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Contractor Cuts
8 Places Contractors Lose Money That Never Show Up on the Estimate
Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.
You look at the job and the numbers work. You finish the job and somehow the profit is gone. It didn't disappear on the estimate — it leaked out in eight places you're probably not tracking.
In this episode of Contractor Cuts, Clark and James walk through the leaky bucket: the specific spots where contractors quietly bleed profit, and what to tighten up so you can pick up two to four points on every job.
They cover:
- Unbilled trips — the drive-bys, Home Depot runs, and "I'll be right over" calls eating three hours a week
- Timeline slip — how a three-week job becoming four weeks costs you 20% of your annual revenue
- Gray area absorption — saying yes to free work and never naming it
- Flat markup — why 35% across the board loses you bids and underprices your risk
- Equipment sitting idle — the toys you justify for one job and pay for all year
- Free pre-construction — why every estimate needs a pre-con line, even a $150 one
- Rework from late decisions — the changes that cost $400 now and $4,000 later
- Overhead creep — why one good month isn't permission to buy the truck
- Which leak Clark and James think is the most dangerous — and why it's the hardest to see
If you're doing good work and still wondering where the money went, start here.
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Why Profit Keeps Disappearing
SPEAKER_03Welcome to Contractor Cuts, where we cover the good, the bad, and the ugly of growing a successful contracting company.
SPEAKER_00Welcome to Contractor Cuts. My name is Clark Turner. And I'm James McConnell. Thanks for joining us today. Bing bong. So today we are talking about something we've we've talked about a couple times, but I think it's it's worth revisiting and kind of doing a deeper dive on, which is the leaky bucket. We've listed out eight things that never show up on estimate and that end up costing you money if you don't watch it. It's where the actual eight spots that we have found dollars just disappear on jobs and running a company and what you're doing. So the goal of this is to walk away and say, hey, I'm gonna tighten up some of these things. I'm gonna, I'm gonna try to gain two, three, four percent profitability on every single job moving forward if I can get these things tight. So listen to this in self-assessment mode and thinking about how you're spending your money, how you're doing things. Um, because the goal of this is, you know, we talk to guys all the time, and when we look at the financial data behind it, they've lost a lot of money over a year. But in our heads as a contractor out running jobs and being out on site, it's like uh, you know, I'm gonna lose two grand on this job, just let's do it.
SPEAKER_03Let's just get to the shock it up as cost of doing business.
SPEAKER_00Yep. And so we're we're gonna kind of cover some of that stuff, uh, as well as things that we do that just waste dollars, um, that I think is pretty easy to clean up like by tomorrow. Um, so I think it's I think it'll be a good one. Um one other note that I wrote on here too. This is kind of we're trying to cover everyone at listening to this. So if you're a one-man show, every leak on this list is yours personally. You're doing this stuff. If you've got a project manager, your processes that you got built, you might not be doing this, but we need to tighten up the processes to cover some of this stuff. We can't allow some of these things because as you duplicate and grow, your PMs are not gonna be as efficient as you, but they will be as efficient as the processes that they're running. And so if we can tighten those processes up, then all of these dollars will be back into your pocket.
SPEAKER_03Uh I want to stop just for a second because you said something that was so profound. It was they're not gonna be as efficient as you, but they will be as efficient as the processes that you run. Absolutely phenomenal. You get that tattoo.
SPEAKER_00I mean, that's something I'll get on the lower back. Uh all right. So let's uh let's jump into these. Let's talk about tattoos more. Let's talk the tattoo. Oh, that's next week's podcast. Okay. Uh, so let's run through these eight. Uh,
Unbilled Trips And Drive By Chaos
SPEAKER_00number one, the unbuild trips, returns, pickups, punch out, drive-bys, three hours a week, 50 weeks a year of wasted trips. Not trips that you need to take, but how often are you grabbing your keys, jumping in the truck because someone texted you, hey, I got a question? How often is the homeowner saying, Hey, I got a question over here? Can you come look at this? Yeah, I'll be all right over there. Or the crew saying, We don't know what to do about this. Can you stop by? Yeah, I'll be right over there. And how many, how many times do we do that throughout a week? Yeah. Um, I I think that's good.
SPEAKER_03Wouldn't it be amazing if you had the same level of urgency when like you told yourself you needed to do something. Yeah. Versus when a crew reaches out to you about a project. Because you're just like, I just need to get over there because something's on fire. Yeah.
SPEAKER_00I uh uh I think it was last week I met with one of my coaching clients. Um, and this was one that we circled for him. Uh and it was like a So it's a guy. It is a guy. All right. Uh he lives in America.
unknownOkay.
