120. Breaking Through The Backlog | John O’Leary

Brian, I could have— in 6 months, I could be— I could set a goal for $10 million for this year for my company, and I could do it. I could hire more salesmen. I got access to the crews. I don't have a material problem at this time, which is another subject. But we, we don't— we're not— we don't have these issues because I'm looking at the future. I'm working a month from now. Actually, I'm working about 8 weeks, 12 weeks from now, you know, and, and I, I have planned for this. This is the Wealthy Contractor Podcast brought to you by G4 Marketing. Interviews with today's top home improvement entrepreneurs about marketing, sales, money, mindset, and lifestyle. Now here's your host, Brian Kaskavalciyan.

Welcome to another episode of the Wealthy Contractor Podcast. This is Brian Kaskavalciyan with G4 Marketing Group, and I've got him back again, Mr. John O'Leary from O'Leary Roofing. We did an excellent, excellent interview very recently, but John is in our highest level mastermind group, the Wealthy Contractor Mastermind Group. And just last week, I think it was, he shared with the group that he got his backlog down from 12 weeks to 8 weeks. And we talked a little bit about it and I thought, John, this would be an incredible podcast episode. And so I asked him if he would come on and share kind of what he did, and maybe it'll help some of you with clearing out some of your Backlog as well. And so I will tell you that as we are recording this, both John and I are pressed for time. So I'm going to just going to jump right into it. You to get John's background and what he's done with his business over the last 3 or 4 years. And his mindset is really incredible because just 3 years ago he was still hammering shingles on a roof. Today he is the owner of a multimillion-dollar, very profitable home improvement business. And aside from a couple bumps in the road in the last month or two, the business is kind of running without him having to go out and sell and without him having to install. And if you want to find out how he did that, go back and listen to the other episode. But today we're going to talk about backlog. So John, thank you for coming back. Thank you for doing this. I think you're going to be able to help a lot of people with some of your ideas. So welcome.

Thanks, Brian.

Okay, so you're in the roofing business, you had a 12-week backlog and you got it down to 8. Talk to us about that.

Well, there's a lot of factors to it. It wasn't, you know, experience is one of the factors that really helped us out. But, you know, a year ago we had 1.5 crews, you know, and we were doing like a roof every day and we, you know, and we felt like we were slammed. And now we, we came back from a trip to visit with you guys and we were 12 weeks on the calendar. So we, uh, you know, we've been wanting to put on what we— our third and fourth crew all along, but it was like not afraid to, but we were, we were all— we were sitting around that, uh, around that 8-week mark and we were comfortable with it, you know. So we have our main crew came to me and says, I have, you know, I have another group of boys, you know. That wanna install for me. And it was like, you know, okay, so you're gonna manage them and your regular crew so that now that takes a little bit of stress off of production. So that was one of the things that helped out is they're on now, the second crew's on full-time. But there was also a point where we had to make that jump from 2 crews to 3, but we went from 2 to 3 And as soon as my production manager got back in the seat, we went to 4 and, and just burned and burned it up. But from that, that time I went away, something happened with sales and they sold everything. And, you know, we came back to 25 folders, you know, 25 jobs to do. And, and so we knew we were at that, you know, that 12-week mark, and we, we got it back to about 8. Well, now we have 4 crews going. We've finished all those folders in the production, and we have another 15 or 20 that came through. So we're back to 10, 12 weeks. But, but the bottom line is there's a lot of things you can do with the business to help that. And it's trust your crews and trust your people. And we used to do everything in one day, drop the trailer off with a couple accessories have the boom truck come in the morning with the crew, you know, they— the delivery shows up, and then at the end of the day we would pull the dump trailer. And I'm like talking to my production manager, I'm like, I'm like, Mike, dude, we gotta figure out— we gotta find out what customers will let us drop our trailer and our accessories the night before and pick it up the day after we finish. Because then our two runners that run around with dump trailers, they obviously can't drop 4 off at the same time. So that was, that was one of the pivotal points that we did. Also with our suppliers, they will, they love doing a ground drop the day before at 3 in the afternoon because everybody wants their delivery first thing in the morning. So we have, you know, key, key customers that we know their vacation homes, they're not occupied, we're not blocking their driveway. So we can, we can put the stuff in the driveway and put it there and do the job. And, you know, then when the crew shows up, if they get there at 7, the trailer is there, it's in the right driveway. Your chances of roofing the wrong house when you put the trailer in the driveway are pretty slim, you know. And then as far as the delivery goes, most of my crews don't care whether they use the roof elevator or whether it's a boom truck. We use the boom truck because we were in our sales presentation, we did part of that were you know, one day. 98% of our jobs are done in one day, and, and our crews will bring a couple extra guys if it's a bigger job. But now we had to change that model a little bit, that we're going to drop stuff off the night before and pick it— pick the trailer up, leftover materials, you know, check, inspect the job the day after.

