169. Cashflow & Wealth With Jaya Lesley

Welcome to another episode of Professional Builder's Secrets. In this episode I interview jaya leslie from jleslie.com and the JL Society. Jaya specializes in helping business owners tackle one of their biggest challenges, building long term personal wealth from their business efforts. Her approach demystifies financial management, showing builders how they can make smart financial choices without a finance degree and generate sustainable money from their business. JS shares actionable strategies to boost your short term cash flow without losing sight of those long term goals, helping you align your company success with your personal wealth aspirations. Enjoy. This episode of Professional Builder Secrets is brought to you by Apparatus Contractor Services. Apparatus provides full scope end to end QuickBooks, Precision Construction accounting and CFO services for residential builders. If you feel like you can't completely trust your weekly and monthly financial reports or you feel like you're flying blind, Apparatus will rebuild and operate your QuickBooks accounting system and give you precision construction accounting capability you can trust. Learn more@apparatusteam.com or on the APB Rewards Partner Directory.

When you're running the project, focus on the build, focus on the process. That's you just delivering your product. You deliver your product to the best quality that you can at that point in time. All of the finances set up before that. The good news is about if you are having cash flow problems and you want to work on your long term goals, anything you do right now to improve your cash flow is going to add to your profit and it's going to be something that you will learn about your business and improve your business so that in the long term you're only going to become more profitable. Foreign.

Builder 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 Jaya Leslie. Jaya, welcome to the show.

Hi. Thank you. Thanks for having me.

Very excited to have you on today. We met not that long ago, but so far I'm super impressed with everything you're doing, so I appreciate you coming on.

Oh no, it's great to be here.

Jay. Do you want to kick start things by just giving a bit of a background about who you are, what you do?

Yeah, yeah, definitely. So I run a private members club called JL Society. It's all about business, investing and networking. Basically I love finding new ways to earn money and connect with great people. So I created a society for people who want to do the same. I before that was doing a lot of consulting work, especially with other builders and other tradesmen in the construction industry. And yeah, I've also done Retail, manufacturing, all other different industries. So I was just. Now let's get it onto an online platform and help more people at the same time.

That's cool. What is it about your background that makes you uniquely positioned to talk about financial situations that builders are facing?

Well, I've had a lot of experience in helping businesses when. Like helping builders. Sorry, when I was consulting, my background is financial management and business development. So that's what I was doing through all of that. And I started the consulting company about six years ago, which was a really. In Sydney. Like, it was a really interesting time period. The industry was booming and builders had work thrown at them. They, you know, if anything, just couldn't find enough guys to get the jobs done. And then Covid hit and the world changed to some extent economically. And yeah, it's been. I feel like in the construction industry, it's been a domino effect of one problem after another ever since the pandemic ended. And it's. Yeah, we've witnessed quite a few. Quite a few dramas that they've been through with that.

Yeah, I'm sure there's builders out there, may have been operating back six or seven years ago, like you mentioned, but it seems like a very foreign place in terms of the amount of work that's coming in.

Yeah, yeah, definitely. And I think because it was so easy for someone to start their own business, like their own own business and go out on their own six years ago, seven years ago, there was a lot of people all of a sudden giving it a go and they just needed to learn the business side of things, work out what to do. But as long as they knew how to run a job and make that job somewhat profitable, they were fine because work just kept coming through the door, whereas now it's a little bit more challenging. And so if you don't have the experience or the business acumen or any type of financial management going on behind it, a lot of them are struggling.

I mean, try to dive into more about, I guess, your business experience with builders and the financial management side of things, but also how that ties into people wanting to accrue personal wealth. Because at the end of the day, let's be honest, people are running a business to generate wealth for themselves. I think in most instances. Can you talk to me a bit more about, like, JL society at this point and just like how you help other people accrue wealth?

