83. The 5 Stages Of Decline For A Building Company With Russ, Sky & Andy

Kind of know something's wrong, but they can't put their finger on it. And the numbers shine a light on a business for sure.

No, things aren't going well. So when we say some people come to us too late, they're mentally done. They cannot bear to go through it.

99.9% of builders are not crooks. They do not do this deliberately. It's exactly what Andy said. It's simply ignorance at that point. They get angry because they realize they've been working for nothing and and some of them have been doing it for years.

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To industry experts and your fellow professional builders. You need to know to generate more leads, more sales and higher margins while improving the building experience for your clients. Hello and welcome to the Professional Builder Secrets Podcast, a podcast by the association of Professional Builders for building company owners, general managers, VPs and emerging leaders. Here we discuss all things running a professional building company from sales, processes, financials, operations and marketing. Joining us today are Sky Stevens, co Founder for the association of Professional Builders. Excited to have you on the show again, Sky.

Thanks Bosco. How are you?

I'm doing well. Russ Stevens, Co Founder for the association of Professional Builders, thank you for joining us again today.

Hey Bosco, good to see you as always.

And my friend Andy Scarta, head coach for the association of Professional Builders. Always great times when you're on. Really excited to get into it today.

Thank you for having me. Nice to be here.

Well, today's theme is around the five stages of decline for building company and I think it's a really timely topic. So I'm going to hit you with when do you know when your building company is declining?

Well, that really depends on how good a builder's KPI dashboard is and by that I mean how well they are monitoring their key performance indicators. Now this is the first thing that we set up our private mentoring clients with because it enables both the owner of a building company and also the APB executive coach to look at the lead and the lag indicators for a building company. So I guess to answer your question, a professional builder that is monitoring their lead indicators which relate to marketing and sales, they will know months in advance before their building company actually goes into decline. However, a typical builder that only Monitors their lag indicators. And by that I referring to revenue, gross profit, and net profit, otherwise known as what we call history. Those guys, they only realize they're in decline when the net profit turns negative. And obviously at that point, it will take a few months to get the building company back on track. However, for those builders that do not have a KPI dashboard and are not analyzing their monthly financial reports, they don't know their business is in decline until they start running out of cash flow to pay their subcontractors and suppliers. And that obviously makes it a lot, lot harder to turn those businesses around.

And without the metrics, it's sort of a really shocking surprise at the end of it, too. So if you don't have the metrics, you could pretty much be surprised very quickly.

Absolutely. And it's probably the reason why there is so much surprise and shock, because they kind of know something's wrong, but they can't put their finger on it. And the numbers shine a light on a business for sure.

Take me through the stages of decline for a building company.

Well, I know we talked about there being five stages of decline, but really we started at stage zero. And stage zero to us is potential loss on a contract. And that is going to be the first sign of anything going to go wrong in a building company. And when we talk about potential loss on a contract, what we're talking about is when the gross profit on your contract, so you've got a building contract signed, you've got your materials and labor, but the gross profit after that cannot cover the company expenses. That's when you're actually going to start making a loss on that building contract. And if you are at stage zero, you probably haven't even started that contract yet. But that is your first sign of danger. It's like your warning sign that things are not going to go well if you continue down this path. Now, stage one, really where it all starts happening, is where you actually make a loss on a contract. Like you're actually building your at construction and the contract is in play. And this is where you've actually started to lose money. Stage zero was before you started stage one. You're actually losing money on those contracts. And this is really important because we're not talking about the cost of materials and labor. This is when this building contract cannot sustain the operations of your building company. So you can't pay all of your fixed expenses, which are going to be your payroll, your rent, your vehicles, your marketing, your advertising, everything that actually keeps the company going. So that's stage one. Stage two is when the company loses money. And this is where your building company will record an overall loss for the year, like financial year or financial year or calendar year, doesn't matter. Stage two is when you're actually recording that loss. Now, stage three, when we get into that, is where you've got negative equity. And the problem with stage three is you can technically still trade legally, even though you're in negative equity, because new homes and new construction is cash flow positive. And because of that cash flow, you are still able to pay suppliers and subcontractors on time. And that actually classifies you as trading solvent. But that's not really the reality because you're just nothing more than a construction Ponzi scheme that your cash is coming in from Project A over here and you're robbing Peter to pay Paul. So stage three is focusing on negative equity. And then you get to stage four in the five stages of decline. Now, stage four is insolvency. And you reach stage four when you're no longer able to pay your invoices as and when they become due and payable. So you can no longer just rely on all that positive cash flow coming in from the new contracts and new projects that you're actually signing. Now, stage four is the. That you're actually classified as being insolvent. Now, obviously, all the stages leading up to this are not good. Stage four, this is pretty bad. This is pretty dire. Stage four is insolvency. Now, as soon as a building company reaches stage four, this means you're no longer able to pay your invoices as and when they are due and payable. So no longer can you rely on all of the cash flow coming in from your new projects to pay off all those other debts. Stage four is insolvency. This is when you're classified as being insolvent and you can no longer trade. So rather than being stages 1, 2, 3, 4, 5, we've made it stage 0. 1, 2, 3, 4.

