Avoiding Big Mistakes as a Contractor

Because that's what you're doing is you're running a business. You're not running a sales organization, you're not running a construction company. You're running a business like a construction company. Build stuff, and that's neat. And a sales organization sells stuff, and that's neat. And when we get into contracting, that's usually one of the two things we're good at. We're either really good at selling or really good at building something. We get word of mouth and network and more and more business. And as we create more and more business, we create more and more risk. And if we're not good people, business people, we open ourselves up to liability. And this beautiful thing that we've worked so hard for is now compromised and we can lose it. Protect yourself. Be smart with your business. So today, let's talk about risk. Risk. As a contractor, we have to realize that with risk comes either great reward or great consequences. You may have heard that in the Spider man movie. With great power comes great responsibility. Same thing with risk. The higher the level of risk, the higher the level of reward, but also the higher the level of consequence. Lower the risk, the lower the reward and lower the consequence. And so I'll put this into terms that hopefully clarifies what I'm talking about. As a salesperson in the home services industry, the risk that we have is pretty minimal. If we make a mistake or a job goes wrong or anything like that, we don't really own the risk for that. The actual contractor does. So I don't have a lot of exposure there. And then I also have this ability to earn some reward, but that's capped a little bit. It can be really great for a lot of really good guys out there. But even then, the ultimate reward of selling a company and the value that goes along with that is still limited as a salesperson, but could be very ideal. I know a lot of guys that have gone from being a salesperson to owning a business. Running into all these risk things. I'm going to talk about today back to being a salesperson because they're more comfortable there. Now, being a contractor, that's taking on a lot of responsibility, a huge amount of responsibility. And our reward could be amazing. You know, it could be millions of dollars if we do it right, but. But our consequences could be dramatic, bankruptcy, all kinds of things that could affect your marriage, divorce. I'm seeing it all, and it can be really tough in people's world. So what I'm trying to do today is to help mitigate some of those risks so that you avoid them as you move forward in your contracting business. And what I've decided to do is I've decided to put them into five different categories. We have our work risk, the things that we're doing, what risk lives there. We have the risk in agreements and the agreements that we create with people or customers. We have our insurance, huge risk thing there. And we're going to get into that when I'll give you a few stories along those lines. Finance risk also another one where it's actually the biggest area of risk that we have as contractors. Not understanding them well can lead us down a path of destruction. And then finally we have business and just the operational business side of things. And so let's start off with work. Let's start off with some of the easy stuff, some of the basic stuff, and hopefully get to some of the more intense stuff here in just a second. So work stuff. All right, first things first. Understand OSHA and what it means. The Occupational Safety and Health Associate Association, I believe, is what it is. That is where they control the safety of the work conditions that we are providing to the folks that are engaged with us, whether they're subcontractors or employees. There's a huge book on it. You should go make yourself aware of that book. You should go make yourself aware of the safety precautions that are necessary for the particular trade that you're doing. So if you're doing roofing, you have a lot of fall risk involved in that. And so what do I need to have as far as ropes and harnesses, fall protection, the various things that go along with that? How far is a ladder supposed to extend above the eave line of the roof whenever you access it? There's all of these different things that if you're off on any of them, they can cost you significantly. And we're not just talking $100, $500 fine here. Depending upon the project, it could be hundreds of thousands of dollars fine. And if you think about it, they actually have a point. The risk of somebody's life is at stake here. And if we don't present a safe place for people to work, we open ourselves up to a risk. Yes, that person could fall and die, but that fall and death could severely affect our business to the point of putting us out of business. And if we aren't following the rules, fines are the least of our worries because we get into a bunch of other areas where it can be emotional, physical, mental damage to us in the loss of a person's Life. So get your safety stuff squared away. Do everything in your power to train your team. Make sure that you're providing the safety information that you need to provide in order to, to provide a safe workplace and avoid all of those nasty fines that OSHA loves to get us on. We think, boy, we'll get away with it, we'll get away with it. And all of a sudden, of course, it's always the best project. The one you're most proud of is the one where you get tagged by those guys saying that you pulled a permit. They know where you're located, they're going to come out and watch, and sure enough, there you are. And even if you don't have to pull a permit, they're driving around, taking a look and knowing what's going on in their particular regions that they cover and they're looking for you. So get up to