Latest / Remodelers On The Rise / Know Your Numbers and Then Do Something About It

Transcript

Know Your Numbers and Then Do Something About It · Remodelers On The Rise

• 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. Welcome everybody to the Remodeler's On The Rise Show. I have a guest today. His name is Chris Anderson. He is the founder of Monthend. I'm going to have him introduce himself shortly. before, you might have seen it in the title, depending on what my wonderful staff decided the title was going to be. But you might think, oh, you guys are going to talk numbers. You guys are going to talk financials. Kyle, already heard that before. Oh, please. I plan on, I'm 43 years old. What if your website works so well, you canceled your Google ads entirely. That's exactly what happened for this month's sponsored remodeler story. Evan Clark, co-owner of Elevation Basements in Denver, Colorado has been working with CGN and here's what he had to say. We canceled. What if your website works so well, you canceled your Google ads entirely. That's exactly what happened for this month's sponsored remodeler story. Evan Clark, co-owner of Elevation Basements in Denver, Colorado has been working with CGN and here's what he had to say. We canceled. all of our Google ads in January, we've already received quite a few leads this month. I think we have 16 or 17 leads this month. So it's been pretty solid. And the numbers back that up since working with CGN elevation basements grew from 2.94 million to 4.6 million in revenue, a 1.66 million increase in a single year. Their close rate nearly doubled going from 29.4%. all of our Google ads in January, we've already received quite a few leads this month. I think we have 16 or 17 leads this month. So it's been pretty solid. And the numbers back that up since working with CGN elevation basements grew from 2.94 million to 4.6 million in revenue, a 1.66 million increase in a single year. Their close rate nearly doubled going from 29.4%. 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. I don't know what retirement looks like, but I bet you I'm still gonna be coaching for the next 20 years. I've already been coaching for 18 years and 50 year old Kyle and 54 year old Kyle and 47 year old Kyle and 60 year old Kyle. And maybe I'm still doing this at 80. I will still be saying, remodelers, you gotta know your numbers. You gotta do job costing. So you listening to this, you can always improve with understanding your numbers. And today we're going to be using some phrases, financial discipline, cash consciousness. to 51.8 % and they went from ranking in the top 10 for fewer than 25 keywords to over 240. No paid ads, just organic leads from homeowners who were already sold before they ever picked up the phone. If you want to see the full breakdown along with case studies from other design build firms with real numbers behind them, go to contractorgrowthnetwork.com forward slash results. to 51.8 % and they went from ranking in the top 10 for fewer than 25 keywords to over 240. No paid ads, just organic leads from homeowners who were already sold before they ever picked up the phone. If you want to see the full breakdown along with case studies from other design build firms with real numbers behind them, go to contractorgrowthnetwork.com forward slash results. Chris comes at it from a different angle, a fresh angle. I'm looking forward to it. Chris, introduce yourself ⁓ and tell the people about you, maybe even a little bit of the backstory of who you Chris Anderson: Backstory, you guys are really in for a boring, boring, boring fast here, but I'm Chris Anderson. I'm the founder of Monthend. Monthend is a boring old construction accounting firm, but our history is different. My history goes way back to, well, way back for me, it feels like a long time ago, 2008, when home building was amazing, right? It was a great place to be for a lot of you who've been around that long, but that's when I got started actually. So I started developing land, selling land to... Kyle Hunt: Mm-mm. CGN publishes these regularly so you can see exactly what's possible for a firm at your stage. That's contractorgrowthnetwork.com slash results. CGN publishes these regularly so you can see exactly what's possible for a firm at your stage. That's contractorgrowthnetwork.com slash results. Mm-hmm. Chris Anderson: builders, selling lots to builders. And then I said, I want to become a builder, but I don't know how to frame a window. So I'm probably better off partnering with an existing builder. So I did that and great craftsman, ⁓ great, great reputation, not so much of a businessman. So I brought that discipline into the organization. And, you know, you take a combination of a great craftsman and somebody who really understands money, and you turn it into a big behemoth home building company. So I built a lot of houses until 2018, a couple thousand. Kyle Hunt: A lot, a lot being what? Yes. I just wanted to, you know, there's some people listening to this that maybe went, not just like a craftsman and a financial guy kind of built a business. No, we built multiple thousand homes. The real deal. Chris Anderson: Yeah, and it was a really good adventure. was my sort of indoctrination into construction and real estate. And it was a good 10 year run. we got to the point where the largest privately held home builder in Minnesota. And then I sold my stake in that company. The company still exists. It's a great company. It's called Hanson Builders. Check them out. But I sold my stake in that company and moved on and started month end. Kyle Hunt: I mean, for being from, are you from Minnesota? You don't have much of a Minnesota accent. Chris Anderson: You'll hear it. It'll sneak out sometimes. If I say the word roof or something like that, you guys will hear it. Kyle Hunt: How do you say it? try it. Let me hear it in Minnesota. Chris Anderson: That was it. I don't want to say too much because it's embarrassing. don't say it right. I don't even think Minnesotans think I say it right. Roof. Roof. Roof. Roof. Kyle Hunt: Really? roof. Say it. Okay, now I hear it. All right, we'll see. We'll see if we hear it ⁓ if we hear it as we go. ⁓ Okay, that's okay. And that's good. Frankly, a Minnesota accent is one of I think America's finest accents. So so month month end, the reason we're even connected is because several clients in our peer groups ⁓ use you guys for kind of the full full bookkeeping side of things. Maybe just give a Chris Anderson: It will sneak out. Kyle Hunt: a quick synopsis of what Monthend does, and then we're going to get into some of the kind of idea sharing and coaching related to the financial