I've got to ask a question, and this is a hard one too, but are building company owners usually in denial when it comes to this decline stage?

I'm going to jump in on this one, Bosco. I would say 95% of the cases, no, they are not in denial, they're in ignorance. And the reason for that is that we always draw the differentiation here between a professional builder and a builder. So let me start with the builder. In most cases, for a builder who hasn't had the training and the development that they need around running a business, they will tend to look at their bank account as the indicator of whether or not they're doing well. And sky has done a magnificent job of sketching those different stages for you. If you think about it right through from 0 to 3, the bank account still looks like you're okay, but it's like one of those Aero chocolates. It looks solid until you bite into it and then it's full of holes. And that's the problem. So there will be a small percentage of building company owners who know they're in trouble and stick their head in the sand or try and trade their way out of it, which I know we'll probably get to talk to a little bit later in this. In this discussion. But my experience with this has been overwhelmingly, it's because they don't understand those five stages. And most importantly, they are not tracking their financial results well enough. Russ. Russ did this so wonderfully earlier. He just kind of threw in the word history. But that's such a critical word in this discussion, because think about it. If you only get even if you are getting financial results, if you're getting them two weeks after the end of the month, potentially a whole bunch of things happened six weeks ago about which you can do nothing other than take remedial action now to try and turn it around. So the emphasis here has to be, you've got to have the data and the information to be able to see what's going on, and you've got to understand what that's telling you. If you haven't had the training to be able to do that, you are not in denial. You are simply unaware of the fact that. That you're actually in liquidation.

And just to add to that as well, I think we should emphasize here that 99.9% of builders are not crooks. They do not do this deliberately. It's exactly what Andy said. It's simply ignorance. But the trouble is they get labeled as crooks. You've only got to read what the public perception is. And yeah, I think we're always at pains to emphasize that builders are just as much victims as everyone else. When a company goes down, can a.

Building company in decline be salvageable at all?

100%, absolutely. And I say that with such conviction because the association of Professional Builders has helped to save hundreds of building companies that we know about and probably hundreds more that we don't even know about. And the reason I say that is because that is what so many builders continue to tell us year after year. They Say to us, my building company would not exist without apb. And the reason they say that is because they were doing the equivalent of flying a plane in complete darkness with no navigation equipment. And it's like someone just popped into the cockpit and said, hey, you realize there's a mountain ahead, don't you? And because of that, they were able to course correct and then reach their destination safely. But when they look back, they know they were heading for a nasty crash. They just couldn't see it coming at the time. But yes, to answer your question, even if they are losing money to the extent they have no equity left in the business, and like sky said, they're trading with negative equity, as long as they have cash flow and the determination to survive, they can be safe. But obviously, the longer they leave it, the harder that job becomes.

I just want to jump in on this because this is so critical. One of the things that I find myself saying over and over and over in the private mentoring program is I wish they'd got to us sooner because there are some of them that by the time they get to us, unfortunately, the die is already cost and it's gone too far for us to be able to turn it around at that point in time. So I just want to underline what Russ is saying. If you even think there might be a mountain somewhere in your future. Www.apbbuilders.com Click join let us help you because we don't want to see this happen to any builder ever.

At what time do you cut your losses as a building owner?