date on your OSHA stuff. Warranties. So your workmanship warranties need to be written clearly and understood completely by whoever it is that you're working with because you don't want to come to a situation where after you do the work, your warranty either is less than what you pervade it to be or it's including more than what you intended it to be. This is a great place to get with an attorney. We're going to talk about those attorneys towards the end. But having an attorney helping you with your warranty, your workmanship, warranty is paramount and it's different in every state. It's different in what you're willing and able to take on. And so each company is going to have its own belief system on how they want to warranty things. And really truthfully, it came down to this for me. If I had a five year warranty on something and somebody called me on year seven, I was going to go take care of it, but I didn't want to get into a position where that particular person was disparaging and ruining my company. Although I still was living up to my warranty and even surpassing it. So you want to make sure your warranties are tight. I know that I own the risk on that warranty too, not the salesperson. A good example is a large commercial project doing the work. I'll take my glasses off for this one because it still hurts. Large commercial project. Come, you know, three years later, after it's all done, that particular building was being sold. So they did an inspection on it. And in that inspection they found out that ice and water shield, which was necessary by code in that area had not been installed on that roof. Well, sales guy that was supposed to watch the job wasn't there. Crew that installed the job wasn't there anymore. And I owned the warranty. So it was my responsibility, my dough that had to take care of that. And to the tune of about $125,000. And so knowing that I always set aside a warranty fund off of every single project that we ever did, I took a couple of bucks per square and set it aside to cover warranty, to say, hey, if something ever happens, we're able to make sure that we take care of this. And fortunately, we had done that. And it solved a lot of problems for us in having to perform that work. Although I wasn't overjoyed at having to outlay that cash, but I was overjoyed at making sure that it was right. So make sure that you have a good tight warranty, have an attorney look it over. Attorneys for those type of things aren't as expensive as you think. And for what it costs for them, 3, 4, or $500 to have them look it over, make sure it's right. Far less than $125,000 or even 10 or 15 or $20,000 on a project that you may not be responsible for having to deal with because you don't have a good warranty injury. So somebody gets hurt on your job site, who is that person, first off? So are they an employee? Are they a subcontractor? Based on either one of those, do you have the right workman's comp in place, general liability in place, the subcontractors, certificate of insurance and liability, we're going to talk a little bit more about those. But this all ties back to setting proper expectations, being clear about those things from the beginning, that if somebody's injured, what precipitated that injury? Were they possibly under the influence that caused it? Were they. So have had that happen, Guy fall off a roof, hit the ground, broken bones, all kinds of problems, hospital, and come to find out after a blood test he was under the influence. Well, we didn't have anything in writing saying you could or couldn't. And we suddenly became responsible, had to get attorneys, huge expense. We were ultimately not held responsible in the end, after several thousands of dollars in defending ourselves. But it was something that we could have eliminated by having great documentation up front. So make sure you have yourself covered. Now, that's not to say that if somebody gets injured and they get injured in a way that we play a part in avoiding that we shouldn't be willing to step up and take care of the people that work for us through our insurance. That's what it's there for. Or if we've got a pan of our own pocket for some reason or another, being willing to do so. So that kind of covers the work side of things. It's not all encompassing, but all the things I wish I would have known, those are like, hey boy, if somebody would have just told me those before I got into it, that would have prevented a lot of problems. So let's talk about those agreements a little bit. We have agreements with a variety of different people. We have agreements with our employees. We have agreements with our crews. We have agreements with subcontractors that are maybe sales reps. We have all these different agreements. We have agreements with our people that we're going to do work with. So there's all these different legal documents that need to be taken care of. And so in order to do that, that goes back to that attorney. Get those things right. But I want to give you some of the things that may help prevent you from issues, for example, with your crew. Subcontractors have a good solid subcontractor agreement. But include in there what may be a consequence of not doing things correctly and what might be a reward. So you might include in your subcontractor agreement for every job that you do well and it passes inspection. Perfectly. $100 bonus. But if it doesn't, you're required to fix that job before being allowed to do another job or being given another job. And write in clearly what that entails at all costs. So their cost, their time, their labor, all that stuff. Nothing off of you for improper installation, for great installation, you should probably provide some type of reward. Doesn't have to be on every project. It could be every 10 projects. It could be a lot of different