Episode 140 | Why Contractors Making $30M Still Struggle With Cash Flow with Patrick Shurney

In this episode of The Mobilization Mindset, Drew Aldridge sits down with Patrick Shurney, Founder of 3P Consulting, to break down why revenue growth doesn’t always translate to real wealth—and what contractors are often missing when it comes to cash flow.

In this episode, they discuss:

• Why profit on paper doesn’t mean cash in the bank
 • The biggest misunderstandings around cash flow
 • The key numbers that actually drive performance
 • How small improvements can unlock significant profit
 • Why revenue growth doesn’t always increase personal income

If you’re growing but still feeling the pressure of payroll, timing, and cash flow, this conversation will challenge how you think about your business and your numbers.

From Builder to CEO Event: https://go.3pcllc.com/from-builder-to-ceo-summit-tampa-2026

Learn more: https://mobilizationfunding.com/

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Patrick's LinkedIn: https://www.linkedin.com/in/patrick-shurney-millionaire-contractor-coach/

Company Website: https://3pcllc.com/home

AI Tool Link: https://go.3pcllc.com/net-profit-wizard-custom-gpt 

Transcript

SPEAKER_01 0:00

So it's all about it's all about the gross profit margin. And the best way to test that is I ask a simple question. Say, what's your gross profit margin? And the typical answer is it depends, which I totally get. I said every 1% of a$30 million company in gross profit is$300,000.

SPEAKER_00 0:19

Yeah.

SPEAKER_01 0:20

And and I know every consultant just says improve your gross profit, but like 3%, which is reasonable, and I walked through within the next 15 minutes on how to get that 3%, is 900 grand. And I said, without another dollar of revenue, you could be a millionaire contractor.

SPEAKER_00 0:42

Hey gang, welcome to episode 140 of the mobilization mindset. I'm really excited to be here. Obviously, you guys have been seeing a little bit more of me lately. Uh, and the benefit of that for me is that I get to talk to really awesome people, just like Patrick Sherney, founder, CEO of 3P Consulting, a CFO, financial wizard consultant, specifically to you guys, to the construction industry, particularly in the specialty trade. So, Patrick, really glad you're here. Welcome. Welcome aboard, man.

SPEAKER_01 1:20

Hey, man. Good to be uh on your podcast. Thanks, Drew.

SPEAKER_00 1:23

Let's let's dig right in. Um, first off, I just kind of want to provide some context for our audience. Give me the high-level overview of what you do, what you focus on, types of companies you like to work with, all that type stuff. Just kind of the, you know, 30,000 foot pitch.

SPEAKER_01 1:42

Yeah, yeah. So, real quick, so I call myself the millionaire contractor coach. Um, and I help owners of construction trade contractors. The bulk of my clients are between five and 50 million, and they have a pretty common problem that I help solve. And the best way to explain it is just give that example. And I think that'll tell everybody. So you'll you say you're a contractor doing 5 million and whatever trades, it doesn't really matter. I moved, I I can work with GCs, but most of my clients are subs. Um, and they're mostly commercial. There are some that are on service residential, but um, they're 5 million, they're making 250K, they grow to 10 million, they're making 250K, or maybe 275. They they grow to 20 million and they're making 300K. And I'm like, you you should be making a million bucks. And they're great at building and delivering and doing stuff. Um, but they didn't get into business to be a CFO or they didn't get into business to be a you know an accountant. And I'm just like, without a dollar more of revenue, like we should be able to find, you know, six figures and more in your business. And I help them do that because my background was in banking, which you know, we can talk more about later, but it's really to help them capture more of what they already earned because I'm just really good at uh cash flow.

SPEAKER_00 2:52

Yeah. No, that makes total sense. And I want to get into the particulars on sort of those examples that you gave here in a minute. But the first thing I want to hit on is what makes you kind of like uniquely qualified as a prior banker? Like and I'm a prior banker too. So I have my thoughts on this. But um, from your experience being a banker, in quite honestly, an area where there's a lot of specialty trade companies, right? And what kind of things were you looking at while you were in banking that made you think, wow, I, you know, I can I can leverage this knowledge, I can leverage this expertise into actually helping these companies beyond just providing them capital from a banking perspective. Uh, love to know kind of like that roadmap of thought that you had. Um yeah.

