Breaking Through the 7 Figure Barrier as a Contractor

Hey, everybody, it's Jim Johnson here, the head coach at Contractor Coach Pro and your host with Contractor Radio. We are here to educate you, hopefully entertain you a little bit, help you with this strategy and tactics to move your business forward as you continue to grow your business. Our whole intention is to help you get control over your business so you can grow it and find that personal and financial freedom that you've been chasing since you started your business. And I'm super excited today because we're going to be talking about the stages that a contractor goes through in their life cycle and these ceilings or barriers that they have to break through. And I was racking my brain, like, who are some of the best guys that I know that we can have that conversation with? And I've brought two of them in today to have that conversation. But before we do that, we got to pay the bills. So we're going to have a little word from one of our sponsors, and we'll be right back. Don't miss a show. It's going to be super important for your understanding what you might have to do to grow your business. The Atlas Pro plus Contractor program is designed to help you build your business. It gives you tools and resources, training, industry insights, bonus structures, technical knowledge, the.

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Thanks. I really enjoy being part of this team.

Yeah, it's a lot of fun working with you guys. We've got to see so much in our history. I've been doing this as a contract or in the contractor industry for the last 23 years or so. Nathan, how many years for you?

25.

25? Longer than me, but he's still younger than me. And then we got Dave. Dave, how many. How many years you got into it at this point?

Man, it's a lot of years. I can still remember In March of 97, working a PowerPoint and writing out the concept of Master Elite and Golden Pledge and Authorized in System plus and all that stuff. So, yeah, it's been a lot of years in a great run. What a great industry.

Yeah. So if I do the Math, that's almost 75 years of experience between the three of us watching contractors grow or being a contractor that grew. And so today, what I hope to do is to give the listeners some understanding in the stages that they go through as a contractor what some of those barriers might be to growing as a contractor. And so let's start off with, like, why does a guy decide to be a contractor in the first place? Dave, how about you? Why don't you start with that one?

Well, in general, my experience has been most people tell you they got into this industry by accident. Right. And it's either on the sales side or the installation side. They started and it was, hey, they needed a job. They started working for someone. And after a while they said, you know, I'm not going to be driving a car like my boss there doing what I'm doing. I know how to measure. I know how to get guys to work with me. I drink with them on Friday and Saturday nights. I'm going to start my own firm. And they start out. And how's it start? Well, first, the solo. It's just me and I know what to do. Then it's the second stage. I call it the friend stage. And that's a. Just do it. It's my way. I know what I'm doing. Then it sort of evolves to the team stage and says, wow, we're really rocking. We're awesome. And now they're up to a million or a million and a half and things are great. And then all of a sudden, chaos hits and chaos was, you know, this isn't as much fun anymore. And wonder if we're as great as I thought. Maybe I got to Switch out some of these guys, but I can't because they're my friends. And then the frustration of I don't know what to do. Maybe this is just the way it's always going to be. This isn't what I pictured, but on the other hand, I'm making a living. This is what I'm doing.

I can't remember, it's been so long. It's like he's just part of the family at this point.

Forever, right?

Yeah, it seems like forever, but you've gotten to watch several of our clients and a lot of your clients go through this growth thing. What do you see as these contractors kind of start out and then start to hit these barriers?

Well, there's some, there's some pretty major milestones that guys go through that they don't realize. Some oftentimes they don't realize they pass these milestones and they should give themselves a high five and a pat on the back for it. One of those first milestones is if you've been in business for more than two years, that's a big one. It's over 80. It's gotta be close to 90% of contractors, they go out of business inside of two years. So if you've cracked that two year mark, man, give yourself a high five. You're, you're in a very elite group of people. Even though that bar seems pretty low, I would say that next milestone that contractors. I think there's a half a milestone in there. I was going to say the next milestone is probably your first million or million and a half in revenue is a map. But I think there's a middle one. I think there's a middle one and it's like a half milestone and it's probably somewhere around that like 7 to 800,000 number. Right. Because that's like you could make a. I mean you can make a pretty good living just doing 500 grand in revenue and your life isn't terribly stressful and you make a decent money. But when you start cracking that 800,000, you start seeing that next milestone and you have the decision, am I going to stay here and do okay or am I going to try and do okay heading to that next level? So there's kind of like a half milestone in there, I feel like. And then the next one's that million to million and a half. That's when you start realizing, I mean, as organized and as powerful as you might be, you start realizing, if I have to do this again, I'm either going to close the doors or I'm going to kill myself or I'm going to need to build a team of people. I need some help because I can't just keep doing it this way. And then from there, I think probably five years is your next time milestone. Because if you're in business more than five years, that rest of that group that didn't go out of business, they've all gone out of business inside of five years. And then you're pushing to 5 million, 8 to 10, and then on you go. So those are. Those are, I would say, probably those big milestones. And I think a lot of the guys that we talk to, they've hit those first two or three and they're so busy, they don't realize that they're in. They're in the minority of contractors. So I see those as some milestones. People really should, you know, be proud. I mean, if you've been in business for three years, man, high five.