things. But make sure it's in an agreement so that it is clear you don't want it to just be verbal. That's where we get into most of our problems as a contractor. A lot of verbal exchange of information. And yeah, if you do a job great. And with patent inspection, I'll give you 100 bucks. And then they get their check. And there's not 100 bucks. You say, well, that's not exactly what I said. What I said was this, now we have a problem. Now we have conflict and things just go drama. Ground zero H bomb. And everything's a problem. So we want to be really clear about what our agreements look like. We want to be clear about what it takes to do the work, what it takes to get paid and what that pay will look like and who it will be paid to. For example, you don't want to pay a subcontractor to just his name, like Bob Jones. You want to pay it to an entity. It will protect you and it will protect your homeowner. Much better to have them have an entity. So like an llc, a lp, a corporation or incorporation. Either one of those would be sufficient to say, hey, there's some protection between entities instead of personal liability. Want to avoid personal liability at all times. We're going to talk about that a little bit too. So that kind of handles subcontractors with your crews, but with your salespeople. Let's say you have salespeople that are subcontractors. It's very common in the home service contractor world to have independent sales reps out selling your service, whatever it may be. Maybe your roofing, maybe your pest control, maybe your solar. A lot of Those guys are 1099 independent contractors. And we just have a verbal thing with them. They come in, hey, yep, we're going to pay 1099. This is going to be your commission. And there you go. Get out there and go. A guy goes and sells a whole bunch of stuff and he's doing well, and then he decides to leave. What does that look like when he leaves? Am I now responsible for everything he's sold? To pay him the full commission on when he had other responsibilities like washing the job or collecting things. Well, if that's not written into the agreement somewhere, that he gets a part of his reward for each aspect that he does, we owe him for the whole thing. And if he ever goes to the labor board on you and says, hey, I was hired to be a salesperson, I sold these things, they're not paying my commission, and I left, you're going to lose in court. You're going to lose that battle. But if you have an agreement that says, well, he had three responsibilities, sell it, watch it, make sure it got built, and then collect the money and all he did was sell it. So we're willing to give him a third of his commission and the other 2/3 are going to go to people to take care of those projects, you'll win that as long as it's in an agreement, usually drafted by an attorney and signed off on both parties. So make sure your agreements include all of those little areas that you could get caught in. That's one of the big ones, is, hey, you gotta. This is what it looks like for a salesperson and the responsibilities he has and what portions of the commission are allocated to him. Because if he leaves, I gotta have somebody else do it. The other things to be concerned about is like when people get paid, do they get paid right away when they sell it and they turn in the contract, or do they get paid when the job is built and collected in full? Include those things in your agreement because you hire somebody. It's a verbal exchange of information. He sells three or four jobs and then he gets clarity on the fact that he's not going to get paid until these jobs are actually produced and collected. And he can't make it that far without making some money. And he leaves. Now we have a problem. Now there's an issue. So we want to make sure that we're really clear about those things and how people get paid when they get paid, when they need to turn in their payroll request form to get paid. Because all of those will play a big part in us being clear, setting proper expectations and having a team that loves us while protecting our company from risk. Then we have the contracts for our work that we do. This is something that is near and dear to my heart because there's a variety of contracts that are out there. I've seen all kinds of them. I know that I can write a loctite contract, I mean absolutely go to court, win every single time. But the ability to get that contract signed out in the field becomes very difficult because everything's in huge print and big bold face and stuff like that. And I'm not saying to write a contract that doesn't fully protect you. I'm saying write the contract that protects you while still afford you the opportunity to get business. And if you lose one here and there due to a technicality, it's okay because you got so many over here that you wouldn't have gotten before because you had this really difficult, hard to understand agreement. Because attorneys, I'm going to warn you about them, they don't like to lose in court. And whatever they write up, they're going to write up an agreement that ensures they win in court. They're going to cover every loophole, every everything. And when you try to go to explain that to a homeowner, it gets very legalese and something that somebody doesn't want to sign, it sounds like they're going to have to give away an arm or a baby or something to do work with you. And so be cautious in how far you go and how far you need to go get A really good attorney. I'll mention somebody here. Her name is Karen in Inslee with the Benitez law firm in Dallas, Texas. She's a good resource to start with. She understands our industry. She's a contractor attorney and she works with a lot of folks. You can also talk with Steve Patrick. He's got a download, it's something you purchase called Prodox, has all