Mastering Construction: Financial Health Check

We've reached 200 episodes of the Contractor Success Forum! Join Wade Carpenter and Stephen Brown as they reflect on their journey, discuss the value of contractor education, and unveil a special 85-question quiz designed to help construction contractors assess and improve their business practices. 

Discover insights on financial health, systems, operations, and project control tailored specifically for the construction industry. Don't miss this milestone episode filled with valuable advice and a deep dive into key topics that can elevate your construction accounting game!

Subscribe for weekly construction finance tips:  https://www.youtube.com/@CarpenterCPAs?sub_confirmation=1

Topics Wade and Stephen cover on this episode:

• 00:41 Reflections and Lessons Learned
• 01:27 The Importance of Contractor Education
• 02:24 Adapting to New Technologies
• 04:05 Introducing the Contractor Success Quiz
• 06:08 Details of the Quiz and Its Benefits
• 08:38 Encouraging Listener Participation
• 15:31 Looking Ahead: Future Plans and Projects

LINKS

Visit the episode page at https://carpentercpas.com/evaluation for more details and a transcript of the show.

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Wade Carpenter, CPA, CGMA | CarpenterCPAs.com
Stephen Brown, Bonding Expert | SuretyAnswers.com

Transcript

[00:00:00] Wade Carpenter: Can you believe it? We've made it to 200 episodes of the Contractor Success Forum. Whether you've been with us from the start or joined along the way, today's episode is a celebration and an opportunity to level up your construction accounting. And in honor of this milestone, we've created something special, something we know you'll value to help you set up for success.

As we continue this journey together. Before I go any farther, I just want to remind you to share, and subscribe, and let's get into it This is a Contractor Success Forum and I'm Wade Carpenter with Carpenter Company CPAs. And with me as always, Stephen Brown with McDaniel Whitley Bonding and Insurance. 

Stephen, 200 episodes, I appreciate hours you've spent doing this with me. Any thoughts and reflections on walking into 2 01?

[00:00:45] Stephen Brown: I guess the most important thing is, do we have 200 good episodes out there or 200 crappy episodes? I don't know. We'll have to get feedback from our listeners on that. But I can tell you this, I sure enjoyed the ride.

[00:00:56] Wade Carpenter: Yeah, I'm sure our earlier ones weren't probably as polished as they are now, not that they're polished now, but I've enjoyed it too. And I think we both have embodied the thought that this is all about education. And I think this is education that's not out there for everybody. And I've gotten some great comments over the years, even, people, whether they can work with us or not, I hope that our listeners value this as much as we value them.

[00:01:24] Stephen Brown: Well, exactly. That's what we want. We don't advertise, of course, we want to promote our own businesses and we work with people all over the country. The most important thing is that we want our clients to not have the kind of problems that we see happen over and over again. To be proactive in knowing what those problems are.

And the best contractors are out there. We see them doing it all the time. And what a better way than a surety bonding agent that works with hundreds of different contractors, and a construction oriented CPA that works with hundreds of different contractors. And as we talk about all the time, all the moving parts involved with getting a construction project bid to completion to recognizing the profit after paying your taxes.

Wow, that seems like a long haul, but, if you do it all the time, it gets easier, doesn't it? 

[00:02:16] Wade Carpenter: Yeah, and I think that's something I've learned over the years. We're actually coming up on four full years of doing this. We haven't missed a week in four years,.

One thing I've learned over the years is that, before, say, COVID, no contractor would get on a Zoom call, and a lot of them did not understand how they could use an accountant that is, not right in their backyard. That we got some that are clear across the country. 

And from your standpoint, I know you work with contractors and can work with contractors all over the nation. And I don't think you talk about that enough because you give some valuable advice on this.

And I think our listeners, they all appreciate it. And, I think you should probably talk about the ability to deal with other people in different states, if they're not right in your backyard. 

[00:03:04] Stephen Brown: Right, Wade. The problems are universal. The territory may be different. The geographical implications of where you're building a project can mean everything. Especially right now, look how most of the country's snowed in today. But nevertheless, appreciate you saying that.

This has really opened up a world to both of us that didn't exist to the degree it has now, and I'm very thankful for it. And I appreciate our listeners for putting up with it. You know, a lot of times, Wade, we will be extremely geeky on a topic, and with a guest. We'll go so far down the rabbit hole that I'm sure our listeners are literally driving their trucks off the road and trying to wreck their vehicles to keep from--

[00:03:46] Wade Carpenter: Laughing?