SPEAKER_00Knocked a couple out. Canadian. Uh anyways, he one thing that I was like, can I can I can I call you out on something? He was like, Yeah. I said, it feels you have bad breath. I can tell over Zoom. Uh no, it was a I feel like what you we keep talking about is you're gonna do A, and then three months later you're still doing B. And it feels like you just keep going to the job sites because there is an ego trip. There is a dopamine hit that you show up and everyone's like, dude, you're here, great, awesome. And it's like you're the you're the man when you get there. Everyone loves you, everyone needs you, everyone's got questions for you. And so there's that is I wanted, and you get there and have friends. So, you know, especially the smaller you are, the more tight you are with your crews and they're your boys. And oh, we're gonna do this. Let me hang out here. Oh, let me grab a hammer, I'm gonna help you out with that. And all of a sudden it turns into I've been here for three hours, I'm doing something. I'm and I didn't, I didn't have to come. The crew had a question, we could have FaceTime for five minutes and got it answered. But I enjoy coming out here as a dopamine hit to my to looking at the project and kind of not having to do the paperwork and write estimates. I just want to be here on site, right? And so there's this unbuild trip that we don't view it as the time being wasted from our by our client. It instead it's oh, I want to go do this. It's like, well, yeah, you're choosing that over writing the estimate, though. You're choosing that over getting home to your wife and kids, you're choosing that over so many things, but you don't realize that because you can justify it as work. And I need to get on site. And those those guys had questions for me.
SPEAKER_03So well, I think there's also an element that you do this business long enough, you become very risk adverse. Like everybody in this industry already has a pretty high threshold for risk. Yeah. But the longer you get into issues and the longer your the more times your screw or your your crew screws up and you have to go fix the uh the relationship with the client, the more often you're like, I I just can't trust anything. Yeah. And so it's I I feel like it's less often an ego trip and more often a I just can't trust anybody but me to do this. And I've learned that lesson too many times to not just get my keys and go.
SPEAKER_00Yep. And let's it's not just today's problem. It's I didn't write very descript line items. So my work orders are vague. So my crew doesn't know what to do when they go. It says, demo the bathroom. Well, what does that mean? Where's the bathroom stop? Where are we there's a closet there? Are we demoing the closet like which bathroom? Yes. And so it's I write my estimates and my descriptions and my work orders in a way that I know I can read it and translate for you, but they need to be translated. Uh, and so that's part of that problem of trust. Are you training your crews? Are you sitting down for an hour with your sub and going through onboarding? And this is how we do things, this is what we need, this is how the end of the day looks like, this is what the job site should look like. This is what I need you to do. If we're doing all of that stuff, it's gonna build the trust that they do it right on the job site because they now know their expectations, right? Yeah. It's it's not today the crew starting, and so today there's a problem. It's the last three weeks of how I've been running things is causing me to not trust a crew today because I haven't prepped the right way.
SPEAKER_03Well, and then not to beat this horse even more dead, but unbuild trip. How often are you going to Home Depot? Are you are you already planning on going to Home Depot multiple times? I mean, some guys are going every day. Yeah. Some guys are going multiple times a day. And this is you're not putting this in your 99% of guys are not putting it in their scope that we have we need deliveries. Yeah. They're just thinking it's going to be covered, it's in the wash, it's part of my percentage. But then they go every day. Yeah. And it's like you cognitively know how much time you're wasting. If you sat down, you're like, I really got to stop doing that. But put it in your scope that we pay for deliveries. It's a 250 bucks for 500 bucks, it's going to probably cover the deliveries you need for a small project because you are going to pick up some ancillaries, but just have it all delivered to the project.
SPEAKER_00Yeah. And again, that's preparedness. That's I'm going to walk the job site day negative one before we start with the crew to get my materials list together. What do we need to do? Normally we start with demo. So I don't need materials day one. And I can put together that order and send it over to my rep at Home Depot who's going to get it delivered for me. Um, I think one thing that we we push guys into a lot when they come into coaching that they don't currently do is part of the onboarding is I talk to my crews and say, your work order per our contract, per what you're signing here, it's not written on there. There's two things included when you say yes to my work order. So make sure you can do these two things with everything on the work order for the price I'm paying you. Number one, you're gonna cut out 10 minutes early every afternoon before you leave, and you're gonna clean the job site. I want a clean, tidy job site at the end of the day. I want it organized, I want it broom swept. That's part of my work order. I expect that.
SPEAKER_03If you do, if you want, if you don't feel comfortable with that, put a line item. Put it on. Hide it from clients or don't.
SPEAKER_00Absolute cleanup after the job site and it's a lump sum. Yep. Number two being I'm going to do an initial materials purchase. And then from that day forward, whatever's not on there, I need you to hit Home Depot on the way to the job site in the morning. So I need you the day before to be good enough at your job to say, what do I need tomorrow and the next day? All right, I'm gonna pick that up on the way in. I don't want to make five purchases at Home Depot where you're running back and forth tomorrow. That's that's four trips that you didn't need to do if you planned well. And each of those trips costs anywhere from 45 minutes to an hour and a half. So you spent half your day going back and forth for trying to find the right material because you're being inefficient and you're not gonna make money here, right? So I want to help you make as much money as possible because then you're gonna be here long term and be my guy that that will be committed to us making good money.
SPEAKER_03And maybe you're like, no, I'm gonna be doing deliveries because uh my guy, I don't want my guys doing deliveries. Fine. On Monday, when you walk the property, talk to each of your crews on site. Hey, what do you guys need on Wednesday? Yeah. Because I'm gonna come back and I'll bring some material. You can go to Home Depot, you can do five different purchases for the five different projects, load your truck up and then drop it off as you go, like Santa. And that's fine. You're being at least more efficient with your time. But Mart, like you need to have that planned. That is probably the biggest bucket is guys just running to job sites and just spending too much time there because that's normal. I'm just gonna go check in. Yeah.
