Coaches Roundtable - Part 2 - How to Move the Needle on Profit

Hey, everybody. Welcome to Contractor Radio. In this week's episode, we're actually picking up on a conversation that we started last week in a coaches roundtable about profit. What we did is we got our experts in business strategy four, finance, human resources, sales together and we had a really long, deep conversation about the concept of profit. If you didn't see part one of this episode, definitely go check it out first. It'll help to lay the groundwork for part two that we're gonna pick up today. Remember, profit has a very basic formula. What you charge minus what it costs you to produce minus your company overhead creates profit. But there are so many different things that go into those three areas, which is what we took a deep dive into in this conversation. We're gonna pick that conversation up right where we left off from part one, right after a word from our sponsors.

Hi, I'm Ricky Harmon with Balance Claims. I'm here in the balance claims office to help answer one of the questions I hear all the time. Why use Balance Claims? Well, I have two of the account managers here, Travis Croft and Emily Caldwell, to answer just that.

Contractors should use us because we have experts on site that are well versed in xactimate, able to write our estimates and make sure that your claims have everything accounted for, making sure that you're paid out correctly.

Contractors should use balance Claims because we are hassle free.

You have the time to focus on the homeowners and the sales for these.

Roofs while we focus on the insurance claims for you.

That is where time is money and.

We are here to help you.

So you heard it from our ams. There are multiple reasons why you need to be working with balanced claims. If you want to reach out to us, our email is successalanced claims.com or you can reach out to me directly. Ricky Harmon at 317360-0903. Talk to you soon.

Welcome back to this episode of Contractor Radio. Our special edition Coaches roundtable. Coaches, coffee time with the coaches. I don't know. Coaches, coat closet. I just wanted to say that. So we just left off with Chuck teasing us a little bit about jumping into this concept of financing. So take it away, Chuck.

So when we're talking about financing.

The.

Question I get, and I didn't run this by Ginny, so me and Jenny may have, we may have a difference of opinion here, but how we have dealt with financing, first of all, you have to limit the terms that you get. I mean, if you go with Green sky or Service Finance, any of those guys where they have like 15 or 20 different terms. You have to limit it to about three that you allow your salespeople to have. Now the other thing is do you charge that that cost directly to that job or there's an easier way of doing this. And again, me and Jenny may have a difference here, but if you have some, if you have some experience in this, say you finance all last year, you take all the finance charges, all your credit card fees for that year, and you take that and base it on the amount of sales that you had, the revenue and. And what is that percentage? So what we found out was that's about 4 to 5% of our revenue. So we added that on every job instead of taking, okay, this one's 7%, this one's only 2%. Maybe we only took a credit card here, but we averaged it across and what we found was that we nailed it on the head year after year. That's what we did at Able Roof. And because we. It was so hard to look at each job and, and what the finance charges when on that particular job so that we could go through and do our job costing so much faster.

I will discuss this with you here, Ben, because the way I have people coaching on those financing fees comes pretty easy to assign those costs directly to the job. And in my mind, if you have an incentive or a system where you're allocating out an average, to me that's lost money out there. I know there's a need for it. I know there's a time where you need to offer. And I love your tip on simplify what you offer. Right. If you get too complicated now, that's a different issue you're dealing with. On the sales end to execute it well on the customer experience end, to feel like you're standing behind what you're offering them complexity is I love, totally stand behind that in general, I guess I just don't want to add pieces that will incentivize that there's no accountability whether your customer pays with credit card or 5 financing. Right. Where if you're charging it to the job, yeah, your jobs are going to get dinged. Now, whether you pay them off of gross profit or if you're just analyzing their gross profit, I want to be able to see if I have a sales guy that's constantly charging the highest financing rate. Right. Like that's a little alarming to me if I'm a manager and an owner. So that would be my one challenge. And so if you're finding it chuck that that it's hard for your teams to allocate it. Again, where I'm just all about the finance strategy side. Let's simplify that and make sure you understand how do you get that allocated to the job easily.

Right now I believe is you're both right because I like to see it allocated to the job specifically so I know what actually happened. But I also like from what the salespeople see, it's a flat. It's already built in. And here's why. I don't want the salesperson second guessing and losing confidence on should we or should we not offer financing. I want that to be in management decision on how's this affecting my close rate and is that a good idea? I want to take it out of the salesperson's head and that's a reason in their calculation do it as an allocation. But behind the scenes in the corporate books, I track it as an absolute per job so I can do analysis on that and see if there's a trend going on. I didn't see.

I love that, I love that bridging of those two thought processes and two very different goals. Right. And outcomes. And from the sales, you're spot on. I totally see where you're coming from.

Yeah. So that's, that's why, you know, Nathan and I are head coaches. We're the ones with the referee outfit and you know, we work with the two of you. So.

Oh man, I don't know.

I'm gonna, I'm gonna go against what I said just a little bit. So if you have software quoting software such as Leap or Sumo Quote, some of these actually have those things built in. Like we use Leap and so our sales reps have to go at the bottom. They, they click on what finance option they're going to use and it adds it into the job and it's very easy there. But if you're just gonna, if your sales reps maybe use accu Links or something like that where it doesn't do that and you're just going off of say price per square. And the guy, the sales reps, you know, you don't want them trying to figure out what the finance charge needs to be. You know, it's easier to just say, hey, we just need to add in 5% on every job that we averaged or that we, that we quote. And to Jenny's point, you're right. Once it gets to accounting, oh yeah, that finance charge has to come into play.

Let me add one more thing, Chuck, and you may have more data on my next Comment. So if I'm wrong, please correct me, but the finance companies have a vested interest in you going as long a term as you can. That's how they make their money. Now, I can only share with you in my experience in doing the data analysis, I'll give an example. In, in the markets my clients were operating with, that finance was, you know, was a large amount of money. We found that offering a three month or six month got every bit the benefit of doing a one year, but it was a lot lower cost to offer it. So you also need to be careful on the advice you're getting from the finance company. And back to Chuck's point where they're going to give you 20 different options. You got to ask yourself, what's in their interest? What's in your interest? And be careful on that because you can get sucked in pretty quick and be giving away money you don't need to.

