107. The Industry Reset With Russ, Sky & Andy

What's happening is those builders that are not behaving professionally and haven't been behaving professionally are getting found out.

Welcome to Professional Builders Secrets, the podcast for building company owners wanting to grow safely and securely. I'm your host, Will Blunt, and today I'm joined by the co founder of the association of Professional Builders, Sky Colliday. Welcome to the show, Sky.

Hey, Will, how you doing?

We've also got another co founder of app, Russ Stevens on the show. Russ, welcome.

Hey, Will, how you doing?

And our head coach, Andy Scarter.

Andy, thanks for having me. Nice to be back.

Great to have everyone on the show again. Today we're talking about a recent action plan that we released for our members called the Industry Reset. Andy, can you go into some details about what's happening in residential construction at the moment that made us create this action plan for members?

Sure. I think anybody that's watched the news recently will see that unfortunately, construction companies feature regularly on the news as they are failing all over the world. And on a number of our previous podcasts, we've, we've spoken about the factors that contribute to that. So we don't need to go into those in, in any great detail. But obviously that kind of picture, coupled with the realities of the economy, basically worldwide at the moment, with high interest rates, high inflation, it really gives potential consumers, potential people that are wanting to build or renovate or remodel their homes. It doesn't give them a particularly positive picture and in most cases it kind of gets them waiting rather than moving ahead with a building project because of that. So consumer confidence is low. Obviously, the realities of those economic conditions in some cases make borrowing quite difficult for people and therefore they can't borrow as much money as they need to build the house of their dreams. So that coming together, you've almost got the tsunami of, of situations happening, which really means that the, just generally speaking, things are not very positive, apparently in the industry. And we just believed that it was important that we set the record straight and actually let people see the reality of what's going on so that they can reset and move into this, what I'm calling the next normal. I don't know if it's the new normal. I'm pretty certain this one's going to change fairly soon again, but into this next normal positively and make the most of the opportunities that do actually exist.

I think it's also like when you're seeing all of this, what's happening with consumers and what's happening in the marketplace for builders Clients and potential clients. What's all also contributing to this factor in the industry is how many builders are starting to fail and fall over now. And, you know, Andy's already said it, it's a tsunami. It's this, it's. It's a snowball effect because it's not inspiring any more consumer confidence. It makes people a lot more wary of what's happening in the industry and conservative and quite concerned about moving forward. And as purse strings start, start to tighten, that's when you're going more and more. That's why we played on words. It's a reset happening in the industry. More builders are failing, going under, and it's changing the landscape is not what it was in the last several years. It's changed. Right now a reset is happening. There's a huge clean out of a lot of residential building companies, particularly the volume builders. And, you know, we can get into why, but that is a huge, huge reason that's affecting a lot of consumer confidence out there and, you know, snowball effects into what builders want to do, which is sign contracts and keep growing their building company.

And, you know, the reality is when we see those pictures, always because it's the news and it's because it's media, they're looking for sensationalism. Those bigger building companies, when they fail, there are lots of zeros in the numbers that they owe people. And, you know, it's. The reality is, for the entire industry, that is a negative scenario on the face of things. But where it sort of pans out is what's happening is those builders that are not behaving professionally and haven't been behaving professionally are getting found out, unfortunately, by the economy now. So, again, even in that scenario, although if you just believe what you see in the media, it's all negative. The truth is, for the industry to have those kind of people out of the industry is actually a step forward in the right direction. And that's part of what we're trying to do with this, is to. Is to let builders see the reality, both sides of this coin, not just one side, which is consistently what's put into the media.

Russ sky mentioned volume builders being more affected by what's going on at the moment and what's happened over the last 12 to 18 months. Can you elaborate on why that's the case?