Yeah, I mean, and that's you saying that, you know, a lot of people are in it to accrue wealth. That's A lot of where it came from. Every client I was working with, they were so much happier when their business was making money. And they weren't people that were necessarily money greedy. It just takes so many of your stresses away when you know your company is making money. You've got the money there to pay the bills. You feel like you're getting rewarded for the work that you're doing and you just have this sense of purpose about it. It just really helps. And so, yeah, I wanted to create that for people that weren't just business owners and let them see a way that they could do it in their own personal life as well. I started my first insight into the finance industry was I was working at a stockbroking firm when I was in my early 20s. I was 20, actually. They were amazing. They wanted, there was 25 men and they wanted to get me on the, in the trading room. So they taught me everything that about the operations behind the business, how it worked, how they executed trades, researched them. And then from there, when I did start doing my own business, I continued to then learn about forex trading and other areas of trading and just loved it. And then that has been what has helped me over the past decade with my own personal finances. Just knowing that there's extra income out like coming my way.

You really got thrown in the deep end then getting on in the calls with 25 men.

Then I did, you know, it was more just like this. It was more just educational that they wanted to, they offered to pay for my business degree and basically they just wanted to teach me. I was the office manager at the time, so it wasn't like they were expecting me to fulfill these roles. It was more just they wanted to teach me everything so that then one day I could do it. Unfortunately, I didn't because I just didn't want to live that lifestyle. I don't, I don't think of what, what that entails, but it was definitely something I was forever grateful for.

It's a pretty intense industry, stockbroking.

Yes, yes, there's some big personalities there.

Although in saying that there's big personalities in the building industry as well.

Yes, there are some big personalities and some really interesting characters sometimes too, which. But I love that I feel like that everyone's kind of unique.

You made a great point in terms of like the stresses that finances can bring on, on the owners of businesses and builders especially because you can't make good decisions if you're, you know, constantly worried about cash flow and all these kind of things. So I think that's a great place to start. What cash flow challenges are you seeing that builders are facing there at the moment that create these stresses and remove their ability to make good financial decisions?

Basically when trade started to increase, their prices and materials started to go up. If these, if their contracts weren't set up in a way that covered them and if they didn't have some items at least being provisional some and things like that, there was a lot of companies that started to lose money on their projects. If they were running multiple jobs at a time, they then their company would fill this significantly. And so I feel like now over the past couple of years, that's where the cash flow problems are starting to come in. Because they may have had a year or two where they didn't make the profits that they needed to. And so they're catching, they constantly kind of catch up, chase their tail a little bit there. I think for builders the biggest problem is they are really good at rinsing and repeating. So basically they know their process of quota job, win it, run the project, complete it, get paid, it's done, move on to the next and they just go, we just got to keep doing that and then we earn money. And that's how it works. If they are doing everything right, but if they're misquoting in one area or they aren't setting up their progress claims correctly in a way that it's actually going to cash flow the individual project anywhere. If they're just making their margins too tight, which is still such a common problem for something that actually is quite simple, it's going to. The rinse and repeat is just a down becomes a downward spiral.

Yeah. It's a great point too as well that it, it might not rear its head for a period of time as well because you may not know because a building job goes for a long time. Right. 12, 18 months in some instances, you won't know that you've made those poor decisions until well down the track.

Yeah. And then if they've already repeated that process for the next two or three jobs that they're doing, they're already locked into a contract where they're going to be doing the same thing. And so that's when I'm wanting to show them that they can look outside the box, try some new areas to try and boost their cash flow. They can still focus on building, but if they have influxes of cash, they can invest that in other areas and do some short term options.

Yeah, it's a, it's the perfect Storm at the moment though as well, because leads are drying up in the building industry. Interest rates are really high, so people can't build as much as they. They were at one point, as you mentioned, like, decreasing your margins. Right. Because you're like, I need to get this job across the line.

Yeah, yeah. It's definitely become more competitive in that regard. And I feel like a lot of the sub trades haven't. I feel like they're only just starting to feel the burden of it all. So the past year they've been able to increase their. They had the work there, they were able to increase their margins, and the builders were getting squeezed out in the middle because they're having to accept whatever trades are giving them so that they have someone to complete the job. And then the client's wanting that margin down lower and lower. But one thing with anyone, a year or two ago, I was saying to them, invest in marketing now. Find whatever way you can to allocate some money to marketing and do it in the right way. Because everyone else is going to go quiet. It's the first thing that a business will cut from their budget. If they're getting nervous about spending, they look at it as a luxury, but it's not. And it's like if you get your name out there now while the marketing's quiet, that's when you'll get the leads while everyone else is not.