That's, that's good advice. That is good advice. And I doubt Chuck Upsher from service finance is hearing this. He's a longtime old school friend of mine. But if you've ever had a chance to see him speak, he is just a hoot, right? He's, he's so good. And one, one tip I caught from him in his, in his speaking was in order to break the ice about financing, we. When you're doing your initial conversation with the customer, leaving some sort of financing literature out, right? Leaving it out, having it be part of the packet you give them that they go to research or something, you don't have to break the ice. You don't have to do that. But I think what he, I think what Chuck would say is like, you take, you take the thing out and you leave it on the table with your other materials right out in the open, right? So I always thought that was kind of a cute little tidbit, therefore breaking the ice with that one.

One key thing in financing, though, is the, the biggest disaster I've seen is when sales people think they can guess who needs it and who doesn't. Chuck, you want to pick up on.

That because, oh, I can, I can do a whole podcast on that one.

Maybe we got two podcasts to do with us.

But that is very true. You know, when they're looking at a, a homeowner like, oh, this person's going to need financing and you really can't do that. You have to offer it in every house. And we always say offer it early and often. You know, if someone's looking at you like, man, it's going to be expensive. This is going to be expensive. They'll shut down. But if they know that you are offering financing and you offer different types of financing, that they will keep their options open and they'll continue to listen to what you have to say until they decide that maybe they can't really afford it. But remember, and I want to speak to every owner, you will not be in a house unless they can afford something. People don't say, you know what, I just lost my job yesterday, I can't buy anything. But you know what, let's have this roofing company come out and talk to me.

That's a good point.

And therefore one of the, one of the things, and Chuck probably has a lot more way of presenting this than I do, but one of the key things I always share directionally is when I bring up financing is look, I have a lot of customers who use the financing and they have plenty of money. They would just rather use the money for something else. And what that does is it takes away the self esteem. Oh my God, they think I'm a deadbeat. It takes it off the table.

How we offer the financing towards the end, we let, we let the homeowner know that before I put the pricing on the sheet, I want you to know that there are three different types of people, types of customers that we offer financing to. The first, these are the people that just like cash flow. They just like using other people's money. They have the money to pay for it. And what they want is they want to be able to not really have to give me much of a down payment and finance the entire job. And sometimes they will even pay the job off rather than continue the financing. Or they're just going to use that, that the, the finance companies money and they like the same as cash. They like the fact that it's no payment, no interest and they can spread that out. The, the next one is, the next customer is the guy that they've been saving up for this. And they found out that this is going to be a little bit more than what they were expecting. So they could pay for most of it, but they're gonna have to finance the rest. And of course the last one I always throw out that it's, it's just like me. Just in case they're that person, I want them to feel bad or it's the people like myself that I would absolutely need the financing to do the job, you know. So which way do you think is which customer do you think you are? And they'll pick one of them, but that gives them that option. Because remember that if you just make it easy enough, people will buy anything. But you have to allow them to do it.

Vogue. And like a true sales guy.

Let me add one more thing to it. Chuck just said, though at least I found this extremely helpful, is I like to take ideas I've seen work in other industry and apply it to my industry rather than trying to reinvent the wheel, right? And let's just take cars and what they did. Some people say, I can't afford a 35, 000 car. Oh, but I can afford 199amonth. Right? And that same person may actually come up with a 35,000 cash. The point is, in their mind, oh, I can afford at one time. That's not frivolous, right? So one of the reason, other reasons I always add financing is it gives me an opportunity, whether they take it or not, to say, you know, it's essentially this much a month. It is amazing the thought process, logic and people who think of themselves, especially that category of group of, hey, I'm frugal, you know, I'll spend on quality, but I don't want to throw it away all of a sudden. That price point is a legitimate price point. So that's another key reason in the sales process to consider it.

I would really hate to see what your terms are on 35 grand at 200 bucks a month. No, thanks. It's like school loans there. All right, so we talked.

We.

I mean, God, this has just been fantastic. Now remember, the thrust of our conversation here is apply these concepts to how we can appropriately raise what we charge while reducing what we, what we spend, right? Because that, at the end of the day, that's the thing that makes profit, right? So capitalizing on every one of our sales opportunities, reducing the cost per acquisition. Right. Knowing our slugging average per salesperson and per lead source. Right. And what that costs us and how we can reduce those things. Now, whenever I'm talking to a contractor and they're having some sales struggles, I had a conversation with a guy just a month and a half ago, I think it was, and he was telling me, he was telling me, man, it's just we haven't had a storm. There's just no business out there. And I even talked to the suppliers, and the suppliers are saying that nobody's really putting that many orders in, okay? I talked to another guy in his same market, and that guy said to me, it is a little slow. That just means we have to go find it. Which one of those two guys do you think is in more risk of going out of business? Okay, now, one of the. One of the number one things that I will say first is whenever somebody's like, well, we're looking for, you know, we're kind of slowing down a little bit. Your pipeline, okay? Your pipeline. Now, a lot of guys don't pay attention to pipeline because there is a lot of emphasis on one call closing in home sales. Okay? Now don't mishear me. I am not ever advocating that you don't close when you can and you shouldn't try to close at every moment. Okay? Don't hear me wrong. That being said, there are people out there like me, okay, who enjoys the sales process, does get excited and, and will. And when I get excited and I start drooling over the possibility of purchasing something new and cool, I hit the brakes. That's me. And I go timeout. This guy has done a very good job of getting me excited to do this thing, and I appreciate him for doing that. I am going to sleep on this. And if I feel the same way in the morning, I'm going to pull the trigger. That's my buying process. I'm sure Chuck has a name for guys like me. What is it?

Sleep on it, guys.

Sleep on it.

The mattress people.

Mattress people. Oh, all right. I'll take sleep on a guy. I don't think I'm a dangerous person. And so guys like me will fall into your pipeline?

Yeah.

Pipelines are essentially the people who did not get captured on your one call close. Okay? Salespeople are notoriously avoiding and not dealing with their pipeline. Okay? Now some, some companies, especially larger companies, will make up for this by hiring somebody to do that. Right? We call that the what? The refresh or the, the rehash. That's what I'm looking for.

Right?

But if you're a sales guy out there and you feel like your closing percentage is struggling, the first place I would go are the appointments I didn't close. I would call them, all of them. Right? And I'll let. I'll let Chuck and Dave now once again, because in home sales has such like a one call, close driving component to it, sometimes this gets ignored. Okay. But the people you didn't close are more likely to close than the ones you haven't talked to yet. So I'll let you guys jump.