Well, I think this piggybacks onto what Andy was just saying in that there is such a thing as it can be too late. But what Andy was talking about is it can be too late to salvage the company. I think there's also a period where it can be too late to even save the owners. If you have been going through a decline for years, like this isn't. It doesn't just happen overnight. This takes years and years and years to happen. It can be months if it's particularly bad. You know, all these. All these awful contracts. But it doesn't just happen overnight. So it's not like an unsung mystery like, you know, things aren't going well. You may not have all the data in front of you, but you know, things aren't going well. So when we say some people come to us too late, they're mentally done, they cannot bear to go through it. And I think this is what Russ said before. I think you asked the question Bosco Can a building company in decline be salvageable? Of course it can be, but it is 150,000% percent up to the owners of that building company. Do you have it in you? Because it is a hell of a lot of work. My goodness, it takes tenacity like you've never seen to actually do it. It is possible, but it's not easy. And we've talked about this so many times on the podcast. What is worth having that is easy? You know what I mean? A lot of things are difficult, but this is extremely difficult. This is just different. So, you know, if you ask a question, at what point should you cut your losses? There's a really good book by Seth Godin. It's called the Dip. It's a super short book. Literally, like probably like 50, 60 pages. He talks about this quitting point. And before you enter into anything, work out. All right, what is your quitting point? If you don't achieve X, Y, Z, by what date, when are you going to walk away? And I think if you talk about cutting your losses financially and at the company and legally, everything like that, you've got to seek expert advice, actually get help and work out where you financially, legally, what your obligations are, where you actually stand. If I'm answering this question from like a mental point of view and mental standpoint, at what point should you cut your losses? You've got to decide. Because if you're going to go and say, I am going to look, I've self diagnosed, here's where I am on the five stages. If you've decided that you want to be better and get better, then you have to actually commit and do. And you can't afford to change your mind or even have a few off days or a week because this is going to be hard. But if you can get through the other side and when you even just start seeing that glimmer of light, it spurs you on and you can keep going. But at the point at which you cut your losses, after you've get your expert advice and obligations and you've worked everything like that out, that's when you got to be really honest with yourself and be like, okay, how much can I take? What's my quitting point? What am I willing to put in to turn around? That's way more dependent on the individual running the company, to be honest.

How can you pivot or make a change if you know your company's in trouble?

I think this goes back to the thing we often talk about. If you wanted to be able to sit under the shade of an oak tree. The best time to plant the seed was 20 years ago. If you didn't plant it 20 years ago, the second best time is today. So the reality here is if you are self diagnosing or if you're even worried that there might be a mountain somewhere in your future, the sooner you start taking action, the better. Now, Russ and Sky have done a wonderful job of really highlighting the fact that there's two things that have to be in place if you're going to pivot. One, you have to have the testicular fortitude. You've got to have the guts to literally muscle through this because this is going to be 6 to 9 to 12 to 18 months of really, really hard work. And I think sky made the point beautifully. It's not that complicated, but it's not easy. So it's simple in terms of explaining how to fix this, but it's not easy to do. It's going to take a lot of tenacity and a lot of investment and you need to be sure that you're up for that challenge. Secondly, it's critically important that we get the data side of things sorted out, that we're able to accurately see where the business is. And you know, in a lot of cases, I can think of a case recently that came out where the data that was being presented to the owner of the business was in fact incorrect. And because of that, to go back to Russ's analogy, the radar wasn't picking up the mountain because it was looking in the wrong place. So it's critically important that those two things, whether you do that through somebody like us and you get involved with a coach to help you, or whether you get to an accountant and you make sure that you understand what the numbers are telling you, as long as you've got the will and the data, you can. Absolutely. That's the point. And the earlier the better is when you need to pivot.

Can you tell us about building company that shut its doors and what were the key learnings from that experience?