side. Chris Anderson: Yeah, great. Well, the goal of month end is to help builders make more money. Similar to the goal ⁓ of working with remodelers on the rise or Kyle or another coach. And that's the goal. And we do that through a little different lens than a coach might. And we start with how much money do you want to make this year or next year? And then we back into what it takes to get there. And the language that we speak to figure all of that out is the language of really accounting. And that sounds like a scary word to a lot of people, but really it's just addition and subtraction. So we start with add up how much money you want to make this year. subtract your overhead. What's left? How much you want to build in houses or remodeling minus how much it costs to get that done. All right, now you have a plan. So it really starts with a goal. And then what month then does is just keeps track of all of that stuff. And it does it in a way that's consistent with compliance, which is keep the IRS happy, but not too happy. Right. So compliance and then analytics. And that's what we really care about. Because if you don't know what's happening in your business, you don't know how to change your business. You've heard you can't manage what you don't measure. So we help you measure it. We help you measure it in in a way that makes sense because there's a lot of ways to measure it that are wrong. And then ⁓ we help you understand, what's your next tactic to get from where you are now to what your goal is. And that's really month end. Kyle Hunt: Mm-hmm. You already sound like a different kind of bookkeeping approach, a little bit more holistic approach. You used two phrases when we getting to know each other yesterday and chatting. You said financial discipline. You said cash consciousness. ⁓ I want you to riff on both of those and what they mean. Chris Anderson: Let's start with cash consciousness. And really what that is, is a lot of builders and just business people in general who come from non-business backgrounds, ⁓ sometimes they lose track of why they're in business. They lose track of the fact that they're in business. be one, they want a little bit of freedom, but you can't have freedom if you're not making money. And two, ⁓ you're in business to make money. And they lose track of that. And in order to understand if you're making money, you have to track it. You have to understand it. And tracking it is just part of it and interpreting what the numbers are telling you is a different part of it. So cash consciousness is this idea there's, there's a thing called profit and there's a thing called cash and they're completely different. So first is becoming aware of the fact that there are these things out there called financial statements and they're standardized and they're designed to help people make decisions about the business. That's what they're for compliance and tax stuff. That's what most people think about when they think about accounting. I have to do this because I have to do my taxes. That's this much of it. This much of it is you want to do it because you want to. Kyle Hunt: Mm. Chris now some people are watching the video version. Some people are just watching the audio, so now I need to narrate it. First he said the tax part is just a small amount that the small little part and then he went both hands and he made a bigger space between that just so that you listening can now see it in your imagination. I got hey, I've done. I've done hundreds of these podcasts. I've got you covered. If you make another horrible mistake like that next Chris, I got you covered. I'll pick you up man. Chris Anderson: No. There you go. And in your consciousness, you can see it in. Ha See, this is coaching. He knows some people, they need the carrot and some people need the stick. And he gave me the stick because he knows. You have to know who you're coaching. Kyle Hunt: Yeah, honey and honey and yeah honey and vinegar sometimes you take sweet, know vinegar I gave you a little vinegar in there too, but I love where you're going with it I love where we're going with it carry on Chris Anderson: Yeah, that's cash consciousness and we can call it number consciousness or profit consciousness, but cash consciousness sounds better. Alliteration, sounds cool. So understand that these numbers matter. These numbers actually exist. Financial statements are designed the way they are to help you make decisions. And that's cash consciousness. And then discipline is creating a goal and then doing whatever it takes to hit that goal. And ⁓ it's really cool. I met Peter Olenichek, that's a mouthful, but Peter Olenichek, He's the guy in charge of month end right now. And I met him through bicycle racing, not a popular thing here in the United States, but enough people do it. Very popular in Europe. There's a lot of races going on right now that are exciting to a lot of people, but not Americans. Well, I met Peter racing bicycles and there's a ⁓ very famous, in that circle at least, American bicycle racer. Some of you may have heard of him, Greg Lamond. He won a lot of stuff back in the 80s and early 90s. what Greg, Greg was, he's an amazing person. I had the opportunity to meet him on a few occasions, but he... preaches this idea of setting goals and then somehow you make those goals happen. If you don't set them, good luck. And so when he was a kid, he set a goal to win the junior world championship and he wrote these goals down. Important to document these things, right? He wanted to win the junior world championship and then he wanted to win the world championship, know, adult 18 or older. And then actually I think it's 23. And then he wanted to win the Tour de France and he wrote them down and then he did those things. And he actually credit the guys a maniac, right? physically gifted beyond belief, mentally gifted to be able to suffer through things like this. But he credits that success in large part to setting the goals, writing them down. And he still has the little sheet of paper that he wrote them down on and he's really proud of it. So I think builders need to start with that same mindset. Set a goal. Kyle Hunt: Hmm. But Chris, but Chris, I don't know what my top line revenue of my remodeling business is gonna be. That just feels like picking a number out of thin air. Chris Anderson: Yeah. Don't, don't worry about that. How much money do you want to make this year? Start there, start there. Does 50 grand cover your wants and needs? No. Does a hundred? No. Get that number to where this is what I want to make something that I need or I want to have happen with my business and then back into the rest. All right. Back into it. And that sounds simple and it actually is. And we can talk about how you back through it and get to that top line number and then translate that top line number to jobs. Right. And so Kyle Hunt: Hmm. Not like that. Chris Anderson: Yeah, I want to make 100 grand this year. How are you going to do it? Well, you have two people on your team that you have to pay. Between the two of them, it's 150,000. So you got to make at least 150 and profit to break even because you have to pay those people. right. Beyond that 150, I need to make money for me, right? I want to make 100. So I need to make 100. How do I get there? Well, each of your jobs you're making 20 % on. If I'm making 20 % on each job, what do I need to do to have 100 left? Well, you need to make 500. Kyle Hunt: in time. Chris Anderson: 20 % of 500 is 100, right? 