, the ups and downs, the ebbs and flows, it's, that's why you make some of the decisions you make in the good times in order to withstand some of these, you know, outside factors that start to impact you. they're never timely, right? It's never a good time. Right. Never convenient. Yeah, exactly.

Starting point is 00:16:41 But do what you can in the fruitful periods to be able to keep your business healthy, keep your team intact, which really is the key to managing through situations like this, and be successful in that regard. Yeah, yeah. This is the reason that we talk about having retained our business. earnings, you know, because that's that little security blanket for your business when these things hit. And it's a, as you all said, it's a matter of when, not if, you know. Yes.

Starting point is 00:17:14 I'm going to ask a little more pointed question. When crisis have happened in the past, whether it be COVID 2008 or even on the early stages of the one that we're in now with all of the inflation, have you learned from any mistakes? Or if you want, you can say, I learned. I learned from others' mistakes and then describe their mistake. You don't have to own it, you know. What mistakes do you feel like Donnie has learned from the most? So I think there's, you know, if you're even just thinking about COVID, how, you know, a lot of people went remote. And so you kind of changed your team dynamic. And it got maybe comfortable. And we certainly still allow remote work. I still do a lot of work remote.

Starting point is 00:18:00 But we had some really major projects going on, and it was early in my CEO seat, that I wish I had been more present physically. Like, actually get in there and just get amongst everybody who's working on a project. Rather than trying to manage it or oversee it remotely, I think I just needed to be there. Is this different, isn't it? Yeah. For me, I would say putting a lot of that pressure on our team, I'm thinking of a project we did a water treatment plan down there in South Florida and near the homestead area where we knew we should have had a superintendent 100% dedicated

Starting point is 00:18:44 on the project because of the size of the project. But in trying to find those efficiencies and save a bit of cost, we had a foreman on site and a superintendent coming in maybe 40% of the time, 50% of the time. We ended up making a lot of mistakes there that should have been avoided. The relationship with the client suffered a bit. We were able to turn it around, but it was a lesson learned that sometimes finding those inefficiencies and trying to cut costs in certain areas can end up costing more in the long run than what you're actually saving. Yep, good call. Well, mine is a, it was my experience, so I'll admit it.

Starting point is 00:19:29 That's big of you? Well, I did. I realized recently that myself and my team are not having as much fun as we used to because of the nature of external factors. And that's not okay. I came into this role in a mindset where I love coming to the office every single day. I have a smile on my face when I open the door. I want everybody to feel that same way. And when there's stress, you don't realize that you forget that.

Starting point is 00:20:10 And if you're not having fun, the entire team and the culture breaks down so quickly. So that for me actually is a lesson that I'm learning while I'm here and hopefully going to take back with me in injecting more fun back into. our team, even when things are tough. So you suffer together, you win together. It really is, you are able to do that in a team. I love that you're connecting to having fun while you're here. Is that, I'm curious, is that something that you heard talked about or is it just where we are being at Disney or what's causing that? Yeah, it's a little bit of everything. Disney, definitely adds to some of that. Yep.

Starting point is 00:21:01 But the part of the content and part of the message is you have to be positive and you have to be energized. And that is all leadership and fun and why people want to be a part of great organizations. We've all heard people will leave if they are not enjoying themselves. And reasonably so, right? You have to be fulfilled. You have to be enjoying yourself. And it takes intentional actions to make that happen.

Starting point is 00:21:36 I heard Peter Drucker say one time, as a leader, our number one job is to take control of our own energy and orchestrate the energy of the environment at our company. And I think, you know, I think that's what you're talking about. When we talk about fun, you know, if the whole place is down or heavy or whatever it is, of course, we can't be. Pollyanna and just pretend like everything is okay, but if we're just, you know, if our spirit animal is Eeyore every day, you know, I mean, that just is going to, that's just going to kill the energy in the company. One of the comments that was made yesterday in one of the sessions was, we have an opportunity to put good out in the world, and it's almost a responsibility to put good out into the world

Starting point is 00:22:23 through our teams, through the work that we do. And I do believe that. The world needs a little bit more of that nowadays. So even though we have complicated business decisions to make and profitability metrics and data analysis, you can do both. You can do the business management, and you can do the good stuff also.

Starting point is 00:22:50 I can tell from talking to all three of you, All three of you are world-class leaders, and I really mean that. And I would love each of your perspective, just on how do you lead well through tough times? And I know there's a lot about your business and having a solid team. You all have shared just brilliant things. But I mean, you know, somewhere between when the alarm goes off and you get to the office, and it's you're thinking about yourself and you're thinking about what you bring to the organization, what does it take to lead well through tough times?

