Scaling a Family Business Beyond 8 Figures - Live Coaching Call with Matt Kowalske

I want you to realize you've already won and that everything else from here on is just bonus time and fun and you get to do whatever the hell you want. And that might allow you to settle into not having to just work constantly to then be able to be excited about having kids, do some other businesses on the side or just to be able to only work in the areas of the business that really feed you and feel good.

So.

Hey Matt, looking forward to the coaching call. How are you? Hey, me too. Good. Yeah, Just so for anybody who's watching right now, one of the reasons that we did this was we decided to do some live coaching that we would actually be able to stream so people can see coaching call can be. And it was also a way for me to get some good word out about my new book, the Second in Command. So you bought a bunch of those in bulk to be able to share. That got you onto the coaching call for free. So thank you for doing it. I know it's also a little bit vulnerable to be able to open up and, and dive in around your company. But we won't go anywhere weird. We'll go anywhere you want to go. So why don't you just tell us really briefly about your company so we understand the lay of the land and the way I always start all my coaching is tell me what's going well with your business today, what's not going well with your business today, and what are you working on over the next month or two and then we'll kind of dive back in from there.

Yeah. So I own a Kowalski kitchen and bath, which is a design build remodeling company in, in Delafield, Wisconsin. We handle everything from start to finish. So we handle the design and all the way through construction. We self perform as much of the work as we can too. Meaning we have carpenters and tile guys on staff and we have designers on staff as well. So really kind of helping the customer through the whole process. Handling everything from design through construction team. Now is around 35. The business has been growing pretty rapidly. I am second generation so my father started the company and I started running the day to day operations about a decade ago. And he is for the most part retired. He'll come in and do what he wants when he wants, but for the most part he's out.

So he has, he hasn't walked in recently and like fired anybody and then left and gone golfing?

No, no, no, not, not like that at all. He likes to drive around from, from job site to job site. And, you know, give people a hard time. And he's, he's much different now than he was when he was running the business. So get to see a different side of him at work.

Yeah, I'm sure now he's more the cheerleader because he gets to go in and just be happy. Go. Lucky dad. And the. Oh, wow, your dad's such a great guy, but he's not stressed with the day to day. Right. So now he's probably showing up as his best self.

Yeah, that's exactly right.

Yep. All right, why don't you tell me what's going well, what's not going well, and then we'll dive in and then what you're working on and we'll dive in from there.

A lot of things are going well. The foundation of the business is really strong. We have really, really strong balance sheet. Our P and L is looking good. Year after year, month after month. I wouldn't say it's not going well. Some of the challenges are getting the right processes in place and making sure that everyone's following them and everyone's going in the same direction. You know, we're not in a factory making widgets. Right. So the outcome is always different. Every project is different, every project is unique. But how do we make sure that the customer is getting a consistent experience and that it delivers consistent results, not only for the customer, but for the business as well?

Quick question. In the business that you run, are you guys a cost plus or you have fixed price in terms of your projects?

Fixed price.

Fixed price. Okay, so for anybody who's not listening, fixed price means that you quote and bid out a job. At the beginning, you do the work for somebody, and at the end, any of the profit that's left is yours. If there's change orders, then they probably have to play a change order, and that gives you a little bit of coverage. Cost plus tends to mean that they can make all the changes they ever want. It doesn't matter to you because you're always making your 10 or 12 points above.

We prefer the fixed price model. I mean, for a number of reasons. Probably a separate conversation, but sure, yeah, we prefer that model over the cost plus.

Going from there. What's going. What else is going well or anything not going well right now. And where are you or what are you working on over the next month or two?

What, what I'm working on really is, is the process. And then kind of the, the. What I'm struggling with is the next step to kind of scale the business and and, and what that looks like and, and really understanding the right guy because at times, you know, I feel like it's, it's probably beyond my, you know, my expertise really. You know, my dad always ran a smaller business is always profitable. Our business, you know, our business today is, is much larger, but we've kept the margins intact. I feel like we have achieved a level of operational excellence beyond our peers and that it could be repeatable in different markets. But I'm struggling with where we go. You know, we're, we're going to pass the $10 million mark here pretty quick. And I, and I go back and forth on the best way to, to scale it. Or, or maybe, or maybe I shouldn't. Yeah, my dad will tell me I, I shouldn't, that I should, I should work less and be incredibly thankful for, for what we've done and what we've accomplished.

How many hours a week do you work right now and how many weeks vacation did you take last year?

I take about six weeks of vacation, but when I'm not on vacation, I'm working. So I do get away a lot. But I love what I do so, you know, it's tough to pull me away.

Are you married? Do you have kids?

I just got engaged.

Okay, that's a good transition.

So at least I got, yeah, at least I got that going. But you know, I mean, there's obviously been sacrifices over the years and that's one of them. Well, I just turned 42 yesterday. Right. So never been engaged, never had kids and spent the last decade plus working and, and I've honestly, I've enjoyed every minute of it.

