James Brooks - Ep.38 - From Near Bankruptcy to Thriving and Profitable

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. So imagine this, you've just doubled your sales staff, you've added a new product line, and your sales were skyrocketing. Everything appears to be going incredibly well, but behind the scenes, everything is spiraling out of control. This happens every day. It happens all of the time, and it's one of the reasons why this podcast exists, because I don't want that to happen to you. On today's episode, I've got my client James Brooks from Platinum Exteriors, and that's what happened to James just a short time ago. It all hit rock bottom for James when his office manager called him into the office and told him that for the first time they couldn't meet payroll. To make matters worse, customers were calling to cancel jobs, jobs weren't being completed, and there was a lawyer online too. Needless to say, James's life was turned upside down. Now everybody said file bankruptcy, walk away, just start over again, but James didn't do that. He stuck to it, did the hard work, and turned his company around. Today, James's company is on track to do 500 to 600 very profitable jobs with a staff that loves what they do and an online reputation near 5 stars. If you've ever felt like you're in a place that you just can't come back from, this is an episode of the Wealthy Contractor Podcast you don't want to miss. So let's get to it. All right, everybody. Welcome to the Wealthy Contractor Podcast. This is Brian Kaskavalciyan. G4 Marketing. I've got James Brooks with us today. James, thank you for being here. I appreciate you joining us on the Wealthy Contractor Podcast.

You're welcome. It's great to be here. Great.

So James, I asked you on the podcast because when you and I talked a few weeks ago, I left that conversation so motivated and so inspired by your story, I thought we've got to share this story on the podcast. So if you wouldn't mind, tell everybody a little bit about you and about your company.

Well, I originally, I spent almost 20 years in the Marine Corps, and when I finished that, I had a career in the financial industry. And it got to the point where I was just not having fun. I didn't enjoy what I was doing. I went to work on kind of a part-time basis working for a contractor. And, you know, I really enjoyed doing that. I was still interacting with people on an everyday basis. And I just took a look at things and what was going on. And I thought, you know, I can do this a better way myself, you know, give a customer a better experience and So I pretty much made a decision one day that, okay, I'm gonna, I'm gonna go study a little bit more about this business and we're gonna do this on our own. And that's how it started.

Great. That was how long ago? How many years have you been in business?

That was fall of 2010, so we're, you know, going on 7 years now.

Okay, awesome. And a little bit about the business today. The products that you sell?

We primarily started out as an insulation contractor, and then through advice and request of the builder supplies, they came to us and said, hey JB, you need to start thinking about doing roofing. And we basically started taking training on that. So we got roofing into the mix. And then of course, over the last 7, you know, or so years, that grew into— now we're doing gutters. Um, it grew to the, you know, Platinum Insulation is the parent, you know, company that we started with. And then whenever we started doing roofing, siding, gutters, windows, um, then that's when we developed Platinum Exteriors. So they both kind of work hand in hand, and that's how that came about.

Great. Um, how many salespeople?

Um, now we have 3.

3 salespeople, awesome. And about how many projects do you think you'll complete this year?

This year we will approach probably 500 to 600.

Awesome, good for you.

In that range.

Okay, James, so let's go back to 2016. You had some troubles in 2016. Why don't we talk about that a little bit?

We went into 2016 with the— I had the idea like, okay, we've been doing, you know, well, let's really amp this thing up. And we added probably 4 salespeople, added a product to the mix, you know, which was the vinyl siding. And it seemed like that's when we added a product that we weren't well-versed in, and then we tried to add all these salespeople all at once. It took a little bit of time, but eventually that's whenever things started to go a little bit out of control. But it was, it was kind of well hidden because we got sales guys out there selling, contracts are coming in, jobs are getting done. But what we didn't realize behind the scenes were that sales guys were not selling jobs number one, at a profit. Measurements were off. You know, the accountability from a project manager that was not on the ball when we thought he was on the ball. You know, we thought we had some checks and balances in place, and we trusted that group of people to do too much.

