0:01

Welcome to Contractor Cuts , where we cover

0:03

the good , the bad and the ugly of

0:05

growing a successful contracting company

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.

0:13

Welcome to Contractor Cuts . My name is Clark Turner , I'm Jared

0:15

Flo . Thanks for joining us again . So

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this week we are covering how

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should you pay yourself if you are an owner

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of a company . We get asked that question all the

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time by guys coming in like am I overpaying

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, am I underpaying ? Can I take more money out ? How

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should I be taking money ? Should I take it per

0:30

job ? And there's a lot of

0:32

ways to chop it , to

0:34

do it a different way . Today we're

0:36

going to cover the two different types

0:39

of contractors and the way they should

0:41

initially set up , how paying themselves

0:43

.

0:43

That's kind of a big deal as an owner

0:45

, entrepreneur of a company . It's kind of a

0:47

big deal to be able to actually pay yourself

0:49

some money .

0:50

It's the reason you have a company . I need to take money

0:52

and I want to make more money next year and I want to make more

0:54

money the next year . How do I increase it ? How

0:56

do I keep going ? What am I looking at

0:58

and how do I make the decisions on how much money

1:01

I could take ?

1:03

We run into people in all spectrums

1:05

of this where guys come in and they pay themselves

1:07

nothing and

1:10

some of that is not because they didn't want to , they couldn't

1:12

.

1:15

Or they pay themselves the profit from the first

1:17

two months that we're killing it in and

1:19

they try to continue that pay . Just

1:22

because you had two amazing months mid-summer

1:24

, all of a sudden they drop off and now , uh-oh

1:27

what ?

1:27

am I going to do yeah ? Or somebody sets themselves up

1:29

with a standard of six figures plus

1:31

whatever and they just stick with it and

1:34

they have ebbs and flows , ups and downs

1:36

in the business and the ebbs , they start taking

1:38

more money out and the flows , they stay where they were . That's right

1:40

yeah .

1:42

Getting into this , we are going to be covering like a 30,000 foot

1:44

view with . We know

1:47

every single company is different and the way we've

1:49

kind of described it is there is a different

1:51

recipe in doing this for every

1:53

single company to bake the perfect

1:55

cake for them .

1:56

There's no perfect formula . There are some standards

1:59

, but there's no .

2:00

everybody has a different variable , different

2:02

things going on that affect how

2:04

this is going to be , so we're going to lay out kind of ground

2:06

level how you should do it , kind of

2:08

baseline looking at it and the numbers

2:10

you need to be looking at and how to make those decisions

2:12

. But then there's a lot of customization

2:14

because some guys can do this way , some guys

2:16

look at this way , and we'll kind of talk through that

2:18

as well . But all of that to say , if

2:20

you're going on a retreat , we are going to take

2:23

this and dive deep with you

2:25

one on one on the retreat to get

2:27

you exactly what you should

2:29

be making now and where you need to be

2:31

to make what you want to make . And so that's what

2:33

we're doing on the annual retreat that we're going

2:35

on . So if you're interested in that retreat

2:38

, please go to our website , go to our ProStruct360.com

2:41

resources and then events

2:43

and you can sign up for the retreat there . It's

2:45

a $6,000 cost for the retreat . If

2:47

you are in the software at the 499

2:50

level , it's only $600 bucks .

2:52

Yeah , you get 90% off of it .

2:53

So sign up for the software and

2:55

then you get it's super cheap to come on

2:57

the retreat , if you . Also

3:00

, we are giving out a scholarship this year to a

3:02

construction company . So if you

3:04

are wanting to come but don't

3:06

have the money to come , still contact

3:08

us , let's talk about it . We've got one scholarship

3:11

out there that we're trying this year . We're going to award

3:13

it to someone . If you want it

3:15

to be you , let us know now , but

3:17

also at the time of this podcast release , we

3:20

only have about a week and a half to sign up and reserve

3:22

our rooms . So if you're interested , contact

3:25

us today when you hear this podcast .

3:26

Yeah , but if you hear this later on

3:28

and you're catching up on some old

3:31

podcasts , still

3:33

feel free to hit us up , because this is stuff that we do

3:35

throughout the year . We do events throughout the year and

3:37

we sit down with individuals and help them work

3:39

through this as well .

