How to Create Profitable Processes for Your Contracting Business

Is there a difference between a system and a process? And if there is, what is the difference?

Ooh, that's a great question. It has been something on my mind here quite a bit lately, especially when it comes to the sales side of things. There can be sales systems. So one of the systems might be like a multi level type system where you're focused on recruiting the next person in and the person that you recruit in, you get some of the benefit for recruiting them in. That's a system. A process is the order in which you follow something where A then B, then C, then D and you don't skip E to get to F. It's linear. If it deviates, it's actually another process. So if you're going along in your process and something is an if then statement, if this happens, do that. That becomes a new process you have to follow till you come back to the original process. We talk about this a lot in the ideal process.

Yeah. To answer your question, I guess I think that there is a difference between systems and processes, but I think you're splitting hairs. So, for example, like I think a system might be an overall way of doing something and the process is the granular method inside of it. Right. We hear this a lot with sports teams. Right. Because a team will have a system like they fit into the west coast offense. Exactly. That's a system. And then a play has a process to it. As soon as we go this count, this person goes here, this person goes here, this pressure is applied here. So if I was to try and separate those two out, that's how I see it. I could be wrong. And if somebody was to argue with that, I don't think I would give them much pushback.

I think we were both kind of on the same page.

Like I have this process supports the system. That's what I'm understanding here.

That's how I would probably.

I may have a retail system and I may have an insurance restoration system. Those could be two different types of systems. But the process inside of each one of those, of how you get from A to Z to get a signature would be different in each one of them that fits that system. But like you said, it's granular. It's the detail, it's the step by step.

So am I understanding you properly? You can't have a process implemented until you know what your system is. Am I understanding that correctly or am I just making just a vast assumption?

I think it's probably helpful to have them defined, but I don't know if they hinge on each other.

Well, here's a good example, I think where you might be headed with this. If I'm a smaller company, more than likely my salesperson is going to handle more things in the sales process than a larger company. As the company grows, that sales process gets staged out a little bit. And so my system becomes something different than what it was before. Like, I have a single salesperson system. He handles the client from A to Z. He's with them the entire time. He watches the job and does all the stuff. But maybe I have a staged system. So I have a canvasser that knocks doors and gets leads. I have a person that goes in and does an estimate and documentation, and I have another person that comes back and picks colors and closes the deal. That would be a staged system. They're still following the same process. It's just multiple people in the system doing it. Does that make sense? I think it's great to think about where you want your system to be. And I really, really believe strongly that you need to do your process first. Like, the process is the important piece of it. How you execute that in the system can grow over time because of the growth of your business. Okay, so would.

So back to the west coast offense thing. Right? So the west coast offense, that's the system because. So that's the theory.

Right.

So is it. And then we have the. The process, which is the plays that are inside of it. That's the implementation of the theory. Is that kind of. Because that's how I have to make it make sense in my head. If that's the way that it works.

I think that's fair.

System is a theory. The process is the implementation.

Would that be accurate?

Sure. Little more than a theory. I think theory is a guess. Where I think it's an educated guess is the definition of a theory. It's a philosophy. I think is a better way I would describe that. I have a philosophical approach with my system. Fair enough.

So now that we've got that kind of squared away a little bit, now that I understand that some of these other questions hopefully will make more sense.

Okay, great.

So at what point does a process need to change? How do you go through and say something's broken inside of this? I need to begin to make changes in these areas of my process.

I probably start with how to build the process in the first place first. Just because how do you fix. You have to understand how to build something before you can fix it. Right.

Or work on it.

I think processes have to have they're broken down, right? So you have an elephant and how do you eat an elephant? You eat it one, like one little bite at a time. So you got to take this overall concept of whatever the end goal is. And the companies have all kinds of processes. They've got hiring processes and firing processes and disciplinary processes and reporting processes and production processes. Production. They've got all kinds of processes. But generally the biggest, hairiest, nastiest one in the hall in the whole company, the longest one is taking a client from being a lead or an interested party to a completed and happy customer. Like closed in the construction industry, like the closed file in the file cabinet or in your software. Whatever it is going from, hey, I'm interested in what you guys do to. Thank you very much, your bill is paid. Please let us know if you ever have any issues. Oh, by the way, we take referrals, blah, blah, blah, and then into the folder or file. Right. That's the longest process that most companies are going to have. And so if you can tackle that process, you can handle pretty much any other process that you might possibly have in your company with the exception of some that have compliance and legal issues, in which case you just get some help with that. But you want to start with the overall end in mind, which is happy customer referrals, continuing business, hopefully depending on the kind of company that you have.

