The Home Service Expert Podcast - How To Stop Losing Money Using The Boring Success Formula

Episode Date: January 30, 2020

Shawn van Dyke is a business coach, mentor, and expert in the construction and contracting industries. Drawing from two decades’ worth of professional experience, Shawn authored Profit First for Contractors, which details clear, actionable steps on how contractors can apply the Profit First formula to achieve sustainable profitability. Shawn also travels across the United States for speaking engagements, and to help construction business owners in developing streamlined processes and tailoring their operations for success. In this episode, we talked about construction, contracting, coaching and mentoring, growth and leadership...

The way that I explain that to my clients and how I work with them, I try to make it very simple. I call it the boring success formula. And here's what the boring success formula is. When people ask you years from now, months from now, however long, when people ask you, how did you become so successful? This is what I want to teach my clients. Here's the formula. We just figured out what made us money. And we did that every single day. And we figured out what was losing us money. And we stopped doing that. And that's it. Like, there is no secret. There is no magic pill. We looked at what was making us money. And we just did that. And we figured out what was losing us money. And we stopped doing that. And we did it again and again and again and again. And in fact, the reason I call it the boring success formula, I want your business to become boring when you describe it to somebody.

Hey, what do you do? I mean, I want you to have a mission statement and all that kind of stuff, but for the business owner to get out of that chaos, it should be boring. We're just excellent at this, and this is all we do, and we never do this anymore. Welcome to the Home Service Expert, where each week, Tommy chats with world-class entrepreneurs

and experts in various fields like marketing, sales, hiring, and leadership to find out what's really behind their success in business. Now, your host, the home service millionaire, Tommy Mello. Okay, guys, I want to tell you a little bit about this next podcast. It was absolutely phenomenally killer. I got the guy, his name is Sean Van Dyke. He wrote the book Profit First for Contractors. Now, Profit First is all about paying yourself before you pay for your expenditures. It's kind of like putting money in the bank before you go out to eat when you get a paycheck.

So what I mean by that is, have you ever had $500 in your account and you're like, wait, we can go to a really nice dinner? I mean, if you were in your early 20s, you know what I'm talking about. Like, we've got the money, we can spend it. And most of us, most Americans tend to spend everything they have available. Or if you have a warehouse, you tend to use the whole warehouse. You end up using all the space. That's called Parkinson's law.

We dive into that. We dive into so many cool problems. Most podcasts I do go about an hour. This one went an hour and 40 minutes. I'm telling you, this is the best podcast of the year. It's absolutely amazing. We talk about exactly how to start earning more for your business, the little things you need to do, how to get started today. This guy came up with all these crazy things about the traps we get into when we're early in the phase of entrepreneur and why we deserve to make a profit.

So many times we mistake profit for what we pay ourselves, but that's not true profit. So profit first is about making more money. And it's all about being frugal and innovative. He talks a lot about frugal and innovative, and he teaches us how to do separate bank accounts to not use more than what's in the account, which makes us more innovative. And I promise you, this is a must listen to. You're going to get a lot out of it. And I'm a little under the weather. I got a cold, but you guys know me by now. I got super into this one. We went way over time and there's not a minute of it that you're not going to get a ton out of. So really think you guys are going to enjoy it. And just please

let me know what you think. And the more people you can share this with, you share it on Facebook, you send it to people, the better guests I get like this one. So you'd be doing me a huge favor by getting it to as many people as you know to listen to it. And hopefully more people could subscribe. I'm not making profit doing this.

I'm not making money doing this. I'm trying to get the message for you guys. I appreciate everybody. You're gonna get a lot out of this. Order the book, Profit First for Contractors. I ordered several of them. I've already read the book. It's in my hands right now. You can't beat it. Appreciate everybody. Thank you. Welcome back to the Home Service Expert. This is Tommy Mello here in Phoenix, Arizona. And today I have an amazing guest. He's an author of several books. His name is Sean Van Dyke. He specializes in construction, contracting, coaching and

mentoring, business growth and leadership. If you go to SeanVanDyke.com, he's the owner of that website from 2016 to now. FindHomeBuilding.com, he's the brand ambassador from 2016 to now. Finish Point Trim, 2013 to 2016. Redbud Construction Services. He's the owner from 2005 to 2013. He's the author of two books, Profit First for Contractors. And I got this book sitting right in front of me. I've read it.

Amazing. I just ordered more for my staff. It's Transform Your Construction Business from a Cash-Eating Monster to a Money-Making Machine. And then the other book is The Paperwork Punch List, 28 Days to Stream money-making machine. And then the other book is The Paperwork Punch List, 28 Days to Streamline Your Construction Business. Fine Home Building brand ambassador contributed

to JLC and has been rated an outstanding presenter at JLC Live and NAHB IBS events. His book, Paperwork Punch List, has been downloaded over 3,000 times, and he earned the Profit First Professionals Marketer of the Year Award in 2018. Sean, this is quite an extensive resume here. Oh, Tommy, thanks. Thanks for getting through all of that. I used to have things listed on my resume beforehand, and I would show my wife before I even started this, and I was saying, hey, honey, look, I've got quite a bit of experience. And she always joked around and just said, it looks like you can't hold down a job. So whenever someone goes through all that kind of stuff, that always comes back to sometimes I think like, oh, this guy can't make up his

mind on what he wants to do. But no, I've been enjoying what I'm doing now as a business coach. And thanks so much for having me on the show. I'm really looking forward to just bringing your listeners as much value as possible. It's going to be great. I had Michael Michalowicz on with a bunch of books he wrote about a year and a half ago. And you kind of took it and specialized it for contractors. And this whole podcast is dedicated to better the lives of home service experts out there. So that's why it's called the Home Service Expert Podcast. And I love the concept. Do you want to just tell me about your life experience in the contracting world and how you met Mike and how you came to be who you are today with coaching?

Oh, yeah. Wow. That's a long story. I'll try to give you the shortest version possible. So coming out of college, I got my degrees in civil engineering and then got a master's in structural engineering, went that route for several years and worked as an engineer. And then I realized I didn't know how to build anything. So I wanted to get into construction. So I went into project management, worked for some large commercial contractors, did that for a few years on the project management team, then found my way eventually to working for a real estate developer. So I was traveling around the country, building Walmarts and Lowe's and Home Depots and typical large commercial retail properties. And that was great. Loved that job. But my wife, by this time, we had a couple of kids and she was like, hey, you can't be on the road three days a week and be a good dad. And we already had two kids.

We have five now. So I said, okay, you know what? I got this crazy idea. I'll quit my job and I'll just do the real estate development thing in and around Knoxville. So I'm based out of Knoxville, Tennessee. And this was 2005. That's when Redbud Construction Services started. Started as a construction management firm for real estate developers. And for three years, it was going great. Then 2008 hit and banks wouldn't lend real estate developers any money anymore. So I had to make a shift and went into residential construction, had a small remodeling firm that we did, Kitchens, Baths, and Additions, did that for a few years. And then

my trim subcontractor, and he and I were good friends, went to church together, and he was a young guy too. We started our businesses about the same time. His business really started to take off in the high-end trim and millwork specialty here in Knoxville. And he came to me and said, I think I need somebody to help me run my business. And I thought we were just having lunch. And I said, yeah, you do. You suck at running business. You're excellent at the work, but your paperwork's a mess. You don't have any contracts. And I'm sure that you're losing money. And he over lunch said, yeah, great. Why don't you come and run my company? And I thought, well, I got my own thing going on here, but he is an excellent salesperson.

And he convinced me to come and kind of give it a test run and help him out, help him get out of the weeds. And that's where I really saw the potential for the systems that I had developed for my own business through real estate and through engineering and in my own construction company. So I said, you know what, I'm going to give this a try. I had a small company, had a couple of employees. He at the time had about six to eight employees. And so it was just an opportunity to test out those things that I had put in place. So I came on board with Finish Point Trim and Millwork as their COO. And then it was a whirlwind for the next three to four years. And we doubled the size of that business, both in revenue, profits, got it out of debt. We went from eight guys to over 22 guys out in the field in about 18 months. So it was nonstop

implementation, execution, screwing up, figuring out what didn't work, redoing something, apologizing and figuring it out. As I'm sure that you can attest to, when you execute, you mess some things up. But if you try to wait and get it perfect, then you never get any growth. So it was that sort of constant figuring things out. And it just eventually turned into realizing, hey, these things that I know from a systems and operational standpoint, I think that I can take those and help more than just one company. So again, got this crazy idea. I'll quit my job and go start a coaching business. And so that's really the paperwork punch list came out of that. Nobody knew me. Why would anybody do anything? Why would anybody send me any money or agree to hire me. I had to prove and show people what I knew and how

it could help them. So I just started writing the paperwork punch list and I wanted to break it down and say, I know because I've been that busy contractor with limited time. I don't have the systems in place and I need some help. And so I thought, man, if I could break this down and give them a plan for 28 days, for four weeks to cover some of the basic stuff that will help them get them to the next level and free up some of their time so they can really start to grow. So I just put all that stuff down on paper, put it out into the world as a PDF, which people can still download today. It's been out for three years now. And I still get emails about people saying, oh my gosh, this is what I've been looking for. And so I put that out there in the world and said, all you got to do is just give me

your email address. And then I started emailing people saying, hey, is this helpful? How can I help you out some more? And then eventually somebody said, yeah, I need you to help me out a lot. Why don't you, can I hire you? And I said, yeah, that's the whole point. So that's kind of, that's how it got started. Then everything else from there was just by delivering value to the industry and the fine home building brand ambassador and all of the other stuff that came after that was just from tapping in and filling a need and delivering value to this industry. And man, I just, I'm the luckiest guy in the world. I got the best job in the world. That is five kids, a happy wife, happy life. Yeah. Well, I like to say that, you know, I've been, I've been happily married for 18 years. My wife's been happily married for maybe seven. So. Yeah, there's a lot goes into it. You know, in the construction industry, sometimes, unfortunately, work comes first. That's how we pay the bills.