What's your management team or leadership team? Of the 35 people, I would imagine you also have all the subcontractors and trades and stuff that you have. In addition to those 35, is that correct? You also have like all the electricians and plumbers and stuff you bring in to work on projects. So of the 35 people, how many are on your management team or leadership team?

Yeah, so we have production manager, who's my right hand man. He runs the entire side, the production side of the business. So he oversees all the project managers and all the subcontractors, Marketing director, office manager, cfo, and then I also have managers for the project coordinators and the.

Designers for, for those six people. How much training and skill development have you helped give them over the last 12 months to 24 months?

Not as much as I should.

How much training and, you know, coaching and development have you gotten for yourself?

I Consume a ton of stuff, whether it's books, podcasts. If I have any time in the car, I'm listening to something related to business. Okay. And, and as much as I can, my business specifically, I have not had a ton, I mean none really. I, you know, I learned from my father and then just self taught stuff or self up. So, you know, just by consuming as much stuff as I can.

Okay, last question. Are you involved in any mastermind communities yourself? Are you a member or part of any like entrepreneur groups like EO or Vistage or Genius Network, Maverick, anything like that?

Nope.

Okay. What's your peer group in terms of your friends? If you were to think of like the, the five guys you spend the most time with. Five people you spend the most time with, excluding your fiance, how many of them run their own businesses?

They are all very entrepreneurial. A couple of them do not on the scale that I, that I do. I've got a real estate business. It's small, you know, we buy apartments and improve them and hold them over the long term and rent them out. And I have a partner in that business. And while he has a corporate job, he's got, you know, a lot of that kind of training and leadership stuff over the years. So I bought some stuff off him then. The other part too is, you know, my father played a big part in the early part of my career and now it's kind of above him, you know, and he doesn't necessarily know what's going on day to day or where he can help me and you know, bouncing ideas. If I had an issue, I would just call him, you know, and we'd work through it. But now he just doesn't have those answers anymore.

And I'm going to give you some perspective on that too. So first off is that you're the average of the five people you spend the most time with. The reason that your confidence or worry about your skill level or you're bumping into a ceiling or not really sure what to do is you're not surrounded by people who are also so had those same discussions and are having those same discussions. If all of your friends drank and smoked cigarettes, you'd probably drink and smoke cigarettes. If all of your friends go to CrossFit, you probably go to CrossFit. Right. If all of your friends golf, you probably golf, you kind of. We get sucked into the environment of where our friend group is. So we need to get you a friend group that is entrepreneurial and you're at an age where it'll by the way it'll blow your mind when you start spending time with people that are in groups. And I would suggest that you don't do them in industry groups. I wouldn't try to join the US association of Bathroom and Kitchen Remodelers. And I'm sure there is one. It's probably quite good.

And.

And, you know, maybe join that one. Right. But I would call it ideas having sex. I would. I would get into an entrepreneur's organization group. What city do you live in?

Milwaukee.

Okay.

Or just outside of Milwaukee.

