Latest / Business Roundtable / Maximizing Growth and Profitability in California's AEC Industry

Transcript

Maximizing Growth and Profitability in California's AEC Industry · Business Roundtable

0:01
Speaker 1: Welcome back everybody. Here we are on the Business Roundtable podcast.
0:05
Speaker 1: I'm your host, David Carr of Stewart Your business or
0:08
Speaker 1: help business owners of their teams come bring their teams
0:10
Speaker 1: together to accomplish great things. I've got a brand new
0:13
Speaker 1: guest here. I'm super excited to have Rocky Levannie on.
0:17
Speaker 1: Rocky and I had met actually last week and we've
0:20
Speaker 1: connected on LinkedIn and we have a lot of shared
0:23
Speaker 1: connections and he brings a whole other dynamic that I
0:27
Speaker 1: don't do. I focus on the people's side, and Rocky
0:30
Speaker 1: is all about being profitable and making sure that you
0:34
Speaker 1: have a profitable business. And then we're going to get
0:36
Speaker 1: into some specifics here in this episode because I work
0:40
Speaker 1: with a lot of clients and it's challenging times to
0:44
Speaker 1: run a profitable business. So Rocky, I would love to
0:47
Speaker 1: have you just do it. I'm giving you a brief introduction,
0:49
Speaker 1: but I'd love to hear a little bit more of
0:50
Speaker 1: your background where you're coming from. And welcome to the podcast.
0:55
Speaker 2: Oh thank you so much for having me. And I
0:57
Speaker 2: will say this, the one thing I'm not is the
1:00
Speaker 2: people person. I'm the numbers guy. Give me a spreadsheet,
1:06
Speaker 2: let me look at the numbers. The numbers will tell
1:08
Speaker 2: me the story that we can then go have the
1:11
Speaker 2: conversation with the people about. But trying to manage people
1:18
Speaker 2: is not my thing at all, and I realize that,
1:22
Speaker 2: and I think people need to realize, what are you
1:23
Speaker 2: good at, what do you love doing, what do you
1:27
Speaker 2: not like doing? Get someone else to do the parts
1:30
Speaker 2: you don't like to do, because if you put me
1:33
Speaker 2: in charge of people, it would not be pretty. You
1:36
Speaker 2: put me in charge of numbers, We're gonna make lots
1:39
Speaker 2: of money. It's that simple. So do what you love
1:44
Speaker 2: and figure out that that perfect fit for you and
1:50
Speaker 2: understand what your skills are and the same thing for
1:52
Speaker 2: your people, right, we always say, and I know you've
1:56
Speaker 2: got the traction book behind you as well. We want
2:00
Speaker 2: the right people in the right seats who want to
2:05
Speaker 2: do the work and have the capabilities, and that's going
2:09
Speaker 2: to show up on the P and L. I'm going
2:12
Speaker 2: to see your numbers, and I'm going to see how
2:15
Speaker 2: efficient your people are and how that's all working. And
2:20
Speaker 2: then we can also talk about when is the appropriate
2:23
Speaker 2: time to hire people or when is the appropriate time
2:27
Speaker 2: to outsource people or create that mix, Because I think
2:31
Speaker 2: too often people do the field of dreams. They build
2:35
Speaker 2: it hoping they will come, and then you're negative on
2:39
Speaker 2: your numbers and the question is do you have enough
2:42
Speaker 2: money to survive until they show up?
2:45
Speaker 1: Mm hmm yeah, no, I mean this is really important.
2:48
Speaker 1: I literally got a call right before this. I was
2:50
Speaker 1: talking to the president of a company and you know,
2:53
Speaker 1: he's a strategic visioneering guy. Amazing, but some of the
2:56
Speaker 1: parts and he has to know you has to know
2:58
Speaker 1: the numbers. But you know, we were talking about like
3:00
Speaker 1: I was getting I was getting out of the budget
3:01
Speaker 1: some of the things. Is it's just really draining because
3:04
Speaker 1: he's like, yeah, I'm the visionary guy. I'm like I
3:06
Speaker 1: have to do this. So it's like understanding. Like and
3:09
Speaker 1: then we were talking about like doing things on your
3:11
Speaker 1: team that was like I shouldn't be doing some of
3:13
Speaker 1: these things. So you're right, Rocky, it's like really getting
3:15
Speaker 1: people in the right place in your focus and know that.
3:18
Speaker 1: And that's why we have people like you walking on
3:19
Speaker 1: the business roundtable because we want to have other business
3:21
Speaker 1: owners and leaders understand who can I rely on, who
3:26
Speaker 1: can I talk to, who can be a trusted strategic
3:29
Speaker 1: advisor to me in areas that I'm not as strong
3:32
Speaker 1: on or further along on the journey. Right.
3:35
Speaker 2: So I'm the integrator numbers guy who knows how to
3:38
Speaker 2: put an anchor on a visionary by showing them the outcome.
3:42
Speaker 2: I say, based on what you're telling me and what
3:45
Speaker 2: your your goals are, here's the math and here's the outcome.
3:51
Speaker 2: Are you okay with this outcome? And a lot of
3:54
Speaker 2: times they'll look at that and go, no, that's not
3:57
Speaker 2: worth it, like okay, Or other times I'd be like,
4:02
Speaker 2: you know, you got these six ideas. This one is
4:07
Speaker 2: the one where you work the least and you make
4:09
Speaker 2: the most. See, I don't believe in grinding it out.
4:12
Speaker 2: I'd rather work as little as possible and make as
4:14
Speaker 2: much as possible. Sorry, I'm lazy.
4:18
Speaker 1: Work smarter, not harder, Right.
4:21
Speaker 2: And that's the key. And you can do that when
4:24
Speaker 2: you when you have objective, real measurements to to be
4:31
Speaker 2: able to do that. You know, we say judge by results.
4:34
Speaker 2: Sometimes they're harsh, yeah, but they should always be fair.
4:38
Speaker 1: Yes, absolutely absolutely, uh and and so yeah, I mean
4:44
Speaker 1: judge the results. What again, what are you trying to
4:46
Speaker 1: achieve here? What's your what's your desired how come? And
4:49
Speaker 1: then you said, like you said, and you you can
4:51
Speaker 1: run the numbers, you know. One of the things I've
4:55
Speaker 1: just jumping into some of this the challenges that I'm seeing,
4:58
Speaker 1: particularly in the East industry that I work with, is
5:01
Speaker 1: like you said, Iraqi, obviously cash flow is a huge one,
5:07
Speaker 1: you know, getting paid on time? When do I There's
5:09
Speaker 1: a lot of things here, like when do I hire
5:11
Speaker 1: the right people at the roy do I bring them
5:13
Speaker 1: on right? I've noticed, for example, a lot of them
5:17
Speaker 1: struggle with accurate forecasting, like Rocky, meaning like how am
5:24
Speaker 1: I going to get you know, hire the right people
5:26
Speaker 1: right and have the cash flow to support those people?
5:31
Speaker 1: When do I know that? When do I know to
5:33
Speaker 1: toggle that? What would you say to a business owner
5:37
Speaker 1: that's like what they should be looking at, Like it's
5:40
Speaker 1: like you said, hiring is a good, good example of
5:42
Speaker 1: a challenge that we see.
5:43
Speaker 2: You know, Well, so I think the first thing is
5:47
Speaker 2: a create a forecast. Not everyone does, but b I
5:53
Speaker 2: want to know the numbers behind the forecast. So if
5:56
Speaker 2: you tell me you're going to have five million in revenue, Okay,
5:59
Speaker 2: what's your average contract it's five thousand dollars? Well, if
6:03
Speaker 2: it's the average contracts five thousand dollars. You got five
6:06
Speaker 2: million in revenue. I don't know what that that's like
6:09
Speaker 2: one thousand customers, right, So if you're gonna have a
6:12
Speaker 2: thousand customers, how many do you have today? Two hundred? Well,
6:17
Speaker 2: how are we going from two hundred to one thousand?
6:19
Speaker 1: Yep?
6:20
Speaker 2: Like, what is the plan to do that? Oh, we're
6:23
Speaker 2: we're gonna we're gonna put out a marketing program and
6:26
Speaker 2: we'll have that in six weeks. Really have you ever
6:29
Speaker 2: done that before?
6:30
Speaker 1: Right?
6:31
Speaker 2: Do you have it? Tell me something? Why are your
6:34
Speaker 2: clients buying from you? Well? I'm not sure mm hmm.