Getting into your marketing automation system.

Yeah, getting into marketing and continually communicating with them. That's the end game. So then we go, okay, well if that's the end game. And then over here we've got somebody who doesn't even know who we are or is just only interested is just finding out what we do and wants to talk to us. What does that path look like? And so breaking that thing down into smaller milestones. Smaller milestones. So construction is pretty easy, right? You've got a lead, you have an appointment that occurs. There's some sort of inspection of, of whether or not they have a need for your service. Then there's the presentation of that. Of that need that they have along with the analysis. And then a presentation of your solution with a, with. With a price attached to it. Potentially negotiations. Then you have. And I'm just, I'm laying this out real general because I know that for some of you, your, the product you deliver is so complicated that you may actually have a bidding process or an estimation process, whereas if you're doing in home sales, it might be my gu can actually go out to his truck and generate a price right on the spot. Whereas the product you deliver might be so complicated. It's like I got to take all this information back to the office and let somebody way smarter do that. Sorry, sales guys, truth hurts. That person heard it here first, guys. That person plugs. That person has to plug that info into a spreadsheet and design the product potentially for the client. And then you have a presentation of solution price. So all I'm doing is laying out milestones, right? So then we have a completed sale, we have the pre production or pre delivery component with double checking and stop gaps and accountability for having everything we need to continue through the process. Then we have the actual production or installation or delivery. So I'm laying out milestones you may have in progress where we're actually doing the work. And then we have the post progress where there's a final inspection or some kind of thing to make sure the customer's happy and everything's done. And then we have final paperwork delivery and invoicing and invoice reception, and then paying all the bills of the products needed needed to fulfill the order. And so hopefully that's. Am I making sense? And then inside of each of these milestones, inside of each of these milestones.

That'S why most people don't do it.

This probably is. For some of you, you're getting excited and your breath is getting heavy, and for others of you, you're like, you're.

Getting three of you watching this video.

Yeah.

For the rest of you, you're going, oh, my God, you lost me at lead. Right? So then inside of each of these milestones are these steps that need to be taken to make this thing happen the way that we want it to happen most of the time. And how does that happen? Who does it? When do they do it? What tools do they use to accomplish it? What are the details around it? Okay, now most of the contractors I talk to have tried to do this in one way or another. And maybe they have a few things. They'll have an outline and in oftentimes the biggest problem is the level of detail involved. They'll say something like, I've seen guys that are just like, create appointment, close the deal, give it to production. And it's like there's about. There's about 800 steps between inside of those three things, right. If you handed that to somebody, somebody's gonna go, okay, what, like. Or that seems easy enough. And then you're going to end up getting your phone blown up every five minutes by your new hire. So the detail that needs to be Applied should be something that your people can look at and can read and it reminds them of the things that we showed and demonstrated for them to do. It's possible to get too granular with your processes. As if you could write something that somebody would never be trained to do and they could read it and know how to do it without training. That's super granular and a very difficult thing to build, number one. And number two, if it's that granular, high probability it's not going to get used.

And it's probably not something you need to do until you get into that 25, $30 million range. Because at that point you're hiring people, they're stepping in to go and do something. They do need to follow an instruction list to do their particular job.

So they should be able to read this thing and know what you're talking. If you were to say create new lead, schedule appointment, somebody might go, I know what those words mean, but what does it mean to create it? Well, that means opening up the CRM, clicking the new lead button and inputting this list of data. Name, address, phone number, email address, you know, source of lead, potential need or reason for calling or whatever. Right now, all of a sudden, oh, okay, I get that part. So you got to go a little deeper than simply create lead then. This is schedule appointment. Well, what is that? What is that? What do you mean? I know what it means to schedule an appointment. Say, are we using Google appointment? Are we using the CRM's calendar? Are we using Outlook? What do you mean by schedule the appointment and then who do I schedule it to? You know, assign lead.

Great.

Assign it to who? Assign it to a salesperson. Which one and why? Well, do I sign it to the sales guy who's working that area? Do I sign it to the sales guy who is available the soonest? Do I sign it to the sales guy who the appointment date the customer wants fits with who's in the area? Do I have a round, Rob?

Do I sign it to the sales guy with the highest nsli?