Yeah. So I would look for the EO chapter in Milwaukee, or I would look for a Vistage group in Milwaukee and try to join that where you can immerse yourself in a community of other entrepreneurs that are in your marketplace, that are in completely different businesses than you are, and that all they do is talk about. All they talk about on a monthly basis is business. And all they talk about is the issues of CEOs in running businesses. Confidence issues, skill set issues, problems with employees issues, you know, market changing issues, what to do with my life issues. Like, it's just. That's what they talk about all the time. And so I think. I think you putting yourself in that group would be really powerful. The advice that you get from your dad on running your company has also kind of run its course right now. Because now what your dad has is opinions. And your dad has expertise that is based on the way he's always done it, but not necessarily on the best way to do something. And this isn't a slight on your father at all. But anybody who says, oh, I have 30 years experience, probably has five years experience six times in a row. You know, I talked to a CEO one time and I said, how much experience do you have? Or how much training have you had on interviewing employees? He goes, I've interviewed about 100 employees. I'm like, no, that's not what I asked. I didn't ask, how many people have you interviewed? How much training have you had on interviewing? He goes, well, I read some books. I'm like, it's not what I asked. How much training have you had on doing interviews? He goes, none. So maybe you've done all 100 interviews wrong. Have you had anyone observe you doing interviews? Putting the systems in place from the books that you read? No. So maybe you're not doing it properly. And all of a sudden he's like, maybe I've been screwing this whole thing up. Your dad's advice has kind of run its course because all he's done is the best that he's ever done, the best that he ever could with the resources that he had. But he probably didn't have insights to the rest of the best practices systems out there. So. I grew up in an entrepreneurial family similar to you. My dad started his own company. Both grandfathers ran their own companies. I've written six books, and my dad started reading my books like he's 70 years old reading them. 75 reading them. He died last year when he was 80. And I'm like, why are you reading my books? Like, you're not running a company. It's completely irrelevant. He's like, every time, he reasons like, I wish I'd known this when I was running my company. My dad was the smartest guy in the room 30 years ago with no experience or, sorry, with experience. But no, he didn't have the theoretical. He didn't have the practical. He never got the coaching. He didn't have the community. Thankfully, he grew up in a small city, and all of the guys at the golf club that he hung out with were entrepreneurs. If I think back to all the guys my dad played golf with, every single one of them ran their own company. I can name them. I could give you the names of 15 of them off the top of my heads. They were all entrepreneurs. So he ended up in this kind of mastermind community of other entrepreneurs. And they could commiserate and share problems and vent and feel the pressure. Right. And they understood each other, and I think that'll be powerful for you. Second part of that is on the books that you read. I learned this from a CEO that I coached years ago. I led their strategic planning meetings four years in a row, and he'd taken his company from about 100 million to 806 million in revenue. He's 40 years old. When. When I stopped working with him, what he started to do was think about the projects he was working on this quarter or over the next six months. And he started listening to podcasts or reading books or reading stuff online about those specific projects. Projects like he went searching for stuff. So if you're thinking about growing a business, how big should I grow my business? You should be trying to listen to every podcast interview or read every book or read every article about entrepreneurs who think about growing their businesses and what they learned and why they, you know, all that stuff. If you're firing three people, you should read stuff about firing. If you're hiring two, you should read about hiring two. If you're buying a company, read three books on Buying companies. So try to drive your learning about the stuff that you're working on. You probably use more of the math that you learned in school in your job than most humans do. Like, you probably use fractions and percentages more than the average human does because it's in your job every single day on blueprints and cutting, right? Well, you imagine if a teacher said, we're going to teach you about fractions today, you'd be like, cool, because I use it every day, right? Like, your, your ability to. To learn that information would be so much more powerful because it's what you're working on. It's dangerous for us as entrepreneurs to always be learning because a lot of the stuff we're learning is completely irrelevant. We don't need to know how to cut apart a dead rat unless we're starting to cut apart dead bodies, right? If by listening to another podcast, listening to another book, and doing that every time you're in the car, it doesn't necessarily let your mind relax. It can often add more to your to do list that is random. It can often stress you out and overwhelm you because you're getting all this information from so many different areas that's not related to the stuff that you should be thinking about that's happening this week, right? So if, if you can apply all your learning towards the stuff that you're working on now, I think you're going to find that you're going to. You're going to supercharge that part of your business. A really good book that you can read about how big to grow your business is a book called Small Giants. Small Giants is by a guy named Bo Burlingam. He was, I think he was the. The editor of Inc. Magazine. And it talks about companies and CEOs that build these small businesses that are kind of giants in the way that it gives them an incredible life. So we only run a company for one of three reasons. To give us money, to give us time, or to say that we kind of accomplished something, right? That we did something and it made us feel good. When you take over your dad's business, there's sometimes not that feeling of accomplishment because we feel like we either had to do it or it wasn't necessarily what we wanted to do. Do you feel good about running it? Like, are you excited that you're running it? Are you happy running it? Are you kind of? Or do you feel more pride in the real estate business because it was yours and you're, you know, that was idea and you're doing it.

No, I, I've never, I've never really thought about it that way. No, I, I, I love it. Maybe subconsciously, is that why I've started other businesses? I mean, maybe.

So it's not whether you love it or not, it's. Does it give you the sense of pride, of accomplishment that you go, I did something because one of the very first things you did was said that I run a business that was my dad's business and I kind of took it on versus I run my own business. Like, I want you to at some point feel that sense of accomplishment of the fact that you run a company. It doesn't matter how it got there. A lot of entrepreneurs are like, oh, I'm not really running a business. Because like Brian at 1-800-got-JUNK. There were 17,000 independent junk removal companies the day that he started the Rubbish Boys. So it's not like he had a unique idea. He didn't, he didn't go, oh, let's create the Facebook. Like it wasn't anything revolutionary. He just put a brand on some stuff.

Right.

So we don't need to create something brand new to feel the accomplishment of running. But I want you to feel that sense of accomplishment, the fact that you run a company that's doing 10 million in revenue, that employs 35 people, that has really happy customers. Because as soon as you settle into that feeling of accomplishment, you're not going to be chasing the dopamine rush of bigger. You might decide to grow it to the 100 million, 50 million, whatever, but you won't be doing it to chase the rainbow. And often entrepreneurs are chasing the rainbow. Like, I'll be happy when I get it to here, I'll be happy when I get it to there. But there is no there. You'll never. So. But if you're already happy and everything else is a bonus, it's like the sports team that by the end of the third quarter, they've already decimated the competition. There's no way in history they could ever lose the game. And they put in all the guys off the bench and let them play because they know they're going to win anyway. I want you to realize you've already won and that everything else from here on is just bonus time and fun and you get to do whatever the hell you want. And that might allow you to settle into not having to just work constantly to then be able to be excited about having kids, do some other businesses on the side, or just to be able to only work in the areas of the business that really feed you and feel good. Start. The third reason we start the business is to give us money. I don't know if you feel comfortable with disclosing, but do you pull a good amount of money out of the company every year or are you always pulling a lot of it back in?