Well, quite a few years ago, I was asked to perform an audit on a building company that was part of a franchise group. And that was triggered after some subcontractors had complained about not being paid. So I took the journey down to see them and rocked up. And from the outside, everything looked good. You know, they had a couple of nice cars for the directors outside being valeted at the time. They had a nice logoed up car for the salesperson. There was a couple of V8utes sitting there for the supervisors and the project manager. And I walked into the office, lovely modern office. Receptionist greeted me from behind the counter there. It looked like a really good company and it needed to because they were doing high end custom homes. So I then spent the rest of the day doing the audit. And by the end of the day I'd calculated that the company was actually a million dollars underwater. So that's to say their liabilities exceeded their assets by $1 million. And if the company had been wound up that day, suppliers and subcontractors could not be paid. Now when I shared this information with the owners, they were quite nonchalant about it, quite casual, and they said it was no problem, they had another business and simply put more money in. And I thought that was quite a strange reaction because I'd be hitting the panic button if I had just found that out. But the next day when I got back to head office, I found out why they were so casual. And apparently they'd spoken to head office and fell about laughing at the whole episode. They said I was an idiot and there was no way that they were putting any more money into this company. They didn't need to and it certainly wasn't a million dollars under water. So they asked me, I said what, what should we do? And I said the only thing you can do, you got to terminate a FR because they will go under. Six months later the GFC hit and it hit hard. Literally in this particular area, contracts were being ripped up. Sign contracts that were due to start were being ripped up and people were not starting. And obviously that just hammered their cash flow overnight. It was like flicking a switch off. And three months later the company folded. It happened incredibly fast. It doesn't normally happen this year this quickly unless there's kind of other influences. But the interesting thing was that when the auditors report came out, they were actually $1.5 million in debt. So just in that period of time since I'd done the audit, which was nine months prior to them being folded, they'd lost another half million dollars. So you can see how this kind of accelerates and just gets worse. And the key learning here was that neither they or their accountant knew how to calculate work in progress, which is probably the most important cal in the construction industry. And the reason why the accountant got this so wrong is because this calculation is very different in construction to manufacturing and that's how accountants are typically taught. So therefore, because they had cash flow they thought everything was okay. And as a consequence they didn't Course correct. And as a result, they plowed right into that mountain. So when Andy mentioned earlier that directors were acting on bad information because they had the wrong information, that is a lot more common than a lot of people may realize. You know, in as much as 90% of builders doing new construction, their financials are actually incorrect. So this is a massive, massive problem in the industry.

What are some of the key factors that end up making a building company struggle?

I mean, there are so many time and time again, every episode this industry is not easy. So it's not as if it's one thing that makes every building company go down. I mean, obviously, obviously work in progress is of course important. But to make a building company struggle, I mean, it's systems first and foremost, it's a lack of systems, a lack of robust systems, the lack of the ability to scale systems to a building company from once you started to where it is today. I think it's of course financial knowledge as well, like Russ and Andy have so eloquently already gone through. It's the data in front of you. And if you don't have that financial knowledge and financial understanding, that of course is going to make you struggle to operate and even grow a building company. But I think as well, it's also support maybe the word community in there as well, because it's not a particularly at the moment, unfortunately, it's not a particularly open community, the construction industry. It is a bit isolating and knowledge isn't shared as freely as it could be. And so I think without having some connections to so many other professional builders, you're all just operating in your own sight. Silo. And we've heard this so many times, but it can be quite lonely being the owner of a building company if there's no one else to talk to. You don't really know if you're doing it right or wrong. It's just a few throwaway conversations with some acquaintances that you used to work with or for or whatever. But it's not as open and so really without all three. So financial knowledge and expertise, systems in the building company, but then community and support, you really can struggle if you lack in any one of those areas. Because I truly think you need all three to operate a successful company or at least continue operating a company with the thought of it being successful.

And professional marketing as well is so, so important because if you don't have good marketing, you're not going to generate the number of leads that you need and you become dependent on the leads that you get. And desperate. And when that happens, you cut your margin to make sure you don't lose them. So that can be a key factor that ends up in building companies struggling. For sure. Sure.

100%. Your marketing systems, your sales systems, are you even increasing your margins throughout the build? Everything. That's a really good point.

So what are some of the things builders can do to prevent and prepare for this financial hardship? Is there any proactive things that they can do?

Do everything sky just said. Simple. Yeah. Simple, easy. No. I think we've probably touched on all of these in different ways throughout this episode.

But.

But the reality is, step one, I think, would be to get those financials sorted out and be able to read, as Russ has alluded to, both your lead and your lag indicators. You've got to be able to predict not only what's going to happen on the jobs that are currently being built, but you've also got to be able to see that you've got a solid pipeline of work at the correct profit margins into the future. You said one of the things that sky responded to earlier was when should you cut your losses? When do you pull the plug? Well, the answer is quite simp Simply, if you are doing what Russ has alluded to because your marketing isn't right and you're cutting future margins and you are already in trouble, unfortunately, you haven't turned that thing around at all. You are just heading deeper and deeper into a hole. So it's critically important that we get data on that lead flow. Not just the number, but the quality. Are we talking to the right kind of people that will be able to pay the kind of money we need? And I think this is really the answer to your question in order to be able to start building those reserves. And I think the reserves fall into the three categories that sky mentioned. We need emotional reserves. We've got to see the light at the end of the tunnel and not believe that it's an oncoming train. It's got to look like I can keep pushing through this because it's worth it in the long run. Number two, you've got to make sure that you've got the financial reserves and number. And those reserves may require to be used in various different ways depending on what the situation is in the business. And then I'm going to go all the way back up the funnel and say, you want to make sure that you've got the sales reserves in that you have more work in front of you than what you can complete. So if you've got More work that allows you to be significantly more picky about what you do. That means you can cherry pick the jobs with the biggest margins and the bigger the margin, the bigger the spade you get in order to dig yourself out of the hole.