So what ended up happening?

We went through like that whole, pretty much through that summer. And going into fall. And when I started getting phone calls from customers, like, demanding to speak to me, and deadlines weren't happening, product was wrong, that's whenever we started digging into it. And then I had my, my right-hand, you know, person at the office, you know, the office manager who also does our accounting, called and says, hey, we got a problem, you need to sit down. And it was kind of like, okay, what's up? And it was basically, you know, I'd always prided myself on, we always meet payroll. We never had trouble clearing that. We always get stuff done. And for the first time I was told, um, I don't think we can meet payroll coming up. And we have jobs that are not complete and we have people ready to cancel. And by the way, there's a lawyer online too. So yeah, so that was kind of a wake-up call to, okay, I relaxed too much. I gave too many people too much, um, room and didn't have the oversight in place. And that's what I walked into that morning. Wow.

All right, so you walked into that and, uh, Did it get worse before it got better?

Oh yes, yeah, much worse, because it was like a— it was a snowball rolling downhill. And of course, all this stuff came to the surface when we were going into the end of the season. So the revenue that we're used to bringing in throughout, you know, right after home shows, right after we have our big push for when we go out and have all these appointments and make these sales. I'm going into the fourth quarter of the year, which the bigger ticket items and projects, those are not gonna happen again until you get to late February and March.

Yeah.

Yeah, so we really had to sit down basically just kind of like a, you know, You know, I call the conference room, the war room. We came into the war room with my, you know, top 1 or 2 people and basically like, okay, well, what, what is our direction? How do we fix this? We actually had meetings with, um, uh, you know, a couple of the attorneys and it was like, hey, you're too deep. Uh, just shut it down, walk away, file a bankruptcy. And you can't do that. And I luckily, I'm fortunate that I went to 3 to 4 different opinions and the last 2 gentlemen that we spoke to basically just said, okay, you've created a business with, you know, little to no money 5 to 6 years ago and you're generating all of this revenue. So you obviously know how to get appointments, you know how to get customers and you know how to complete jobs. So yeah, you got two options here. You can file, quit, walk away, and you're going to have a lot of people look at you like, this guy has my money, this guy didn't come through. Um, you don't have to look in the mirror and live with that every day. Or you roll up your sleeves, you get busy, you start putting a game plan together, you pick up the phone, you call every customer, let them know what's going on, and Let them know what your game plan is to take care of them, then you go to work.

And at that point, James, when you were— when you didn't have payroll to meet, did you make payroll?

Yes, we did. We— it was one of the things that the, uh, one of the attorneys, I think it was, and it still rings into my mind every day, the bit of advice that I got from him whenever he says roll the sleeves up, go to work, get busy. You know, you know, you can have your moment, you know, you know, of your tears and woe is me, but the more time you spend in that phase is the longer it takes you to get to I'm back out on top again, right? And his words were, nothing bad comes from good intentions, being honest and communicating with people, and good old-fashioned hard work. That's where we went back to the drawing board with like, okay, let's get in here let's list all these customers, let's call everyone. And to meet the payroll, it was basically, okay, you need $15,000 or $25,000 in sales and you need it in 72 hours. Go get it. And so we went through customers, you know, we just started reaching out and I ran every appointment that I could myself. And by the time we got to Friday, Table clear. Wow.

Now, when you realized what was going on, um, and you had to sit down and have the meeting with the— first off, that attorney sounds amazing. That doesn't sound like any lawyer I know. Uh, what great advice he gave you.

Yes.

So at that point, What were the mistakes that you made? Because— and here's part of the reason why I'm asking you this— is because a lot of people are doing that right now as we speak. I would not be surprised if there are a number of people that are listening to this right now who are exactly at the beginning of where you were. Business is good, The economy is good, there's money in the streets, let's go blow this business out. Let's go hire a bunch of people, let's bring on overhead, and let's go do this thing. What were the mistakes that you made?