Yeah, I think this is probably a bit more extreme in Australia than other countries. I mean, we've, we've certainly seen insolvencies on the rise in Canada, New Zealand and the Us but they've not been affected as hard as the building companies in Australia and particularly in Australia, like Sky mentioned, it is the volume guys and that's largely as a consequence of the larger sales teams that these guys run. So bigger sales teams that gave them more capacity to sign up contracts during what we call the COVID boom, which started at the end of 2020 and ran for the next 18 months, two years. So with that increase capacity, these salespeople signed up an extraordinary amount of contracts. We've, we've seen residential building companies that signed up three, four and even five times the number of contracts that would normally sign. Now they didn't have the capacity to actually deliver those contracts. And what that meant was these contracts got stacked sequentially and with the cost of construction going up, what that resulted in is heavier losses as the years went by. So in some cases these volumes guys were starting contracts two years after the contracts have been signed on a fixed price contract. So with the cost of construction increasing by 30% a year, you can imagine the kind of losses they were carrying on those contracts and that just exposed them a lot more. It's why we've seen a lot of big companies going under in Australia. It's why we've seen other very well known companies getting bailed out to the tune of tens of millions of dollars in order to help keep them going. But, but the data we collected on the state of the residential construction industry at the back end of 2022 clearly demonstrated that smaller building companies, they didn't overexpose themselves around about 50% of these smaller builders didn't sign any additional contracts, which was exactly what we were advising them to do in 2020 and 2021. We were advising them to be very, very cautious and not to expose themselves. And even the guys that did sign additional contracts only signed about 20% more than they would nor. So you compare that to the other guys that sign 3, 4, 500% more. You know, there's a very different attitude to risk. I think it really highlights the professionalism of the, the smaller builders in the way that they have looked at their numbers and taken a very pragmatic approach to their business. You know, they, they could have gone the easy route and, and signed up a load of, got carried away, signed up a lot of contracts, but they didn't, they were very sensible and as a result they protected their exposure to risk.

Andy, how's this playing out in the day to day operations of residential building companies?

Well, primarily in the space of demand, or demand depending on which side of the equator you're on. Obviously what's happened is as interest rates have risen, people have found their borrowing capacity is reduced as inflation. As Russ has mentioned, the cost of building has increased significantly over the last three years. What that's done is it has taken away the number of people that are in the market and ready, able and willing to build. So the pool from which builders can now draw their future business is a lot smaller. And essentially we're back to talking about why did we call it the industry reset? In simple terms, if the size of the pond changes, you have to change the way you fish in that pond. You can't keep fishing the way you were when it was a bigger pond or a fuller pond. You've now got to adjust how you behave to meet those, those changed circumstances. So that's kind of, it's really the demand picture has shrunk compared to where it was a year or 18 months ago.

Would you call this a crisis? Sky?

I think, I suppose if we look at the definition of a crisis, it's a time of intense difficulty or danger. So I think you could define it as a crisis that's happening in the industry, but I wouldn't necessarily say it's anything new. And maybe that's. That, that maybe can turn it not into a crisis because it's, you know, some, some builders definitely are going to find it difficult. There's definitely a perception of danger, of what lies ahead, but only if you're not willing to change, only if you're not willing to reset. Just like Andy has mentioned. I think at the end of the day, all that's happened now is, you know, how it's affecting the day to day to day. Sales are a lot harder. Leads aren't flowing as freely into a building company. But is that a new issue? Not necessarily. This is the same issue that every building company had pre Covid. Like the number one problem builders were experiencing was either sales or marketing. The lack of quality leads, the lack of quantity of leads to just essentially sign them into building contracts. So really all that we've seen right now is it's not developing to a new problem. It feels new because we're in a post Covid era, but it really is just the same old problems in, you know, a new year. So yeah, crisis, yes, but it's less scary when you realize it's really the same issues. So we just need to remember the lost art of sales and marketing and just really remember those skills and sharpen that saw again.

And I think Just to amplify what sky is saying. It's, it's, it's going back to what the situation was previously. And when we talk about is it a crisis, we looking at interest rates in most part parts of the world that are back to normal. That's actually what's happened. If you, if you go back to pre Covid and you think about what interest rates were and you look at interest rates now, they're pretty much back to where they were. And the indications worldwide are that they're going to kind of stay where they are now for probably the rest of this year. And then the economists are telling us, telling us, guessing that they'll start to come down a bit in the new year. So when we've got to be careful and I think we've got to make sure that we don't add fuel to them. Media fire. I mean, sky summed it up beautifully. Absolutely. It's a crisis. If you don't pivot, if you don't reset, you're in trouble. But if you make the reset, make the change, recognize what's really going on and adjust to that, you'll be absolutely fine. In fact, you have the opportunity to thrive.