What's the mindset of a builder that's going through a company decline and how does the APB help someone going through this? You talked a lot about people that have come to you in the past that have been in trouble and you've helped them. But take me through their mindset and how do you guys help them?

Well, I think that really depends on the stage of decline that they're actually going through. Because if we think back to stage zero that sky described for us, and that is where they've signed a contract and the profit, the gross profit on that contract won't cover the fixed expenses. The mindset is just to get started. In a lot of cases they're not actually thinking about the consequences of starting this low margin contract and maybe in a lot of cases, not even aware that this isn't going to cut it. This isn't going to cover the fixed expenses. So the mindset at that stage is just to get started. And when you look at the next stage, which is when those losses have actually been realized in terms of the fixed expenses exceeding the gross profit on that particular job, a lot of the time the mindset is, yeah, but. And it's like, yeah, but I won't have those problems next time. Yeah, but that's not going to happen. And without actually making any changes to their own processes, they just think it is going to improve, which obviously that's a definition of madness I think as well. And I think we can go through every stage and say there's kind of a different mindset as to how they address the problem that's occurred, which to a certain extent, I guess you could even say it's a little bit of denial. But I think when we get to the end, and I think that's probably really where the question is coming from, it's desperation because at that point, this is where they are trading insolvent and they've gone beyond using up all the equity in the building company, it's beyond desperate the situation. They're getting chased for money, the phone doesn't stop ringing, subcontractors are not turning up for site. If they do turn up, the materials haven't turned up because the bills haven't been paid. It's absolute desperation. And these guys are working flat out, round the clock trying to connect the dots, trying to make it work. And they just don't realize that what they're doing is futile and will not fix the problem. And it really doesn't matter how hard they work. They will not get out of this situation by working harder or even if we go back a little bit earlier, earlier when it first starts to happen, they're not even going to get out of it by taking on more work. Because all those things taking on more work and working harder, it just prolongs the situation. The death of a building company is extremely slow and painful. So in order for APB to help someone through this, like Andy said, we show them reality of the situation, cold hard facts which is their financials. And at that point point they get angry because they realize they've been working for nothing and some of them have been doing it for years. And yeah, that's not a flipping comment that that is a fact. There's a lot of building companies that run on a loss for years without even realizing it. But once we've shown them the situation and they have gotten a bit angry, we then show them the path to get out of the mess. And that's key because I feel depression sets in when you can't see a future. So not only do we create a clear picture of of what the future looks like, we give them a clear pathway to follow as well. That's going to get them there. And it's not easy. But I've got to say some of the best businessmen and women in our industry have emerged from this experience.

I think Bosco Russ isn't taking it as far as I'll take it. What happens often with these people is that when they see the path out, all of a sudden there's hope. Hope. And hope is the key. If you have no hope, you won't have the reserves that Scott mentioned earlier to be able to pull this thing through to where it goes. If you can see that we're going to get to a finish line and from then on things there's clear water ahead, then you can put in the mileage that you need to to get it done. So that's really the critical thing is to move that mindset from depression and giving up into no, no, no, this is do it. And I've now got the help and the resources around me that'll get me to that process.

And that's the difference though, isn't it? Because going from that dire, depressed mindset, you're very anxious about it to then finding that hope. Well, it was actually getting support and bouncing it off of someone and actually having that path forward. And I think a lot of the time as well, the realization, the aha and a lot of the hope comes from realizing that that plan is all based on solving the root cause of the problem, not treating all the symptoms that they were to doing or that has been tried for the last couple of years. You know, but I think it's worth us taking a minute because Honestly, for what, 25 minutes, all we've been banging on about is how hard it is. It's really hard. It's awful. You've got to be able to go through it. Make no mistake. Closing down a building company because, you know, you got liquidated or voluntary administration, anything like that, that is far more painful. I think we can all attest to that. When you see people go through that, that is far more painful. It feels so much worse than if you have the mindset to get through this. And you guys, correct me if you've ever spoken to any other member who's going to correct me on this, but if you were to ask all those building companies that we've mentored and worked with and stood by for all those years to get through it, if they were in a decline to actually get to the other side, and you ask them, all that work was at work worth it, I don't think anyone's ever replied no. I sort of wish it just went in decline. I think it just went the other way.