SPEAKER_00No, no, why? Why are you going there? Um, number two, timeline slip.
Timeline Slip And Lost Revenue
SPEAKER_00This is something that when you're small, you don't feel as much. And as you get bigger and as you start really duplicating and growing, it really you really feel the burn of this one. This is when you take a three-week job and it turns into a four-week job. That changes. If you take every three-week job and change it into a four-week job and you're doing a million a year, you end up only doing 800,000 a year. You lost 200,000 of revenue, 20% of your revenue is gone because you went from a three-week job to a four-week job. So getting off the job site as quickly as possible, getting that client engagement and the front-end due diligence where we plan everything out and we don't have delays because all the decisions are made, all the selections are picked out, all of the change orders and changes to the scope are all figured out on the front end as much as possible. Um, that's going to make us super efficient and stick to our timelines. We we push Gantt charts not because the clients love them, though that's a bonus. It helps us and our project managers keep our guys accountable and also be like, oh crap, like this should be starting on Monday. Why are we not starting? Okay, what are we doing? And so you can start planning your jobs two, three, four, five weeks in advance, as opposed to, all right, it's Monday, what are we doing this week? Yeah. Right. And so the the understanding the full timeline when it should be done and when it's falling behind, I have an imaginary deadline, even though like the client's like, oh, you know, as long as it's done by Thanksgiving, we're good. Well, I've got an imaginary deadline of like, I've got to get done by next Tuesday so I can start my next job and not have timely. Um, and so if I start doing that and looking at that way, then it's Friday morning and I'm walking, I'm like, guys, you got to have the paint 100% done because we got flooring coming on Monday. And so they're like, okay, well, I guess we can work late tonight, or what if we come tomorrow instead of Monday? Then Monday you got something else for us. Yeah, why don't you come Saturday, finish the paint? I'll keep the flooring going, and I got another job I'll start you on Monday. So the guys are getting more money, my job's staying on timeline, and it's all because I was like, I can't let this slip. When you're living and managing day by day in the moment, not looking at the bigger picture. On Friday, they're like, hey, the paint's not not anywhere close to done. It's like, yeah, we'll probably have to come back Monday. Okay, cool. I'll let the flooring guys know. Right. And so you don't really feel that time slip because it pushed today. Yeah.
SPEAKER_03But because there was no, there was no tension. Yeah. Because the you weren't telling the homeowner, they weren't frustrated about it. It was your painter that was saying, hey, we need more time. You're like, great. You call the flooring guy, he's like, that's fine. Yeah. Great. No one's upset, but you should be.
unknownYeah.
SPEAKER_00You're just making less money. Yeah. Right. Um, and if I don't have uh a projections of what the next couple months look like and what's coming up, it almost feels like if you're just living, and we're gonna talk about this next week's podcast, but if you're just living weekly and just looking at what's going on this week, there is not a big sense of urgency that I'm losing dollars this month. Because it's like, well, I've I've landed these jobs, I'm still gonna get them. I'm not losing those jobs. Well, those jobs push to next month because you didn't get done with your jobs this month. And because of that, any job that you could have landed and start next month pushes to the next month. Well, we don't know what that looks like. We don't have any sort of data or vision into what's coming up and what we're actually slipping and pushing. Because if uh if you're a company that does 100 grand a month on average, you and you then this month we only invoice 50. Next month, it's very difficult to do 150, to do your 100 that you expected plus the 50 you lost from this month. Normally what you do is, well, we we only invoice 50 this month, next month, well, we got it back to 100. Well, we're not making up the dead month. We're we're just pushing everything down the road. So you're losing a lot of cash. And like I said in the beginning of this one, as a one-man show, when you're doing a million a year and it kind of pushes, you don't really feel it. Once you scale up and you got four project managers and you're doing eight million a year, there is a huge damage to the company. Like you won't survive running it that inefficiently. Yeah. So get those processes in place today. So as you grow, we're making higher percent profits on each of these jobs.
SPEAKER_03And I will say the time slip thing is um it can feel overwhelming to like see a time slip and it's like maybe you have got four projects running and three of them are dealing with some time slip. There is an there's like a sense of anxiety of like, oh, well, it's slipping, I have to do something to fix it, and you know, uh, and just like the hands go up almost immediately. Like, I can't I I don't have control over these guys, they're 1099, I can only make them do so much. Yeah, I can plan on the front end, but there's always things that happen. It's just kind of like timelines slip. But if you actually just interact with it like it's information and you look at it like timeline slip, is there anything I can do? Maybe there's not. Maybe it it is what it is, just still owning and accepting the fact that the timeline is slipping and don't just like bury it because it's okay. Like the timelines are going to slip, but you can get better marginally over time at landing on your timelines. Yeah. All of your in onboarding with your guys, you get better onboarding, you get better buy-in from your guys. That's a whole process. It's going to get better, but timelines are a big deal.