Jump onto that one there.

And Nathan, I am so glad that you didn't go through. Jump right into an always be closing. Glengarry Glen Ross speech. I love it. No, no, but let's, let's talk about this. So there's so many people that will come to us, whether it's you or Dave, myself or Jim, and they'll say, how do I get more leads? How do I get more leads? And you want to spin around, see, what are you doing with the leads you already have?

Yeah.

You have a database of thousands of people in this thing. And so, and then the moment you mentioned rehash. Oh, no, no, no, we don't, we don't, we don't get into all that. I'm not saying that you call everybody and tell them you have product that fell off the back of a truck. You know, that's what used to happen. But, and I'm not going to make this about rehash, but you have to understand that you squeeze the towel. There's a database of people that we like to call just the home improvement procrastinators. And they're just waiting for someone to get back in touch with them.

Mattress people.

But when you're looking at rehash, it can't go back to the same sales guy. It can't. That if that is a lead from the company, that is that company's lead. And, and they have to have a detailed process, not hey guys, I need you to get back in touch with your pendings. That's not going to do anything. The sales guys are going to look at all the low hanging fruit that they think is going to close you, move it over to a different set of people and it may just be one person. We have a girl by the name of Alicia. She is an absolute bulldog. She will get in touch with you and if you will engage in a conversation with her, which she's going to call you, she's going to go through a survey with you and, and at the end of the survey, she's going to ask you why you didn't buy. She doesn't really care what you say, but she's going to ask you why you didn't buy. No matter what you say, she's going to tell you that she has a manager in the area that she would like to get another set of eyes on this. She's not talking about any discounts. Remember, I'm with Dave. Why give him a discount even though I'm ringing the towel many times? We can get them for more than what they were looking for. Before you know, it just the, the sales guy was pinpointing on a lower system and what the customer really wanted was something that they. They wanted them to get sold on, something higher, you know, but not to get into a discussion on that of how much of this. Now, my experience is that you can close 80% of rehash.

Here's why.

Well, holdings not of your.

Chuck just said you can close 80% of your rehash. Your cost to do that versus find new business. Remember, we're talking about profitability here. That's why I started this out by saying that is a gold mine in your pocket that you're just ignoring. So sorry, Chuck. I mean, interrupt you. But I just wanted to. Just wanted to poke that.

No, and it's. When you're looking at rehash itself, the cost of rehash is very low because this is. These are jobs that unless you did rehash, they would have been gone. Somebody else would have gotten them. They would have started their process here in about another six months of looking again. Oh, honey, let's. Let's start looking again, you know, but you're gonna go through your rehash. Someone else comes out there. It's a new face, not the same sales guy. That's the biggest misconception is I. I love my sales team so much, I'm going to put them back out. He couldn't sell it the first time he was there. You're going to send him back, you know, put another face, another conversation in front of him. And so that's. That is rehash, and that is how important rehash is. When people look at, like, how do you close 80%? Realize that people, they've already had you out and they're willing to have you out again. They're buyers.

One of the things I love. Oh, did you want to go deep?

I wanted to pick up off that point in what might sound like a bizarre concept here. I believe in two different types of rehash. Right. There's the one that Chuck just mentioned. Absolutely agree with him. But here's another one, and I'm going to start with a statistic. Statistically, at least half the people who used a contractor wouldn't recommend them. At least half. That's a statistic. That's an industry statistic. A B, separate point. And then I'm going to tie them together, regardless of type of personality. And Chuck can take you in the detail that, I mean, would blow all of us away. And it's one of the reasons. So good at what he does. But there's one thing in common with almost every individual born in this Earth trust is the most important thing they're looking for. And the recipe for trust is demonstrating that you care and respect them. Right. So if you take those two key things together, I love, during downtimes, getting on the phone and calling people that did not buy from us and call them six months later and say, hey, I want to learn for me, because I really care about you, and I really wanted to do your project. All right. You guys were awesome people. I really wanted to do it. I need to learn. What did I miss? What didn't I hear? Other than there may have been some price issues, and I don't want to go there. Other than that, what did I miss? Well, what you're doing now is they're playing back to you what they do remember and liked about you. And, you know, I didn't get business from them, but my referral numbers went way up, and they were the best for. They were great referrals because now it's top of mind of, hey, I wasn't totally happy with who I had. I'm always going to ask B.S. hey, who'd you use and who'd you recommend? The person I didn't give it to, but I just told them the things I liked about them. Referrals go way up, and that's an inexpensive lead generator.

Yeah, very true, Rosalind.

You were going to jump in there.

Yeah.

The one thing I was just going to touch on that. I love what Chuck talked about about the process. Right. So I think sometimes where an owner or a sales manager might have, like, feel some resistance to what you just described of putting a different face onto it is like, well, but my guy went out and they did the work, and that feels unfair. They. You know, they. They started the process. But I think if you have that clear process established, then it's clear for your salespeople. They know what to expect. So then it kind of takes out some of that emotion or hurt that could come with, well, but I already did all the work. I warmed them up. You know, I think about it, like when I asked my husband to open a jar, and he just comes over and he, like. And I'm like, well, I was already losing, like. So I think you can just be mindful of the fact that you are. You may have some salespeople who have those feelings about it, but if we kind of get ahead of those feelings and those expectations with our process and we have clear communication around that, we. We can kind of lessen some of that while I warmed it up for you.

So I'M going to ask a question, both you and Chuck, and not share my own opinion, because I don't have a strong opinion. But I've seen it blow up before.

I know it's coming.

Chuck, when you do rehash, I've seen all versions of this. The original salesperson, how does it affect compensation?

I was waiting for this one. So we remember you have to control your culture here. Most companies are like, hey, you know, he didn't sell it. He doesn't get anything. I'm gonna be a little in your face here and say, look, you know, the guy spent his gas, you know, and if this is a 1099, and let's not get into that again, but if this is a 1099, gas, he spent his time, you know, to get out there. But even if they are W2, they did spend their time to go out there. So you do want to throw them a little bone on this and say, hey, we're gonna give you either maybe it's a hundred, $200, you know, well, we like to throw $100 at the rep, but let them know that, hey, we still care about you. You couldn't sell it for whatever reason. Maybe they just didn't connect with you. But we sent someone else out and. And they were able to close it. And, you know, we want to thank you for the opportunity for warming that customer up.