3:41

We do one-off sessions , one-on-one If you come into

3:43

the coaching program . This is kind of part of your initial

3:45

onboarding , but along with

3:47

that , we double down on the retreats

3:49

we reset every year in January

3:51

for what 2024 should look like , what 2025

3:54

should look like . So the

3:56

retreat you'll be able to come on if you're part of the program

3:58

, no matter when you sign up . And so , yeah

4:00

, if it's after January and you're listening to this , feel

4:03

free to still reach out and contact us , because we have other

4:05

events planned for the rest of the year as well as some

4:07

one-on-one sessions we can do . But

4:10

, yeah , this is super important to custom-build

4:12

around you . But today we're giving you the foundation

4:14

, the fundamentals of what

4:16

you should be looking at . If you're trying to make this decision on your

4:18

own , that's right . So , diving into it

4:20

, there's really two types of contractors

4:22

that we're going to talk about , of how they should

4:24

build their pay . One type is our level

4:27

one contractor and the other type is our level

4:29

two and up , and the difference of

4:31

those . If you haven't been through

4:33

our program and you don't know our org chart and how

4:35

we separate the levels , level one

4:37

is a guy still swinging a hammer . He

4:39

might be out there doing all of the work himself

4:41

, might be doing sheetrock , might be running paint

4:44

on houses by yourself , you might start

4:46

bringing guys with you , you might start building crews and

4:48

you might hopefully get to a spot where

4:50

you're project managing one project and

4:52

you're running labor on another project and you're working

4:55

yourself out of the truck and into

4:57

project management and more a general

4:59

contractor as opposed to a laborer

5:01

, and so that's the level one guy

5:03

, if you're putting your

5:05

tool belt on multiple times a week , paint and

5:08

walls multiple times a week , that's the

5:10

category that most likely you fall

5:12

into , yep level one and so we're going to

5:14

talk about level one first , and then level

5:16

two is any company that is contracting

5:19

all of the work . They're a general

5:21

contractor . They've built a little bit larger scale

5:23

of a company . They aren't

5:25

doing the labor themselves . They have crews

5:28

, they have employees , they have vendors

5:30

1099s . However , they have it set

5:32

up that this is level

5:35

two and up is a different way that we like to look

5:37

at money , so let's start with level

5:39

one . If you're a level one contractor , you're swinging the hammer

5:41

. The biggest thing you need to

5:43

be doing to pay yourself is well

5:45

, for all levels is knowing your numbers and

5:47

to know your numbers . As a

5:49

level one contractor , the biggest issue that we see

5:52

guys have is that they will

5:54

Price a job for

5:56

how much it's gonna cost them to do the labor

5:58

, right . And if you're doing that and you

6:00

scale from there the cost of that

6:02

labor , you're gonna have to pay out to labor and

6:04

there's no profit on that , right . So the first

6:06

thing we want you to do as a level one Contractor

6:09

is it's gonna cost me Two

6:12

weeks to paint this house . I need

6:14

$3,000 to do it , because

6:16

that's how I need $6,000 this month

6:18

to make my bills and to

6:20

make some money . I'm going to price

6:22

that job not $3,000

6:24

plus materials . I want to have

6:26

a work order from my labor at $3,000

6:29

and I want to make $1,200

6:31

profit on top of that , right , so I'm gonna price that

6:33

job at 4,200 . Now I'm gonna

6:35

pay myself as a laborer

6:37

$3,000 on the work order and

6:40

that $1,200 profit is gonna

6:42

go into the company . Yeah , right . And so we're

6:44

gonna start building up our profitability On

6:47

line items that way to where . This

6:50

is how much it's costing me to do the labor , whether it's

6:52

me or I'm subbing it out , and I need to make money

6:54

as a company on top of that labor

6:56

. Yeah , so that's the very first , because

6:58

we guys miss that all the time . They're like well , you know , I

7:00

Charge $300 a day

7:02

, I can get by on that , you know , blah , blah , blah . Great

7:05

, that's good that you can get by on $300 a day

7:07

personally . That's not good

7:09

to build a company .

7:10

Well , and that's and that's exactly right , because I

7:12

think the the big point of this

7:15

is that you know if you want

7:17

to stay at the place where , where

7:19

you're at , and you're fine with that and you make decent

7:22

money and the way that your company operates , that's

7:24

fine and continue operating that way . But if you

7:26

have dreams of growing to

7:28

the next level , where you're not doing work on site

7:30

anymore and you're you're , you know More

7:33

of a standard , standard general contractor

7:35

, you have to be able

7:37

to Partition this money

7:40

to be able to make that move . Yeah

7:42

, and so you need to understand that it's two

7:44

different types of pay . There

7:46

is the pay that you are paying yourself

7:49

for Executing the work

7:51

, the labor , and then there's the pay

7:53

that you receive as the owner of

7:55

the company and really the pay that the company

7:58

receives for the executing

8:01

, managing this job right . In

8:05

reality , all of that money is as the owner

8:07

of the company . All of that money comes to you , yeah

8:09

. But to make the move to the next

8:11

level , that partitioned labor money

8:13

has to be Calculated and

8:15

and sent out .