It was, you know, like you said, you know, things were good, what appeared to be good on the surface, right? You know, I got those guys out there that say they have X amount of years of experience, I'm the best thing in the world. They were coming in. The number one mistake that was made was not double-checking what was coming in the door. And I— what I built my business on was that original face-to-face contact with a customer. How are things? You know, how are we taking care of you? Are you getting what you asked for? Those kind of things. I, as a business owner, um, and I'll say it, I got lazy. And I thought, okay, I've got 4 sales guys out there. I got my girl in the office handling stuff. I got a project manager handling things. It's 2 o'clock in the afternoon. All right. Hey, you know, Jackie, write me a check for this. I'll see you guys Monday. And that was, I mean, that's it. You know, when it comes to looking at what happened, you know, I can say yes, these sales guys sold jobs that were not on our, you know, below our price list. They didn't measure correctly, that kind of thing. But at the end of the day, when you own the company, you know, you have to take ownership of, you know, when we do well, yep, I made that happen. When we're not doing well, yep, that was because of something that I did not do or something that I didn't make sure happened.

Yeah.

So I think just getting complacent and Okay, the wheel's turning, the bus is moving, we're going down the road, um, everything is good. Um, instead of going out there and, you know, trusting but verify it, right? It's okay to put something in somebody's hands that you think is qualified and capable, and that's why we hire, you know, people like that. But you have to go back and double-check to make sure, like, okay, is it happening the way this person's telling me that it's happening. And if I had gone back and double-checked, verified, spot-checking here and there, you know, going out to a job site and just making sure somebody's happy, we would have gotten the word from the customer that, hey, you've had material here for a month and nobody showed up. Yeah. And that's an embarrassing phone call to get when you put out there to the internet world and to, you know, out to the public that that, hey, we do things different here. You know, we're sharp. You know, you don't have to worry about the nightmares that you hear with other companies that are in our business.

Yeah, you kind of became that company.

Yes. Yeah.

Yep. And it's just—

Absolutely.

And like I told you when you and I had this conversation, I don't know, a month or two ago, A, I appreciate you sharing it. But B, you're not alone. I did the same thing. And I will— and, and you, you, you know, you pull a cross-section of entrepreneurs, uh, business owners in this space or any other, and, um, a lot of people have made this same mistake. And, uh, what I'm kind of hoping by putting your story out there is, you know, inspiring people to become aware of what's going on and look for the danger signs, but then also have the confidence and the inspiration to know, hey, James got out of it, Brian got out of it, we can too. We can lift ourselves out of this. So, so now you're coming into winter of 2016. Did you keep all of those salespeople?

No, that was the first thing that we did. I have a few key players, you know, a very close friend of mine who became my business partner through all this. You know, that was the first phone call that I made, you know, hey Richard, what do I do here? And we sat down and basically we put all of these jobs on the board. We didn't have the money to finish the jobs. And that's whenever we sat down and he was the one that said, okay, you need this much money to happen, go get it. We sat down with him and that's when we started developing a plan of like, okay, what is in front of me right now? You know, like take a step back. What do you have out there right now that needs immediate attention? What, what can be, you know, what I call like a medium level and anything that is a back burner that's not important and not going to have a detrimental effect on the company, that immediately gets pushed away. And so we came through with a game plan. First thing we did was we looked at the, the employees and the people that we have. Um, who's our most trusted? Who is our most productive, most proficient? You know, who really cares about the job that they do and who has been doing the right thing? And that's when we identified, okay, these sales guys here really, you know, they're people that just really didn't have the company's interest in mind. And we immediately let those people go. A production manager who, you know, we're in the middle of the day whenever this stuff started to come up, like, hey, made a phone call, hey, how's it looking out there? Where are you at? And he's on a field trip at an amusement park at 2:30 in the afternoon. But yet he's on a $65,000 a year salary.

Wow.