the documents we never need agreements and all that other stuff. A lot of those were in collaboration with Karen Inslee to get those done, to protect you, protect the people working for you and protect the people that are having work done for them so that all parties are clear on things while still being able to obtain the business. And then we have our employee contracts, so we have contracts with our employees. Another good person with this Karen Inslee, again, she is good at getting these written up and ensuring that it is a contract that is employee experience. A lot of times we write a contract that sounds very negative, like all the things you can't do. But we should include in that contract all the benefits of what happens when we work here. And so we don't want to write a consequence contract, we want to write an employee experience contract. But what it looks like when you come on board and what your pathway to success looks like and what your responsibilities and duties are, and then what happens if there is a termination and being really clear about that so that you don't run into legal battles on the back end saying, this guy fired me for this, when actually it was for something else. So get really tight on your employee contracts to ensure that you mitigate the risk for your business in the long run. We all think when we're contract, I will never have any problems. Everything is going to be wonderful, rosy, it's all unicorns and rainbows. But the reality is somebody will come along, somebody will not understand exactly what you said to them versus what they interpreted and the final result. So we want to be clear. And one of the best ways to be clear and mitigate risk in our businesses is clear written documentation. Whether that's an employee contract, a subcontractor contract, crew requirement, sales rep requirement. All these things need to be well documented to keep that risk off of you. So that kind of handles agreements at a high level. Once again, my advice there is go get an attorney, Explain what you want. Explain, hey, I want to hold my customer accountable to paying me, but I also want to be able to get them to sign this thing. So let's write it in that fashion and they'll Understand what you're talking about and usually do a pretty good job. You also have state by state issues that you deal with. And so make sure you find an attorney. And this is the best thing about attorneys advice I can give you. Test them, make sure that they have other contractors that they work for. Call those contractors and ask them if they're happy with the work that they've done. Find a attorney that is used to working with construction contractors. Because we are a whole different breed from any other business out there. There's a lot of risk in what we do with injury, damage, all these type of things, warranty. We want to make sure that the person that's writing these things up for us has knowledge of our industry and writes them accordingly. So that's two work and agreements. Let's talk insurance. So this is one of those ones where it's kind of fun because we get into the business, we don't really think about this a whole lot until we decide that we're actually going to do it. We like left wherever we are, we're gonna go start our own business. And they're like, I know I'm supposed to have insurance, but I don't know what that looks like. I'm gonna go talk to somebody that provides insurance and they ask us a key question. How much revenue do you think you're gonna do this year? And we all being who we are is like, it's gonna be awesome. We're gonna do $5 million or a million dollars or $10 million or whatever the number is, and whatever that number is determines how much your general liability is gonna cost. So higher the number, the more liability you have and the more your insurance is going to cost, what you really want to do is be very accurate, be as accurate as you possibly can be, and then a hair over that. So if you think you're going to do a million, say 1.2, that way your liability insurance is close to accurate. Because if you overpay and under produce on revenue and they owe you the difference back. But if you overdo and underpay, they're going to come back to you and say, hey, you have a bill with us. And that bill can be pretty large all at one pop. And if you have not planned for that and not kept that into your thought processes while you're doing your business, like, holy cow, I'm doing a lot more than I thought I would need to call my insurance company, get that adjusted. You're going to get a big bill at the end. And if you have spent on other things prior to that. And now you're out of money, you're out of business, you're not able to actually perform business legally and it can put you out of business. You can be very profitable and still go out of business because you did not cover yourself from a general liability aspect. The other thing about general liability is to ensure what it covers. Most of these policies and the most of our approach is, hey, I need general liability insurance. What's the cheapest thing I can get? And so your agent, being who they are, want to sell a policy and they say, well, okay, what do you think you're going to do with this? He runs all his numbers and does his magic tricks and tabulations and actuaries are all involved. And here you go, here's your number. It's the cheapest thing you can get for that revenue. But it doesn't cover anything. It doesn't cover anything that could really actually happen. Like for example, one of your crew who's underage driving a vehicle into a house, well, that's excluded from your policy. Any of you guys that do insurance restoration work, you know about exclusions, so you should be on top of this. But any of the rest of us really don't think about it too much. So we need