234. Habits That Scale With Andy Skarda, Ahmed Yusuf, & Erick Villa

Welcome to another episode of Professional Builders Secrets. This episode was part of a webinar series that we ran to launch the 2026 State of Residential Construction Industry Report. But we go beyond the data and look at some real insights and practical takeaways that builders can put in place in their companies. So we thought it was so valuable that we wanted to share it with the podcast audience as well. In the session, I interview APB's head coach, Andy Scudder, as well as Eric Villa and Ahmed Youssef from construction management software WonderBuild. We dive into the financial habits that keep builders in control as they scale. There's a bit of Q&A with the building company owners that attended, so just be aware of that as you're listening to the episode. There's a little bit of back and forth throughout. This episode of Professional Builders 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 at apparatusteam.com or on the APB Rewards partner directory.

Builders are incredibly busy, but not sure about their financial position. Being busy does not necessarily translate into being profitable.

You equate success to being busy, but somehow the bank account and the numbers don't just add up and you start questioning yourself, what am I doing wrong here?

You can end up in a situation where your bank balance is full of other people's money. What got you here will not necessarily get you to the next level.

What happens is that it catches up with you because you start to lower your markup, for instance, to win bigger jobs. And all of a sudden your markup moves from 30% to 20%. And conversely, your margins have completely been obliterated. But they're the cancer cells that are inside your book.

As you grow, financial illiteracy becomes more dangerous. There needs to be a reporting cadence that is non-negotiable.

Well, welcome everyone to this webinar today called Beyond the Data, Episode 4, the financial habits that keep builders in control as they scale. As everyone's piling into the room, there's quite a lot of people here already, but let's just do a bit of a brief introduction as to who I am, what we're doing today, and what role you can play as you've turned up. So I appreciate everyone giving up their time. I'm the head of marketing here at APB. My name's Will, and I'll be speaking for a little bit at the beginning of the webinar, but hopefully not for too long after that because we've got some phenomenal experts with us today. I'm in Sydney, Australia, but if everyone can just share in the chat where they're joining us from, it'd be great to get a feel for who we've got in the room. While we're doing that, we've got a couple of panelists here. Just throw around to tell us where you're coming from. Andy Scudder, you're coming from Sydney as well?

I am just down the road from you, Sydney, Australia. I'm the head coach here at the APB and it's an absolute pleasure to be here. Thank you.

Perfect.

Ahmed and Eric from Wonderbuild, where are you guys joining us from?

My name is Ahmed Yousouf, director at Wonderbuild. I'm located in cold, this cold morning in Melbourne.

Ah, yes, very good. It's a bit cold in Sydney, to be fair.

So Hi everyone, my name is Eric and I'm a Customer Success Manager here at WonderBuild. I'm also from Melbourne and I'm really looking forward to today's event.

Awesome. So we've also got Pedro from the Gold Coast, Ben from the Gold Coast, Eric from Colorado, Lynn joining from Bendigo, Kylie from Inverloch. Lots of Victorians in here. So we've got Reed from South Dakota in the USA, Clayton from Kansas City in Missouri. Chris from the Gold Coast, Jordan from the Gold Coast, Sean from New Zealand, from Palmerston in New Zealand, Matt from Sydney, Maddie from Brisbane, Craig from Central Coast, Janelle from Airlie Beach up north in Australia. We've got Connor from central northeast of the USA, Hakeem from Houston, Stephen from Sydney, Ben from Bend. There's lots of people joining us today. So, thank you very much for everyone joining. I won't keep reading off the names, otherwise I might go for too long.

Yeah.

I appreciate everyone joining us today. Lots of people from all over the world are here to learn more about some of the insights that we've taken from this year's research. What I would say is I'd encourage everyone to put their questions in the chat. I'm going to be monitoring the chat the whole time. And what it is, is a great opportunity that if anything's coming up that we're talking about in this discussion, if you've got a question that you want to get answered from the head coach of APB or one of the team from Wonderbuild, we can bring it to the floor and get it answered live today. So it's a phenomenal opportunity to do that. It's not your typical webinar. I'm actually going to stop sharing my screen in just a moment because it's about leaning in and having a really strong conversation about financial habits that are going to help your building company. So that is the most important thing today. Take notes, switch off your phone, do all the things you need to focus on this conversation because it's going to be really, really valuable. So on that note, let me stop sharing my screen and we can do a bit more of an introduction to our expert panelists today. As Andy mentioned, he is the head coach here at APB, and I've just grabbed a quote about Andy because I think in a way it summarizes his style and the way builders respect and appreciate his advice. So one of his clients said, Andy's been like my shoulder to cry on, my rock to yell at. And everything the whole way along. So I think that middle part probably gives you a bit of an insight into Andy's sense of humor. Andy, welcome.

Thank you. Nice to be here, and I'll do my best to behave.