Nice. Okay, so people listening to this will say, okay, well, wow, how, how convenient for you to be able to go from 2 to 3 to 4 and just turn up these crews when some people are just struggling to even find a crew. So how did you— where did these crews come from?

You, you have to, you have to know your guys. And what I see in this industry in our area is, all right, the contractors don't know their crews. They don't know the guys. They're, they're paying, you know, they're paying, you know, the guy, whoever he is, or whatever they're paying them by the square. They don't, they don't— they know his first name, they don't know his last name. They know the business name. You need to know your guys now and talk to them and say, hey, you know, do you have some friends? You got anybody, you know, anybody wants to work with us? You love working with us, so, so help, you know, bring somebody else out, and you'll always be our number one guy, you know. But we got some jobs we need to get done, and we're growing, and we need good people. There's another thing, it's funny, there's a town by us that has a little park with, with basketball hoops and volleyball nets. Friday afternoon, about 6 o'clock, there's 10 vans there with ladders on, and they're all playing volleyball. Go stop by, you know, and talk to them. When you're at Home Depot, Lowe's, when you're, when you're at the big box store and you see a van, put your name on, on there, put your card on there and say, we're looking for roofers. You have to think outside the box with it with this. And, you know, I'm very fortunate that my crews, they will, they will bring other, other people when I ask. And the beauty of my main crew is he brought another crew. They're actually working for him, and they came, you know, they have their own general liability, their own workers' comp, their registered business. So that's taken some of the risk off of our business as well. That we have two workers' comp policies protecting our homeowners, you know?

So you were a guy that was on the roof for years, years and years. You did the work yourself. So one of the things that I know, and we talked about it last time, is you had to get over your perfectionism, you know, like of, you know, is anybody gonna be able to do it as well as me? So you got over it. And you've got these crews now, but how do you know that the third crew is good, the fourth crew is good? How do you know that they're going to take care of your customer and do the job right?

You, you have to trust your guys that have been with you and leave them alone for a little bit and concentrate on the new guy. And you know what, every manufacturer has a book called the Pro Guide or Installation Guide, and this is how they want it done. They're available in Spanish. I give it to them in the interview when I'm talking to them and say, this is how we do it. It's not the way I did it when I was, you know, 15 years old learning roofing. I don't even agree with some of the stuff in the book, but you know what, this is the how we're going to do it because these are the guys backing our workmanship warranties. So, so we explain to them and then we check on them, you know, and if I have to spend you know, a day or two going out watching them and talking to them, or my production manager has to spend extra time with them, that is the best time well spent. Because I, I would say right now on my production manager's desk, we have 2 red tickets, maybe 3. A red ticket is a callback, and I think 2 of the 3 that are there are like, oh, the stain on our ceiling is, you know, we don't know if it's from the new roof or the old So we're waiting, you know, to see if it rains and if it gets wet again, you know. But we don't have issues because we, we watch these guys. The other thing is pay your crew. Pay them. You, you gotta pay them. You— if you're gonna try to get a guy and you're gonna underpay them, you know, and you're not going to get performance out of them. My guys will come to my house. If I call them at 5 o'clock, say, can you come to my house and help me with something in my yard, they'll drive right over here. Because they know I'm going to pay them for it, you know. They'll— they— you, you can't be afraid. We pay our crews probably 20 to 25% more than anybody in our market. Well, you know what, we're not the cheapest roofer either, right? So we're going to share that, you know. And our same with our employees, you know, pay your people and you'll get out of it what you put into it, you know.

Yeah, I, I remember— I'm not going to mention his name, but I remember a really good friend of mine in the business, he, he built a company that $75, $80 million. And I remember one time he was, he was low on crews, and I, I asked him, I said, what, you know, what are you, what are you doing to get more crews? And he said, look, he said, I'm just going to pay him more. I'm going to raise my prices and I'm going to pay my crews more. I'm going to offer the crews more money to come and work for me. Like, okay, that seems like a good way to do it. And so look, you're proof of that too. But the other side of that is you can't just pay people more. Well, there's two things going on. There's two opposing forces here. One is that if you're an owner and you think that people are just price conscious and they want the cheapest roof, you're in trouble, right? You're not gonna get good people. You're not gonna be able to scale and grow, and you're certainly not gonna make any money. But if you do it the way you are doing it, which is, look, this is how much it costs me. This is how much margin I need to make. And if my costs go up, well, guess what? I'm not paying for it. The customer's paying for it. So the price has to go up. And you've done an amazing job over the last 2, 3 years of, of making sure that you protect your margins. And well, you got to pay more. You just raise the price, right? Exactly.