6:41
Speaker 2: And and so we want to know that each part
6:45
Speaker 2: of that math equation works and we do the math
6:49
Speaker 2: to say it's reasonable unreasonable. A lot of people love
6:53
Speaker 2: to make these big, audacious goals.
6:56
Speaker 1: Yep.
6:56
Speaker 2: I'll be honest. Ninety nine percent of the time they
6:59
Speaker 2: don't happen. You get disappointed. I'd rather have Hey, we've
7:05
Speaker 2: got two hundred clients. A reasonable growth for us is
7:09
Speaker 2: maybe twenty five percent, so fifty more people. What marketing
7:14
Speaker 2: has worked in the past? Where can we apply dollars
7:17
Speaker 2: to marketing to get those types of people who are
7:21
Speaker 2: our best clients? You know, out of those two hundred,
7:25
Speaker 2: we might find one hundred of them not really that great,
7:30
Speaker 2: and a hundred of them are okay, but forty of
7:34
Speaker 2: them are phenomenal. Well, who are the forty that are phenomenal?
7:38
Speaker 2: And did we leave money on the table at five
7:40
Speaker 2: thousand dollars? Could they have paid us twenty oh? So
7:44
Speaker 2: maybe we don't need to work more, Maybe we don't
7:47
Speaker 2: need more clients. Maybe we need to focus on the
7:50
Speaker 2: forty and find more like the forty in sake about
7:54
Speaker 2: everyone else? And those were all the decisions that have
7:57
Speaker 2: to be made. But that's what the or does they go, Hey,
8:01
Speaker 2: let's actually before we move, pick the right course, check
8:07
Speaker 2: the weather right, and part of that is your cash flow.
8:13
Speaker 2: Plan out the cash flow, and then we have a
8:16
Speaker 2: strategic point. We need to hire somebody. But in order
8:20
Speaker 2: to hire somebody, we need to hit this milestone. So
8:24
Speaker 2: we're gonna do it in six months. And at six
8:26
Speaker 2: months we sit down and we look, do we hit
8:28
Speaker 2: the milestone? No, but then we're not hiring the person.
8:33
Speaker 2: Or four months, Hey, we hit the milestone early. We
8:36
Speaker 2: got to hire the person. Okay, good thumbs up. Let's
8:41
Speaker 2: go hire the person because you hit the milestone, but
8:44
Speaker 2: it's also understanding we One of the things we like
8:47
Speaker 2: to look at is labor efficiency, which is for every
8:53
Speaker 2: dollar in you spend on payroll, how many dollars engross
9:01
Speaker 2: profit do you actually get back? And by knowing that number,
9:08
Speaker 2: we know how efficiencier employees as a whole are. Yeah,
9:14
Speaker 2: and then if we don't see a great number or
9:16
Speaker 2: we don't have a good benchmark, then we start to
9:19
Speaker 2: work down and say where is the problem occurring? And
9:23
Speaker 2: then you got to come in and fix the people.
9:25
Speaker 2: The people, right, that's your job.
9:27
Speaker 1: Yeah, yeah, all the other people. No, you're you're bringing
9:30
Speaker 1: up some great issues. Actually I want to dig a
9:32
Speaker 1: little bit more into this. Yeah, because one of the
9:34
Speaker 1: things I've seen, particularly you know, I met before, and
9:37
Speaker 1: I work with a lot of small business owners typically
9:40
Speaker 1: under you know, probably under six or seven million in
9:44
Speaker 1: annual revenue. Let's just use that as a rough number. Uh.
9:47
Speaker 1: And so there there's what I've found is working with
9:50
Speaker 1: some of these firms what you said, you just brought
9:52
Speaker 1: up good point about clients. Have they did an analysis
9:57
Speaker 1: of even their the percentag clients and how much is
10:01
Speaker 1: weighted and you know, you may have a lot of clients,
10:03
Speaker 1: but maybe that one client is one or two clients
10:05
Speaker 1: is a majority of your income. Right, what would happen?
10:10
Speaker 1: Right if that something happens to that that that client,
10:14
Speaker 1: they lose contracts or whatever. Right are you looking at
10:18
Speaker 1: those variables and preparing for like how do you offset
10:21
Speaker 1: the market changes? Right? There's shift. I was here in
10:25
Speaker 1: California in two thousand and nine when when the stock
10:28
Speaker 1: market went down and a lot of the private money,
10:31
Speaker 1: private projects, they'll just completely dry it up. If you
10:35
Speaker 1: had any of those projects, those contracts just stopped. Everybody
10:37
Speaker 1: just held onto their money. And some companies are like,
10:40
Speaker 1: we we just cut our cash. LIW is cut off.
10:43
Speaker 1: You know what do we do?
10:47
Speaker 2: And that happened during COVID for some companies. M hm.
10:51
Speaker 2: You have to you have to make quick, efficient decisions
10:56
Speaker 2: in situations like that and be a to pivot because
11:01
Speaker 2: that's what it is. Now. If I see a client
11:03
Speaker 2: and they've only got two major customers, the first thing
11:08
Speaker 2: we're going to focus on is a how do we
11:12
Speaker 2: take two to five even if they're not all at
11:16
Speaker 2: the same size, but how do we start building those relationships?
11:21
Speaker 2: Because it might take a year, two years, three years,
11:24
Speaker 2: but let's start planting those trees today so that tomorrow
11:29
Speaker 2: they're built. Don't wait until they leave, because that's difficult.
11:34
Speaker 2: The second thing is you really need to understand where
11:37
Speaker 2: your client is. So I'm asking my client, hey, what
11:42
Speaker 2: are you seeing in your industry? What's going on, what
11:46
Speaker 2: are your concerns, what's on your radar? Because for example,
11:53
Speaker 2: let's say I don't deal with private money, but my
11:55
Speaker 2: client is dealing with private money. I want to know
11:58
Speaker 2: what's going on in the private money space because if
12:01
Speaker 2: something's going on there. And I think you talked architecture,
12:06
Speaker 2: commercial real estate, I know what commercial office space is
12:09
Speaker 2: doing these days. It ain't pretty. Knowing that knows where
12:14
Speaker 2: my client is sitting, and it tells me now my
12:19
Speaker 2: risk because if they can't pay you, you're out. And
12:23
Speaker 2: so you've got to be aware of that and being
12:26
Speaker 2: intentional with that. I think too often, especially visionaries, they
12:30
Speaker 2: close their eyes.
12:32
Speaker 3: Yeah, and so you've got to know that, and you've
12:37
Speaker 3: got to be able to pivot quickly, setting deadlines and saying, hey,
12:41
Speaker 3: if the growth doesn't happen, or if things aren't happening,
12:45
Speaker 3: what changes do we need to make to people.
12:48
Speaker 2: It's always horrible to let people go. Sometimes it's actually good,
12:54
Speaker 2: especially if they hate their job.
12:55
Speaker 1: Right right, right? Yeah, I mean another thing you brought
13:01
Speaker 1: up to in this and I think this is really important.
13:04
Speaker 1: I feel like when the business owners are they're they're
13:06
Speaker 1: trying to figure out, like you said, they struggle with
13:10
Speaker 1: how to come up with the efficiency of the employee,
13:13
Speaker 1: like what what's my all of my direct and overhead costs?
13:19
Speaker 1: And what should I charge, especially because I deal with
13:23
Speaker 1: a lot of consultants, Right, what do I charge? What's
13:26
Speaker 1: the markup that I make on said roll?
13:30
Speaker 3: Right?
13:30
Speaker 1: It's sometimes they feel like it's a I feel like
13:32
Speaker 1: it's they're just they're just guessing on and you know,
13:36
Speaker 1: what is their standard commercial rates? What do they need
13:39
Speaker 1: to make to make like you said profit Rockey.
13:43
Speaker 2: To me, I use markup as a minimum mm hmm.
13:48
Speaker 2: But I really don't want to use a markup number
13:52
Speaker 2: unless you're forced to because that's your business model, in
13:55
Speaker 2: which case I'm gonna ask you, how do we change
13:57
Speaker 2: your business model where you're actually providing value, yes, instead
14:02
Speaker 2: of providing labor, Because if you're stuck in the labor situation,
14:06
Speaker 2: you're always going.
14:07
Speaker 1: To get squeezed yep.
14:09
Speaker 2: Whereas if you're providing value in insights, you can charge
14:13
Speaker 2: ten times. And I think it's building your business towards
14:20
Speaker 2: that is, how do I change my mindset around it?