I think it probably feels like a crisis to anyone that has come into this industry in the last few years. They, they wouldn't have been exposed to how things normally are in terms of lead generation and sales because it's been relatively easy. Clients have been queuing up to, to sign with builders and there hasn't been any objections. So, yeah, it's been pretty easy to run a building company and get those contracts signed without sales process, without all the things in place that we, we talk about, not necessarily at great margins and not necessarily dealing with the best clients. But hasn't seemed too challenging to, to run a building company in the sales and marketing respect of things. You know, obviously in terms of the supply chain, it, it's been extremely challenging. But that might lead some people to believe we're in, we're hitting a bit of a crisis in terms of the, the sales funnel drying up. But like the guys have said, all this is, it's a return to normality and it's part of business, isn't it? We constantly have to adapt, react to the situation and optimize our business to make the very best of the current situation.

Literally what I was just about to say, this really in a sense is normal. There's always a problem. There's always something that's going to happen. There's always going to be External influences. So is it different? Is it new? No, it's just another thing that as a building company, company owner, you need to navigate. You need to really just work out how to get over or get through. If it's not one thing, it's another. So it's just about looking ahead strategically and. Yeah. Adjusting your plan so that you can sail on through.

Okay, so that's the problem. And I'm sure a lot of builders listening out there know about the problem. How do they go about resetting? How do they change things, Andy?

Well, Scar just told them, so they need to stop, rewind and listen, and then we're done. Thanks, Will. It's been a great episode. No, seriously, they need to change their strategy. You know, the definition of insanity is continuing to do things the way you've always done them and expecting a different result, a different outcome. Bottom line is, as I say, if circumstances have moved, we have to move with those. And always that's going to start with planning and strategy. We literally have to now look at this and go, if this is the new or the next normal or reality, how does my strategic plan need to change? Or as Russ has alluded to until now, he didn't really need one. There were people with money in their hands available on every corner. So you didn't need a plan. You just had to be there. And if you had a, you know, a truck or a ute and you had the right Bear Grylls shorts on, you got business. It's that easy. Now you're going to have to actually plan. There's going to have to be a strategy that puts you in front of those smaller number, more discerning, more nervous buyers. And you're going to have to be professional enough to give them a solution to their problems in a way that you can still run your building business at a profit. That's. That's really the kind of change that needs to happen. Obviously below that, there's a bunch of other things, but it starts with re planning, restrategizing how you are going to move into this next phase.

It's easy to look like a rock star and a boom, isn't it?

Well, and I, I couldn't help thinking when, when Russ was talking about it, you know, boom has multiple connotations. I mean, there were some building businesses that literally went boom because they couldn't handle what brought with it. So, you know, we've got to understand there's two sides to that word as well.

I think it's important to realize as well that Most or not most, but more building companies lose money in a rising market than a cooling market. It's easier to make more money in a cooling market, but of course, everyone gets a little bit carried away with a boom economy, but it's not profitable for building companies generally.

Can you just elaborate on that, Russ?

Yeah. Well, in this industry, the vast majority of builders operate on fixed price contracts. So when you have a rising market, your costs are rising. Not just the cost of construction, but the fixed expenses as well, which means the fixed expense ratio actually increases. So that takes out a portion of your gross profit there. But typically you are locked into that price on the top end. So there's nowhere to go at the top end. But below that, your costs are constantly rising and the only place to go is your profit margin. That's what gets eroded. But when the reverse is happening and the market is slowing, then, sure, your, your top line is still capped, but there's an opportunity to renegotiate on supplies and, you know, and even service providers as well. And that's because of demand and supply, you know, when demand cools off and there's excess supply, everyone's fighting over your business. So it, you know that that brings an opportunity to expand margins.