100 grand. That's what I have to have left. But I need to pay those people 150, so I need another 150. And just do that exercise all the way to that top line number. What does the top line number need to be? Oh, it needs to be 800,000. I need to sell 800,000 in remodel jobs at a 20 % margin to pay those people, to pay for my rent in this building, and then have 100 left for me. Well, how many units is 800,000? Well, my typical job is 100,000. All right, I need to do eight units. Now create a plan to get to eight units. Now we're talking about sales and marketing. You have to... Kyle Hunt: Yeah, so pause there. Some people got stuck when you said 20 % and they're sitting there going, well, I do more than that. And if you're currently thinking that right now, you're missing the whole point. The whole point is for you and whatever margin you're selling at and how you understand your gross profit and your overhead expenses and your goal there, let's start doing the math. Let's have some goals. You've mentioned it multiple times, even when you're mentioning month end. Well, we get into your QuickBooks and we see if you needed to clean up your chart of accounts and you have some stuff in your overhead expenses that should be a cost of good. So, well, sure, that's bookkeeping, but it was interesting how you started with, what's your goal? What are you trying to achieve even numbers wise here? And then you start thinking about financial discipline. Well, what's your goal? And I think a lot of business owners just kind of say, I don't know, I want to make as much money as I can. Like, I'm just going to work hard. And what you're, what you're encouraging here is. That's fine. And sometimes that works. But what you have found is when you create a clear goal and work the math to understand what that means, you're working all the way back to going, okay, this is going to give me discipline, financial discipline when it comes to my sales process, my closing, I'm going to track my closing percentage as a result of that. I'm going to pay closer attention to my average job size. I'm going to start thinking about the marketing side more. I like how that kind of works itself back. Chris Anderson: It can't not. All right. It's all just addition and subtraction. It can't not. You start with how much you want to make you back into what that means that you need to sell and then you have a plan to come up with what it takes to sell that if you track your close rates. All right. This many dollars gets me this many leads. This many leads gets me this many meetings. This many meetings gets me this many closings at this dollar amount. It all just becomes addition and subtraction and it becomes very simple. And Kyle Hunt: Hmm. Chris Anderson: Beyond that, there's this psychological idea of setting a goal and then telling people about it. And then them, you think they are holding you accountable, but you're holding yourself accountable to it. It doesn't have to be fancy. You don't even need to start with a spreadsheet. You don't even need to start with some QuickBooks. Get a bar napkin, go have a beer, sit down, have a glass of wine, write down how much money you want to make, and then just start backing into it. Well, if that's what I want to do, here's what I need to do. And the really interesting thing is when we were building houses, we ended up doing about 180 houses that final year. That's a lot of houses. And we sit down in November of the year prior, we create a plan, just like what we're doing now. It gets a little more complicated because there a lot of moving parts. But if you strip it down, it's how much money do we need? Do we want to make? And what does that mean for how many houses we need to sell? And we create a plan. And it's very detailed at this point, month by month, right? House by house, budget line item by budget line item, right? How much are we going to spend on marketing? How much are we going to spend on our team? Kyle Hunt: long houses. Chris Anderson: What do we need to spend on our drafting organization? And the crazy thing is year after year after year, when we put that plan together, we hit our numbers. And it's not because we're incredible forecasters. It's because we put the plan out there and then we manage to it. We do what it takes to hit the plan. And when you're within on a $200 million a year company, if you're within a half a percent of your targets and your goals every year, it's not because you're an amazing forecaster. It's because you have discipline and you say, I'm going to do what it takes to reach my goals. And that's Kyle Hunt: Mm-hmm. Chris Anderson: That's anything sports, business, whatever it is, your relationship goals with your wife, set goals, create tactics to hit those goals, measure it hard to measure love, I guess, but measure it. Honey, you know, I'm not the expert. Kyle Hunt: Chris, tell us more about how you measure love. How does that work? Yeah, yeah. This podcast could get real interesting. Come on, bring it over. Put it in front of the microphone. ⁓ Chris Anderson: I'm not the love expert. She's shy. She's your typical modest, shy Minnesotan. She's not going to be helpful in this area. Kyle Hunt: Okay. Okay. All right. Fair enough. I bet you she says rough weird too. Chris Anderson: She does say some weird words like berate. This morning she was helping my daughter berate her hair and I'm like, honey, it's braid. It's braid. Kyle Hunt: No. My our senior in high school, she says, instead of saying breakfast, she says, breakfast. And it's just she's always said it that way. And we always smile when she said, like, Can you please never fix it? And I think she's even trying to fix it and she can't. It's just breakfast. Checkup. Chris Anderson: do don't want her to. My five year old says, yeah, my five year old says chocolate and we won't, we won't correct