[00:03:47] Stephen Brown: Yeah, right.. We mean well and we do want your feedback. And we're the first to appreciate someone saying, okay, guys, you're, you're way off track on this, And let's argue about it. Let's discuss it. We've always been open for that, wouldn't you say? 

[00:04:04] Wade Carpenter: Absolutely.

[00:04:05] Stephen Brown: And I think what our listeners need to know is that you have come up with a great idea for 200th podcast anniversary present to our listeners.

[00:04:14] Wade Carpenter: Well, let me give a little context. Because this sort of was born out of an episode we did way back just after the first season. It was like it's at least 120 episodes old. And before we even got onto YouTube, it was some of the ones that were just on the podcast. But at the time, I mean, we got some good feedback that week, but sometimes these podcast episodes get buried.

And it's one that I had done on the common setup mistakes of construction contractors. And there wasn't a lot of views. If you look at YouTube, there's probably not as many views on that one because it's older, but I found that I've actually had thousands of contractors going to my website because of this one episode.

And I noticed that some of the things we talked about in there, the building a chart of accounts, the cost coding, job costing in general, some of the mistakes that people make that are key and sometimes hurting their business. 

So, I started thinking about that, and I don't know if you have any reflections on that particular episode, or if you even remember it. Because I think some of these things we both see all the time is that they don't have good records, don't have their act together when they come see you, they can't get a bond because you can't trust the numbers.

But that wasn't really the point. The point was, I felt like our contractors got some value out of that. And I started thinking, and this has actually been a project that's probably six months old that I started down the road of, but just evaluating really where you are in your business, as well as, me getting to know several contractors that called me from all over the country. 

A lot of these things that they have problems with, they're common to everybody. And so, what we find was that, I'm asking the same questions and I'm finding the same issues. 

So what I ended up doing was creating this quiz. And it's actually 85 questions long, but it's 17 different areas of your business that are scored and it may sound intimidating, but, my thought was like, okay, well, I'm going to use this to evaluate prospects and have them fill it out, or use this as a teaching tool.

But over the course of six months of developing this, it's well, okay, I can automate this. There is some costs involved for me, but what I wanted to do was give this out to our listeners. And I'm not sure how long we'll keep it up there or how expensive this is going to get, but my thought was, and we can talk about more about what it goes into, but the idea is, okay, let's get some good ideas.

I instinctively know probably a lot of the areas, but you never know. A smaller contractor may be having more problem with cashflow. Bigger contractor may not have certain things like change orders dialed in or whatever. Does that, make any sense? 

[00:07:09] Stephen Brown: Yeah. are we talking specifically about systems, best practices survey, or a financial health survey or both?

[00:07:20] Wade Carpenter: Well, it goes into several things that have to do with your financial success. And again, I know this sounds like, I'm gonna take a 85 question quiz. It's not really that intimidating. What I've done is put five questions in each category, that you're just gonna rate yourself one to five stars.

Do I have this dialed in or not? This is more of a self assessment. And, the idea is what can I work on in my business to, or what do I need to focus on? 

[00:07:51] Stephen Brown: Sure. And maybe when we post this, you could also list our episode numbers that kind of correspond with those topics because as I was reading your outline, Wade, it was amazing how many of those topics we've covered over the last 200 episodes. 

[00:08:07] Wade Carpenter: Yeah, and I mean, they're all sort of intertwined. If you're interested in doing it, I mean, I was going to put it out there, but it's basically in three main sections. It's mainly on financial health, your systems and operations. 

And the other one is really has to do with project financial control. Do you really have control over things? I already mentioned like change orders or, getting your bids locked down and, and doing things the same way. 

[00:08:38] Stephen Brown: I think our listeners will understand when they can access the survey. And then our ability to give our listeners feedback on the importance of those scores. 

For example, I was talking to you earlier last week. I got my physical, I got my blood work in the mail. There's a range category of average. And, you glance it over and if the doctor didn't make a comment and everything, you know, you're a okay, right? 

But a friend of mine that was really geeky about understanding blood work, he had some heart issues, literally was looking over, telling me what everything meant.

Do you know what this bilirubin test means for you? I'm like, no, and I don't really care. Well, I heard about it anyway. And as a result of it, I found out, I really do need to know about this. Yeah, this is good Yeah, I'm on the high normal side. What specifically do I do to bring that item down?

