How We Fixed Pay in this $3M Construction Company (Mike Andes Coaching Call)

Everyone, it's Mike Andes and today we're doing a coaching call with a $3 million whole barn building company.

We started small, just me working out in the field with my brother.

They're trying to figure out how they can do pay for performance for massive projects that take four or five, six weeks and are six figures $100,000 plus.

I guess I'm just not quite sure how to implement that.

Let's go and see how we can figure this out. And in the three phase approach to rolling out pay for performance and installing a culture of accountability, because right now he keeps seeing production slip and lower and lower numbers in efficiency. How much of this revenue comes from labor? We need to figure out that number. Let's see if we can turn this around. Give me a little bit of background. I know I went through your form, looked at your site and stuff, but maybe just give me a quick summary and then we'll jump right into it.

Sure. First off, I just want to say thank you for all the content you put out. I've watched you for a few years and a lot of inspiration there. So appreciate, appreciate that and kind of feel like I know you even though we never talked before.

Absolutely, I get it.

But.

We would have kind of got started and kind of part time in 2016, we would have went. I would have started the business full time in 2018. Since then, we kind of started small, just me working out in the field with my brother. And then we hired, hired employees towards the end of 2018 and kind of grew from there. Mostly kind of started in roofing. And then we kind of went over into building post frame buildings just because there's a higher demand in our area for that. So that's, that's kind of the biggest part of our. In house, we have two pool barn crews. We build, you know, commercial building, some big, some small. And then we also have another side of the business for roofing now, which, which that is we, we pretty much sub all that, if you know what I mean by that. We have a sales guy and then we just, we have crews that we sub that to. We're doing with both of them together, we're right around doing about 3 mil and in gross revenue. That's what we did last year. I'm not sure this year if we'll be. We're pushing for more than that, but we'll see.

So I guess kind of, you know, I, I listen to you talk about P4P quite a bit and I've always kind of been interested in doing it that way. I guess I'm just not quite sure how to implement that in, into, into, you know, kind of in landscaping with, with smaller jobs it seems like be easier to do, you know, because. But on our. I guess the biggest problem is let's say we have 10 guys on it on a, on a, on a project for 30 days and there might be one guy that takes four days off over that time and another guy takes two days off. You kind of get where I'm going with that. And you know, just. I guess I'm not sure how to work that out where it's, where it's even, you know, fair for everyone. And the other thing is, is some guy has been with us for seven years and they're already getting paid a pretty good hourly wage. So, you know, talking to them about, you know, we're going to bring you down some because we're implementing P4P. I'm not sure how that would, would look and, but I need to do something. Production went down a bunch in the past. Seems like just kind of slowly, especially over the past three years since I have not been on the crew, just keep going down and it seems to continue continually. Just drop off. Yep.

Cool. Yeah. So this is actually a big reason why we ended up having to switch away. Switch from Excel to software is the tracking for large projects. So when we actually implemented P4P, we were doing jobs that were 70 to $100,000. Since then I've simplified so I can get completely out of operations. But when we started it was, we were still doing large projects that we'd be there for three, four, five weeks sometimes. And this was the biggest problem is the big projects because we need to keep track how many hours everyone's worked on the job. So when the job gets completed and like, okay, done, then the software breaks apart all of the labor revenue according to how many hours that every person worked on the job. And that was just getting to become a beast inside of Excel to manage. And so the, so the first thing I would say is, well, question is, do you break out labor revenue or have budget hours on the job?

So we don't have budgeted hours. We kind of, we kind of have a set, a set cost for our buildings. And everyone does keep track of how many hours they have on each job. So on their timesheets, they write down their hours and then how many hours and what job they're working at. So we have a pretty good idea of, you know, let's say John for an example. He's Been worked on this, this job, you know, 105 hours. We do have. We would have that.

Yeah. So that makes it really easy. You could, you could probably, you know, assuming, like I'm assuming right now, you're kind of just trusting that number. Once, once you start incentivizing based on that number, that's when you kind of need to have like, some sort of tracking on it. I'm like, yeah, it would be geofencing or something like that, however.

So this is a problem. So we have five guys that are Amish that work for us. So I don't know if you're familiar with them, but. So they don't have. They have flip phones, they don't have any type of smartphone. So we can't. We can't have them tracking in an app, really. So it has to be on paper for them. The rest of the guys, you know, would have smartphones that we could use.

Yeah, you could even just make it where. So we've had this a couple times with crew members. We just had them text, literally the manager whenever they, like, they're clocking in and out because, like, I sound like I'm trying to get you to do the software, so I don't want to do that. You could probably do this in Excel because you're already having them track time on the job. The only trouble becomes, like, eventually the system can get gamed because they can just tell you, oh, yeah, I spent seven hours on the job when they only spent six. So that's the part where I like to have tracking. But ultimately you could just make time cards manually. Right. So it'll take you 10 seconds just like, okay, they clocked in at this time, they clocked out this time, and they spent so many hours at this job site. What we do now for the really big jobs is we actually create a project inside of P4P software. And then when they clock in, they can see the job and they can clock into it. So that's ideally on the app. For the folks that don't have the, the mobile app, I would just say, hey, look, like when you, when you're starting at the job, I need a text message or at least, or just.