SPEAKER_00Yeah. I I uh uh two things with what you were saying hit my brain with that. Um lightning. Number one, um the ability to stack crews. My electrician and plumber hate working at the same time in a property. I can call in a favor and be like, hey, I'm sorry I gotta do this, but I gotta stack you and the plumber at the same time. I know you hate it. I'm so sorry. I don't like him one bit. I will bring you a pizza on Monday. Like, I will I will say I'm sorry, but I need y'all to work at the like they can do it, they just don't like it. Okay, but Clark, you owe me one. That that's number one. Like, you gotta work with my mother-in-law.
SPEAKER_03You get it.
SPEAKER_00The the other thing I was thinking about too with that is if I make the timeline and the Gantt chart when it starts slipping a problem for me, then I then the client feels like, oh, okay, this guy wants to get out of here. Um, I I feel like there's a spot where clients get to where they're like, you just won't leave. You're just dragging your feet to stay here. Like, get out of, get just get this done. Yeah. Right. And so if I'm showing them the Gantt chart saying, listen, we've got to like, I'm gonna keep reworking this. I got to get done sooner because I got other jobs planned and I can't, I can't cancel those at this point. So I'm gonna work my butt off to get this as tight as possible because I can't stay here beyond next week.
SPEAKER_03Client, excuse my French, but I'm gonna work my tush off to get this thing back in line.
SPEAKER_00All right. But it's aligning what you and the client both need, which is to get out of that job site. And so letting, like, I'm looking at that, I'm planning on that, I'm trying to move this around. Bringing them into that allows them to be like, oh, cool. Like this is a bigger problem for him to be here for next week than it is for him, for me if he's here for next week. Um, so it's kind of all of that stuff together. It also helps with the customer care side if you're not letting your timeline slip or managing and and always looking at that side of planning.
Stop Absorbing Gray Area Work
SPEAKER_00Advocacy. Number three, and we had a full podcast on this, so we're not gonna spend too much time on it. Gray area gray area absorption. Uh, you say yes and never name it. That's an easy one to say, folks. Gray area absorption. Um, naming it as free, absorbing it is silent. We had a full podcast a few weeks ago about this of the even if I'm doing free work on a job site because I can just handle it while we're here, I'm gonna name it, I'm gonna quote it, I'm gonna send it over, I'm gonna say that's $400, but I'm gonna handle it for you. I'm gonna eat that price. So then I've got some uh uh bullets in the gun when something happens later and I can say, well, I I can do what you're asking, but you gotta pay for the first thing I did or pay for this. Like I can't keep comping stuff for you. Remember, I already ate that $400. Um, if you want to pay for that, then I'll do this other thing for you. Right. And so using it as ammunition against the client thinking that, oh, well, you know, he's doing what he was supposed to do anyways. And so not absorbing those gray areas and at minimum calling them out, naming them, telling the client what you're doing and what it is costing you, but you're covering um really alleviates that leaky bucket. Yeah, at least get the social capital.
Ditch Flat Markup For Reality
SPEAKER_00Uh, flat markup, whether it's 35% across the board, 25%, whatever your markup percentage is, depending on how you how you price things. Um, underpriced risk, overpriced roof, um, lost bids, risk, and your time are not one number. So uh I write this as when you're quoting a roof job, we've got a roofing company that we use as our sub. We've got some really good pricing with them to where we can practically price it the way that they price it to homeowners. I don't need to make 35%. On my roofer, I have one phone call. He gives me the price, I give it to the client, they say that's good. We pick out a color shingle and he goes. I've got two phone calls and zero management. I don't need 35% on a $15,000 line item for two phone calls. And if I mark it up 35%, I'm not going to land that. They're gonna be like, oh, my brother-in-law works for a roofing company, we're just gonna use them. But you can still do the gutters. Oh, goody. Can you do the tear-off and cleanup? And then uh so can you just come over so I can yell at you? The the flat markup across the board is I think something that skilled contractors don't do anymore. But when you're newer to it, it's like I just what am I supposed to do? Everything 35%. Great, I'm gonna just do that. And you've got to realize there's some line items that need to be way higher than 35% because it's a $1,000 line item, but I'm going to have four different trips over there, three different calls. I got risk because the guy I'm using is not a big company. And if he screws up, then I can't make $300 on a $1,000 line item. I need $800. I need $600. So I might have an 80% markup on that small line item because of the risk, time, and effort I need to make on it. So when you're putting your pricing together, don't just say I do flat rate 35% across the board. What we need it to be is what's my time consumption, what's the risk factor here? And I'm gonna change my percentage of profit according to those things. Um, if I'm doing a job that's majority roofing, HVAC, and cabinetry, my profit line at the bottom of the job is gonna be 18, 19, 20% probably, because all of those category items are a lot easier, a lot higher price items that don't take a lot from me. Um, so on those, it's oh, it's a very healthy estimate to be at 20% potentially. But if we're doing a bunch of punch out work on an inspection report and it's eight grand worth of punch out and it's a ton of meticulous stuff, I need to be at 60, 70% because of the amount of time I've got to be there and go back and fix stuff. And oh, the inspection report called for A and we did B, and though the both kind of work we got to do it the way the inspector called for it, right? So having an adjustment of your profitability on risk and time spend is an art form that you got to learn, but start working in that direction if you're if you're newer.