Sometimes our families take a back seat. But, you know, once you really understand, I think there's a lot of jack of all trades out there and a master of only a few. And I think there's the great guys that are out there that don't know how to make their lives. They're great technicians. You know, the E-Myth, they're great technicians, but they never learned to be an entrepreneur. And I'm guessing that your paperwork punch list is something to help them start to be a better manager and an entrepreneur. Yeah. I mean, it really is. What it starts off with is just, you have to understand what your value is. And it's really, that's for any business,

but putting it in construction terms. And one of the problems I find with construction business owners, specifically general contractors, is in the name, general contractor. And a lot of these guys and gals can do a lot of stuff. And that's the problem. Just because you can do something doesn't mean that you should. You can do siding and windows and decks and additions and roofs and all of these other things. I know you can't, but you can't make any money at being general at everything. You have to specialize. Now, that doesn't mean everybody is a trade contractor. Somebody has to be the general. But even to specialize. Now, that doesn't mean everybody is a trade contractor. Somebody has to be the general. But even as a general contractor, you need to

specialize in what it is that you do and how you market that and how you sell that. So that's one of those things where the paperwork punch list is saying, what is your value? What is your unique value? How do you sell that? And then when you do sell that, by the way, stop working for free. Stop giving away your professional services for free because there are plenty of people out there that like free stuff. And you can charge people, the right people, the right clients, the ones that pay you the most, you can charge them for professional services, and they're happy to pay it as long as you deliver a good experience. But in order to do all of that,

you got to free up some of your time, which means you have to have systems in place. You have to know what you're charging. You have to know how to do job costing. You have to know how to do some of these fundamental things from a business perspective. And when you get these things in place, it gives you so much confidence. And that's what I hear time and time again with not only the clients I work with, but even people that just read my books. They're like, I understand it now. And because you understand it, then you can stand in front of that client. And when they say you're too high, you say, I'm not. The other person you're talking to is giving you bad information. And I can walk away knowing that I didn't lose work. I just actually made money because that person was never going to

pay me enough to make a profit. And I know my numbers and I know what we need to do. Like you were talking before, just before we started the podcast about the growth and eliminating certain things. It provides income, sure, but it doesn't produce the margins that your best work does. So that was really what the paperwork punch list was about. Give you some basic systems, break it down so that you can,

a 28 day plan, four weeks, do some of these things. And it's really about giving you confidence in the system part of your business so that you can work on everything else that comes after that, which is people, sales, and growth. So many construction business owners struggle with the basic systems, getting those in place. And once they do, it's like, hey, by the way, you got all this other stuff that's getting ready to come your way. And I say, once you get the paperwork out of the

way, the next problem is the people. And I don't mean that in a bad way. I mean that if your business doesn't eventually turn into serving people, your employees and your customers, you're never going to grow profitably. So get the paperwork, get the systems out of the way and continually improve those because you've got this big thing that you as the business owner have got to work on, and that is pouring into people, your customers and your employees. So where do you download the punch list? Yeah, you can go to seanvandyke.com and that's S-H-A-W-N, seanvandyke.com slash the paperwork punch list. Just put all that

in. You can just search paperwork punch list on Google or Sean Van Dyke, you'll end up there. And it's all over my website. It says, Hey, download your free action guide or the paperwork punch list and just give me your email address and you can, it'll be delivered to you. And I'm going to, you know, I'll give you a series of emails to follow that up, to kind of supplement that, to give you some additional training on how to get started in the Pay4Funch list. I love it. Sean, I think there's anybody from 200,000 a year businesses to 40, 50 million. And I know occasionally we'll get a couple of people that listen that are those $150

million plus companies. And we still have problems as we grow. Everybody does. They're bigger and better problems. They're bigger because they're relatively more money consequential. If you turn the knob a little bit when you're a $100 million company, you get $10 million out of it. But, you know, I think that we all, as entrepreneurs, we have this shiny light syndrome. We are attracted to, hey, look entrepreneurs, we have this shiny light syndrome.

We are attracted to, hey, look, my buddy flipped a house last month. I have enough money in my account to take it and flip a house. But it pulls away from our core. And so this year, 2020, my big New Year's resolution is just, it's not to necessarily do something. It's to quit everything else. It's to quit my distractions. It's to keep my eye deadly focused in one small single lane. And this is my core. And, uh, I talked to these guys, they're two man companies, half commercial, half residential.

They picked up the home Depot. They do a little bit of new construction. They do a little bit of retro. And I'm like, so wait a minute. You do AR net 90 on some. You've got different insurance for part of the business. You carry different stuff on the truck for other businesses. You've got different supply. How the hell are you supposed to be profitable with that? You know what I mean?

That's my question. You know, you see this at the next level because you consult a lot more people. What do you say to somebody like that that's just going 90 different directions? And the biggest thing, Sean, is they don't have any idea if they're making or losing money. They're saying, I picked up this commercial job for $10,000. I guarantee you by the time they collect it, it's out of pocket for 90 days. They've lost money. Yeah. There's some fear around that because the way that most of the construction business owners, and I don't care if it's a $500,000 company or a $50 million company, if they've grown up through what I

kind of call the craftsman cycle in my book, The Profit First for Contractors, there's a lot of fear saying, I understand when we get started, you don't say no to anything. Like we just got to get out there and get going. I get that. And I'm not saying that you're going to start day one and never lose any money. But when you get into that habit of like, okay, like you said, we'll do some residential, we'll do some commercial, we'll do some net 90, we'll do that. And all this money's coming in and you're growing and growing and growing, but you don't take the time. That's the most valuable asset any business owner has. Anybody really is the time to analyze, hey, did this make us money? If not, how did it, or if it did, how specifically did it make us money? Because when this thing gets to be four crews from two crews, it may not, because if we scale up the efficiencies,

inefficiencies that we have now, it's going to break. And we can grow this now with two or three very technically trained people, but we got to get to six people. Those other three aren't going to be trained at all. We've got to do some on-the-job training. So we've got to identify that. And the business owner's got to figure that out. The way that I explain that to my clients and how I work with them, I try to make it very simple. I call it the boring success formula. And here's what the boring success formula is. When people ask you years from now, months from now, however long, when people ask you, how did you become so successful? This is what I want to teach my clients.

Here's the formula. We just figured out what made us money. And we did that every single day. And we figured out what was losing us money. And we stopped doing that. And that's it. Like there is no secret. There is no magic pill.

We looked at what was making us money and we just did that. And we figured out what was losing us money and we stopped doing that. And we did it again and again and again and again. And in fact, the reason I call it the boring success formula, I want your business to become boring when you describe it to somebody. Hey, what do you do? I mean, I want you to have mission statement and all that kind of stuff, but for the business owner to get out of that chaos,

it should be boring. We're just excellent at this and this is all we do. And we never do this anymore. This is it. This is it. This is it. If you want to know, that's what we do. And we make a buttload of money at it. It's not like to describe it as not fun, but man, to work in a company that's making money and have people that understand what makes us money and what doesn't make us money. That's a lot of fun. So the boring success formula is actually a lot of fun to own, to operate and to work in, but to describe it, yeah, this is what we do. This is the one thing that we do. And it took us a while to get down to this level. We just do this thing. Now, like you said before, you can have a residential, a commercial, a service department, all of these

things, but then they become these divisions because we say, hey, we see this opportunity, all right, that opportunity, how can we make this opportunity. All right. That opportunity. How can we make money at it? What are the things that are going to cause us to lose money at that? Let's go do that. But we have to do it. We have to test it out a little bit and let's keep it isolated from, like you said, the core. We've got to keep it isolated from the core. Let's go chase after some opportunities. And I think that Jim Collins describes it in his books is, you know, firing bullets before you fire a cannonball. I'm all about that, man. Test, test, test before you launch, fail fast. You hear all that kind of stuff, but fail cheap too. But you cannot, you got to protect the core. This is how we make money. And this

loses us money. Let's just focus on that and do the boring success formula. And I think one of the greatest things, and I'll tell you a quick story is I used to have a controller that didn't know shit. And basically, this is all the way up to last year when we were bringing in almost $30 million. And I didn't know where the money was really going. I was assuming get into some debt, living very comfortably, expanding the business. But regardless, now I know when there's a problem. I mean, the things that are visually, I'm telling you, I never had any idea how important it is to have a numbers guy that can show you because you can't fix what you don't know is broken. And so I have this automotive shop and it's really a hybrid of, we do vehicle wraps and automotive. And I said, let's get out of the

automotive stuff because we're not specialists. And I got a buddy of mine running it. He takes on anything. And he said, Tommy, why would I turn down a hundred dollar oil change for a big truck? I said, because we don't have the oil. So how long does it take a $1,200 a week guy to go buy the oil? Let's just say two hours. Well, he's making, you know, 40 bucks an hour. So there's 80 bucks right there. And then we got to pay for the synthetic oil for that truck. We lost money. That's what you don't understand. Unless we're going to go sell the guy a bunch of other stuff, which we got to look up the hours out and out and out. You're not a specialist. So, you know, and another thing I got the page on your book, you spoke about it earlier, but are you stuck in the craftsman cycle? And this is, I'm just going to read these out because I

think this is amazing. You're busy. You've been booked for several months and you don't have any money. Number two, you don't pay yourself a salary and no, your sporadic owner's draws that your CPA told you to take don't count as a salary. Number three, you don't understand the difference between markup and margin. Number four, you are guessing at what your price should be instead of calculating your value. Number five, you get most of your work, you look at a high closing rate, and you fear saying no to projects. Number six, you tell yourself that you are investing in your company when you can't pay yourself. Number seven, you don't know how to read your profit and loss statement. Number eight, you always seem to be behind schedule, and you have to start the next job before you finish your current one because cash is tight. Number nine, you believe there are industry standards for what you can charge and you

provide a lot of free work to your potential customers instead of selling your value. Number 10, paying your taxes is a mystery and you depend on your CPA to tell you how much you owe. I love all 10 of these, but my favorite one is you believe in the industry standards of what you can charge. Instead of making a profit on your particular company, the way you run your office, the way you get paid time off and insurance and know your own bills, you say, well, there's an industry average and I can't charge more than this. That is complete bullshit. And anybody listening to say industry standards exist, go home and rethink if you want to be an entrepreneur, because that's bullshit. Here's the only industry standard for construction. Most construction businesses go out of business in the first three to five years, and the ones that don't never make

a profit. You want an industry standard, that's it. Outside of that, there are no industry standards. Again, I'm speaking for contractors. We can only charge 20%. I say, markup 20%. First of all, they don't understand the difference between markup and margin. And I didn't either. I had to learn that when I looked at the stuff, the profit and loss statement. I'm like, I don't understand. I don't understand any of this. So I dug in and figured it out. But when I say, okay, you know you you need to be charging. Like if I told you that you need to be charging like a 50% markup to 67%. Yeah, that's not margin. No, I buy something for a hundred bucks. I'm going to sell it for 150. That's a 50% markup, which

again, this is some people are going to lose them here and they'll have, they need to go look this up. If I buy something for a hundred100, I sell it for $150. That's a 50% markup. I made a 33% margin. Right, but let me explain it in simple terms. I buy everything it takes to make a pizza. Literally, I buy the water, the flour. I buy the pepperoni.

Literally, I have less than $2 into this. I market up 1,000% to $20. Now, there's $18 of margin there, but I made profit after at the end of the day, I might have only made by the time I advertised, pay the overhead, pay for the insurance. I mean, God knows I could go through 50 million, the internet, the blah, blah, blah, blah, blah, blah, blah. I might have only made 10%. And that's what nobody gets. You know what people do? They say, I saw that it only costs this on Amazon.