And this, this is really where the whole reset comes from, because everything's different to the last couple of years. And so when we launched the industry reset, like all of our action plans and our members would know this, they're very tactical, they're very specific. So whether it's on using a particular calculator to price your jobs, calculating WIPA site signage, like anything tactical, that's really specific and really just quite easy to go to. You're looking for one solution, you're following the plan, you're getting an outcome. But when we launched the industry reset, it's not tact. Well, it's not really tactical in any way. It is a strategic action plan because it's about, it's talking about resetting your entire strategy. And yes, from a business planning perspective, but it's looking at every different area inside your building company as well. Not just the sales, but the marketing, your financials, your clients, even the culture within your team. And really what you're doing, resetting each part of your building company so that you can walk in to this. What did you call it, Andy? It wasn't a new normal, the next normal. The next normal with confidence so that you can clean up in this market when a lot of builders are going to be thinking, you know, what do I do next? Like, where do I go from here? Like, I don't know what to do next because what I've been doing the last few years, it's suddenly not working anymore. You don't hit the panic button because you have reset. You have re strateg every particular area of your building company. So you know what the weakest link is and that's the gap you plug first and you go into the tactics to move forward in that respect. So it's been quite different, but it really is a strategic system so you can think about what you know. Every building company is going to be different, but your hair's on fire in one part of your building company and that's where you move first.

If we started the business model level level, which you mentioned, sky, how do we, how do builders go about restrategizing at that stage?

Well, in our system that we launched a big part of what we were talking about, even just, you know, reviewing your whole quarterly strategic plan, where are you going to be in three years, one year, next 90 days? Have another little look at that. Because we can have all these, you know, growth expectations, aspirations, whatever. When things are going really well, when things are getting a little bit tighter or a little bit more maybe realistic, have a, like just reflect on your strategic plan and, and look at what's in line with reality. What is realistic in the next 90 days, one year, three years? You don't want to completely redo them, but you need to recap and refresh yourself on what you've set out. But a huge proponent of what's going to either help you achieve your goals or really limit you is your entire business model. And we've even done a couple different episodes on this. We' done episodes on are you a design and build building company versus do you quote other people's plans? But probably even more important is what's your business plan in terms of the contracts you're using? Because what a lot of builders switched to over the last couple of years is a cost plus model. So cost plus building contracts because of what happened in the last couple of years, because of all of this construction inflation, their mindset, let's say, has changed from, you know, fixed price contracts. They just don't work. They're not going to help me remain profitable or get me to my goals. This is absolutely something you need to review if you are going to reset and change the direction of your building company or maybe realign it to still where you want to go, but so that you can move forward. Because it's very the success of your business is going to hinge on the money you make in the, you're building contracts.

And I think just to, to pick up from where, where Sky's taken that, we're talking about the fact that the D word has changed. Manned or manned, depending on where you are. What does that mean? Well, that means that the client profile has changed. Why has it changed? Well, largely because people can't access as much money as they used to be able to. So budget is one of the things they scared about. They don't want to be in a place where there's an open ended top, there's no top limit, which means the fixed price contract is the solution to one of their biggest fears. So we've got to be, we've got to be understanding. And all of this really comes back to. I think if we're going to try and pull one thing out beyond planning, the focus really needs to get us back to understanding what your ideal client's fears are today. Not what they were a year ago or two years ago. They were just trying to stay alive in those days and spend the money that the government or the banks were giving them. Now they're in a very different place. They are going to live and they have limited money. They're not going to nibble on the same bait that they did two years ago or a year ago. So getting back to that fundamental understanding of the biggest problem you can solve for your client now becomes paramount of importance. And then as sky said, what you got to look at is based on that, which other parts of your business are on fire or are not going to deliver the solution that those clients are looking for. That's what we're going to fix next. But getting more client centric, I think is going to be a big part of taking that first step in the right direction.

Yeah, I love that, Andy. So you can easily get caught up thinking too much about the challenges you're facing as a business and the challenge within your business and forgetting about the clients.

Well, and I mean, let's just, let's, let's pop the myth right now. All over the world, people need and want to build, remodel and renovate their homes. That hasn't gone away. I mean, we, everywhere we look, there's a housing crisis in every country that's listening to this podcast. So in terms of saying. What we're not saying is there's no demand. What we're saying is the demand pattern has changed and we've got to get cleverer because there are less fish in the pond. If you want one of them, you can't just drop any bait in there anymore. You've now got to put it in a very specific place at a particular time of day and make sure that it's the right kind of bait. And if you can get that right, it's. It's going to come back. So it's. It's almost being prepared to accept. Despite what we see on the news. People want me to build them a house. I just have to find them again.