Good for you.

Yeah, you're in the 20% at that point. If you've been in business for three years, you're in the 20%, because 80% of contractors go out of business the first three years. You are also in the top 10%. If you've broken a million dollars. If you've broken a million dollars, it puts you in the top 10%. I did a little studying before our podcast day to figure out those numbers. And so that is. That's a pat on the back and a high five, like, well done. But when we get there, at least through what I've obs, what happens is it goes from just being me to now I gotta incorporate somebody else. And usually that person that gets incorporated could be a family member, usually very close, like a wife, spouse, girlfriend, best friend, that type of thing. Sometimes I see mom. Mom, like, steps in and handles the paperwork and the books and that kind of stuff because you find you need the help. You need the help in the areas that may not be your strength. So that's kind of like you got the startup phase. And then stage one is, I need some help. And once you start to incorporate help, all communication becomes much different. All the communication before was in your melon, right? It's between you and whatever you say in the mirror to yourself. But the second you bring somebody else into the equation, communication starts to be a part of it. And so where does that break down for people? You know, that part where you bring this person in and where does that break down in that stage one contractor that's moving forward.

Jim, if I can use an analogy. There's a very successful magazine in the business world called Inc Magazine, right? And a lot of people know Inc. And if you ask the publishers, because I remember the guy who founded it, he said, why are you successful? And he goes, because every industry faces, every entrepreneur faces what we do. What do you mean by that? He goes, well, there's a huge difference between the skills for startup and using what Nathan shared. Maybe that's through a million, million and a half, whatever that number is. But you know, at the end of the day is just get it done and you can get away with it. You can get away with it verbally, you can get away with your friends, you can get away with it. The people, the small team that you hire, you can get away with it. And why is there an Ink magazine? Because that's where failure hits small businesses. And it hits it for one of two reasons. Either one, it outgrows the ability of all we have to do is get it done because something steps in. It's called A leadership. It's called B culture. It's got three processes, it's got four holding a accountability. It's got all these different dimensions that once you pass through that million and a half, two million dollar range, you can't succeed long term without that professionalism that's going to kick in and that's a whole separate set of skills. So Inc Magazine as an example is analogy here. You either learn how to break through those or you crash, or you simmer back down and say, you know what, I'm going to just have to stay three quarters of a million to a million and a half and be happy with that. And that's what makes frankly why I have so much fun being part of Jim organization is we're sort of like the Inc. Magazine of the contractor business world, where the people step in and say, hey, we got insight into that and we can help you break through it.

I love it. Hey, let's. We should brand that. That's a fantastic analogy. I've always kind of looked at it like we become professional hat makers and so we make all these hats, we put them all on our head at the same time. We are the production guru, the sales guru, the administrative guru, collections guru, problem solver, fire put router, and all these different hats that we're wearing. The difference becomes when I know how to make that hat for somebody else and not just like take the hat off and put it on their head and say, you're now the firefighter. It's like I put it on your head and I've given you the tools to fight the fires with. And so it's a different mindset. And so, Nathan, that kind of comes to the way you perceive a lot of this. Talk a little bit about that and this shift that we have to have in mindset as contractors.

I think a natural mindset shift, which I really appreciate. So another high five to contractors is somewhere around that one of these milestones is that level of desperation that starts to occur. Like, I don't know what I'm feeling, like I'm not entirely sure what I'm doing, and I'm a little afraid of where I'm going to end up. And so I think a lot of guys, when they start to hit some of those real stressful moments and they're facing those decisions that, that Dave was talking about, they start looking around for help, which I think is cool, right? They start reading books like the E. Myth, right? Which is a really good one. Like every time a small business owner discovers the E. Myth, they feel like they just found the bible of business management, which is a great book. So don't, don't hear me wrong, if you haven't read that book, you should go read it.

And it's not about the Internet. When you first see the title, you go, it looks like a computer book, right?

It's not about the Internet. But they start getting this idea that they need some help. And so then they start looking around for help. And man, these days, between YouTube and podcasts and gurus and people selling books and all kinds, like, there's a million different places you could go to get a little bit of help and advice on how to break through. But one of, I think the primary shifts in mindset that needs to happen after the idea of getting help is that that same grind and effort and pursuit that you had that got you to where you were with that energy now needs to get redirected somewhat. And there is no silver bullet. So just because a guy got on stage and said you need to build a killer sales team doesn't mean that you need to pour every ounce of your time into trying to build 20 sales guys. Okay? Just because somebody said that you need to track your finances all the way down to the penny, not bad advice. Okay? But that doesn't necessarily mean that we need to go hire a full time bookkeeper right this second. The mindset shift starts to become, okay, I am a finite person with a finite amount of attention and energy, and I have some talents and experiences how Can I strategize what I do on a day to day basis in order to create more resources to be reinvested back into my company? And how can I. Who would be the next person I bring into my world to allow me to accomplish that exact thing? Right. And it's a contin.