Very good. Hopefully not too much because I think we need a bit of fun as well. Also, we've got Ahmad Yousuf and Eric Villa from Wonderbuild. Like they introduced themselves before, if you're not familiar with Wonderbuild, highly recommend checking it out. It's a cloud-based construction management software designed specifically for builders to help you with project planning, scheduling, budgeting, and all the things in between. One thing that's always stood out for me with WonderBuild is how much they listen to their customers. So in terms of developing new features and making sure that customers are getting the most from their application has just been worlds ahead of any other software that I've experienced before. So that's always great to see. And we get phenomenal feedback from all of our clients as well. So Guys, welcome. Eric, go to you first.

Yes, thanks again for having me. Really excited for the conversations ahead. Yeah, just looking forward to like building strong partnerships through these kind of webinars. Thank you.

Likewise here. Very excited to be here this morning and looking forward to our conversation. And I just want to put a disclaimer out there. If I say something and there's a bit of a doubt, please don't take my word. Go talk to your accountant, please. That's the equivalent of a medical doctor. All right. I'm just a software person. All right. Okay. Thank you. Very good.

I mean, I'm not sure that some accountants you could say are the equivalent of a doctor, but never mind.

Careful, Will.

I've been around Russ too much, Andy. Yeah, you have.

Absolutely.

Well, welcome everyone. And also just wanted to give a bit of a background as to what we're talking about today. So we're not going to talk too much about the State of Residential Construction Industry Report. It's the backbone of the discussion we will have, but it's essentially a report that we publish every year in partnership with companies like Wonderbuild, where over 6 years we've captured data from over 8,000 building companies in the US, Canada, New Zealand, and Australia. And the data for this year's edition was collected at the end of 2025. One thing that we were able to do this year is analyze data across multiple years, correlate multiple data points using artificial intelligence, and it's given us some really, really deep insights into how building companies are running and where they can be more profitable and have better practices. So if you want to get a copy of that report, don't worry, it'll be sent to everyone that's attended today straight after the session. So you don't need to try and track that down. What the point of today's session is, is to go a little bit deeper on some of that data and talk about the insights and the practical applications all of you can actually put in place in your building company, which I think is going to be really valuable. So as I mentioned before, there won't be slides. It's not your typical webinar where we just go through the motions. It's hard-hitting questions to the guests and hard-hitting questions from the people attending. So any question you have, please put it forward and we'll get it to the floor. So hopefully we can all leave today with some ideas around some better financial habits you can put in place in your building company. And thankfully, I can take a bit of a breath now and we can throw it to some of our panelists. Well, almost. I've got to ask the first question first.

Well, that would help. Otherwise, we could just talk rubbish.

That's it. I mean, you probably will anyway.

That's true. That is true.

All right, so the first question relates to this common problem in building companies across the industry, which has been around for a long time. How you can feel busy and work's coming in and all that kind of stuff, but you still don't feel confident or sure about your financial position. And you want to touch on why that might be the case.

When I saw this question, the reality is that sometimes it is absolutely the truth and that builders are incredibly busy but not sure about their financial position. And I think that's going to come primarily from the fact that most builders get into the building industry to build houses. You touched on, you know, the fact that— and I think Ahmed said this— none of us are accountants on this call. That'll be obvious because we all have senses of humor. Ah, did I say that out loud? But the truth is, builders— it's not a skill that most builders come to the table with. They're good at building beautiful homes. So numbers can appear overwhelming. Numbers can literally be difficult to understand if nobody's taught you how to do that. And what that means is somebody can be doing 70, 80, 90 hours a week legitimately, but not know whether they're making a profit or they're not. And because of the lack of, let's call it, financial training or understanding, it can be very difficult for them to even interpret the data that they do have, if they even have it. So it's kind of, there's two things going on here. You can be busy, absolutely, but being busy does not necessarily translate into being profitable, or even knowing whether you're profitable or not. So, you know, I think that's the reality here is you can be working your backside off and your equity is eroding all the way. And that, I think, we're going to get into some of the mechanics of that. But that's the short answer. If you don't know your position, you're not going to do anything about it. And sadly, many builders, because of their lack of confidence in interpreting their numbers, they'd rather go the ostrich route, stick their head in the sand, and just hope somehow that at the end of it, it'll all come out in the wash.

If I may chip in, Will, that's a very good intro, Andy. I have seen it all the time because we interact with thousands of builders and they come to us with all sorts of questions and obviously we interact with them uh, personally around their businesses. So we see it all the time. Uh, I've come to refer to this question, what you've just raised, Will, as a busy fool syndrome, because you might be, uh, an owner of a residential construction company. You go on your site, you see a lot of activity, you see concrete being poured, tradies everywhere. The phone is not— doesn't stop ringing. And you feel successful. You equate success to being busy. You go home extremely tired. You've put in the hard yards, but somehow the bank account and the numbers don't just add up. And you start questioning yourself, what am I doing wrong here? Which is why I found it staggering reading the, uh, Sosi report in terms of the percentage numbers. Of builders that self-reported a loss. And I'm sure the audience here would have time to go and read that report in detail. But I found that staggering. And even more staggering is even closer home. New Zealand had a significant number of people who are self-reporting a loss. And so you wonder, something is amiss between being busy where there's a whole lot of focus on sales. And sales is good. Sales drives revenues. But revenues alone doesn't quite tell the story. There's so much else that follow revenues, which hopefully we'll unpack this morning, that builders are not attending to, which then does not become a surprise when they see their financial result is not where they want to be, and they wonder what really happened. So having a lot of busy— busyness and activity in itself does not equate to financial success. So I'm sure we'll unravel a few more things as they come up.