8:16

You have to be able to live off of the profits

8:18

to be able to start managing crews

8:20

and managing the labor . So we're

8:22

looking at it saying , hey , you know I'm only making 1200

8:25

bucks in two weeks off the profit on this . I can't live

8:27

, live on that great .

8:28

You're not ready to make the move .

8:29

You're not ready if you have three jobs going and

8:32

you're and now you're making $6,000

8:34

in two weeks . You can live off , correct

8:36

? So that that's what we're looking at

8:38

is separating that out that we

8:41

hear all the time well , how do I price my jobs ? How

8:43

do I price this ? How do I price that ? What

8:45

we're saying is how you price it . How much is

8:47

it gonna cost for the labor ? And I'm gonna

8:49

put a 30% markup on top of that . Right

8:51

, start there . That's how you price it . If

8:54

it takes me one week to do this job and

8:56

I need to pay a guy $4,000 a month

8:58

Easy math I need a thousand

9:01

dollars for labor for that week to do

9:03

that , that particular job , right ? So

9:05

then I need to mark that up 30%

9:07

and that's what I'm making as the contractor . That's right

9:09

so again , that's kind of basics on

9:12

pricing . But , with that being said

9:14

, before you look at paying yourself , I want

9:16

to start you out on level one

9:18

, the labor I'm gonna live off of the

9:20

profit I'm gonna bank , yeah , and

9:22

we're gonna start growing the company . Now , if that's

9:24

, if I'm on site , if I'm not on site , if I'm Managing

9:27

a crew over on this job , but I'm on site on this job

9:29

as we're growing through level one , trying to get the level

9:31

two , I'm gonna flip it . So

9:33

, on this job that I'm doing labor , I'm I'm

9:36

making the labor profit or label

9:38

labor costs , banking

9:40

the labor profit , yeah . On job number

9:42

two that I'm managing , I'm

9:44

paying out the labor cost and I'm

9:46

taking that labor profit and banking

9:48

that as well . That's right . And so I'm trying

9:50

to get that 30% markup on all

9:52

of my jobs that are running to where . That

9:55

is what I'm gonna eventually be living off Of

9:57

and then , until that gets to the size that you

9:59

can , that you can live off of , you

10:01

got to keep doing that labor , right , right . So that's

10:03

that's how we're looking at that kind of short term

10:05

, how you're working now of

10:08

that profit . We'll talk about that next . You can't

10:10

just take I made $1,200 this

10:12

month on profit , I'm gonna put that all in my pocket

10:14

zero out the bank account . Yeah , yeah

10:16

and so we'll talk about that on on

10:18

part two of this , with level two contractors

10:21

, but with level one , it's

10:23

, it's , we're gonna crawl , then we're gonna walk

10:25

, then we're gonna run and throwing is . I need to break

10:27

even and make some money . I need to make

10:30

my product , make my money on the labor

10:32

and I need to bank my profit and start building

10:34

cash flow so I could take on more jobs

10:36

, make hires , cover overhead , that

10:38

sort of and that's why we talk about this transition

10:41

is one of the most difficult Transitions of

10:43

all of the stages that we've got , moving

10:45

from that laborer , manager

10:49

, full-time management .

10:50

That that transition is very , very difficult

10:53

for multiple reasons , but one

10:55

predominant reason is just because of cash flow

10:57

, because it just Dynamically changes

10:59

your cash .

11:00

Well , today , if I'm running one job , I'm

11:02

making 4,200 . I got that 3,000

11:04

Uh-huh for the labor and I got 1200

11:07

for this , and so I live a lifestyle

11:09

that that spends 4,200

11:12

every two weeks . That's a $8,400

11:15

a month , which is you're making six figures

11:17

at that point . So I'm living the

11:19

six figure life but all of a sudden , 75%

11:23

of that goes away when I'm trying to sub

11:25

it out and so- .