It's.

You're still on the grind, man. Like, you're not just going to hire an office manager and then get to go on vacation. As much as we'd all love to do that, I'm not entirely sure what a vacation is. I've heard they're nice, but I know we all want to try and take one, right? Jim's. Jim's.

You literally just got back from one.

So I think that's. That's part of that mindset shift is that. Is that there's not a silver bullet, number one. Number two, where are your talents? Where are your abilities? And we shouldn't just hire somebody else hoping that they can magically wear as many hats as we do. They should be a strategic hire to take some of those things that maybe we're not great at or don't like doing, but that create space for us to attack the things we are good at.

That was one of my big epiphanies as somebody that is entrepreneurial. I've opened several businesses. I used to always think I really needed to work on my weaknesses. Like, I was weak at administration, I was weak at detail. I was weak at, you know, a lot of things, to be honest with you. And I got some great coaching advice. It was one of the smartest moves I ever made, was getting my own coach. And he says, why are you doing that? Why are you trying to be good at something you suck at? Why don't you just hire somebody to do that part that's really great at it and then go do what you do well, because you're a great recruiter, you're a great motivator, you're a great coach, and you're great at sales. Why don't you go do that? Yeah.

We're not above a shameless plug for coaching, by the way.

Yeah, no, not at all. Coaching is important. I find it extra. Come on. All the greatest athletes, all the greatest CEOs, all have coaches. They all have coaches. And there's a reason they do. Because they need some insight. They need some understanding. And if I heard you guys right, as you were going through your descriptions there, we tend to get distracted with the newest, shiniest object or silver bullet or whatever we think is Going to solve our problem. You know, we go to conferences, we go to events, we watch them. Now that things are virtual. There's all kinds of things going on out there. And we go to something on sales or something on marketing or something on recruiting or supplementing or whatever it is that you're needing help with, and you go, I got to do that right now. That sounds so good. But is it the right time and place, strategically for you to do that thing if you don't have all these other things kind of lined out first? That's. That's the thing that the speaker always leaves out. Yeah. I went out and hired 20 guys and I grew my business. But what he didn't tell you is that he had job descriptions already laid out. He had a compensation plan already figured out. He knew exactly how he was going to train him and where he was going to recruit him from, and he did all that stuff first before he went out and got the 20 guys.

So he's saying, preparing to grow doesn't mean you just run out and rent a 50,000 square foot building.

All right, good. It's kind of. It really comes down to knowing what to do and when. And that's been, I guess, kind of our epiphany here. You know, whenever I started this whole coaching thing, it was. I knew I was really good at these aspects of the business. Not all of them, but these eight really core ones. Since then, I did what we're talking about today. I went out and hired some people that are better at things than me, and we added for more core concepts to our coaching program. But I knew I had to get those people. And I knew that the only way we were going to do what we needed to do to really, truly serve the contractor was to find the right people for that. And so all of that had to be done at the right time, in the right place. And before I could start going out and hiring anybody, I hopefully had some kind of structure for them to come into, or at least a plan on how to bring them up to the speed that they needed to be. And I see this a lot with contractors. They tend to be very verbal in the beginning. Information is translated verbally for their job description, expectations, performance requirements, and things like that and how to do the job and what to do on the job, which takes an immense amount of time, takes a long time to get there.

And.

But if we. If we lay it all out first and say, hey, this is the exact program, it can go a lot faster. What do you guys think about that like being a little more proactive instead of reactive?