14:24
Speaker 2: And how do I change because what's going to happen
14:27
Speaker 2: your competitor they didn't look at their financials. You know,
14:31
Speaker 2: they're only at let's say half a million bucks and
14:35
Speaker 2: they want to grow to a million. So we're going
14:37
Speaker 2: to get five hundred thousand and we're going to undercut
14:39
Speaker 2: you by forty percent. You're going how are they even
14:43
Speaker 2: staying in business? And the reality is they're not. But
14:47
Speaker 2: if you aren't providing value or you're not showing it,
14:50
Speaker 2: if you're in the race to the bottom game, yes, screwed. Yes,
14:54
Speaker 2: And so I think it's it's being intentional with that.
14:58
Speaker 2: And these are not all surprised. Most of this stuff
15:02
Speaker 2: we can predict. I can predict cash flow. I can
15:05
Speaker 2: predict when a client is going to pay you based
15:07
Speaker 2: on the terms you gave the client. And did you
15:12
Speaker 2: turn into a bank and forget you were a bank? Right? Like?
15:17
Speaker 2: These are all things And you can even look at
15:19
Speaker 2: a client and say, how does that client normally pay?
15:25
Speaker 2: And how do I also structure my payments to protect myself.
15:30
Speaker 2: So some people are billing, let's say over a project, right,
15:36
Speaker 2: it may be a percentage up front and then different milestones.
15:41
Speaker 2: Are the milestones dependent on you? Are the milestones dependent
15:45
Speaker 2: on the client or the what happens when the client
15:49
Speaker 2: doesn't do their part so that you can hit the
15:52
Speaker 2: milestone and you were expecting the money and you've got
15:55
Speaker 2: the employee there and they're they're dragging the boat like
16:01
Speaker 2: changing your contract. And then one of the things we
16:05
Speaker 2: like to do, which is super powerful, is the last
16:08
Speaker 2: payment should be very minuscule because if things get caught up,
16:13
Speaker 2: or they're arguing, or they're in trouble, or they don't
16:18
Speaker 2: you know, they change direction. Even though you know you're
16:21
Speaker 2: eighty nine percent through the project. Yeah, if you've got
16:24
Speaker 2: to walk away at the end and you lose five percent,
16:28
Speaker 2: you're like, you know what, cut the loss? Move along?
16:31
Speaker 1: Yeah.
16:32
Speaker 2: Right, If you end the project and half of your
16:34
Speaker 2: billing is out there, you're like, oh my god, and
16:37
Speaker 2: then it becomes this battle.
16:39
Speaker 1: Mm hmm. No, that's that's a great point. I think
16:43
Speaker 1: you hit on a couple of things that are really important.
16:46
Speaker 1: Look at your contracts. I remember one of the one
16:49
Speaker 1: company I was with, Rocky switching to having an upfront
16:55
Speaker 1: like retainer deposit, which was never done before. To what
16:57
Speaker 1: you're what you're saying was a revolutionary thing. We would
17:00
Speaker 1: ask for thirty to fifty percent upfront, especially it was
17:03
Speaker 1: a new client, never worked with them before, to your point,
17:06
Speaker 1: because then you have got casolin now to sustain you,
17:08
Speaker 1: and then that goes to that final payment like you
17:11
Speaker 1: said at the end. And what was surprising is there
17:15
Speaker 1: wasn't much pushback when we actually put that in. The
17:18
Speaker 1: people were like, I mean, some people would push back
17:20
Speaker 1: a little bit, but someone were like, Okay, I guess
17:22
Speaker 1: that's what it costs to work with you. Okay, that's
17:25
Speaker 1: all it was. That's all it took.
17:27
Speaker 2: You know, I want a business where money is coming
17:31
Speaker 2: in before money is going out.
17:33
Speaker 1: Mm hmm.
17:35
Speaker 2: But but and be very careful on this. Some business
17:40
Speaker 2: owners spend money that's coming in that they haven't earned. Yes,
17:44
Speaker 2: so we don't do that. So it's okay to get
17:49
Speaker 2: money up front, just you gotta you got to actually
17:53
Speaker 2: earn it though to spend.
17:54
Speaker 1: It, absolutely absolutely no, that's super important. You got you
17:58
Speaker 1: can't rob Peter to paper. Also to speak right, do
18:01
Speaker 1: not do that. You'll find yourself in a whole real quickly.
18:05
Speaker 1: You know. The other thing you mentioned and I only
18:08
Speaker 1: see this is I see this occasionally. I particularly have
18:11
Speaker 1: seen this in and I do a lot of work too.
18:13
Speaker 1: I'm rocky with clients that are worked in the public sector,
18:15
Speaker 1: and so again sometimes it's harder to negotiate those contracts.
18:18
Speaker 1: But again just being aware a lot of those times,
18:21
Speaker 1: like you said, the milestone was a big one that
18:23
Speaker 1: I saw mistakes being done or it wasn't clear, and
18:25
Speaker 1: I think, you know, if if it's open ended. You
18:30
Speaker 1: you brought this good point, it's like who is this
18:32
Speaker 1: dependent upon? Because you could get yourself in a real bind.
18:37
Speaker 1: Is like, we don't agree on that what the milestone is.
18:40
Speaker 1: So now we've entered into a contract. Right, we're supposed
18:43
Speaker 1: to do the work, and now we can get hit
18:45
Speaker 1: up for not non performing work. Hey, you're not you're
18:49
Speaker 1: violating the terms of the contract and you're saying, but
18:51
Speaker 1: I need to be paid to get So you're a
18:54
Speaker 1: real challenge, right, a real bind. You're not careful.
18:59
Speaker 2: The other half of that is scope creep going the
19:02
Speaker 2: opposite way. Oh, well, can you do this and this
19:04
Speaker 2: and this too, and just because it's easy for you, yep,
19:09
Speaker 2: doesn't mean you should do it for free.
19:12
Speaker 1: Mm hmm. That's and I think that's that rocky is both.
19:16
Speaker 1: I mean, that's where I come on with your side
19:19
Speaker 1: of it and the people's because I work with a
19:21
Speaker 1: lot of project managers, right, because they want to please
19:24
Speaker 1: the client. Right, they want to like, I want to
19:26
Speaker 1: make it.
19:27
Speaker 2: But let me ask you a question. Right, your project
19:30
Speaker 2: manager is managing the project, but the employee is dealing
19:34
Speaker 2: with the client and doing the work, and they're like,
19:36
Speaker 2: can you do this? This and this? Does the employee
19:39
Speaker 2: even know what scope is?
19:42
Speaker 1: Great question?
19:43
Speaker 2: Right? Do they know what's extra? Do they know what
19:47
Speaker 2: to say in that situation? Have you trained them to say,
19:53
Speaker 2: let me check with the project manager and I'll get
19:57
Speaker 2: back to you on that, right, instead of saying sure,
20:00
Speaker 2: I'll do that. Hey, they get paid a salary, what
20:03
Speaker 2: do they care? Right? They don't know Your employees, chances are,
20:11
Speaker 2: are not financially savvy. They have no idea how you
20:15
Speaker 2: make profit. Right, they don't know what gross profit is.
20:19
Speaker 2: All they know is, hey, you got a million dollar
20:21
Speaker 2: contract and I'm only making one hundred grand. They don't
20:25
Speaker 2: realize that you know, there's twelve of them, and then
20:28
Speaker 2: there's the overhead you know this, that and everything else
20:33
Speaker 2: that goes with it. So you got to train all
20:36
Speaker 2: of that and you have to show them and you've
20:40
Speaker 2: got to create safeguards so that those people know what
20:46
Speaker 2: to do in those situations.
20:48
Speaker 1: Mm hmm. Yeah, I mean very true. And it's it's
20:53
Speaker 1: in my experienced, Rockey. It's it's not a one time.
20:56
Speaker 1: It's like, hey, we're gonna have a project management class
20:57
Speaker 1: one time. Here's all the things you need to know,
21:00
Speaker 1: Like this is not a it's an ongoing thing, right
21:03
Speaker 1: of learning, education understanding. Yeah, I uh. To me, I
21:10
Speaker 1: I it was my eyes were opened. I think, what
21:13
Speaker 1: for as a project manager in Rocky when, like you said,
21:16
Speaker 1: coming in and then saying like, hey, here's the milestones
21:19
Speaker 1: that we're shooting for, you have to be really clear
21:21
Speaker 1: what's the profitability we're looking at? What are the what
21:24
Speaker 1: you know? What how we how are we staying in budget?