But, well, if I can just jump in and take the side of the builder for a second, that is not because of lack of trying or lack of desire. That is because of lack of training, knowledge, and understanding. Many builders— Ahmed raised a very good point— many builders refer to their bank balance as an indication of how successful they are. And the sad part in our industry, we're in an industry where revenue can grow quickly and substantially. But if we're not looking at things like profitability and efficiency, you can end up in a situation where your bank balance is full. Here's where I take the theatrical pause of other people's money. And once you've paid that money out to settle all the tradies and the suppliers and your team and blah, blah, blah, Yes, you've gone home every night exhausted because you're working yourself to the bone and you keep telling yourself, well, if I'm working this hard, I should be making money. And at the end of the day, when you stop shitting all over yourself, you find that actually you are not making any money. In fact, it could be that you're in a loss situation. So there's no lack of ability, but there is a lack of understanding and training. And obviously that's where we at the APB, particularly from a a coaching perspective come in, in terms of giving them the basic knowledge not to become an accountant, but to understand the story that their numbers are telling them. That's the thing that we always drive towards.

I told you not to sell anything on this webinar.

I'm not selling anything. I'm just telling the truth. Yeah.

If I could piggyback on that. Sorry. Yes, totally agree with what has been shared. What I've noticed is that many builders are flat out, like their pipelines are full, revenue looks strong from the outside, everything appears healthy, but internally there's some quiet uncertainty in there. So they're going to be asking like, are we actually making the margins we think we are? Or why is the cash tight? We're so busy. From what I've seen, the issue isn't effort, it's all around the financial habits. So if it has worked, on a like $2 to $3 million turnover, sometimes it doesn't work on an $8 to $15 million project, right? So as complexity increases, we need to make sure that reporting rhythms evolve with it. So the result is that they're going to feel profitable and they're going to be fully in control with all that's been happening in the business.

If I may share one quick example, Will, if time allows. I knew of a builder Good friend. He saw this huge amount in his account. Of course, obviously for him, the bank balance or cash information based on the bank balance was the most significant indicator of financial health for him. And he thought he was flying. In this instance, $200K, thought he was flying and then took a bit of the money and put a deposit because the company needed a new car, chose one of my favorite cars, a Raptor. Cool car indeed. What he didn't see was that 180,000 of the 200K of that was prepaid deposits for work that he had not even started. So effectively, he was spending clients' money to fund an asset that he could not afford at that particular time. And what was worse was that he had not even considered there was GST payments upcoming, there was PAYG upcoming. Some supplier bills, which meant even the extra 20K was already spoken for. So in essence, he was actually spending money that he had not really earned. So it's a quick way to think that I have money in the bank. I can use that when you don't now relate back to what have I not done for a client, which also requires the same money. And that is equating cash money in the account to profit. And that's not correct. And this happens, as I've seen in the SAUCI report, this is happening frequently, but I've actually seen it in practice. Interestingly, it's not just in the residential construction market alone. It's in many, many industries that what actually happens. Shopkeepers do that when money comes into the till box and they use it to pay for something else, not realizing they're, you know, stealing from Peter to to pay Paul in that instance, you know.

And I think that comes back, Ahmed, a lot to the fact that most of our formal training is we get trained to be a technician. We don't get trained to run a business or to lead a business. We get trained to be a builder or a shopkeeper or whatever. And we're very good at that technical skill. And that skill creates opportunity. And that opportunity is what causes the business to grow. And, you know, we have this standard saying that we use a lot at the APB: what got you here will not necessarily get you to the next level. You know, if you think about it, most builders are very good with their hands. They're very good at the problem comes up, they just fix it. They just deal with it, which is great until your business gets to a size where you become the bottleneck and everything's still coming to you for you to solve. But the business is waiting because you can only deal with so many things at one time. So there's a lot going here. That cliché about revenue is vanity, profit is sanity, cash is king. We have to understand that you can spend as much money as you like as long as it's yours.

Yeah.

And for a lot of builders, unfortunately, they don't understand that that money that's in the bank is not theirs. They've got to first be able to separate This is the money I need in order to be able to settle my responsibilities. And then this money that I have left is mine. And I can then I can use that for whatever I want.

Absolutely. And there are many, many examples that I see, but equally, there are many good examples that we see. And I see there's opportunity to share knowledge in terms of things that successful builders are actually doing. Hopefully, today we can also share some habits things that one can do to start correcting that and putting yourself back onto a healthy financial track?

Yeah, I think piggybacking on that particular scenario, I think one solution that has been quite effective from what I've seen is that introducing a disciplined monthly job performance rhythm so you can actually compare your budget versus actual committed cost versus remaining budget. You're identifying and documenting, you know, margin drift, cost overruns, your variations. This way you flash out any flags and you can come up with an immediate action plan because problems are more manageable at 2% and they get really painful at 7%. So the monthly reviews, it shortens the feedback loop. It comes up with that, you know, more effective action plan in resolving any possible financial issue.