Right? And at which point they're gonna go, what's an nsli? So, so your processes. And while some of you, your eyes may be glazing over at the moment, the people whose eyes are glazing over at the moment are the same ones who tell me that they want a well oiled machine, that they don't have to be into the details of every single day and it's not going to happen without this thing that right now is causing your eyes to Glaze over for.

The single biggest factor that propelled my business from 5 million to 25 million was defining the ideal process. And I say ideal for a reason. It's not perfect. It is. Ideally, it's going to go this way. Yes. Things could go wrong.

Make it happen one way every time. This would be the way, right?

I want it to be this way. And it's ideal. It's still not perfect. Ideally, it goes this way, but maybe we could make it better. Maybe we're still working towards perfection, but there's going to be things that deviate for whatever reason. There's a million different reasons why it might not go along this thing, but at least let's start there. The best advice I ever got was to build an ideal process. It took a while, I have to admit. I sat down for a month, a solid month, and just developed the process and really thought through. And the way I did it was I went, okay, I'm out in the world doing this thing. Let me close my eyes and write down exactly what happens. Then I got a little bit more coaching. And that coaching said, okay, you need to have some more detail. It can't just be do an estimate, right? Like, I know that, but the new person doesn't know what doing an estimate means. So then there was a description that went with it. So think task and then description, task description, and then the tool. What tool do I use to do it with? Is it a spreadsheet? Is it a CRM? What is the tool then? Who performs it? Who's the person that does it? So what role? You put a little acronym, Sales rep, administrator, whoever it might be. And then the last one, and this was the one that made the biggest difference overall was the amount of time it should take. Is it something that should happen immediately? Does somebody have 24 hours to do it? Is it something that should be done in a week? Because then you start to time out your process. And we're getting back to your question. How do I know when to do something with my process? When something is not following the process that you've designed? That's thing number one. Hey, why are we not doing it this way? Somebody's not holding somebody accountable to the process. But if the time is going too long for what we've set, I'm now measuring my process. And that's how you decide when and if you're going to actually mess with the process as if it's not hitting the required measurements. Am I asking too much? That's a possibility. Could we do it Differently. And that was some of the big things that happened with the process was you looked at it and said this is the amount of time it takes to do one of these things, whatever it is, from start to finish and an insurance restoration, which is what we happen to be in. It was 133 days from the first time I spoke to somebody till the last time that we spoke to somebody and put them into our automated follow up system. That was too long. How do I make that shorter? And so that's how I'm working my processes. How do I make that thing as short as I possibly can to provide the same amount of quality and experience? Because if I do, I make more money per day. If I'm making $10,000 over 133 days versus making $10,000 over 33 days, I'm a much more profitable and efficient company. That's how we would decide, do I mess with my process or not?

Well, there's other reasons too.

I was going to say one of the other ones and I'll let you go after this because I want to do it before I forget it. Letting the people know that perform the process, that competitive curiosity is a part of the process. Can we do it better? Is there a more efficient way? Is there a unique way? Is there something you're saying out there that's working for you? Bring that back and let's modify our process, improve our. Because that's the whole thing. We've built the ideal and we're striving for the perfect one. And that will never build, but it's always trying to get there. So that's the other place where I would probably modify a process. One of the best ones was like listening to my sales reps going in the field and listening to them, I went, dude, that's really good. I don't know why everybody, everybody else isn't doing that. Let's put that into the process. So that would be another way that I might adjust a process.

And you can apply that to like the front or back office.

Everywhere.

Front office people like picking up the phone, hey, this is what I'm running into a lot. Let's change the process to where it looks like this so we can get more people on the calendar.

Actually those folks were the ones that improve the process way more than salespeople did. Administrators especially, they were always great at figuring out better ways to do things and automating stuff, taking repetitive stuff out of the equation, double entry and things like that out of the equation. And production people Were really good at it too.

And we've just, at Contractor Coach Pro have figured out a way to automate a lot over the course of the past couple months of just how people book appointments with us, the round robin thing, the immediate follow up, you know, getting them into a funnel, you know what I'm saying? Like all those different things. Like there's a lot that we have automated to make our lives easier from a lead intake perspective.

Well, we talked about leadership right before and one of the things of being a really good leader is understanding capacity. We talked about how much time do you have to do what you do. And there's three really good ways to gain more capacity. Automate, eliminate or delegate. And so a lot of times we'll delegate authority to others, empower them. Like we talked about, a lot of times we'll just eliminate the thing that's wasting our time and has no value. But the other one is automating like this, hey, how do I automate this thing? So it's a repetitive task I never have to do again. Your process will identify those things for you.

