Episode Transcript
[00:00:00] Speaker A: Foreign.
You are listening to the Total Profit podcast. I am T2. I'm here with Tommy P, the only guy I know who can look at a P and L and tell you whether you are winning or whether you're just busy.
[00:00:22] Speaker B: And busy is not a business model. So let's get into this and let's help people figure out where they're going.
[00:00:28] Speaker A: Right.
That is exactly where we're starting. So this quarter, season two, quarter two, is all about one thing, which is the performance margin zone.
And if you've ever thought we are working like crazy, but the profit just doesn't reflect it, this is your season. You're going to want to follow us throughout this quarter. So this episode is sponsored by performance margin Software. This is the system that we use that moves you from guessing to knowing.
So the big idea is this. Tommy, let's start here.
Most businesses think that they have a revenue problem. They don't.
They have a margin problem that is hiding in plain sight.
And so let's just kind of start with an overview. What is the performance margin zone really?
[00:01:14] Speaker B: That's a really great question. So the performance margin zone evolved from the performance margin software.
So the software has a particular methodology it needs to be set up. So it's a recipe on how to know if you're profiting on your bidding or not.
So we had to give it a name. So there's an affiliation to it. So the performance margin zone is like a, like a gauge on your car when your car is running. Right. There's no indicators, there's no warning levels, nothing's honking or beeping at you.
That's how the performance margin is. The performance margin zone goes. It tells you if you're not meeting your target margins. So it's an assembly of pieces, pillars we call them, that go through budget, it goes through work types, it goes through resources.
And once you get through the three pillars, it's almost like a gated process. Then you can get into bidding because everything's aligned at your cost. And then you start to get to your margin target. So it needed a little bit of explanation in the beginning because it's like, how do people know what this is and how do we make it, like, stick?
So the. We called it pmz. So look for the swag all over the place.
[00:02:38] Speaker A: And so we're going to spend a few weeks throughout this quarter diving into each one of those pillars and exactly kind of what to expect as you. As you go through that process with us. Because here's what we see over and over founders are grinding. Right. Revenue is up, the team is bigger, but the clarity is not there. So we see that over and over again. So inside the performance margin zone, we break that profitability down into those four pillars. You got like you said, budget, work types, resources and bidding. But let me ask you this question. Why do most owners miss those four pillars? Why do they think that more sales fixes everything?
[00:03:23] Speaker B: Yeah, it's really common and it is truly a lack of knowledge of where these numbers evolve from. So in the processes that we take, we, we give, we lead them into their answers, we give them boxes to fill and it'll make raise a question. Do I need to fill in like non taxed benefits on an employee? Well, if you're paying them these benefits, you need to recover those pieces.
[00:03:52] Speaker A: And those are all tied to jobs.
[00:03:54] Speaker B: Exactly.
[00:03:55] Speaker A: So a lot of owners will just throw those things into kind of a general overhead category, but it's not necessarily tied specifically to a job. So we show you how to do that and we make it easy.
[00:04:06] Speaker B: Yeah. And you, you keep hitting on the keywords here. We help you do this. We just don't sell you a package and give you wish you luck. We come into your team and we help you, we sit down with you and, and we want to show success in what you're doing because you're working hard for it.
[00:04:23] Speaker A: So here's some of the things that we see. Budget is not tied to real job data. Like we just said, the work types aren't necessarily separated by margin.
The resources aren't allocated with math. They're kind of just allocated by guessing.
And then bids are really built on a gut feel.
And I think there's some humility that needs to come into play here because a lot of business owners, especially if they've been around for a while, they, they kind of know the general range where they need to be.
Or they will look at their competitors and they'll say, well, they're charging this much, so I'm going to charge, I'm just going to undercut them a little bit. That may or may not be right for them. We've talked about this on a previous episode. Your competitor or you might have a special relationship with a vendor that gives you a competitive advantage.
[00:05:15] Speaker B: Right.
[00:05:15] Speaker A: You might have, you might not pay your employees as much as your competitor does and that, you know, allows you to cost a little bit less or it might force you to cost a little bit more.
So you can't go based on what your competitors are doing. That's, that's not the right formula.
[00:05:33] Speaker B: No, it's actually, you're 100% right. And I think as we go through these podcasts, it's going to be a common theme, is your numbers are your numbers. That's what you really need to understand, get comfortable with, and see how it fits into the work that you're bidding. Because you're 100% right, you may pay people differently, higher, lower, what have you.
And if you're going back to your overhead, if your overhead is. Is all mashed in with your. Your cost of goods, your. Your numbers aren't accurate. So it's. It's really kind of, you know, number soup.
[00:06:07] Speaker A: It's guessing. Yeah, right. It's guessing. It's number soup. And guessing feels productive until payroll hits.
[00:06:15] Speaker B: Exactly right. It's like, where did the money go? And that's where our pillars show you, where the money should be.
And it's like little assemblies of. Again, it's a recipe on how you get the profit as the end result.
[00:06:32] Speaker A: And this is the phrase that we're going to repeat all quarter.
Guessing is stressful. Knowing is calm.
And this is what knowing feels like.
[00:06:41] Speaker B: Right, Exactly.
[00:06:42] Speaker A: There is a calm confidence about it.
When you're in the zone, you're not hoping that a job works. You know the margin is going to be there before you ever sign up that customer.
You don't wonder if labor is high. You know, you know that. You know your own burden rate by work type. All right, this is everything that we're showing you. You don't assume that the year is going to be fine. You see it in the forecast, it's there. And you know where you're going to be at the end of the year. Like you always say, you know what, what the accountant is going to say before the meeting.
[00:07:15] Speaker B: Exactly. But the lawyers have told me we have to put a disclaimer in here because this feeling, when it hits is very addictive and it's competitive. And if you're a competitive person, it's going to drive you.
Our founder of Performance Margin Software is that. That 7k zone of when everything feels right and weightless. This is when it feels good.
[00:07:37] Speaker A: It feels weightless.
[00:07:38] Speaker B: That phrase, 100%.
[00:07:39] Speaker A: Yeah, I love that phrase.
So over the next 12 weeks, we are going to be breaking down each pillar, three episodes, each budget, work types, resources, and bidding. And if at any point you recognize yourself in what we're saying, book a demo with us. All right. Book a consultation with us and let us tell you a little bit more about it. Let us show you how it absolutely applies to your business. We will even use some of your numbers so that you can see in real time what. What that might mean for you. So let us show you what knowing feels like.
So with that.
Yeah, Take her cool.
[00:08:22] Speaker B: Take her cool. Everything's. Everything's going to be great.
[00:08:25] Speaker A: It's all under control.