11:27

Well , you get to a lot of guys . Get to the place where , like

11:29

I'm so sick and tired of putting my belt

11:31

on , I don't wanna do it anymore

11:33

. I'm getting older , I don't wanna do it anymore

11:35

, whatever it is , and they try to make this

11:37

transition and keep making the same

11:40

money and it'll thank

11:42

you .

11:42

It'll thank you .

11:43

So you have to understand your numbers . That's

11:45

why I mean honestly everybody

11:47

that I talk to , who comes to me at that

11:50

level , says well , I have

11:52

a quick books . I

11:54

mean , I don't really you know , and

11:56

because it's not really necessary , but

11:59

if you're going to move , you've gotta understand

12:01

your numbers and you've gotta have some kind of system

12:04

that organizes those numbers so that you can see

12:06

them .

12:07

So the biggest thing that you can do to

12:09

make the transition from level one to level two

12:11

is to go from quick books

12:13

in your accounting to be evidence

12:16

of what you did To quick

12:18

books and accounting to be the projection

12:20

of what you're gonna do . That's right . All right , separate

12:22

those out . When I'm looking at my quick books as

12:25

a one man show , as a non-growing

12:27

company , I don't care that much about

12:29

it , because all it is is a ledger of everything

12:31

I've done and I make what

12:33

I make this month , and that's gonna show me

12:35

in a couple months what that ended up being . The

12:38

professional companies , the companies that are growing

12:40

, the larger companies , are now taking

12:43

those numbers , projecting into the future and making

12:45

decisions off of what we

12:47

feel is gonna happen , based

12:49

on the past , based on what's coming up , based on

12:51

the pipeline , and that's why

12:53

it's so important to have those numbers perfect . And

12:55

so guys come to us when they've been living in this oh

12:57

, that's just my record keeping and they come

13:00

to us and say , hey , I'm ready to grow and we're like

13:02

, okay , so show me your numbers . What numbers do you wanna

13:04

see ? All of them .

13:05

Show us everything . I've got $20,000 in my

13:07

bank account .

13:08

This is no , yeah , so step

13:11

one , no matter what level you are , is

13:13

going to be organizing your quick

13:16

books or your accounting software that you're

13:18

using using our software . Prostruct

13:20

360 , the software side of what we're

13:22

doing really manages

13:24

that for you . It dumps it all into quick books

13:26

and keeps it all organized for you so you can see

13:28

it . We can run a report on one click of the button . If

13:31

you're on a complete level and you're

13:33

integrated with quick books , we can really dive

13:35

into this stuff if you're managing your

13:37

jobs . So , going

13:39

into level two , a level two contractor

13:42

, if you're gonna pay yourself , if I am now a contractor

13:44

subbing out my work

13:47

or using other people's labor , I'm not swinging a hammer

13:49

myself . What we want you

13:51

to do at a level two , like we

13:53

just said , step one is knowing your numbers

13:55

. If

13:57

you don't know that then you can turn

13:59

the podcast off . Now Can't stress that there's

14:02

nothing else you could do if you don't know the numbers because , I don't know

14:04

how much you should be paying yourself if

14:06

you don't have that evidence of the past

14:08

as well as accuracy of what's happening in the future

14:10

. Next , let's say

14:12

you've got a clean quick book , so you know your numbers , you

14:14

know what's going on , this is what we're looking at and

14:17

again , this is a basic breakdown

14:19

with round numbers to help people understand

14:21

how we're looking at these numbers . And we're gonna

14:23

dive in individually with you to look at your specific

14:26

numbers at the retreat . All right , so let's

14:28

say your revenue is $100,000

14:31

a month . You're doing 1.2 million a year

14:33

. I'm running it , I'm a GC

14:35

, I'm just getting going Million

14:38

, million . Two is kind of the average

14:40

general contractor

14:42

.

14:43

Who's not doing hammering .

14:44

I'm not doing any of the work myself , that's kind of where the starting

14:46

point is for a lot of those guys Really

14:48

, starting point 750 to 900

14:50

and they get to 1.2 is ideal for

14:54

those guys getting going to continue

14:56

going . So we're gonna start with that number

14:59

$100,000 . On that 30,000

15:01

should be profit . If you're hitting 30%

15:03

profit on cost of goods

15:06

, on that only

15:08

profit . And again we

15:10

break it down differently than other companies . But for

15:12

us it's labor and materials , it's not management

15:14

costs , it's not any overhead for

15:17

the company . That 30% profit

15:19

is on labor for that specific job

15:21

, material spin on that specific job . So

15:24

let's say I've got $30,000 profit

15:26

month over month from

15:28

Just the cost

15:30

of goods . Yeah , from there I'm

15:32

gonna subtract out my overhead . Let's say we've

15:35

got $12,000 in overhead . What is

15:37

overhead to you ? To me it's any

15:39

employees that I'm paying . It's

15:41

my Truck for

15:43

business work use . It's my

15:45

gas . It's my cell phone .