Let's talk about horse racing for a minute. So you watch the horse race, the horse that comes out of the gate in first. Do they ever win? No, they don't. Yeah, the guy that's in the back that's doing the slow, steady pace, that's the horse that usually wins. And it might be the worst horse in the field, but if it got a little muddy or a little slippery or something, that horse has got the extra energy to make it to the— make it to the gate. That's, that's how we have been, Brian. I could have in 6 months, I could be I could set a goal for $10 million for this year for my company, and I could do it. I could hire more salesmen. I got access to the crews. I don't have a material problem at this time, which is another subject. But we, we don't—

we're not—

we don't have these issues because I'm looking at the future. I'm working a month from now. Actually, I'm working about 8 weeks, 12 weeks from now, you know. And, and I, I have planned for this. You know, we take a 50% deposit for a job, right? So just say for instance you take that 50% deposit for the job and you have $200,000 in deposits in your bank account. Why aren't you buying the accessories? Buy them. Ice and water shield, synthetic paper. You know, why aren't you buying a head, drip edge? And, and buying it in bulk. Because now you need— you know what you need, you're going to use it. So that little bit of effort to take it out, you know, we put a 12 by 40 tent in our parking lot. It's full. I have 400 sheets of half-inch plywood in there. If I told you what I paid for it, everybody that listens to this is going to call me and want to buy the plywood from me. But I did it because the storms in the South— I saw what happened after Sandy. And we started buying it. And I won't, I won't sleep well if I don't have 400 sheets of plywood in my shop because I remember when they ran out. So you use that money, you know, you have it. A lot of guys, they'll get it, they'll have $200,000 in deposits and they'll go buy a new boat, a lake house, or, you know, a new car, fancy car. And right, and then they wait till they're done with the job.

Yeah.

Not only are you saving money with those purchases by getting it in bulk You, you know, you're still— if you're— you have this stuff. What if, what if we can't get roll goods in, in 2 months? Nothing. No Ice and Water Shield, no Liberty self-adhered, you know, none of the roll goods. Like, they're talking about this big shortage this summer. Well, I have— at least I know one thing, I'm going to work for about 12 weeks. Yeah, because—

well, one of the big shifts that you've been able to make And this is one of the things we talk about a lot here, and you said it very eloquently, is you're thinking 8 to 12 weeks out. Well, if you're so big, if you're like most business owners and you get up in the morning and the first thing you do is you're looking at your email and you're texting with your crews and you're going to the office and you're saying, okay, what, what do I got to deal with today? How can you think ahead? You're only thinking about today, what has to be done today. Where you, you're able to now think ahead 8 weeks out, 12 weeks out, and plan for this stuff and plan for growth and plan for profitability too. How do you— so one of the things here—

go ahead. So, so everybody, you know, there's this guy called a retirement planner, right? He works for, you know, whatever, Morgan Stanley or Fidelity or whatever, his retirement plan. But if you don't— if you don't plan right, you can't just wake up at 70 years old and say, I'm not going to work anymore. Yeah, you have to plan for that. And I'm looking at— I might need a truck like July or August. Try to buy a 2500 truck with a full-size bed right now, used, you know, somewhat about 40,000 miles on.

You can't, right?

Well, I'm looking now for July or August. Yeah, because I— because my growth and the way things are going, I'm going to need it. So I'm looking— I'm not just going to go out and settle for something that, that won't really work for my business, you know. I, I needed a dump trailer. My, my production major says we need another dump truck. I'm like, all right. So I start calling all the places we buy dump trailers from, and they're like, if you order one now, you will get it for you in November, December. And I'm like, oh my God, what am I going to do? I'm going to have to buy a 10-footer. you know, and I need a 14. Well, I call this tractor dealer 2 hours west of us in the middle of the farmland of Pennsylvania. They have 2 of them. I'll take them. 4:30, 5:30 in the morning, they delivered them to our office 2 days ago.