I go, then buy it on Amazon. You don't get a warranty. You don't get 24-hour service. You don't get a guy with a background check and a drug test. You don't get the truck to show up here with a fully wrapped vehicle. We got a CRM. There's no way. You can't go to Amazon and expect these things done. So I love when Amazon said, get it installed now. So you can buy a fan

for a hundred dollars, but it costs $200 to install it. So now you're starting to see, wait a minute, a guy has to come out here with gas on my schedule. Like I take a lot of people through how much did you be charging? And if you look at it, here's a beautiful thing. You're only in the home selling a maximum of a third of the time. So 33%. And then you've got all these other things that you're paying for. When you add it all up with advertising and everything else, you sometimes have to charge $400 to $500 an hour. I mean, depending on the industry.

Yeah. People that charge that much. Here's a question I asked, Sean. Right now, in Knoxville, who's the biggest air conditioning company out there in Knoxville? Just if you know a name off the top of your head. You can call it ABC. I don't care. Yeah. I mean, it's probably, I mean, in this area, you're probably going to be like Hiller or HEP. Okay, so Pillar. So who's the most expensive air conditioning company in the area? Gosh, I don't know. It's so Pillar. So who's the most expensive air conditioning company in the area? Gosh, I don't know. It's probably Pillar or Hap.

Yeah, yeah. It is. They're the biggest because they're the most expensive. They're directly correlated because they spend the most in advertising. You know who they are. And guess what? They spent money on branding and advertising. They spend more than anybody on that. And they're the assholes of the industry. But guess what? There's a guy that wrote HVAC Spells Wealth. He's 83 years old now. And he wrote the book and he said, I used to walk in and see it. I went home and I thought about that for a long time. And he said, well, I charge more so I can spend more on branding and advertising. I mean, it's that simple. Yeah. Well, here's the thing about the industry standards. They just don't exist. You have to have your own standards for your company. And when I mean those standards, your percentages and how you should get more efficient over time, even though

you're going to spend more money dollar wise on your expenses, as you grow your expenses as a percentage of your income might lower. They go down. They go down. Literally, they go down. I mean, yeah. So let's say I'm going to buy a garage door and let's just, you know, for, I'm just making up numbers. So a $50,000 garage door. And some guys are saying, oh, you're ripping somebody off. It doesn't mean that you can just charge whatever you want. I'm not about price gouging or anything like that, but if you can sell a garage door, a whole install and all that kind of stuff for $50,000, great. But if that gives you when, let's say when all the bills are paid, that would give you a 50% margin, profit margin, net profit before taxes, 50%. That's a huge margin. Somebody that provides the same level of quality, service, and product that says, you know what? We can run a really good business at 30%. Yeah, so they literally, they just did it for 40,000 or 35,000. And the point is, it's called capitalism. Well, that's right. Because when you have huge margins

in certain industries, then the vultures come in, everybody comes because it's a high margin sort of thing. But construction isn't like that. So a lot of construction business owners, they're like, well, that's price guy. I can't just charge. No, of course you can't charge whatever you want. The market's going to dictate that. But 90% of them aren't charging nearly what they should be to be profitable. I just say, become profitable first, then test the waters with how high we can take it.

And like you said, that's where the marketing and the branding spend more. You're going to make more when you have a system for profitability in place. And so you're going to find out that, you know what? Hey, we used to make 50% margin, but now since we've shown the industry that you can make a lot of money, now there's a lot more competition. So things start to get tightened up a little bit, but there's always going to be a company that can say, you know what, we can get by on less margin and still deliver the same quality. And that's actually what you want. You want that level of competition.

But what I find is construction business owners don't understand the math. They don't understand the numbers. And I get it, too. It's a chaotic sort of thing, the way that they've grown their businesses. But when you figure it out and you see the math and how it works and you're like, hey, we have to charge 70% markup because these are our expenses and these are our costs. Here's how we can remain competitive. And we got to invest in this company to grow and get the right people and the right technology so we can stay ahead and lead the industry or lead in our area or we want to expand or whatever.

This is what we have to charge. And then people say, you're too high. You go, no, we're not. We're priced exactly where we need to be to make a profit. That's the standard that we set. And to be here when you call us in three years. That's right. Here's another mistake.

I'll tell you, it's funny because most small businesses, they go, I know where I'm going to save the money. I'm going to work out of my house. I'm going to get my son to do the work for me. I'm going to make my wife answer phones on the weekend and I'm not going to take vacations. That's how we're going to grow above the competitors. Rather than saying, I'm going to buy the nicest computers.

I'm going to have the nicest facility. I just drove up here before like a half an hour before our podcast. And I just bought a big buck hunter you know the game where you shoot where you go to the bar yeah and I've got a golden tea here I've got the pinball machine I want to make this a place that people love to come and you know what my customers paid for that but guess what now that everybody comes here on a Monday they show up early they smile on the phone they're excited they're happy and it's like you said earlier it's the experience that's the difference.

Yeah. Oh, yeah. We all pay for experience. Everybody. Now, some people don't want that great of experience. They want to order it off Amazon and Amazon delivers a certain experience. But like if you're thinking about it in terms of that, like you're in people's homes. It's very personal.

Like there's a huge amount of value to be sold there to somebody. Like you said, background checks. We've been around. Here's our network of other professionals that we work with. You see our advertising. You see our cleanliness. You see our office, our shop, our whatever. All of this is here to support you because we want you buying from us next year. We want all your friends and all your family to buy from us. And if I've got my wife's cousin answering the phones in my house when I call up, yeah, maybe you're cheaper, but man, you don't return a phone call. I need this thing fixed now, or I want to get on the schedule now. I'll pay for that. We all do. Now, some people are like- People will pay all day for time.

All day long. All day long. And the other thing is you described when you read off of those things about the craftsman cycle. Here's what it, when I get into the book, what all those 10 things really boil down to is you start off, the cycle starts off with pricing work. So when you price work, when you're guessing and you're not pricing work to make a profit price work, when you're guessing and you're not pricing work to make a profit, but you do really quality work and you really take care of people, when you're underpriced and you do great work, you get really busy. So that's the second. Now you get the work that you just priced and you think it's great. I just priced some work. Now I got some

work. Great. I'm in business. Then you have to go produce the work. That's the third part of the cycle. And that's where money flies out the door. And you realize, holy crap, where did all the money go? So then that leads to the fourth part of the cycle. The fourth phase is now I got to go find some more work and you go find work out of desperation. So you drop your price and then you get into the cycle again. It repeats price work, get work, produce work, find work. Oh crap. I can need a price work. I got some more work. And it just, and then you look up seven, 10 years later and you don't have any money. Like you said, you're working out of your house, whatever your relationships are destroyed. And then it leads

into the stereotypical, like the construction industry just isn't for you but it is one of the most entrepreneurial rich environments for anybody but you got to know the numbers you got to know what that value is and when you can when you can do that then man the world just opens up and most of the time when i talk with construction business owner i hear this all the time and some of your listeners might be thinking this too. And they're saying it right now. They're like, well, Sean, you guys are talking about the money

and it must be nice and blah, blah, blah. But I'm not in it for the money. Okay, if you're in a business and you're not in it for the money, and I'm not talking about greed, I'm talking about effectiveness. Money is a measure for effectiveness. So if you're saying, well, I'm not really in it for the money, probably because you never made any. So if you're saying well, i'm not really in for the money probably because you never made any

So if you're not in it for the money do this because money is a measure for effectiveness Go run a very profitable construction business and then give all the money away It's much better than never having it in the first place. The effect is the same Hey, i'm not in for the money. I'm going to give it all away, but go make it first and see what happens to your life, your employees' lives, and the community that you live in. If you're really not in for the money, I'm all about that. Great. Don't be for the money, but money is a great measure of effectiveness. When you're effective with your customers, when you're effective with your employees, the money just comes in and then you can do whatever you want to with it.

So, you know, I have this general rule that I tell people, if you're getting more than 70% of your bids, not of a broken garage door, not of a broke, if they're calling you out and they're broken leaky pipe, you should be getting 95% of them. That's right. But if you're getting more than 70% of your new bids, raise your prices. Because you shouldn't be getting more than 70%. That's right. Why work twice as hard to get the BS? You know what I mean?

And I'm telling you, there's people that are giving stuff away all the time. And I've listened to podcasts, even in the garage industry. And it's so funny. This guy that's been in the industry forever says, you got to be reasonable with where your competitors are at. I'm like, well, if you're apples to apples all the time, when you're selling the exact same product and it's just a commodity at one point, I'm like, then fine. Yeah, maybe that's true.

I can't sell. Like if I'm a car dealership and I've got a Dodge Caravan or whatever, the same year, same make and model, I can't charge way, way, way more. But we're in service. It's how we show up. It's a uniform. It's a smile. It's footies when you walk in or foot protectors. There's all kinds of things that make a difference. Warranties make a difference. I got this study that says price is the number nine thing people think about. People always say, well, you don't understand. We have too much competition. Here's what I always hear, Sean. There's way too much competition. There's 500 garage drug companies in Maricopa County. I still don't think there's enough competition. Bring 500 more. I'll still dominate. Bring 10,000. I don't care because I'm better. So the difference is

everybody says, well, you don't understand. It's not like that where I live. I'm like, well, wait a minute. I'm in 10 states. I'm in 20 markets. I don't give an excuse. My same guys go to the same markets, do the same tickets. We still make the phone ring the same as any other market. You're lying to yourself. See, until you can stop being delusional with yourself, you're never going to be able to help your customers and your internal customers, which look up to, which are your employees. And if you keep giving them a way out, you're never, ever, ever going to be successful. Yeah. I just say, hey, just try it once. Just try it once when the phone rings, but this goes, gets into developing a process. It doesn't have to be

super hard, but develop a process and just try it once. I don't care what industry you're in, whether you're a service trade contractor, general contractor, whatever. When someone calls you up and you, assuming you've got somewhat of experience, you're not in the startup phase. You've just gone from side job to your first real job for your business. But even then, you know what things cost. But just talk to that person on the phone. Ask them to describe what it is that they need. And you know how much that costs. Just ask them. Just ask them. Okay, sounds great. This is exactly what we do. But let me understand,

what are you looking to invest in this? And- Oh, that's a great question. We all know that price is number nine on their list emotionally, but it's the first thing they will use defensively. But you're a professional. That's what I always say is like,

when you have this conversation with a potential customer and they say these things to you, it's the first time they've ever had that conversation. It's the 50th time this week you've had the conversation. You should know what questions to ask and what answers you're going to get. And when you know that, you script it out. Now, I'm not saying you're robotic with it or whatever, but you direct them exactly where you want them to go. And we say, hey, we do those type of garage doors all the time. And in that neighborhood, because I asked you where you lived and your problems and identified some pain points. See, I'm not talking technical stuff at all. I'm talking emotional stuff. Like, why do you hate your garage door now? What problems does it give you? What kind of security

would you like? What other things? Tell me more. Tell me more. Tell me more. And I know exactly the neighborhood that you live in. I know the style of house. I know the problems and whatever. Then yeah, people that call us up are going to want a $25,000 package. I just know that. And I'm going to ask you, hey, by the way, based on what you described, what are you looking to spend? Oh, I don't have a budget. Great. No problem. Because we're experts and we're professionals, we recommend a $25,000 package. Is that what you'd like to spend? And then they immediately say, no, we're not going to spend that much. Great. That's awesome. Because two seconds ago, you had no idea what the budget was. Now we know it's not $ listen, your budget we finally got there is $10,000. Okay, we're not a good fit for you.