Equipment Toys That Bleed Cash
SPEAKER_00Number five, equipment sitting and Over it. Now, this is one if you're a general contractor, I don't love you owning equipment until you get to a certain size. Um there are some guys I've coached that are in the trades. Um when you say equipment, can you be more clear? Um because surely you don't mean excavators. Yeah, yeah, yeah. Um that's a big one. Yeah. Uh any sort of heavy machinery like that. Um I bought dump trailer. A dump trailer, a the $2,500 power snake that you can that plum only plumbers need. Yeah. Um, we had one of those at one point. Um like 80-pound jackhammers. Yes. It's like I can justify buying it for one job because I was gonna have to rent it anyways. And I like to have toys. Um, but at the end of the day, are you uh what product are you giving? Are you a general contractor project managing the job or are you a laborer doing the work? Um, number one, you can't give your tools to your 1099s because they're then classified as W 2. And there's that, there's that line of demarcation between what a 1099 can do and can't do. And if you cross that line, IRS can come after you for tax for uh W-2 wages. Um, so I can't, I'm not legally supposed to let my crews, my 1099 guys, use my tools. Can they rent their can they rent your tools? It's sticky. I mean, you could get away with it potentially. Um, but what I just gotta make a couple calls. But uh I think uh what we see a lot is we had a job where we're doing a new build, and I was gonna yeah, I was gonna I got a buddy that's really good. He worked for a large company and he's gonna do all the groundwork for me. I'm just gonna instead of rent for two months this X excavator. You got it. Thank you. You know, instead of renting an X excavator, wow, you can do it for a bulldozer for two months, I can just buy one because we do this all the time and it's gonna save me this, that, and the other. I can see why you went with the word equipment. Yes. So that being said, like there is a mathematical way. I always say, uh for me, it's a 60% rule. If I'm gonna keep it out in the field three out of five days a week, actually making money on it, let's have that conversation of purchase. Most of the time, people justify it because I'm gonna have it out three to five days a week for the next three weeks. And then I'm gonna have to pay for storage, I'm gonna have to pay when the hydraulic line gets hit, I'm gonna have to pay for when something breaks on like all of that, those unexpected costs, the fuel costs, like all of that that you need, transportation. No, now I got to buy a trailer to carry this excavator back and forth, right? So there's all sorts of additional costs, additional headaches. I got to hop in my truck and go pick up the excavator because the guy's done with it and we got to get it back to the shop and it's an hour away that we're working on. So it's a two-hour round trip in my Monday morning, right? So there's all of those type of issues as opposed to, hey, my sub, I'm gonna hire you to do this. I need you to either have your own equipment or go rent it. It's part of the pay I'm giving you. Um, if you want me to put it on my credit card, great, I'll take it out of your pay. Uh, but you're in charge of your equipment, getting it there, handling it, right? And so I want to be a man, a project manager that is subbing everything out, not I sub 20, 30, 80% of the job and I'm doing the rest of it myself with my in-house guys, all my equipment. That works if you're a one-man show, if you're doing trades, or that works once you get beyond 10 million plus, when you can have on in-house staff for things like punch out and other things. Two different price points of what justifies that. We're not going to get into today. All that being said, do not have a bunch of equipment sitting. Do not be a toy collector because you got the cash and you can justify it for one job. Um, if you if you have kept it 60% busy for three or four months straight every single month, let's have that conversation about a purchase instead of a rental. Um, but if we're in coaching, let's let me be the final sign-off on that and tell you why it's a good or bad idea. Because I got no emotional, it'd be fun to have. I just I care about you financially.
SPEAKER_01Could I interest you in a lease? What's it gonna take to get you in this uh this bobcat excavator?
SPEAKER_00All
Charge For Pre Construction Work
SPEAKER_00right, number six, fru giving free pre-construction. This is an instant change you can start doing with your estimates today. If you were we uh I force a pre-construction line item on every single estimate. I don't care if it's an $8,000 job, put a $200 pre-con precon line of what we're gonna do to prep for the job. The the um walking all the crews through and getting finalizing pricing, the building out a Gantt chart, the pulling all the selections together, all of that stuff is costing you time and effort. And if you don't have a pre-con line to pay you for that time and effort, A, you do it minimally, so you're not prepared for your job, B, you're waiting burning time for the next two weeks, working, prepping on stuff that you're not getting paid to do. So pull that out of the out of the line item, say, listen, I'm doing a pre-construction line item. We got $1,800 here because I'm doing all of this work over the next two weeks. From there, we start demo and you walk the client through it. Have you ever had client, like I'm sure you've had people push back on that. How how do you have you ever gotten rid of that line item for a client? Or how do you navigate that that, James?
