Episode Transcript
[00:00:00] Speaker A: Foreign.
[00:00:08] Speaker B: Today we are going to be talking about how more sales will not fix a broken model.
[00:00:16] Speaker A: No.
[00:00:17] Speaker B: Okay. If you think that more sales is going to fix your cash flow problem, you can shake your head and think again because it won't. If your business model is broken, adding more sales basically just adds more chaos.
Right?
[00:00:32] Speaker A: So true.
[00:00:32] Speaker B: So let's fix the foundation before you scale the fire.
My first question for you is why do so many business owners default to we just need more sales. When things feel tight, it's the illusion.
[00:00:49] Speaker A: Of generating revenue, which is not a false pretext. It is actually what you need to do. But you need to do it under the right conditions.
[00:01:00] Speaker B: Right.
If your pricing is off, this, this is, this is why more sales is not the answer. If your pricing is off, more sales equals faster bankruptcy.
[00:01:13] Speaker A: Yes.
[00:01:13] Speaker B: Right. If your fulfillment is broken, then more sales is just going to equal more unhappy customers.
If your team is overloaded, then more sales is just going to equal faster burnout.
So the mic drop quote is more gas doesn't help if your tires are flat.
Right.
[00:01:36] Speaker A: I love it.
[00:01:38] Speaker B: You have to fix the foundation before the engine can go faster. So talk to me a little bit about what a broken model looks like. You've got no consistent margin targets, you've got no cost control, no data on your profitability, that sort of thing.
[00:01:58] Speaker A: So, so the three key components that make up your sales are your cost of goods. So that's your material, your labor and equipment that is needed to perform.
Whether you're selling a widget or you're performing a service.
And if your labor is not cost costed properly, that's an immediate loss to your sale.
You're going to go backwards fast.
[00:02:25] Speaker B: That's the first thing we do for our customers. We, we dial in that cost of.
[00:02:29] Speaker A: Goods sold and that costs at zero profit. This is what it costs you. Whether you do a dollar's worth of business or a million dollars worth of business, that cost is consistent but multiplied. So if that's in order, then we move, we move on to your material. All right. What is your cost, your material, how are we marking up your material? And if you don't know that cost, you could be giving your material away at a loss or even a break even. So you have the fallacy that you're making money off of your material and then into your equipment. How much does a piece of equipment cost me to own and cost me to run? So there's a series of questions and check marks that we go through in TPM to make sure that you're set up to go the green light to get out and start bidding work. So if those green lights aren't in place, you're not making money.
[00:03:26] Speaker B: And we pull in certain costs that we have seen business owners over and over again kind of neglect. And they just think, you know, there's these fixed costs, there's variable costs. And I don't necessarily pull that into the exact cost of a job when they should be doing it.
So every time you roll a truck, for example, what are some of those expenses that we consider that most people don't?
[00:03:53] Speaker A: Everybody has to replace tires on a truck. The truck needs an oil change.
Truck is going to break because it is a piece of equipment. How do we account for those costs.
[00:04:04] Speaker B: On a specific job?
[00:04:05] Speaker A: On a specific job, or even over a course of jobs, even if the.
[00:04:09] Speaker B: Tire never goes what?
[00:04:11] Speaker A: Correct.
[00:04:11] Speaker B: Even if the tire never goes flat on that job, that is an eventual cost that's going to happen. So how do you, how do you patch that into a specific job? We show you how.
[00:04:22] Speaker A: We do show you how we build those costs into your hourly rate. So each hour you charge for that piece of equipment, it's like having miniature bank accounts that you drop these tokens into to keep it growing. So when you do have to change a tire or maintain on that piece of equipment, your costs are already in your account.
[00:04:40] Speaker B: You've already banked it.
[00:04:41] Speaker A: Yes.
[00:04:42] Speaker B: That's nice.
All right.
What should someone look at before they're trying to ramp up sales? Some of those, just some more of those things that we just talked about.
[00:04:54] Speaker A: Their accounting tools, looking at their profit and loss statements to make sure that their charts of accounts are in the line and we help our customers. That's one of our first exercises in our, and our initial consults is how is your chart of accounts look and does it reflect your. The way you cost your business? So that's number one. And just keep going off those, those numbers. Like we keep harping on the knowing what your costs are because giving one hour away makes it make or break you.
[00:05:27] Speaker B: Right.
[00:05:28] Speaker A: And doing that one hour over and over and over, it's like a built in discount for your customer, not for you.
[00:05:35] Speaker B: There's a couple different ways to pressure test your business model and decide whether it's ready to scale or not. Can we deliver two times the work without two times the pain?
