156. KPI’s: The Backbone of the Business | Brian Gottlieb

If you think about your profitability, your profitability is a byproduct. That's all it is. It's a byproduct. It's the final measurement. By getting all your other numbers right, the profitability will take care of itself. You don't have to focus on profitability. If you focus on the numbers that achieve profitability, the profitability takes care of itself. And I think that's the thing to know in business. It's— you can obsess on, oh my God, am I making money? Worry about hitting your daily targets and the money will take care of itself. 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 everybody, this is Brian Kaskavalciyan with G4 Marketing Group. With me today, back again, is Brian Gottlieb. We just finished a short session on KPIs for all of our attendees at Accelerate, and we are going to continue the conversation here on the podcast. And as we were talking earlier about this, Brian referred to KPIs as the, the backbone. We're trying to figure out exactly how he said it. He said it real good. I think it was the backbone of the business. So Let's talk about that. Let's talk about KPIs. Why are they important? What are they? Why are they important?

So what a KPI stands for, it stands for key performance indicator. Okay. And by the way, you can drive yourself crazy by giving any one person too many key performance indicators. To me, it's 2 or 3 numbers that helps them run their business. If it takes more than 2 or 3 numbers, we're probably looking at the wrong numbers. But what we want, we want everybody in the organization at the end of the day to be able to put their head on their pillow and know if they had a good day. And they can't do that unless they know what numbers matter and whether or not they've achieved those numbers. They can't figure out what they need to do differently if they don't know what numbers matter. And, and they should be super easy to find, they should be super easy to measure, And they'd be— they should be super easy to communicate. But when done properly, what it will do is it will create an enormous amount of alignment inside of your organization, and really a lot of loyalty too, because people will feel good about the day that they're having. And if it's a bad day, then they'll know at least how to correct it.

Great. So with that said, I want to back up a little bit. Sorry, for new listeners or people that don't know who you are, Would you mind giving the 1 or 2 minute version of your story? Because this, my friends, is a good one. They're all good, they're all good. So is yours, but this one, listen up.

Yeah, well, so look, I've been, I've been in the industry my whole life. Started off carrying the bag in the home, just like most of you that are watching this podcast right now, selling at the kitchen table. Eventually I wanted to become more of a consultant, and I got into the consulting industry, and it was a great opportunity for me because I got to see a lot of businesses across the country. And I kept a journal of, wow, if I ever start a business, I'm definitely going to do this, or if I ever start a business, I'm never going to do this. So I really got my PhD in, in home improvements by learning and visiting with a whole lot of companies. In 2009, I decided I wanted to come off the road as a consultant And I started the business Tundra Land Home Improvements. I started it in 2009 in the back of a friend's warehouse on a plastic folding table with $3,000 in cash. Since that time, we've opened more locations, Renewal by Andersen businesses, all combined well in excess of $120 million in revenue and 600 employees. Since that time, I've recently My Tundra Land business was recently acquired by a great organization, by Leaf, acquired us. And we had an Arizona business that was acquired by Jacuzzi, another great organization. I still own our Renewal by Andersen business, which is about an $80 million organization with about 300 employees. So look, hopefully I've stepped in enough landmines that my goal is to help stop you from stepping in one that I might have already stepped in. How about that?

Yeah, it's a hell of a story for 13 years. I mean, we started at the same time. We started in 2009, and, you know, we've done really well too. Okay, but no, I, I, I joke with Brian, but, you know, when I first met Brian, I think we were just talking about it was either '13 or 2014, and he was 5 years into Tundra Land, and already was really starting to do well with the business. And I remember going out to see you and driving across Wisconsin and going to see you. And I met you at a home show. I don't know if you remember this, but Brian pulls up, and anytime you see Brian, he's, he's like the Energizer Bunny. He is so full of energy, so full of life. He's always got that look on his face. For those of you that can watch the video, he's always got a smile on his face. He's always like excited. It's almost like he's seeing something for the first time every day or every minute. And I remember you setting up that home show and I'm watching you do this and you were coming up with ideas on the fly and it was really exciting. And then we went back to your office and I didn't know you that well at that point. We stopped and got cheese curds, which by the way, at a gas station by his office. I had never had cheese curds before. They were pretty amazing. I was really blown away by the team, first off, but really the marketing. This guy is like, he's a master business person, but man, the marketing. That's what I was there for, was to do something, I don't know, some project with you on marketing, but I was just blown away at the level of thinking and creativity. And the things that you were doing. And it's just— I was telling him before, I mean, it's, it's— he's such a good guy in the industry, and I'm so happy for all of his successes. And I know he's going to help a lot of people. I know you did at Accelerate. So anyway, I appreciate it.