Yeah. Remember your population. I remember this from, like, a really long time ago, but I remember being. It was at one of our events. And it's funny because it's the same problems all over again. And this was a couple years ago, pre Covid and someone, one of our builders, the attendees at a workshop we did, mentioned, you know, it is so hard generating leads. Like, there's just not enough. And it was this mindset of there's no demand, like, there's no opportunity. I can't sign enough contracts. And so the question was, okay, what's, you know, what's your capacity? How many contracts do you need in a year? And it was 10. Do you really think there are not 10 people who want to build a new home? Like, that's absurd. Like, that's ludicrous. There is, and we need to just change our mindset. We're not trying to build all the homes in the area. We have a capacity that we are trying to fill, and we need to make sure we get the 10 buyers that we want over our competitors and over our competition. That's all it is.

There it is. There's the mic drop moment in this podcast. Sky just earned her cup of coffee that she gets for doing this podcast. Right there.

Life is simple. No, if we can just simplify it though, right? You're not trying to build all the homes in America or Canada or Australia or whatever. You service a radius, you have a particular supply, and you're just trying to fill the supply. No more, no less, but no more. You're trying to fill your supply. And if that's the mindset, you can go in with, yeah, you want to have more demand than your supply, say it is 10, maybe you build 20. It's still not huge numbers. And there is a population. There is opportunity everywhere. And we just need to make sure we get those contracts and we get those sales over our competitors. And that's how you can see, survive, propel forward, increase your margins, get a line out the door. Even when the market is cooling.

And which. Which one of us is going to tell the tiger story?

Yeah, I think we. We've told this story like 20 times on this podcast now. Do you reckon?

Well, this, I mean, literally, this is the perfect environment in which to talk about it. Because at the end of the day, not only are we needing to do what sky has just explained, but we need to get the cream ahead of our competitors. We. We have to be more professional. We have to get up earlier in the morning. We have to be the ones working on Saturday. Nobody else working on Saturday anymore. They're going fishing now because they didn't have to work on Saturdays a year ago. Right. So we've got to be the guys that are working on Saturdays. We've got to be more available, more visible. And if we can do that better than the last guy, well, then the tiger is going to eat him, not us. And that's what we want to achieve. We do that for the next year. That'll put us into the next spot and then we can go from there.

It's literally back into the olden days when sales were very important that who, who has the best sales process will win. Who can spend the most on marketing to acquire a new customer will win. It's back to those laws that are dependable. And if you can upskill yourself or your team, you know, it doesn't matter who's doing the sales in your building company. Invest in the sales and really going to overuse this word here, but reset, relook at all of your sales process. Look at the scripts, look at the objections you were practicing. The objections are completely different now to what they were over the last couple of years. That takes a huge amount of effort to completely. You mentioned it, Andy. Be client centric, client focused, and speak to the person and people actually in front of you right now and what their concerns are not. When you built all of this or maybe revamped it and refreshed it a couple of years ago. Like the waters are different.

Yeah.

Yeah, that's a great point, Sky. Russ, if we use that scenario of 10 projects, how many leads do you need to get to acquire 10 projects?

Well, it depends where the leads are coming from, because obviously referrals are very hot, warm leads, and they got a much higher chance of progressing. But the problem is you can't scale a building company purely on referrals. You can, you know, you can kind of survive. You can even do well in a hot market. But as. As a lot of builders are now finding out A business that is fully dependent on referrals is a business that you're not completely in control of. So in order to be successful, you must be able to acquire building contracts through paid advertising. It's absolutely critical that you, you master this skill and, and have this strategy implemented into your building company. So to answer your question, if you need to sign in 10 contracts, I'd say any referrals are just, you know, extras on top. You need to have your company set up to go out and buy 10 contracts through paid advertising. And the typical ratio that we see is 100 to 1 with cold paid traffic. So that means you've got to budget to attract a thousand cold leads into, into your building company. And the, the two most popular channels or the effective channels for doing that are Facebook and Google. And you can, you should be able to get all the leads you need from those two channels. I mean, it's a, it's always a smart idea to dominate your area, especially if you're, you're regional looking at all avenues. But those two channels there alone, they will generate the vast majority of your leads.