Music's my ears.

Well.

Well, I mean, that's what we talk about, right? We recommend that builders invest 3% of their annual revenue into marketing because it's just a numbers game. If you can get this many leads in and turn this many, that many into prelims and sales conversations and then into contracts, it allows you to. It's a supply and demand game. You can charge the margins that based on value rather than, you know, just scraping at the barrel.

Yeah, I'm really big with financial management on, obviously you need a budget. And especially when you're having cash flow problems, you do need to keep your spending tight. But I don't feel cost cutting is always the answer. There's only so much you can cut out. Otherwise you're really limiting your growth. You're really limiting your approach to the business. And so what you need to look for is where you can reallocate that spending. Look at what you are spending and making and look at it like it's an investment and make sure you're actually getting a return on it. And that's why marketing isn't something you should cut because, yeah, you're going to get that return on it.

Well, it's also a band aid solution. You might, you know, in the short term see that your cash flow improves and you're not, you know, spending as much money. But then all of a sudden in 12 months time, you've got no leads and where's your next job coming from? So.

Yeah, exactly, exactly.

So talk to me. I guess that touches on my next question, which is how do builders juggle the long term business goals, which is around growth and setting themselves up and their family and all of those things that builders have with that immediate cash flow stress that they're feeling?

Yeah. So yeah, the first thing they need to do is try and remove the actual stress part of it. Like you mentioned earlier, a lot of people, it's not just even builders, it's even just creative personalities. When they start focusing on the financial side of the business and what's going to make them money and making their decisions around the build based on what they need to do to get money, the build doesn't go as well. They will always say they're like, I can't. I'm not running the project how I normally would because I'm too busy worrying about the finances. So you do need to separate those two things in that when you're running the project, focus on the build, focus on the process. That's you just delivering your product. You deliver your product to the best quality that you can at that point in time. All of the finances are set up before that. The good news is about if you are having cash flow problems and you want to work on your long term goals, anything you do right now to improve your cash flow is going to add to your profit and it's going to be something that you will learn about your business and improve your business so that in the long term you're only going to become more profitable. So basically, if you're trying to improve your cash flow, you're looking at invoicing sooner. You can only do that once you reach a milestone or a progress claim. But you need to make sure at the start when you're doing up your contracts that you are creating those progress claims to cash flow. That project don't just make them based on rough time frames going, oh, that should be, you know, every few weeks, every month I'll send an invoice out because then that part will be done. You need to look at where the money is getting spent throughout the project and then making sure that the funds are there to carry that project. It Won't always work out perfectly, but the closer you can get to that, the better.

Yeah, that's a great point because I'm sure there's many builders out there that have run into things. They get an invoice in that they need to pay for materials or whatever it is, and they don't have the cash in for the job yet.

Yeah, exactly. And there's so many trades now where they really want a significant deposit. Unfortunately, with builders, especially builders in Australia, we've got, if you're going through a bank, you can only do a 10% deposit, whereas you've got trades that can do a 30% deposit if they want to do. If they are doing that and other their competitors are doing that, at the end of the day, that you don't have a choice. So it's about making sure that you allow for that in your contract where you're like, okay, we know we can cash flow this.

It sounds like you need to be pretty smart with your contracts with trades as well, subcontractors and stuff like that. So it does align with your pricing with clients.

Yeah, yeah. Purchase orders are key. Always have a purchase order sent out at the start of the job with the dates on it and the price. Basically, the more planning you can do at the start of the job, the better. And I know things don't go to plan. Clients change their mind. That's why they will have variations, but that's why we have variation fees to try and cover the changes that will happen to them.

Okay, so let's shift energy a little bit because I selfishly wanted to ask you about that stuff because I know you've got a background in financial management in the building industry, but what you're really an expert at is this personal wealth side of things. So talk to me about how business owners can align their business goals and where they're moving towards from that perspective with their personal wealth aspirations.