21:27
Speaker 1: All of these things? And so when I when I
21:29
Speaker 1: my feet held had to be held to the fire
21:30
Speaker 1: and I had to report to that, that was like,
21:32
Speaker 1: oh man, I'm gonna buy better. Yes, but if you
21:36
Speaker 1: don't have those those those clear metrics or how do
21:38
Speaker 1: you get them? That's one thing I've found, Rocky, what's
21:40
Speaker 1: your experience here, because sometimes companies, you know, let's just uh,
21:46
Speaker 1: they use a it's not clear their financial software. It's
21:50
Speaker 1: just hard to get to. It's hard to understand, hard
21:52
Speaker 1: to see. They're not running reports, they're not getting clear
21:55
Speaker 1: you know. So how do you you know?
21:57
Speaker 2: So there's there's two different accounting systems. A lot of
22:02
Speaker 2: times there's their actual accounting system where the accounting is
22:07
Speaker 2: taking place, but then there might be another accounting system,
22:12
Speaker 2: which is the people management system. So for example, we
22:16
Speaker 2: have a project. When we bid the project, we thought
22:19
Speaker 2: it would take one hundred hours, you know, twenty of this,
22:22
Speaker 2: forty of that, thirty of this, ten of that. Are
22:26
Speaker 2: you measuring the actual time of the people on that project?
22:34
Speaker 2: And is it in line with budget? Are they over
22:38
Speaker 2: budget under budget? Is there efficiency there? And did we
22:44
Speaker 2: actually properly bid this to begin with? And if you
22:49
Speaker 2: don't know all of those things, then that's a problem.
22:53
Speaker 2: Now there's a lot of software that people will use
22:56
Speaker 2: to track that part of it, and so what you've
22:59
Speaker 2: got to do is the data from there and grab
23:03
Speaker 2: the things, and then you've got to add the financial
23:06
Speaker 2: data on the other side to put it together to say, hey,
23:11
Speaker 2: here's what the time was. Now we've applied the cost,
23:15
Speaker 2: and we've applied our overhead, and we've applied this, that
23:19
Speaker 2: and the everthing, and now we know this project was
23:23
Speaker 2: or wasn't profitable, and then we can also understand why,
23:29
Speaker 2: so that the next time we go into a project,
23:31
Speaker 2: you know that you know and for me, depending on
23:35
Speaker 2: the client and what they're doing, how much of it
23:38
Speaker 2: is standardized and how much is custom and are you
23:43
Speaker 2: taking that into Are you clear with that? I'm surprised
23:49
Speaker 2: how many people have a lot of standardized stuff that
23:53
Speaker 2: they do custom, meaning they don't actually have blocks to
23:58
Speaker 2: put the stuff in. So that if you're doing repetitive
24:03
Speaker 2: stuff or there are repetitive blocks, then you should have
24:08
Speaker 2: that all systematized. And the other thing is laying out
24:13
Speaker 2: the entire project with the milestones and tracking each part
24:20
Speaker 2: of the milestones. You're going to start to see which
24:23
Speaker 2: people are rowing and which people are anchors.
24:28
Speaker 1: Yes, that's a I mean, so it's interesting you say this,
24:33
Speaker 1: Rocky because a company I worked with previously, they they
24:38
Speaker 1: were using a software basically it was there's there's different versions.
24:43
Speaker 1: But I think you're you're bringing up a good point.
24:45
Speaker 1: I've worked with different kind of enterprise resourcers planning software
24:48
Speaker 1: over the years. In fact, I was a user group
24:50
Speaker 1: leader here in southern California for one called del Tech.
24:53
Speaker 1: They had vision and in his year of use. Anyway,
24:56
Speaker 1: it doesn't really matter the particular one. But what I'm
24:58
Speaker 1: what I hear you say is so Bard and Rocky.
25:00
Speaker 1: Sometimes the business owners, i've heard them just using like
25:03
Speaker 1: let's just use quick books, but they're not using the
25:05
Speaker 1: project management aspect of it. They're just using the, like
25:09
Speaker 1: you said, the accounting side, which is great, it's helpful.
25:12
Speaker 1: But if you're if if and I work with a
25:14
Speaker 1: lot of project based you know, environmental cult is project based.
25:18
Speaker 1: So we're not selling you know, widget like you know,
25:23
Speaker 1: physical things, it's our labor are deliverables. That's what that
25:26
Speaker 1: That is the product. So if you're not, like you said,
25:30
Speaker 1: rock if you're not clearing that, how do you break that?
25:31
Speaker 1: I don't know. Sometimes people even have what I call
25:33
Speaker 1: a work breakdown structure, like how are you? How are you?
25:37
Speaker 1: Is this just a big lump thing? How are we
25:39
Speaker 1: understanding this, like you said, and so it's a big
25:42
Speaker 1: ball of yarn, like how do I detangle this? You know, I.
25:49
Speaker 2: Know this sounds complicated, but more often than not, when
25:52
Speaker 2: you just break it down to simplicity, it becomes easy.
25:56
Speaker 2: And then with experience you will constantly adjust. So at
26:03
Speaker 2: the in the beginning, we're going to guess, and then
26:05
Speaker 2: we're going to test and see how true were we
26:09
Speaker 2: and if things are way off, it's a question of
26:11
Speaker 2: how did we get way off? And how do we
26:15
Speaker 2: prevent that in the future. Is this constant evolution. You're
26:18
Speaker 2: constantly evolving and and I think the biggest problem, especially
26:22
Speaker 2: for small businesses and even big businesses because we'll talk
26:26
Speaker 2: about the other half of that, you have disparate systems,
26:31
Speaker 2: and if you don't have a way to take the
26:33
Speaker 2: information from all these different systems and have one clear dashboard,
26:39
Speaker 2: which is what we create for people, one clear dashboard
26:43
Speaker 2: that shows you are your systems running thumbs up or
26:47
Speaker 2: thumbs down. Because as long as they're running thumbs up,
26:50
Speaker 2: I don't have to dig. When they go thumbs down,
26:53
Speaker 2: I have to go dig. But you need a good, clear,
26:58
Speaker 2: proper dashboard to tell you things are thumbs up or
27:02
Speaker 2: thumbs down, and how it's going down to the employee level.
27:06
Speaker 2: The other thing is, and I see this a lot
27:09
Speaker 2: with larger companies. Whatever the metric is that you want,
27:12
Speaker 2: people will give it to you, especially if they're logging
27:16
Speaker 2: things into systems. When it comes to white collar time tracking,
27:22
Speaker 2: they're going to do what you ask them to do.
27:25
Speaker 2: And if you don't measure to say, hey, you were
27:28
Speaker 2: supposed to do this in ten hours, there's forty two
27:31
Speaker 2: hours build to it. What happened. And you're the people guy,
27:39
Speaker 2: so you know this. I would bet you that your
27:41
Speaker 2: biggest anchors are the sweetest, nicest people right where the
27:46
Speaker 2: guy you hate who drives you up the wall is
27:49
Speaker 2: actually the one who did the ten hours of work
27:52
Speaker 2: in four hours. Because they're actually getting crap done.
27:58
Speaker 1: It's a good I mean, I wouldn't sa always, but
28:01
Speaker 1: it could be. You you have certain people that are
28:04
Speaker 1: are more object oriented task oring, and you have more
28:06
Speaker 1: people that are more just there that they can spend time.
28:10
Speaker 1: In fact, I was talking to a client about this yesterday.
28:12
Speaker 1: If you're not because this is a this is a
28:13
Speaker 1: common thing I've seen in delegation too. Raffie like, hey,
28:17
Speaker 1: just get it done, and they're not clear like you
28:18
Speaker 1: said earlier, they're not clear on the scope how much
28:20
Speaker 1: time do I have? And the project manager they may
28:24
Speaker 1: actually know, they're like they can get it done. Like
28:25
Speaker 1: you said, it's a four hour task, and maybe they
28:28
Speaker 1: even budgeted six hours because they're like, ah, you know
28:31
Speaker 1: you have I'm going to get it done, right, I'll
28:33
Speaker 1: get it. I can get in four hours and they
28:35
Speaker 1: but they don't tell the person, hey, this is the task,
28:37
Speaker 1: get it done, and then they spend ten hours like
28:39
Speaker 1: well you didn't tell me. Like I just kept working
28:42
Speaker 1: on it, and I felt like I could keep working
28:44
Speaker 1: on it, right, Well, yeah, we only have this much.