No, no, Yeah, I pull plenty.

Okay, so more than enough. Okay, good. So if you're pulling more than enough out of the business, that's good. Many entrepreneurs don't pay themselves first. Many entrepreneurs underpay themselves thinking, I'll just keep growing it and that someday I'll sell the whole company for this big balloon. Meanwhile, for the 12 years that they're building the company, they're living this modest middle class life, working 80 hours a week hating life. Or their spouse starts hating life because they're not getting the benefits of all these 80 hours for the big balloon that comes at the end of the rainbow. And often the end of the rainbow doesn't really come right. Or when you divide the end of the rainbow by 12 years, you realize that you were working a job that you never would have taken. Right?

Yeah, that was, that was one of the things my father taught me very, very early in business was the importance of making sure that you're running a profitable business and take, taking money out. So, yeah, good.

Okay. The big lesson I got from my dad, we went to the golf course one day and he pointed to all the guys walking in. You know, that guy's Bruce Frick, he runs this company. That's Bruce McLeod. He runs this company. That's so and so. She runs this business. And then it was like 12:30 on a Wednesday and everybody coming in, he showed me who they were and what company they ran. And we went out and played golf. Played our 18, came back, we're sitting on the balcony at 5 o', clock, I'm eating my fries and gravy, drinking a cherry Coke, and he's showing me all the people coming into to start golfing at 5:15, 5:30. She works at this company, he works at the car dealership. He works for Bruce, Rick, he works for Andy. He goes, do you see the difference between who plays golf now and who's playing golf in the middle of the day? I said, yeah, you can play golf in the middle of the day if you run your own company and if you work for somebody, you can play golf after work. He said, what do you want? I said, I want to play golf whenever I want. He said, then you have to run Your own business. So for me, running my own company meant that I could do what I wanted to do, when I wanted to do, where I wanted to do, like, you know, whatever I wanted to do. A lot of entrepreneurs lose sight of that. We start to tell ourselves that our hobby is our business. There's nothing wrong with loving what we do. But have you ever gone to a party where you meet somebody who just. They want to talk about being a lawyer or they want to talk about being a dentist, or they want to talk about being a doctor, they want to talk about being an insurance salesman or like we kind of run the other way. Right. When all the person, like, especially if they're an insurance salesman. Right. And they're all excited about these new products they're having, it's just. Well, that's kind of like us. When we're excited about our business, no one wants to hear about our hobby. Right. So what, what do you do for fun? I play golf.

I travel. As I've gotten closer to 40, I've like fallen in love with cutting grass. So, yeah, I mean, I keep myself busy. I got, you know, a good group of friends and I'm. I'm really close with all my family. In fact, just got back from Vegas yesterday. I was with all my siblings and their significant others. So I'll gamble occasionally too.

How about things like fitness and health? Oh, yeah, yeah.

So I, Yep. I work out every day. That's non negotiable.

So keep that, keep that balance. And then I would also look to keep it because especially as you start having a family and start having kids is. Don't lose. Don't lose sight of why. One of the core reasons we run the business is to be able to give ourselves the better life. Because what tends to happen as we have a family is it gets hard and stressful and we tend to migrate back to. We're getting all of our dopamine from our work instead of getting all of our dopamine from all the other things too. So like, always, always keep the sense of self and the habits and the hobbies and everything else. In terms of. I want to go back into some of the training those six people that you have working for you. I would, I would work really hard to grow their skills. I would put those six people through the invest in your leaders course or at least two or three of them for sure. Your product manager, probably your office manager, and maybe the two others. Maybe not the CFO as much, maybe not the marketing director as much, but the others, you really want to grow their executive functioning skills around delegation, coaching, management, project management, situational leadership, and it also grows their confidence. So our job as a leader is to grow the skills and the confidence and the connections of our team so that they can take on more responsibility, more projects, and they can work more autonomously. Our job is to delegate more and delegate more and delegate more to free up our time to work in our areas of unique ability. So as an example, if your dad was really sick and was in the hospital and you could only work two hours a week, what would you do in those two hours a week? What would the core parts of the business be that you would focus on?

Finances and customer experience? Probably. Yeah.

Okay, so finances and customer experience, what specifically would you do in finance or in and around finance? Would it be like reviewing the, the P L for every job or looking at cash flow or budgeting or what would you be looking at?

Yeah, I'd be looking, you know, job costing is, is super important. So job costing and then the, the P L and then in terms of the customer experience, I would just be looking at, you know, results of surveys and reviews and stuff like that.

Yeah. So how many hours a week do you spend on that now? It depends.