Andy, throwing back to you. Sorry, your face just then got me going.

He's gonna speak any second now.

Throwing back to you, Andy, Moving on to the financials of the business and the cash flow implications of what's gone on in the last 18 months. What do building company owners need to review from that point of view?

Everything. Like, if there's a foundation to this reset, it's numbers. And again, we're always very careful with the way we put this. We don't want builders to become accountants, and most builders have a sense of humor, so they probably wouldn't be able to be an accountant anyway. But we want them to understand the important numbers in their business and we want them to know the implication of those numbers. And we talk about it always on these podcasts, but really, if we talk about being able to go out, and I love the way Russ put it, go out and buy a thousand leads, what does that mean? You've got to have reserves, you've got to have profit cash available in the business to spend that money. Where does that come from? Margin or where does margin come from? Margin comes from making sure that we are costing jobs correctly and we delivering them on budget and on time. So getting to know those numbers, getting to the place of understanding how profitable your business actually is, how much money you can put into an advertising budget. If not, where are the contracts that are underperforming that we can go and put some time into to grow what we can get out of them. That kind of data. And we always talk about it, you can only make quality decisions if you have quality data. And quality in this picture means it's accurate, it's up to date and you understand what it means. If you get those three things right in your financial space, you're going to be in a, in a much stronger position in order to execute that strategy.

And I think while we're talking about cash flow as well, I think it's really important to emphasize here that cash appearing in your bank account or on your balance sheet, that only tells a very small part of the story. We have a very complex situation in play when it comes to construction financials and not many people understand that them and in our experience, 90% of builders accounts are wrong. So if you think about that for a minute, there's a 9 out of 10 chance that the financials you're looking at, the year end report you're looking at aren't correct. And the danger there is if they're not correct. There's a bit of danger lurking beneath. Now, I think it was a recent podcast episode, the interview that you did will with accountants month end where I think they explain beautifully why most accountants don't understand construction financials. It's because the business model for accountants is not set up to be niched. It means they can't because they work within a regional area, they can't understand all the different industries and the nuances. And, and that's a big problem in construction because construction financials, unless you really understand the hidden liabilities, and we're talking about the work in progress accounting adjustment here, unless you understand what that is and how to calculate it, is you're going to produce incorrect accounts for your clients, which is something we see all the time, unfortunately. And that results in builders paying tax on profits they never made, which you know, puts their cash flow under even more pressure. But the other problem is because they don't understand the full liability that's lurking inside their accounts, they're not aware of the danger that's creeping up on them. And as we hit that slowdown, it really is just like a Ponzi scheme where when the inflows start to dry up, all of a sudden the whole thing falls over like a house of cards. And, and that is sadly what catches so many builders out. They just don't know what hit them. It came from nowhere. They thought they were doing well. One year, six months later, things start to get tight and then Bang. It goes very quickly and all of a sudden the hole that's left behind is enormous and they have no idea how it got that big.

I mean, Russ, I love the way you've put that because it shows you the double whammy that's waiting for a builder that doesn't know his numbers. First point, he doesn't know what his real profit is. So he's paying tax. He's not buying leads, he's paying the tax man the money that he should have been spending on leads. So there's problem number one. He doesn't have the money now because he paid tax on profit that he didn't earn. There's number one. Let's say he gets that part right. We now get to the point of he doesn't know what his liability is in terms of as yet unreceived invoices, so he spends that money on advertising. And now when the plumber's invoice arrives, he can't pay the plumber. There is the perfect example of not knowing your numbers. That's. And imagine if he does both. Imagine if he pays money to the tax man that he shouldn't be paying and he spends the plumber's money on advertising. Ouch. He's on the news the next day.