That's just not going to work out based on what you described. But here's the problem. Someone will tell you that you can have that for $10,000. And if they tell you that, they're incompetent or they're ignorant. Now, we're not going to be able to do it for you because we said it was a $25,000 thing. But now I'm concerned for you. Let me give you some value. Let me give you some questions to ask. And let me help you do some research. And if you have any problems, just please call us back because it's not about the sale at that point. It's about you becoming an expert. So you can do all this. People that are listening, they're thinking like, wait a minute, I can just ask the budget question.

And here's another thing, by the way, never in the history of any construction company, going back to ancient times in Egypt or whatever, never has any customer ever had a budget that was too high. OK, so when you ask the budget question, they're always going to be too low no one ever says oh i've got a hundred thousand dollars to spend on this garage door oh great we thought it was 20 it's just not going to happen okay so just understand but when you know their number's going to be too low then you just gently walk them through and just say here's our process here's what it is And in order for us to come out or whatever, unless you, you know, I mean, if you're very specialized, you can say, you know, we have this product. I mean, you should have a menu of options that you can just price

right there, but gosh, if I got to go out, Hey, like for, especially for a service call, I don't know what it is, you know, 125 bucks to show up and that gets you 45 minutes and any standard, I don't know, pieces or parts that are on the truck. And then it's $90 an hour after that and whatever in materials. Great. Let's do it. You should be charging for your professional service. You got to know, like right now I know, on average, I've got all this data. And the bigger I get, the more data I have,

the more my numbers. It's crazy that payroll's within 5% every single biweekly. And I'm talking hundreds and hundreds of thousands of dollars. I'm talking $400,000 biweekly. It's crazy. But it's within 5%. And what's crazy about it is it's crazy how these numbers work when you understand them. And I can tell you where we need to be. And I can tell about it is it's crazy how these numbers work when you understand them. And I can tell you where we need to be. And I can tell you that I love the guys that go out there that offer more. You're much better at selling face to face than you are over the phone. And I like that question. How much were you looking to spend when I get a no? Because one of the things that I've learned, Sean, is a lot of people like choices and they say good, better, best. I flip that on its butt and I go best, better, good a lot of people like choices and they say good, better, best. I flip

that on its butt and I go best, better, good. And I start out with the best and I shut up, but I anchor at that level. People go, whoa, that's a lot more. Or people go, okay, that's fine. But the thing is now the best, best, better, it looks really good. And then they go, whoa, I probably shopped. I know I can get it better. Well, we've got the good choice. You just told me you're going to stay in the home another 15 years. You told me you wanted to be safe. You told me you wanted to last. You were worried about Russ.

You're worried about your curb appeal. You knew 102% of your ROI, the smile of your home, blah, blah, blah, blah, blah. But the point is, when I told my guys to go best, better, good, some of my not so great sales guys ran out of their best parts. And they never have before. They said, oh my God, we need to come back so great sales guys ran out of their best parts and they never have before. They said, Oh my God, we need to come back in. We just ran out of our best parts. And I said, good, this is amazing. And it's so funny because the same stuff you coach on is, let me understand this. You want your door to be safe. You want to make sure we don't leave any nuts and bolts. You want to make sure we're available when you call us, if there's any issues

at all. You want to make sure that there's someone that comes out right away. Like these things are more important than having Joe Schmo or Melvin that his butt crack is showing when he's fixing everything and he's a predator. That's the last person you want in your home. But people don't realize this. And I don't understand. I've seen guys brag about working from their home. And, hey, I don't have to give my guys any of that crap, any of that insurance. And they laugh. Like I don't have to give my internal family anything.

I don't buy them insurance. I don't feed them. I don't do anything good for them. I'm so much better than everybody. I'm like, wait a minute. You're bragging on how shitty you treat your employees. Yeah. You're bragging because you get to work from your house. But here's one thing I will say as I work with clients of all different sizes, starting out in the growth period and then bigger companies too, you have to sell whatever you've got, right? So if I'm working out of the

house, I'm not going to use that as a value prop. But what I'll say is, we're a small company, so you get personalized attention, right? Oh yeah, never say yeah, yeah what I'll say is, you know, we're a small company, so you get personalized attention, right? Oh yeah, never say yeah, yeah, I got you. Right, so I'm going to sell that company, because that's what they are going to get. I don't have a team of 15 people. I am the salesperson. I am the estimator. I am the project manager. I get that. You've got to sell that, and for the right clients, that's going to be very important. If I'm a $30 million company, I've got a sales team, I'm in 10 states or whatever, I'm going to sell that too. And you're going to find ideal clients in both situations that want to pay a premium service for that small company with the white glove treatment. You're also going to find somebody that will pay a premium service for the big company that interacts with

the salesperson, to the manager, to the office staff, to the warranty folks that follow up, and then all of the other stuff. You just have to learn how to sell what it is that you have. And like you said, it is so important. If you are running a business and you've never gotten any sales training, stop right now and go buy a course, get a sales mentor, something. Now there's a bunch of bad ones out there, but do some research. You need sales training because like what you said, price anchoring, that's how we buy. There was one thing, I even put it in an article that I wrote one time, you know, the easiest way to sell a $2,000 watch, put it next to a $10,000 watch.

Oh yeah. Right. But you have to price anchor. You have to talk about pain points and emotions. Do not talk about technical stuff. You'll get invited into the specs and what it is that you do, but you have to, and it's not natural for a technician. It's not natural for somebody that knows everything about your business. Cause we just say, if I just give them all this really good information, then I'll just be proved

as the smartest person and the most trustworthy. And you will lose business to someone that is just a better listener because your potential clients felt a connection with them. They may produce a crappier product and charge more than you do, but it's because they know how to sell. Now, I'm not talking about selling, like learn to sell to manipulate people. There is some danger in that, but good salesmanship is, here's the way I describe it, is saying, if you believe in your product or your service, then you are obligated to get as much money from your potential clients as possible so that you can stay in business and continue to serve them. It's not manipulation, it's obligation.

I am obligated to get you to spend as much money with me and give you the best service, the best quality and the best product because someone else will take that money and not deliver the same quality service or product that we can and you'll waste your money so I am obligated to be the best salesperson that I can be and also understand stop selling when they're sold oh yeah shut up shut up just shut up let them write

take the order just take the order And when you get to those ideal clients, don't offer them a discount. Don't offer cash back. The reason that they're buying from you is because you are more expensive. Certain clients want to tell people, we have the $100,000 garage door. Sell them that.

And you may need to offer a discount to somebody else to get them up there or get them into your funnel or whatever that is. But stop selling when they're sold. You know, we're examining right now. We're going over 50,000 customers and we're doing this thing called multiple regressions. We're understanding male, female, age of customer, age of home, move-in date, average income, credit card score, all these things. How many garage doors do they have? What part of town? We're calculating data because, see, I'm marketing to the affluent. And when you have a budget, you can say, look, if my average customer is spending $1,000 and I'm at a 10% marketing fee, I can spend $100 to get that customer. Let's say it cost me $1 to do a really nice handwritten letter. I can send 100 of those letters in the course of two100 to get that customer. Let's say it cost me a dollar to do a really nice handwritten letter.

I can send 100 of those letters in the course of two years to acquire that customer and still be great. So understanding the numbers, it's dangerous. It's like, oh my God, I'm like a ninja now. And those people are shooting a shotgun saying I've got Craigslist, I've got Groupon. They don't know the sources. They're just shotgunning it out

and hoping and praying for success without a strategy. You just described the boring success formula. We know in this area, people between this age and this age with this median income will buy this type of product. And we know that this is the language and the copy that works for that. Do it every time. It's so much. Do it. Yeah. And I so much. Just do it. Yeah. And I heard, I think it was Seth Godin that said one of his latest books,

I'll probably get the title wrong. It was, this is marketing or something like that. But I love what he said in there. He said, when you get the right marketing message and it gets into figuring out who your client is and all the data that you were talking about, when you figure out what works as the business owner, don't get bored with it. Don't get bored with that message when your sales team gets bored with it. Don't get bored with it when your other employees, your

technicians get bored with it. Only change the message when your accountant gets bored with it. Meaning when you made so much money that you can say, okay, hey, let's change something. Let's play around. Let's try and do something else because this is where, again, the boring success formula, but you got to know that. Now, people that are listening saying, okay, well, that's nice. I don't have a CRM. I don't have all that data. It doesn't have to be that complicated. Just knowing, like you had said before, your closing rate. If it's 70% or whatever, then you need to raise your prices. How much? I don't know. Test it out. 5%. No one's going to notice 5%. When you get to 10%, some people will

drop off. But now you're making so much more doing the same amount of work. And then you just start honing in on that. And then you start figuring out, you know what, when we're at this price point, we get some more no's, but every no actually leads to a yes. You can start predicting it and calculating it and then tweaking things. And then like you said, several minutes ago, you know, it's like just turning on the faucet. It's like, hey, let's get some more drips out of that. Let's tweak this a little bit because we know that it works. But none of that is possible without time. There are business owners out there right now. And this is, I don't know if it's controversial or whatever, but I like to say it because I want to paint the picture of those business owners out there is if you own a construction business, part of your job,

you're the CEO, whatever, part of your job is to sit in your office with your feet on the desk thinking. If you don't put that onto your weekly or monthly or quarterly calendar to think about the business, and we're not talking about doing stuff, we're talking about deciding stuff. This is sitting, thinking, planning, strategic thinking about your business because that's your job because nobody else is. Nobody else is. All of these things, well, how do I get the data? I wonder what my ideal client would be. I wonder what areas we should be in. You cannot do this when you're running around putting out fires, wearing 17 different hats in the company.

And it doesn't like 15 minutes a week, start there to say, you know what? I'm going to block off this time. I'm going to think about my business. What worked last week? What do I think will work next week? Write it down and start executing on that. And you'll realize that will give you the permission to start saying no to more things because you'll have thought about it. You use a different part of the brain. So those of you that are listening out there, next week, put it on your calendar and I'm giving you permission. And Tommy is giving you the same permission because I know that he does that too. You don't get to have a $30 million plus company without sitting back and thinking without distraction about where do we want to go, what works and what doesn't work.