So I mean, well, oiled machine requires a process, the ability to automate what you guys are hearing. Automation is becoming a buzzword, right? Like just like people say scale, it's like everybody's talking about scaling and automating. How the heck do you automate? What can you automate? Well, if you don't have a process laid out, you don't even have a list of things that you could ask yourself if it can be automated or not. And I'll tell you right now, it's one of the things that, sorry software guys that you guys and I in the past too have failed to explain to clients is if you want to create automations in your business, you got to write your process out, period. First and foremost, it's got to be written out so that you can look at a thing and go, we do this. Can a robot do that? If a robot can do that, then I can go look at the robots I have and see if they're capable of doing that. Okay, number one, so the other thing that happens is just building your process has its own roi. If you want to increase your profit, increase your cash flow speed, reduce your overhead and reduce mistakes, build your process and implement it before you hire another person. You'll probably find you can do more with what you have, which means spending less money right now. Okay, so then you ask, when does somebody, when does somebody start deciding to start monkeying around with their processes? Okay, well Like Jim said, is something broken? Does something continually happen that doesn't get covered, that needs to get covered? We got to take a look at our processes and figure out if it's missing in there. Okay. Or if it isn't, why is nobody paying attention to it? Okay, so we start there. If you're hearing this and you're going, I need to hire people. Do you remember hiring people is the most expensive solution to any problem you have in your business. So if you think you need to hire somebody, you start with your process. Do you have a process? Number one, is it the correct process? Is it working? Number two, is it being followed? So it's probably, do you have a process? Is it being followed? Is the order? And then if it's being followed, is it working correctly or does it need to be modified?

Is it efficient?

Yeah, if the answer to all three of those things is yes, we have a process, people are using it, it is working. Okay? And I still have the same problem. Now you might want to think about hiring somebody, but you might be able to solve the problem without hiring somebody, which is really expensive, simply by rolling through that. Those three things that I just named for you to begin with. I would do that with everything, first and foremost. And if we come up with a new cool way of doing something, test it, put it in the field, if it works, hard coded into your processes. And make no mistake, your software and your technology tools are not your process. And they do not house your process either. No matter what some software technological person tells you. And they hate hearing that. I get it. Your processes that you lay out and write are what tell your people when to use the technologies you have. Because odds are you have more than one. You might have a CRM, you might have a documentation tool, you might have a picture taking app, you might have a time scheduling piece of some kind. You might have a pile of different technologies. When do your people know how to use those things? Well, your process, the processes don't exist inside of one of those things, they live outside of it. And then tell your people when to engage with them.

And even more importantly, we're going to make a lot of software people mag. Because they tell all these people, we're going to create this amazing process for you. And it usually is. Don't get me wrong, there's a lot of value in software. I was in the industry for five years. We helped build one of the best ones that's out there, but it doesn't cover everything. It doesn't tell a guy how to Set up a ladder to be safe. It doesn't tell somebody what to say when they're at the table and somebody says this to them. Your CRMs and technology does not do that for you. So you have to allow for that in your process and like Nathan said, to incorporate when to use the technology. And even if it's not technology, the things that need to be done throughout your process as well, because then you have gaps in your process. If you're just relying on your technology to be that process.

Your process has a bunch of different downstream benefits as well. So if you. We get a lot of people who need to build job descriptions for their people. Well, what do we base the job description off of? Because honestly, you could just go Google production manager job description and it's going to bring up something for you. Yeah, very generic and it might not be half bad.

Might be a good starting point.

Yeah, it might be a great starting point. But how do you know that that's the right one for you? You know it's the right one for you because you go back to consult your process and you look at where the production manager is involved and where they're not. And if you can find those things, then we can begin to generate the scope of work that they're supposed to handle. So you remember how we started with this idea, or there is this idea that your biggest process is your customer start to finish. Well, different people in your company are going to interface with that customer or with that process throughout that whole life cycle of that customer. And so where does that happen? Those are the things that go into your job description. And from that job description you now have a scope of responsibility. And the greater the scope of responsibility, the more you're probably going to pay the person to hold those responsibilities. The smaller the scope of responsibility, potentially the less you may end up paying that person. But your processes are how you're going to get to that point.

Have you ever tried to build a job description without a process?

People do it all the time.

Build hundreds of them.

It's impossible to do it.