I mean, it depends. The finance side has been really heavy since the beginning of the year because we put in place a new system. So, you know, I'm kind of making sure that it's all checking out, obviously with the help of, of the, the cfo, but you know, the CFO is part time. So since the beginning of the year, it's, it's been a lot. Additionally, we've had, we just got hacked too, which has been a horrible mess. They got into our bank accounts. It's a long story. I could go on for 20 minutes about it, but so that's taken up, you know, between those two things, probably 80% of my time since the beginning of the year.

Okay, so just something, by the way, on, on the hack component, remember that it's not how do we do something, it's who do we know that can do something. So it's a who, it's a who issue, not a how issue. Two friends of mine, Ben, Ben Hardy and Dan Sullivan, wrote the book who, not how and they're actually are close friends of mine. But one of the reasons why you want to be involved in a, in the mastermind community and around other entrepreneurs is they often have the solutions for our problems. Our dad's solutions used to be work harder. Right. Grind it out, put in the Hours. Figure it out, try harder. The school system completely messed us up as humans because it told us if we sucked at something, get a tutor. Practice harder, study more, work harder. Instead of saying, hey, you suck at accounting, go find two friends that are good at accounting, get them to do your accounting assignments for you, and you all get an A. That would have been way easier, but now they tried to get somebody who sucks at accounting to be good at accounting. There's a lot of people out there and resources out there that can help you with a hack really, really quickly that can help. Like, so it doesn't expend any of your time and energy, and there's not a single problem in your company that exists that writing a check can't solve. So if all you do is focus on revenue and gross margin, revenue and gross margin, revenue and gross margin, you can buy your way out of any problem. Meaning you can just reach out to your network. Who do I know that can solve this problem? Boom. It solves. So as an example, years ago, I got hacked. I was getting extorted. They had access to all of my accounts. They'd locked me out of all my accounts. I was getting text messages asking me for money. It was all super legit and really scary. My network is ridiculously strong. Like, I'm literally one degree away from the fact that, like, there's a. An embarrassing quote that I can give you about Obama because one of my friends, like, played basketball with Obama and would like. So I post on Facebook. I'm like, quick question. Does anybody. I got hacked. Here's what happened. Can anybody help me? Right away? Two messages come in. One is friends with the founder of Anonymous. Do you know Anonymous? They're like the white mask. Yeah, yeah, yeah. So one of the founders of Anonymous was friends with a very close personal friend of mine. Like, this is, like, he is way under the radar. Nobody really knows this guy exists except, like, his best three buddies in the universe. So I'm like, that might be overkill. I don't really need the guys who hack into government accounts to help me on this one. The second one was a guy named Walter o' Brien who hacked into the NASA computer system when he was 13 and downloaded the space station blueprints so he could put them up on his wall. Fourth highest IQ in history. I got Walter to help me. I literally have the fourth highest IQ guy in history. I'm locked down. In 30 minutes. I literally have access to all my accounts. I'm completely locked down. Everything is bulletproof. Within 30 minutes, Walter helped me do it. And I have the FBI standing in my home in Scottsdale, Arizona, and we phone this hacker, and the guy went completely dark, and he's never been seen in the last eight years. It was like an hour of my life to lock down because I was one degree away from the network and the who. Our job as CEOs is to figure out the who's, not to figure out the hows. Our job is to not work harder. Because a lot of the working harder is like the fly trying to get out the window. They end up dead on the windowsill. And while this might have been a problem you can work harder on and fix, there's going to be 20 more of those in the next two years, 20 other big problems. If we keep working harder to solve all the problems, at some point our business can suffer. So the stuff that you want to work on is the stuff that fuels you with energy, the stuff that you're really, really good at, and the stuff that is at least above your effective hourly rate. So let's say as an example, you earn a million dollars a year, you know, for the profit in your company and what you pull out of the business you're in a million bucks a year, you're paying yourself $500 an hour times 40 hours a week, times 50 weeks a year is a million dollars. Okay? So your effective hourly rate's about $500 an hour. You should delegate everything that's on your plate. That's $500 an hour or less. Another friend of mine, Dan Martell, wrote a book called buy back your time. Dan and I've been friends for 12 years. In Dan's book, he talks about taking your effective hourly rate, dividing it by four, and delegating at least everything under that. So you take your $500 an hour divided by four is $125 an hour. If you're doing any task that's less than 125 bucks an hour, you should fire yourself. Like, if I was your board of advisors and paying you 500 bucks an hour and I found out you're doing 30 an hour tasks, I'd be like, why am I paying you 500 to do something for 30 bucks? It doesn't make any sense. You want to, as CEO, to start getting stuff off your plate that is below your effective hourly rate and that drains you of energy so that you can spend more time on those critical two areas of the business or on the areas that are about growing people and aligning people, or on areas of the business that are the rain making. That bring in bigger deals. That bring in bigger deals. Years my first company was in the home services space. I ran a house painting company and When I was 20 years old, I had 12 employees. We painted 78 houses that summer in four months. And then over the course of a bunch of years did millions of dollars of painting houses. On every job that we did, we did a mini P L for the job. So we took the revenue minus our cost of goods sold, which was like our, you know, our royalty and our labor and our paint and our soft supplies. And then I had a gross margin, or I called it my contribution margin. Like how much per hour, per labor hour do I need to be making to ensure that I cover my overhead, which was like marketing and sales and gas and legal and accounting and entertainment and all that other. So that I had enough profit at the end of the year? So what I did is on every job is I made sure my gross margin and my gross margin per hour were being managed properly. And that doing it, doing a job, we called it a job cost and profit farm or basically doing a mini piano on every single job is probably what made me the most money in the business outside of keeping my people happy. Do you guys do anything like that on every single job?