So put your feet up on the desk and think. And even on top is prioritize and say, wait a minute, I don't have a CRM. I don't know my closing rate. I don't know what my tax are going to be. I have no freaking clue on any of this stuff. The one thing I think, smaller companies when you start out,

and I was one of them, trust me, dude, I don't even know where I would start with Matami 10 years ago. But what I can tell you is figure out what the biggest thing is today and learn. I've learned a long time ago from a consultant, have your top five things and don't, don't bring anything else in until you finish those top five. That's absolutely right. And I didn't know what I didn't know. All I know now is when I get to look at numbers and these, call them bean counters, kind of whatever you want, but they're really, really, my guys are really good now at dissecting data and having accurate reports and say, holy crap, I closed four markets down last year. It was embarrassing to me.

People were like, are you going out of business? I'm like, no, we're actually more probable than we've ever been. But to be able to focus and say we didn't have the right people in the right place at the right time, and these are a drain on energy, focus, money, everything. So we closed those down, and we became uber profitable. We started to invest, and we got out of inventory. We took away all the distractions, and now we're ready to start blowing up again. One of the things I really wanted to dive into, I don't want to take up your whole weekend here, but.

Oh, it's fine. I love this stuff, man. No, this is great, man. This is so much fun. This is the best. This is what I live for. So profit first, sales minus expenses equal profit is the conventional way of thinking.

But profit first says sales minus profits equal expenditures. Can you walk me through that mindset of how an entrepreneur can change from the historical way of thinking? Yeah, so it really plays into also what we call Parkinson's law, the law of induced demand, meaning that demand increases to meet the available supply.

So even before we get into the financial stuff, I want your listeners to think about what you do every morning in the bathroom with a tube of toothpaste, meaning we go in, brush our teeth, we grab the tube of toothpaste, we got a full tube of toothpaste, we just squeeze and we go. We don't even think about the amount that we use. And we go throughout our life or throughout the weeks and months, and then one day it happens.

We're out of toothpaste. So what do we do? We go get another tube. No, you don't go get another tube. You roll that tube of toothpaste up. Yeah, you squeeze it all out. Yeah, you squeeze it. And I always say, you smash it on the counter,

you take the toothpaste and you iron it out and you get a little bit more. And that little bit more is enough to get by for that day. And in fact, you might do it with a tube of toothpaste, you might do it with a shampoo bottle. You might even do it with a roll of toilet paper, but we don't need to go there. Anyway, what I'm saying is you can get by on less.

When you have a full tube of toothpaste, you don't even think about it. Same thing happens with our bank account. When all your money is in one bank account, you say, oh, whew, I can make payroll, I'll go spend it. Same thing happens with our bank account. When all your money is in one bank account, you say, oh, I can make payroll or go spend it. In fact, I can buy some tools. I can do some other things, whatever. Then when the bank account gets low, magically two things happen. You get frugal and you get innovative, meaning we figure out how to cut back and we figure out how to get some more money coming in. If we can do that, being frugal and innovate

and get by, well, that's how we need to operate every day. So that is what we're battling here with Profit First for Contractors is that Parkinson's law. We want to make sure that our bank accounts are set up. So we're going to set up multiple bank accounts so we don't have a full tube of toothpaste. We've got multiple bank accounts so we can see exactly how we want to serve the business. So back to the whole number crunching part, sales minus expenses equals profit. That is every accountant will tell you that's how your business operates financially and mathematically that is correct. But the problem is it doesn't match our human behavior. Meaning when you get tight on cashflow as a business owner, you don't call your accountant to tell you how much money

you have. What do you do? When you get tight on cashflow, you know, if you're like me, even my personal life in the past, you know, you're not going out to a nice dinner. You're going to go shopping. Yeah. But where do you go to find out how much money I have right now today? You go usually in your bank account. You log into your bank account and say, do I have money? Oh, I got some money. Good. I can go out to dinner. Right. I don't have money. Hey, it's rice and beans. Right. So profit first for contractors says, listen, what we're going to do is the money comes into the business sales. Then we're going to set aside our profit first. We're going to set that aside in a separate bank account so that we don't touch it because that's the most important aspect of our business. That's why we're in business. And then the money that's left over, we're going to use to run our business. So sales minus profit first equals expenses. And if you don't have enough money to operate your business on what's left over, you don't

steal it from your profit. That's the reason that you're in business. You change the way you operate. So when people implement profit first and they set aside this money, and it gets into the book, there's actually five foundational accounts, profit, tax, owner's compensation, and operating expenses and income. Income is where it all comes in. It's just a holding account, but we set up those different bank accounts. So in an instant, you can look and you can see how much money came in in the past two weeks. I look at my income account. Oh, we've got $300,000 that came in the past two weeks.

And I know as a business owner, I need about $400,000 every two weeks to come in. So I don't need an accountant, a bookkeeper. I don't even have to run a profit and loss statement. I know that in general, my business burns through or whatever goes through in about $400,000. So we're a little bit light these two weeks. So let's get the team together and figure out what we need to do. And I log into the bank account again. And now we're at $500,000 over the past two weeks. I know my business operates on about 400,000. I can say, hey guys and gals, what do we do right? Because we want to replicate whatever we did over the past two weeks. You can do all of that with your bank accounts if they're set up this way. So that's what Profit First in a nutshell is. It is making that full tube of toothpaste,

artificially smaller tubes of toothpaste, so that when we can say, you know what, here's my profit, I'm not going to touch it. And when I make a profit, I've got an account for taxes as well. Because man, taxes are complicated. But I know that last year, the company paid X amount of dollars in taxes. And that was a certain percentage of my revenue. Meaning every dollar that comes into your business, you need to, or you will spend it on profit, tax, paying the owner's salary and operating the business.

It's that simple. And people say, well, Sean, that's not how you do accounting. I'm like, you're absolutely right. Private first for contractors is not accounting. It's cash management. Listen, when money comes into the business, you have to account for it.

Meaning if you don't account for it, you could potentially lose a lot of money and go to jail, right? So there are laws that says this is how you have to account for your work. So the money comes in and we account for it through bookkeepers, accounting software, and generally accepted accounting principles. That's called GAAP. That's sales minus expenses equals profit, all right? We got to do that. Once it's in the business, you're the business owner. You got to manage it. It's your responsibility.

And then when we spend the money and it goes back out of the business, we have to account for it again, make sure that it's plugged into the right places and all of that kind of stuff so we can pay taxes and do the things that we need to do. But while it's in the business, you're the business owner. You cannot turn that control over to a CPA. Now, a CPA, you got to understand, good ones are going to help you run your business. And they're just like any subcontractor. They will make you money. Bad ones will give you technically correct tax advice, but it's horrible business advice.

Hey, a $35,000 truck, so you'll save $5,000 in taxes. And then I say, do you have any money? No, but my accountant said it'll save me some money. Technically, they're correct. But you don't have any money. You're not running a profitable business. So you have to understand that you are the one that are in control of the numbers. You influence.

The business owner influences the numbers. The accountant, the bookkeeper, they just report the numbers. That's their job. Now, you can certainly have an accountant or a CFO or a controller in your business as an employer that understands a little bit more about the details of your business. But still then, they are wired for sales minus expenses equals profit. And if you think about it, it's saying money comes in, then we spend a bunch of money, and then whatever's left over, we call that profit. And that is a business that is surviving off the leftovers. And what Profit First for Contractors does is it flips that equation a

little bit, sales minus profit first, and then you operate your business on what's left over, what's remaining. And if you can't do that, you don't steal it from your profit. You change the way you operate. You know, the simple way to say that is I have a lot of technicians right now that make six figures. They don't own a house. They don't own a nice car. Their lifestyle is super nice. They do things all the time. They eat out, they go drinking, they do their thing. And if they simply said, your house payment comes out first of your paycheck, it's divvied up. We automatically pay this before it hits your account. Just like your retirement, just like this, just like this. I know people that can't save a dime that have a ton of money in their retirement account because the work takes it out and they turn a blind eye to it. That's the secret of profit first, I think.

The secret is in the simplicity. It really is. People say, well, Sean, man, what's this guy selling? It can't be that simple. No, it is that simple. Every dollar that comes into your business, every dollar, some percentage of that has to go in these different categories. And you can make it, you can customize it.

So, you know, you can have multiple bank accounts besides the five foundational ones. But if you think about that, if you spend more than 100% of the money that comes into your business, you're going to have problems. And it happens all the time. And Parkinson's law, for me, is a lot more than just that. You know, Parkinson's law to me means you get a big warehouse. Guess what happens over time? That warehouse fills up because you say, I've got the space. I've seen it happen in my life over and over. The money's there, you spend it. The space is there,

we use it. I mean, it happens all the time. And knowing it is half the battle and understanding your numbers because you're right. We can go out tonight to a $200 meal with a nice bottle of wine or we go to One Buck Chuck, pick up some really nice steaks and eat for about $30 and enjoy a meal together. And people do this all the time. They just don't realize it. They take their family out to eat. They go to those nice amusement parks and all of a sudden, hey, we're not doing anything this week. Rather than saving up, the most powerful thing in the universe is compound interest when it's working for you or against you.

If people use credit cards, it works against them. People that are buying assets in a house, I've made over $500,000 on my house in Scottsdale so far. Great. I'm excited about it because they let my money work for me a long time ago. And I'm not better than anybody. I don't think I'm better at all. I really don't. The thing is, I learned this lesson a long time ago. And when we're talking, I love the fact of a budget because here's what happens. I looked at some numbers that my amazing accounting division set up. And they said, Tommy, here's what's stealing from our profit.

Our marketing dollars were 17% of this market. And then we looked at one with 19 and 21. Those were our worst. And I said, okay, this next year, I developed this in the last week. We're not going to spend more than this percentage. So what happens when we only spend that percentage? A couple of things happen.

The technicians know we're not getting any more jobs. So they take their time and they start maximizing each opportunity. I also got to get very, very frugal on my marketing and say, I can't spend money on pay-per-click on this search term because it's eating up all of our budget. So I need to be smarter. And I also need to make sure I market to be affluent where we can actually close deals for higher margin. And when you start thinking about it, all of a sudden, here's my question. I can do 80 million. I guarantee you I can do 80 million if I wanted to make 7%. I can get that number. I guarantee you this year, 2020, I get an 80 million at 7%. Or I can hit 50 at 15. Now, which one makes more? I make more money at 15%. I make 7.5 million.

Then if I was at 7% at 80, I made 5.6 million. Even if the cash was the same, that's what I say too. Like for a small business or whatever, if you're a $500,000 company and you're making 6% net is better than a million dollar company making 3%. It's the same cash, but the headaches are quadrupled. The risk is so disproportional. So it's not about growing the top line. It's always about growing the bottom line.