Well, a few things on that and if I can even talk about in terms of stages. So one of the things I've seen with some of the people that we coach. So let's take someone who's small and sort of just starting out and I'll be on a call, you know, Nathan and I will share a call. And one of the things we hear is, well, I'm gonna go out. I think the first thing I gotta do is go out and hire a salesperson. And I've already got a guy to help me. I got a guy from a production and I remember actually a call just last week. Nathan goes, why are you gonna hire a salesperson? Well, because I gotta grow my business. I think I gotta grow my salesperson. And Nathan goes, what are you absolutely best at doing? And he goes, well, I'm really good at sales. And I remember Nathan goes, you know, you might be better off if you think of your hour take. What's an hour of your time worth when it's in sales mode in that hat versus how much are you generating in value when you're in administrative mode? Maybe you ought to start off getting a really good administrator and keep doing what you do best. I mean, one of the interesting things sometimes you see with entrepreneurs is what they're best at. They think owning a company, well, I want to get out of what I'm doing best at as quick as I can so I can be the decision maker. And here's the weirdest part of that evolution. We'll call it at, we'll call it for now the ink moment. You know, am I going to fall apart or not? It's that moment that you realize the best leaders are not great leaders because of their ability to make great decisions. They're great leaders because of their ability to create great leaders. They're great because their ability to help set up processes and set up outcomes that they expect and let the leaders that develop and achieve them. And then there's one other key part to that that I see over and over and over and over again at this so called, we'll call it an awkward stage. Let's call it the, the teenage awkward years of being an entrepreneur. It's the word delegation, right? And here's my rule of thumb on delegation. If you can find somebody who 70% of the time would have done it pretty much the way you would have done it, 25% of the time, you're looking at and saying, oh my gosh, I can't believe they did it that way, but it got to a decent outcome. And 5% of the time you want to throw up. You can't believe what they did. If you can delegate to somebody with a 70, 25.5 ratio, you've got a great employee and you better delegate all day long. And if you can't get to that mindset, you'll never really be able to scale your company because you'll never be able to delegate. And that's the biggest transition situation. Entrepreneurs know how they want it done, but at a point, you've got to change your mindset to what's the outcome that I want to achieve and build a team that's committed to getting it done.

Yeah, I couldn't agree more with that. This. This constant. I'm going to ask you a question. I'm a million bucks, right? I'm doing it on my own. Maybe I got a little bit of help, but I want to grow the thing. Would I say, hey, I'm going to go hire this person and tell them this is the outcome I want and, and hopefully hire the right person, or would I take a little bit of time and lay out the structure for how they get to the outcome, not the plan, step by step by step. But hey, here's a great job description. Here's the process we currently use. Here's the tools that we currently have available to us. This is the goal I want to achieve. You have the skill set to get there. Would we take that step back first before we necessarily hire somebody?

You know, that's a great question. Now, in the case of Contractor Coach Pro, specifically, the answer is very easy. Promote Nathan. Now, talking about the people on this podcast that we're talking to. No, it's not an. It's not a flip of the switch type thing. It's more like a switch that you can dim and bring a pilot. But I can share with you the conceptually, the key thing it is because it's not all one or all the other, right? But here's a few things it is. It's working with the people together to develop the process. And why do I say working with them on it? Because if you work with them on it, they own it. Two, when you work on the process, the key part is sharing. Not just who, what, when, where, how you want things done, the causes. The key thing is that they understand the why. Because if they understand the why, they have permission to make contributions to it because they have insight into that. That's two, three, and so what does it mean as a mindset? What's the difference between a great leader and a good leader? A great leader in that awkward stage starts shifting more to leading through the questions they ask versus things that they tell. And the amazing thing is when you learn, and it's a, you have to learn it, you need, frankly, it's a place a lot of people need a coach. It's not natural at first, but when you learn to lead through questions, you can do anything through a question. You can suggest how to do something, but they still own it. You can uncover information on how to overcome an obstacle. You can, you can do anything through a question, but when you do it through a question, they're engaged, they trust, you're demonstrating respect, you demonstrate, you care. And now they own that process that you put in place and you can now go on to work on something else. And that's what I mean about developing leaders. If you give people the sense of what and why and how things can go wrong, they're part of helping set up a process to prevent bad things from happening and they understand the why. As a leader, you can go on to the next thing, but when you tell them what to do, you still own it. They own it.

That's great advice. I mean, you know, if you're going to start to grow your business, you've got to start to learn some of these habits that we have as leaders. First one is being able to ask great questions and just understanding the value of that. If I, if I'm hearing things correctly, we, I think our mistake is made fairly early on. I think it's made way before we hit the million dollar mark and we decide we want to grow. The mistake is we decide we're going to grow and we, we bring people in, we bring another person on. Maybe we do it right, maybe we do it wrong, but whatever we're doing, we're bringing people into this equation without any real structure or plan for what that's going to look like in the long run. And I always call it putting the cart in front of the horse. Right? Like, we know we can hire salespeople to go sell more jobs. And so what we don't realize is that when we sell those more jobs, how are we going to produce them? How are we going to get more crews that we need? What process are they going to follow that makes that an assembly line? Instead of this guy doing it this way and this guy doing it this way, and then we make these common mistakes of like, hey, I'm going to hire this sales guy on this commission structure. I'm going to hire this sales guy on that commission structure, and then this guy on that can, and then whoever is handling the books, whether it be you or somebody that you've put in place now has three different systems that they've got to manage. So now it becomes much more complicated. And so you're creating. Because of how we position ourselves early on, you're creating chaos that's going to hit your world down the road. You think, hey, I'm going to bring some people in, be great, my buddies, my friends and all that other good stuff, and everything's going to be wonderful. But you didn't put procedures in place that took care of behavior, took care of process.