Yeah, that's good.

Maybe a 60% closer that just had a rehash slapped in his face, and we don't want that. When I first got into sales, it used to be, who's the rehash king? And, you know, that was very negative. And we don't want that inside of our culture because we do love rehash.

That is a good catch, Chuck, and I appreciate that and Dave for bringing that up, too. Like, that is a good catch, because, yeah, I mean, that rehash person could definitely get looked at kind of pretty bad by some of the sales folks, you know, like, that they're just making all this money off the work that they laid the groundwork for. So now if you're a sales guy out there right now and you're listening to this, like, well, I don't have a rehash person, and I don't really call my people back. I want to. I want to say this statistic is somewhere around seven in the home industry, and you guys can correct me if I'm wrong. Seven additional touches post. Post initial sales appointment in order to close somebody who didn't close on the spot I think that's the number. I could be wrong, but about seven additional touches. If you didn't close them, the one call. So if you're a sales guy listening to this and you're thinking, man, I don't know if I want to do this. Let me give you a little practice. For every person who you don't close on the single call, write a number, the value of their deal, their name and their phone number on a piece of paper for every person you didn't close. And then keep doing that. And what you'll discover is that number will be thousands and thousands and thousands of dollars. And one of the reasons why we don't call people back is because we don't realize that we just left thousands of dollars out there in the world blowing around. So put a number. If you put a number to that person, not that people are numbers, right? But we need to understand the value. If we put a number to that person, okay, Then there, that adds a value to your phone call. Okay? It adds a value to the phone call, the text message, the pop by, whatever it might be. But if you don't put a value next to it, then it just, it tends to feel like, like it doesn't, it doesn't have the same impact, right. When you go back and you go, man, I didn't close these 10 people. And that represents, holy cow, $180,000. If you closed half of them with a quick 10 phone calls.

Let me put this into perspective for you. Our rehash rep was our number two. A hundred thousand dollars in rehash this month. That was our second highest rep this month. If we didn't have this guy, that would have been $100,000 we didn't have.

Yep.

So even if you take rehash off, I love quick little numbers, right? So here's a quick little number for the sales piece. Kind of what was just said. Let's say you're a pretty good close rate. And I mean true close rate. You know, I got the lead. Did I actually get to sit with them? You know, I sat with them. Did I actually get to make the presentation? Did you know there's different fall offs? So let's take somebody who's, let's just call it a 30% true close rate. All right. I know there's a lot of ranges. Let's just take that one. That means out of every 100 estimates I do, which for a lot of salespeople is about two months, right? Two and a half months, that about right? Average guy that means 70 people haven't said yes. I'm not even going to say no. They haven't said yes. Right. And if you take the attitude of trust equals care and respect and look at what things can I do with the 70 people who haven't said yes? If I can convert five of them, whether they buy or it's a referral from them, five of them, that's a 20% pay increase in my pocket by the end of the year. I mean, who. Who wouldn't love a 20 pay increase in a United States world that people are thrilled to get 3% today.

Oh, right.

Yeah. It's sitting right there. And what's the number? I only need 5 out of that 70 to get a 20 pay increase. Man, when you think of it in those terms, it's crazy not to go back to those 70.

Yep. Pick up the phone and call them back. Okay. For you sales guys out there who are like, well, we don't have a rehash department. That's you, pick up the phone and give yourself a 20% raise, you only need one person.

One person. You don't need a team, Right.

Yep. And that's as an owner. But you know what? If you're small or whatever, do it yourself. I mean, stay with those 70.

Yeah. And if you will. Really. You know, and as a side note, too, if you're an owner out there, you got a little smaller business, and you've got just a. Just a small handful of sales guys. You want to get a good sense for how they're doing out there in the field, you be the one to make those phone calls. Right. Okay. Well, we've been punching away on sales here very much in having this conversation. But, like, ultimately, the point being, the fastest and cheapest way to increase your revenue number, hands down, is going to be some version of rehash just immediately.

Okay.

All right. So I want to. I want to steer off here a little bit. We talked a little bit about the marketing. We talked definitely about the upfront sales component and all the different parts and pieces that go into that great conversation. I want to talk next about the production side of things. Some of us have a little more experience with that than others. But here's the thing about production, and a lot of people don't necessarily associate this. And here's. I started this industry 25 years ago, and in my company, we definitely sent out customer surveys like you do. Right. And lo and behold, the return on my customer surveys was not any different than it is in the industry. Okay. Your customer experience takes. Will statistically take a dramatic dive during the production phase. The crew was loud. They. The communication on the. On the build was poor. They weren't cleanly, like cleaning, cleaning. Okay. Number one complaint from customers is contractors are dirty. And it's been that way for freaking ever. Like, seriously. Right.

So.

Or communication when we're going to be out, how long it's going to take, that kind of stuff. And so production is where our customer satisfaction takes a dive. When your customer satisfaction takes a dive, what goes with it? Our reviews and our referrals.

Right.

Dave just said it a minute ago. Was it 50% of people who hire a contractor are not willing to refer them. Okay. And referrals are the leads you didn't spend any money on and have the highest likelihood of closing. Everything we just talked about is just. Just made infinitely easier. Okay? So I want to talk a little bit about this concept about the production side of things. Okay. And just have a little talk about it. Because here's the other thing. Here's the other thing about production.

Right.

Production also has the largest impact on when you get paid. You ever had a customer that's ticked off? We scratched their garage door, broke the. Broke their light. They're not happy with you. How do they show that they're not happy? They don't pay you. That's how they show you they're not happy. They owe you the other 50% of the project, and they're going to. You did 98% of that project perfect. But they're going to hold 50% of your money because of the 2%. Does that sound familiar? Right. So whether they pay you or not, okay. So that affect, like how quickly they pay you affects your cash flow and your speed of cash flow and then how much they pay you. It's amazing how clients, okay? And I love clients, don't get me wrong. But it's amazing how all of the stress and all of their frustration over the issues and the problems and the things you dealt with on their project. It's amazing that the only cure to those things always seems to be what? Discounting how much they owe you. Right. I was stressed out. This thing wasn't done. Right. Fixing it, fixing it very often doesn't solve the problem. They're like, well, now that it's fixed, how much am I going to get a discount for? Because you had to fix it. My answer was always, what? Right. Why should. It's fixed and it's 100% now. Well, right, But I mean, it wasn't done right the first time. So I should get a discount. I don't understand where that mindset comes from, but does that sound familiar? So the see how massive an impact production had. So I want to throw that out there real quick. Okay, guys, some of your, some of your thoughts, your opinions on this concept of production's impact on your profitability. Or not, that's fine.