15:47

It's it's really any expense

15:49

, any business expense , that you cannot

15:52

directly tie to

15:54

a project . Yes , right , it's

15:56

. It's anything if I spend , if

15:58

I buy a paintbrush for a job , that's

16:01

not overhead ? Yeah , that is for

16:03

that specific job . If

16:05

I Put gas in

16:07

my car , that is overhead

16:09

your visit . Five houses I can't tie

16:12

it directly to a job . So it's any

16:14

expense in your company that is not tie-able

16:17

to a job , it's just an overarching

16:19

cost .

16:19

Yep , in the company , yeah now that

16:22

I don't want to get too too far in the weeds

16:24

with this . We like to separate out , like if your wife

16:26

is driving a company , wrapped a vehicle

16:28

yeah , advertisement , and you're running it through the company

16:30

, I like to pull that out of overhead and

16:33

have that part of the numbers for my profit

16:35

, uh-huh , because that's really my personal

16:37

expense . You know , if I sold the company , I'd still have to

16:39

pay for that car , right ? That's how I kind

16:41

of look at that . That's where all of this can get really

16:43

complicated , is where you really that , and that's

16:45

where we dive into it because overhead is

16:48

where you Win or lose with

16:50

, with profit , and so we like to dive

16:52

into it and try and start sorting that stuff out to say

16:54

, okay , so if you had to pay bills , this

16:56

is what you're gonna pay , these are the extras that you're spending

16:58

yourself . Let's kind of count that as part of your take home .

17:00

Yeah well , and and the reason why

17:02

we just said 30%

17:04

is what is the profit you made on that ? Hundred thousand

17:06

dollars was thirty thousand dollars , right ? If

17:09

your overhead is 28%

17:13

, you're a

17:15

you know and so you need to know that and go okay

17:17

, 28% , I got to trim this down . You

17:20

know what I can't ? I can't run that car through

17:22

here . I can't have that free car wash thing

17:24

that I'm running to . Right , you've got to dial

17:26

those things .

17:27

Yeah , that's right . So let's say you're over

17:29

, it's 12,000 for insurance , gas , all that stuff

17:31

you're paying for . So you're left with eighteen

17:33

thousand dollars profit . Right and so from

17:35

there , I first want to put away

17:38

into my tax account 25% of that

17:40

. So I immediately take $4,500

17:42

, put it in an account that I don't see , it's not on my

17:44

screen , I can't borrow from it . I pretend it's

17:47

not there , I pretend I already paid . Uncle Sam , yeah , some

17:49

, some guys set it up to where they pay monthly , some

17:51

quarterly , some annually , whenever it

17:53

is . That's the count you're paying out of and you're gonna put

17:55

that money in there and walk away because you

17:58

cannot pay the bank and deal with them . You

18:00

cannot not pay . Right , sam , right

18:02

and so ?

18:02

and one trick of the trade with that one is actually

18:05

having a separate Bank

18:07

institution account that that

18:09

money goes into and you opt for

18:11

no online banking ? Yep , so the

18:13

only way to touch that money is

18:15

to physically go into the bank . Yeah , I know

18:18

that's complicated and it's like I don't really

18:20

like I do everything online . That's the

18:22

point . Yeah , right , don't , because it's very

18:24

easy . Opportunity happens , a

18:26

job struggling to check next week , I'll

18:29

repay it and then you don't repay it . Yeah , and then , all

18:31

of a sudden , you get to the end of the year and you've got 30

18:33

, 40 , 50 , 60 thousand dollars that you got to Run

18:35

a check to the government and you ain't got

18:38

it .

18:38

Yeah , you know , and so putting

18:40

that 25% in the tax and

18:42

depends on what state you're in , what tax

18:45

level you're at , yeah , you're making a lot , a lot of money

18:47

. You might want to get to 30 , 35% , depending

18:49

.

18:50

That's an account and conversation and there's there's

18:52

a there's a book that we're gonna reference later

18:54

on , but it actually says to take 50%

18:57

yeah , take 50% of

18:59

your profit and put it into your tax account

19:01

so that , when you get to the end of the year , if

19:04

it costs you 50% great , you've got it . You pay

19:06

, uncle Sam , and then you bonus yourself

19:08

with the rest , that's right .