Have the crew leader clock everyone in.

That's it. Yeah, yeah, they could absolutely do that. And then the challenging part I, that I always had with jobs that went over three to four weeks is everyone's hitting base pay until the job is done. Because if you're doing, you're going to hit two or three pay periods before and they're going to hit base until that last paycheck when the job is completed. And then money gets dispersed. And so one thing I would consider, Uriah, is doing tiers of P2P. So for example, you could do it by department or by position. So like crew leader, crew member. Or you could do it based upon tenor. I think in your situation, it's probably going to be based upon their title. So it's like, hey, if you are a crew member, you're going to be at this percentage and this base pay. If you are a crew leader, you're going to have this percentage and this base pay. So that way you don't lose the folks that currently are making substantially more because they've been around a lot longer. They have the higher base, they're already used of that. And then you're just going to give them either a small haircut or even just upside, because what we're trying to protect against is this, the deterioration of production.

Right.

And so there's two ways I've seen the bigger projects do this. One is they only do P4P for their crew leaders. So basically, the crew leaders now vicariously are pushing their team instead of the individual team members, which makes it a little bit less work on your end in terms of tracking. And you basically, you just, you just incentivize the crew leaders to push their team, incentivize their team, stay on top of their team, et cetera. And then you really, you know, pay them well.

Crew leaders get a percentage at the end of the year of profits, and we'll probably keep it that way. They probably won't be on P4P, but they're complaining to me that they can't motivate their, their team. That just seems like, you know, they're staying over on lunch breaks and, and stuff like that, and just don't, don't want to work as fast as they should. Yeah.

So if you look at last year, for example, do you know what your direct labor was last year as a percentage of revenue overall?

I'm not sure I know a number. So we did track for a while on each job. And this is the thing it just buried a ton of. So we had some jobs where we were below 30%, and a lot of those were the smaller buildings that we would be there for a shorter amount of time. And it seemed like the bigger the project got, like, we had one project, we were there for three months, and labor revenue ended up being like 60%.

So almost double. And it just varied a Lot. It almost seemed. Yeah. It really seemed like yeah. Some weeks to maybe the guys were just more motivated and. Yeah, yeah. And some of that then my, my estimating. Some of that could be estimating as well.

Right.

Issues there.

But like estimating becomes a bigger, bigger like risk with these big big projects too because.

Right.

It's easier to miss. Yeah. Well it's also a matter of like motivation around P2P because if you miss quit a two month job and then they know after six weeks that they're way over budget last two weeks they're dragging their feet like they normally would on an hourly, hourly job. Right. So that that estimating becomes a big deal. I would probably bake in some sort of like contingency if you went. If you completely obliterated an estimate that they know like hey, I'll take care of you kind of thing. But I would be looking. Okay. What is the percentage and if you wanted to scale it up or down based on this project job size, we need to come up with like how much of this revenue comes from labor. We need to figure out that number whether it be using budget hours or just forget about that. Just be like hey guys, here's the amount of labor on this job. You all get a percentage of this. And then you. Since you're already kind of compensating your crew leaders separately with profit sharing, I would probably just be like hey, let's call it 25 or 30% we're giving to the crew. And now they know when they clock in the job, they're tracking time on that job. They if they finish way early, they know they're going to get way more money. They need one or two of these bigger projects to go really right. And then make an extra $500,000 for them to really click and like oh this, this is going to work. And so I would just make sure is that when you're going to start testing P4P with the crew, you'd have a couple projects that you know you're going to nail like that are maybe a little smaller that they are going to get some quick wins and immediately like yes, this is going to work. Because especially when you have these size of projects. I could, I've seen it where so on average we usually have 25 to 30% efficiency increase on these big projects where they're stopping and starting and having lunch break on the same job site. We can see 40 to 50% increase in efficiency simply because there's so much wasted time in like starting the day, ending the Day and around lunch. Like, it, it's, it's crazy. Um, and so I would just be tracking the numbers without them even knowing about it at first. So I'd take one project. You can set it up inside a PVP software, like for the free month, just set up a big project, like a two or three week project, what have all of your crew in there. You can create time cards yourself, so you don't even have to talk to them. You don't have to notify them, they don't have to have an account, nothing. You can just run the time cards, assign the hours each day to the project that they were working on, and then just run the math and then be able to show and know with confidence, okay, they're making more money on P4P when they do a good job. And you usually know like, hey, they're crushing it versus like this one's falling behind for some reason. But yeah, like, I think so. I think you'd definitely do it.

A question. So I know.