You know, it was okay, tomorrow bring your truck in, bring your keys, and we'll see you later. So we went through that list making those cuts where we needed to make them, and then we started prioritizing customers with a, okay, which job, when we complete the work on this, which job is a profit job, which job am I taking a loss on because it was sold under? And we put a strategic plan in place for this is how we get through completing this work.

How were you feeling personally during that time?

Um, you're, um, you're pretty much like, um, like I was in another world. Like I was sick, um, to my stomach. Um, you know, I would wake up at 2, 3 o'clock in the morning pacing around. And you're thinking about these customers, you know, because the way that I structured and built this company was we take care of you, you know, we do more. So every one of these folders, every one of these jobs that I could see on my board, I can remember their face, I can remember the house, I remember the kids. And at, you know, 2 or 3 o'clock in the morning, you're walking around pacing in the living room like, okay, what's, what's going to happen tomorrow, you know? And, um, yeah, you feel like your world is turned completely upside down.

Yeah, that's a tough place to be. I, I, I was there for a really long time. 2 o'clock in the morning, 3 o'clock in the morning, up.

And that's not the reason why you go into business, you know, to— I mean, to, to be a business owner and have a business up and running that allows me to have freedom to go spend with family, um, you know, and to just enjoy life more, right? Um, and to be able to be different and have those customers out there like, and JB, he's the best. Nobody's doing anything to our house but him, you know, that's what you want, right? And whenever it was totally the opposite direction, now it's, it's at the point where, you know, you have customers going, hey, it's been 6, 8 weeks, you know, 10 weeks, nobody's— there's not much going on. And your communication falls off because you go into a morning and you're handling so many fires that I forgot to call Mr. Jones today. And then, you know, Monday becomes Friday, and then all of a sudden it's next month and you still haven't called him, right? You know, and, and that was the advice of the, you know, the, uh, the strong attorney there is what I'll call him. Um, you know, pick up the phone, call them and let them know right away and tell them you're going to take care of it. And you know, but just that you feel really upside down, you feel completely, you know, your opinion of yourself, and that you really take a hit.

Yeah.

So cold on your body.

Yeah.

Yeah.

So that lasted through the beginning of 2017. But then something happened where things started to turn around. Can you start talking about when that happened, when you, when you were able to start really turning things around?

Yes, I mean, we, we got to a point where the, you know, doing that, um, you know, the flip-flop, you know, take care of a good job, take care of a bad job. And we started to, you know, when you come into this, uh, you know, conference room and you have that board full of jobs and you start erasing those off, okay, that's complete. Okay, this is complete. Then we started looking at like, okay, now how do we get a little deeper into, you know, the revenue? We got to make sure when we do a job, we do a job for revenue, not, you know, and during that period, we cleaned up a lot of jobs that the salespeople had sold that were upside down by, I mean, anything between $1,800 to $25,000, you know, upside down and losses for what we were supposed to do. So looking at the the numbers and I started trying to think of like, okay, I'm a really, I feel like I'm a very good salesperson. I know how to interact with my customers and I know how to interact with the people that work for me because I think everybody can tell that I care about them. But the one thing that I understood clearly was I'm not an accountant and I'm not a bookkeeper. So that was the first thing that we do, like this has to get cleaned up. So if we had good accounting, and good bookkeeping in place, when the first job was completed and we took a $3,000 loss, we could have said, wait a minute, what's going on here? And you would have found it. But a book that I found was Profit First, and that's the book that you sent me. And it sat around on the shelf for a couple of months. You know, I'm like, okay, what, you know, another book on that. And it was just And I'm a guy that I've taught myself this business. I was never in the home improvement business until the day that I started. And I did that by books, going out there and reading, using the internet. And when I started going through the Profit First and reading, it's like this guy's telling a story just like I'm telling you now. This guy's been there too. And when I started, when I could relate to Okay, this guy's had mornings at, you know, 2 and 3 in the morning or days that he didn't sleep the night before and worries. And when I started reading how he describes how you take care of these things and to make sure your money when it comes into the business gets allocated for where it's supposed to go. And we basically started implementing that Profit First plan. And even in the book, you know, I bought the audio version. And, um, you know, I, I got the book that you sent me. So, you know, I'm a guy that has to see things in writing. I got to have it in my hands. I got to see it. So I'm listening to it while I'm reading it and leafing through this book, and that's whenever the light bulb clicked. And whenever he says in there, don't wait, don't think about it, go start this plan tomorrow, you know, where you set up your different accounts that are allocated for taxes, profit you know, your owner's compensation. And that's another topic, probably the owner's compensation. The first thing that you do as a business owner is, I'll pay myself next Friday. Next Friday never comes, right? But using that plan, you know, we read it and I took it to Richard, and Richard was looking at it. I said, listen, man, trust me, just tell me what you think of this. And I mean, we come into the office at 7 AM And he's like, well, be careful what you wish for because I read through this book. You're going to the bank and you're going to open up these accounts and you're going to do it today. And he was, he was up until 2:30, 3 o'clock in the morning. Like, this is great stuff. So that was, if I had started that plan, um, the day that I went out there with like, okay, we, we got to meet payroll. If we would have went out there and started this plan, when we started cleaning house, I would be another quarter or so ahead. Things would have straightened around a lot sooner. And we're still using that plan. We're still not out of the barn yet on everything, but we are excited about what's coming up. And it was all because of that. That Profit First was like part of a lifesaver for us.