It's impossible to do a good one. One. So.

And my experience with that, when I ran Nubs Media, I brought my mom on as like the secretary. That's what we'll call it. We'll just call it secretary. I had no process behind when she was supposed to like, do what or anything like that. I was like, answer the phone, reply to emails, send invoices, make sure everyone gets paid. That's your job.

But when and how?

Yeah, and but and then I never thought about any of that. And I would spend a lot of my time answering those types of questions. But I was so new of owning a company, I didn't understand. It's because I was missing a process which bled into the social media manager that I had that worked on all of that stuff. There was no process for her on how to go about doing it. It was just me telling her what to do and then just go do it.

Well, Nathan mentioned the downstream side benefits of a process, and that's one of them right there. Back again, talking about leadership and capacity. One of the things that will bog us down as leaders is not having a process. And by not having a process, the reality is we become Google and we are easily searchable. They just type in our number, hit a text message, and boom, here we go. Or they dial us on the phone and they call us. And we're constantly in this mode of answering questions that if we would have just sat down, did the hard work, put it together one time, we'd never have to answer that question, which, this is the big epiphany that I had. Once I finally did a process, I created about 70% more time for me to work on my business. Everybody had exactly what they were supposed to do, how they were supposed to do it. All the questions stopped. I didn't know what to do. I was like, man, I got all this time now. Okay, let's make this thing repeatable. Let's make this thing scalable. Let's measure it and improve it. And that's the ultimate benefit of it, is if you can create a process that's repeatable over and over and over again and train to it. Now you know what to expect from everybody, so you can inspect what you expect instead of just simply out there shooting from the hip and doing their best to try and get something through. Well, if you can measure that, you have a chance to improve it. It can always be improved. Nothing's perfected. And it's amazing the new things that come out of that, how that process actually goes from this kind of big thing that you created. It actually gets smaller and smaller and more refined and cleaner. And when you make something repeatable and scalable, it's valuable. I can now sell this thing. And here's the real key thing. This is one of the things that put me down this road, like why I started thinking about it and there was a story behind it. I got a call at 1:15 in the morning from one of my sales reps asking me how many squares does a roll of felt cover? And for those of you that don't do roofing, a roll of felt covers four squares. We have talked about it a hundred times. I've done it in training, but we never.

Some rolls of felt.

We know some rolls of felt, 15 pounds, 10 square.

Like, we get it.

All right. Yeah. At that time, in that place, in that circumstance, it covered four square. So instead of, oh, that's gonna be brutal. I can't wait. So instead of answering the question, the frustration, the lack of emotional intelligence, all that other good stuff, because I was a young leader, young owner, instead of answering the question at 1:15 in the morning, I took the phone, threw it up against the wall and shattered it against the wall. Woke my wife up in the middle of the night. She was like, what's going on? And my reaction was very emotional. He's an idiot. I've told him a million times, how in the world can they not know it? And all the other good stuff. And that was what started me down the road. I asked myself, why, like, why did that, why did that guy need to do that? It was my fault. It was my fault because I did not give the instruction, the guidance, and the process to do it. So then I went and hired somebody to say, hey, how do I build a process the right way? We ended up building that process. We made it very repeatable. And so every single time that somebody went out in the field or interacted with a homeowner, or interacted with a vendor or interacted with a teammate, I knew exactly what they were supposed to do. And I could measure it, I could hold them accountable to it. And it freed up a whole crap ton of time for me to grow and scale my business, which also made my business very valuable to the point that lots of people wanted to buy it because it could function without me. That was the key.

And maybe lastly on this, if you really are envisioning dreaming of truly scaling your business, I mean, macro level scaling, you will not be able to accomplish that without having this process written. Because what many don't understand about scaling is scaling isn't just adding people to your company. Grow it.

Come on.

No way I can hire 100 sales. I'm just scaled. Scaling is when you increase your production and ability to handle greater volume by decreasing the amount of responsibilities that each role holds and down to the truest form of what they're best at. And so, in other words, when you're scaling your business, and Jim alluded to this earlier, you actually reduce the number of responsibilities your salespeople have trying to get them into the zone where they are their most efficient. You do the same thing with your production people, the same thing with your administrators. And so you're adding people to your company but for smaller amounts of responsibility. That is a actual scaling because each, each pile of responsibilities has so much volume in it that what, what one person used to be able to do 10 different steps. There's so much volume that now five of those steps is a full time job now. And so that's what scaling actually looks like. And you're not going to be able to do that unless you have these processes laid out so detailed that you can then say, okay, we're going to take this hat, cut it in half, and now this hat is smaller, but this hat's handling way more of those tasks now. And then begin to add people to your company with more narrow and more specialized jobs to do. And that's not going to happen unless you have your processes built.