And if you get really good at growing the bottom line, it pushes up the top line because you get so many opportunities. And exactly what you were saying is when you look at your budget and you know what these numbers are, and that's what we talk about in the book, Profit First for Contractors, is we say you've got to trim the fat, but you don't cut out the muscle. Marketing to the affluent, that's the muscle, man. In fact, we might even bump that up a little bit. We're going to build up that muscle, but we're going to take it from this 2% or 3% over here that we're just like, this is fat. This isn't working, this pay-per-click or whatever. We may come back to it later, but that's where a lot of construction business owners will find, they'll say, oh, well, when should we hire somebody? I can't afford this. I'm like, whoa, whoa, whoa. The problem is

with you right now is that you can't do everything. So you need to hire a bookkeeper. You need to hire an administrative assistant. I know you want another lead carpenter in the field, or you want another technician on the wall or, you know, it's somebody else, but you need that support. You need some muscle, right? All of the other stuff is going to create fat for you. Get that muscle in the office. Get that muscle in the CRM. It will make you money. You know what's so funny, Sean, is a lot of people tell me I made $250,000 profit last year. I said, what did you pay yourself? They said $250,000. That's what I told you. I said, well, you understand that you're working. Did you sit in Hawaii when you made that? Because it would

be profit if you never did anything in the business at all. But how much is it going to cost to replace you? That's right. I would say like, that's right. You get hit by a bus and you can't work. That $250,000, that's your profit. That's also what you paid yourself. It's not really profit. Can you hire somebody to do all of the stuff, work 70 hours a week and all of that kind of stuff for $250,000. No. Probably not. Let's say you could. You probably have to hire two people. Okay, fine. You got two people. And let's split it down the middle.

They each make 125 grand. You got a CEO and an operations director or whatever. Great. You still didn't make any profit. Isn't that interesting? It's interesting, the mindset. Yeah. Well, it's just, they don't know.

And I was the same way. It's like, oh, I paid myself. Is that my profit? And you've just got to say, well, wait a minute. Profit is after all the bills are paid. And what's so confusing about the financial stuff, and this is where we really break it down in Profit First for Con.

And I promise, if your listeners go and get the book, they will understand their financial statements for the first time. Even if you got to kind of read a couple of chapters a couple of times. I'm not saying that because I'm a fabulous writer. talking about profit, and I'm the owner of the business, and I work in the business, I got to think of myself in the business as an employee. Correct. And the owner receives dividends and those dividends are paid out of the profit. And so that's why I say, I don't know if I mentioned this in the book, but I've said it a lot. Like if you're confused about the whole owner working in the business and how you pay for it and whatever is going to a McDonald's and asked to speak to the owner, they won't be there, right?

That store will be full of a bunch of employees that are working there. The owner could be sitting on a beach somewhere and that McDonald's sends them a check. And it's the same thing as if any of your listeners own stock at all. I don't care if it's in a mutual fund or whatever. They get a dividend check from that company. They own a little piece of that company and they didn't do anything other than give that company, you know, they made an investment in it unless they sit on the board or whatever, but they got some money. And for your listeners that say, oh, well, I'm investing in my company. If you've ever received a dividend from any stocks or whatever in any investments, I guarantee you

didn't send it back to them and said, you know what, Apple, I appreciate this money. I'm going to send it back to you because I want to plow it back in. No, you go buy more stock. So people that are saying, well, I'm investing in my company. That was one of the things on the list by not taking a salary. I'm investing. No, you're stealing. That's not how an investment works. And so you've got to understand that there's some confusion around the financial reports, what profit is. And even at the bottom of the profit and loss statement, that's not all the money. There's more money that's spent in your company that doesn't show up right there. That's why it's confusing. That's why when you look at the bottom of the profit and loss statement and you see that number, then you go

check the bank account. The numbers never match. Why? Well, because that's a financial report. The bank account is telling the real story. And you got this crazy thing called the balance sheet and some money is existing over there too. And your accountant doesn't know how a construction company makes money, but they do know how to limit your tax liability. So it gets very confusing, very quick. And because you don't have time, then you just throw your hands up and say, well, the accountant's got it covered. And like, I think you had mentioned before, and I've had other people, oh, it breaks my heart when they say I had the financial person that was in charge of all of this kind of stuff. And I didn't have time to look at the reports or

I just, I thought it was all handled and they find out there's hundreds of thousands of dollars missing. Oh man. But it's the owner's fault typically because they say, I thought the money was there to spend and I'm guilty of it. And it's actually, it crushes you. It's so funny. We buy stuff. We say, we got enough money. Now we can finally buy those machines. The machines don't do anything to, to really help that this sits there. Like when this economy, it's hard not to be healthy. I'll tell you that. Yeah. And people are spending money like crazy, which is a good thing for the economy to put in. But you got to stockpile some money for the business. Because for me, I look at money in the business as a chess game. It's like, I got my king, queen, and bishop on the table. The whole point of that is when the economy turns a

little upside down, I could buy companies for pennies on the dollar because we get a lot of money in the bank. And I think acquisitions is the secret key to growth. I really think the further I get along in the business, acquisitions is, you know what it does? I'm buying all of your customers. It's the best thing ever. Now, of course, I'm buying your employees too, but here's what I'm doing when I buy your company. This is amazing. This is something I learned last year, Sean. Not only am I buying, I'm giving you a better multiplier. I'm giving you a better system. I'm squeezing more of that juice than you've ever squeezed before. I'm probably letting go of staff that we don't need because it's, I'm going to make you uber profitable, but here's the coolest thing. The day I buy your company, Sean, you're probably a three multiplier. I'm a seven. I just created four more times what your EBITDA is. Four more times you're earning by me buying your company, which means if I bought, you were 300,000, I bought it for nine,

it's worth 20, 21. Yeah. 3,000,021. So I bought it for $9,000. It's worth $1.2 million more. And it's arbitrage. And it's crazy because this is the kind of stuff that I love the listeners to understand because when you build a valuable company and you start doing acquisitions, there's money created that doesn't exist because you're a better run company. You've got a better multiplier. You've already negotiated better. You have a better CRM. And when you can build that, it's amazing what comes out of it. I want to talk about one more thing that you wrote in the book. Yeah. Because I could talk to you all day, man. Yeah, this is great. You mentioned in the book, one of the things was raise your prices. And I've been on the podcast. People heard me say I'm raising my prices. You know what happens with a vendor?

Sean, I get sometimes 18 price increases, metals going down in China, this, that, the other. Why don't we raise our prices? We've all had vendors do it. So I'm raising my prices again next week by 3%. And it's a couple of buttons on my CRM. And you're a big fan of raising prices. And I'm a big fan of raising prices too.

Every single year, the cost of living goes up. Tell me a little bit about raising prices and how I can get more listeners to do it. Well, again, it's going to be very hard to raise your prices if you don't have confidence in your numbers because you are guessing. And when there's a little bit of pushback, which is great, I love the pushback because it invites me into a conversation that gets to talk about, I get to talk about why we can charge more. I don't want to come out with that in the sales process or whatever, but people expect that everybody else's prices are going up. And so, yeah, you got to raise your prices, but you got to have the confidence to be able to explain why. And when you do, just understand you're being invited into a conversation. One of my favorite questions during the sales process, especially

when you're talking about numbers, when a customer says, well, who the hell do you think you are? They're pissed off, but I love the question. I just got invited to explain why we're better than everybody else. And I can do that confidently, not arrogantly, but confidently. Well, let me tell you a little bit about it. Here's why we need to raise our prices. And I list them. Materials are going up. Demand is up. We want to be able to continue to attract the best people to work for us. And we're also offering our people benefits. I don't care what it is. Whatever the reason is, just tell people that. Be confident with it. And if you have the product, if you have the service that's delivering an experience, your best customers will applaud it. I guarantee there are people, there are

listeners out there right now that if they went and raised their prices by 5% to their best customers, their best customers might not say it, but their best customers will be relieved. Especially if you're marketing to the affluent and these ideal customers, they know you should be charging more. They don't wanna tell you to charge them more, but when you charge them more,

they have a sense of relief like, oh, good, he's finally getting it. Like he's going to be around next year. Good. I'll keep recommending them because he's finally starting to charge. Cause they all run businesses too, or they all have had price increases. Everybody has. This is the truth. This is realistic. You know, I had five vans one day, five vans, Sean, broke down in one day. So that means five guys running five jobs is 25 customers we didn't show up to that day. We rerouted a couple, so let's just say 22. 22 unhappy customers because we had shitty-ass vans.

Now I can brag about their brand-new vans with a warranty that can fix them. There's no problems. There's no trannies going bad, you know? Yeah. The other thing too is the business owners just have to realize like all of those other little costs that add up, like your customers pay for that because sometimes there's nothing you can do. Like if you know your numbers and you realize like, hey, we spend two to 3% of our annual revenue on warranty.

Guess what you add into your pricing? Two to 3%. Customers pay for everything. They pay for everything. They pay for your taxes. They pay for everything. They pay for your vacation personally as the owner. Everything comes down. It takes time, but it gets pushed through. So all of a sudden, if some new legislation changes, all of that gets passed on to the consumer. They put a new tariff on fruit. Guess what? I pay for it when I go to the grocery store. That's what nobody understands.

I feel like one of the things you mentioned is you hate the fact, your goal in life is, I couldn't do anything else, so I ended up in the trades. I couldn't do anything else, so I ended up, isn't that shitty? Shouldn't we say we're blessed, we were fortunate enough to be in the trades. I couldn't do anything else. So I ended up, isn't that shitty? Shouldn't we say we're blessed?

We were fortunate enough to be in the trades? Yeah, well, that's the perception. That's what I hear from society is saying, hey, you gotta go to college. And if it doesn't work out, well, you can go into the trades. And I think that there are certainly some people, and this is kind of an

offshoot of that too, I hear all the time about the military. And construction and going into the military are some of the best career choices, the training and the opportunities that you get from that. But people look at it as like a fallback sort of thing. And I don't know of other industries, and I've worked with construction business owners that didn't graduate high school, that had a really bad childhood. And even one of my customers or even one of my clients was like, he shouldn't be alive. He had a hard life. But he was a great, thriving construction business in a very large city. And he's known for his reputation. And he's like, construction saved my life. It saved my life. And so when I hear people saying,

oh, it's a fallback or you couldn't do anything else, you must have gone into construction. It just pisses me off because there's so much opportunity. And right now, there's so many construction business owners that are looking for good people. And there's this mentality of like, you can go do a lot of stuff, but you don't want to go into construction. And I'm like, people that get it and say, get in construction right now and ride this wave of demand, get the training. I don't care what industry you're in. If you hate your job, give construction a try. I promise. If you don't want to sit in an office all day, if that's just not you, get into construction and learn to trade. The opportunities are absolutely phenomenal.