A little earlier you kind of pointed towards maybe not getting paid for drive time. How do we do that? So we're kind of, we live maybe kind of out in the country. So we're driving oftentimes an hour, hour and a half to these projects. They're a little farther away. And I've talked to this in one of our team meetings about, you know, potentially doing P4P and not getting paid for drive time. And, and some of them raised the concern, you know, well, it's not our fault that if you get a job an hour and a half away when, you know, now we got to have three hours of unpaid time every single day when we would get, you know, the same amount of money if we were working, you know, half an hour away. So I don't know. And I think that's a fair point. I'm not sure that I cannot pay them for having to drive to these far projects.

Great point. So. So I would, I would try to disassociate yourself from whether or not they're clocked in or out. Because you could just say, because right now I'm assuming they're clocked in for drive time. So say, hey guys, we're still, you're still going to clock in for drive time? I could care less. Because what we're doing is we're giving them a percentage of labor revenue, right? So let's just say on a project there is $10,000 of labor revenue and then $15,000 worth of materials, et cetera. They're making, let's just call it a third. $3,333 on this job. They can clock in out, clock in when they're driving. I don't really care because all that's happening is we're tracking their clocked in time. That's their base pay multiplied by how many hours they work. And then we're tracking P4P. And so I want them just focus on getting the jobs and getting the work done so they can get P4P higher than their base pay. As long as they're making above base pay, I don't care if they're clocking in and out. When they're driving, I don't care when they're clocking out. If when they're at dragging their feet, I don't care.

So I guess I like that kind of what I was thinking. So my idea was the kind of setup. So like for our sub crews, we just have a set amount that say for this job, you know, 10, five and they go do it. So I thought about doing the same thing for our in house crews that say, you know, we have $100,000 project, we're figuring 30,000 in labor. We tell them, you know, we have $30,000 here, that that's going towards labor. We're going to pay you an hourly rate and then whenever you get finished with the project, whatever's left you get as a bonus. And I was figuring that we would instead of giving higher percentages. Now I'm open for an advice kind of a question here. I was thinking for the higher performers on the crew, we would just keep their, their hourly wage higher and the lower performers, we would just keep their low hourly wage lower. And then they would all split the profit at the end evenly.

Yeah, you could definitely do that. Just like, hey, like this. The challenging part with this is you're not incentivizing people to necessarily go faster individually because now they have this collective bonus they all tap into.

But it could definitely be something that's lower lift. So for example, you say, hey, there's $10,000 worth of labor revenue at the end of this job. If everyone's, you know, combined Pay is only 8,000, you're getting paid 10,000. Because ultimately what P4P is doing anyways, like you're, you're already setting. This is how much I'm paying everyone wages. If you go faster to get done sooner, you're still going to get this amount. So that would definitely be an option. It's just like make it very simple. And be like, hey. Because I'm assuming you already track the direct cost in terms of labor on each project. So you say, hey, we're assigning $10,000 worth of labor revenue on this job. If you just get it done sooner, cool, you're getting 10,000. And then they're just incentivized to go quicker. There's a few dynamics where that starts to get a little hairy. You don't have as many problems with things like callbacks and yellow slips or shop maintenance, etc. Those start to get. That's where it starts to get a little bit hairy on that side because you'll need to keep track of that somewhere. But you don't have daily maintenance on equipment, oil changes, stuff like that. Like, they're usually, I'm just. I'm assuming just showing up at the job site and working. So I think that would be like a. That would be like. The first step is like, hey, let's just assign a certain amount of labor revenue to a job. I would do that on the lower end than what you currently. Like, don't go too high on that, because if you have to bring that number down, you'll have a revolt. So if you're like, okay, I'm very confident we can hit 25%, put that number out there and say, hey, guys, you're all going to get paid exactly what you're currently doing. Nothing changing. But if you beat this number, you're going to get paid this number.

Would you drop their hourly rate from where it is now or leave it the same?

You could leave it the same if you're doing it this model and saying, hey, look, on this job, we have $10,000. If you guys, we're going to keep track of all the wages. Now this is where you're going to get a little bit hairy on this one. If you don't have some sort of system around how everyone's getting paid hourly. Because they're going to eventually want to know these numbers. Well, like, you know, because. Because it's now coming out of their bonus. Right. So if Billy bob is making $10 more an hour than me, I can now see it. The wages are a lot higher when I just do the math of how many hours I was on the job. So you might want to just have. At least there's some sort of a system around base pay. I would still recommend that. But you could just do this as a pool, like what you're saying. It could completely work in our industry. It won't because we have Maintenance, shop time, a lot of other like callbacks every day, things like that. But when you're doing big projects like this, it could definitely work. And super simple. You don't have to change their compensation. You have to change the way they clock in and out. You just simply are now giving them a target to say, hey, this is what we're signing in terms of labor revenue on this estimate. And if you guys get the job done sooner and we only paid $8,000 in wages, we're going to give you the extra 2,000. It's going to split evenly between the team. That's easy.