But you correct me, I'll back you 100% on that. That we've never had that. And I can't see why we would because of course, we're focusing in on the dark side of this industry, primarily with this. But we've got to understand that once these things get fixed, this is one of the most incredibly rewarding and fulfilling positive industries. When you are building building homes that you are proud of for people that love them and you're earning enough money to build the reserves in your building company, I don't know whether it gets much better than that. So the reality here is, again, I want to make sure that we balance this equation. Sky, as you. As you've just said, it's worth it in the long run, as long as it is salvageable. That's the key.

Is it too late to salvage a decline company? Does it look like the further the stages are, the harder it becomes? When do you go, it's too late? Oh, of course.

It's like treatment. And I think, you know, going through this just a little bit earlier. Every building company is salvageable if you have that mindset once you have the right data in front of you. And I think what you just said in that question there, you've, you've rephrased it from what we've talked about earlier in this conversation and it's like, is it harder to turn it around the deeper into the stages you are? Of course it is. Of course it is. But that is why getting the data as quickly as possible so you know exactly where you're at, you have a better shot. And so even if you just feel like something's off, something isn't as good as it could be, even if you're. Russ mentioned this. This was perfect. We both smiled, Andy and I, as Russ was saying this. But it's on stage one where it's an actual loss on a contract. When you ask, you know, what's the mindset around that? It's the yeah, but it can always be explained away way, you know, well, the only reason was because of this or because of that or because this happened. Don't worry, it's not going to happen again. And we've heard this so many times. If it happened once and there's no system in place so that it will not happen again, it's going to happen again. There's fundamentally something wrong. So we just got to have open mindedness, like the open mind to actually go and look for a long term sustainable solution for the company. Not can we put a plaster on.

This little boot be your point there is so valid in terms of it's only when you get the right systems that you spoke about earlier in place that you get to have the conversation two months in a row. Because I'll let you get away with the yeah, but it won't happen again the first time. But when you come back to me a month later and we look at your numbers again and the same problem exists, you've used up that get out of jail card. Now even you cannot deny the fact that we have a real problem that needs to be resolved. But if we don't have those numbers and if we don't have that level of accountability in the relationship where the numbers are being checked every month and made sure that whatever we've done has turned that thing around, you literally end up in a place that you just start to work through these different stages of decline very, very quickly.

And for those owners that are going through this struggle, would you say that the financials is the first primary focus where what should a company owner Focus on when it comes to that stuff. Stage.

Well, yes, because that's where it's reflected. And this is something that we're at great planes to explain to builders, particularly when they find us for the first time. Our goal is not to turn them into accountants. Okay. Most builders that I've met have us. No, don't even say that, Andy. It's to get them to understand the story that the numbers are telling them. And they're not just financial numbers, they are things we've spoken about. The fact you need to be watching your marketing results, you've got to be looking at that funnel to make sure that you are getting regular inquiry. You've got to be measuring that inquiry not just from a quantity perspective, but also from a quality perspective. So it's not just hard, cold financial numbers. But the truth is in any business, everything you do is reflected in your numbers. I heard this beautiful quote yesterday. Every single business is engineered to achieve the results that it does. Does. I mean that is just such a wonderful quote. Yeah. I mean, so essentially what that's saying is if you are not getting the financial results out of your building company that you want, well then we've got to re engineer your building company. And the sooner we get into that, the better. It's not just financials, but that's probably where we're going to first start to dig. And we spoke about those stages of the decline. We're going to work those backwards. We're going to look to make sure that the contracts are delivering profit first. Because if they're not delivering profit, you haven't got a hope in hell of getting net profit out of the business. It's literally taking those things apart and then looking at each of them individually and then putting them back together in a way that's going to give us.

A different outcome thing to piggyback onto that. And even just to explain as, as well, we've all said it's going to take a while. It's going to take a while. Going to take a while. But if we can just put words, why making change in this industry, or maybe I should say realizing the changes you've put in place in this industry takes a hell of a long time because you are sitting through. We've. Andy, you and I talk about this most weeks, I swear in a lot of our meetings. But a lot of clients, you know, if they're coming into mentoring and working one on one with our team, they always have to say, I just need to get through all my rubbish contracts because you're sitting through all of the crap, sorry, all of the rubbish going through, and you're working on the company. You know, you're doing marketing, you're improving your sales process, you're signing contracts at higher margins and they're all immediate wins, like, yay. They're implemented. But to realize any of that, you need to get through all of your crap for a while until. Because that new contract you signed probably doesn't start for 8 months, 9 months, 12 months, months. So you just need to hold out and you need a plan to hold out. How. How long is it going to take for you to get through all that crap so you can get to the good one?