Right. Do we know which jobs are actually profitable? And that's one of the things that we help you define.
[00:05:52] Speaker A: Yes.
[00:05:52] Speaker B: So that you can see that instantaneously. You can see it very Quickly, do we have a repeatable process? That's where those sops come into place. Your standard operating procedures, are they repeatable at a larger scale? And then are we priced to grow, not just to survive? Dive into that for me just a little bit.
[00:06:11] Speaker A: That's great. And if you have projections as we set our clients up with the baking down your sales of if the longer, less profitable jobs make you more money, those are the ones to focus on. The little jobs that are higher profit may be the ones to focus on. But if you never dissect where your, your time and value and money are going, you don't know. So breaking those down, just do a cost analysis of your last month's jobs and see where the dollar value is, how much time you put into it, and what was your profit. And those will give you a pretty good barometer of where you should be. But knowing what that margin target is, you have to have that margin target to aspire to and it will lead you down the path that you need to go for success.
[00:07:08] Speaker B: That's another thing that I'm not sure we have really told people that the software does is different size jobs are. Your margin is probably different for every different size job. Your margin may be higher on a small job, but you take less margin or you're willing to accept less margin on a larger job because the total at the end is going to be bigger. And so the software does take that into account, especially when you're doing your forecasting and so on. It's one of the things that I love about the software is that you define the end goal that you want to be at and you want to say, okay, I want to, I want to reach $8 million in revenue this year. And because you've defined typically how many jobs, how many different size jobs you get in a year, the software will tell you you need to do 27 small jobs, you need 18 medium sized jobs and 7 of the large jobs and you'll hit your revenue target exactly. It's that kind of proactive planning that we're always advocating for.
[00:08:17] Speaker A: And it will walk you through the steps to make sure costs are covered. So that's, that's the other beauty of truly is an exercise of we took a client through a past year of all the jobs they did and tallied them up and then put them into the software. And they were astonished. And, and you can predict what you could have made or what you didn't make.
[00:08:42] Speaker B: Right.
[00:08:42] Speaker A: But what you can make. So it's, it's kind of this enlightening exercise that gives you energy to see I can keep my doors open.
[00:08:50] Speaker B: And here's how we have literally made grown men cry.
[00:08:55] Speaker A: Yes.
[00:08:55] Speaker B: Showing them this software because they thought their business was failing. Felt like a failure. And then we show them where to make adjustments, and all of a sudden, the lights come on and the choirs start to sing, and the angels start flying, and they're like, hey, I can do this.
[00:09:14] Speaker A: Yeah.
[00:09:14] Speaker B: And I can make this work.
[00:09:16] Speaker A: And I can do it better.
[00:09:17] Speaker B: And I can do it better. And I can continue to do it better and better.
[00:09:19] Speaker A: Exactly.
[00:09:20] Speaker B: And so literally have. Have saved their business.
[00:09:25] Speaker A: Yes.
[00:09:26] Speaker B: And it's great feeling. So today's message. Fix the model and then pour the fuel. Right. Lock in your numbers, your overhead, your labor, your pricing, your margin.
Streamline your delivery process. Train your team before you scale any more chaos, and then build your sales engine that pours fuel on a fire that you can control.
[00:09:49] Speaker A: Yes.
[00:09:50] Speaker B: So our challenge for the week is to pause, pull your last 10 jobs and. And calculate what was your net profit? It grows. What was your net profit per job? If you scaled that 10x, would your business grow or would it collapse?
So find the cracks. Oh, that's where you add any pressure.
[00:10:12] Speaker A: That's a great assignment. This will be a fun one to get feedback on.
[00:10:16] Speaker B: I'd love some feedback on it.
[00:10:17] Speaker A: Yeah, for sure.
[00:10:19] Speaker B: And while you're doing it there, you know, there are some growing pains, but.
[00:10:25] Speaker A: Take her. Cool.
But again, the software we're talking about, performance margin software. It's the tool we use with our clients. It's just a comprehensive look for the owner to see what those costs actually are outside of your accounting software. We integrate them together, and it gives us real data, real time.
[00:10:45] Speaker B: So this isn't accounting. It is much broader Finance accounting tells you what you've done. This will tell you what you can do and what you should do, and it's just a huge relief.
[00:10:58] Speaker A: And yeah, it's our financial roadmap. Where are we going to go?
[00:11:03] Speaker B: It is Jake.
[00:11:05] Speaker A: Cool.
You're cool.
It's all going to work out.