to make sure we ask a lot of questions, well, what does this cover and what does it not cover? That's the key thing. What does this not cover? That could be a problem for me as a contractor. Make sure you find an insurance provider that specializes in contractor services. The understanding the risk. One of the great choices out there is roofers choice. If you happen to be a roofer, all they handle other contractors, that's their specialty. But they do a really good job of reviewing the liability policy you have, pointing out where you may have an issue that you didn't realize. There's general liability policies that do not cover fire. So you set somebody's house on fire, which happens. It can be happening for all kinds of different reasons. It could be a spark from a saw blade, it could be a flame from a torch. It could be all kinds of different things that cause a fire on a home. And that's excluded. So while you have insurance, it's not going to cover it. Now you're out of pocket on all of it. So pay a few more dollars for your general lab. They'll make sure it covers those things that you know are high risk. People falling off and getting injured, people having personal injury in whatever it is that you do. If they're on a roof or something like that. What does that look like damaging a person's home in any way possible that you could imagine based on what it is that you do. For example, if you're a fencer and you're putting in fence posts, you can hit electrical lines, you can hit water lines, you can hit sewer lines. And all that stuff is supposed to be marked off by the utilities company because you make the phone call first. But even if they mark it off, they may miss stuff and have been known to miss stuff. They also have an agreement says they're not responsible, and it all falls back on you unless you have it in your agreement that it doesn't. And now the homeowner is responsible because it was their utility that did it. And then what level of responsibility would you have as far as general liability? It could be simple things. For example, if you're a roofer again and that exhaust cap on their furnace is shoved down too far backfills, carbon dioxide in the house could kill a bunch of people. Is that covered? Those are really important things. Those are big questions to ask. Think about what it is that you do. What are the possible problems that it could generate, even the least likely ones? Get a list of them and make sure your policy covers it. Now, on the other side of things, you've got subcontractors. So now you're protected on the work that you do, but you've got subcontractors doing work for you. They need to carry general liability as well. And there's a key point in this that you need to get their certificate of insurance, this thing that says, yep, they're insured for that thing, and they're covered. But there's a key little component that I wish I would have known. I wish I would have known that I needed to get the policy as the certificate holder that my company held the certificate, was to be notified of any changes in this policy, whether it was reduced, eliminated, they quit, they didn't pay, whatever it was. Anything happens where that policy was changed or canceled, my company would be notified. I didn't do that. And I learned the hard way. I had Cruz came in, went to work for me, had a certificate of insurance. I'm like, this is great. I knew I was supposed to get that. And we did work all year long. And we didn't just do a little bit of work. We did $5 million worth of work. First year, I thought we were going to do about 3 million. So it's 2 million over. So my liability insurance went up Automatically, which I prepared for. I kind of think, hey, we're ahead of the game. So I'm going to hold a little bit more back. But I wasn't the certificate holder on all of those general liability policies for my subcontractors. Who went out, got a general liability policy, got proof of it, turned it into me, and said, here's my general liability insurance. I went, great. And then proceeded to cancel it right away so they didn't have to pay anymore. And at the end of the year when I got audited, and it wasn't that year, it was two years later, got audited by my insurance company. I'm due $150,000. Fortunately, my business did well and we were able to survive it. But that was not a bill I was planning on. So like I said, I wish I would have known. Get your certificate of insurance and make sure that you're the certificate holder on that certificate of insurance. Make sure that whoever's driving a vehicle that has your company name on it, that is covered by your general liability, that if something happens while that person is driving a truck, whether it's theirs, yours, or somebody else's, that's got your company name on it, what could possibly cause you risk or liability, make sure that your insurance covers it. So that's your insurance. I've got two more here. I want to talk finance and business. Some of the. I wish I would have known. But we as contractors have to mitigate our risk. And so we've talked about our work risk. We talked about our agreements and the risk that exists there. We talked about our insurance and the things to avoid there to mitigate the risk for our business. So we've got last two things to cover. We got finance and business. So let's talk finance first. So finance has a lot of different cavities to it. I'm not gonna cover everything that's a possible risk to your business. There's not enough time in the day to do that. But. But I want to hit the big ones. And so we're going to talk a little bit about credit lines now. When we're first starting our business, we got to do what it takes to get the ability to purchase product. And a lot of us will go the route of getting a credit line. Most of our suppliers will offer us or