And I mean, this is really the flip side of what we were saying earlier. Be careful about becoming busier when you start to think you're in trouble. Because, Scott, just to put your mind at rest, having lived in the United States for a number of years, crap is an official word. So you can say it as often as you like. The reality with that crap is if you keep taking on jobs that are going to run at a loss, loss, it's not just the fact that those jobs are running at a loss. You are using available capacity that now cannot be used in a job that is going to generate real profit for you. So it's that opportunity cost that you're also losing out on if you continue down that particular road. So it's really. I mean, I. As we're talking, I'm thinking about two wonderful human beings in Western Australia who, who came to us with two contracts signed and they were very proud of the fact that these contracts were ready to go until we looked at the margins. And you know what? I've watched those two people literally work for the last 18 months to get those things out of their hair. But I tell you what they've done. They've used them to learn from and they are now sitting in a completely different place. They're now sitting in a place where they've got contracts, license roundup that are at good margins and are ready to go and they will never, ever make that mistake again. And that's the key here. We often talk about management philosophies. The growth mindset says if we're going to fail, then let's fail forward. Let's at least take the learnings that we can get from the mistakes we've made and not repeat those things again. Change those systems. As sky has said, go in, in there, find out what led you to that place, turn it around, start Again, the next one that comes in is going to be better and better and better and eventually the crap is out of the system and it's clear water.

It's beautiful if a company is declining. And you know, we've talked a little bit about the mindset. We've talked about the owners, we've talked about the systems. Let's talk about the people inside the company. Let's talk about how do we take care of the people affected by this crisis? Why long term?

Well, first and foremost, you know when you're on a plane and they say in case of emergency, oxygen masks are going to drop down in front of you. Secure your own first before helping others. I don't want this to come across very selfish in any way. I do want to, like, caveat, exactly what I mean by this. But your company, your building company quite literally takes care of so many people. People. You got employees, you got contractors and subcontractors, you've got clients. But not only that, all of your employees have a family and responsibilities and clients have a family. And, you know, there's this, this affects. This ripple effect is crazy. So first and foremost, you always have to be protecting the company. So when I talk about putting your own oxygen mask on first, you have got to be in the right headspace. You have got to be able to take care of yourself so you can do what is right for your company because your building company takes care of so, so, so, so many people. And that's what I mean by putting your own oxygen mask on first. Like protect your energy, your company, and how you are going to get through this. Get help, get professionals on board, get that advice, get a plan going and protect this company. But then like anything, I mean, we've, we've talked about this, you know, when the P word struck or the C word, I should say. But a pandemic hit and everything was changing in the world. What was one thing we kept saying over and over again? We're talking about over Communicate. You want to communicate situations to people. Now, I'm not saying you need to go out and say we're in a really bad situation, everything is terrible, blah, blah, blah. But when you are proactively making changes, give them the why, okay? We need to operate more efficiently. We're going to put this in place because was this, this, that and that. You know what I mean? So we need to get way better at our communication. If we're just working like a crazy person to take care of everything, but we cannot communicate why that's important. To anyone else. Do you think anyone on your team is actually going to help and pitch in or really understand why you're doing what you're doing? So the communication part is so, so, so important as well.

And I think just to amplify what you've just said, sorry, Bosco, we had a recent case that was a pretty serious, serious case of decline, etc. Etc. And the building company owner really didn't think that his team was going to respond well to what was going to be needed in order to fix it until he actually spoke to them. And what he found was in fact completely the opposite. That as soon as he communicated clearly what had happened and why and what was going to be needed to fix it, everybody rolled up their sleeves and got involved. Involved to turn it around for the exact reason that Sky's just mentioned because they all have a vested interest. That supplier and those subcontractors Russ spoke of earlier about the guys won't come to site anymore because they haven't been paid and the materials haven't been delivered. That's because of a lack of communication. If you are honest with people and you tell them where you're going and see, here's the beauty of the plan. Once the plan has been worked out, we can tell you to the day pay when people will get paid. Literally you can give somebody a payment schedule for the next 12 months that says I will pay you this amount of money on that date, that date. And what they can see is it's actually in their interests to help you through this process because they will end up in a far better situation by the end of it. So this side of this is critical that this communication thing and this. We're not saying go and air your dirty laundry in public, but what we're saying is make sure that you're able to communicate what the problem was and what we are doing to fix it. Clearly, to everybody involved with the business.