I used to always say, it's like, man, at my construction company, I never met a plumber that didn't have a boat paid for in cash. And that's why they could charge what they wanted to charge on the weekends, because you're going to take them away from their boat time. Now, I knew a lot of doctors and attorneys that also had boats that probably weren't paid for in cash and they never got to use them. Well, yeah. Plus, you got to think the average plumber is 47 years old. The good thing about that is the trades are getting more and more valuable. You know, a plumber needs to go through so many times before it comes to journeymen. There's an apprenticeship of three to five years. I mean, look, there's not as many people getting in right now. So that's making it more and more valuable. Supply and demand, it's a basic lesson in

economics. And, you know, there's certain industries that are full of a ton of people. And I can say garage doors, there's a lot of people getting into it. Do you know how much that scares me? I never want to hire anybody with experience. I want to get someone young, willing, and able that can train my way, that learns from exactly our way of doing things and understands, look, you don't have to be a salesman. You got to look me in the eye. You got to be confident. Your body language has to reflect that and your tonality that you believe it. And you need to ask the questions I ask because, look, when you go to the doctor, the first thing they do is say, boom, I'm going to get you on the scale.

I'm going to weigh you. Then they check your height. Then they check your blood pressure. Then they bring their stethoscope and check your heartbeat. And then they stick something in your ear. And they ask you these questions. How are you feeling? What is this?

Hopefully, I'm not the age to stick a finger in your butt. But my point is, they diagnose the person before they diagnose the problem. Yeah. And that's what we do with our customers. When my technicians learn how to do that, that's when we all win. And it doesn't mean you have to be this snazzy used car salesman. I always ask my guys, do you believe that we're the best? Do you believe we have the best parts? Do we have the best call center? If not, what do we need to do you believe that we're the best? Do you believe we have the best parts? Do we have the best call center? If not, what do we need to do? What do we need to carry?

What more do you need? Because if you guys feel like this walking in, you'll be able to sell the stuff because some people go, wow, I look these parts up. We charge a lot. I'm like a lot relative to what? To Amazon, to the Chinese? Because here's the thing. When I go through with my technicians

on what it really, really costs, and I'm not the type of guy that says, you don't even know about my bills I pay. I just take it through a basic lesson. It's simple math. We do it together. And I said, this is why plumbers or roofers or garage guys have to charge this

because we're driving. We've got a lot of things. This is what happens. And a lot of us as owners don't explain these bills or these costs. I don't want to say bills. They're costs. They're just costs of doing business.

And I just hate the people that brag about cutting corners. I didn't have to pay taxes in 2018 because we had accelerated depreciation on a lot of trucks that ate into the, you know, and it was, I needed those trucks though. You know what I hate the most, Sean, is the people that say, well, it's a write-off. The write-offs, you don't understand how that works. Maybe you're 35% taxes. What you could do is if you made a million dollars, you're going to pay $350,000. Now, a write-off means out of that $350,000, you could write off the $21 bill against the taxes you owe. The $21 doesn't come straight off the tax bill, it comes up

to 35%. It's complicated, but you pay $21 less on the million. So you're actually only getting $7 for that mill. And the cash in the bank is worth way more to you than that write-off. Yeah, that's right. So to simplify it, like for profit first for contractors, when people are thinking about their taxes, that's what the accountant will do and explain 35%. And you take out your expenses and you do all this complicated stuff. But let's say, you know, a million dollars in revenue or whatever, and you paid, you know, $50,000 in taxes after you run through all of the calculations or whatever, right? After your expenses and some depreciation or whatever. Just using it, just picking some round numbers to do math in my head.

Okay, $50,000 out of a million is 5%. So ask yourself, that's what we paid in 2019. We wanna do better next year. Meaning we wanna do about the same, or let's say we wanna do even more. We want a 15% growth. We're gonna be 1.2 million or something like that. Great. Guess what's gonna happen in taxes? You probably pay a little even more. We want a 15% growth. We're going to be 1.2 million or something like that. Great. Guess what's going to happen in taxes? You probably pay a little bit more. So you could set

5% of 1.2 million aside, but just to be on the safe side, I might set 6%. That's as complicated as the business owner needs to know is like, how much do we pay in taxes? How much do we have in revenue? What's that percentage? Stick that aside. When it gets down to the quarterly stuff, that's what the accountant's for. They'll figure out exactly what it is and tell us how we can save it. But as far as like, I gotta run this business day to day.

And in fact, I wanna do higher margins, increase my profit. I'm probably gonna pay more in taxes next year. I know that I paid 5% last year. I'm just gonna bump it up to 6%. I'm gonna stick 6% of every dollar that comes in into a separate bank account. And then when my CPA says, oh, by the way, you need to send the government $20,000. I said, yeah, no problem. It's right there in the account. What else you got? Okay, good. I'm going to get back to running my business. That's how simple

it can be. So I've read Michael's book too, that he says you don't need to start with 20% for profit. Where do you recommend that first month? You just say 5%, 6%, 7% or do you say take out 15? I guess it's circumstantial, but what do you recommend? All right. So, this works 100% of the time. Start with 1%. And that's what we cover in the first chapter of the book.

You've got to know your numbers. You've got to run through it. And let's just say, again, I'm just making up these numbers, but let's say you do the analysis that's in the book. We call it the initial assessment. And you get some numbers figured out. And let's say that your company, when you've looked at your books correctly, when you've looked at your numbers correctly and you say, okay, we made a 5% profit last year after taxes. Okay. That's where you start right now. Or we say, okay, let's bump that up to 6%. Meaning you did 5%. That's what you did last year, but we need you to get to 8%, 10%, something like that. The way that you go from 5% to 10% is slowly, one small step. You say, we did 5%. That should not be a problem for us to do. Let's stretch it out and let's go to 6% for one quarter, and I promise, battling Parkinson's law, you're not going to miss 1%. You won't feel the difference between, and I don't care how big the company is, you won't notice the difference between 5% and 6%. And then you'll go another quarter and say, now we're going to bump it up

to 7%. Now you might, if you haven't changed the way you operate, then you might feel it then, but you'll know exactly where you need to change. And then you get to 7%. Now we're six months into your plan. Now, the third quarter, now that you've got some stuff figured out, and also, by the way, here's what's going to happen for a lot, and you've probably experienced this too, when you really start honing in on the business, you're going to fire some people or they're going to quit because you're going to start measuring them in other ways and the things that make you profitable. And you're going to lose some people just throwing that out there. That's actually a sign of a maturing business. When people leave, because now you have to start measuring them in a way you didn't before, because you become more aware and they leave.

It hurts at first. It's a little scary, but it's actually a sign of a maturing business. So now we're at 7% and we got rid of some people. We got some new systems in place. We're actually selling at a higher margin. We've raised our prices and doing all of these other things in the book. Now we can go from 7% to 9% in a three month period and it doesn't hurt as much. And we see it. And then a year from now, we're at 10%. We're there. So it depends individually on the company and the size of the business. And a $10 million company, the numbers and the percentages are not going to be the same that you would apply to a million dollar company. But when you go through it,

wherever you're at, you just start small. And if you have no better information, start with 1% always. I want to put 1% of my money in my profit account. I wanna put 1% in taxes. That's not gonna be enough. That's not sustainable, but I'm gonna start the habit, and that's where I'm gonna start, and I'm not gonna miss that money, and then I'm gonna set money aside

for my owner's compensation and then my operating expenses, and I'm gonna see where the money is going, and then the next month, I might go to 2%, and I'm just gonna slowly raise it over time, and you become operating expenses. And I'm gonna see where the money is going. And then the next month I might go to 2% and I'm just gonna slowly raise it over time. And you become very aware without the complication of a profit and loss statement. Now you need those financial reports. Don't get me wrong.

I'm not saying you don't do the accounting. You don't learn the numbers. You've got to know what those numbers mean and those percentages mean on the profit and loss statement. But to get started, you don't have to. You just start small with 1%. So that's what I always recommend is start with 1% and add 1% every quarter to your numbers. And then it becomes very, very clear. And the 1% helps establish a habit. And that is really the mantra of the entire book is that profit is not an event. Profit is a habit. Meaning that a lot of times we'd look at our businesses and say,

oh, when I get three more trucks on the road full of crews, then I'll be profitable. I'm not profitable at $5 million, but when I can get to $8 million, then I'll start making a profit. So I'll borrow my way there to scale up and actually scale up all of these problems. Note, if you aren't profitable with what you're doing now, if you grow what you're doing now and you're not profitable, you'll scale up your problems faster than you can grow your company.

So you gotta say, I'm gonna get profitable. This is back to the boring success formula. I'm gonna figure out what makes us money and keep doing that and figure out what loses us money and stop doing that. I need to be profitable today and next week and next month, next quarter and next year. I'm going to make it a habit and program profitability into what I'm doing right now because I'll never get there when it's an event, when it's something, some big thing has to happen in the future. Profit is not an event. It's a habit. And the best way to start a habit is just to start small. A good start, my friend. I love this stuff. I'm going to ask you a few more questions. I just wanted to tell you, and the questions are kind of closing out. I read a book once and it said, you want to double your profit, cut your jobs in half per guy. Let them focus on the jobs they have. And I remember going through

a slow two weeks, and this is years ago. And I went to my GM. I'm like, dude, I don't know, man. This is just, I can't do much more. And he goes, you know, it's okay. We'll see. We made more money with half the jobs. We booked more phone calls. The call center did amazing. So I always go through this thing. I say, how much money do you want to make? What's your percentage of profit? What's your average ticket? What's your conversion rate? What's your booking rate? And then what's your cost per acquisition? And I look at it and most of the time I'm like, dude, you're paying way too much to acquire a customer or your conversion rate sucks or your average ticket sucks or your call center is horrible. And the call center is always the biggest one. They go to a shitty ass company for PPC and

they're paying for crappy calls. So once you figure out how to break the cycle of where you're at, and I love the fact you say this, I want to see 10% more booking phone calls. We got to book 10% more. So we're at 78%. I want to get to, that's hard, but I'd say 68 to 78. And then you say, we're going to increase the average ticket by $50. We're going to get the conversion rate a little bit higher. All of a sudden you made a 60% growth by these little percentages in each one of those. And I love the idea of saying, we're pocketing this. This is not money we have to spend. This is our future self or our company growth because it really does. It allows you to live differently. If you do that with your retirement, I think Profit First exists for everything.

The original book is learn to live on what's realistic and make those choices because so many of us, we stop at a gas station every day. Some of us, I don't smoke, but some of us spend $12 on a pack of cigarettes. They go pick up a 24-pack of beer. Go to Costco. I don't know. There's different things they can do. But I'm obsessed with the fact of we are all smart enough to get more frugal and more innovative.