him. It's too cute. We won't. Yeah. Kyle Hunt: Yeah, come on. Yes, yes. No, hope that when you're 40 years old, you still say it that way, my dear. Yes. So, but you're talking about, yeah, it's interesting. I have this love-hate relationship with goals. I think early on in my business, I was very goal-oriented. You get to a certain level of kind of stability and success. I think you sometimes ⁓ kind of take your eye off it a little bit. I also feel like sometimes I set goals and let's say I'm here. For those of you listening, I'm holding my hand at my chin level, if you're watching the video. And I set a goal up here by my eyeballs, and then I end up hitting in between there, where my nose is. And it's like, dude, you grew nicely this year. You had a little bit of a stretch goal or this or that happened. And I think over a number of years, there was a little bit of like, ⁓ crap, I didn't hit my goal. ⁓ And instead of recognizing, okay, why didn't I hit it? Maybe it was the discipline. Maybe I didn't really believe I could do that. And maybe I need to adjust some of my mentality, but also give yourself a little grace. You still grew from here to here. You still improved. And I think my love hate with goals, you're helping me evaluate that again, because when we set goals, that helps our team, that just helps in a lot of different areas. Chris Anderson: Yeah, 100%. And there's these big goals, how much money do I want to make? And they translate into littler goals. And if you're hitting most of those small goals, you're going to hit the big goal. And if we go all the way down to even a job budget, where you're creating an estimate, which becomes a budget for a particular remodeling job, that budget, what is it? It's just a goal. It's a goal that you're trying to hit. And if you break that down even more, it's individual line items. I have a goal that I'm setting that this HVAC installation is going to cost $14,000. That's a goal. And you're going to have tactics and plan to reach that goal. What's the first tactic to reach that goal? I'm going to create a purchase order for this bid so I can hold my subcontractor accountable to the number and the scope of work that he gave me. Okay, that's a tactic you use to hit that little micro goal. If you're doing that for all of your subcontractors and vendors, well, now you've controlled those goals. And if you miss those goals, you have perfect documentation to understand why. So the next time you have another job, Kyle Hunt: Mm-hmm. Mm-hmm. Mm-hmm. Chris Anderson: You don't miss those goals again. And all of those little micro goals, success for fail. Well, actually in our team, we call it win or learn. There's no failure. You win or you learn. Kobe Bryant, win or learn. Kobe Bryant, he said, there's no losing. You don't lose. He's never lost in his life. He's won or he's learned. So you do that. Each little goal, each big goal, you win or you learn. If you win, great. Good job. Pat yourself on the back. Congratulations. Kyle Hunt: Wait, is that Kobe Bryant? I don't know, interesting. Chris Anderson: If you didn't win, you better learn from that. right. ⁓ you missed the, your HVAC came in at 18 grand and you paid the bill. Should have had a purchase order. I learned better for next time. The purchase order is to control the price and control the scope of work. All right. And then Kyle Hunt: Yeah. Or shouldn't have waited till the last minute to get it over to your HVC guy. He was under pressure. You didn't have good drawings and design for him, so he kind of guesstimated. You put it in there as a fixed price. That one's kind of on you. It's not even on them. What did you learn from that and how are we going to... Chris Anderson: Right. And if you take a look at your whole business like that, at the end of the day, you're going to learn a hell of a lot, or you're going to win a heck of a lot. And if you just continue to iterate and continue to absorb what you're learning through documenting these things, setting goals, no way to, there's nowhere to go but up. Right. Kyle Hunt: Yeah, I can if I'm listening to this and I'm a remodeler and I've got in house team members to play around people you're listening to podcasts, not so that you can get overwhelmed with more ideas or, you know, come up. I never heard that before. Baloney, you've heard a lot of these ideas before you're listening to this. So you take action on it. Let me let me take what Chris said and make it real practical for 25 of you listening to this. You're actually going to do it. I said 20. Chris Anderson: Yeah. Kyle Hunt: There's hundreds of people listening to this, Chris. We get hundreds of people. 25 of them, hopefully, I'm hoping 25 of them will take action on what I'm about to say. You'll have hundreds of people listening to this, yeah, maybe even millions, maybe even millions. But for 25 of you, you're actually gonna do something with this. For the other hundreds, you're like, Win or learn. Hey, we've got, and I love micro goals when it comes to job costing and encouraging our team. Chris Anderson: Hahaha Kyle Hunt: team, we have a goal for the demo phase on the Smith kitchen. Our goal is this many hours right here. This is our goal and we're either going to win or we're going to learn from it. Like that. And also I've got a crisp little $50 bill. If we do win and you guys make this happen, I have a $50 winners little bill here. If you don't, we go over, then we just learned it's not, it's, it's okay. Like taking that and being creative. I think that's what I'm emphasizing, like taking that idea, make it your own. Be creative with it. Give your team a little micro goal. Have the words win or learn come out of your mouth. Knock down your overwhelming, ⁓ there's so much to this job and job costing, and give them a nice little micro goal to shoot for and do something with that. So I encourage them to do that. Now, I love what you're saying with cash consciousness. It helps you make decisions. ⁓ Just give a sprinkle a little bit. What are a couple of your favorite decisions that you gain clarity on when you have? Tash consciousness. Chris Anderson: Yeah, that's a, that's it. That's what we're talking about. So when, when you're looking at your business, you want to be able to answer the questions you have about your business. One of the biggest questions is, am I making money? Another question is, if I am making money, how much, if I'm making a certain amount of money and I want to make more, why am I not? What's the difference? Where is this money either leaking out or where am I doing really well? So a business owner who's trying to get better, Kyle Hunt: Mm-hmm. Chris Anderson: is going to have