That shows good leadership, doesn't it? When we have this clear communication and articulate what we're going to do, we instill confidence in our team and they can follow. But yeah, the exact opposite happens when you don't have that communication. It feels like a rudderless ship and people are looking to jump overboard.

Well, literally, people know people aren't stupid. People know when things aren't right. People hear the whispers, oh, you haven't been paid such and such. Oh, the payroll was late or materials weren't paid on time or, you know what I mean? Like, and people talk. So people aren't stupid. People know what's going on and it's not going to give you any support, so they're going to go looking elsewhere. I mean, think about it genuinely. Everyone listening to this right now, think about how many interviews you've done when you're hiring people. And that key question, when you're asking, why are you looking to leave? How many times have you heard what's happening at the company? Whether things aren't running right or there's been all these redundancies, no one's talking and this is happening. And so they just need to look elsewhere or it doesn't feel so secure. They're going over here, people know. So you've got to be able to communicate and actually instill confidence. And it's a skill on communicating your plans, you know, and, you know, as.

We talking, I'm just thinking about how many husbands, husband and wife teams we have who run building businesses together. And I just, again, want to, in case there is somebody listening to this, where this is a very real part of your life, you need to understand that this is not the time to alienate people around you. This is the time to be honest. This is, in fact, where you need to be hugging those people that are close to you a lot more than what you normally do because they're also scared.

Scared.

And it really is one of those things where the damage is not just to the building company or to individuals, but it can seriously damage relationships, marriages, etc. Etc. And obviously we don't ever want to see that happen.

If it's avoidable for our listeners out there, what are some of the resources available to help builders in trouble?

I guess I've got to get in. Of course, it's www.apbbuilders.com. no, but seriously, if we are not the right solution for you, for whatever we fully accept, we aren't the right solution for everybody. The key is get help from the right people. So if it's financial help you need, I always talk about finding an accountant who has the heart of a teacher. If your accountant, or for that matter, any professional service provider cannot explain themselves to you in language that you can understand, find another one. Because at the end of the day, it doesn't help you that people are using terminology and language, language that goes over your head. And that's not in any way to say that anybody listening to this podcast is not intelligent. I keep going back to this. I have absolutely no idea how to crochet. None whatsoever. Not because I'm unintelligent, but just because nobody's ever taught me and to be honest, haven't really been that interested. I guess I could have learned on YouTube. But the point I'm trying to make is not understanding things does not mean that there's something wrong with with you. It just means that the manner in which it's being communicated to you is not right. So go out and get the help from a professional. Obviously at the APB we have a range of resources available. There's a ton of free stuff on our website. We give away incredibly high quality content that'll help build us through this thing. There's a wonderful article on this exact subject, in fact in our blogs that will explain a lot of the detail behind what we've covered today. And obviously, obviously one of the things that gives us as a company the most intense satisfaction is when we are able to help people turn these situations around. So coming on board as a member obviously is step one that gives you a bunch of information. If you are further into the process and you need more urgent help, getting into our private mentoring program would obviously be something else that people could consider. And you know what? If all else fails, buy the Professional Builder Secrets book. Because if ever you needed a bible or a blueprint on not getting into the situation, that little book, and I know they won't promote it because they wrote it and they feel embarrassed and all that stuff, I'll promote it. That book is the bible and the blueprint to making sure this never ever happens to you.

They're really good points. One more to add to that, just to inundate everyone with resources. Andy talked about having a team around you and like a team of vice versa. Check out the APB Rewards partners. So if you go onto our website, we'll put it in the show notes. Look at all of the partners, preferred partners we have under APB Rewards because these are all vetted by APB and they can cover things from accountants and bookkeepers to estimators to different software marketing services, anything you need. But that's a wonderful place to start. If it's not necessarily business coaching and setting up a plan or anything like that. Check out the partners and see what other resources and advisors you can find that way that have actually already gone through the APB systems because that would be a really, really good place to start. And of course if you're a member, you just get a rebate of cash on anything you do spend with them. So that was very worthwhile pointing out as well.

Someone once said to me the epic story of tomorrow can be written if it ends today. So I think this conversation has been very timely and I want to thank all of you, Sky, Russ and Andy for your insights and look forward to sharing many any more insights from you in the future for sure.

Thanks.

Thanks Bosco.

I can't wait.

Thank you for listening.

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