Yeah. So a lot of people may have heard of the book Profit First. How— what specifically, you know, you talked about setting up the accounts. So there's a tax account, a profit account, um, your owner's compensation account. So once you have these different accounts, or once you had these accounts set up, then what was, what was the plan? How— what did you do with the money as it came in?

Um, every check that comes in, um, goes into an income account, and then with the income account, I disperse to operating expense account, you know, which is our payroll, materials, that kind of thing. And then, you know, the— and you have a percentage breakdown of each one of those. Um, and I think in our situation, we were behind and under the gun We tailored it a little bit more to fit for us, and we created what was called the debt settlement account, you know. So a portion of the money went into that account. So of course, through this whole experience from going into late 2016-17, um, you know, with the situation with the revenue, now we're behind with a vendor, you know, and we're not behind with just one vendor, we're behind with a few more because of the way things went. But we created that account so that Every time somebody gives us a check, a credit card, or deposit, there is a set percentage of that amount of money on the deposit and on the final payment that gets distributed according to those percentages for each one of those accounts.

Right. And the beauty of it is, you know, going back to what you said earlier about why we go into business in the first place, I mean, the job of a business is to make a profit. It's to earn a profit. But a lot of times profit is the last thing that gets thought about. And in this case, it's saying, no, no, no, wait a minute, that's not the right way to do it. The right way to do it is you gotta think about your profit first. And so the concept is if you get in $10, whatever percentage you've decided gets allocated to profit gets taken out of that. So let's say it's you know, let's say it's, uh, to make the math easy, let's say it's 10%. So you're going to take $1 and you're going to put it into an untouchable account. And he even says if you have to, put it in a completely separate bank where you have no internet access to it, right? So you go and you deposit that money over there and you don't touch it. It grows. And so that's what you guys started to do. You had the profit account and the debt settlement account. So then what start— so what time period are we talking about now? Are we talking like second quarter of 2017?

Let's see. Yeah, this is actually— yeah, second quarter, second going into third quarter of 2017 is when, when we finally picked that up. And I'm gonna say it's probably closer to the third quarter. That's when we finally picked that system up.

Okay.

Started using it really effectively.

And so now today, in early 2017, for the last then 6 months, you have been putting money into a profit account?

Yes.

And you have been putting money into a debt settlement account?

Yes.

Okay, and so, so what's kind of happened to the business then? I mean, financially Um, have your debts been paid off?

