Latest / Remodelers On The Rise / How To Make More Money In Your Remodeling Business
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- Kyle Hunt: Thanks for tuning into the Remodelers on the Rise show. Whether you're listening or watching, I appreciate you being here. If this was helpful, make sure you're subscribed so you don't miss the next one. We're putting out new episodes every single week focused on helping you build a better remodeling business with real stories, practical ideas, and things you can actually take and use. If you're on YouTube, hit that like button and turn on notifications so you know when new episodes drop. Good day, Remodelers. Hope you are having a good day. It's currently a nice Tuesday, sunny morning over here. It's actually day number two of my son's doing the student painters, the college student painters thing. And man, he was up and rearing and ready to go yesterday and said, dad, first job, we came in under quoted hours. I'm thinking, wow, keep it up, buddy, keep it up. And ⁓ that's part of what we're going to talk about on the podcast today is ⁓ making money in your remodeling business, how to make more money in your remodeling business. And I just want to share some things that you already know, some things that are reminders, maybe a vein of conversation that ⁓ is kind of fresh or kind of taking my eye off that. But at the end of the day, it is almost as simple as this If you're listening on a podcast app, a five-star review goes a long way and helps more remodelers find the show. We've got great links below or in the show notes where you can connect with us, check out our remodelers community and learn more about our coaching and resources. Appreciate you very much. See you on the next episode. When someone in your area searches for a builder or a modeler or just asks AI who to hire, does your name come up? For this month's sponsored story, Devin Vaught of Vaught Construction in Berkeley, California does. He's been working with CGN, and here's how he put it: we're still number one, builders, custom home builders, general contractors, number one. And then even in AI, we show up as the number one in AI. End quote. Simple student painters business. We generate a lead. We have a conversation. We meet them in person. We go, you know, in your case through design and project development. We put that estimate together. ⁓ baby, that estimate is where you can make or lose a lot of money. We sell the job. We produce the job. And how did we do at the end of it? How did we do of what we were expecting to make versus what we were So Devin's sitting at the top of Google for the searches that actually bring in work, and he's also the name that tools like Gemini hand back when a homeowner asks for a recommendation. As more people start their search by asking AI instead of scrolling, that's a pretty good spot to be in. If you're curious about results like that, want more proof, or just want to hear more stories from remodelers like yourself, head over to contractorgrowth network.com. actually making. That's the nuts and bolts of it. When we, when we talk about the money side, how to make more money in your modeling business, starting with the why, why do you want to make more money? Let me, let me remind you of some of these things. One, a better quality of life for yourself and your family. When you started your business, you did, you did it with the intention of having a more slash results where CGN is always publishing case studies with real numbers behind them. That's contractorgrowth network dot com slash results. resources and money available to you and your family, the freedom and flexibility that running your business allows, the opportunity to make more money than you would working for somebody else, that better quality of life. is absolutely possible. I see remodellers over the last 18 years that have gone from struggling in their remodeling business to absolutely kicking butt and taking names. $400,000 of take home. What if the marketing you're already paying for turned out to be the stuff you could cancel? That's about where Bob McCumsey with McCumsey Builders landed. Since he started working with CGN, his average spot on Google went from buried on page three or four up into the top 10. And here's what he told us: quote, I'm trying to cancel other subscriptions so I can put more money to you guys because I find more value in this. kind of dollars between salary and net profit 300, 200, 250, 500, 560. By the way, people aren't making, I think everybody, when you look around, you're like, they must be making $1.3 million in take home pay. No, no, no. There are people doing that, but it is amazing. It is amazing to be bringing home to your, you and your family, 250,000, 190,000, 320,000. It is absolutely. When a builder starts pulling money out of everything else just to put more into one thing, that tells you which one's actually working. If you're curious about results like that, want more proof, or just want to hear more stories from remodelers like yourself, head over to contractorgrowth network.com slash results, where CGN is always publishing case studies with real numbers behind them. That's contractorgrowth network dot com slash results. doable in this business. Why do you want to make more money? A better quality of life for yourself and your family. You've got to believe that that's possible and it