Yeah, that's what I spend a lot of my time doing. Yep.

And then what I would do is make sure that your people know how to do it so that there's a system in place so that you don't do it. Managing that system and doing that analysis, that's a $50 an hour task. That's not a $500 an hour task. You should spend two hours finding more business or connecting with suppliers or connecting with, you know, remote, like whatever, wherever you get, like a lot more of your business. If you spend two hours on that every week instead of managing this mini P and L process, but making sure that people are managing the P L and are reporting back to you. So all you do is see the jobs where the P L was wrong, like where we missed the gross margin. We were either way too high, which is potentially dangerous because we could be overcharging, which is going to hurt us, or it could be way too low, which means we don't make enough money. But if you're in the zone, you don't even want to get a report. So if you, let's say you do 10 jobs a week, you should only see the P and L for two of those 10 jobs because eight of them are right in the sweet spot. Like, imagine if I came to you. What kind of car do you drive?

Rivian suv.

If I. So the Rivian is an electric vehicle. So what you, like, you know on any given day what your battery level is like on the Rivian, how many miles you have left? Would you want your car every hour or three times a day to tell you how much battery is left? No, like, you already know. You just need it when you're below a quarter of the battery to tell you, hey, mother, charge me up. Right? So why do you want to know about eight jobs that were really good? Hey, it's really good. Hey, it's really good. Hey, it's, like, off. I don't need to know it's really good. I already know it's really good. What you want to know is, hey, it's way too good. Oh, what happened? Oh, wow. We're charging too much. We got to be careful because we're not going to land as many clients later or, oh, we didn't make enough money. What happened? What went wrong? Where did we miss on the budget? How did we mismanage this? All you need to know is the outliers. So you need to train people on the system, make sure the system's being executed on, and you need to get reports on the outliers so that you and the management team on a weekly basis can only talk about the outliers. Because you don't need to do the work. You just need to make sure the work is done. It's like if I managed, let's say I rent the same Airbnb in Vancouver every time. I don't need to be the one cleaning the Airbnb. All I need is for somebody to walk around the home and say, yes, I checked off this checklist, and everything in the home is done by the checklist. Great. I can show up to a clean home. But so many entrepreneurs go and clean the home on their own to make sure that it's good. Because I want to make sure the customer's happy. No, put the system in place to make sure that it's good so the customer's happy. So I learned a system years ago from the COO at Starbucks. I was being groomed by the CEO at Starbucks. He was coaching me every single month, and then every quarter in person for a full day. And so Greg got a phone call one day from the CEO at Starbucks. The CEO at the time was Howard Behar. And Howard called Greg and said, why is the letter B on the sign at 45th and Wallingford in Seattle. Not working. Greg said, I don't care. Howard's like, what do you mean you don't care? Greg said, that's not a system that we should be or not a question we should be asking. He said, the question you should ask me is what system do we have in place to ensure that every letter on every Sign at all 14,535 locations are always working? So your questions need to be not why did we screw up that job or why did we miss on that, you know, part of the bathroom quote? What system do we have in place to ensure that those things don't happen again? What system do we have in place to ensure that we're always managing to our gross margin per hour? What system do we have in place to ensure that our people are more productive and they kind of come in under the know the bid on the piece rate that we're setting them up on, whatever it's going to be. What system do we have in place to ensure that change orders are always applied? What system do we have in place to ensure that the customer feels good about signing the change order and paying more money? Because at the end of the day, like, it's good because we get our money, but it's bad because they feel nickeled and dimed even though they wanted to change something. You want the new gold toilet? Cool, we'll do the new gold toilet. But there's a change order. So your question is to always ask, well, what systems do we have in place? And not manage the systems.

That is something that I've, that I've been working on a lot is, is building out these systems. The problem that I have is, or I guess my question is, should I be the one building them or you know.