So I guess my, my concern with that is what is, is right now that say, you know, like I said earlier, we have one job that maybe was 30% labor costs. The next one was 60% labor cost. And so we kind of average that out. You know, we make better on some. It kind of helps for this job. So if we keep their wages the same and they're making, let's say they make some on this job. Now, I don't have any money from. Left over from this job to cover this job.

Yeah. So I would just make a system for your estimating that when you go to them and tell them that dollar figure, you've already calculated what that percentage needs to be. So, you know, on the big, big projects, okay, maybe 50% is what I'm now, okay, guys, now it's 12,000. It's not 10,000. Right. So I would create a better estimating system so that when you give them the jackpot, like you, you, I would create some sort of like a name around it. Hey guys, this is the labor pool. This is the wage pool. Whatever it is for this, like the target for the job. If we beat it, you guys still make this. There's only upside now for them. You're going to get some people that don't get motivated by that because there's no downside. But usually high performers love that. Like just if you just give them upside that they'll be great. If I can make an extra four or five dollars an hour just by hustling the next few weeks, great. There will be some people like, hey, I like my base pay. I'm not going to work harder. And that's where we got the crew.

Meter members pushing each other.

Exactly. And what will end up happening, you'll probably lose a couple people because they're the lower performers. And the other rest, the increase in performance of your higher performers will, you won't need to hire anyone new. So Usually we see a few people leave. Usually about 10 to 20% of labor force will leave because they're just like, they like base pay. They don't like pushing themselves. But because of the increase in efficiency of 25, 30%, we usually don't need to hire anyone new. And so the extra, extra wages just go to the highest performers. So I think that could definitely work and then there would be no downside for them.

So what about people that take off?

What.

I'm sure you had that with your bigger projects as well. So how, how do you, how do you do that if, if they're all sharing an even amount of profit at. Out of the pool.

Yeah. So when we, we. That's why, like tracking the hours on the job site is important if you're not going to do that and you want to try to keep this as like, basic as possible. So I would look at two different ways I would do. First, let's do the simple model, which is, here's the jackpot, dollar amount. And we track how much wages we're spending on the job. And if you beat it, everything above that is just going to, we're. We're going to split between the team. And then in terms of protecting against time off, I would just have a rule around how many days off on a project would disqualify someone from the profit share of that job. I'd probably just call it profit share because that's what your team would make sense. It makes sense. Hey, this is the profit share. Basically, we know what we need to make in terms of profit for the business. Anything. If you guys beat that, we'll just give you the money extra. If you want to work hard, there'll be extra money for you. That's like phase one, phase two. Once they like that system, there's high performers in the model. They're really good at efficiency. They start to really understand, you know, how this thing works. Then I'd move to where you are tracking time on the job site. And then when you do the profit share, if someone did work 80 hours and someone else worked 20 hours, it's not really fair that they're both making a split on the profit sharing.

Right, Right.

It needs to be based upon how many hours they clocked in on that job. But that I would do that secondarily, I would do that down the road. There's also a lot of advantages around that because then you can get like efficiency score of every team member. They start to get feedback from the software in terms of, you know, hey, last project you crushed it. Here's you're trending in this direction. They can see a leaderboard of who's making the most money. Like there's a lot of advantages once you actually get more granular with it. But for now I like the idea of just like make the jackpot and anything below that you guys are still going to make more money. And then I would just have some sort of rule around time off throughout a project. If it is more than say 10% of the job in terms of time or you just make it round like three days. If you're, if you're off more than three days during that project, you don't get a piece of the profit sharing.

Do you think P4P would be a good fit for us?

I think so. I really do.

There's a way to, to track a big project like this. So. So what I'm thinking after our, our discussion here is you know, if we would just turn in all the hours like we normally do every two weeks and whoever's doing payroll would, you know, when they put it into every. Right now we just have a spreadsheet. They would just put it into P4P as well and all the guys hours. So you think it would work that way? We would be able to.

Yeah. Like really, you could just be running on the back end. Like I would almost look at it as like I would probably be doing phase one now and then just tracking it in P4P software. Having someone just put in their numbers and then you would actually start to know what percentage of the job did so and so do what percent because you'd already know that you'd be tracking. Like you just assign. It takes like less than 30 seconds for a big project. So you just do the clock in and out and then assign those hours to a specific project that's open. And then when you complete on that job like it's done, it breaks all the numbers in the background for you. But the reason I don't want to do, I don't think we should pay them on that yet is because it seems like there's a little bit of a built up.

Angst around like bringing their pay down, having more structured base pay. I think that that's why phase one just having the big pool is so much more easy. There's only upside for them.

And then down the middle thing would work in P4P. You think?

Yeah, yeah. 100.

How much is P4P? Is it? I'm not sure.