We know how to do this stuff. We just need to be forced into it. And our human brain will allow us to do it. So Sean, dude, this is overwhelmingly amazing. This is one of the best podcasts yet. Oh man, this, Hey, you made it easy, man. We just a couple of guys talking shop and, and, uh, have had some hurdles to jump through or jump over along the way. And like, and that's the other thing I've learned in working with clients is you got people out there listening right now. And they're, I'm telling you, they're like, well, that's not me. I've screwed up. I don't know. I'm not as smart as these guys. And I don't know Tommy very well, but trust me, like he just worked hard. He's not that smart. If you don't mind me saying,

like, we just figured it out. Right. Like you're a smart guy. It's your podcast. But there are guys out there right now that are like, I've screwed up. I don't know how to do this. And I'm telling you, you are not alone. You're looking at other, other companies in their trucks and their logos and stuff on social media or whatever. And you're like, man, I'm screwing up because they've got it all. I promise. I promise they don't. They don't. You're not alone. The difference is the really successful ones, you don't hear about them as much. You might see them. You don't hear about them as much because they're just the boring success formula, man. They're just doing their thing. So there's some listeners out there right now and all of this is

kind of like overwhelming and they're like where do i start okay i get the you know start small or whatever but you got to understand like this is why i'm in business this is why i love to do what i do and this is why tommy does what he does is to help you out because you are not alone but if you pick one thing and for the next three months focus on that one thing have Have your list of five, like Tommy said before, but pick that one thing, just violent execution on that thing and then do the next thing.

And the next thing I'm telling you, like you will make super profitable growth in your business, but that's the advantage that you will have over your competition. Focus, focus, focus, focus. And you're not alone, man. Everybody else has screwed this up. I've screwed it up. That's why I'm doing what I'm doing is because I spent hundreds of

thousands of dollars in what I call research and development, meaning losing a lot of money over the years trying to figure these things out. And then when I figured them out, I just honed in on them and said, let's just do this again and again. So for your listeners out there, it's possible. This isn't a couple of guys that are somehow lucky. I mean, luck, yeah, we can always talk about luck or whatever, but it's just about focusing and keeping your head down and doing the right thing and understanding those numbers. Because man, once you get that data in your hands, even if you're not a data person, it's okay. You turn it over to somebody else and you get that dashboard developed. it is so much fun to run a business. You know, it's funny because you remind me of, there's a book called The One Thing. Yeah. The Russian proverb in there when it starts out, it says, if you chase two rabbits, you will not catch either one. Isn't that a life? I mean, it's so true. You throw so many

things in the air, you can barely catch one of them. And that brings me to the point of what, what are the three books that you would recommend to the listeners? Oh man, I love, love this question. All right. So I've got a book list. Well, I'm a book listener. So I like to listen to a lot, a lot of books by far, when I heard this one and I've heard this guy speak at conferences, and his book is awesome. Everybody, especially in the service business, needs to get this. It is called Excellence Wins by Horst Schultz. Horst Schultz was the CEO of the Ritz-Carlton, and he's gone on now to do other consulting and work with other hotels. You want to talk about a service business, global

business that operates 24-7, has to serve customers. Excellence Wins by Horst Schultz, best book I read or listened to in 2019, hands down. So that's number one. Number two is American Icon by Alan Mulally. Alan Mulally was the CEO of the Ford Motor Company and was the one that came in and turned it around. And Ford Motor Company was the only big car company that didn't need to take a bailout from the government. They kind of forced him to. Fabulous story about how to get your people on board, how to be a great leader in a global company. And the things that he did to turn that company around apply to the smallest of businesses too. So that's number two is American icon, Alan Mulally. And then

my third recommendation is really a bunch of books, anything and everything by Patrick Lencioni. Patrick Lencioni is a mentor of mine. I got to actually meet him personally once, but huge fan of his. And if you had to start out with one for the construction industry, especially, I would say start out with this, the death by meeting. That will help you formulate a structure around your weekly meetings. And that'll actually play off pretty well off the American icon. You read that book. I don't want to give too much away,

but Alan Mulally turned that around with a weekly meeting. Death by Meeting by Patrick Lincione. Great, great book. And then go read The Ideal Team Player. You want to hire people that are humble, hungry, and smart. It's a great book, but basically everything by Patrick Lincione. All right. Again, I can go on books forever, but those are my top two with a whole bunch for number three. I got this audible dude. That's like loaded up right now. We're reading from my book club hiring for attitude. And, um, we just read the E-myth. Obviously that's a, that's an icon book. So I'm going to do a separate book club with three people in my financing, even though, and we're going to go through your book and you know, I'm a big business and I'm not bragging, but I think I'm going to try out just throwing 15% away. And what I think it's going to do is my marketing is the

biggest thing. I'll tell you what, I'm involved heavily in my marketing. I don't believe you can market too much. I just believe there's better places to spend the money in certain types of marketing. And I have 4,000 call tracking numbers. So I know exactly what does what, and I'm lowering my budgets for every single marketing. And here's what happens. As I lower the marketing budget, the vendors come up to me and they say, why did you get out of five zones? And I say, here's the reason why. And I show them it's so black and white. I mean, it's down to the penny of exactly what we spent exactly what we made or conversion rate. And they say, well, look,

there's several times a year that I renegotiate and they hate me, but they can't argue with the facts. The problem is 99.9% of their other people don't have facts, but when they see the facts and The problem is 99.9% of their other people don't have facts, but when they see the facts and they know I prepay, I sometimes pay with check. Typically I want a discount of at least 5% or else I'll get the points for a credit card, but they know I'm just hands off. And I, you know, Hey, just keep doing what you're doing. I'm not calling them all the day going, Hey, I'm out next month because I don't have the money this month because Christmas is coming.

They just know we're a big company. We pay all the time. So they'll make concessions for me. And those are the things that when you talk about being frugal and innovative, it's learning how to negotiate with vendors. You know, they'll give me a certain amount of co-op for my distribution centers. They'll give me co-op. And here's the one thing I say is, all you got to do is ask. A lot of times we don't even take the time to ask. We just say, oh, they would never do that. We're not big enough. And here's what I ask. I got a big, big, big, big, my biggest meeting of the year, probably my biggest meeting of the whole year tomorrow with my biggest vendor. It took

over all of our inventory. I'm going to be asking them for a lot of concessions, a lot of concessions. And guess what? Chances are they're going to say no to some of them, but I of concessions, a lot of concessions. Yeah. And guess what? Chance. So they're going to say no to some of them, but I'm going to say, here's what I'm going to say is what do I need to do to get there? Yeah. They might give me an impossible goal, but guess what? I'm really good at accomplishing impossible goals.

Yeah. But you never know what, what they are unless you ask. And that's, yeah. We're like, Hey, invite them to say no. You can say no to this, but I'm responsible for, for a lot of people's lives here. And I wouldn't be doing my job as the leader of this company if I didn't ask. So don't be offended. You tell me no, but here's what I need. Here's what I want. Can I get it? No. Okay. How can I get there? How can I get that? I love that. That is, for anybody, that's back to the basic fundamentals of increasing your prices and all that kind of stuff is just ask somebody what the budget is. They're not going to tell you. That's okay.

But you just ask. Some of them will, and you'll get more information. Absolutely. Well, I want to just turn it over to you for the final thought and maybe a course of action or whatever you want to talk about here to finish us out. And I got to tell you, man, this has been a pleasure and I'm honored to even be able would say, just to kind of sum things up for your listeners, is that everything starts with the numbers in your business. I think you may have a good culture. You may have good advertising and marketing. You may feel like there's a lot of money coming in.

I hope so. That's great. But you got to know what the numbers mean. And if you're quote unquote, not a numbers person, then get a numbers person. But you're driving this thing. Put together that dashboard so that you don't have to know the details, but you want the dashboard when the warning lights are going off. You got to do that.

I want to give you some resources to do that. We've talked about those at the beginning of the podcast. So go to seanvandyke.com slash the paperwork punch list. You can download my free 28 day guide to streamline your construction business. You can start there and reach out to me and let me know if you got any questions about that. You'll get my email address and all that kind of stuff. Then I want you to go to profitfirstcontractor.com. You can get the book there. It's, it's available on Amazon. It's in Kindle version there. It's on audible and on iTunes as well. So it's everywhere. Just search for profit first for contractors. The website is profit first contractor.com right there at the top of the page

is going to give you some free downloads for all the tables and the graphs. You're going to have to crunch some numbers. So get all of that. And then in the middle of that page at profit first contractor.com, give me your email address, plug it in there. And then in the middle of that page at ProfitFirstContractor.com, give me your email address, plug it in there, and I'm going to send you a free video training series on the four core principles of Profit First for Contractors. You'll understand once you get into that book. And I'm going to ask you to do one other thing too. When you get the book in chapter one, Tommy had mentioned it. We talked about this a while back. We talked about the craftsman cycle. At the end of that chapter, I'm gonna ask you to do something very specific. I'm not gonna spoil it here.

I want you to go check out the book. I want you to take that action item. And when you do that action item, trust me, it's very simple. Then I'm gonna send you an email with a super big discount on the Profit First for Contractors training program. And I'm not gonna make this available to anybody else.

So when you take that action item and you respond and do that thing, make sure you say that you heard it here and I'm gonna give you a huge discount on the Profit First for Contractors training program. And it is an online program. You'll get coaching from me and my team through that program, through our private online community.

But it's going to walk you through step-by-step-by-step. So do those things. Go to seanvandyke.com slash the paperwork punch list. Go to profitfirstcontractor.com. Give me your email address and then get the book, do the thing at the end of chapter one. And when you do that thing, just let me know you heard it on this podcast and I'll give you a super big discount on the training program. And then 2020, I mean, it's over. You're going to make so much money in 2020. And you're going to have clarity on exactly what you need to do to make a profit in your

business. So that's it. Go do those things. And let's have a great 2020. All right, Sean. Well, I appreciate you very much. I'll be meeting you out here at the end of February, hopefully for dinner and appreciate all that you contributed. I got a lot

out of this. I definitely know the listeners have. Yeah. Thank you, Tommy. Thanks for having me on and would love to do it again anytime. All right, my friends. All right. Thank you. Hey, I just wanted to take a quick minute and thank you for listening to the podcast. You know, most people don't understand this, but the way that the podcast has grown is when people subscribe and they leave a review. So if you would please, please, please, Wyatt's top of mind, take a quick minute to subscribe and leave a quick review. It'll help me out so much. If we just took a little bit of time right now, I can't tell you enough how much I appreciate the listeners and the feedback.

And also when you subscribe, what I'm gonna do is let you know the next guest coming on the podcast and I'll let you email me anything you want me to ask that next person coming on. All the pros I have on here, I want your feedback. I want you to subscribe

so you can start giving me the questions you want me to ask and help us grow together. Also, I'm giving away my book for free now. All you got to do is go to homeservicemillionaire.com forward slash podcast. You got to cover the shipping and handling, but I'm giving the material out for free. It's 200 pages. It's a hardcover book, homeservicemillionaire.com forward slash podcast. I appreciate each and every one of the listeners and thank you for making this Home Service Expert podcast a success. I hope you're having a great day and thanks again.