a lot of questions about their business. And almost all of those questions can be answered in one of two financial statements, your profit and loss statement and your balance sheet. Quick education. Balance sheet for those of you don't know is a reflection of the financial health of your business. It's the things you own in your business, like cash, accounts, receivable equipment, the things you owe in your business, bills that you owe your subcontractors, loans, credit cards, and then the difference, it's called equity. Just like in your house, you have home equity. You own the house, it has a certain value. Kyle Hunt: Mm-hmm. Thank you. Chris Anderson: You owe the mortgage to the bank and the difference is your home equity. Business is exactly the same. That's your balance sheet, your P &L, profit and loss, sometimes called the... Kyle Hunt: Some people just got really excited because they've always been super confused by the balance sheet and their new friend Chris just explained it very clearly. And then the P &O. Chris Anderson: That's it, that's all it is. PNL, same thing. It's like your household budget. Think about your household budget. You have a job. You're a remodeler, so your job's kind of dynamic, but imagine you're a W-2 wage earner. You have a job, you make X amount a year. You have household expenses and other expenses. Subtract the two, and that's your, let's call it profit. That's what you can either save, put in the bank, whatever. Same thing with the business. Your income is your revenue. That's money that you're taking in from your clients. It's a little more complicated than that because the money they give you isn't yours until you earn it. For simplicity sake, let's say it's the money you take from your clients, less what it costs to build their home. That's called gross profit. Right? Now you have other things related to running your business, not related to that house directly. That's overhead expense or sales general and administrative, whatever you want to call that. There's a lot of terms for it. The difference is your net profit. That's generally what's available to you as an owner or your net profit. Now there's some things that affect that, that translate that not to be cash, but simply If we're going back to how to think about this simply money you make minus whatever it costs for that job, that's the gross profit. Very important number to track and understand and benchmark. And then whatever it costs to run your business, not to run the jobs, but to run the business. That's your overhead expenses. It's very, it's very important to understand those two as a percentage of sales. So we want to break it down a little more. Or is that too boring? You want to talk about it? Kyle Hunt: No, I loved that. ⁓ break it down one more and then I'm going to take us into a new vein of conversation. Chris Anderson: So there's a couple of ways to set goals. If you don't even know where to start, I suggest you start at how much money do I want to make? But then when you get deeper into it, you're like, well, what's normal? What's actually achievable? What can the market support? What are other people getting who are successful? And so there's two really important numbers to understand. One of them is gross profit. And gross profit is how much does it cost you to build a house or to remodel house? And you subtract that from how much you made from it. That's gross profit. And you can express it in terms of a percentage or a dollar amount and expressing it terms of a percentage helps you benchmark yourself against others, which can be really important. Right. So do a big fat fancy remodel job to million bucks costs you 800,000 to do it. You made 200 grand on it. That's 20 % or let's make the number more realistic for remodeling. A hundred grand cost you 80, $20,000. Yeah. 70 even better. Cause that's a better goal. 20. Kyle Hunt: Let's say it costs us 70. Thank you. Chris Anderson: 20 is fine. 30 is great. 30 is great. So you have 30 grand. That's your gross profit. You made 30 grand. 30 divided by the 100 that you charged for it, 30%. That's your gross margin. Why is that number important? Job by job, it's important to understand because you want to have these micro goals, job goals. But overall, when you're looking at your company, you want to understand it too, because that's how you can set goals. Like, I'm currently at 20. I want to get to 30. How do we get there? Well, I can raise price or I can control my costs better. Kyle Hunt: Mm-hmm. Chris Anderson: That's it. Those are your two levers. And if you think about it in that lens, all right, it looks like I'm kind of ringing the bell with price. You know, if I look at a price per square foot, given this spec level, I can't really charge anymore or I'm going to start losing jobs. Well, don't be afraid of that first of all. But if that's your conclusion, how do you control your costs better? That's how you can get to those margin goals. So let's say your gross profit on a job is 30,000. Let's say it's 30%. Now what's left? Now you have the overhead to run your company. What's a good number there? Well, depends how big you are. Depends how complicated you are. 15 is a little fat, 15%, 10 % and it's getting kind of lean. If you're a one or two person show, you probably want to be less than 10%. But that's what it costs. And when we're talking about 10%, what do you mean by 10 %? 10 % of what? You always are comparing these numbers to your revenue number, your sales number. So if your total sales for the company for the entire year is 2 million, if you're spending more than 15 % of 2 million, which would be what 30,000. $300,000 to run your business, right? That's to pay salaries to non-productive. And when I say productive, don't mean, your marketing manager, they can be plenty productive, but they're not putting nails in houses, right? They're not managing the project. So if you take all of those people and all the costs related to running the business, if it's more than 15%, you got a problem. Either you have a sales problem, you're not selling enough for the amount of staff that you have and the amount of like overhead business expense you have, or you're fat. You're a fatty. have too much extra cost there and you have to make some. I mean, I've got my winter weight on too. know, teapot. Kyle Hunt: Did you just call our listeners fatties? That's not it. That's not it. not appropriate. Yeah, I'm sorry for it. But but but besides that everything else was was very, very solid. I liked I liked when you were just saying, like you're simplifying end of going, hey, if you aren't getting on a job by job basis, enough gross profit, you either need to raise your prices, or you need to control your costs. If you're going way over on ours, then maybe you need to control your cost by changing your estimate to put more hours in there the next time because it's reasonable that You were being way too optimistic with the number of in-house labor hours. You need to start going towards getting fixed prices from your trade partners. That's part of controlling your costs. If not raising your prices or controlling costs, those are your two levers. That's what's gonna move you from 26 % margin up to 33 % margin. you explained it well, but where people just get really lost is you could have three projects. that came in at 40 % margin and produced over that month, let's say $30,000 of gross profit. 