Well, first of all, that, you know, Chuck was talking earlier. I'm going to tie the point of hey, different forms of marketing and things affect close rates. There's no higher close rate than referrals. There's no better way to build your business than a referral based business. A great mature business often is between 30 and 70% referral based. Right. If the operations process is something they look at and say it was great, they're going to refer. So where do I see some contractors skimp? Well, we turned it over to production and then every part of the relationship, including often picking up a check and everything's done ends with production. So I would share that regardless of how you do it. And I have clients doing it various different ways. But the end of the day, invest a little bit in the check ins. You know when people get upset, right. They get more upset when they feel you didn't listen, you didn't care. Sometimes I can tell you when I was on the manufacturing side of the business, when I look back on my career, some of my best customers and my best refers were ones that we messed up. But it's how you deal with how you messed up, right? And if you deal with it on, well, I gave you back money that doesn't really deal with it, that's a band aid. So I would argue, hey, when you've got a problem, frankly, with the right attitude, it's actually one of your best opportunities. But you got to put that mindset in your head.

That's a great point.

I love that. Dave and I will just chime in from the perspective of, yes, investing in the dollars into that production department. Right? Your production people, the culture, the whole team mentality, that customer experience is just what you touched on. Referrals are the best source, right. So if you can do something organically like just having a great product for your customers, right. The production side is your product, right. It's your service, you're providing them that's gonna alleviate the need to spend marketing dollars. The way we were chatting about and trial and erroring different marketing strategies that I couldn't echo enough that from my experience in this industry just like you mentioned the 50% rate like you say or whatever, you got that stat of half the people out there don't like their contractor. You constantly hear that. And it's just, you know, they're inevitable to have problems in our industry. You're people oriented, things are going to go wrong. Weather oriented, things are going to go wrong. So it's all about that experience you can give your customers.

So I'm going to add one more thing that I now try to get the clients I work with to do to tie to this, right? And something that as surprised. It's rare, but it's rare. And my guess is on this call a lot of you may be doing this. My guess is Chuck may be doing this. There's a few things we do differently. One, we have the sales team share even even subcontractors we share our sales presentations and give it to them. We want them to know what we're saying in the home and bragging about them. And if they're a spin accrue, we bring an interpreter. Right? But we want them to know that we're bragging about their work because as a crew that feels again same thing. Trust that you care about them. Most of these people out there, subcontractors have never seen a sales presentation. It's never been shared with them. They're there to so called just do the work. That's one thing we do. The second thing we do is we make it clear and we go back every three months and remind them if you can come up and share with us something that we can do that a lot of our competitors don't, doesn't mean none of them do. But a lot of our competitors don't make that suggestion. And if the sales team ends up using it, we're going to be a small disc gift certificate, 100 bucks. 150. But the point is they now feel part of the team. They're looking for stuff that we can say and you know what, that's really valuable, right? Third quick thing we do is we have salespeople occasionally take these people out for breakfast or for dinner, including their spouses. Because the one thing I've noticed especially by the way in Latino cruise, we could us American Caucasian guys could learn a lot about how the Latino group treats their significant others and spouses. And I'll give you one example of that. One of the best things I ran across by accident recommend to anybody, it's totally off topic but it ties to the point, you know, most companies do things like they might give away turkeys or they might, you know, at Christmas or Thanksgiving. The best giveaway that I ever saw, the effect on the culture is some clients that, that had large Latino crews on. On balance.

I'm gonna pause you for just one quick second here Dave, because I know that Chuck has to jump. He's kind of hit his time thing and I just wanted to say thank you to Chuck. Appreciate having you join this. This has been friggin amazing and I expect to do another one of these. But we're going to keep rolling along here. But I just want to acknowledge Chuck and thank you for your time and your input here.

I want to thank you guys. I also learned a lot. I've written down a bunch of notes even for myself. So this has been fantastic, even for me. So thank you so much.

Awesome. We'll see you soon, Chuck. Alrighty. Alright. Sorry about that, Dave. Go ahead.

No, it's good. So one thing we learned is on Valentine's Day and on Mother's Day we hand the cruise on Friday two, one dozen bundles, sometimes three. Depends. We know in the family once for the significant other one's for their mother in law.

That's smart. That's really smart.

That went over so much better than turkeys and stuff ever could. Partly because of their culture. It's different.

Mm, that's. That's awesome. I mean production is. Production is your number one threat, your number one threat to your cash flow. It's your number one threat to collections and it is your number one threat.

To.

Referrals ignored quite a bit.

One more thing that we do, actually I should have mentioned this one first because I think it's the one that has the most effect on our clients, on our subcontractors and contractors. We have my, some of my clients, they have their weekly meeting like other clients. A leadership team. Every meeting ends with a recording of each person on the leadership team talking about someone who's either in administration or in production operations that they appreciate something they did that week. So we have a little one minute thing on each person. It's constantly changing who. And we put it out on our internal Facebook. Oh my God. It's a culture magic.

So on the production side of things, there's a few things to keep in mind. Right. Managing your cogs. Okay. Job costing. Right. Being able to pay attention to that.

Right.

There are a lot of, there are a lot of metrics in production that we can track and pay attention to. Material labor wastes and overages. When we start diving into production, a lot of the Things that come to mind for me have to do with efficiencies, speed, process and tracking. Right. And I see Jenny down there nodding her head. I'm pretty sure she's probably got some things to add along these lines.

Yeah. I mean, again, this comes down to utilizing your system and your process to do that heavy lifting for you. And one of the things I know we. You think of on the rebate side, the discount side of your material, suppliers create those good relationships and take advantage of the money they're offering you to pay on time. I mean, they give you pretty generous terms to even pay on time. You can have a bill from the beginning of the month that's not due until the 10th of the following month, and you still get 2% back. Right. So there's just things like that that can really just be part of your process and keep you maximizing those is a great point.

I mean, negotiating those prices to. Look, sometimes we just kind of take what we get.

Okay.