And I got some really good feedback and an action plan, even though if I hadn't have talked to him about it, Wade, the doctor would have only reacted when it was outside of the range. Well, you know, this is concerning me. We need to do something. And then what if it's too late? 

So, I don't know if that even remotely ties in to what your goal is for helping our listeners take this survey and project their financial health. And to be able to discern, do I need some additional help in this certain area?

[00:10:11] Wade Carpenter: Well, again, it's not specifically, are you healthier or where are you falling down on-- so just on the financial health side, there's broken down to things like cash, your credit cards, your accounts receivable systems, your accounts payable systems, how the cash flow comes in.

And it's all in how you interrelate. There is a scoring by section. It's more like, you know, what should I maybe focus on first? Because it's not just, what are you doing well? What, I like your analogy there. That is really what the doctors out there just, oh, this is bad. I'm going to tell you about that. Otherwise, there's nothing to tell you. 

Maybe this will give you an idea. And this really, again, is self scoring, but are you doing okay in this area or do you need to improve? And it's not just a quiz, but it's more of okay, we're going to give you ideas of number one, what to focus on, but how to fix it. And just, general advice on how to fix it. 

[00:11:09] Stephen Brown: See, I love that attitude because the way I'm seeing it is both of us being the financial end of the construction industry, we're used to all the time looking at financial ratios, key performance indicators and just like a blood test, knowing whether that's in the average range or not, that just comes from experience, right? 

And to just throw a financial ratio in front of a contractor without explaining what it means, is worthless. But what I like is, I think your approach toward this quiz is so much better because it's more of a holistic approach. It's literally looking at a general health picture. More like getting an overall physical from your doctor and not just having your blood test run, right?

[00:11:51] Wade Carpenter: Right. And like I said, I will tell you, I mean, the quiz--

[00:11:55] Stephen Brown: With no prostate exams, by the way, this is going to be painless, right? 

[00:11:59] Wade Carpenter: But, but with that said, I mean, the idea is, yes, this is confidential. But what my goal is, is to score these and send them back to the contractor. But I will need like an email address and, contact information, so that I can send this to you. 

The other part of this, again, it's not anything we're going to sell your data or anything like that. It's not going to be shared with anybody else. But what my thought was, is I'm asking like, where are you at in the country? Which is sort of relevant because some places, maybe doing better in the, in East Coast versus West Coast, let's just say.

But also have like revenue level in just different buckets. We're not asking specifics, not trying to get too personal, but what I envision is if I get enough scores is that I can take it and say, everybody that is in, I don't know, the electrical trade under, a million dollars, are saying accounts receivable is one of my main things or cash flow. Whatever that thing is, whether it's profitability, or I can't really rely on my job costing. I'm making stuff up here, but that's where I was trying to go with this.

[00:13:12] Stephen Brown: Wade, I think this is great. And I also believe it's going to help us as podcasters to dial in on specifically what most of our listeners are concerned about today. Otherwise, we're just going to preach to them what we're concerned about because we see it happening over and over again.

So I love the Idea. So this, the questionnaire survey format, I know we're kind of ready to go on that, but what are you thinking the process will be? 

[00:13:39] Wade Carpenter: So when this goes out we're gonna post a link in the show notes, but just go to profitfirstconstruction. com. And in the community, it's free. Just you jump in there, put the information in. And again, it's just, this is who I am. This is a little bit about me, the trade I'm in.

And then you're just clicking like one star, four stars, three stars, whatever it is, and hit submit. And it's again, broken down into three different quiz--

[00:14:08] Stephen Brown: Segments.

[00:14:09] Wade Carpenter: Right. So it's not hard and you don't have to take all of them or you don't have to take any of them, obviously, but I was just thinking I had put so much effort into this.

I thought that, originally I was just going to scrap it because there's not going to be enough, but I'd rather give it away and give somebody some value. And I've probably never talked to even 1 percent of the people that are ever on this podcast.

I think you and I always came into this like, we want to educate contractors. We want to give them good information. And we'd love to work with you, but we can't work with everybody, obviously. And how can we leave our mark on this?

Like you said before, we're old guys that have been around the game for a little bit. And I hope people glean some kind of knowledge from what we're telling you. 

[00:14:52] Stephen Brown: Well, that and in our own defense, we stay relevant. Things change. It's an exciting business that we're in. And it's a rewarding business that we're in. And Wade, I think it's great that you're offering this. I can just tell you from having worked with you over the last four years and 200, our 200th episode, it's a great journey. And I've always enjoyed your company and your comments. And I really appreciate it. And I just want to thank you for offering this. I think most people are going to really get a lot out of it.