I think for phase one you don't even need the software for phase one. I would, I would do this manually because you probably have what, three, four jobs going at the same time?

Probably. Yeah. Sometimes we end up having like five, you know, say we are waiting on Windows for this job so we start another job. And some of that can get a little hairy because maybe two guys go back and they, they maybe put some trim, finish some trim up on one job and. Yeah, but for the most part, we try to keep everyone together.

Yeah. Given the fact that you only have three or four jobs going each time, and given the fact that half your crew doesn't have mobile devices, I would, honestly, I'd get like, I was going to show you, but I can't move this camera. I'd get like these cork boards and each, each project on their wall is just one of those. And you're simply tracking the jackpot like, hey, this is $10,000. And then as payroll goes out, you're just filling in on that job where they're at. So they know like, are we beating expectations? Are we quote unquote being budget hours? But budget hours doesn't have anything to do with it right now. I would just keep it super analog because half your crew can't get on a mobile device, go to a website, track it on like Trello or something like that. Like the P4P software could do this, but I think for phase one, you don't need it. I would just go with every single job. When it gets one and it's on the schedule, I'd be, I'd be like, okay, project name at the top. I'd cork that. And then I would just have like the crew members that are assigned and I'd probably like make little magnets or names that I can just move around. And then I would just have two different, like bar graphs. One is, you know, the, I'd call it P4P just because that they'll start going in that direction. This is P4P. Here's the wages on the job. And then they're just going to see as they work, they're working on the job, the wages on P4P or the P4P is set. They get, they see what that jackpot is. And then as you fill in the weeks that go by, they're going to see the wages on that job go up to here. Then when it's completed, you're able to have a box. It's like $2,000 in bonus. Like that's basically the difference between what you paid them on the wages versus their P4P. Like jackpot. But the part that has to get nailed down honestly. Right. Is that what is P4P? Dollar amount. That's the estimating portion. I would. You'd need to figure out because like if it's varying between 30 and 50%, we need to figure out why. Like is it based upon size of the job? Is it based upon the location? Like we need to keep some sort of estimating mechanism that. Now that's a more accurate number.

Yeah, some of it's, you know, weather conditions and, and just things go wrong. You know, skid loader won't start or.

Yeah. And I always seem to actually.

And now we got guys, you know, quitting half a day early and have extra two hours on the road because of that and just stuff like that probably.

And that's where all the efficiencies of P4P get gained because now they're actually thinking about being efficient throughout all those little stops and starts.

So I think you can absolutely do. I don't think you need the software for phase one. I would roll that for at least a year, get them all into this motion. Like P4P is a good thing. I see you're gonna now have when they run payroll, their regular hourly rate like normal. But then every two, three, four weeks, when they complete a job, assuming it went well, they're gonna be getting a $500,000 bonus. You just want them to like love this thing. And P4P becomes very, very positive. Very, very good. And then down the road they can track their budget hours, get more granular with how that profit sharing is split up at the end of a job. But for now I just keep it super, super analog.

Okay, I like that. And then I guess away from the, from the pool building side there for a minute and go. I would like to talk just for a minute about our. We have a roof roofing repair crew or not really crew, it's just. Just one, one guy runs a truck and I want to do profit sharing with. With now this is probably a lot closer to landscaping idea or mowing lawns or something. So a lot of, you know, roof repairs will take two hours maybe.

Roof tune ups and stuff like that. And I guess I'm debating if I should give him a profit. So he's getting paid $30 an hour now plus overtime. And I want to implement some profit sharing there too. Just because there's a lot of driving, don't want him stopping at gas stations and just give him more incentive to get as many In a day as possible. He does all his own scheduling as well. So you know, he can incentive to try to cram them together somewhere. And I'm not sure if it would be better to do per job or if I should just, you know, at the end of the month give him a percentage of the profit.

Yeah, like this, this is a easy candidate for running him. MP4P. Yeah.

Okay.

Because especially if he's doing his own scheduling. Like he could double his efficiency because.

And you just keep his base pay at 30 bucks. Like there's no downside for him. Yeah, it's like hey, now you're making a certain percentage of all the revenue. Make it the bids. What's the reason I say this is a perfect candidate? Because there's no mat. There's low amounts of material cost like I would assume on tune ups and these sort of things. Like maybe 10% of the revenue goes towards cost of goods. Right. So I would, I mean like material cost. So then what you can say is much more a matter of like hey, you make X amount of the revenue generate. And that makes it really easy on P4P because it's like here's how much you earn for the business and here's how much you earned yourself.

And also now that you mentioned that on the pool barn side, it's actually hardly any material costs in there as well because we have a partnership with the supplier and what we do is we, we have access to software where we, we build the barn in our, in our software or the building. And when they put in their down payment, it goes straight to the supplier, you know, if that would, if that makes sense. So our down payment kind of pays for it right away. So we have this, you know, the 40% that I'm talking about, 60% gross, gross profit before. Before, before late, any labor cost, if that makes sense.