The thing is though, you can get away with that in a booming market. When sales are coming in, cash is flowing, life is good and it's easy, but it's what's going to happen when it's not as exciting. There's like cash isn't moving as quickly or as freely as it once was. That's what actually exposes these problems. And again, you know, I don't know, I wouldn't hazard a guess of how many, but I would say the majority, let's say 80% of building company owners. They're not crop, they're not crooks, they're not con artists, they're not trying to scam anyone. This is a lack of knowledge. And so, yeah, when the sales slow down, exposes these gaps, these huge problems in a building company, like you said, Andy, you'll end up on the news. But unfortunately for the, for the most part in this industry, it's not builders fault. It's a lack of knowledge, a lack of education, a lack of support from the people that they've got in their lives that really should be there supporting them. Like we've mentioned, mentioned accountants as a great example.

Yeah. And when we call this a construction Ponzi scheme, it's not to bring the industry into disrepute or anything like that. It's to simply highlight a situation that not many people are aware of. And the fact is, when you rob Peter to pay Paul, that really is the definition of a Ponzi scheme. So we're doing this to try and raise awareness of the problem that's existed in our industry for far too long, which isn't being addressed by the authorities. The accountants don't even realize it's an issue. So if we can raise awareness by using this unfortunate term, that's what we'll continue to do. But, yeah, it's certainly not to bring the industry down in any way.

Andy, you touched on this briefly. It feels like the financial space is almost the cornerstone to this reset, because how do you know how much to spend on advertising or how much you can spend on advertising if you don't know how much cash you've got?

Well, I mean, that's. That's exactly it. And, you know, it goes a step further. I always tell my clients that your financials are the mirror into your business. Every single thing. I'll say that again slowly. Every single thing you do in your business is reflected in your financials somewhere. If, if you give any one of our executive coaches. Never mind Russ and Sky, but if you give any of the coaches a set of books from a building company company within 15 minutes, we'll put our finger on where the biggest problems are, because they are sitting obviously in the numbers, if you know where to look. Now, I'm just feeling a little bit like we've kind of taken this podcast into a bit of a dark space for the last five minutes. I want to just brighten it up a little bit and say the thing we ought to keep in mind is if you do know your numbers, the opposite applies. You now have the opportunity to perform efficiently in the areas that you need to, and therefore, you can actually thrive in this, in this current situation. You know, sky said it earlier, builders are not crooks. Unfortunately, we often painted with that, that brush. The reality is those people that are behaving professionally, getting that message out to the market is what's going to put you ahead of your competition. And again, that will help you to thrive in this current scenario.

Sky, these are all the strategic points around how the business runs. But at the end of the day, it's people executing on all of these strategies. So what implications are there for building companies in terms of the people working at the company?

Oh, that's a great question. Because especially over the last couple of years. What's been another crisis that's been thrown around. It's a staffing crisis, it's a labor crisis, staffing shortage. So it's been, you know, if it's not one thing, it's another. So over the last couple of years, I think a lot of building companies have struggled with maybe even just the amount of people they could have on their team to service the demand that they had, to service the amount of contracts that they signed. I definitely feel like it has been leveling out. It's still particularly difficult in terms of on site. We recently did a whole episode on that as well. So we've already had that conversation. But in terms of, of this reset and what we're looking at with the existing team that you've got in place in your building company, and something we really focused on in the action plan is the team that you've got, it is going to be very important to have a little step back, have a bird's eye view over this and have a look at the culture that you are breeding in the building company at the moment. Because, you know, again, what's gotten you through the last couple of years? Do they understand what has to change now to take your building company forward? And really, the mindset of anyone working for a company is you want to protect the company. The company is the vehicle that gets everyone where they want to go. It pays people's jobs, it delivers people's homes. It's seriously so important. And so do your team members. Not only all of your staff that are actually employed, any contractors that you are using, all of your suppliers, do they all completely understand what the plan is moving forward, what your values are, what your mission is, how to act and interact as a representative of your building company? That's going to be so important because really, ultimately, as things do get more difficult and even if it's not painful in your building company over the next year, couple of years, that's brilliant. You're doing the right thing because you have been working on this reset and you've been and putting the right systems in place. It does not mean, however, that all of your staff just believe that everything is okay. The people in general are not stupid. They're reading what's on the news, they're watching and listening to what is on the news. And they can be hearing what is happening in this industry that they are actively working in. So we need to ensure that our communication is on point and we are clearly communicating what's going well. Well, what's not going well, what are we working on fixing and who can we recognize for fixing it as well? That's going to be so important moving forward with the team that you want to move forward with.