Yeah, you have—

and I might not have needed to, but if you can't order them or buy something and you know there's going to be a shortage, it's not going to go bad. Yeah, you know. And, and if you have those contracts written, you're— even if you're, even if you're a little cash poor in your business account and you have those contracts written and you have deposit money set aside, you'll have the money coming in, you know. But the one thing I will say is one thing we do not do is we don't steal from Peter to pay Paul. I will not eat— if I will not eat, I won't buy groceries if I have to dip into the material deposit account. To buy anything besides materials for those— for the jobs. And I might be buying 400 sheets of plywood with the material deposits, but I'm not buying a car with it, you know?

Yeah.

And I might not need 400 sheets of plywood for those jobs, but I'm still— I'm still planning ahead and I'm using the material deposits to buy material, not, you know, not toys, right?

You know, so— and we got to wrap up here. I'm looking at the clock and John will be back. I'm sure John will be back again with more because again, what he's done over the last few years with his business is amazing. But he's just a really, really smart, as you can tell listening to him. But one thing that really struck me with this is the planning ahead. You know, we talk all the time about price and about profitability. So one thing is, if you didn't have your profitability right, you wouldn't be able to do these things. You wouldn't be able to plan, you wouldn't be able to think ahead. In order for your profitability to be right, you have to have the right price, right? And your price is gonna be higher than probably everybody else in your market. That hasn't stopped you from selling jobs. Why? Because he is the best value for his customer. He's not the cheapest, but his customer's willing to pay more. Why? Because listen to him. He's prepared, he's thinking ahead, he's making sure, hey, I'm not going to dip into the material money that my customer has entrusted to me to go and go out to dinner or to buy a boat, like you said, or to, you know, or to make payroll. No, that's material deposits. It's used for material budgets. So you got to manage your money, you got to charge the right price, but you got to be the best value for your customer. And in most cases, that means that you are going to be more expensive than everybody else. Is that a pretty good summary?

And, and, you know, we, we had a sales meeting yesterday, you know, and our sales coach was on the, on the Zoom, and I had raised the prices, you know, because we keep getting increases, right? Remember the $7 a square May 1st coming? But I raised my prices. If, if I raise my prices now, that's for the June 24th price increase that's coming, right? It's not for the May 1st. I already raised those when we were in Miami, right? Those sold jobs are all going to be sold at the right margin because they, they have to be, or you start doing jobs and your margin goes down, and you know, and then your salesman's commission goes down. Because he, he sells a job, he expects to get a certain commission for the sale price. And then, you know, so you have to, you have to really watch what's going on in this market. I was told today, July 24th, they're going up again, and they told me it's going to be $7 to $10. And I'm like, okay. And he's like, I said, but I, you know, then we make a deal. Anything that I have on the, you know, in their computer ordered by, you know, a certain date, they will hold the price for it. Yeah, you know what I'm doing? I go to the office and say to Mike, you got 30 folders there, order all that material with, with X supplier, you know, and, and put it on hold ahead of time. Yeah, take the time to do that.

Yeah. Well, John, this has been really good. We started off on one thing and we kind of took it to, to something else. So hopefully you guys actually got double value out of this short podcast, but I hope that it was of value to you. John, I appreciate you so much. Thank you for taking the time. Thank you for doing this. I'll, I'll have you back again because there's definitely going to be more stuff for us to talk about. But thank you very much. And to everybody listening, short podcast but powerful. A lot of really good stuff here. Learn from John. Follow, you know, kind of follow in his footsteps. Look, you don't have to figure all this out alone. There are Plenty of people out there that have come before you, and here's, here's really good proof of that. So with that said, until next time, this is Brian Kaskavalciyan with G4 Marketing Group, and this is the Wealthy Contractor Podcast. Thanks for listening to today's episode of the Wealthy Contractor Podcast. Let me ask you, did it help you look at your business in a different way? Did it spark an idea or ideas that you hadn't thought of before? Do you have a list of action items that you can take and implement into your business or your life today? I really hope so. If it did, I'd like to ask you a favor. Would you leave a 5-star review of the podcast? By doing so, you'll help other contractors find the podcast more easily so that we can help them achieve more success, wealth, and freedom. And before you go, make sure you subscribe to the Wealthy Contractor Podcast so you get access to the latest episodes as soon as they're available. We're always striving to provide you with great content, so you don't want to miss what's coming up. In fact, if you haven't already, make sure you go to thewealthycontractor.com and get your free copy of my latest book, The 7 Secrets to Becoming a Wealthy Contractor. Just pay shipping and handling, and I'll take care of the cost of the book. So until next time, this is Brian Kaskavalciyan.