Okay, so with. Basically you can apply the exact same principles that you are to your business, to your personal. Just look at, like, look at your salary and your income being your revenue, your daily spending, your family budget being your expenses, and whatever's left over at the end of the day is your profit. So you're going to do the same thing. Whatever income you have coming in, if you can create a multiple source of income, if you can create new ways to gain income, then you want to do that. I'll come back to that in a second. And how we can do that if you don't already have it, because there's only so much time you can give up in if you're wanting to get a second job or if you're wanting to do other things like that. If, especially if you have a family, you're wanting to spend time with your kids as well. And then your expenses. Have a family budget. I'm not the best at sticking to a family budget because I do it, but I don't like to. I don't like to do it in the sense of reviewing it like I would with a business where you've got to check at the end of the month. To me, that's just not living. I think because I do it for work, it might be similar to that whole, you know, a chef doesn't cook at home thing. I just, I'm just too. Too much. What, what I do is I. I will allocate money into a certain account every time I have money come in. So it's just like you have your spending account, you have your savings account where it's just like that's what will sit there like a business would, where you want money to sit there to know if you're not going to get work for a certain amount of time, you're covered with your overheads. Do that same thing at home. And then when you have. And then you should also have an investments account or kind of a playing with money account. So this is things where. If you're wanting to eventually do an extension on the house or if you're wanting to look into an investment property, things like that. That's where people think of now. But they take a large. Then you need a large amount of money to do it. So on the platform that I've created, we have different options of how to get into share trading or how to invest in a real estate investment trust where you can just put a small amount of money into a company. You can even start with like $100, $500 and start just growing and playing with money like that and realize it's not that hard to then have just these little bits of money come in. And as it does, you can reinvest it. And that's how people can then have those multiple sources of income without having to create a business or have a second job.

Yeah, I think one thing that stood out for me when you were talking about that process is having a salary as your revenue kind of like your business. Right. That reinforces how important it is for building company owners out there to actually pay them market salary as well. Because a lot of them don't Pay themselves properly.

Yes, yes. Have it set up. I feel like, I think it's a lot of what the old school mentality was with going out on your own and you just, you know, run your project, you get the profits, that's what you earn. Do it again. But when you do that, builders are dealing with so much money day in, day out. There's so much money moving into your bank account and moving out of it. And if so if you don't manage it, you could end up spending money that's not actually yours. And it's just a really tricky game to play.

Yeah. That's all about the work in progress, accounting adjustment. Right. Which people can check out if they're a member of App.

Yes. Yes, I have actually seen this. Yes, I do agree. Definitely check that out.

Okay, so talk to me about some of those ways, those incremental ways you can increase or have diversify your income and wealth that you were talking about.

Okay. So this can apply to businesses as well as personal. So if we go back to talking about a building company, if they're having cash flow problems, they will have, well, and this is with WIPA as well, they will have money coming all of a sudden and then it may not need to be spent for another three to six months. But it's, it is going to be sitting there. But they could move that into other areas so that they could then start to earn a little bit of money on that money that's sitting there before then it gets used. Now there's obviously, you know, your high risk options like forex trading and things like that. I wouldn't recommend doing that with money that isn't yours because you can lose it just as much as you can make great money from it as well. But there's even just moving it into a high interest savings account if you want to play it that safe. There's no risk of losing it. But at least if you're talking about hundreds of thousands of dollars that's going to be sitting there, move it somewhere where you can at least earn 5% on it. But there's other options as well. Same thing with the, with the property. There's the crowdfunding platforms as well where you can move money into those areas too.

So.

And there's even some shares that with the paid dividends, some of those, they're really low risk. You can see what percentages you could earn from them. It'll basically give you another income every three months.

Yeah, it's a great point. You're putting your money to work for you rather than just having it sit in a bank account?

Yeah. And it's, it's so much simpler than what people think that it is. I think it. Because it has a bit of a stigma around it. Like I don't know about that. No, I don't know what to do. I just to want. Just won't learn about it. But as soon as you remove the jargon from it and look at it as buying and selling a product like anything else, it's so simple.