absolutely is possible. Why do you want to make more money? Reduce the stress. So much of your stress in your business, a lot of times what I've seen in my coaching has to do with the money side of things. When we figure out the financial side, a lot of stress gets alleviated. Go check it out, people. Why do want to make more money? Reduce frustration. Keep more of what you bring in instead of this, ugh, we're working so hard, money's coming in and money's going out. It can be frustrating. We want to solve that. Why do you want to make more money? We want to have more money to reinvest. Reinvest in your team, offer new benefits, better pay, really take care of your people, not just yourself. Invest in coaching or in processes or in new tools that help you run. more efficiently and productively. Why do you want to make more money? Cause you want to run a growing and well run business. You did not sign up for this business ownership entrepreneurial thing so that you can run kind of a halfhearted, kind of sorta okay business. No, we want to run businesses that kick butt and take names and positive cashflow and positive financials help us get there. ⁓ Or maybe you just want to buy a boat. Maybe that's why you want to make more money. Maybe you want to buy some new golf clubs. Who knows? But those are some of the reasons, probably the biggest reducing stress, better quality of life for you and your family and taking care of your people really well. How to make more money in your remodeling business. So how are we going to do that? I'm not going to be exhaustive in this, but I am going to go through several, ⁓ what I call dials that are really the biggest drivers for my years and years. in coaching these are the ones that probably move the needle move the financial side move the making money side more than anything else there's main dials in your remodeling business and then a lot of smaller dials underneath each what i mean by the the dial thing ⁓ an example would be ⁓ getting on an airplane and the example that comes into my mind is we went up to aisle royal which is you got the you got the map of michigan You got the upper peninsula. And if you go way up in Lake Superior, there's a national park. It's the least visited national park in America. ⁓ we took a, my dad and my two sons and I, several years back, took a sea plane, a little sea plane over across the, across the lake and onto Isle Royale, technically onto the water next to Isle Royale. And I was in the front ⁓ seat. Yeah. Front seat next to the pilot. And he's just just little dials, just tweaking this, adjusting this, tweaking this. And this, this concept of this is just like a remodeling business. There's some dials that you need to really adjust. It is off. It is out of kilter. There's other dials, especially as you get things organized that you just need to tweak it a little bit, tweak it a little bit, tweak it a little bit. So let's talk about a few of those main, main dials. One of them is just your overall. profit and loss statement as a big dial in all the different aspects underneath it. When you think of your profit and loss statement, you've got income, total income coming in. That is a main dial. For some of you, you need to get a sales thermometer, go to Amazon, type in sales thermometer. You need to put a goal for total revenue that you're gonna bring in this year. And every time you bring in dollars, you need to scribble it in, color it in with some highlighter and pay close attention to that. Some of you listening, Total revenue, the top line revenue dial is your most important dial to focus on because you've got certain amount of overhead that you've got pretty organized. Maybe you're even bringing in work at a pretty good gross profit margin. We're to talk about that in a second. And you just need to add more fuel to the fire. You need to increase your revenue to help take care of everything else. Pay attention to total revenue. Do not freak out in the month in month out. Business can kind of ebb and flow based on how projects are going out in the field, but do pay close attention to quarter by quarter. After three months, it definitely will start to tell a story of where things are at. Even as you sit here, this will probably be published in June, about halfway through, what is your total revenue so far this year compared to what your goal was for the year? Did you have a goal for total revenue on the year? You should because you- should have created your overall business budget that needs some total revenue goal at the top of it. Pay close attention. How are you doing pace wise through the first half of the year? What needs to be adjusted to increase total revenue? Are you going to add team members in the field to produce more? Are you going to lean a little bit more towards trade partners and not self-perform as much work? There's a lot of different ways to adjust it. Let me pause there. As an example of what I just said, You could add a third crew in the field to help increase production. Let's say you're adding two employees in the field to go along with your four that are already out there. That is a strategy. You've got more resource in the field to produce more work. But that also comes at the risk of going, all right, I'm hiring two people. I've got their pay and benefits and payroll taxes and workers comp, et cetera. and I need to keep them busy. And if things