distributors will offer us the ability to obtain a credit line. And we want to be really on top of that because. Because what it is, that's a debt. Think about that as debt. And so I owe this money at some time If I partake of it. So if you have a credit line, usually when you're smaller and newer, they're going to give you a small credit line. Depending upon the type of trade that you do, that credit line will vary, but they're going to ask, like, how much work do you think you're going to do? And based on that, they're going to be able to assess like, hey, this is the amount of credit I would be able to offer. And we may even have to offset some of that with our own cash in order to do the production levels that we're trying to achieve. But those credit lines can be very beneficial. Now, one of the things that they're going to ask you to do early on is to personally sign for that credit line. In other words, if your business goes out of business, they can go after you personally to collect that money, which can put you in a world of hurt if things don't go well with your business. So your goal is, while you may have to do that to start your business, once you've created some credit history and some credit line, you want to go back to those distributors and back to those suppliers and say, hey, I've proven my worth. I've proven that I'm going to be here. I need to take my personal off this. I need to sign for it with my company and if they aren't willing to do it, find a different distributor. This is protection for you to help you avoid any kind of financial negativity. If things aren't going right for your business, you do not want it to affect your personal life because it affects more than just, hey, they can come and get me for the money. It affects marriages, it affects bankruptcy, affects all kinds of situations. If things don't go right, and here's one thing I know, we can't plan for everything. There's all kinds of threats out there. There is a housing crisis that created a situation where a lot of businesses went out of business. Pandemics that we weren't even prepared for knowing about. There's all kinds of things that you personally couldn't control that affected your business, but will fall back on you personally. Whether you like it or not, if you have personally signed for those credit lines. So make sure that you assess your credit lines, do that often. Work with your suppliers and distributors, create good payment history, pay those things off as quickly as you possibly can. Your credit line is to get you through a cash flow amount of time. Ideally, you want to pay net 10 like you get the bill, you pay within 10 days, you usually get rewards. You get discounts for that. If you're not getting those, approach your distributors and suppliers with, hey, if I pay early, what kind of reward or discount or credit may I receive for paying early? Then you have net 30, which is what they expect in most cases to get it paid off within 30 days. And sometimes the bigger you are and the more you grow, you can push that out to 60 and sometimes even as much as 90 days without any kind of consequence. But once it goes over whatever the agreed upon date is, they all add finance charges on top of that. And so now you're losing money on that project that you were expecting to make money on. So do not go over your days, get those paid off. Know that those get paid first. Everybody you owe money to gets paid first. You pay your salespeople, you pay your vendors, you pay everybody that's owed money, then pay yourself now in order to pay yourself first, which is what we coach and suggest, make sure that your margin and your markup on your projects is where it needs to be. Marking something up is taking your cost and marking it up. A certain percentage margin is saying at the end of it all, I need to make this on it, focus on the margin, make that margin be what it needs to be and incorporate your salary into it. And you'll save yourself a lot of hassle. While you may mark things up, check what your margin is on it and make sure that margin is there enough to pay for you and hopefully some to put back into your business. So make sure your payment terms fit what it is that you need for your business at the time and place that it is. Your trade is going to have a lot to do with that. The faster it goes. Like if you're a residential roofer, that's going to go pretty quick. So your cash flow is going to be pretty fast, hopefully, if you're doing it right and you're going to be able to pay that bill off net 10, net 30 for sure. And they're going to know that and they're going to set those type of payment terms. But if you're an insurance, restoration may take a little bit longer. Cash flow holds out longer. Insurance companies delay payment, they may give you a little more time if you're a fencing contractor, pretty fast. So think about how fast something goes and that's going to help manage your cash flow. You want to try and align your payment terms with the velocity from the time you build it until you collect it. So if I can collect really fast, great I want to do that. If it's going to take me longer, I need to set my credit terms to match that amount of time. Next one from a financial aspect, pay your taxes. Pay your taxes. I cannot express that enough. One of the number one reasons businesses go out of business, they don't account for tax. And you have all kinds of different tax that are involved depending on where you're at. Like in the state of Texas, we have franchise tax, we got over a certain amount. We got to pay this extra little percentage on top. And so know your taxes. Get a good cpa, bookkeeper, tax advisor. And when we're small, we can't get all those people. It's just like it's an expense. But I would suggest this, the first person you're going to pay