[00:15:30] Wade Carpenter: Well, I hope so. And, just like my book that's coming out in May. I mean, this started from me training contractors. Sort of reflecting on a lot of things this episode, but 2008, I know probably affected you like it did me. I don't think we've ever really had a really deep discussion on it, though I've talked about some of the things.

But I had so many contractors go out of business then, and I realized that me preaching all these things about like having great books and great job costs and accounting and they can do what they want, but realizing that they're going to have certain behaviors because of the way they spend cash. That was majorly eye opening to me. 

That's why Profit First resonated with me so much. And originally, I thought about like everybody else, it's like, okay, that's just another gimmick. But over the last six years of helping contractors implement it, I have seen major turnarounds in some contractors. 

And again, this is my thought of a legacy for us. This is some of the things we've been talking about, and I want to get that out there in a way that people are not talking about. The way the original books were written, the derivative book on Profit First, It does not teach it the way I'm teaching it.

It's also taught as a story. And again, I know I'm, three or four months from the publication date. It's amazing how long this has taken to do, but it's coming, it's in editing and all that stuff and getting this published. I know somebody could probably get on ChatGPT and spit something out in a day and publish it, self publish it. But that's not what I've done here. 

So, I put a lot of my waking hours in, in the last six months into this thing. So I feel like I'm, I've said enough on that, but what are your thoughts? 

[00:17:17] Stephen Brown: No, I love it, Wade. You're exactly right. Things have evolved over the last four years, haven't they? There's beenn a lot of changes. All for the good, all from not having any clue how to podcast, to figuring out how to, uh, use Zoom, to StreamYard, to finding Amanda, and all the folks that have helped us produce the podcast. 

It's been a journey, and it's been fun, and it's been rewarding, and I love the fact that it helps keep us on our toes, because a lot of times-- and at the different trade association meetings where I'm around contractors, you usually have to be pretty close friends with someone to be able to speak honestly about the problems you're having.

What are you doing about this? What are you doing to fix this? You don't want your competitors to think that maybe you're not as good as they are in any area. And also you're having problems in general that everybody has. You've developed a way, around those problems. I guess what we're doing, Wade, as we're sharing that information with our listeners. We always have, because it's good information.

Good information produces good results. If anything, it's food for thought. We've given a lot of information out over the years that you can chew on and you can throw it away, or you can embrace it. But either way, I guess I can say you, you get what you pay for. We're not charging. I think the fact is that our whole intention to start this was for educational purposes. And financial purposes, secondary as was the case then, it'll always be the case now. And, I think that's been a good podcast model. I don't know, maybe we're wrong. 

[00:19:02] Wade Carpenter: Well, we've never taken money or sponsorships and I know some have actually reached out to offer sponsorships and stuff like that, but we've never wanted to taint our opinions or push somebody's product because they're paying us. 

[00:19:17] Stephen Brown: That's not fair to our listeners And it's not what we do for a living. Well, what you do for a living is financial consulting for contractors and getting their systems fixed to make a profit. That's huge. and what I do for a living is hopefully get those contractors that are making a profit that I can get bonded and getting their surety bonds for them and help them manage their risk and their company through insurance and other methods. That's what we do. Yeah. 

[00:19:42] Wade Carpenter: Okay. Well, if any of you have any thoughts on this, again, we appreciate it. I know Stephen probably would love to hear, reach out to him. He works with contractors all over the country too. And so, don't hesitate to let us know what your thoughts or feedback on the episodes are. Especially this particular one.

We'd love to hear from you. you know, If you've been following along and never reached out, we just, put it in the comments. we'd love to hear it. And, hopefully you'll be along for the ride for the next 200 or 2,000 episodes. However many we can survive.

[00:20:15] Stephen Brown: On our 2000th episode, Wade, we're going to be using AI to make ourselves look presentable. 

[00:20:21] Wade Carpenter: Well, we may be needing to do that now. But anyway, with that thought in mind anything you'd like us to cover, let us know, drop them in the comments below. Thanks for listening. If you more information, go to ContractorSuccessForum. com or the Carpenter CPA's YouTube channel. And if you enjoyed the episode and you haven't already share, subscribe, do all that.

Follow us every week and we will see you next show and all the 200 afterward. Thank you.