Well, Jordan's asked the question and I just want to acknowledge it. We'll come back to it, Jordan, because you've asked about the monthly reporting around WIP. So I think we'll cover that off in a little bit when we start talking about those regular habits that builders can put in place. But before we get to that, we've got a couple of other things we want to cover off. And I just wanted to draw attention to a couple of statistics which reinforce what everyone's been saying here. One of them is that while builders, 60% of builders said that they understood how to calculate WIP adjustments, what was true after they had follow-up testing in the Sourcey survey was that nearly 80% of them didn't actually understand the calculation. And I think that really ties into what you were saying, Andy, in the sense that it's not like a deliberate thing to not understand how much money you've got available. It's just a lack of understanding of what you actually need to be doing.

Yeah, you know me. I'm— what you see is what you get. Before I joined the APB, although I'd been in business for 30-odd years, I'd never understood the concept of WIPA. And nobody has made the, the explanation of what that is and the impact it has on a business clearer than the APB. It really is. It's, it's revolutionary in terms of the difference it makes in a business. So I just, I want to make anybody that's out there feeling there's something wrong with me or I'm, you know, I don't, I should know this. No, if nobody's taken the time to explain it to you, you won't know it. I had 30 years experience, but I had no expertise in work in progress. Okay, there's a nice little nugget. You can do things for 30 years the wrong way. And then one nugget changes that and all of a sudden, there's a new universe available to you.

I think the other data point which is worth mentioning is what Sourcei told us was that builders working over 60 hours a week were actually making less than those working 40 hours. And I think that tells you something about the maturity of the way they understand their financials as well as they grow.

And the default picture of I need to work harder when I think the reality is what we see across the world is you need to work smarter. That's the difference.

And to add to that, from WonderBuild's point of view, I mean, obviously the lack of systems, the lack of structure, the lack of processes, you know, all these things leads to chaos, leads to what I call the, uh, you know, the overflow of work, the avalanche of things that actually befall the builder or whoever is around them. And those who work less hours actually have built in those structures and systems, and they let other things do the heavy lifting for them. So they get to focus more on what they love doing, building good quality, beautiful homes, when they know the mechanics of the business is on a nice sound footing and well, well structured. I've got to point out, there are others who still rely on good old spreadsheets. But I gotta say, you gotta be an expert on spreadsheets to really get it doing the heavy lifting. Spreadsheets, by and large, will fail you because one wrong data you put in messes everything in entirety, and it's very hard to pick that out. So moving in with the times in terms of digitizing your business, enabling your business to help you as a builder get control of the systems makes you work less hours and have more time for for your family and for your other things, for your own well-being, which is also very important.

So yeah, for the important things.

For the important things. That's true, Andy. That's very true. That's very true. So important to highlight that.

Let's move on to the second question, which is about what happens when a building company is growing and how this control of the finances becomes even more challenging. So just to touch on a couple of things that came out of the Sourcee data, And Eric, you kind of alluded to this. What we saw in building companies under $3 million is their net profit was around 9.5%. But from $3 to $10 million, that dropped back to 7%. And then once they got over $10 million in revenue, they got that back up on average to 9.5% net profit. And of the building companies who didn't make any net profit, that pain was a lot bigger when they grew. So it really emphasizes that as you're growing, it becomes harder to control those aspects of the business unless you fully understand them. So can we dive into that a little bit?

Yeah, well, look, I think Eric touched on this very, very clearly. Something that's a small stone in your shoe when you're at 2%, if you don't resolve it and you continue to grow and add complexity and volume, it becomes really painful as you move on down. We have a standard default protocol at APB. We will not scale an unprofitable business. And really, if you think about it, there's a chain of things that need to happen. If we started this discussion around the fact that a lot of builders don't know whether they're profitable, they're not 100% sure whether they're profitable. Step 1 is to get that clear first, get the data captured, get that into a place that we can see We are profitable or we not. If we are not, then we need to identify why not and we need to address that to then get into that profitability scenario. Because the truth is, it's that profitability that's going to be the fuel that funds that scale. And we want to make sure that there's obviously enough of that for the builder to be able to grow. What you've got to be careful of, and I think what happens at that $3 million level, is that often when a builder goes through that level, if things aren't properly set up, they start to borrow from Peter to pay Paul. I think Ahmed has touched on that. So what they're now doing is they've got more work coming in because they've got more work coming in. There's more deposits coming in, there's more cash coming in, and they can kind of keep— I guess I'll be as straightforward as I normally am— they can keep the Ponzi scheme going as long as they keep selling new contracts. So as long as there's new work coming into the business, it'll keep flowing simply because they're taking money from future jobs to cover the current jobs and just keep that cycle rolling. The scary piece is as soon as that growth stops, the turnaround is very quick. Literally, I've seen companies implode in a 6-week period from really looking healthy into gone in a 6-week period simply because they weren't profitable to start with. So it's really a scenario of things are going to get more complex as you grow things. There's going to be more volume of everything. I think Ahmed said it. We've got to have the systems in place and we've got to have the help from people like Wonderbuild that can give you the tools and the automation that makes handling that volume and scale possible for a normal builder?