40 % margin, $30,000 gross profit that month. But if your overhead expenses are $40,000 a month, you lost $10,000. You have to understand how gross profits and overhead and net profit play together. If you are confused by it, please reach out to me. I will send you a free training. I will tell you to go watch this training. Join the VIP club and go click in on remodel your profits. You have got to be able to ask the questions that Chris is mentioning. You have to understand your numbers in a way that you can set clear goals. It matters. If you are struggling and you aren't making a good living, I'll just put it that way. If you are struggling, working your face off and you're not making a good living, you can absolutely change that. And the stuff we're talking about is what you need to be doing. And you can do it. There's many, many, many remodelers who've gone from total confusion and chaos to this that improve it. There's also a lot of remodelers who continue to say, I don't know. I don't understand it. I can't charge that amount. And they're out of business. They're in debt. They're out of business. They went and got another job. So you can fix this. ⁓ I got a little passionate there for a Friday morning. Chris, thank you for teeing that up for me. And, and thank you for sharing that. Chris Anderson: you you Kyle Hunt: Next line of questioning. I think a lot of people make bad hires when it comes to their bookkeeper. They don't know what questions to ask. They're confused as to what it's going to be. All of it kind of sounds the same. What do we look for now? This is like somebody coming to me saying, Kyle, I know you're a coach, but like if I'm going to hire a coach, like what advice would you give me? Let's say I'm your brother and you're going to give me advice on hiring a coach. What would you tell me? So Chris, similarly, like I know you provide bookkeeping services and you guys do good work at month end, but talk to me and talk to the listeners, how do I find, what do I look for, what questions do I ask to make sure that I'm hiring a good solid bookkeeper? Chris Anderson: Yeah, this is a good question. ⁓ Coaches, there's a lot of different types of coaches that can bring you value in different areas. ⁓ There's coaches who are really good motivators and good cheerleaders. There are coaches who are really technical, who really understand where to point you. ⁓ There's a lot of different types of coaches that come from a lot of different backgrounds that they can all give you a lot of success. Kyle, you worked for a plumbing organization at some point, right? Kyle Hunt: Plumbing, heating, cooling, remodeling, yes. Chris Anderson: Let's talk about how you hire a good plumber. How would a subcontractor decide how to hire a good plumber? What are some key variables that they need to look at? Kyle Hunt: Hmm. I'm a remodeler hiring a plumber. Yes, I'm looking at their reputation. In that case, I'm looking at their Google reviews. Ideally, I may have been referred to them by somebody I trust and has firsthand experience. ⁓ Therefore, my HVAC guy recommended this plumber. So there's that. ⁓ I have sit down face to face conversation and I start asking questions and learning about them and sharing how we work. I share with them some of the challenges I've had with plumbers before. Chris Anderson: Yep, just like you'd be a remodeler hiring a bookkeeper. Kyle Hunt: and get through a lot of that rigmarole, do a little background check, et cetera. And then I find an opportunity if everything's looking good to try them out and to see how they're fitting and then, ⁓ go from. Chris Anderson: I love that. And one other thing that you didn't mention and it probably would have come up in your background check, that plumber have a license to operate as a plumber. Pretty big because if you don't have a license to operate as a plumber, it probably means you don't have the education to be a plumber. And maybe you got that education firsthand out in the plumbing world. But the great thing is our municipalities don't really let plumbers operate without a license, right? You have to be a licensed plumber. Kyle Hunt: Mm-hmm. Right. Chris Anderson: The weird thing about accounting is except for very particular circumstances, anybody can just pick up and call themselves an accountant or a bookkeeper, except in Texas. I don't think you're allowed to call yourself an accountant in Texas unless you actually are. So the problem with that is, especially when it comes to a discipline here, that a builder generally doesn't have deep knowledge in. A builder has a decent understanding how plumbing works and for the most part can understand good plumbing from bad. Not necessarily the case with accounting and bookkeeping. And what makes it even more complicated is I'm a certified public accountant. A lot of certified public accountants, they're really generalists. I would say most of them. And they have to be generalists because they have to take enough clients because it used to be hyper local to be able to have a business. Well, it's changed a lot. It's not so hyper local because we have this thing called the internet where people can provide services to people, the interwebs. So now you can be a niche operator. You can have a very specific expertise. Kyle Hunt: I like to call it the inner webs. Chris Anderson: and be able to provide that service at scale. And that gives remodelers and other people who are in a very specialist industry, the opportunity to take advantage of the skills and knowledge of the people who know deep, deep experience and have deep expertise about these things. So very important to understand that because your current CPA and where I'm getting at is this, you generally think that your CPA is sort of the gatekeeper. Whoever's preparing your taxes is going to validate that whatever the bookkeeper is doing is correct. Well, you have a problem here where you think the CPA is validating