28:47
Speaker 1: It's not like unlimited. You know. Well I could want
28:49
Speaker 1: to work on this a little bit more and I
28:51
Speaker 1: could do this with this. I'm like, we're not looking
28:53
Speaker 1: for perfection here.
28:55
Speaker 2: No. No, people are very good at being busy. Everyone
29:00
Speaker 2: today is busy. That's wonderful. Are you productive?
29:04
Speaker 1: Yep?
29:05
Speaker 2: I don't care that you're busy. I'd rather you be
29:11
Speaker 2: less busy and think more and build out systems and processes.
29:17
Speaker 2: And every business can have systems and processes. And I
29:20
Speaker 2: think a lot of people don't want to build them
29:22
Speaker 2: because they take time and they're no fun. But at
29:27
Speaker 2: the end of the day, that's what makes you profitable.
29:32
Speaker 2: Your businesses should be a well oiled machine, and you
29:35
Speaker 2: should be irrelevant as the business owner in the daily operations.
29:40
Speaker 2: That's when value goes up, fun goes up, and you
29:43
Speaker 2: get to have fun and enjoy the fruits of your labor.
29:46
Speaker 2: That's not the case, then we've got operational problems. And
29:51
Speaker 2: I can tell you the numbers, but David's going to
29:53
Speaker 2: have to fix the people.
29:55
Speaker 1: Yeah. No, you bring up some good points here. There's
30:00
Speaker 1: like this evolution that I see especially with business business
30:03
Speaker 1: own business owners particularly, and I see it a little
30:07
Speaker 1: bit in the maybe two to three million dollars and
30:10
Speaker 1: now in your revenue. They're still very involved with the business,
30:12
Speaker 1: but like you said, you've got to continually step back,
30:15
Speaker 1: and that's hard for them to separate themselves from the business.
30:18
Speaker 1: At least I've seen that and get a little bit
30:21
Speaker 1: more objective, like you said. And what I found, Rocky
30:23
Speaker 1: is they're doing so much in the business. It's like
30:28
Speaker 1: there's a I don't know, maybe you can speak a
30:30
Speaker 1: little bit to the mindset and this profit first, this
30:32
Speaker 1: idea of profit first, and they're doing in there and
30:35
Speaker 1: so they can't even see it like how to be
30:37
Speaker 1: more profitable. They don't even think like I don't want
30:39
Speaker 1: to quote unquote spend money on developing processes or systems.
30:43
Speaker 1: They don't see that as an investment or why I
30:45
Speaker 1: don't want to use this. They're you know, the software,
30:48
Speaker 1: like you've talked about, maybe this accounting, the project management
30:51
Speaker 1: based software, which will actually help them in the long run,
30:54
Speaker 1: but they don't see the value in investing and how
30:57
Speaker 1: that contributes to ultimately being more profitable.
31:00
Speaker 2: I think part of it is the one to three
31:03
Speaker 2: million range is what I call the trap. And in
31:07
Speaker 2: that range, you're small enough that the business owner is
31:10
Speaker 2: still wearing a lot of hats because they don't have
31:14
Speaker 2: enough revenue to fill all the seats, and so it's
31:19
Speaker 2: a struggle. At that point. They still they're now starting
31:26
Speaker 2: to experience all of the problems because things that were little,
31:31
Speaker 2: you know, when you were at half a million, have
31:34
Speaker 2: now you know, at three million, they're six times the problem,
31:36
Speaker 2: and and it's six times six, so it's actually thirty
31:39
Speaker 2: six times the problem or or even more. And I
31:45
Speaker 2: think they don't know where to start or they get
31:47
Speaker 2: overwhelmed and they're like, I don't, I can't, I can't
31:50
Speaker 2: do anything. You know what, you almost got to let
31:52
Speaker 2: the business burn at that point. You got to you
31:55
Speaker 2: gotta let the the emergencies just kind of burn out,
32:03
Speaker 2: and you've got to step back. The biggest thing we
32:06
Speaker 2: tell business owners is what do you love and what
32:10
Speaker 2: do you hate? And let's start with the hate. Because
32:16
Speaker 2: whatever you hate doing, whatever drains you, you are not
32:18
Speaker 2: going to do. So that's the first place we're going
32:21
Speaker 2: to start getting people who love what you don't like
32:27
Speaker 2: and start putting him into those seats. And today, more
32:30
Speaker 2: than ever, there's tons of what we call fractional help,
32:35
Speaker 2: where you can hire great talent for a fraction of
32:40
Speaker 2: the money to help you get through these things or
32:43
Speaker 2: to help you do this until you get to that
32:47
Speaker 2: point where you can actually hire a person to do it.
32:51
Speaker 2: And I think I don't think people realize that that
32:56
Speaker 2: help is available. And when you actually start to compare
33:02
Speaker 2: the cost of having a full time person to that,
33:05
Speaker 2: it's like a no brain er decision, right, It's an
33:07
Speaker 2: easy decision. Plus, if you don't like the way it's going,
33:11
Speaker 2: it's an easy cord to cut right, no offense. But
33:14
Speaker 2: you know, yeah, at this didn't work bye.
33:18
Speaker 1: Like yep mm hmm. Yeah.
33:23
Speaker 2: And it's it's easier emotionally to do that for whatever reason. Yeah,
33:29
Speaker 2: I think it's harder when you've got people there permanently
33:33
Speaker 2: all the time.
33:34
Speaker 1: Yeah, oh yeah, you feel like that's a big burden.
33:37
Speaker 1: I mean they always say, you know, hiring your first employee, right,
33:41
Speaker 1: it's like, oh man, I got this burden. And and
33:44
Speaker 1: and you think, you know, as much as the best employee.
33:48
Speaker 1: You think that they're going to care as much as
33:49
Speaker 1: you are, and it's just not It's just not right, Rocky.
33:51
Speaker 1: I mean it's just I mean, they care, but it's
33:54
Speaker 1: ultimately it's a job for them. You know, it's not
33:58
Speaker 1: their it's not their business, you know. And this is
34:03
Speaker 1: something I see a business owner struggle with too, Rocky
34:06
Speaker 1: as far as like retaining people and what does that
34:09
Speaker 1: look like and trying to I mean number one, I
34:13
Speaker 1: want to go back to just I agree that's what
34:16
Speaker 1: I'm a fractional chief people officer if you will coming
34:19
Speaker 1: in there and wait. And I realized that with a
34:21
Speaker 1: business owner, because yeah, if you have to commit payroll
34:24
Speaker 1: every month, benefits all of this stuff. It's a heavy burden.
34:29
Speaker 1: And so if you have that flexibility, financial flexibility to
34:33
Speaker 1: kind of turn it on and off, be wise about that.
34:36
Speaker 1: But don't And also but don't be foolish in that.
34:40
Speaker 1: Like you're saying, find the things that you hate and
34:42
Speaker 1: bring in those that will help you so you can
34:45
Speaker 1: focus on where you're gonna have the most impact, right,
34:47
Speaker 1: most effectiveness.
34:49
Speaker 2: And part of the thing with building systems. So I'll
34:52
Speaker 2: give you an example. Email. We all deal with email.
34:56
Speaker 2: My first thought was there like, hire a VA to
34:58
Speaker 2: do your email. I'm like, okay, I'm going to hire
35:01
Speaker 2: a VA to do my email. So before I hire
35:05
Speaker 2: a VA, the first thing I said is, well, what
35:07
Speaker 2: am I going to tell the VA to do? How
35:09
Speaker 2: are they going to sort this? So I started looking
35:10
Speaker 2: at my email and I'm like, this is all crap.
35:14
Speaker 2: I'm not paying somebody money to look at crap. And
35:18
Speaker 2: I actually found a different way to do it that
35:21
Speaker 2: I use technology to auto sort my email. And I
35:27
Speaker 2: think I pay twenty bucks a month. I'm not going
35:29
Speaker 2: to get a VA for twenty bucks a month, right,
35:32
Speaker 2: And so the first thing is wherever possible, systematize. Only
35:40
Speaker 2: after systematization do we bring in people to run the system.
35:47
Speaker 2: And I think that's a big part of the key.
35:49
Speaker 2: And the reality is no one's going to do it
35:51
Speaker 2: as well as you. That's just life, and it's okay.