If I may chip in, thank you, Andy. That's a very good intro there. My role in Wonderbuild, by and large, is to manage growth. So the word growth is something that I talk about nearly every day. So growth is in any company, in any industry whatsoever. But what I find with growth, it's a double-edged sword. In fact, I remember coming across an old adage which said growth for the sake of growth is like a cancer cell because growth can overtake you and overwhelm you. So when you're doing, for example, 2 jobs a year, it is very easy to manage your numbers on the back of a piece of paper from a cafe and everything is easygoing and you can manage that. But the word is scale. The minute you hit scale, because you say, we guys, we want to grow. And everyone wants to grow. Everyone wants their business to be big. The minute you hit that scale now, you get to what I refer to as a scale divide, you know, and this is where your complexity of your business now starts to grow quicker or faster than your systems, meaning it's growing faster than your capacity to manage that actual growth. And sooner rather than later. You get overwhelmed because you're now working harder to catch up with that speed of growth that is running ahead of you. And of course, you're carrying more risk because you're getting more jobs. You're getting a lot more retainers and deposits being paid into your bank account. You're probably not maintaining different accounts for different jobs. It's all mixed. So that's what I call the fidelity to the job financials is thrown away. You're managing more people. People by themselves are tricky task to handle. They add more complexity in your business. And sooner rather than later, you find yourself carrying less dollar back home. And all of a sudden you're in a trap and you're wondering, how am I going to get out of this trap? Yet the business was seen to have been growing. We've seen a lot of newspaper articles where some businesses have folded up, yet the amount of projects they had on their books was massive. And people ask, how did that business hold up? But they have so many projects and so much money in the bank, not realizing that there are few things that have gone astray to make the business strangulate itself. And that is where the growth of the business and the systems and capacity are not flowing in tandem. They're not structured in tandem. And just to round that up, in Wonderbuild, I know we've had these conversations with Will about growth. And we say, well, we constrain ourselves because we focus on making our product right for the market. We don't want to scale too quickly because we will overwhelm our own capacity. So we are slowly building our capacity to make sure we equate to the growth of Wonderbuild. If we don't do that, we will be, uh, will be gone. Yeah, so similarities are there across all industries, but this is something that is very prevalent. I see it constantly, and it's got nothing to do with you as a builder wanting to achieve success. Success is good, but that success has to be underpinned by things that will help the success to actualize itself. It just doesn't happen.

Also, I think that that challenge, just like any other business, if a company is scaling up, they're growing, that challenge is always going to be there because growth means multiplying all the moving parts in the business. From a builder standpoint, you're looking at more concurrent jobs, like more supervisors influencing outcomes, more variations are in play, more subcontractors and suppliers are involved. Whereas from a smaller scale, a builder can sense if a job is going off track. So they're actually closer to the detail. You know, as a business grows, that distance, it increases, and your intuition as a builder, as an owner-operator, it becomes less reliable. I believe control doesn't disappear because builders lose skill. It disappears because systems and habits do not evolve with the scale. So having the right tools, having the right systems, Creating and streamlining processes for your team, training your team members so everyone is on the same page. Having that right structure would really help from a builder standpoint because builders who scale successfully don't really work harder. It goes back to what Will said earlier. You don't work hard, you work smart. So they, they increased financial discipline the same rate that they increased the revenue. That structure. Makes sure that you have control over that growth.

Just to add one more thing, something that I've seen particularly with growing businesses, I've seen the practice where, so you're a builder, you're growing your business, so you want more jobs. And you know what? It's very infectious. Winning is infectious. If you're on the winning trail and you're winning business, it's wow, fantastic. But what happens is that it catches up with you because You start to lower your markup, for instance, to win bigger jobs. You're like, I gotta get that job, you know, I gotta win that job. So the propensity to discount your pricing because, you know, I've got some cash in the bank, which you still can't quite tag to specific jobs. And all of a sudden your markup moves from 30% to 20%. And conversely, your margins have completely been obliterated. For that particular job, you can hardly even make up for the fixed costs that you have to incur each day that your business is open. All of a sudden, you're finding jobs that are making losses. But because you have too many jobs, you're growing, they may actually be obscured. They hide away. But they're the cancer cells that are inside your book. And as they grow as a percentage of total volume of jobs, the rot starts to occur in the business. And that is something that a builder may not see because you're not focusing on the numbers daily or weekly or monthly. You're focusing on winning more jobs. And winning is infectious. It's beautiful. It's joyous. It puts a smile on your face. But in the back end, My word, things are starting to happen and it just comes as a surprise, complete surprise. And you ask yourself what really happened here. Yeah.