Um, we're not completely paid off yet, but when this took place, we, we took the first step. And, you know, remember what, you know, the attorney said— communication, good intention. Yeah, we reached out to everyone that we owed. Hey, I'm going to be able to take care of this, but it's going to be this way. Yeah. Now, some played nice, some, some, some didn't. Most of them did. And so with having that debt settlement account, that was, you know, we had that percentage, you know, that went into that. And, you know, for example, we were able to pick up the phone, you know, there is a vendor out there that we owe $2,000 to. We had an X amount of number, you know, in that settlement account. And we picked up the phone to say, hey, I'm printing your check. Can you please come pick it up? Or would you like me to deliver it? And basically the first thing that, you know, I didn't even get the words out of the mouth and the guy says, hey, you know what, it's coming up, you know, close to Christmas, man, just give me $1,000 and we're cool. Okay. And so, and there was another, you know, guy that we thought, okay, we owe him $1,000. So it was like, yep, this guy got his, the other guy got his. Yeah. Two of those problems are off the board.

Off the charts. Yeah. It was accounted for because it was accounted for. Yeah, it was taken off the top. Yeah, you know, I— yeah, the whole debt thing is it can get really scary. It can get really stressful. And, you know, debt is a— it's a tool. But if you're using it because your pricing isn't correct, your business model isn't correct, your Overhead is too much. Debt will crush you. And I know that. And a lot of people listening to this probably know that as well. So to kind of, you know, I'm watching the clock here and your story is— it's just such a great story. The last thing I'll ask you is, how are you sleeping now? You sleeping through the night all the way?

I have not slept better in a long time. I mean, and, and, you know, you're talking about like the accounts, the way that we have those set up. And, and we've had— I mean, we have large trucks that are expensive, you know, um, and we had a phone call the other day, hey, the, the big diesel is on the side of the road. And like, that is the, um, that truck is the money-making machine that has the equipment on it. That is the number one piece of equipment that we own. And to have the ability to pick up the phone and call and say, you know, I don't care how much it costs to tow that to get it over here, find out what it is, get it fixed, and get it back on the road now. Yeah, because guess what? In my profit account, I have the money there for profit, which is to, you know, that's for being a profit. I use that to grow the business. You know, and, and that is there for a reason. Yeah. But if I didn't have that program set up, I would have figured out a way to spend that money on something else or to get something else done. And it has been, that's just a part of the program that that's the reason why you set these up that way. When those things pop up, it's accounted for and there's something there to take care of it.

Yeah. Beautiful. Well, James, like I told you, man, great story, very inspiring. For anybody out there that's, that's, you know, listening to this story, Profit First is a great resource if you're having some financial troubles. The author is named Mike Michalowicz. It's not that hard to find. Just go to Amazon and put in Profit First. The book delivers exactly what it promises. It will deliver you your profit first. I've been talking a lot about profit over the last couple of years, and it is the most important thing. It is the fuel of your business. And if you don't think about it, if you don't focus on it, it can get away from you and get you into, into trouble. James, again, I appreciate you being on this episode of the podcast. Um, I think we've learned a lot today. Um, love your story. And to everybody else, this is Brian Kaskavalciyan, G4 Marketing Group. Until next time, thank you. All right, so that's it for today's episode of the Wealthy Contractor Podcast. Let me ask you, did it help you look at your business in a new way? Did it spark an idea or ideas 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. Now, 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. And a favor, I'd really appreciate it if you'd go to iTunes and post a review of this podcast. Let us know how we're doing. And finally, we started The Wealthy Contractor as a resource to help you, the home improvement entrepreneur, regardless of where you are on the wealthy scale, get where you want to go. We want to provide you with the motivation and the confidence, the resources, and the tools so you too can live the life of the wealthy contractor. Now, the wealthy contractor is a place where it's okay for you to want it all. In fact, it's not only okay, it's encouraged. So until next time, this is Brian Kaskavalciyan with G4 Marketing Group.