The biggest thing about process that I realized is it reduced friction. There was so much friction between people and how they did things. And like this guy did it this way and that guy did it this way and they would turn it into the next person in line and they'd have two or three or four or five or ten different ways to look at something. But when they got it one way, the same time the friction was reduced, the process sped up, they could do it faster and repeat that thing over and over again. And like you said, scaling isn't adding people. Scaling is reducing the amount of responsibility for somebody to perform because your volume has necessitated it. Correct. And think about what that does for you. What that does for you makes your training easier. Now I only have to train this little piece to this guy instead of this huge big piece and then he can grow. He has a growth path with your business starts out here, moves to here, moves to here, moves to here, and gradually learns all this stuff that when you were a smaller company he had to learn through a lot of experience. It's a beautiful thing.

Like Nick Saban said, trust the process.

Trust the process, trust the process.

Well, I think that's really it.

Unless you guys have anything else to.

Add from that perspective.

I don't want to beat a dead horse.

The last thing I would say like this I think is really important because if your eyes haven't glazed over at this point and you haven't stopped listening to us and it's overwhelmed you and seemed over complicated, start simple. First nail the Milestones, just get that down. Like, let's follow these milestones and that might still be a little willy nilly inside of each one. Then find the right person to help you define what happens inside of those milestones. Because you don't have to do the whole thing. Maybe you don't. Maybe you have a production manager assign the production part to him. Maybe you have a sales manager assign the sales part to them. Maybe you have an administrator that's helping you give them the bookkeeping or the invoicing or the paperwork or whatever it is that they're doing. Have your team help you. That's why we do process. Where we do process, we do leadership culture and then process. If we have great leaders that foster a great culture, that culture wants to build those processes because it makes everybody's lives easier. So don't think that this thing is this big gigantic thing that you got to bite off all at one pop. Get the milestones, then start to work inside of each one of those milestones until you get that ideal process. Once you have that, whenever you get the if then statements, if this happens, go do that, then you build out that little process and you do that with just the small little milestones that are in each one of those.

And in our next, our next conversation will be about the organizational structure and the accountability, which is really where we spend more time. How do we hold them accountable to the processes and all that good stuff.

Yep, 100%. And like Nathan said, because we built that process, we can actually build our organizational structure. We know who does what.

Exactly.

So.

Well, appreciate it.

Cool. Yeah.

I mean, you really should, you really should try as much as you possibly can.

That's the one thing that we haven't talked about.

Incentive to connect their incentive to their job. Like, oh, yeah, there's a lot of, well, this is how much I make per hour, or this is how much I make in a salary. And they're. And it seems like that's over here. And then they just have all the stuff they're supposed to do over here. And there is no connectivity between those things so that they're like, oh, this is what I get paid to do. And, and honestly creating additional incentive, like, hey, if you make this thing better, it's better for you. Because one of the fears that people have too is if somebody's paid by the hour, right. The longer it takes them to do something, the more money they make, quite frankly. Okay. And then if somebody's paid by the salary, then they want to do as little as Possible for what they get paid. That's how they're incentivized. So, and that's just human behavior. It's not that they're bad people. Honestly, if I was paid a salary, it's not that I would be lazy. But at some point I'm going to be like, if you ask me to do any more than this, then I want more. Then I want more money. So with your processes, I think you can find places to actually incentivize people who might not otherwise think about incentive for. And so this is probably a pretty good topic to have. How do I incentivize my production manager? Well, you could be incentivizing them on the velocity of a job from the sale to closed. In other words, how many days does it take us on average to get a closed sale to a built and final inspected project that the customer's happy and the customer's happy. Okay, so how, like, what is that? And you could have a range. As long as it's within this range, then it generates a bonus for you. If you, if you reduce that average while maintaining customer satisfaction and happiness. Okay, if you reduce it, there might be a little something in it for you. Maybe there's a. Maybe there's an average cost of goods sold percentage that you want your production people to stay in line with. Because if you're, you got a true production manager, they're probably also managing the cost of their labor of your labor and materials between you and your suppliers. Okay? And if they're in charge of that, maintaining that and staying shrewd and sharp with that, maybe we have an average percentage we want to see that at. And if they maintain it or maybe reduce it, maybe there's a little something in it for them. If you have admins or customer service representatives, maybe they can be incentivized on the number of referrals they're able to obtain off of each of the clients that you have, maybe we can incentivize them on the number of reviews that we get. If you have production assistants or superintendents in the field, maybe we can incentivize them on the number of projects they can handle simultaneously while still maintaining our standard of quality and workmanship. Maybe we can maintain. So inside of these standards, you could find little places to incentivize your people above and beyond so that they're not just thinking about how many hours they're working, whether they're paid on salary or whether they're paid by the hour. They're also thinking, if I better this Thing, or if I make this faster, or if I increase this volume, I get a little chunk of doing that. And they, they will. And here's a good example. If you're having a hard time getting your sales guys to go pick up the final check from a customer, ask one of your admins who maybe isn't working a full 40 hours a week, if they'd be willing to run around town and pick up checks for 50 bucks.