19:09

That's ideal , yeah , but again , when

19:12

you're only doing 1.2 million , it's very

19:14

difficult to put that much away , absolutely . Absolutely

19:16

. I say start at 25% because if you're at 1.2

19:18

million you're not going to be in a higher tax bracket

19:21

. If you're only , you know if the profits

19:23

are 18,000 a month you'll

19:26

be in a decent tax bracket . But you definitely

19:28

can probably be safe with 25 , 30

19:30

, 35% .

19:32

Talk to your accountant and you're straight for that .

19:34

So I put that money away . So what's left is 13,500

19:37

. I know we're using a bunch of numbers , but we're

19:39

just understanding the concepts what's

19:41

left after overhead taxes

19:44

. I got 13,500

19:46

left . What I want to do with what's left over

19:48

? I want to put half as my

19:51

paycheck . Yep . I want to take the other

19:53

half and put it into the company as a capital

19:55

investment , leaving in the company to keep rolling

19:57

. The reason is next month , if we

19:59

have zero profit , I got that money there to

20:01

pay my paycheck . Or next

20:04

month I want to start a new job and I'm going to go from two

20:06

jobs to three jobs . I need some

20:08

overhead , I need some cash flow for that .

20:09

So we're going to build cash flow in the company with that If

20:12

I'm going to make the transition from a laborer

20:14

to a manager right , I've

20:17

got cash to float myself . If I'm going to hire

20:19

somebody , there's cash needed to float

20:21

. If you start a new job that this

20:24

specific client doesn't pay for 30 , 45

20:26

days , I've built up some reserve to be

20:28

able to do that .

20:29

I mean , I rule of thumb

20:32

for me is I want cash flow equaling

20:34

to the amount of revenue

20:36

I'm doing monthly . So if I'm at

20:38

$100,000 a month , you probably

20:40

have 80 to 100 deployed in cash

20:43

flow with floating jobs

20:45

, collecting checks , paying crews and all that

20:47

stuff . And if I want to go from $100,000

20:50

a month to $200,000 a month in the

20:52

next year , where is that extra 100 grand of

20:54

cash flow coming from ? You're going to go get a

20:56

loan and then you're going to shoot yourself in the foot . So what

20:59

we want to do is start building .

21:00

that ? We've never done . That We've never . No , we haven't done

21:02

that at all . We'd be dumb to do that .

21:05

But I mean , we know , because we've made

21:07

the mistakes , yeah , and we've gone out and

21:09

done that because it's like I got jobs , I can get to $200,000

21:12

a month with this . Let's go take a loan so

21:14

we could float these jobs and move forward

21:16

and you never pay that back . So

21:18

now it's just a ticket that you're paying once a month

21:20

of paying that loan back .

21:22

Small caveat if you've done that and you're struggling

21:24

with a loan , we have a podcast about a

21:27

few months ago that specifically about to

21:29

loan or not to loan , talking about

21:31

all the different variables and how to protect yourself to

21:33

do that . So go check that out .

22:14

So if we take that 13.5 and split

22:16

it in half , that means my take home is $6,750

22:20

. I can pay myself this month . I'm going to try

22:22

to set that as my month over month goal and

22:24

I'm going to try to build my lifestyle around that . Now that's

22:27

again . You're running a million dollar company

22:29

, $1.2 million , and you're taking home 80

22:31

, 81 , 82,000 a year . If

22:33

you can live on that , great . If you need

22:35

more , this is what we're going

22:37

to do . We're going to start looking from

22:39

this spot . If I run

22:42

these numbers and it's like well , this means I'm only going to be

22:44

able to take home 3,000 a month and I can't live on

22:46

that . Okay , so let's start diving

22:48

into the numbers as to how to change up .

22:50

Well , and first of all , the first place that people go is they're like

22:52

well , I'm not going to split it 50 , 50 . I'm only

22:54

going to put 10% in savings . Then

22:57

I'm going to just take all that money . And when ?