that your tax preparer, your CPA is validating what the bookkeeper is doing, but they're not because generally they don't have enough deep industry expertise to know that your books are correct. Their job is to take the information you give them and prepare your taxes. But you think their job is to take the information you give them, validate that it's correct, and then prepare your taxes. They're not doing that. They're not doing that. partly because they don't have the time and partly because they actually don't have the expertise. Sorry, other CPAs listening to this, you know it, you know it. Unless your construction has a very unique set of rules and circumstances and here's why. And then I'll get to the answer of your question. How do you evaluate a good accountant or bookkeeper? Here's why construction is different than almost any other business. In construction, the client gives you money first and then you spend it. In almost every other business, you spend money first and then the client gives you money. Think about it. Think about if I'm a manufacturer or I'm a retailer, I buy clothes, I put them in my store, and then somebody comes in, buys it. And so accountants just by default, they have that mindset, tax preparers, they have that mindset that that's how it's supposed to work. So they prepare your taxes as if your business operates that way. Guess what? Your taxes are wrong, right? So that person who's doing that doesn't have enough knowledge to hold the bookkeeper accountable to quality. And the bookkeeper, guess what? In most cases, that bookkeeper doesn't have their plumbing license. The analogy is that bookkeeper isn't an accountant. They've never studied accounting in almost all circumstances. They especially don't understand how it works for a really complicated, nuanced business like construction. So you wouldn't hire a plumber that doesn't have a plumbing license. And if they did have a plumbing license like the CPA, they might be somebody whose expertise is plumbing, you know, high rise buildings like they're generalists. Right? They're not. Kyle Hunt: Mm. Chris Anderson: expert at plumbing for a remodeling job in a small condo or a residential home. It's completely different. You use different materials, different techniques. All right. Long kind of analogy there. But I wanted to show like the reason why there's there's no accountability. The IRS doesn't hold the CPA accountable. Unless there's fraud, the CPA doesn't hold the bookkeeper accountable because they don't have the time or expertise. And the bookkeeper doesn't generally understand what's happening. Right? Because they're either a generalist also. Kyle Hunt: Okay. Like it. Chris Anderson: but they actually don't have the background knowledge. They didn't study accounting. Maybe they did, but they didn't study it specifically for construction. Maybe they did. You got a good one then, probably, right? So here's how you evaluate a good bookkeeper. One, to your point, check out their reputation. Go look at Google. Kyle Hunt: Mm-hmm. Mm hmm. Yeah. Chris Anderson: Two, ask your friends. Three, make sure they have some sort of foundational, fundamental understanding of how this works and that somebody's validated that. For construction especially, a lot of your education comes from a gallon of sweat and a pint of blood out on the job site. And that's great. And I've learned a lot in my life that way. Kyle Hunt: The visual on that just got me there. Get it though. Yeah, that's where my education came from was all that sweating and bleeding. Chris Anderson: Yeah, exactly. Where does the best education come from a home builder? Well, wearing the tool belt, right? Watching a window get framed and trying it yourself. And then when you come back later, as a remodeler has been doing it for 20 years, you can evaluate whether somebody did a good job and that window is going to leak or not. Good luck builders trying to do that with your accounting. There's no way. Like you're not, you're just not there and you never will be and it's not your job to be. But there's nobody who's holding these people accountable. There's no accountability built into this system. You are responsibility. You are responsible for the quality of your financial statements that you give to the IRS. The CPA, I don't know if you realize this, they're not responsible. It doesn't have to be accurate. The IRS doesn't hold them accountable to it being accurate. The IRS holds them accountable to not committing fraud. That's it. That's it. Or negligently overlooking things. Gross negligence. All right, so I sounded like I'm preaching a little bit here because I get passionate and frustrated about this. Kyle Hunt: Yeah, but that preaching is related to just seeing it and experiencing it and seeing the horror stories and all Chris Anderson: ⁓ my gosh. Here's what it is. I've been doing this for eight years and I've had over 1400, 1400 half hour conversations or more with builders because I'm evaluating their books and deciding if we're a good fit for one another at the, at the accounting firm. And of those 1400 sets of books that I've reviewed, how many do you think I would be happy to say, yeah, we did this. This is a good job. Probably five or six. So that means Kyle Hunt: Percent? ⁓ Chris Anderson: 1,395 sets of books are just wrong. And most of those, not all of them, most of those people are overstating their income, paying more income taxes than they need to. By the way, the tax part of this, getting the books done right, small part of it, big dollar amount, because you're overpaying, but it's a small part of how does your business get better? And that's where the analytics come. And if you hire somebody who really understands how to prepare the financial statements in a way that they're supposed to be prepared, one of the big things is adjusting your revenue for what you've actually earned. You've probably heard it called a whip adjustment. Right. And you're like, that sounds complicated. And it actually is the calculation is very complicated, but the concept is simple. All the whip adjustment is saying, yeah, you collected a bunch of money or you charge somebody for all this stuff, but you haven't earned it yet. And you measure how much you've earned by how much you've done. And then we're going to adjust the revenue based on how much you've done and how much you've earned. That's what a whip adjustment is. And if you don't do that, and it's a complicated thing to do, your numbers are wrong and most likely you're overpaying in your income tax. Kyle Hunt: Mm-hmm. in progress. Chris Anderson: And then your decisions are terrible. You're to make terrible decisions. You're