If you're in the process of trying to sharpen your pencil, talk to your suppliers, okay. They. You're. They don't feel. Let me. Let me put it this way. Unless you're being a jerk about it, okay. Which happens. Your suppliers don't feel like. Like you're being a jerk to come in and try and get the best price you can. They don't. And they know that it's important because for you to stay in business and be profitable is good for them. They want you to keep buying materials from them. And so if you go to your sales guy and say, hey, look, Jack, we've been. We've been analyzing and studying our profit, and we're looking for any place that we can try and improve it just to continue. To continue to what? Can we talk about this? I guarantee you your sales rep is going to be so happy you're having that conversation with them as opposed to the other sales rep from a different manufacturer or some different supplier. And they will sit down with you and they will talk to you about it and say, okay, how can we help? Right. And I know Dave's had a lot of experience in these types of negotiations or conversations as well.

Yeah. And look what they're offering, and look what they're doing. I'm going to go back to Jenny's point. Right. If you're, you know, if you've got cash in the bank, you're doing well. And some people say, yeah, but why still, why would I want to pay early? Well, let's say you have 2% 10 net 30, right. Jenny, what's the equivalent? I don't want to put you on the spot. What's the equivalent of the return of that 2% for 20 days? It's like getting a 36% return on your bank account. Who wouldn't do that? If you got it, do it. Right. Sometimes these little things don't look like much, but there are a lot, right? Give me another example. If you're a bigger contractor, right? It's the middle of winter and you're in a northern state. What's a contractor got a ton of inventory and no cash coming in. What are most of them happy to do? Let me buy that material now and I'll give you the cash now. By the way, you hold it in your warehouse because you got no place to put it. So many people think, oh, I can't do that because I got no place to put it. No, put yourself in their shoes. What they need and what you've got working.

That'S good stuff. Rebates, okay? Sometimes we forget that there are things out there that are negotiable, okay? They are negotiable. Talk to your manufacturers about rebates and find out what they are. Find out what they offer, right? And sometimes we figure, well, we start looking into what manufacturers offer as far as value propositions and things like that. Don't forget about the rebates. That should play a factor in kind of picking which. Which manufacturer is the right one for us to work with. And they also. Here's the. Here's the other thing people forget about, too. Manufacturers and suppliers allocate dollars for customer happiness, okay? They allocate marketing dollars for you as a contractor. And we forget about them. We forget about it. They will. They'll help sponsor business cards. They'll help you sponsor shirts for your guys. They'll. They'll. They'll sponsor events and stuff that you guys do. They might even sponsor signage on your vehicles or on the sides of your buildings, because these are things that you can do to reduce. They'll help you with marketing dollars. They will help you spend marketing dollars. And we don't want to forget about those things. And they want to spend it. It's in the budget, and it's there to strengthen your relationship with them and make your business stronger. Because what. They want you to keep buying stuff from them. So don't forget about all of these things that exist. I've talked to suppliers and manufacturers who. They buy Eagle Views for their customers. Now, I'm not saying anybody. They can or they will do that for you. But I've seen that kind of thing happen. Reducing the company's overhead in specific areas. You start combining these things. 2% here, 5% there, 3% there. Right. That could be, that could be an entire employee salary for the year that you save.

Yep. Nathan, you're exactly right. And I want to add another piece on top of that. Right. I have my clients ask for things that don't cost money, that are hugely valuable. Let me give you some examples. I'm dealing with the distributor. I want to be on your advisory council. When you put together an advisory council, I want to be on it. Well, now I'm within the home. I am, you know, I'm a special. I'm even on the advisory council of such and such. Multibillion dollar distributor. I use that one. Give me another one. I'm dealing with manufacturers. Not only do I ask for that one, I ask for them. Hey, I know the magazines you advertise in, in this industry are always looking for articles. I want you to help get an article written about my company in those magazines. All I need is one. You know how valuable that is in front of a customer in your sales presentation, differentiating. And you know what it costs the sales rep? Nothing. But passion wise, they love having that happen to one of their clients because it makes them look good. So it doesn't always have to be dollars.

Yeah, that is 100% correct. Okay, so guys, efficiencies, right? The fewer warranty calls you go on, the more money you save. The final punch list, right? How many times we have to go back out to the job continues to cost us money. Okay. Not having that customer punch list because we took care of it in the first place saves us money and mistakes. Right? And one of the number one things that solve these things are building out strong processes. Some people don't realize that the effort you put into building a process isn't just a smart thing to do. It saves you money. Okay? So I want to lean on that one a little bit. And I know we're coming up on some time here. One last, I want, I want to, I want to touch on this one last thing and then I want to, I want to get some feedback from Roz. Roz has been sitting patiently and quietly. And part of that's my fault. One of the things is, one of the things I know the absolute least about is hr. Okay? And if any of you know me that, that, you know that I'd probably get fired at just about any other company. So I don't know enough about HR to get Roz involved. And before we jump in with a. With Roz, there's one last thing I want to touch on. And it has to do with. Excuse me. The overall velocity of your projects. The speed that a project can go from being a lead to a closed out job. That is something that a lot of people don't pay attention to. How fast does that happen? And here's the reason why that's important. Okay. The amount of money that you pay your sales guy, his commission might be static. He gets X percentage of whatever number. And that's a static thing. It doesn't change. So whether that job takes 90 days to go start to finish, or 80 or 120 or 160 days to go start to finish, that sales guy makes the same number. Okay. But your hourly employees do not. The more times that your hourly paid employees have to touch that file. Okay. Or revisit that job, you're paying them to do that every time. So the speed and the velocity of your job increases how much money you make per day and per hour on the projects that you're knocking out, and it reduces the amount you spend on hourly labor. The amount you spend on hourly labor with those folks. All right, it looks like Dave might have popped off. It's possible that he had to go. We've definitely been going long form here, and I am left with my northern sisters here. And so I just wanted to touch on that hr. I'm sorry, on that velocity component because it's important, but to kind of wrap up some of this stuff here, there are some silent killers to your profitability. Okay. And I know that the HR recruiting and hiring are some of those because of how expensive it is. So I want to open this up for that component a little bit and let you jump in with how we can affect our profitability through those components.