Yeah, that makes sense. That makes it easier down the road when you get to phase two. Because you could then what I like about that you're right is you're able to just share all the numbers with team. Here's this size of project, you make 30% of it. Right. It makes it really simple to be able to open up the books too and be like this is the total amount. So I like that they'll make that part easier for you down the road.

I've heard you talk on this before. So you would think that we should open books.

Once you get more granular.

P4P you almost get forced to. Because they start asking questions. Right. Because if you're going to say, hey, you make a percentage of this job. They're great. How did you come up with that number? Right now they're just going to be thrilled because you're like, basically, hey, there's no downside for you. If wages were $8,000 on that job and we have the, the jackpot at 10,000, you all split a $2,000 bonus. Nothing but upside. Everyone's happy. But when you start saying, hey, we're tracking hours on each project. When you start saying, hey, people are different base pays. Now all of a sudden they want to know the numbers. They're like, okay, well, why is it a thousand dollars, $100,000 on the invoice and we're only making 30. Then you're like, well, because then I think you're making 70. We're like, well, no, there's insurance. I got to pay for trucks and rent. Now you have to start showing the numbers because they're going to start getting curious. Now. If you're making a bunch of money, then you just start. You have a profit sharing program for them. Right?

Right.

If you're not making enough money and things are tight now, they don't believe that. Now you actually have evidence that you're not making 70 grand in every project, because that's what they're just assuming right now. You just make.

So we are making probably not 70 grand, but we might be making, let's say, 30 from each project. And they're like, wait, now the company's making 30 and we're making 30, and we're, you know, the ones doing everything. So I guess that's. I'm kind of scared to open the books up. And also we have revenue coming in from other sorts of the building. You know, we sub out concrete and plumbing, electrical and which that's not really part of anything they're doing.

But yeah, so. So I believe, like, let's just say, do you think net profits are on 25%? 20%?

I would, I would say so, probably. Especially with adding in our subcrews for, like, concrete stuff, I would say we're easily hitting that number.

So when. Because right now they see an invoice, let's assume they have the open books, they're going to think you're making 50% margin or 60% margin because they just simply take the dollar amount minus how much you're paying them and thinking everything else is gravy. You're going to show them. That's not like you're going to show them insurance and the rent. And the cost of admin and actually show that breakdown. Most people don't care, but your highest performers will care. And then what I do is I just give them a percentage of distributable cash or profit sharing at the end of each quarter. So kind of what you're doing for your crew leads you eventually just do for your crew, crew, crew out in the field. Because especially if you move to a P4Pmodel, each crew only cares about their crew when it comes to daily efficiency. They don't think about the whole business until you give them a piece of the pie. And so I would just, again, you could do the exact same thing. And that is like, hey, we want to make 20% profit margin. Anything over that, we're willing to give a big chunk of that to the team. And then you just start incentivizing based on that. That way they actually still want you to make more money. And now every single day they're rooting for the business to make more profit because they get a piece of it. So it is a mind shift. And I would do this in like phases. I'd be like, phase one is what we've talked about with the jackpot on big projects, nailing your estimating system. How do we actually get accurate on that labor revenue? Phase two is we actually do track the hours of every crew member on the job site. So that profit sharing split is much more accurate. Phase three, and I think this is literally a two to three year kind of rollout. Phase three is we open up the books and we actually share the numbers with the team. Because that's when the cultural change, because now they actually understand that them driving further cost of business more, them having downtime really does cost because they see the numbers. And I would then have had profit sharing inside of that for the team. And once you get there, Uri, that's when a business can start to run without the owner. Because everyone's thinking like an owner throughout the day, right? And that's why you see the degrade in production as you get out of the field, is because no one's thinking like you were.

Right?

It's like I've always said, like, in order for someone to think like an owner, they need the compensation of an owner, P4P. But they also need the information of an owner. And that is knowing what things cost, knowing how things affect the business's profit and loss statement, and then caring about the bottom line. Because I want them to see another crew being lazy and be like, hey, what's up with that, like that's affecting my profit sharing. Someone else breaking stuff like being negligent with equipment. Hey guys, like, what are you guys doing? So that's really when people start to run the business in a way that you could actually like walk away from it and they still care.

So eventually get to the place where you can pay everyone off. The bottom line.