SPEAKER_03So great question, Clark, because I I wanted to talk about this. Let me back up. The um I feel like there are certain jobs that it's gonna be very difficult to get somebody to pay you for due diligence, simply because it might be a really small project like a secondary bathroom remodel where they have three bids and or they have two bids and you're the third, and you know, your desk estimates at 15, and other guys at 12, and another guy's at 13, and there's just not a lot of wiggle room in this type of project. And so to be like, well, also on top of that, you need to pay me for the due diligence, uh it just gets a little bit like I could land this job, it would be a fine job for us to have. I don't want to lose it because of a $300 due diligence that the other guy's not paying for the charging. Yeah. So in some instances, it's like, okay, why don't we change the model to this is a $15,000 project, $1,000 is due upfront for due diligence, but that's part of the scope. So it's like a non-refundable deposit. I like just the due diligence to stand on its own, and it makes sense, and you can sell that for a larger project, like $150,000, an $80,000 kitchen remodel. You say I I need I need $1,000 or I need $1,200 up front, and that is legwork, me vetting this entire thing out and pitch it as an insurance policy for them so that you vet the entire thing out before you start and you're not asking for 30% up front. It makes a lot of sense on larger projects. And then on the smaller projects, I feel like there's a there's a workaround, but it again, it's an art to where like there's might be some $50,000 project that it makes total sense to have due diligence because there's six or seven trades. There's also some fifty thousand dollar projects that's just a retaining wall. And it's like I my due diligence is getting one guy out here. That might be a $200 due diligence. Yep. But that's why I'm saying in in the cases where you don't feel like you can actually charge for straight up due diligence, do the down payment, like the small $1,000 non-refundable down payment for the legwork. That's just part of the total.
SPEAKER_00Yeah. I go at that a different way of like, I'm gonna pull this out and call it due diligence, but I'm taking out of these other line items. Um what's funny is there's a guy I'm not gonna call out, but that you know that I coach. Um we we were tracking his jobs. He's an executive level, so we're kind of job level diving into his jobs. And um we were looking at a handful of jobs and we were circling because like we're trying to hone in his process, like he's got it all in place. Like, how do we get it super tight? And so we started flagging jobs that didn't go well. Like, just let's let's start doing a post-mortem on those jobs. Let's look at those jobs, what's going on? And it was like almost to a T. The jobs he didn't have a pre-construction line on didn't go well. Yeah. And it was not because the pre-construction changed things, it's because there is a difference in his mind and all of our minds. And the client's mind. And the client's mind. I'm getting paid to do this, so I owe it to the client. It's on the Gantt chart. I'm paid to give them deliverables. And when I'm forced to deliver something and organize my job before I start, the job runs smoother. Yeah. And so, like it was literally, it's I don't care if it's a $2,000 job and it's a $150 uh pre-con line item. The mental, like, I have to do this and check this box and give the deliverables of a Gantt chart and whatever two selections they need. We're not going to do a full workbook. I just need these two selections. I need this color and I need this type of whatever. If I can just have a moment, whether it's $150 or we did one for $60,000 for the project in Lexington, a pre-con line. But again, we're developing 10 houses on 14 acres. And so there's a lot we have to do there. Um, that being said, that can scale with the project. But if you have it in there for every job, even if it's $150, there is a different set of responsibilities that I have to be held accountable to to organize before the job starts. And I can't just wing it like I, like I used to do before I had these processes in place. So I think that for guys, like just the mental between them and the client of I you're paying me for these deliverables, let me get them to you. And now I have my whole project planned out, prepared, work orders done, everything's great.
SPEAKER_03I I want to draw a hard line in the sand like that. I just know that there are seasons where it's like, I can't, I don't want to risk this job. Yeah. And it like, it feels like a risk. And then it's when you're coming from that standpoint, it's hard to sell. Yeah. It's hard to sell the idea of due diligence when you're like, I don't want to, I don't want to lose the opportunity for this job.
SPEAKER_00Well, and again, like our other line item or the the other thing we just talked about with flat markup and knowing how much time, like it's it goes into the final chunk at the bottom of the of your job card of the profitability of the whole job. And it's it's costing me zero and I'm charging 500 or a thousand or eighteen hundred, that's straight profit. And so if I can cut that out and my profit's where I still want it to be for the effort that's gonna need for this job, great. That's that's that's a little bit better. But I'd almost tell clients like, I'm gonna chop down that paint price by a thousand, but we're keeping that thousand dollar uh line item. That's how important it is. Yeah, like that's uh I I need to make sure we plan this well, and I don't want to hit you with change orders and have the domino effect in the middle of a job that costs us three weeks. And like my job is to try and do all that in the front end. So I'm gonna knock this other price down, but I'm gonna keep that in there. Either way, it's a moot point for you. But I want to be able to have that, right? And so the client's like, oh, wow, this guy is like organized. Like that.
SPEAKER_02I like I like yeah, or like, or like, why like this is just like left hand, right hand kind of stuff. Why is this guy so hard up about this line?
SPEAKER_00Uh all right.