Yeah, Nathan, I mean, one of the things that comes to mind right away for me, and even as you're talking about velocity and process, is really understanding that when we don't have those things in place, it can be really disheartening for our employees. And then we result in usually higher turnover numbers. Right. And turnover, it can be such a huge killer because we don't really pay attention to how much it actually costs us sometimes to hire a new person, which is its own separate cost, and then train a new person which has its own additional costs. When we look at our profitability, there are really a couple things when it comes to just Even onboarding our people, one is hiring, typically it can take anywhere up to a couple of months to identify the right people to get them on board. Just even that replacement of a person takes time, it takes investment. You know, we're placing ads, maybe we're running different ads on Facebook, Maybe it's on LinkedIn. Usually we're using multiple boards, things like that, so that the spend to hire people can get up there pretty quickly. And then there are additional training costs. And so not only do we have the cost to actually invest in that person to get them up to speed, sometimes what we're not looking at is in the background there's a ramp up period. Right. So we've hired that new person and they're on board, but they aren't going to be selling at 100% of their quota or their expectation day one. Right. So now we've kind of got maybe a month where they're at let's say 30% a month where they're at, you know, 60% of their expectation and then a whole nother month before they're really firing on all cylinders and they're pretty producing the kind of results that you would expect to see. So we have to understand that throughout that, you know, 90 day period, we are actually having a loss to our overall profitability. So it just comes down to this criticalness of we really want to make sure that we are paying attention to what our turnover numbers and trying to keep our staff on staff as long as possible.

I mean when they're excited to go to work, they, they're sharp, they're paying attention, they're having fun, they're enjoying like they will be more efficient, they will stay, they will advance quicker. Right. I mean, do we, do you have some figures on, on like average onboarding costs for new employees, what that looks like?

Yeah, usually it ranges between like 15 to 30% of their salary annually.

Man. So, so you hire a, a $50,000 a year employee and they're costing 70, another $7,500.

Yeah.

Get a month. So they just cost you almost 60 grand in the first year.

Yes, yep. And so, and typically before you even start seeing that return, it's like six months in. Right. Especially for like a mid level person, you're not going to see that return on your investment until they've been with the company at least six months. Months. So now you're looking at that and you're saying, okay, I've hired this person, I have this expense. If we're not getting past that six month Threshold with our people, the cost is even greater, right?

Oh, yeah, right. Like, because so we hire one person, we're like 7,500 bucks over the course of a year. I mean, it's not that bad. Well, yeah, but what if you lost three people, right? Right now you're at over 20 grand.

Yes.

Okay. And then you hired another two at the same time. Now we're at any given point, we could literally be spending 25 to 50 grand at any given moment with people who are either onboarding or been onboarded or who are on their way to full efficiency and value in their position.

Yep, exactly. And then, you know, you kind of scale that based on the size of your organization.

Yeah. So that's. Yeah, that is. That is crazy important. Oh, there's Dave. Dave, did you jump out on purpose or. Nope. Okay, you're on. You're on mute.

All right.

Okay. I thought that he had left, so. Yeah, that's huge. So we were just talking about the cost of hr, right? And hiring people and, and like in Time to money. So we talk about this with sales guys. Jim likes to use the term ttm. Time to Money. Okay, here's the deal. Most people, when you hire somebody, most people cannot afford to go three or four months without a paycheck. They just can't. Right. I mean, that, that's. And that's just a fact of life right now. People don't have. Many people don't have 20, 30, 40 grand sitting in the bank and they're like, oh, I can make a career shift and not get paid for a while. Okay, so what happens when our ramp up period is too slow? They can't afford to work for you. Think about that phrase. They cannot afford to work for you if you're not able to get them to the. To earning as quick as possible. And then guess what happens? They leave. And then you start that cycle of spending money on a new person all over again.

Yes, exactly. And that's where, again, having those processes in place for your team becomes so critical. Because if, and this even goes back to what we were talking about with Velocity Nathan, those number of touches, if I'm new and I don't have a clear understanding of the process, I'm going to retouch and touch again and again right before it actually comes to completion. If I have a clear process, if I have a clear training process, I have people identified that are on our team that are good at what they do and they understand our training process so they can help buddy along with someone. It Definitely shortens that window. It shortens that number of touches. And so not only does our velocity of our sale go up, our velocity of our training and really getting to that time to money point increases to.

You also have the hidden cost of the people when people are out and turnover that now their jobs just got piled on. Their stress just went up. That happens too often. You got the whole other cost of the speed up of people leaving because the people there and want to be there. They can't take the stress anymore.

Yeah. So there's some of the hidden killers that I put down. So we got hr, we've got Riga onboarding. Okay. Culture the way. And Dave touched on this a little bit earlier. Culture eats strategy. It's expensive to find people. Okay, what's not expensive? People finding you. That's not expensive right now. How? Why would somebody find you? It's going to be your culture. It's going to be the people who already work for you that love working there. Look, I love working at Contractor Coach Pro and American Contractor show and Contractor Radio and all the things that we do. And I've always got my eyes peeled for somebody. I love that I could get in here. If my best friend had talents that laid along the lines of the things that we do, I'd be trying to get them to come work here because I would love to work with that person. And in this business, do your employees feel that way about your company? Because if they do, how much does it cost? Doesn't cost you anything. That's an entire recruiting. And that's an entire recruiting program that's free. We talk to clients all the time and they're like, should I use Monster? Should I use Glass Door? Should I use. And I'm like, how happy are your people?

Yeah.

And Nathan, sometimes that comes down to communication with your team too. You know, if they don't know that you're looking to add. Have you communicated? Have you. Does your team know and understand that you're currently hiring? I mean, sometimes we get down into that process and we think, you know, as employers, we know that it's so important and it's right in front of us. Right. And we're thinking about it. But we have to remember that our employees are coming from a different experience. Experience. They're thinking about their jobs. Right.

And they don't know.

They're not always paying attention to what our job board looks like. And so I think there is a communication piece on our part where we want to make sure that we're being upfront with our people and they know not only what that we are hiring, but also what we're looking for. I think giving just some clear points on, hey, a great person for this role would look like this. And kind of casting that vision for our employees can help them better identify, you know, who we should be bringing onto our team. Obviously we want a culture fit, but when it comes to that job fit, sometimes that can be hard for our team to know exactly what that means. And so if we have some just key points that we can share with our team that can really help them become our internal recruiting partners.

Yeah, we've got a client. We have a client or one of contractor coach pro's clients. Had somebody travel across the country to work to go work for them.