Yep. And you can even have benchmarks like, hey, anything over 20% goes towards the profit sharing program. And in that profit sharing program they get a big, a good chunk of it, like 25 or 30% or whatever. You could, you could figure that part out later. But for now it's just like I would just go through the phases. Like everyone just first you need them to love P4P. And that's why we're only giving them upside. We're not going to go anal about them tracking nothing changes in terms of their day to day. There's literally just going to be boards on the wall and they're going to see P4P versus how much wages went to the job. And they know that if P4P is higher than wages and in the job, they're going to make a bonus and we're going to call it P4P. So they start to fall in love with it. Then phase two, we get a little more granular with it. We actually really determine who gets this profit sharing. How many hours were people on these job sites, you know, and get a little more granular with it before we then move into profit sharing for phase one. Uriah, what other question? Because I feel like we got those three phases pretty good. But the phase one part, I think the only hurdle I see on your end is the accurate estimating of what that kind of bonus pool should be for P4P. I would assume it has to do with like so many variables, but if you could create some sort of grid based on like, okay, how far away it is, the size of the project, some sort of sliding scale that when you give them that number, it's actually based on something and you can refine it in time, but you just need to make sure you don't lose your shirt on one because you go to standard with it like, oh, 40%. Well, as you know, sometimes you lose your shirt, sometimes you crush it. So some sort of sliding scale is what I would be doing. But you right now, because you haven't shared anything with the team, they're just going to have a dollar amount that they're shooting for. And so you just need to make sure that Dollar amount is accurate to some degree.

So maybe what I'm thinking right now is just to set that, that percentage at something that I know that we, we do very well at. And since we're not dropping their pay at all, they don't have anything to lose, like you said earlier. So that say, you know, we know at 40%, you know, we're making a, you know, a 30% net profit. So if I just say, you know, 40% of, you know, labor cost is going to them, and whether they go over that, if they go over it, then we're just where we are now anyways. Not a big deal. But they can still see that. That benchmark and try to hit it.

And then what you don't, what you don't want to happen, though, is they start to figure out which jobs they can't beat that on because odds are stacked against them. So, for example, if they're bigger projects, it sounds to me that's going to go more towards 45 or 50%. So I would probably, if I was you, to have determined three different percentages, because again, right now we're not sharing the percentage with the team. You're just literally giving them a dollar amount. So, like, right now we can keep this pretty rough. And so if you want to do like, say 35%, 40% and 45%, and, you know, okay, what are the variables that make this a 40%, 35% or 45% job, maybe size, service area, whatever. Like, keep it as simple as possible, but that way it becomes more accurate because you just don't want it to be where, like, they see a big job, like, there's no way we're doing 40. Like, let's just work slower, guys. Like, we're never gonna hit it.

Yeah, so that, that's a good idea. So just, just give a dollar amount and we could even put it on our screen. And then just as they can see their wages getting taken out of it and to kind of see. Exactly. Yeah.

Yep. And then you celebrate. Whenever a job gets done, like on their team chat or if even on the wall, like on each project, I let it sit on the wall for a week or two after completion. It was just a massive bonus amount because two, $3,000, they start to just see, like, oh, man, every project, people are making thousands of dollars. And then when jobs go bad, they're going to actually want to know why, like, why does that go bad? And then they actually have reasons like, oh, like, yeah, we broke this piece of equipment. We have to wait on this other subcontractor, they start to actually figure some of this stuff out because it affects their paycheck. And you're going to get really sharp on your estimating by doing this too, because they're going to, like, push you in that direction.

They're going to start getting on my case.

Yep. Which is good because down the road, when you hand off estimating, you want that perfect tension for the estimator of, like, I want my crew to make money and I need to close this job. But with you as the owner. That's why it usually tends to where you eventually open up the books, because they will start pushing you on, okay, how do we come up with that number? How much of that is materials? They'll eventually get there. But I think for now, by, like, protecting their base, you're giving them no downside whatsoever. They'll just be looking at the board and like, hey, how can we beat this? Like, and then what's. Cool your eyes. When it starts becoming like, they want to know, for example, if someone asks for increase in pay in base pay, you just. You just be like, hey, look, here's how last week, so and so made 50 bucks an hour, crushed this project. And here's why. They show up with their lunch. They don't stop at gas stations, you know, xyz. And you start to create, like, a culture of, like, people looking for ways to be more efficient.

Right. Okay.

What you might want to do to Uriah at the beginning is get a bunch of those jumbo checks, the big ones. And at your team meetings, hand out the first several big checks on, like, the big paper. Obviously, give them an envelope with a small, like, the actual check. But, like, do some big, like, make a spectacle of crews that get. For example, you could call like, the four.

The. The comma club. Anything over $1,000 bonus per person on a project. You deliver the big check at the team meeting. So the comma club would mean it's over a thousand dollars. You would start handing out big checks at team meetings based upon projects going. Right. And this is going to just enforce that. Like, hey, we like P4P. This is an amazing thing. There's no downside for them whatsoever. The highest performers are going to be lasered in on this very quickly, and it's going to push out any of your lower performers because they're not going to want to work with them anymore.

Okay, so do you think it would be.

Better to do this per job or should we do, like, quarterly where we have the jobs they can see how much they made per one. And then every quarter we do profit sharing of all the jobs they did in that quarter.