I think the thought, I mean, at least from my point of view, it's like, okay, I need to learn everything to do with, you know, the share market and stuff like that if I want to start investing in it. So are there tools and platforms that people can use where it's a bit simpler than that, where someone else will manage the funds for you or, you know, it's just a really easy process.

Yeah, I mean so you can do the managed funds but they do have higher fees. So yeah, you know, if you've got it, if you're going to put your money into a managed fund, say it might get you 5% for the year, 6% but then half of that will go in fees usually. So it's pretty much like a super fund. Like it's a long term, slow growth, you can do that. But I feel like right now with the economy and people and the cost of living going up, I feel like we're wanting things that are a bit more where if you're managing it yourself, it's, you're actually going to gain from it right now or at least in a year's time. So what I've done with JL Society is basically I've filtered through the information and giving you what you need as opposed to going learn everything you can about the stock market and then come back to me. Because there's too much information out there and you don't need to know it all because you're not going to become a stockbroker. All you're wanting to do is just earn a bit of extra income for your family.

Sounds good to me. So you're going to give me the answers?

I could just say this is what it is, have a look. But and the main thing is it's like look at it all, a condensed version of it all and go, that's what I'm interested in. And it's like, okay, let's dive deeper into that element.

Okay, well let's, let's talk about that a bit more in a moment. But before we do, I want to ask you what are some common mistakes you see business owners make when it comes to planning for future wealth?

When it comes to planning for future wealth, I feel like the biggest mistake is they don't. They don't plan for it. They. They want it to appear. And then. Yeah. Are we talking about mainly builders?

Yeah, probably. I mean, obviously builders are listening to this. I said business owners to make it more general for you, but I mean, many business owners face similar challenges to builders. So I think. Yeah, what challenges do they face in this space? And, like, what mistakes are they making that are holding them back from generating wealth?

Yeah, I think actually with builders, the most common mistakes that they seem to make, that, like I said, the rinse and repeat, where they just. They think, if I just. I've just got to get more work, that's their go to. If I get more work, and then it will be fine. But it's like, well, maybe not. You could be. It could be the work that you're doing that's actually hurting you. So let's check what is actually going wrong first. So I feel like that's the main thing. It's not always getting another job that's going to help you, especially if your margins are too low, which is probably the second most common thing I see. As builders start to quote larger projects, they start to lower their margins because they start to look at the dollar amount. So it's like they don't look at the percentage. They look at the dollar figure, and so they're like, oh, this job's $4 million, $400,000. That would be great. Oh, that's. That's great. Like, if I make that from that project, I'll be so happy. That's more than what we need. But then if you're looking at 10%, a 10% margin on a project, no, that's not going to work for you. That won't cover what you need to do to build a $4 million project. It does not give you any room for error. It does not allow for the time frame that it's going to take you to build that job. It's not going to allow for the overheads that you've got there, as well. As they start to get bigger sometimes, then they start looking at the dollars. But remember, it's always a percentage gain.

Yeah. One thing that we've seen over, over the years at APB is like, the fixed cost aspect is not factored into the markup and margin that they charge on their projects.

Yeah, that is a very common thing as well. Yeah. I find actually with. When I was doing consulting, I noticed that a lot of builder. Everyone seems to do it differently. And I was. I would do work with a lot of a few building companies in the same area around a similar age bracket. And their quoting systems that they would use would be so different from one another where some would allow for it, some would be, you know, purely just using a spreadsheet and sending out to trades to quote. And then they put their percentage on top, and then some would do a full takeoff using actual software. And I just felt like there wasn't. There didn't seem to be from people who would have done their apprenticeship around the same time in the same area. There was not a one size fits all for how they would quote.

Yeah. I mean, there's so many. It is something which it seems like the building company. Sorry, the building industry is so far behind other industries in terms of adopting software. Like, there's too much paperwork, soft spreadsheets and everything being used for really important tasks like estimating and quoting. But it feels like it is moving in the right direction. There's so many softwares out there now.

Yeah, yeah, it's definitely a lot. Even in the past five years, it's changed. It's the softwares that are available. They've grown and become a lot better than what they were five years ago.