Yeah, yeah. I'm going to share a recent one I had with a client, which just shows you got to be creative and have your. Your ears open. So a lot of people have trouble finding right now capacity of crews.

Right.

And so what we found out by accident over lunch with one of our most important crews is this person said themselves, I don't want to be any bigger than X.

Right?

So many employees. This guy said, I can manage four crews effectively as an owner. I don't want to get any bigger. So in that lunch I asked, I'm just curious, any of your foremen, are they ever potential owners? He goes, yeah, but why would I want to do that? So we put together a deal where a he identified a foreman in his crew that could be a great owner. We gave an incentive to give us a name and help set that up. And we provided for just the first year, some accounting services. Someone much more lower level than Jenny, but someone who could teach him how to. Okay, we'll get your QuickBooks set up. We'll get your website set up. Cost us a few thousand bucks, and all of a sudden we had a lot more capacity. Sometimes that extra capacity is even within your subcontractors.

Man, that's awesome. And so that kind of comes down to some of those silent killers are a lack of creativity. Right. That's a silent killer to your profitability, your leadership. I mean, gosh, the number of companies I've seen that got ripped apart because owners or managers would just stomp into the office and like a tyrannosaurus rex when something went wrong and just tear that place apart. Constant turnover or just a complete. Just falling apart because of a lack of leadership. Right. And so that breaks into some other stuff and that maybe that's another podcast. All right, so here's what I want to do. I want to do a couple of parting shots from you guys if you have anything. No pressure, but we're going to do that right after another word from one of our sponsors.

You're not using Hell Trace. It's definitely worth the money. That money invested was one cell was already bought. We've got from denied or declined two.

Acts of being bought just because of Hell Trace and the storm reports that they give us.

Not only do I know where the storm's at, sometimes as they're happening and I can already head right there to the storm, but also after the fact, when I'm out knocking on doors, I can show homeowners the map and what kind of hail was in their area.

We've seen a huge return on our investment, and I have no doubt that you will, too. Welcome back to Contractor Radio. This has just been a. A monster of a conversation. I mean, in just such a good way. The, the content that, the notes, the, the practical takeaways from this. If you're listening to this podcast, this podcast has been worth million. I mean, I'm not exaggerating when I say millions of dollars, Dave. Do you think that's an exaggeration?

Absolutely not.

So if you've listened to this, this podcast could either save or may help you make millions of dollars. 100%. And it's free. Maybe we should charge for it.

I don't know.

See what happens. So, all right, so one last thought here. Anybody have any parting shots for our listeners out there as we, as we wrap this sucker up?

I have a. I have a parting shot or a parting thought. In terms of having mentors and coaches, it's not a sign of weakness, it's a sign of strength. Tiger woods has a coach. He's always had a coach. Mickelson has a coach. Now, they may be getting different coaches because there's different aspects of the game they need. I think whether it's contractor coach Pro or you find somebody else or whatever more comfortable with, frankly, we just want you to do well. Right. The thing I love about Contractor Coach Pro comes to analogy I used earlier. Ideally, when you're smaller, you need more like a chiropractor. As you get bigger, you need a team of doctors, a family practice with specialists, that wherever your pain is, we've got that experience. And I've never personally been part of a group that is as well in tune with the contractor specifically. Not to all these other industries, but the contractor specifically in, hey, how do I do my books and financing and tie it to the most common packages like QuickBooks or Aculants. How do I make sure from an HR standpoint, I'm following what's actually happening in that business? And frankly, we even learn from each other. My personal example was I thought for sure I'd always want as many people as I could as a subcontractor. And Roz convinced me I'm an idiot, but I'm an idiot. But that's okay. We've got the expertise within this group and if we can help you, we'd love to help you.

That's a good one, ladies.

I just echo that. I think we've touched on that throughout this. I mean, I think that's where we are just so excited at CCP to bring the collisions. Like you mentioned, the refereeing. That's what brings so much value to. I think what we do is we're not solo focused, we're not one leg of the business focused. We are coming at it from all, all encompassing perspective in our industry.

I think for me, what came up just again and again throughout the conversation, Nathan, was this idea of process and how critical it really is to profitability. You know, whether we were talking sales process or your marketing process or your production process for your customer referrals, your hiring process and your retention process. I mean, I think it really drives back to how critical having the foundation of your business, those building blocks really in place if you want to get your arms around profitability. And so maybe if you're listening and you're looking for what is that one, you know, thing I want to focus in on today, I think you could look at your business and maybe take an honest look at what areas are our processes kind of breaking down or non existent. And that might be a great area for you to dive into and start tackling process so that you can increase your profitability.

Yeah.

And to Rosa's last point, I'll echo it this way. If you had a kid in high school and came home from being in the concert band and you asked to see the music because you used to play band and the kid said, oh, we don't have music, you'd say get a new music teacher. If you had a kid that went out for girls lacrosse and you used to play girls lacrosse, and the kid comes home and says, can I see you lacrosse plays? And your daughter says, oh, we don't have plays. You'd say, get a new lacrosse coach and I can go through any sport and anything we learned in high school the importance of processes. But Most businesses don't have them because processes require discipline and discipline is doing what we don't want to do, but doing it anyway.

That is awesome. Thank you guys so much for being a part of this. I know that we really put in some, put in some work here and I just appreciate your guys dedication. I just want to honor and acknowledge all of you guys for your expertise and bringing that here out. For those and for you contractors and our sponsors, thank you so much. We really love Contractor Radio and we love the relationships that we have with our sponsors. Like I said, give them some love. Go check out their websites, go talk to their sales reps, find out what they do and how what they do can be valuable to you. And last but not least, thank you to you contractors. We really do love you. We love this industry. We love working with you guys and seeing you folks grow and the impact you have on your people and on your customers. So until next time, thank you to everyone. Have a good one.

Want more 5 star reviews from your customers? At Signpost, we make it easy for your customers to give you great reviews on Google, Facebook, Yelp and more. Our software connects with industry specific solutions driving even more reviews from your customers. Drive loyalty and repeat business by sending the right messages at the right times to your prospects and customers. Message your contacts from anywhere, anytime using text, photos and video all in one app. Check on progress with campaigns and review generation across Google, Facebook and Yelp. Visit signpost.com and get your demo today.

Sa.