No, no. Your, your job is to make sure the systems are built and your job is to make sure your product manager, your marketing director, your office manager, your CFO and your two other managers have the skills and the confidence and connections for them to build out the systems properly and that. So you delegate the system to them that you want created and they you using situational leadership and coaching and delegation, all systems in my invest in your leaders course, that you use those skills to delegate it to them so you get back from them what you want and so that you coach and lead them in that process and they can actually do it. Your job isn't to do the work. So that's why you give them the skills and you give them the confidence, you give them the connections or you plug them into things that will give them the skills, confidence and connections so that you can delegate more to them so they. Your work, your job is to get results through people. One of the biggest things your dad has given you recently is such a huge gift, and it's that he's coming into the business on a day to day and cheering people on and showing up, being happy and showing up on job sites just being happy. Dad, you need to bring that in now as part of you as well. You need to be showing up on those jobs with that same energy your dad is, because your role is to be the chief energizing officer, not the chief executive officer. And your dad has been able to uncouple himself from the stress and the day to day and the worry and the P and L and the money. And he gets to come in as happy. Go, lucky guy. And he probably didn't do anywhere near as much of that when he was running the business, or if he did, it was very bipolar. Right. Most entrepreneurs of your dad's era were very bipolar in their leadership. They'd come in screaming and yelling at people one day and why the are you guys screwing this up? And it's my company. If you don't like it, get the hell out. And then the next day they're bringing in Dairy Queens, they're saying, sorry, I was a dick yesterday, here's an ice cream, I love you. And then they joke around and, and like our employees all had whiplash, but they knew the guy loved this. But they're like, why was he a dick yesterday? But. Right. That was probably your dad. Right?

Yeah. And that's, that's me a bit too. Yeah.

Correct. So. So your, your thing that I want you to learn from your dad now is watching him show up as the chief energizing officer and bring that in. How often do you tell your fiance or show your fiance through words or actions? How often do you show her or tell her that you love her?

You know, I try and do it every day. I, I think what's more relatable for.

Me probably, but you probably do do it every day. You probably tell your fiance or show your fiance in some way that you love her. Every day, I guess. Oh, yes.

Right. Through actions or words? Yes. Yeah.

How often do you tell your product manager that you love them or appreciate them or gratitude?

Well, that's what I was getting to about once every never.

How often do you do it with the office manager? Right. How often with the CFO? So here's the problem. As CEOs, our job is to really, let's say that each of them had a jar on their desk. Every time you praise them or thank them or show gratitude or celebrate a project they got completed, or say, great job with living a core value, you're putting a penny in their jar. And anytime you give them a new project, you give them a new task, you push them on something, you hold them accountable, you follow up on a project, you show them areas that we need to get better at. You're taking a penny out of their jar. Your job is to make sure that all of your direct reports have more penny in their jar and most. I've almost never met a CEO yet who spends enough time putting pennies in the jars. That same CEO at Starbucks, Howard Behar. Every Friday would sit down at his desk and there was a spreadsheet and it had a list of stores and employees for him to write thank you cards to. And two hours every Friday, Howard Behar would write thank you notes to people. Kelly Smith, congrats on hitting the frappuccino record in Virginia. Hope to see you in the field this summer, Howard. Store number 1207. Great job breaking your record. Super happy to see you're doing great in Mississippi. Howard, two hours every single Friday. The CEO of a 14,000 chain Starbucks, multi billion dollar publicly traded company. Two hours a week, every week, he spent time saying thank you and showing gratitude and praise. If we were to fast forward that to today, because this was back in 2004, 2005, he would probably be sending loom videos out. Hey, Kelly, just wanted to say doing a great job out in the field. Keep it going, Howard. Boom. And his team would send it out, right? Howard would write the note, but then they would send it out, ship it out, put the stamp on the thing. But your job is to find a way to, with those 35 people and with the sub trades and with the contractors and with the electricians is praise them and thank them and show them gratitude. How often do you call an electrician or a plumber with an urgency, like a, like, I need you to come in now. I need you to come to the job you weren't scheduled for or you just left. Like, I need you to come back in now to fix something or help with something. A lot. So how often do you send a loom video or a text message to those subcontractors going, hey, Jamie, just wanted to say thanks you. Jamie's plumbing has saved our ass three times this quarter. You guys are amazing.

Love you not enough. I mean, it's interesting because my brother is, he owns Kowalski Electric. They, we sub them to do all of our electrical stuff. So, you know, with him probably more than others, I, I've, I've made a conscious effort to. In fact, I just called the plumber yesterday and as difficult as it was, you know, thanked him and you know, talk to him about some personal stuff and it felt good. But, and I'm trying to do it more.

I would get. Have you ever used loom?

Oh yeah, all the time.