Bucks a piece that comes out of the salesperson's commission.

Comes out of the salesperson's commission. Sorry, sales guys, do your job. But if, but if you said that to your admin, think about it right now, business owners, sales managers, if you said that to one of your admin, what do you think they'd say? Gone. They'd be like, I could double how much money I make in a week by picking up another. By picking up five to 10 checks a week, I could double how much I make a week. And they will do it in a heartbeat.

Well, think twice about it.

You would hear the door banging behind them as they go out.

You couldn't finish the question. You wouldn't get the sentence finished. So there's another component to building your processes. Is this idea that we can find those little places where we can create greater incentive and connect what somebody does to their compensation.

Yeah, you got to really think about compensation when it comes to that process. And it ties into that side of things where we're talking about organizational structure, accountability, all of that's all tied together and they are in that order, like process, first organizational structure, then accountability. When you put them all together, though, the job description that somebody has, they have an expected reward for it, whether that's salary, hourly, or commission. But if they do it a little better, is there something in it for them? Is there a bonus? Is there some type of incentive? Those type of things, we can identify those with a great process. Without a great process, it's hard to identify. It's more randomly shooting from the hip. Hey, man, you sell 2 million bucks, I'll give you a bonus. That to me, really makes a construction owner more of a businessman. He starts to become a business owner, starts to become somebody that understands his, the function of a role and the reward and incentive that it can get. I think so many of us miss that side of incentive. It's one of those questions I hear all the time that just drives me insane. How should I pay my salespeople? I'm thinking about changing my commission structure. You see it asked on Facebook, do.

You love that question.

No, because the hardest thing is I get a lot of questions already just from our clients and from people in the industry and stuff like that. And then I see something like that on Facebook and I really want to get involved in it. I really want to ask some questions because it usually necessitates another question back. Because I'm thinking about changing the commissions on my salespeople. How would you pay commissions? And 900 people give them 900 different answers, all inside of a vacuum of their own business without having much experience outside of it. But they don't ask the key question, well, what do your salespeople do? Do they do the whole thing? And when I say the whole thing, what I mean by that is, are they from lead to an approved job, or are they watching jobs? Are they actually running production? Are they collecting check? Like, what are they doing? Or are they maybe just doing a small piece? Are they just closing the deal? They're just showing up to an appointment. Closing a deal because that function is less responsibility, deserves less incentive, but has higher volume so they actually make more money. That's the key component that most people miss whenever they're talking about commissions. I have a guy that makes 4% commission, makes $350,000 a year. All he does is show up and close deals. He doesn't knock a door, he doesn't do an inspection, he doesn't talk to an insurance company. None of that stuff at all. 0. Just closes deals, makes 4%, does exactly what he loves doing. But when somebody asks that question online, you can't give a great answer unless you understand exactly what that person's doing.

You also can't ascribe a commission structure. And here's another component of the scaling as well. We pay a commission, and one of the mistakes that we make as owners is we go, well, this is your commission for making a sale. When in fact, that's not entirely true. Normally it involves. Sometimes it involves that commission might involve generating lead, that commission might involve doing an inspection and documenting, which means taking pictures, filling out forms, stuff that might get turned in later. That commission might involve dealing with the insurance company. And if that's part of what you do, or walking the customer through product selection, getting, building the contract, building the estimate. So there's actually a whole host of things that go into this 10% commission that you pay, depending on how you pay your commissions.

Right?