Rework From Late Client Decisions
SPEAKER_00Number seven, rework from late decisions. I think this is something uh we've we've talked about a lot, but I think it's definitely a a big bucket of um, we didn't do a benchmark walk. We got three weeks past something that the client thought wasn't done and I thought was done, and now we got to go backwards and repaint the walls, but we've already put the flooring in and the trim. We got to cut everything differently, like all of that stuff that we've talked about of how we fix that with the benchmark walks, with the planning, with weekly invoicing to where the client is checking the job weekly, and this is what I think is done, and what we're gonna be starting next week. Those conversations on a weekly basis go to eliminating those late changes because we we had two different paths, and a month ago we kind of split from what I thought we were doing and what you thought we were doing. And now a month later, we got to back the train up four weeks. Um, reworking those late decisions, I think costs us a lot of time and opportunity cost, even if it's not costing us dollars on this job. But a lot of times it is like in relationship, though, the big yeah, the client's experience of it. But like the example I just used, I thought I was done painting. The client wanted one more coat on the walls. I put the flooring in and did a bunch of stuff. Now instead of spraying all the walls, I'm gonna have to hand roll them. Also, I'm gonna have to put plastic down for the floors, and I'm gonna cover everything up, and what their furniture they just bought is now sitting in the middle of the living room. And like it's just uh a hornet's nest sometimes going backwards like that. Where if we caught it the week of, yeah, spray one more coat, we'll be good. Great, done. We're good, out of here. So I think a lot of again, the common theme of this is all of the processes we do result in these things. Um, this isn't a one-time, okay, I'm not gonna rework pay uh, you know, uh benchmarks all of a sudden. I'm not gonna do work at the end. You're it's too late at the end. Like you're already there, you're already in it. It's do we do the pre-con? Did we do the client engagement agreement properly with the client to talk about those walkthroughs and how we do those? Are we am I invoicing weekly to make sure that we have those communications about what I think is done and what they are gonna pay for next? So reworking those late decisions are a big hole in the bucket. The final
Overhead Creep After A Good Month
SPEAKER_00one is overhead creep. Um overhead creep. Uh that was your nickname in high school, wasn't it? Overhead creep. Yeah. Yeah. Because I was just constantly in the ceiling. You snuck into like the women's locker room.
SPEAKER_03Clark. Clark, why? In today's climate, in today's climate, why would you put me sorry out of you? Why would you put me in this theoretical situation above a girl's locker room?
SPEAKER_00Because it happened. Didn't it really happen? No, it never happened. Overhead creep. Revenue went so uh what revenue went up. You got it. I got this. Let me try again. When your revenue goes up, things feel good. You bought that new truck, you you leased that Bobcat, you went out and got that huge office. Baby, get the wallpaper. Yeah. Well, I mean, we this happened to us. I mean, in our Atlanta branch, uh, we were in a 4,000 square foot plus space, paying $6,500 a month, and we had five employees all spread out, two offices apiece, because we're gonna grow into it, right? Like, but we had the money and the overhead went up or the revenue went up, and so we could let's keep moving up to the next office. Let's move up to the next one. We kept jumping sizes of offices. Um, and then COVID hits, half your business falls away.
SPEAKER_03What was what was COVID?
SPEAKER_00Uh, it was this, don't worry about it. Okay, you weren't, you weren't there. Um it, but it just cut a revenue in half. And turns out the landlord wasn't okay with cutting the the rent in half, right? Like, but I still have to pay it, right? And so the when the revenue goes up isn't the indicator for spending more money. The indicator for spending more money is the needs and the and the plan of growth that we're doing. Uh, and so, yes, you need to get an office at some point, right? Uh one of our companies out in in Utah, we just hired our first project manager. We don't have an office yet. They meet in their basement. That's part of it. Our second PM, though, is coming in the spring. We're gonna have an office before that happens. That's a part of the game plan. We got to hit certain revenue points, we got to be moved into an office, and then we're gonna make that next hire. So we have a game plan of when and how, as well as a budget line for it. Um, and we need to be able to make sure we can afford what we're spending today, not hey, we're about to grow, we're starting to grow, we're, you know, one month I hit 220 in revenue. So that means every month is gonna be that. So let's go ahead and move. Like, yeah, no, no, no. I want to afford what the last six months average can afford, not what I think is coming can afford. So that is a huge leaky bucket of we we always do it's it's a roller coaster. You get highs and lows month in and month out, season in and season out, year in and year out, depending on economy and so many other things. We don't want to have our spending hit at the top of our uh expected revenue. We want like worst-case scenario revenue. What's what's our overhead percentage there? And so planning that and making again, great great part of having a coach is I don't care if you get a nice truck or if you're driving around in a in a 10-year-old crap truck. Like for me, I care about the health of the company. For you, you got a pride thing and you want to you want to buy that new $120,000 truck that that just came out with all the bells and whistles. So if we can justify it in the price, great, go buy that. If if we can look at the numbers and the data says there's space for a car payment for that size, let's have that conversation. But I think just because you had a good month doesn't mean it's time to go buy that new truck. Um keeping your overhead low. All right, those
The Most Dangerous Leak
SPEAKER_00are our eight. The unbuild trips, the timeline slip, the gray area absorption, flat markups, equipment sitting in overhead, free pre-construction, reworking from late decisions, and overhead creep. Jims, of those, which one do you think is the most deadly for a company? Um that's gonna cost you the most out of all of those things?
SPEAKER_03I think time slip. I feel like it's just the most if you're if you're time slipping, you're doing it on most of your jobs because it's it's indicative of process. Yeah. It's in and how you have your relationships with your sub set up. So if you're doing that on most of your jobs, it's not just that job that you're losing money on, it's the opportunity cost. I think it's the most compounding of all of them. Yeah. But like and blind. Like you don't see it unless because you're making money still, and it might be even if it's going slow, it might be like still good. Yeah. Like the client relationship and everything is.