Well, this is the point that I've got to jump in again because I'm thinking about what we're saying and I want to jump out the window. So everybody that's listening must be going, how the heck do we actually resolve this? I think there's two things really to summarize the answer to this question. As you grow, financial illiteracy becomes more dangerous. That's the real short answer is if you don't know, if you don't understand your numbers, it's going to get worse and worse and worse for you. That's just the reality. But I think to balance this picture, it's important that we say it's not necessary for a builder to become an accountant. There are all of these number one people. I mean, I would recommend for every single builder, one of your first hires as you start to grow must be a competent financial controller/bookkeeper. That understands the technical aspects of work in progress, gross profit, markup, margin, net profit, and most importantly in this space, your expense ratio, your overheads as a percentage of your revenue. If they can get those 4 pillars in place, as long as the numbers that are put in front of the builder are accurate, up to date, and he understands what each of them says, That's all he needs to do. He does not need to try and understand the technical side. This gets even more complicated when you understand that the tax law around things like work in progress absolutely complicates and confuses this picture completely. And sadly, it's where I think Russ Stephens' historical fight with accountants has come from. They often don't understand the nuances of the building industry. They've been trained to do the books of a manufacturing industry. The concept of us carrying so much of other people's money doesn't happen to the same degree in other industries. And because of that, they put the financial reports together from a taxation perspective, which completely muddies the water. It is very, very difficult for a builder to run his business from a management perspective every single month. If what he's looking at is tax compliant numbers. It's very confusing. So I think the positive to pull out of this is you don't need to be an accountant. You can hire an accountant. In fact, you probably shouldn't. You should get a bookkeeper in that can handle the basics for you. And then you need to understand the difference between management accounting and taxation accounting, and that'll clear up a lot of the confusion.

And would you say, Andy, on top of that, and the point you make is a very good one, that now that your business has grown, you're no longer a Cessna plane, you're now a jumbo jet. So obviously as a jumbo jet, you're not going to use a Cessna cockpit. So the fact that you have a tax accountant, a good bookkeeper, that you'll also have other roles within your business clearly identified and delineated. So you have someone who is handling your cash accounting, someone who's handling your estimation. Your administration. So the clarity of roles in that company has to be so clear that accountability shines through and each person is accountable for specific outcomes. To you, the builder, you are the conductor of the choir and all those who are playing different instruments have to work on the same hymn to make sure the bottom line is financial success for the business. Wouldn't you say that, eh?

Otherwise, why are you in business? We shouldn't be in business to work harder or longer. We should be in business to create the financial stability we need now and what we need to build a legacy for our families generations into the future. That's why we should be in business. If not, go and work for somebody else. Why do you want all of this, this headache and this risk? Go and work for somebody else, earn a salary, go home at the end of the day, crack open a beer, put your feet up. Watch the footy. Life is easy. But you're never going to grow a financial future out of that kind of scenario. Essentially, what you've said, which is a very valid comment, is that for a builder to really get this process right, they have to evolve from being a builder into becoming a business owner and leader. That's actually the difference. I loved your, your choir and your orchestra kind of analogy. You can make it as a singer-songwriter at the beginning, But eventually, when you start to tour that hit album, you need a band and a sound engineer and a lighting guy and a blah, blah, blah to make that performance actually sing. So that's a very valid point. We've got to understand that a lot of what we're talking about is that evolution from I'm a builder to I'm a leader or I'm a business owner.

Sounds like that's come from a musician who's been on the road before, Andy.

Just a bit.

It also sounds like based on what you're saying, Ahmed, and Andy, I know you've mentioned this before, it's the definition of success and winning. It's almost like it's misaligned. That's attached to revenue. Maybe it should be attached to margin and profit, and therefore that's what you're focused on in terms of success.

Without a doubt. I mean, revenue to the owner of the business is of no value if none of it is profit. The only piece that is of relevance to him is How much of this money is mine? And the first bucket of money that he gets, he uses to cover his overheads. And whatever he's got left over at the end of that is then his personal money that he can either reinvest back into the business or he can use it to do whatever he wants with it. He can go and buy that new boat or car or plane or whatever it is that he wants.

Okay, we need to start, we need to jump ahead because we've only got 19 minutes left. And we did promise some habits and some practical advice to round out the conversation. So I'm going to jump to that question in a moment. But we did have a question from Adam, and I think this is probably one that might need to be an offline coaching situation, Andy, but I'll throw it to you. He's asked about the construction slot planner and revenue forecasting tool that we provide at APB. And if he's using different milestone payments for different types of builds, so single, double story, varying number of milestone moments through those builds, how does he get the kind of standard calculator to give him accurate forecasting from that?

He just needs to set it up for his most complex situation. So for example, if the most complex thing he does is a double storey, which by definition— and I'm just going to use it as the simple example— he's got another storey's worth of build and progress in it. He needs to set the calculator up for his biggest, most complex situation, and then adjust backwards on the ones that are simpler and quicker. So just literally set up the most complex and then scale back for the things that are easier, and that'll get it working perfectly. And if you want me to be really gritty, if he's in a double story, he's, let's say, got 4 weeks of work on each story in terms of framing. What will happen is when he sets the calculator up in a single story job, he'll set up the 4 weeks for the stage that relates to the ground floor work, and you'll set up 0% and 0 days for the stage that relates to the second story because there isn't one. And then everything else will work from there.

Perfect. Thanks, Andy. I hope that helped Adam. If not, yeah, you might be able to reach out to someone at APB to chat further about that. But for anyone wondering, that was referring to a specific tool available in membership with the Association of Professional Builders and to our coaching clients as well. One other question from Jonathan about best practice for daily, weekly, monthly, quarterly financial tasks. I think we're going to dive into that now. So hopefully if we don't address your question, Jonathan, by the end of this next discussion, please drop it in the chat again. But let's dive into that. What financial habits separate the builders that are performing well from a financial perspective and the ones that aren't?