22:58

I start making more , then I'll go over that . That's

23:01

a recipe for disaster . That is

23:03

the break glass in case of emergency

23:06

way to operate , and we don't want to set

23:08

it up or have plans to break glass in case

23:10

of emergency , because if you're starting in the

23:12

emergency , there's zero safety

23:14

net . So what

23:17

we want to do is let's say this works

23:19

. Let's say this is set up . I've got this . The numbers

23:21

work . I can live on 67.50 a

23:23

month . I'm going to put money away . I'm going

23:25

to handle all that . The next thing

23:27

you need to do , whether it

23:29

does work or not work really is once

23:31

I know these numbers , I'm going to only

23:33

concentrate , week over week , month

23:36

over month , on three aspects of

23:38

this . I'm looking at three numbers

23:40

weekly in my company Revenue

23:43

for the month , profit

23:45

percentage on that revenue for the month .

23:48

And what are my overhead ?

23:49

expenses . Those are the only

23:51

three things that you have control over . To either

23:53

make money or lose money . That's all we're looking

23:55

at .

23:56

These are the areas that when we sit down with people on

23:58

the retreat , these are the spots that , okay , let's

24:00

spell out all the numbers . Now let's look

24:02

at where do you need to be , where are

24:04

the holes , where are you in trouble ? And then we look

24:06

at these three things and say what

24:08

can we do about these ? Can we take on more revenue

24:11

? Are we charging enough ? Are

24:13

our expenses too high ? And

24:15

figure out is there

24:17

a spot where we can manipulate

24:20

this to do and get to the numbers

24:22

that we need to be at , or get out of the hole

24:24

that we've put ourselves in , and that's hiring

24:27

decisions , spending decisions

24:29

, a bunch of different

24:31

decisions are made .

24:32

Looking at those three numbers and having this budget

24:35

laid out in front of you , because what you

24:37

can do is take those and say , okay , if

24:40

this is your company and I was consulting with you

24:42

, jared , and I was like , okay , so you're at 100,000 a

24:44

month , how much more work can

24:46

you handle without making any hires , without

24:49

hiring a project manager ? How much ? And

24:51

you're like I'm max out , man , hundreds it

24:53

, great . So that number can't budge Profit

24:56

. It looks like you're making 12% profit

24:58

right now . What's going on ? Well , I had to say yes

25:00

to some jobs just to get jobs rolling . Blah , blah , blah

25:02

. Okay , so you're not gonna survive

25:04

as a company at 12% profit . So

25:06

we have to increase the numbers

25:09

that you're bidding and figure out how to land

25:11

those . And maybe it's . Are you

25:13

overpaying labor ? Are you spending

25:15

too much on materials ? Let's look at all of those . But

25:17

we have to start expanding that profit number

25:19

. Or , hey , profit looks

25:21

good , revenue looks good . You're maxed

25:23

out on how much you can do without a hire . Let's

25:26

look at your overhead . What are you spending on ? Well , I got

25:28

this truck payment at 1400 a month

25:30

and I got this rent at 6000 a month

25:32

and I got it's like whoa , whoa , whoa , whoa

25:34

.

25:34

I wanted to treat my employees well , so I

25:37

went ahead and bit the bullet and I got

25:39

them insurance and 401ks

25:42

and I'm paying all of that out this month , monthly

25:45

or whatever , which is fine

25:47

, yeah , honorable . Can you afford

25:49

it ? Again , if you're making 30% profit

25:51

and your overhead is 28%

25:54

of that 100 grand , you

25:56

can't survive . You're going out of business . Yeah , you can't survive .

25:59

You know we rent an excavator , I feel like , once a month

26:01

. So I went ahead and just bought one to be cheaper . Sell

26:04

the thing Right , put the overhead

26:06

expense . We talked about this a few podcasts ago about

26:08

renting . If you're renting once a month , put that in

26:11

what you're charging and marking up to your

26:13

client . That's now buried in

26:15

your cost of goods . You're still making your

26:17

profit and you just lost that monthly payment

26:19

on the excavator off your overhead . We lowered the overhead

26:21

to bring in more monthly cash to the company

26:24

. So that is all where the

26:26

recipe is changed , where we start

26:28

switching stuff around , assessing per company

26:30

where they at , how do we make the numbers work

26:32

and how do we make you more money as a company

26:34

?

26:34

Yeah well , one other thing to think about . We

26:37

talked about , just for the numbers , just

26:39

splitting that 13.5 into 6,750

26:43

, right , that's what you're taking home

26:45

Eventually

26:47

, working with your accountant , your CPA . What

26:50

you will wanna do is actually set

26:52

a portion of that money up

26:55

as a salary , so you're being paid

26:57

, as an employee of the company

26:59

, a salary for a portion of

27:01

that cash . But you need to be careful with that . Can

27:03

you maintain this

27:05

amount of profit month over month ? Yeah Right

27:08

, because once you set yourself up as a salaried employee

27:11

, you gotta make sure you're hitting these numbers .