for, maybe you can even manage your books yourself through QuickBooks and things like that. Get a good construction CPA. I wish somebody would tell me that because I didn't get a construction cpa, a bookkeeper that worked for me, that bookkeeper knew how to run QuickBooks way better than I did, was not a CPA, didn't advise me correctly on how to spend my money, use my money. And then also I trusted them way too much and they stole from me. So there's a risk right there. Being too close to somebody and trusting somebody too much that there's no checks and balances for and leaving them in charge of your finances. You never know what's going on behind the scenes personally for somebody, they have a drinking problem, they have a gambling problem, there's problems in their family, that medical issue, whatever it is, unfortunately they choose a bad path that causes conflict and risk for your business. Make sure that you stay on top of your books. Ask every question that you think is pertinent to it. If you're going to work with just a bookkeeper, make sure you understand what your accounts mean and what your categories mean and who they're going to. Because you don't want to see something go out and go, hmm, I wonder what that is. If you ever ask that of yourself, you need to ask of your bookkeeper and they better give you some pretty strong accounting for that. So my best advice, have a bookkeeper, somebody that does your book. So it could even be you if you're smaller and that you can still manage that time and, and get your invoices in your accounts receivable and payables and then have a construction level CPA overlooking your books and advising you on how best to use your money, how best to pay your taxes, how best to organize your business, which we're going to talk about in the business side of things as you grow your business. You may want to get a tax advisor. We have a tax advisor. I had a tax advisor as a contractor. This tax advisor, their whole job is to help you set your business up in a way that it gives you the highest tax benefit without crossing any lines. And so taxes aren't black and white, unfortunately. I wish they were. They are by each little code. But does that code apply to you or not to you? Everybody wonders. You want to be as close to the black and white as possible. Not a whole lot of gray. I, I'm going to leave that up to you on how far you want to press that. But a great tax advisor is the person to get in place to let you know, hey, you know, if we reorganize your businesses and did this with this way, this would be the tax benefit to your business. They are an expense. I don't usually suggest them when you're under about two or three million dollars as a contractor. But once you get over that, take a little money and invested into that advice, you'd be shocked at how much they save you in taxes. So that brings us to the business side of things. The last piece of this avoiding risk aspect of things and one of the things big ones that I see is new construction versus retail. Okay? So this new construction is you're working for a general contractor and they want you to do something for them. They want you to put siding on their houses, install windows, put roofing on, install the gutters or whatever it is that they have a lot of. You may even get with some of these big general contractors that built thousands of houses. But their whole thing is, how low can I keep my costs and how much can I charge for this house? Basic economics. So they pit everybody against each other and keep those margins as low as they possibly can on new construction. I mean, I've seen like $200 per job in, in actual profit on what would normally be a 10, $15,000 project. But there's a bunch of them and they line up and we think, wow, we are doing a whole bunch of work and generating a whole bunch of revenue, but there's very little profit. So make sure that you understand your margin if you're going to get into new construction. And my advice, really and truthfully to us blue collar guys that do home service contracting, stay away from that new construction if you can, and go after the retail side of the business where we're working directly with the owner of that property and doing the work. So we might be doing fencing, we might be doing roofing. Excuse me. We might be doing siding, installing pools, whatever it is. I want to work directly with them. I don't want to work through a GC because he's the one making all the money on this new construction side of things. Stick with that retail world where you can charge a value proposition situation to ensure that you're being profitable on your projects. So I did some new construction stuff and didn't even last six months. I'm like, we're not making money there. Stop that. The other thing is assess all of what you do as services by the service that you offer and determine whether it's profitable or not. Because many of you do multiple things all the way to the level of, like being a home builder, and you do the full gamut, everything. Maybe you're a remodeler. And so remodeler does all kinds of different things. They install garage doors and redo basements and redo kitchens and redo bathrooms, all kinds of stuff. Do all of those make you money? Are you doing one to get another one? Now I'm losing money over here, but making money over there. Why would you do that? Just stop doing that one and be great at this other one and be highly profitable in your business. You might actually generate less revenue because you're not doing this over here, but your margin expands dramatically, you walk away with more money. There's one piece of advice that I wish I would have known. It was that as an insurance restoration contractor, we felt the need that whatever needed to be restored, we would take on for the homeowner. That would