I would send a loom video to some of your sub trades once in a while and just go, hey Bobby, Matt, over here. Kowalski. Just want to say thanks. You guys have been crushing it. You've been amazing. Really, really appreciate what's going on. You know what Bobby's going to do with the video from Matt? He's going to show four or five of his other people. The phone call will be good, the video will be good, text message will be good. But anytime that you can start depositing more of those deposits will be really, really big. For you guys as a company, I think we need to look at the business itself because. And I've done, I've done renovations and remodels and built homes of ours that I've lived in. And yet every freaking house is different, man. Like unless you're building tract homes and you're building them all the same and even those are some house. They're all different a little bit too. I think you need to find some ways to have some systems that are fairly repeatable, some processes that are fairly repeatable. And if it's the way that things are bid or the way that things are pitched, or the ways that things are ordered, or the timeline like keep working so that your company puts systems in place that are repeatable even though the end result is very different and unique.

Yeah, and that's, that's, that's really what I've been working on. And we're, and we're getting really close. The question I have is, feel like every time I've tried to get someone to help me build these systems, they can only like their vision for the system is just too narrow. If we're having an issue on the production side and I go to my production manager and say, hey, we need a new system for X problem.

Right.

It will be really good for the production side of the business, but it will burden the rest of the business with a bunch of paperwork and bullshit. I've never successfully been able to delegate that side of it and I don't understand exactly what I'm doing wrong.

Well, so part of it is you're growing the skill set of people that have probably hit their glass ceilings too. Right. I would guess that all six of your people, this is the biggest thing they've ever done. So they've never necessarily worked around people with interdependencies, cross matrix decision making, the ability to talk to different business areas, to collaborate. So one thing to do is. Do you watch football at all?

Oh yeah.

Favorite team?

That's another one of my hobbies. I forgot. The Green Bay packers, the only team.

Green Bay packers, the only team. So if you've got the wide receiver for the Green Bay packers, you know, you got the offensive team, the special teams, the defensive team, what's the most important team for the wide receiver? None. All Green Bay Packers.

Right. Well. Right.

This is the big lesson here. What's your CFO's most important team?

It's a business in general. Right, Right.

What's your, what's your director of marketing's most important area or most. It's Kowalski. It's the whole. So what, what you need to do because what you have now is you've got six people. You have a quarterback who's only thinking offense. You have a defensive tackle that's only thinking defense. Nobody's thinking about the Green Bay Packers. And that's why when you see the defense coming off the field, the offense is coming on, they're high fiving and cheering them on. They're saying, hey, somebody just beat you out there. Like I was watching from over here and I saw this, they're cheering each. Right. There's constantly that interaction helping each other. But if they just sat on the bench on their phone waiting for the defense to come off the field and didn't care, no one would ever win. The only way that a business area is ever going to create a system that includes all the other business areas, that thinks about all the other business areas is if they realize that we're all on the same team. And I can't create a system in a vacuum that makes all the other business areas work harder. Which means that if I'm going to create a system, I need to get their feedback on the system. I need to ask them about the system. We need to co create about the systems. So the way that you get them to stop creating systems that are only for them is if they, if you get them to start thinking about the whole Green Bay packers and not just about the offense.

I think I'VE struggled to, to do that. I mean, that, that was a. It's been a realization for me probably for the past six months or so.

Tell them that I've been trying to tell the same story. Tell them the same story that I told you. Or when you're delegating, hey, create the system. Stop and say, which business areas are going to have to touch this system that you're creating? Which business areas are you going to be passing this system off to? Or which business areas will you be slowing down with your systems? Or which, which business areas are you going to depend on for your system to be successful? Have you talked to them? How could you talk to them? What can you talk to them about? Right, so you're going to kind of coach them and lead them to think about that because you know now know it in your head. But we need to now grow their skills and confidence too.

Would you agree that there isn't one part of the business that is more important than the other, even if you just look at like the four or five main things? Okay, yeah, yeah.

And it's very similar to if you go to a theater production. Let's say you go and you watch the, the. The play Phantom of the Opera. You know, there's only ever like three or four characters on the stage at once. And without those four characters on stage, there's no play. But then you also have lighting and costumes and makeup and music and set design and ticketing and marketing and sales and the coat check girl and the guy selling popcorn. Without all those people, there's no play going on. So there's front stage, backstage, but without all of them, there's no play going on. So no one is more important. Now, that being said, I don't think there's any problem that exists that writing a check can't solve. You know, no matter how good our play is, if we're not selling tickets, we have no play. So you always have to drive revenue and marketing. Revenue and marketing. Revenue and marketing has to be the thrust. Building a better company is all about driving revenue and driving gross margin so that you have money to buy your way out of all the problems, to pay for all the perfection. Most of the companies that fail are the ones that keep focusing on building the better mousetrap, and they don't necessarily get out the door. Rivian's biggest risk is that they don't actually get the sales and marketing to kick in. I think one of their biggest successes is the cars look so beautiful that people probably want to have one. So the more of them that are on the road, the more of them will be on the road. But that's really what. What Tesla did really well, right? They were the marketing and the buzz machine. Building the better car was only part of it. And then. And now that they have so many orders, they can start working on building the better car and getting cars out the door faster. But if they don't have orders, who cares if they can produce a gazillion cars?