27:13

Yeah , and when he says salary , it's more guaranteed

27:15

payments as an owner . We're not talking

27:17

the way the W-2 , first owner like

27:19

it's a set , take that , it's a guaranteed

27:22

payment . If you're an owner that you're considering

27:24

your salary , the accountants have to

27:26

different states have to do different

27:28

baseline salaries where you're taking

27:30

it from . So you'll have a portion of that separated out into

27:33

salary . The rest of it is a

27:35

profit from an investment in

27:37

a company , right , don't worry about

27:39

the accounting side . Yeah , have a really good accountant

27:41

to tell you how to set that up . That's right and help you set that

27:43

up . But what Jared's saying is I'm

27:46

going to have a certain amount of money For

27:48

me and in our company it was weekly , once

27:50

a week . I take this paycheck and

27:53

it's going to be a guaranteed payment once a week . That

27:55

is just part of the bills , right , and

27:57

so we have a really good month . That doesn't

27:59

change . It's just the set amount . A

28:01

great month , good , put that money away . We can make a

28:03

hire soon , yeah , so that's where we want

28:05

it to be set up . Now , if you have a bad month , you're

28:08

the salary that's going to drop . Or maybe we've banked

28:10

money for four months and that's what I'm going to use to pay

28:12

my salary this month . But if I go three

28:15

months of bad months . I'm going to adjust my salary

28:17

. We need to start looking at that stuff , start saying

28:19

what's the minimum , all that sort of thing . So if

28:22

you want a book , we've recommended this

28:24

on one of our TikToks . But

28:26

if you are looking for a book that

28:29

really dives into doing

28:31

this , there's a book called Profit

28:33

First . It's by a guy named Mike McHalwitz

28:35

and the book

28:38

is great . It really dives into the numbers

28:40

, helps you . We've got a full report

28:42

that we built in a spreadsheet that

28:45

we can give you as a company . That breaks

28:47

down exactly . I'm going to put my numbers

28:49

in .

28:49

It's going to spit out the percentages that I do From

28:52

the way the book talks . The contracting

28:54

industry is kind

28:56

of its own thing . There's a variable

28:58

of the way that we operate based

29:01

that's different than a standard business

29:03

because of labor and

29:05

materials and all of that stuff . So

29:07

there is a variance

29:09

from the way that it works , which is why we

29:11

built our spreadsheet to help figure

29:13

that out . But the concepts

29:16

I actually just had . I recommended the book to somebody

29:18

recently and they read through it and they came back and like

29:20

dude , that was so helpful , just to give

29:22

me a different perspective of the way

29:25

to look at it . The book's called

29:27

Profit First and that's the concept

29:29

.

29:30

The goal is I'm going to build a company around me taking

29:32

my paycheck first , because if I can't take a

29:34

paycheck , why am I doing this ? Reinvesting

29:36

never helps . I need

29:38

to have a company that I might

29:40

not take a paycheck for six months , but this is the

29:42

plan when I hit these goals , that I'm going to start paying myself

29:45

to ensure that I am taking money because

29:47

I'm taking the risk on this company and

29:49

building this company . If you

29:51

want to dive into this with us , please go to our

29:53

website , prostruct360.com . Hit

29:55

us up . Hit the Contact Us button . We'll

29:57

love to talk to you about it . If you want a session just

30:00

to ask some questions , we'll do that for free . Even

30:02

if you're not in our coaching system , no

30:04

problem , we're here to help you . We know

30:06

that if we can help you guys grow , you're

30:08

going to be with us long term . We can work

30:10

together , we can partner . When you need us , we're here . When

30:12

you don't need us , go run it , handle it , and

30:15

so we are here to help guys grow

30:17

to the next level . If you're looking for software

30:19

, our software is live . You can sign up right now to

30:21

get in it . We've got our free version $89

30:24

if you're using vendors and subs and want to be the

30:26

work order system , and then $199

30:29

a month for the complete everything QuickBooks

30:31

, integration , emails everything

30:33

you want is all there . Go

30:35

to prostruct360.com , check that out , set

30:37

up a demo . We'd love to show you exactly how

30:39

it works and how it will work in your

30:41

company . That's right . It's a really cool piece

30:43

of software . Thank you guys so much . We'll talk to you next podcast

30:46

. See you , bye , $pro

30:48

.