I do it per job. The closer I can get pay to the performance. Like the reason I call it pay for performance is I want pay as close to performance. By doing it quarterly, you've lost them. That's like most frontline team members are not think about quarterly benefits or they're not, they're thinking like what can I do in this job? And if you incentivize me in three months based upon what I'm doing today, I don't care. But if I know, hey, this is a two week job and if I hustle now, I'm going to get extra thousand dollars in this pay period. They're hustling. That's why I like the idea of having the projects on a, on a cork board on, on the, in the office. I'd have like the project wall name of the customer P4P which is your big bonus pool wages. You'd have whoever's doing your payroll filling in that each pay period as it goes up. They will walk in every day and be looking at that board.

Yeah.

Okay.

Let's see if I have any other questions. I think that's the main questions that I, that I really had. And I think once we implement that, I think it'll make a. I'm hoping it'll make a big difference in efficiency.

Cool. Yeah. So I think for phase one, it's like nailing the estimate kind of grid matrix. Second thing is figuring out a policy around people taking time off and what that does their profit sharing. You could, you could potentially do like hey, kind of like three strikes are out. Like hey, if you get three days off during a project, you're not, you're disqualified from the profit share. If you have one or two, it's like 50% or it's like there's a cutout that way too. You get guys really focused on getting projects done.

So percentage of total time on the job. So say we have, you know, a thousand clocked hours total on the job and whatever percentage they take off, that's maybe the percentage less that they'll get of the out of the pool.

You could do that and that. But that's going to require tracking every single day. That's what I think phase two is going to be. Okay, phase one, I'd keep it really simple.

Really simple.

Yeah, I'd really, really keep it basic. And it's basically if you miss days while throughout the project either miss it or a percentage comes off. Like if you miss one day, you get 50% off. If you miss more than two days, like three days, you're disqualified from the profit share at the end of the job. I'd keep it super basic so they don't have to track anything. There's no requirement of just going to keep.

Keep them from taking as many days off.

Yeah, exactly. And then what they'll do is they'll try to get jobs done so they can go on vacation. They're like, hey, like, guys, let's get this done. So I need like, I want to leave later this week and they'll get stuff done more.

Yep, I like that. Yeah.

The time off between jobs is so much better than time off middle of jobs. It slows the whole crew down and they'll start to plan things together. They're like, hey guys, I want to take next week off. Let's get this job done and then we'll all take it off together.

So yeah, okay.

Yeah. I would say if you do like say six months uriah on that phase one, once you hit getting towards phase two, you're like, hey, I'm ready to kind of start getting more granular with it. Maybe book a call with the support at P4P software, take the free month trial and then run a few projects through it. Because you can just set it all up on the back end and then you'll start to. You're going to get like a whole nother layer of information once you start doing it more granularly. And then from there you can work on that aspect.

Okay, yeah, I think we'll do that. The main thing, I probably would already got the software. I just wasn't sure how. I guess in my mind I'm thinking mowing jobs are there for an hour. They can see that they have 600 hours on the job. And.

I was having a hard time seeing how that would work with ours. But talking to you, it seems like it would work.

There's a bunch of stuff we've done for big projects. So for example, we've made it now where you can create a project and then assign people to it. So that way when they clock in, they already see the job and they clock into the job. So you don't even actually have to assign hours each day. They already like the hours are going towards the project. At the end of the job, you literally click complete and it does all the math for you. But I don't think it's needed right now. I would wait to kind of get the culture pushing towards P4P before, I would make that change to where, like, you're really getting granular with it, Especially because half your crew doesn't have smartphones. It adds another layer of complexity. So I think right now we give them only upside. We get better estimating in this process. Before we start getting more granular, we need to kind of nail that estimating process down too.

Okay. Yeah, I think. I think that's going to help me.

Good stuff, man. I'm excited. I think it'll definitely work 100%. Just like you have little bumps, you got to figure out like, hey, how do we do this around time off or when someone calls out, like, there's all those little things. And when you get more granular with it, that's what's nice, is you can really customize it. So whether it be like, okay, what happens if someone's doing training, it's gonna slow the crew down. Like, there's all those things. Once you're in the software, it makes it all really custom. For now, just make it really big buckets. Get them involved in P4P, and then they'll actually pressure you as time goes on to get more granular because they're like, this isn't fair. He worked only, you know, half as much time on this job and he's making the same split. Like, it'll eventually just kind of require more granular tracking. But for now, you're not giving them any downside. So it's just like they should be. They should be happy.

It's a win win for them. Yeah.

Yep.

Okay, sounds good. Is there any way you could send me this recording that way? Yeah, yeah, maybe I'll get it to.

You by end of today. Yep, absolutely.

That'd be awesome because I like to go back through and take more notes.

You got it, man.

I appreciate it.

You got it.

I think it's helpful.

Good stuff. Well, we'll stay in touch and hopefully, you know, in six months we can look back and phase one's behind us. But best of luck to you, man.

That sounds good. Appreciate it. Thank you, Mike.

You got it. Take care. Have a good one. Bye.