going to say, look at all this money I'm making. I'm going to go hire people. So if you're actually not making money and you're hiring people that you shouldn't be, now you're making really bad decisions that are going to make your company worse off. Kyle Hunt: ⁓ Yeah, I think that all of that are good things to do to hire a good bookkeeper. In addition to that, whether it's your existing bookkeeper or somebody you're, or whatever you're using now, business owner, you've got to just be more curious and you've got to hold a higher standard. You also have to, when you need to feed them information, when you need to get, you need to say, this goes towards the Smith project, I know that one wasn't coded right, you need to jump all over that. Do not be the bottleneck in this. Get a system in place to make sure that everything's being coded properly, the bookkeeper isn't waiting on you. If it's 20 days after the month is over and you still, everything's still murky and things haven't been reconciled, et cetera, et cetera. throw a little stink a little bit, get a little vinegar in there, say, look, I need this updated. I want this updated. What can I do on my end to help set a little higher standard? I see too often where the bookkeeper's kind of pointing at the owner, the owner's pointing at them, both of them are kind of at fault. This is too important. We want to make this really, really strong in our business. So it's similar to, I would say, the world of search engine optimization and like website and SEO. It's very like... There's a lot of bad players in it. There's a lot of good players in it. And for, from a business owner standpoint, it's really confusing. Like I'm getting emails. ⁓ I could get you listed number one, Google. You've, you've tried this company at burned. You tried this, that didn't work. ⁓ finding a good SEO company is hard work. And I think bookkeeping is similar to that because a lot of the people, a lot of the business owners that are hiring, all of it is so murky. Everything kind of sounds good. Come on, lean into that, lean into that. And if you realize that you've hired the wrong person, let's cut bait and switch and figure it out sooner rather than later as well. Should people reach out and talk to you about your services at month end? Are you guys any good, Chris? Chris Anderson: We're not perfect, but we have the right combination of experience, knowledge, systems, goals that we set, including customer satisfaction goals. They're going to lead to most likely the best experience you could possibly have. Doesn't mean everybody's a good fit for us. Doesn't mean we're a good fit for everybody, but yeah, we're good. Kyle Hunt: Bam, bam. Well, our time has come. We have a little bit of a hard break today, folks, because yours truly in 12 minutes, in 12 minutes, my heart is already beating a little heavier. got a little pit in my stomach feeling. There is a conference that my wife loves going to. It fills up her tank. If she doesn't go, she's a mess for the year. If she goes, oh baby, she's fueled up and ready to roll. And it is harder and harder and harder to get these tickets. I have Bailey on my team with her Amex card ready, Cassie on my team. my wife, myself, we are ready to go in 12 minutes to secure these tickets. Chris Anderson: Shoot me the link, Kyle, I'll help. I'll be a part of your team. It takes a village. Kyle Hunt: Will you also will you also can you will you just use your card and stuff. Chris Anderson: I have fast internet, I'll use my card and yeah. Kyle Hunt: And then I can just refund you. Were that tight just after a 49 minute podcast and a 30 minute call yesterday? Chris Anderson: We'll see how many people knock on Monten's door. Maybe it'll be a nice little gift. have no idea how much this conference costs. Kyle Hunt: Wait a minute, this sounds fishy. Are you gonna charge an upcharge or something? You gonna hold these tickets hostage and double the price? Okay, okay. Capitalism, baby. So we're gonna wrap up, but I'm okay with wrapping up because I feel like we achieved what I wanted to achieve, which is hearing from your vantage point, your experience, how you're thinking about this. And there are several just interesting ⁓ emphases that you made, which were excellent. Chris Anderson: We'll see. Capitalism. Kyle Hunt: If people want to reach out to you, so two things to close out. If people want to reach out to you, where do they go? Go ahead and do that. Chris Anderson: Yeah, www.monthend.com. And you can book a meeting and you'll probably meet with Peter Olenichak, who's a former professional bicycle racer. You guys can chat about bikes and building. Kyle Hunt: He also, clicked on his Instagram earlier when, when I was just, cause five P proper preparation prevents poor performance. What do you think I show up here? I know research the guy I'm talking to and, his, his head honcho at his company and this and that. And I clicked on his Instagram. Not only is the biking thing, but it looks like he's been into this cross country skiing thing. And if I learn. Huh. Chris Anderson: You know, he picks it up. It's just something to keep him fit for bike racing. he's, you know. Kyle Hunt: ⁓ if I learned anything from watching the Winter Olympics, I'm like, I do not want to do that sport. They get done with it and they collapse. They just fall over. That looks hard, man. Chris Anderson: Yeah. Yeah. Kyle Hunt: I don't know what bicycling feels like. Also, I don't know how you do the bicycling thing. It hurts my butt after two seconds. Give me that big old fat padded seat and then I'll play ball with you. Chris Anderson: No, no, no, no, no. You need a rock hard carbon fiber seat and you just need really good shorts. And then you just have to build up a little bit of something like that. It's, know, the racers have been known to get butt calluses. Kyle Hunt: Calis on my butt Hmm, you know, you know, it wasn't on my bingo card today to record a podcast that used the word butt callous Not once not twice, but now three times you're welcome people This is what makes the remodellers on the rise show must see must watch podcasting and then and then lastly if if people heard nothing else from if you wanted to emphasize either something that you said already or Even something that wasn't said. What would you emphasize to the remodeller listening to this? Chris Anderson: You You Set goals, win or learn, never give up. Kyle Hunt: Bam. Chris, that was great. Thank you so much. Everybody, thank you for listening. Go ahead and click on a little review button. Go ahead and subscribe to the podcast and reach out anytime. Thanks so much, Chris. Chris Anderson: Thank you, this was fun.