don't line up just right, all of a sudden I'm throwing four guys at a project that I should have just two guys on. Therefore hurting my overall gross profit margin on that project. Maybe your strategy to increase your total revenue is to keep your field exactly the same size or even maybe one less and lean more heavily into using trade partners. Instead of self-performing that big framing, You bring in a framing crew instead of self-performing that tile work, which you're already not very good at as far as producing gross profit margin and holding onto that margin. Maybe you need to work your butt off to go find a great tile crew to bring in. Same with drywall. Maybe it's painting, whatever the case might be for you. There's a lot of different ways to adjust that dial. So that's the total revenue dial. Then you got on your profit and loss statement, you got your income minus cost of goods sold. equals gross profit. That gross profit dial is one of my favorite dials in the entire financial world of the remodeling business. How to make more money in your remodeling business? ⁓ focus on that gross profit dial. There's gross profit dollars and there's the corresponding gross profit margin. When you pay attention to your job, the best way to really start to pay attention to your gross profit is to pay attention to each individual job. I'm gonna pull up a little resource here so I have it in front of me. ⁓ But you have to understand markup versus margin, lock in on that, ask chat GPT, dig into it, whatever you need to do. But if you are at, let's say a 1.50 markup across the board, that means that that project should be coming in at a 33. Percent margin margin your gross profit dollars divided by total revenue equals gross profit margin gross profit dial is incredibly incredibly important a Lot of times what what you're gonna find if you're not very organized with your estimating and your job costing and that side of things you're going to find that hey, I Upped my pricing, Kyle. I've been listening to you. I've been thinking about it. I just need to flat out charge more. That could be a good thing. That could be a nice adjustment to the dial. But then we have to pay close attention to our job costing on that particular project. You need to be able to tell me what your expected gross profit dollars and margin are compared to your actual gross profit dollars and margin. You sold that project for $100,000. Amazing. You're expecting $33,000 of gross profit. Wonderful. Now, how did it actually come in? Oh, you only made $26,000 of gross profit or in this case, 26 % gross profit margin. That is a problem. There was $8,000 of slippage on that. Where did it come from? You need to get to the bottom of that. You need to understand. Was it your estimating? Your estimating was way too optimistic and you put in 50 labor hours for that and it took them 80? Did you forget something in your estimate because you have not put the time and focus and effort into creating great templates to make sure you're not missing things? Could be. Did you not do the work upfront in design and project development to make sure that before a hammer hit the job site, that this project was ready to rock and ready to go. And therefore more fires came up and more clunkiness came up and more trips to the lumber yard came up and more delays because that material that should have already been ordered ended up being back ordered. We had to stop things for five days and move on to another project. Is our team in the field just not as efficient and productive and focused as they need to be? part of that slippage, this case $8,000 of slippage. Did I say eight? Should I say seven? I apologize. I think I said 33%, 26%, but $7,000 of slippage. We won't edit that, but I think I I miscalculated in my mind. Listen to me, I'll teach you how to make more money in your Mali business, even though I can't do simple subtraction in addition. ⁓ But those are all the reasons, those are all the reasons. And that gross profit dial, is one that you can tweak. It's the estimating, it's your project management, it's your detail and design and development. It's having a great pre-construction meeting. It's frankly just motivating your team in the field. Maybe going back to what we talked about, it's not self-performing that part and that part and bringing in trade partners who can do it more efficiently and productively and frankly profitable for you. Okay? So how to make more money in your Mali business, what I've talked about so far ⁓ is total revenue, and really paying close attention to that. Talked about some strategy around in-house labor versus trade partner labor. And I just gave you about eight different ideas related to the gross profit side. But you could hear hopefully the passion, we'll say, the passion in my voice when it comes to the gross profit margin. If you are a remodeler and you can't tell me precisely on each of your projects exactly what you're expected an actual gross profit is doing, That's your focus. Focus exclusively on that. When you are able to have your job costing system in place where all of your labor is being tracked to each of those categories, when you are carving out enough time to pay close attention to your job costing, when you're getting fixed prices from your trade partners so that that $2,500 bill from the plumber is exactly what comes in unless there is a specific