All right, Joe, what are some practical steps that the builders listening today can use to get on track with all of their wealth and business goals that we've been talking about?

Okay, well, so basically, like I said, knowing your contracts are set up correctly, knowing that you have the progress claims in the right timing, making sure that you're quoting correctly, that your margins are there, not just not your markup, but focus on the actual margin. I feel like there's still plenty of builders out there that get confused between the two. So if we just focus on margin, at least I feel like that's better. Because when builders focus on markup, they automatically go. They know constantly will go to a lower percentage. Yeah. So it's just like, well, let's focus on margin, because then at least your markup percentage then will naturally be higher. But yeah, so if they can focus on those. Those early steps before the job begins, the more you can get, the more you can have organized, the more that can be planned with purchase orders, getting schedules done and getting all the information out to your trades, having all of that ready to go, the smoother process and the build can be so So I would definitely say that. And then basically it's just monitoring it throughout it with your financial processes, making sure that you're sticking to budget, which I know I think you guys use. You often recommend BuilderTrend to people?

We do have a partnership with BuilderTrend on some things, but we have a rewards directory with a number of different construction software partners as well. So we don't necessarily align with any one software. There's great use cases for many different construction softwares. BuilderTrend is one that is quite robust but there's. Yeah, there's tons of others as well.

But yeah, so basically I do recommend using a project management software so that you can monitor your budgets throughout and then also definitely review. Don't just assume that oh yeah, we got what we went for on that project. So as. Yeah, first and foremost make sure you have that process fine tuned because at the end of the day that's the product you're all selling. Once you have that down packed, then make sure that your overhead, percentages and everything work. You're basically your whole picture for the company works together with the profit margins that you're getting and then anything that's left over anytime that there's something there, make sure that you can invest it in other areas like a real estate investment trust or maybe some shares that will pay you some dividends or maybe even just a high interest savings account if you just don't want to look into right now. But look, there's other options out there and look into that and incorporate that into your business because at the end of the day it'll create another income stream, more profit for you without you having to allocate more time and you can just then go back to focus on building. Once you look at the big picture and know that your company then overall is profitable and making the amount of margin that you are after, then look at what other areas you could invest in. So with any other cash that you have, look at real estate investment trusts, they're a really simple one to start with. Look at real estate crowdfunding, look at shares, look at even the high interest savings account just for something really simple to begin with. But basically once you start doing that, you will then increase your bottom line. You'll have a higher profit year after year because you're going to have that multiple source of income without having to do any extra work. You can go back purely to focusing on building.

Yeah, I love that. So I guess what you're saying is getting your business financials in order, then thinking about how you're using your money within the business to start accruing wealth for the business. And then how does that play into the personal side of things as well?

Then on the personal side of things, do the same thing. So pretty much on the personal side. So you've got your business, you earn your salary from your business. You know what you're getting week by week or month by month, however it is that you choose to do it. And then in your personal finances, do the same thing, have a certain amount that you allocate every pay cycle to investing into something else.

Makes a lot of sense. And I guess if anyone is looking for some, some quick tips on exactly where to get started from a personal point of view, then obviously JL Society is the best place to check that out.

Definitely go to JL Leslie.com and it's all there.

JLeslie.com Follow Jaya on all of her socials, check out JL Society, highly recommend it and you won't be disappoint.

Thanks, Will.

Yeah, no, thanks so much for coming on the show today, jr. I've really enjoyed it and you've provided a lot of really helpful advice for the builders out there.

Yeah, thank you. It's a tough time in the industry right now, but I feel like, you know, we'll come out of it soon and yeah, the work's still there. It's just different.

Yeah, absolutely. If you're looking to go further with bit of learning, obviously. JL leslie.com Like Jaya mentioned, episode 121 of this podcast is called Cash Flow vs Profit, which is another interesting episode. And for members of the association of Professional Builders, check out our Cash Flow Mastery Action Plan. You might want to dive deeper on those things, but otherwise had a lot of fun today. Thanks for coming on, jr. No worries.

Thanks so much.

A big thank you to our listeners as well. Wherever you are in the world. If you like the show today, 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.