Starting point is 00:23:22 I think there's, I look at it as an energy exchange and we're looking at the overall big picture. And there's times that, you know, where I put my energy and where people on my team and our clients are giving. And you have to be incredibly intentional about that. And I think that's my reward system is my energy. And so if everybody's down and it's really tough, I got to come in with high energy. Like I've got to come in and lift as much as I can. Donnie, how about for you? What do you think?

Starting point is 00:23:59 Well, remaining positive, just being an optimist, I think it's very important, especially when things are a little uncertain. I think back of two times my family growing up, that we're going through difficult situations that I didn't find out were difficult situations until I was much older, and I hear the stories. And the reason for that is because my parents shielded my siblings and I from a lot of that hardship. And the way they did it was by inserting joy and inserting experiences as simple as they may be. So I love you mentioned that of bringing joy into the workplace. That's something I want to work on myself because sometimes the problems and the weight of it all just,

Starting point is 00:24:45 if they put a mirror in front of me, it's like I look mad, right? I look upset and sometimes I'm just in deep thought. So just shielding my team is something I try now more intentionally to do by just being a little more joyous. And maybe they'll hear back like that job was, I'm not talking about the leadership team because those guys should be a little bit more aware. But a lot of the guys in the field that can't really affect the outcome much. Right. Just protecting them a bit. If there's nothing they can do about it, why worry them, right?

Starting point is 00:25:14 Yeah. Yeah. I love that. I truly care for everybody on our team to the point where I kind of know what's going on and everybody's here and there. And we're all getting to this age where doctor's appointments become more frequent and you have to take care of yourself. But I want people to feel like they are cared for at work. There's no reason that you can't treat each other with care, genuine care. And I bring that.

Starting point is 00:25:53 I personally bring that to our team. My door is always open, whether it's work or personal. And I personally think that goes a long way in having people bring their best selves to work. I love your heart on that. That's awesome, Meredith. Yeah, thank you. You know, I've heard all three of you talk about things that you've learned along the way you've been at this for a while.

Starting point is 00:26:20 If you had a chance to go back and talk to yourself when you were just getting going, what do you wish you could go back and advise yourself on? And what would that advice be? I almost feel like I'm stealing from one of the presenters, but the, you know, just the idea of being your authentic self. That's the only way you can truly get through, you know, some of the challenges ahead. and come out the other side feeling good about it. Yeah, not try and be somebody that you're not.

Starting point is 00:26:50 No, that you won't be successful. Mm-mm. What do you think, Donnie? I would say to enjoy the process a bit more. A lot of times I find myself maybe wanting to rush out of a season a little too quickly, but just taking the time to learn, whatever, the lesson that needed to be learned during that time frame. and understanding that nothing is permanent, things change, and hard times don't last forever.

Starting point is 00:27:22 Neither do good times last forever. So just understand that there will be these changes and seasons to go through. That's awesome. Thank you. I would have probably strengthened my personal relationships. Okay. order to be stronger now because it's lonely at the top is a real, real thing. And I recently had gone through some experience where there was some turmoil and, you know, stressful situations happening.

Starting point is 00:28:06 And one of the hardest points in my career. and I just needed my husband to hug me at the end of every day and make me feel like it's going to be okay. Yeah. And I didn't realize that I needed that. So I probably would have done a better job of understanding that this role is very difficult, and you do need to have strong relationships to support you through it. Absolutely. Absolutely. Good call.

Starting point is 00:28:39 You know, as we talk, I hear all three of you focused on the things you can control. And we're talking about, you know, these costs that are going crazy. But the response to that is focus on what you can control. And that is just such a clear signal of how strong you are as leaders. And so I commend you for that. And then it also makes me super confident because I know from talking to a lot of people, strong leaders make strong businesses. And y'all are going to get through this just fine.

Starting point is 00:29:08 Thanks for coming and visiting with us today. Yeah, thanks for having us. Thanks for having us. At the end of the day, there's a lot that's out of your control. Rising costs is just one of them. Your only option is to focus on the one thing you can control, how you lead. But you don't have to figure this out alone. You can talk with one of our Entree leadership coaches

Starting point is 00:29:30 who are trained to help you work through problems in your business, just like this one. Schedule a free 30-minute consultation call by clicking the link in the description and then stick around for the next video. Because there are three big mistakes business owners are making right now to deal with higher costs. We'll show you how to avoid them. Plus the three things you should be doing to keep your business on track as costs go up. And if you enjoyed this episode, be sure to like, share, and subscribe for more real-world leadership content. I'm your host Dave Ramsey and this is Entree Leadership.

EntreLeadership - Rising Costs: Real Business Owners Respond

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