35:56
Speaker 2: But it's also finding the right people. If you hire
35:59
Speaker 2: the wrong people, the cost of that is massive. And
36:04
Speaker 2: I think what a lot of small business owners think
36:07
Speaker 2: is if I just pay them more, and that never works,
36:12
Speaker 2: like I mean, unless you're way out of appropriate paying more. Actually,
36:19
Speaker 2: I can't tell you how many business owners were like,
36:22
Speaker 2: my people are doing so well, we're doing well, I'm
36:24
Speaker 2: going to give them bonuses. And so they started handing
36:27
Speaker 2: out bonuses and three months later they're like, I don't
36:30
Speaker 2: know what happened, but my people all went south. And
36:33
Speaker 2: I think it has to do with intrinsic versus extrinsic motivation,
36:38
Speaker 2: which is not my place, that's yours. And and money
36:44
Speaker 2: doesn't always solve problems, sometimes it creates them.
36:48
Speaker 1: Yes, yes, no, you're you're right. It's understanding your team.
36:52
Speaker 1: What's what's the culture you're trying to create? Is this
36:54
Speaker 1: this is a this is one you and I talked
36:56
Speaker 1: about before we you know, with the podcast here, because
36:58
Speaker 1: there's this culture issue you've got to address in the company,
37:03
Speaker 1: and like you said, money is not it. And one
37:04
Speaker 1: of one of the challenges, particularly here in California where
37:07
Speaker 1: I'm at, is we have companies that hire employees. California
37:11
Speaker 1: is big on employees versus independent contractors. And for those
37:16
Speaker 1: you know, for those that you don't know that independent
37:18
Speaker 1: contractors are going to be able to have a higher
37:20
Speaker 1: rate because you don't. They have to have a higher
37:22
Speaker 1: burden of themselves that they've got to carry. But what
37:26
Speaker 1: you have is this weird dynamic where you have a
37:29
Speaker 1: company that have both or they hear people in the marketplace,
37:32
Speaker 1: and so you have an employee that's like, how come
37:34
Speaker 1: they're making twice when I'm making hourly? Well, is because
37:37
Speaker 1: you're an employee, not an independent contractor, right, And so
37:41
Speaker 1: there's a bit of education too, I found at least rocky,
37:45
Speaker 1: particularly for employees and new people new to maybe consulting.
37:50
Speaker 1: They don't understand all, like you said earlier in the podcast,
37:53
Speaker 1: all the things that the business owner has to cover, payroll, taxes,
37:56
Speaker 1: all benefits, all of these things. They have No they
37:59
Speaker 1: have no con this right, no literacy even about that.
38:04
Speaker 2: No, And I think one of the things I tell
38:08
Speaker 2: business owners is see what you can do to up
38:12
Speaker 2: the financial literacy of your employees. And I know, but
38:16
Speaker 2: that's not my job. I know it's not your job.
38:19
Speaker 2: But here's the thing. If your employees are financially struggling
38:25
Speaker 2: at home, even if they're making six figures, then they're
38:29
Speaker 2: going to struggle at work, right And if they can't
38:32
Speaker 2: afford the new tire for the car, then they're not
38:35
Speaker 2: showing up. And if they're not doing the right financial things,
38:39
Speaker 2: it's causing stress at home, which is going to bring
38:42
Speaker 2: stress into the work. And these are the types of
38:45
Speaker 2: things that you've got to look at to say, hey,
38:50
Speaker 2: how do we teach our people to be more financially savvy?
38:55
Speaker 2: Because at the end of the day, if they're more
38:57
Speaker 2: financially savvy, they'll bring that financial savvy into your business
39:02
Speaker 2: and they can help you with those questions. They do
39:05
Speaker 2: start to understand the costs and all these things involved,
39:10
Speaker 2: and then they start to make better decisions.
39:14
Speaker 1: Yeah, I mean it is. There's a whole host of
39:17
Speaker 1: ways you can educate them. I mean something as simple
39:21
Speaker 1: as like for example, Rocky, you know, charging even just
39:25
Speaker 1: fifteen minutes to a project versus just putting in an
39:28
Speaker 1: overhead category. It's like because they're like, well, it's just
39:31
Speaker 1: easier for me to lump it into an overhead category
39:34
Speaker 1: because it's like, uh, but it really is project related
39:37
Speaker 1: and documentation. And so there's fifteen minutes. That's one person,
39:40
Speaker 1: but you multiply that across multiple people, like you talked
39:43
Speaker 1: about earlier, like how you know what's our effectiveness in
39:48
Speaker 1: bringing in revenue to the company and just having them
39:52
Speaker 1: be a biased to that and then what I what
39:54
Speaker 1: I found Moroccyla you're talking about is like what motivates them?
39:57
Speaker 1: So like that they're like, that doesn't motivate me putting
40:00
Speaker 1: in that, But I'm thinking, hey, if but if you
40:02
Speaker 1: want to get this professional course or go travel on
40:04
Speaker 1: this location, and that would be meaningful to you that
40:07
Speaker 1: by doing this enables the company to provide that benefit
40:12
Speaker 1: to you. Right, it does.
40:15
Speaker 2: And you have to look at individual people's utilization because overall,
40:21
Speaker 2: let's just say your you know your goal is eighty
40:23
Speaker 2: percent and you're at seventy percent. Most people are just
40:27
Speaker 2: gonna go yell at everybody. You're like, wait a minute,
40:31
Speaker 2: dig in, oh, four people are at eighty two percent
40:35
Speaker 2: and one's hit thirty two mm hmm. Go deal with
40:39
Speaker 2: the thirty two and fix that and stop bothering the
40:43
Speaker 2: people who are doing it.
40:44
Speaker 1: Right m hm. And you need systems to be able
40:48
Speaker 1: to do that analysis right. You need to be able
40:52
Speaker 1: to go through and look at that on a regular basis,
40:56
Speaker 1: like just you're very much rocky or you know, one
40:58
Speaker 1: group is very like utilized and why is that? And
41:02
Speaker 1: I found this too even in larger companies too, Rocky.
41:05
Speaker 1: I've worked in your you're as huge engineering firm. You
41:08
Speaker 1: know that you have to look at all these different
41:12
Speaker 1: areas because you may have one division that's super utilized,
41:15
Speaker 1: almost overutilized, and they're like, yeah, one that's just because
41:18
Speaker 1: of whatever contracts or whatever, it's not currently available. It's like,
41:21
Speaker 1: how do we shift the work, Like let's let's trying
41:24
Speaker 1: to find some It's like I like the stock market,
41:28
Speaker 1: the rebalancing, right, you know of like looking at your contracts,
41:33
Speaker 1: looking at your clients, looking at these things. Where do
41:36
Speaker 1: we shift within the company, Where does it make sense
41:41
Speaker 1: to maybe you know, move management of a particular contract
41:46
Speaker 1: or client right within the organization.
41:51
Speaker 2: And you can't do that on feelings. You've got to
41:53
Speaker 2: do that based on the numbers. And at the same point,
41:56
Speaker 2: if you look at employees, certain employees like stability, Certain
42:01
Speaker 2: employees like flexibility. They like hopping from job the job
42:05
Speaker 2: and handling problems, know who's what, so that you can
42:11
Speaker 2: move them around appropriately instead of putting people in places
42:15
Speaker 2: they don't want to be because just like you, they're
42:19
Speaker 2: not going to do it well. And now our efficiency
42:23
Speaker 2: numbers drop.
42:24
Speaker 1: That I've seen that happen a lot in the environmental
42:27
Speaker 1: consulting industry. That that's my background, Rocky, where you have
42:29
Speaker 1: people that are technical specialists, they do very well in
42:33
Speaker 1: the technical work, and then they're saying, well, manage projects
42:36
Speaker 1: or manage people now because you're you're you're you know.
42:39
Speaker 1: And and they they struggle, Rocky, They struggle there with
42:42
Speaker 1: their their you know, and then and and the team right.
42:46
Speaker 2: You know. And I think this is where companies get
42:49
Speaker 2: it wrong. Like if you've got people who are great
42:52
Speaker 2: at sales, they go, oh, let me put you in
42:54
Speaker 2: sales management. Oh you're great at technical let me put
42:57
Speaker 2: you in technical management. Just because you're good at doing
43:01
Speaker 2: it doesn't mean you're good at managing it. And back
43:05
Speaker 2: to your specialty. If they're not good at managing people.
43:11
Speaker 2: Then then you've put the wrong person in the wrong seat,
43:15
Speaker 2: and you have to realize that. And I think too often.