include roofing, siding, windows, gutters, paint, drywall, you name it, screens, everything. There was one of those things we weren't great at. They weren't profitable. The insurance companies didn't pay enough for. And over time, as I started to break them down and look at them individually, I'm like, why in the world are we doing these window screens? Just in the time alone, we're losing money, much less making money on the actual project itself. Okay, Mrs. Jones, we don't do window screens anymore. Here's a great resource for you. Take them off a home. We'll do that for you while we're here, just as an extra benefit and service and take them over to True Value. And when we get done with the work, we'll put them back on. We don't hold any liability for it. It's not Our workmanship, we don't have to warranty it, we don't lose money on it. And we saved a ton of time. That's our goal with our businesses, is to reduce risk and increase profit or the reward. So that's a little bit about new construction, Assessing each trade that you do, making sure that you're profitable on it and getting things out of your world that you aren't good at. And just be honest with homework. We're a master at this. We're great at this thing. We're great at roofing, we're great at fencing, we're great at siding. No, we don't do carpentry trim work because first off you don't. Secondly, you gotta find somebody that does. If you take that on and, and then you gotta hope and pray that they're good at it. I guarantee you they won't be. Because you had to find the person that wasn't busy, the person that wasn't working, the person that wasn't the creme de la creme. And he found him for this one project and he did it. It was a mess. We're dealing with the drama from it and I'm not gonna do another one for another six weeks. And sure enough, that one is gonna be a different contractor and he's not any better than the first one. So get to the thing that you do very well that you can repeat over and over again and turn it into a well oiled machine. Next thing on business, be cautious of family and nepotism. That doesn't mean we shouldn't hire a family. We should just be really clear that when we hire family, they're not treated any differently than anybody else that works for us. I've had several instances with different family members working for me. The situations that went well, I was super clear on said this is business while we're at work and as family, when we're together at family stuff. And I'm going to hold you accountable to our core values and who we are, the vision we're after, the mission we're on, all of our duties and responsibilities. And I don't expect your work to be any less than anybody else. When I set those things from the day one that they were that way, things went really well. But at any moment when I gave a special bit of attention or favoritism or whatever to any family member, whether it was deserve it or not, everybody else went, oh, that's his family. He's just taking care of his family. So you got to be really cautious of that, be cautious of hiring a bunch of family. The ones that are talented and worthy and should be a part of it, bring them on. But don't just hire somebody because they're family. It will get you in trouble in more ways than I could possibly count. Back to the attorney thing. Get a good attorney. It's worth the investment. Get it as soon as you can afford it. Make sure that your documents are tight. Make sure that they have you tight and you covered from a contractual standpoint and from a business standpoint. That's what attorneys are great at. Make sure you, you investigate into one that is a construction attorney. Avoid anybody else. Company structure. Last thing to talk about. How are you going to structure your business? Are you going to be an llc? Are you going to be a incorporation? Are you going to be an S corp, a C corp? All of those things play a huge factor in the risk that's associated with your business based on the type of insight entity that you are. For example, when we're really small, we can file as a corporation that's an S corp and it saves us a little bit on taxes when we're smaller. But as your business grows and if you reposition things a little bit, you can actually save money on taxes by filing as a C Corp. But being a limited partnership, and so there's a lot of different ways to position that. That's where those attorneys tax people really become extremely valuable. The one other thing I'm going to tell you that hopefully will keep you out of a bit of risk. Don't put everything in your company name. If everything is in the company name that has to do with your business, that business now owns that. And if God forbid, something bad happens and you get sued and people are after you for whatever reason, whether intended or whether intentional or not, that this bad thing happened, they sue the business. You own the business, so you get sued as well. And everybody's in a world of hurt. But if that business doesn't own anything, there's nothing there to get and you are not responsible for it. So how do we get into that position? Well, creating a holding company, a company that is a separate company, that is the parent company or the lease e and everything this company over here that they use is actually owned by this company over here. That way the contract that was signed with this company doesn't have anything to do with that company. So you say, okay, I have this LP that owns all this stuff and they lease it to the company that's actually doing the work. And so if it ever gets sued. Nobody owns anything over here and there's nothing of value to get. While it still can be not fun to be sued and you have some expense there, it's not going to be as bad as if everything was owned by that company, which could be devastating.