There's all these steps that go into doing that, and they're required or should be required to do. We as sales guys are required to do these things in order to get that commission when we close a deal. The problem is that when we say you get a commission for closing a deal, what did we just tell them? They get a commission for these three steps. Need assessment, price presentation, and closing. So then that anything else they do outside of those three things they're doing is a favor to you. They're like, oh, this is just extra stuff I have to do. And I do it because I like my job and I like the owner. It's not the case. So then what happens? What happens is when we decide to scale our company and get these guys even more specialized and move our sales guy into just showing up, presenting solutions and closing, we have to reduce their commission percentage because they're not doing all these other things, and we have to pay somebody else to do that. What happens? Your sales guys get really ticked because they thought their 10% was for that already. And because your process wasn't laid out and their compensation not associated to those steps, they might just as well be right.

That's so key to all of this. The more and more contractors we talk to and discuss this with not understanding that the commissions. Commissions are a budget. It's a budget. This is a budget. I have to pay commissions to my salespeople that covers all of these things. And if at some point one of those things isn't done by that salesperson, that reduces the amount of this budget that I can give that person, because I got to give it to somebody else. But instead what we do is we say, no, you get to keep that commission. I'm going to add somebody else to the equation. Overhead to go and run it. And your overhead goes up, and your.

Salesperson responsibility goes down.

Salesperson responsibility goes down. And so does your profit, and so does your profit, and so does your bank account. It's why we code like, these are the things that we don't think about a lot. That. And you talked about a production manager tying his incentive to his role. I would operate under the fact that. That this guy is my production manager. He is a true production manager. He's not just somebody that pushes paper through. He negotiates with the supplier, he negotiates with our labor, and I give him a budget. I say, man, our budget's 55%. That's what we can spend on labor and materials. You need to stay within that for the year. If you can get below that, whatever the difference is, I'll give you 20% of it or 40 or half. Whatever you want to do like that.

Maybe they get a rip on the rebates from the volume.

There's a million different ways to apply that incentive. Right? But then I have them operating in a budget that's now predictable. I can predict that this is going to be the number on that. So if I say that's my budget over here, what's my budget for sales? Well, I prescribe for most contractors that their budget for sales, and I'm talking from initial lead canvassing, if you have marketers in place out in the field doing that all the way to your sales management people managing it and the whole bit, you got 15%, that's what you got total. Now how are you going to split that up for all of those things that need to be done? If I got a salesperson handling pretty much A to Z and somebody leading them, I can give him a pretty good chunk of commission. But I need to be really clear of all the things he's doing to earn that commission. And the other part of this that's really, really key is if the guy leaves, if he thinks all he is is a sales guy and he sold the deal, he goes, give me the commission even if I leave, Right? But if really his job is to generate the lead, get the job approved, go out and close the deal, watch the job, collect the money. He's ascribed to more roles than just a salesperson. So his commissions should really be contingent on those roles that he's covering. And you get 25% of your commission for this, 25% for that, 25% for this, and 25% for that. So if you leave, I gotta get somebody else to pick up the ball where you dropped it. They get paid the rest of the commission. It's one of those big things. If you just put it in place, it would solve a lot of problems on the exit of somebody on your team.

There you have it. So when you hear your sales guys complaining about some company owing them money, make no mistake, there are dirty owners out there. Make no mistake, there are dirty sales guys out there. But I'd be willing to bet, and based on our experience, more often not, it's a misunderstanding of the roles and responsibilities and the compensation associated to those things between the salesperson and the person who hired them, all because of processes.

That was the one I wanted to get in there. I was hoping we'd fit that in somewhere.

That was good. That was really good. And process is a good place because it even gives more ROI to the whole point behind it. If you want to create budgets, probably need processes.

You can't create a budget without a process because I don't know who's responsible for what. Have you heard that there's a social network just for you? Well, if you haven't, you're going to. It's the Contractor Collective. It's a purpose driven social network that we built, built just for you. So you have a community that's just like you, sharing information to make us all better. No negativity, no distraction. If you're anything like me, you hate social media because of all the distraction and ads and all the other garbage algorithm telling you what you want. This allows you to create your own algorithm to follow the people you want to follow and get the feed that you want to have. There's also all kinds of other training, content groups to join. Fun stuff to do as a community of contractors without the distraction of traditional social media. If that sounds like a good thing for you, go to the Play Store, go to the App Store, download the app and join today or join right below. In the description there's a link. Invite all your friends and we'll see you inside Contractor Collective.