I think the word is, the answer's in the question. It's a habit. And I think Eric has touched on this already, that, that there needs to be a reporting cadence that is non-negotiable. You know, when we drive our cars, we might not be consciously scanning our dashboard, every single dial on that dashboard every minute. But what we are conscious of is a warning light that comes on if the car is not properly serviced, if we're not sticking to that cadence. That warning light may never come on, in which case we've got a problem. It's exactly the same here. So the absolute minimum that we should be looking at is monthly financial reporting. And what does that mean? Well, that means that at the end of every single month, books are reconciled, bank statements are reconciled, all of the standard financial reports are done, and then that should generate a profit and loss account and a balance account. Might be in some parts of the world called an income and expenditure statement. But those reports should be available 7 to 10 days after the calendar month end, and the owner has to dedicate the time to go through those. And again, let's be honest, if you don't yet fully understand them, go through them with somebody that can explain them to you. And if you have an accountant who can't explain them to you, you need a new accountant. You want an accountant or a bookkeeper that has the heart of a teacher. That's what you're looking for until you get to the place where you can interpret them. And that cadence needs to be non-negotiable. Obviously, you must take care of your work in progress. We've touched on it a couple of times in different ways, but what your work in progress accounting adjustment will do for you is it will answer the question, how much of the money that has flown through my business and is now in my bank account is mine? It'll answer that question for you. On the flip side, it'll also tell you exactly how much money you owe to suppliers and subcontractors who have not yet invoiced you. So it'll give you both sides of the coin. You can actually manage your cash just as easily out of the WIP adjustment as you can your own profit distribution. So those things are important. And then getting the core financial metrics from those reports. Understanding what your margins should be, understanding what your ratios should be. If you've got that dialed in and you are tracking that job by job and across the company every month, you will be absolutely fine.

Thank you, Andy. Just to also jump in there, again, I emphasize, you know, practical financial habits cut across many industries. But if I sort of dovetail into the building industry, firstly, to understand that You know, habits is about setting a rhythm. It's not about being a hero. The last thing you want to be is a firefighter in your business. Be a firefighter when there's actually fire in the natural landscape, not in your business. And Andy was right. You don't need a degree in accounting to set habits. One of the things that I find useful is having a healthy business mindset in your business and getting everyone in your team thinking alike. And one of the things that coalesces people onto the single mission about the business could be as simple as a daily huddle, getting together just for 10, 15 minutes every day. Some of you call it a toolbox meeting, others call it different things, others say the morning prayer or whatever you may call it. But this is the opportunity where you look at the little issues that sort of come through and the issues that if you catch quickly and early, get to save you money at the end of the day. So it's about putting a spotlight on your business every single day. I find that very, very useful for businesses. Something else that I'd offer, which we practice, you know, call it a Tuesday habit or a Wednesday habit, where every morning on that specific day that you select, you spend about half an hour looking at your variance to budget. Eric alluded to that a bit earlier on. And you make this habit of looking at your budget and all the variances constantly. You look at where the actual costs are drifting from your estimate. And when you look at the cost in terms of labor, material variations, and so on and so forth, because you want to be on top of that. And extending the period when you actually look at those numbers simply means you're now behind the 8-ball. And that is not something that you want to find yourselves in. The last point that I'd probably share is something that again cuts across all industries. You must know your fixed cost per job per day. Every business has a fixed cost per job per day. We know our fixed cost. Fixed costs are those costs that you will incur come rain, come sunshine. And to be honest, I've seen, um, construction sites where, for instance, 3, 4 weeks, no activity is happening. When there's no activity happening on that construction site, rest assured you're still incurring your fixed cost. That is something you're incurring. But how many actually go and calculate the efficiency that you apply on a specific job to make sure that you're maximizing whatever fixed cost you have? You have— remember, if you're a growing company, your fixed cost has increased. You've probably moved to a bigger office, Your backroom staff has increased. You've put in new shiny computers. There's a whole lot of other fixed costs that have actually come on because you want to equip yourself to handle more jobs. But any moment of idleness is actually costing you. So knowing your fixed cost per job per day is very important because you want to make sure that it's divisible across all the jobs or the number of jobs that you can win to make sure you can easily pay off your fixed cost and then start working on your profits. So that's something which, if you don't look at, it actually comes to bite you. So I'll stop there.

Thanks, Hamed. Interestingly, just a couple of data points from Sourcey to touch on what both of you just said. Only, sorry, 32.5% of builders don't produce monthly financial reports from the data that we collected, but we did see a positive improvement year on year in terms of fixed expense understanding per job per day. So that moved from 52% to 56%, and understanding gross margin on projects every month went from 58% to 68%. So it is good to see there has been improvement in those parts, but obviously there's still quite a, a long way to go. A couple of questions really quickly, and Eric, I think you were about to jump in, so I'll pass it back to you in a moment. But one question from Ben, which I think is Probably really quick one is, do you use Xero to work out percentages?