43:20
Speaker 2: So I used to coach soccer when my kids were young,
43:24
Speaker 2: and the biggest thing I learned to like the kids
43:26
Speaker 2: would tell me where they wanted to play, and my
43:31
Speaker 2: other coaches were much more technical coaches. Right, Oh, he's
43:34
Speaker 2: really good at this, so let's put him there. And
43:37
Speaker 2: I would ignore both of them. What I would do
43:40
Speaker 2: is I would just watch what happened on the field,
43:44
Speaker 2: and this kid's like, oh, I want to play up front,
43:47
Speaker 2: and yet he was always in the back. And this
43:51
Speaker 2: kid's like, oh, I want to play defense or I
43:54
Speaker 2: want to play here, and yet he was always playing there.
43:59
Speaker 2: And so what I would do I wouldn't even tell
44:02
Speaker 2: them they're new titles, right. I would just go, okay,
44:06
Speaker 2: you you, you, you, and you go. And I knew
44:10
Speaker 2: that they would naturally end up where I needed them
44:14
Speaker 2: to be. So I needed to match all the people
44:18
Speaker 2: up at a given point, knowing this group is going
44:22
Speaker 2: to work together, and this group's k not, Like certain
44:25
Speaker 2: kids aren't going to pass to certain kids, so there's
44:28
Speaker 2: no use putting them out there together, right, Like that's
44:31
Speaker 2: team A, this is team B. Yeah, and learning how
44:35
Speaker 2: to play the the thing and be able to do that,
44:41
Speaker 2: and it's amazing what happens and how they come together,
44:46
Speaker 2: and then everyone being clear on who does what when right. So,
44:52
Speaker 2: in the game of soccer, right, the game is constantly
44:55
Speaker 2: moving except when the whistle blows. You know, the whistle blows.
44:57
Speaker 2: Because the ball goes out, it's are arguing, well, I
45:01
Speaker 2: want to throw it in. No I'm I'm like, no, no, no,
45:04
Speaker 2: this is the rule one who throws it in? And
45:06
Speaker 2: then it's like, who's that And then they immediately know, oh,
45:09
Speaker 2: that's his boom and they and they move at that moment.
45:14
Speaker 2: And the other thing that happened what we taught them
45:16
Speaker 2: was when the whistle blows, what does everyone do? They stop?
45:21
Speaker 2: They just stop, they stop. We taught our kids when
45:25
Speaker 2: the whistle blew, you come alive and in that fraction
45:29
Speaker 2: of a second, when everyone else has got their back
45:32
Speaker 2: turned and stopped, you attack m And so it's it's
45:37
Speaker 2: understanding these dynamics of how things work and how things
45:43
Speaker 2: go together and observing them.
45:46
Speaker 1: Ye.
45:47
Speaker 2: And then and I'm not the people person after that,
45:51
Speaker 2: and I could figure this out, like and I didn't
45:56
Speaker 2: try and change people.
45:58
Speaker 1: Yeah you couldn't.
45:59
Speaker 2: Ye just said, hey, this is the way they're going
46:02
Speaker 2: to behave I can build a behavior system that fits
46:06
Speaker 2: the behaviors.
46:07
Speaker 1: Yep. Now it's so important. I was working with a
46:10
Speaker 1: client just to this point, Rocky, where I had somebody
46:13
Speaker 1: that is very much a people person, very much step
46:17
Speaker 1: by step. Great, he's running running with few field operations,
46:22
Speaker 1: if you will, did really great on that. And he
46:25
Speaker 1: was doing well, and then he was asked to buy
46:28
Speaker 1: this manager that I'm working with, asking him to work
46:31
Speaker 1: on some proposals. Right, but the proposals are very they're
46:35
Speaker 1: not formulaic. Okay, they're not formulaic. These are these are
46:38
Speaker 1: custom ones. They have a car nuance. And so when
46:42
Speaker 1: he asked him to do these things, he wasn't getting
46:45
Speaker 1: what he wanted from this gentleman. Because this gentleman needed
46:47
Speaker 1: to have all the steps lined out. He was very formulaic.
46:50
Speaker 1: He would do very well in implementing. But he was
46:52
Speaker 1: being asked to come up and put a proposal together,
46:56
Speaker 1: and and and and get it out to his client
46:58
Speaker 1: in a timely manner. And he didn't do all of it,
47:00
Speaker 1: not because he didn't care he just he took it
47:03
Speaker 1: to where he was. He didn't have comfort with it.
47:06
Speaker 1: It wasn't his sweet spot. And so sometimes I say
47:09
Speaker 1: is we were thinking, these people have achieved a level
47:12
Speaker 1: of success in one area of the business, and so
47:14
Speaker 1: we just think, oh, well, then NA should just naturally
47:16
Speaker 1: be able to do these other areas, and we're fust
47:19
Speaker 1: they become frustrated, like to your point, you were saying, like, well,
47:23
Speaker 1: why don't they just get it? I get it, but
47:25
Speaker 1: they're not. They don't process information like you, and that
47:28
Speaker 1: that's not what motivates them, right, or.
47:30
Speaker 2: Or I need somebody there, so I'm going to stick
47:34
Speaker 2: the body there, whether it's the right or wrong body, right,
47:38
Speaker 2: And then we wonder why these things happen. And again,
47:42
Speaker 2: all of this stuff shows up on the P and L,
47:45
Speaker 2: but it takes a lot of digging to figure out
47:49
Speaker 2: where that's happening and so forth. It takes eyes to
47:52
Speaker 2: watch and to see and to be able to do that,
47:58
Speaker 2: you got to make the time to do I mean,
48:00
Speaker 2: you know, I think the business owner doesn't realize their
48:03
Speaker 2: job is to watch all of this, not to actually
48:06
Speaker 2: do anything. And that's kind of the key. And I
48:11
Speaker 2: think too often owners are trying to do the work
48:17
Speaker 2: when things fall apart. Yes, yes, Instead of sit back
48:21
Speaker 2: and let the team do the job, we interfere too
48:25
Speaker 2: often and that causes all kinds of problems beyond like
48:31
Speaker 2: you know those that's your place. I just see the
48:34
Speaker 2: end result less money and frustration and all of that.
48:41
Speaker 1: Well, one of the things you've made this really powerful
48:45
Speaker 1: comment earlier on in the podcast talking about when letting
48:48
Speaker 1: things burn. An example that I've seen is where the
48:51
Speaker 1: client is so focused on bringing in I would say
48:56
Speaker 1: probably more revenue. Like there, I got to bring in
48:59
Speaker 1: more projects. I got to bring on more work. Right,
49:01
Speaker 1: they don't have a neces. They don't have they have
49:03
Speaker 1: kind of maybe maybe they have an idea, but they
49:06
Speaker 1: don't have a like you've said, a broken down system.
49:08
Speaker 1: Were with you, Rocky, where we're going through the numbers,
49:10
Speaker 1: looking at the clients, which ones are profitable, all of
49:13
Speaker 1: that stuff you talked about earlier. They're just like, I
49:15
Speaker 1: got to bring in more projects. And so they're bringing
49:17
Speaker 1: in more projects, they're putting more pressure in the system.
49:20
Speaker 1: And what I have seen at least is and you've
49:22
Speaker 1: got a team and they're just feeling overloaded of like
49:26
Speaker 1: another miss deadline, Another miss deadline, because I'm getting all
49:30
Speaker 1: these things because I feel like they're they're like, well,
49:32
Speaker 1: you just we've got to feed the system, and you're
49:35
Speaker 1: overloading the system.
49:36
Speaker 2: You know, Revenue is vanity, profit is sanity, and cash
49:42
Speaker 2: flow is reality because you can be profitable and out
49:45
Speaker 2: of cash. And I think that really blows business owners'
49:50
Speaker 2: minds is the fact that hey, Mike, accountant said, I'm
49:54
Speaker 2: profitable and there's no money in the bank. Well, depending
49:59
Speaker 2: on how you do your counting, it's probably because your
50:01
Speaker 2: customer never paid you. You sent the invoice, so it
50:07
Speaker 2: said you invoice this, but nobody was paying attention to
50:11
Speaker 2: whether it was actually coming in. And so understanding the
50:16
Speaker 2: movement of cash through the business and understanding it goes
50:21
Speaker 2: back to again, if you're just driving revenue and it's
50:24
Speaker 2: unprofitable revenue all the time, you're never gonna get out
50:29
Speaker 2: of the hole. I don't care if you quadruple or
50:32
Speaker 2: ten times your business, you're just gonna have one hundred
50:36
Speaker 2: x the headaches and you're gonna wonder why am I
50:40
Speaker 2: having more and more revenue and less and less coming
50:42
Speaker 2: home to me? And I see that all the time.