And look, your audience is happy to have you because I think you add so much value to so many organizations. And, and look, I, I think people would do quite well if they would follow everything you, you speak of because, you know, read your book, you know, The Wealthy Contractor is a great book. Join your mastermind sessions. Really, if you really want to grow a business, do those things.

Yeah, thank you, thank you. Okay, so KPIs, so we got to have them, they're important. So I told the story at Accelerate of the company that I was having a conversation with and figuring out, okay, they wanted to do $10 million. By the way, the numbers don't matter. You could be doing a million, you can be doing 5, 10, 20, whatever, the principles that we're talking about apply. Although you probably can't get to 5 or 10 unless you really have a grasp on your, your numbers. How do you start this? How do you like come up with the KPIs? How do you determine, like right now, one of the things I see people doing is they're saying, well, we grew 50% last year, so let's grow another 50% or let's grow 100%. How do you come up with the numbers to even to begin with?

Yeah, that's a great question, Brian. I, I think that first of all, it's not done in a silo with just me coming up with it. It's about challenging our team. And whether you have 3 people in your organization or 300 people, it's about challenging your team to think what's aggressive but also what's realistic. Because if it's just pie-in-the-sky aggressive, it's probably not attainable, and then people are really going to get disappointed. Or to try to or trying to reach unattainable numbers can push a business into bankruptcy because you'll just spend a whole lot of money on marketing in the wrong places and not really make any money. So when we look at what's attainable, what's aggressive but realistic, it's what, what's aggressive but realistic from a marketing standpoint? What's aggressive but realistic from a staffing standpoint? What's aggressive but realistic from a closing average? What, what's aggressive but realistic from a pricing standpoint and a profitability standpoint? And again, why are we growing? And part of it is, how do you grow your business without adding a lot of complexity to it? It's why I got my bumps and bruises in the bath business when I thought the best way to grow the bath business was by, we're already doing showers in a bathroom, why don't we sell vanities, toilets, and flooring? And what it did is it made the business so complicated. And yeah, the average ticket was more, but my dollars per crew day fell apart and it just killed profitability. So I think it's about really understanding Who you are, who are you really, how do you scale, and how do you scale profitably and, and do so with simplicity? But my recommendation is never look at just growing top line. Always look at— if it's not— if it's growing top line, what's the bottom line? Should be growing too. It's one or the other, it's probably not the right decision. Yeah.

So unattainable— how do you determine that it's unattainable? Because on the one hand If we read, you know, personal development books, which I know you're a, you're a big believer in mindset and belief and all of that. Well, why can't we do $10 million? Why can't we make $2 million in profit next year? We're only doing a million today, but next year, business, you know, the economy is good. But how do you determine what is attainable and what's unattainable?

Yeah, you know, you want to bend your business, you don't want to break it. Okay, so I'm all for believing in being limitless and empowering others to realize their full potential. Anybody that knows me, that's, you know, that's my mantra, right? That's— it's all about helping others realize their full potential. That doesn't mean that we can go from $1 million to $100 million next year and not think that's going to affect customer delight along the way. So it's, to me, when we talk about aggressive, but then we talk about realistic. We want to think about how does it affect the customer journey, how does it affect the work-life balance inside of our organization, do we have the tools necessary to do so. Because what happens in a growing business is this: as your business scales— I'm just going to use my pen at an angle like this— by the time you plug in one system, you've already outgrown it when you're really trying to grow a lot. So you have to be sensitive to that as a business owner. On the same hand, if a business is flat you're not challenging the business and you're at a risk of going out of business because the business— you have to push a business because it's healthy for a business. It's either growing or it's dying. So what I think it's— and I don't think it's just the owner's responsibility to determine what is attainable. That's where I think, unless if you're a one-man show and you only work for yourself and you have nobody else on your team and I can create any target and I'm the only one that's going to have to kick my own butt, But if you have other people in your organization that you're trusting with certain functions in the business, you need to include them in the targets and the aggressive targets because they're going to be essential in achieving these targets. I've got a friend of mine that has a manufacturing plant. He used to tell the story about— there was a— this rearrangement was necessary and, uh, to try to get the plant a little more efficient. And he went back in the plant and the team is having a meeting about how they want to rearrange the plant. And he said, well, oh yeah, I'm listening, but why don't you just do this? What instead? Why don't you just do this? And well, he's the owner, he spoke that, so of course they did that. And it didn't work nearly as well, but they did that because, well, the owner said we should do that. But, you know, it's the people that are closest to the business that are going to be able to innovate the business the best. So, so what he should have done is he said, you're— if this is your business, you're in the business of manufacturing, you do it your way, you know it best. And I think when you lean on your team that way, that, you know, that I might want to install $10 million next month. Does my production manager think that's attainable, or does he think that's really going to put our, our, our business at risk? We have to listen to that advice.