And I mean, I think if we broaden that, the question is, can I use my accounting software to calculate the percentage? Yes and no. Some do it, some don't. But if you've got the data and it's accurate, you can calculate the percentage yourself.

Yeah.

So literally, and I just happened to see one pop in, Will, that I'll just use as an example. Somebody was asking, how do you calculate what's the average fixed costs in a building business? We know that in a growing building business, you need 15% of your revenue as a fixed cost. That is the ratio that we always look for. So very quick for people to do. Take your cost of your overheads, your fixed expenses for a month, divide that by your revenue for the month. That'll give you the percentage relationship between those two.

Great. I think that answers Hayden and David's questions in the chat there. Hayden Simmons, shout out to Hayden. He's from PricerPlan, I believe. So if you need any estimating help, check out PricerPlan.

There you go.

Just a little plug.

Yes.

Well, I should point out that given PricerPlan is in the house, I should point out that your financials start from your estimates.

Absolutely.

Yeah. If your estimates are wrong and if you're using 4 weeks old, I mean, weeks old estimates and assuming that things haven't changed and you're not relying on expertise in the market, then you're starting on the wrong footing. And then you get mixed up with your markups and your margins, and now your double aims are confusing. And yeah, you fall into the trap again. Yeah. Yep.

No, I'm sorry, but I was about to say, I think, yeah, having those regular reporting rhythms would really help your consistent job performance reviews, would flush out any issues that need to be looked into. But at the same time, you also want to look at like forward-looking forecasting. So you just don't want to stick to your historical profit and loss. You want to look at the forecast in terms of expected job margins at completion, you know, cash flow within the next 60 to 90 days ahead, any other upcoming workload capacity. Because if you factor this in, it shifts the decision-making from being reactive to proactive. And I guess one more thing that I do want to mention is that from an overall standpoint, being busy is not the same as being in control. So you, you want to make sure that when you scale, you want to scale sustainably. I mean, it's not necessarily being more aggressive, it's working smarter. The topic has— for, for today has always gone back to building that healthy financial habits. So it's not over-analysis. It's just disciplined repetition of what you need to do from a building standpoint, from a manager standpoint, looking at the financials, comparing everything.

And I think it's important, Will, just to, to make people understand that the financials are really a mirror image of what's happening everywhere in the business. You know, we've spoken about revenue because this is— we've been focused on financial issues, but what is revenue? Revenue is the thank you certificate that you get from your client for completing the construction that you'd actually built. So when you look at how much revenue you've earned, what you're actually doing is seeing a measure of how much you've built so that you could invoice. So, you know, we haven't gone into the next layer, which I think certainly Ahmed and Eric have touched on, is that unless you are tracking your actual job progress on a weekly basis, as in measuring construction progress according to that estimate and that schedule. That's the thing that's going to keep you in that proactive space to be able to see what's coming if things are starting to slip. We've kind of kept it at financials, which is kind of, again, Eric's point is valid. It's a rearview mirror look is mainly your financial reporting. But those progress things and those forecasting things will give you that look through the front windscreen as well, which is critically important.

Very good. Well, Eric, thank you. You kind of summed up the conversation very well there. It's probably not a bad time to think about wrapping up. What I'm going to do is pull up a couple of QR codes on the screen just in case you want to find out more about Wonderbuild and APB. If you're not familiar with what either company does, one thing to take note is Wonderbuild is a rewards partner with APB. So if you're a member of APB and you're looking to check out what they do, you can get a rebate there. And obviously, as I mentioned at the start of the webinar, their team's phenomenal, looks after all their customers and has a really open door policy. If you're looking into business coaching or want to improve your building company and get these financial habits in place, like some of the advice that Andy provided today, you can go and check out more about APB and get in touch with our team there. But yeah, thanks Shane. Great webinar. Very impressed with Ahmed, Erik and Andy. So thanks for dropping that in the chat. And thanks for everyone that turned up today. We've actually had everyone pretty much stick around right until the end, which means the conversation has been good. There's been a lot of some good advice in there. We'll send out a recording of today's webinar to everyone that came along. You'll get the Saucy Report, like I mentioned, if you want to dive deeper into the detail and highly recommend going and checking out WonderBuild and APB. But Andy, Eric, Armin, thank you so much for giving up your time and coming today. And just before I let you say goodbye to everyone, Jordan wants to know, how do I get advice from First Question without full membership?

We've got a lot of free resources around the subject on our website, a lot of blog articles. Russ Stephens is an absolute master in this space. So yeah, it's— you don't need to come through the paywall, but understand you're only going to get a portion of the picture. You'll get the what, you won't necessarily get all the how. That's going to be the difference.

One thing I would say, Jordan, is we have a free discovery call as well with a specialist on our team. If you wanted to just have a chat to them and get a better idea of where, and they might be able to put you in the right direction, even if it's not through membership like Andy mentioned, they can put you in the right direction to find what you need. Well, again, Andy, Eric, I mean, thank you so much for giving your time today. Let's wrap it up there.

Thanks for having us.

Thanks. Thank you for having us.

Bye-bye.

Bye-bye.

See ya.