50:45
Speaker 1: MM hmm. Yeah, and I see too, rocky, and it's
50:49
Speaker 1: frustrating because I'm trying to have the business owners you are.
50:51
Speaker 1: I'm on the people side. You're on the numbers. See,
50:53
Speaker 1: let's look at the numbers and helping the people. And
50:56
Speaker 1: you know. And then the other thing you said, too,
50:59
Speaker 1: is that the cash flow side of it. Cash flow
51:02
Speaker 1: is like your life blood. And this is where I've
51:04
Speaker 1: seen the profitability stream. You might have very very small margins,
51:09
Speaker 1: let's say five percent or whatever the case might be,
51:12
Speaker 1: and you you're not getting paid, like you said, You're like, hey,
51:15
Speaker 1: revenue I'm charging the invoices is going out right, I'm
51:18
Speaker 1: getting revenue. And and I was working at one company
51:21
Speaker 1: where we had so our payroll was so high at
51:23
Speaker 1: one point we had to take loans out to pay payroll.
51:30
Speaker 1: So we're actually get treading charge interest to pay our
51:34
Speaker 1: pay our employees. What's that interest rate? And what's my
51:37
Speaker 1: profit margin is? It's is it's pretty close five percent whatever?
51:41
Speaker 1: That there there's no there's no profit now, yeah, reason right.
51:48
Speaker 2: And And that here's the dirty truth that happens more
51:52
Speaker 2: often than you can imagine.
51:54
Speaker 3: M mm hmm.
51:56
Speaker 2: It's just the reality of it.
51:58
Speaker 1: Mm hmm right. So if you're not being you know,
52:02
Speaker 1: like you talked earlier, forecasting, considering all these things, you're like,
52:06
Speaker 1: what what does it benefit you? It's like you said,
52:10
Speaker 1: I like that revenue is revenue is the vanity because
52:15
Speaker 1: a lot of people like to talk revenue. Yeah, what
52:18
Speaker 1: did you actually take What was the cast you actually
52:20
Speaker 1: took home? What's the profit you actually made in your pocket?
52:25
Speaker 2: That's what matters. We're looking at the wrong metrics throughout
52:29
Speaker 2: the business, and I think that's the problem is what
52:33
Speaker 2: are we actually taking home? And that's what I love
52:35
Speaker 2: about profit first because with profit first, the moment a
52:39
Speaker 2: dollar comes in, the first thing we do when the
52:42
Speaker 2: dollar comes in, we put it in our profit account.
52:46
Speaker 2: We take our profit first. This is not evil, right.
52:50
Speaker 2: The purpose business is to make money. You said you're
52:52
Speaker 2: going to make money. Let's take our profit first, let's
52:55
Speaker 2: set it aside in our profit account, and now let's
52:59
Speaker 2: make sure everything else runs. Because more often than not,
53:03
Speaker 2: most business owners are like, well, I got to reinvest
53:06
Speaker 2: in the business. Really, you're going to reinvest show me
53:08
Speaker 2: the return on your reinvestment.
53:11
Speaker 1: Yeah, yeah, I mean there is so much more to
53:18
Speaker 1: going to with the rocky ye know, you've got you've
53:20
Speaker 1: brought You've talked about cash flow. You know, you've you've
53:24
Speaker 1: talked about profit revenue, you've you've you brought up so
53:28
Speaker 1: many great topics here today. And I feel like I'm
53:32
Speaker 1: hoping as everyone's listening to this podcast, you recognize that
53:36
Speaker 1: Rocky is coming on here giving you dropping a gold
53:39
Speaker 1: here some just fantastic insights. And the reason why we
53:43
Speaker 1: have this whole business round Table podcast is the opportunity
53:46
Speaker 1: to listen and learn and see, uh, is this somebody
53:49
Speaker 1: that could help me benefit me? And I can tell
53:52
Speaker 1: you just from what you've been sharing, Rocky, I'm taking
53:55
Speaker 1: goal and it's helping me affirm and confirmed some things
53:58
Speaker 1: that I need to follow up on and in my
54:01
Speaker 1: own business, and you know, and working with other clients.
54:05
Speaker 1: And so as we're wrapping up, Rocky, I would love
54:09
Speaker 1: to just you know, what are the if any if
54:11
Speaker 1: they're listening here, what's the what's the kind of the
54:13
Speaker 1: key takeaways that you want them to you know, the
54:15
Speaker 1: listeners to hear that we shared it we talked about today,
54:18
Speaker 1: like hey, if you've heard nothing else, just remember that
54:21
Speaker 1: remember this takeaway.
54:23
Speaker 2: So let's start with first of all, you've all been
54:26
Speaker 2: given the wrong equation for profit. You're all told sales
54:30
Speaker 2: minus expenses equals profit, which makes profit a leftover. We
54:34
Speaker 2: believe it's sales minus profit equals expenses. You've got to
54:37
Speaker 2: constrain yourself, right. It's just like me in a bowl
54:40
Speaker 2: of candy. If I'm not constrained, I'm eating a bowl
54:43
Speaker 2: of candy. And you know what, it's not good for me.
54:46
Speaker 2: So let's constrain ourselves with our cash too. And the
54:51
Speaker 2: reality is your business is a machine. You've got to
54:56
Speaker 2: figure out how your machine works and then put the
54:59
Speaker 2: people in to operate the machine. And at the end
55:02
Speaker 2: of the day, it is supposed to be profitable. And
55:06
Speaker 2: if you're not generating the profits in the returns that
55:09
Speaker 2: you expect, it's not I'll be profitable when it's profitable today,
55:15
Speaker 2: then let's chat, let's fix it, let's look at it
55:19
Speaker 2: in More often than not, I know, we talked about
55:22
Speaker 2: so much stuff and it seems overwhelming.
55:24
Speaker 1: Yep.
55:25
Speaker 2: More often than not, a couple of small tweaks create
55:29
Speaker 2: a massive difference. This is not when you when you
55:34
Speaker 2: can look at it and go, oh, there, that's the problem.
55:40
Speaker 1: Yep.
55:41
Speaker 2: And that's what we do we can cut through all
55:45
Speaker 2: the noise to go that. Let's fix that and that's
55:50
Speaker 2: where we get the majority of benefit and then little
55:53
Speaker 2: by little will get the rest of it done.
55:55
Speaker 1: Yeah, great insights, Rocky. How are What's the best way
55:59
Speaker 1: for folks to connect with you if they want to
56:02
Speaker 1: learn more?
56:03
Speaker 2: So I have a podcast, Profit answer Man. You can
56:06
Speaker 2: listen to what we do numbers wise, much more in depth.
56:11
Speaker 2: The website is profit Comes First dot com and you
56:14
Speaker 2: can find me there. You can email me or connect
56:17
Speaker 2: with me on social I'm easy to find.
56:20
Speaker 1: Yes, yes, I know you and I are connected on LinkedIn.
56:22
Speaker 1: So if you if you guys are connected with me
56:24
Speaker 1: on LinkedIn, you'll you'll see Rocky there. So grateful to
56:28
Speaker 1: have you, Rocky, would love to have you back again.
56:30
Speaker 1: It was really awesome having you share your insights drop
56:33
Speaker 1: this gold here on the podcast today.
56:36
Speaker 2: Thank you so much for having me David.
56:38
Speaker 1: Absolutely, thanks everybody for listening in. We appreciate you subscribing.
56:42
Speaker 1: You know, leave it, leave a five stary. We love
56:44
Speaker 1: that we are on all the different platforms. We make
56:48
Speaker 1: this an event on LinkedIn, so it's great to have
56:50
Speaker 1: your comments. I'll share them with Rocky Rocky can reply
56:53
Speaker 1: it directly himself, you know, so send in your comments,
56:57
Speaker 1: your your your feedback is always welcome. If you're interest
57:00
Speaker 1: didn't join us on the podcast, let me know too.
57:02
Speaker 1: We love having guests and glad to have Rocky here
57:04
Speaker 1: for the very first time, so thanks everybody for listening.
57:07
Speaker 1: Until then, take care and we'll talk to you soon. Thanks. Bye,