Yeah, that's a great point, Sky. I imagine there's an element of fear coming through because of all the media stuff which could unsettle your team.

Yeah. And why, why wouldn't they, like, if you, if you think your team members, ultimately, as important as the company is, let's be honest, ultimately, everyone's thinking of, of, you know, me and mine, we're all thinking, you know, can I pay my mortgage? Can I support my family? You know, I, you know, I've already got several kids, I've got another on the way. They're thinking of themselves and thinking strategically. Okay, how can I set my family up for a successful future? And their thinking is aligning with this company in my best interests or are they going to fall over? Are they going to have mass redundancies, you know, whatever. So can we clearly communicate the confidence that we have in our systems and what we have. Have built and what everyone has done? Can we clearly communicate that to what's. What's the word? We've talked about this in sales before. It's the transference of confidence and conviction and certainty. Can we get that and communicated through to our team? So we've really sold our team and they believe in the future as well, that they have that confidence, conviction, that certainty and my goodness, does that help them do a better job at work as well? Because they believe in the company. Yes, I can help you sign this building contract. Can. Because we will be here in a year. Yes, I will help you move forward, you know, on site, talk to you about your building contract or, you know, your actual construction at the moment, because you have certainty and confidence in the building company, your systems moving way deep into the future.

And you can't do that unless you have a plan.

Boom.

What are you going to tell your team? We're going to do what we did last year. That's not going to cut it. Because they know that what their mortgage cost last year is very different to what their mortgage costs now. So, I mean, it's. Sky's raised a wonderful point. We've been talking until now about kind of marketing outwards, but the reality is that same message has to go inwards so that you retain. Sky's right. We did that episode recently on the labor shortages in the industry. This first step in solving that is retaining all your good people.

People.

And the only way you're going to do that is if you are communicating that plan to them in a way that they not only understand it, but they understand the role they play in making it happen so that they have the confidence to commit to what you need them to do in, in the company as a whole. So we, we've kind of gone full circle. We're back to step one, plan it. Because if you do plan it, here comes the next step, then you can lead it. And that's going to be the other thing that's important, important for business owners, building business owners. We've got to be better leaders. We've literally got to be the people that inspire and encourage and motivate our teams to reach whatever the goal is we've set in in the plan that we've put together.

I think that ties it together nicely, Andy, bringing it back to the whole point around planning and resetting everything within your business just to make sure it's up to date with the current market. Ross Sky, Andy, thanks so much for coming on the show today. Any final thoughts on the industry reset before we wrap things up? Where can people go to get started?

I reckon the first thing anyone needs to do is I would actually complete the whole action plan, honestly, if you're a member, if you're not, you can go into the members portal. It's called the industry reset and there is an in depth video on each of these sections and actually a couple more that we didn't even get to cover on what you're looking at inside your building company to then determine where you start. You can't work on all of this stuff at the exact same time. So you have to put a strategy in place for even implementing this strategy as a whole. So I would definitely go through that start to finish so that you can understand where your biggest gap is so you can work on plugging that. But if you go into the members portal, it is on demand and available. And at the end of the day, the biggest advice for anyone listening to this episode right now is start yesterday because it's changing in the next month. 2 months, 6 months, 12 months, 18 months, it's going to be different. So the sooner you can work out your plan and start plugging those gaps, you can, you know, you're one step closer to signing those 10 contracts. You're ahead, you're booked out, you're done.

And I mean, I'm just gonna. Because I think it's important for the people that listen to this podcast that we make it clear, although there are changes out there. There are still lots and lots of opportunities. This is not a place for us to go into, oh, the sky's going to fall in on us mode. This is. This is exactly that. Reset, change gears, refocus, and move into the next normal positively and professionally. And this will be just another bump in the road.

Well, thank you, Sky. Russ, Andy, it's been an absolute pleasure having you on the show again today. Also, a big thank you to our listeners wherever you are in the world. If you like the show, please subscribe to Professional Builder Secrets on your platform of choice. And if you're feeling generous, leave us a review. But until next time, have a great day.