SPEAKER_00I can measure the the revenue and profit I'm making. I can't, there's no data point to say what I could have made, but I didn't. Yeah. Right? Like, well, I hit I hit my numbers. Well, yeah, but you could have invoiced another 50 this month if you would have kept tighter than you did. Yeah. Well, I still hit my number. Like, there's no data point showing what didn't happen. Yeah.
SPEAKER_03Uh but I I do think it's time slip, but like un unbuild trips and gray absorption, I think together are the second. Yeah. But they have to be together because I think that captures I think those two, those top three are the biggest for sure.
SPEAKER_00Yeah. And I think with time slip too, I agree that like unbuild trips harm me. Time slip harms me, my subs, and my homeowner. Right. So, like all three levels of a job site are harmed by time slip because the crew's not gone. I keep calling them back. I keep rescoping what I thought they needed to do. And like, well, also, oh, I thought you were gonna do this. And so they're losing money by being there for another week. Yeah. My homeowner's like, my parents were coming in town.
SPEAKER_03And and the more time slip that you uh incur, the more likely it is that you're gonna have more because your subs, it's that cascading issue where, well, we got to get started, but my painter is now on another job because I didn't have this one ready for him. Yeah. And that can just continue to extend yourself out.
SPEAKER_00Yeah. I think
Measure It Then Fix One Thing
SPEAKER_00look zooming out at all of these, you have to understand this is not a construction problem. It's a data and control problem. It's you being able to zoom out and look at what's happening and be able to adjust accordingly. Most men have data problems. There's a pill for that. Uh you can't plug a leak that you don't have measured or know is even there. Uh, and so I think where I would I'd I'd push you step number one is to start figuring out on each of those stages. If anything that we talked about kind of hits, you know, you feel like you're sitting in church and the preacher's talking right at you, if the if that's that moment on any of these, then lean in. Lean in. Lean in. Listen, listen, listen, listen, listen. Uh I think that's those type of things are, okay, I'm gonna try and fix this. I'm gonna fix one thing at a time. We can't fix all eight of these at once, but like, all right, timeline. I'm gonna start doing a Gantt chart and I'm gonna see how accurate I can be with that. That's all I'm gonna do. On the next two jobs, I'm gonna, I'm gonna own a Gantt chart on them. Or I'm going to visit job sites every Monday. And before I get in my truck to go to a job site, I'm gonna ask myself, can this be done over FaceTime? Can I answer this with a call or answer this on Monday when I go back out? And if you can run those questions and say, it has to be decided now, I have to be standing on site. This has to happen, or I'm gonna lose this client. Cool, jump in the truck. That's fine. But I wonder how many trips you can say, all right, I'm just gonna do FaceTime with the crew and we're gonna figure it out over that. Um, or I'm gonna call the client, have a conversation. If they're cool with waiting until Monday, I'm already going by there on Monday. So I'm gonna talk to them on Friday. Hey, I'm gonna be out there Monday. Is that something we can chat about then? Were you around around 10 a.m. on Monday? Cool, let's talk then. Great. You just avoided two trips, right? So let I think try to find something like that on any of these that you feel like you're struggling with the most of this little thing I'm gonna tinker with. I'm gonna change this. I'm gonna try it out. And I'm not gonna do it full sale starting Monday, new me Monday. We're gonna run everything differently. Like, no, I'm gonna take one job and run it, run a little differently. I'm gonna test that out on this next estimate that comes out. I'm gonna do a pre-construction line for my first time on this estimate I'm writing this week, and I'm gonna see how it goes. And it's gonna be super cheap. I'm gonna try to sell it, but just try it. Just have it there. Start tinkering with these one thing at a time. Start bringing, patching these holes that are in your bucket. If you
Coaching And Retreat Invitation
SPEAKER_00want to talk through these, if you want us to assess your processes and how you run things, James and I will love to talk with you. We're taking on more coaching clients right now. We're prepping to kind of really work the second half of the year in coaching to launch into the retreat this January. So you probably heard the commercial at the beginning of this. We've got the retreat signups available now. Go to ProStruck360.com or contractorcuts.com. You can get some information to if you're not in coaching or part of our program and you want to come on the retreat, we make it, we've got some giveaways for you. But we start with a 15-minute call that you have with me. I want to make sure it's a good fit for you and that you're a good fit for us. Make sure that we're everything aligns before you get signed up for our retreat. Um, but it's a full conference. It's a three-day conference, two days of retreat, and the third day being the workshop. And it's something that I'm I wish that I could rewind the clock 20 years when I started this company and could go to this as to watch yourself talk. To watch my to watch 43-year-old Clark talk. Uh no, uh, to I wish there was something like what we're doing when we first got started, because it would have saved me hundreds of thousands of dollars and years of of making the wrong decisions and figuring it out on my own, do it the right way. So come get a cheat code, learn from our mistakes, learn why and how we do things. Let's rebuild some processes going into 2027 and let's really launch your companies. Go to go to contractorcast.com. Love to chat with you. Thanks so much for tuning in. Bye. Bye.