So I have two things that— one is, can you, when talking about KPIs, you gave, you gave a great example at Accelerate. Can you give that quick example again of the hamburger stand? Because I think this— that's such a great way to think about, about this, although our businesses are a little more complicated. But give the hamburger stand example when thinking about KPIs, right?

So if you think about if, if you own a hamburger stand and maybe one person's role is ordering hamburgers, another person's role is the manager of the hamburger stand, and another person is responsible for the kitchen inside the hamburger stand. The person ordering hamburgers has to think about what is the demand? How many hamburgers do I need to have in that hamburger stand tomorrow? That would be a KPI. How many hamburger stands do I need to deliver tomorrow? That's a KPI. If I'm working in this, in the kitchen, and it's my responsibility to staff the kitchen, I have to think, well, I've got all these hamburgers coming in. And that means I have all these customers coming in. So how many people do I need on staff to flip those hamburgers? That's a KPI. Staffing can be a KPI. And if I'm the general manager, I need to know how many hamburgers I sold at the end of the day. I've got to be able to count my cash register at the end of the day just to close out my hamburger stand to see if I made any money. That's a KPI. Every department in a hamburger stand has a KPI, as does in home improvements.

Great. I love that example. I think that's such a great example. And closing out the cash register every day. People in this business, it blows my mind how little focus there I see in collecting the money, having money left over for us, the owners, and then taking that money home. One of the things I'm seeing a lot right now, and I'm sure you, you hear about this a lot too, is All right, over the last 2 or 3 years, our business has grown. We've got— we were a $2 million company and now we're doing $4, but we haven't really made all of the adjustments we need to do $4, to go to $5, to go to $6. Now we know that this current environment is unsustainable to a certain degree, and I guess what I'm trying to say is I see people are like they're plowing through it, they're, they're muscling their way. They don't have the— they're not developing that team of people yet. And I think that's going to bite them later when things start to kind of normalize or go, go down a little bit. Can you talk a little bit about how do you start to develop? Because one of the things that I know is the teams are not really well developed in a lot of these organizations, not just the home improvement business, you know, I mean, it's everywhere, but we're talking specifically about the home improvement business. So how do you really start to develop that team of people that you can trust to help you develop where the business is going?

Yeah, that's a great question. And I wanna filter it a little bit with something that's really super important. And again, what I'm gonna share with you is strictly my opinion, okay? I have no facts to back this up, but what I will share with you is that if you scale your business properly during these times, and if you're putting in the right people, the right processes, you're focusing on the right profitability that Brian speaks about all the time. If you're focusing on those things, what you're doing is you're building a much stronger business. And therefore, I think this growth is sustainable for strong businesses. I think if you have your structure— Yeah. Yeah. If you have your structure and disciplines in place, you can weather any storm and you can grow through those storms. This is such a great time to invest in your business because at some point there's gonna be a pullback, but that doesn't mean it's gonna hurt you. It will hurt the others that didn't invest in their team. It's a great time to invest. So look, I'm a big fan of developing people. I think if you wanna realize your full potential as an organization, the path through that is developing the individuals inside of the business. Frontline people, salespeople. If I, if I said I'm going to put a salesperson in the field, I'm not going to train them. You, everybody watching this would tell me I'm crazy that I put a sales rep out there without giving them any training. That would be crazy. And so, you know, we put salespeople through a 2-week boot camp or a 3-week boot camp. We put marketing people through a 1-week boot camp. We put production people through a boot camp. But do we put our managers through boot camps? Do we take that same time and energy to teach a manager how to be a good coach? How to do a performance review, how to, how to be a strong decision maker, how to hold people accountable, how to provide performance feedback and instant feedback and actionable feedback. And all these things, I think the role of the owner of an organization is about helping their managers become better leaders. And the more you— and there's a great program out there, it's called Google Project Oxygen. It talks about the 8 behaviors of a great manager. EOS has great management development programs. Brian has great management development programs. You know, these are essential to growing a business. Now, what I'll share with you is that the risk you run as an owner is this: I'm not sitting in your office right now, but my guess is you're getting bombarded with phone calls that, you know, Mrs. Jones's shower is leaking, or the window, uh, the, the flashing wasn't done right on the window, or this crew didn't show up. Or the sales rep just crashed their car, and you're dealing with all the firefighting stuff, which is urgent, but it doesn't do anything for growing your business. The things that it takes to grow your business are super important, but not very urgent. So they tend to get put to the back burner. We tend to be in firefighting mode as business owners, and that's strictly reactive. Until you change your paradigm, and move into a proactive mode and working on people and processes and structures so that the flashing doesn't— isn't a problem to begin with. That's, that's how the business is really going to grow. It takes time, it takes patience, but my recommendation is calendar out a section of your day every single day like it's an appointment with a customer where you're working on your business. Over time, over time, your business will improve.