change order that you billed for instead of this guesstimate of what the plumber or what the electrician or what the drywaller is gonna be. If you can say, Kyle, it sucks. I had slippage of $4,272 on this project. But if you can say it sucks and you can tell me the exact amount, I'm hearing a remodeler who is on the cusp of really making more money in the remodeling business. When you're able to say with that kind of specificity and that type of frustration in your voice about it, that's somebody who's about to fix it. If you go, I don't know. If you go, My team doesn't like to log their time. If you go, I just don't have time to look at my job costing. If you go, I haven't figured out how to communicate, connect job tread and QuickBooks online yet. I'm waiting for my bookkeeper to do it. If you go, just don't, I just don't even, I don't know why we missed this and missed that. I don't even know where the money's going. All of those things. And I apologize if I was sounding in a mocking voice there. I apologize. I apologize, but. If that those are some of the excuses coming out of your mouth, I already, I know from my 18 years of coaching experience with hundreds and hundreds of remodellers, I'm talking to remodeller who will continue to struggle when it comes to actually making bank in their business. And you're not, again, going back to the why you want to make more money. It's not, it's not for the $175,000 boat or whatever the case might be. It's because you want peace of mind. It's because you want less stress. It's because you want to be generous to your team members. It's because dog on it. You have worked hard and your family frankly has, has sacrificed for your entrepreneurial journey and you want to bring home money that you guys have kind of dreamed about when you started this thing. And I'm telling you, the things I'm mentioning are the keys to turning this thing into a profitable beast. And if you're listening to this and you're already doing pretty well financially, it's time to do more tweaks. It's time to do more tweaks to your dials and let's squeeze some more gross profit out. Let's make sure we know our numbers like the back of our hand and let's make sure that our net profit is also rocking and rolling. This is kind of what I wanted this podcast to be. How to make more money in your modeling business and giving you a bunch of specific things and dials that you can adjust. Let's just work our way a little bit more through the profit and loss statement and then we'll call it good. So total income minus cost of goods sold equals gross profit. I want you to love gross profit as much as me. And then we have our overhead expenses. Every remodeler listening to this, especially the fact that we're already about halfway through the year, you should be able to say, hang on, Kyle, you just asked me how much my total overhead expenses are for the year. Let me pull that up and I will be able to tell you the specific number. Meaning you've already gone through every line item in your overhead expenses, advertising, insurance, rent, owner salary, office salary, office payroll, ⁓ software, ⁓ internet, phone, utilities, all of those line items in your overhead expenses, on what we call the chart of accounts. You have already gone through each one of them, ideally in November or December the previous year, and you've looked at each one of them, pulled up the previous year and said, okay, is this going to be less than last year, the same or more than last year? And you took notes as to the number you put in and why you put it in there. Because you, my friend, are a professional remodeler. You, my friend, are a professional business owner. Therefore, you create and you wrestle with numbers and you put a business budget together. See that beautiful hat? If you're watching the video, it says remodeler's on the rise. I practice what I preach. I need to see my business budget for the year. I'm making investments in coaches. I'm wanting to give raises to my team. I'm putting some more money. into job tread booth this year and spending more on marketing and advertising. I want to know exactly what my numbers are showing in my overhead expenses and my cost of goods sold. And I want to set some revenue goals because I want my business to be profitable. I don't want to run a half-hearted, okay business. I work hard. I had a lot of sleepless nights for years and years and years. I still carry some stress and work and I'm still working my face off to make sure that I am providing results. in serving my clients and improving our business and engaging with our clients to help them be a remodeler on the rise. Of course I have a business budget. That needs to be your attitude as well. Of course I know what my overhead expenses are, Kyle. This year it's going to be $625,000 and it's up from $525,000 last year. It's because we're turning up the advertising dial a little bit and I'm investing in this video marketing and some search engine optimization side of things. And I also, last year, I finally hired that designer, but we only had her for half the year. So when I did my business budget, I annualized her pay and that's also what's increased our overhead expenses. Bam. I'm talking to somebody that's going to make more money in the remodeling business because they know their numbers, know their numbers. So your overhead expenses, pay close attention to that. Let