Do you ever, you know, when you just rattled off all that stuff, I'm just thinking about that and I'm thinking, wow, I'm fortunate in that my business partner and I were able to do some of that together. And then we were able to start to develop and bring on people that were better than us at operations and at selling and all of that. It's a lot of work to become more people-focused. Do you have any type of recommendation? So I'll give you a scenario. So owner of the company, one or two salespeople, not a real system for selling, but right now, you know, things are so good right now that things are getting sold. Not a big marketing budget because leads just happen to be showing up. Production's okay, you know, I got Charlie over there. Charlie's been with me for 20 years. You know, Charlie's running production and I am the firefighter. We're doing $3 million. What is the first thing that— like, what are the steps? Like, what's the first person that needs to be replaced? What's the next thing that needs to be— what's the next— I kind of— I've seen a pattern, but I'm kind of curious to hear from, from you. In that scenario, what would you look at?

I was just on a phone with, uh, somebody that went to your Accelerate event, and we were on the phone yesterday. I was trying to help him through some of those decisions. He called me and I was happy to take his call. And the advice I gave to him is, you know, when you look at— when you look at marketing, when we say marketing, we're talking about lead generation, right? Sales in the home and production and installing. I asked him which of these, those 3 buckets, in your opinion, are going to be the hardest to scale? Which of those 3 buckets is your bottleneck? And he said, well, I'm pretty good at production. I feel like I can grow that. I'm pretty good at— because he was asking the same question, who's the first person I should hire? Like, I can kind of COVID the salespeople, you know. I said, what about lead generation? If you have— if you double your sales force, what's your level of confidence that you could first of all install what they sell Yeah, I think we can scale up to it. What about generate the leads for those sales reps so they're not sitting at home on the, on the couch eating potato chips? He said, yeah, that might be a problem. I said, there's your first hire. That's your first hire. That has to be your marketing manager. In his, in his situation, what I would say to you as a business owner watching this is ask yourself those same questions. Which area do you think is your biggest bottleneck if you're trying to say grow your business 30, 40, 50%? If that's your biggest bottleneck, it's probably your biggest weakness, and which is also probably not your number one strength, and therefore it's probably the first position you should hire to.

Yeah, one of the things that I recommend too, and tell me what you think about this, is I always ask people, what do you as the owner, what are you spending the most time on right now? Are you running leads? Are you making leads? Are you running production? Is that a good place to start too?

Right, right. That's a great place to start. Even what do you like and what do you hate, right? When we say, you know, the risk of hiring to a weakness is that we stink at developing our weaknesses because there are weaknesses. So there's a risk there. Yet nonetheless, that's really where you need to hire, in my opinion. Yeah, what's, what's taking out— taking up the most amount of your time, or what's your absolute weakness, or that thing that you despise doing. Because if you're always doing what you despise, you're going to get burnt out and you're never going to—

you're going to resist growing a business because, yeah, and you're going to be miserable.

Yeah.

I know I'm looking at the clock here and I know we got to wrap up. What is that? What's a good last question to ask, to ask you? I mean, I could have Brian on every week for like the next year. We'd never run out of cool stuff to talk about. I just don't know how he would feel about about that. We'll have a standing appointment every week. No, what's a good last question to ask you? What bit of advice, what sage advice do you have for people given the current environment? What's going on out there? You know, leads are still— seems like they're pretty plentiful. People are buying, people are financing. What do you see coming down? What are people— what do they need to be looking out for?

So look, I think rather than looking out, it's looking inward. Okay? I think the focus is on what you can control and what you can be excellent at. And in business, if you're a boat builder and if you want to build a mighty ship that's going to sail across the Atlantic Ocean, sure, you can just hire a whole bunch of people and teach them how to swing a hammer. But if you wanna build a magnificent ship, first, get those people to yearn for the open sea. And the more they yearn for the open sea, the more magnificent of a ship they'll build. My suggestion to you as an owner of a business is have a bold vision for your business and share it all the time. Share it all the time. Share it all the time. Open up every meeting with it. Open up every event with it. Constantly share it all the time. Make it a signature in your email. Share. The more you have a strong vision for your business and share it all the time, the more people will help you achieve that. Because it's one of these— this is the kind of business where you're never going to do it alone. You need a team around you, and you focus on that, you'll have a heck of a business.

Awesome. Well, Brian, thank you. I appreciate you, my friend. I appreciate you taking the time to to be here and for being at Accelerate. You killed it. You know, for those of you that weren't there, you missed the hell of a presentation, and I hope you'll come back again. I'd love to have you back again next year, and I definitely will be hitting you up for more podcast episodes throughout the year. And, uh, to everybody listening, 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.