me pause there. Total revenue, cost of goods sold, gross profit. What is your gross profit margin? It better at minimum be 30 % margin and going up from there If you're at 37 gross profit margin And i'll throw a wrinkle in there all your project management expenses are down and overhead expenses Okay, interesting. That could be good. Um A lot of my clients are at 40 margin 38 margin 41 margin 35 margin 33 margin Pay attention to your gross profit margin And then look at your overhead expenses. If I have a 33 % gross profit margin and I look at my total overhead expenses that total up to $600,000 and that comes out to 23%, let's say, 23 % of my overall income, total overhead expenses divided by total income, and it comes out to 23%. That means I've got 33 % of every dollar that comes in that's gross profit margin. 23 % of every dollar that comes in is in my overhead expenses. leaving me a net profit of 10%. And in my overhead expenses, because I am set up as an S-Corp, I have paid myself a reasonable owner salary in my overhead expenses of $90,000. So I'm sitting on $90,000 of salary plus some other owner benefits in that overhead expenses, taking care of my vehicle and gas and et cetera, et cetera. And then I'm left with a 10 % net profit. It's pretty good. It's pretty solid. Amazing, amazing would be. 20 % total owner compensation between your salary, owner draws and net profit. 20 % total owner comp is an amazing gold standard, platinum standard best practice. If you're at 15 % total owner comp, I bet you're pretty happy and doing pretty good. If you're at 7 % total owner comp, meaning total of your revenue, that percent, you're at 7 % of your revenue, you're probably not too happy. You're probably working your face off and don't have a lot sitting there. How do I fix that? You fall in love with numbers. You know your numbers like the back of your hand. You pay attention to job costing. You do your business budget. Your job costs, job costs, job costs. You make sure your total revenue dial is continuing to get pushed, pushed, pushed. You start to look at your job costs and go, we can't self-perform that. We're getting killed on that. We're going to go find a trade partner for that. You don't make excuses that it's hard to find a good tile person. You go out there with a positive attitude and you go find that person. Sorry, I'm a little serious this morning. As I'm recording this, but I'm passionate about this. These are the things that whether again, if you're struggling, you need to hear every word I'm saying and go back and listen and listen, listen. You need to sign up for the VIP club and invest $497 a month. You need to go in there and listen to the recorded sessions. Remodel your remodel your financials. Sorry, remodel your profits. You need to start attending the weekly call at two o'clock Eastern on Wednesdays. and you need to dive into the VIP club so that we can help you and your peers can help you with that. If you are a little bit more established and you've got this in place, hopefully you're still hearing things that remind you, ⁓ kind of taking my eye off that. ⁓ I got to get back to tightening up my job costing. I didn't really do a great business budget, but let me kind of update that at the halfway part this year and finish that thing off and make sure I'm doing a budget versus actual on my overall business. And maybe you need to get involved in some one-on-one coaching or maybe join one of our illustrious peer groups to help keep you focused on this. See other remodellers around the country's examples of this, compare and benchmark against them and get together in person twice a year. Our peer groups are amazing. So wherever you're at on that, hopefully that's all solid. And then after your overhead expenses, you're left with net profit. ⁓ baby, make sure that after you've paid yourself a reasonable owner salary, that that's an 8%. and hopefully going up from there. Recognize that out of your net profit are any owner draws you take that comes out there, any principal payments on any loans. So if I have a $50,000 truck, the interest that I'm paying on that is gonna show up in my overhead expenses. The principal that I pay on that is coming out of net profit. You need just be a student of that, understand that, dig into that. How to make more money in your remodeling business. I gave you a bunch of good ideas. I hopefully did it with some clarity. I talked a little fast. I apologize for that. ⁓ And with some passion and hopefully some clear next steps that you can take. All right. That's today's podcast folks. Thank you for listening. Leave a little review. I would love that. Leave a little review on your favorite podcast app. Keep listening and don't be shy about reaching out. Go to remodelersontherise.com. Click on the contact form, fill that out if you want to set up a time for you and I to talk ⁓ or dig into, if you're on that kind of ⁓ million dollar-ish of revenue and under, get involved in the VIP club. If you're in that 1.52, 2.53, $4 million range, look into our peer groups. We've got limited availability, but some good spots in all five of our groups right now as of this recording. You might be filling up here by the time you listen to this, but look into that. Having that coaching support and resource can be a very helpful way for you to make more money in your remodeling business. Have a wonderful day. See ya.