SPEAKER_01 3:45

Well, I spent 30 years in banking, and uh a lot of bankers just retire with that knowledge. You know, some people get out younger, like you, Drew, but like a lot of them, you know, they just take that knowledge and retire. And I wasn't really sure how to turn that into a business. And I started my company six years ago. But I'm as a banker trained to be interested in one thing, and that is, well, more than one thing, but the main thing is cash flow. And that's what owners care about. And I think that owners naturally, and I learned this, will look to their accountant and and we God, we need our accountants, you know, because they're gonna do our taxes and compliance and keep us out of jail. But um, they're more focused on that than cash flow. And so when I started doing this six years ago, I I don't know, I guess ignorantly just thought accountants were coaches uh and they're more tacticians, right? They're like, there's like I have a bookkeeper and I'm like, Barb, show me how to do this. She's like, I don't have time to show you. I'm just gonna do it. I'm like, well, I want to learn. Well, I'm like a teacher and coach by kind of just natural. I was in corporate and also I coach my kids sports and stuff. So I like explaining things and breaking down complex principles. And so I would just talk to business owners and I was I was kind of dumbfounded when I was just sharing with them some cash flow. I didn't think they were secrets, I thought they were common knowledge. I said, Doesn't your accountant teach you this stuff? And they're like, No. So I was like, Well, I'll teach you. So I care about cash flow, and I think a business owner looks at their net profit and it's not cash flow and it's confusing because it's a PL built by accountants for accountants. I'm like, let's turn that net profit into a cash flow number because guys like you and me, that's that's what we care about. And that's a hundred percent aligned with what owners care about cash flow. So I think that's that's the perspective I bring. And with contractors in particular, I helped probably a hundred different industries as a banker over my career. And I chose to work with contractors, one because I had a concentration of them. They're kind of like salt of the earth, my people. But they, out of all the industries I work with Drew, they had the toughest cash flow and capital challenges of any industry. And I love helping them because they're the people that build things around here. So that's that's the particular bent for me.

SPEAKER_00 5:44

Yeah. In in your banking experience, um you you obviously understand the structure of the construction industry, right? The commercial construction industry, which makes inherently uh the way it's structured makes the cash crunch a real thing, right? That's created by the structure of the industry. Um, when you were a banker though, so you you you identified that problem. Uh what is another industry that I'm just curious that you worked on as a banker that that that did not have that problem? And what were the sort of structural elements of that industry that uh mitigated the risks of cash being a constraint?

SPEAKER_01 6:23

I think we can keep it within the construction industry and compare it to home services for cash flow, not cash. That's a good point. For cash flow. So if you're if if like I had a plumber at my house, right? And when he leaves, he's getting paid. Versus in commer in commercial, as we all know, we do the work, then bill for the work, and then wait. And we think it's 60 days, but we don't really count the time from when we did the work and build. So it's like 90 days to wait for your money while you're growing, paying your rent, all that other stuff. And so when when you can turn over money faster, which is most industries, there are some industries that were slow. Um, you know, manufacturing is very similar to to uh to that as well. Some government contracting can be that way. But I think that if I'm a construction person, the best understand it is compare yourself to the roofer who's doing smaller jobs, turning money quickly, and they can grow their business organically with cash flow because it's turning quickly and they don't have to always sweat payroll and those kinds of things. And I think that's the best example within the construction world. And that's why some people try to dabble doing both residential and commercial, which I haven't seen many people do both successfully.

SPEAKER_00 7:33

Yeah, that's really interesting to say that. I mean, obviously, you know, we we look at a lot of companies every week, right? And um we have some companies that come in that are commercial specialty specialty trade contractors that also will have a you know residential division. And sure, and albeit it might be a smaller component of their business. And I I always ask, why are you doing residential and commercial? Um yeah. And the reality is, yeah, it's a hundred percent cash flow. They're like, well, actually, my residential division kind of bankrolls my commercial division and and floats me my payment terms, right? But that can only, I mean, you've gotta, you've gotta have that perfect mix of business uh in the residential versus commercial to actually make that work long term.

SPEAKER_01 8:24

Yeah, some people can some people can do it well. It's just not easy. And when you're smaller, it's easier. Like if you're five million dollars and you're like 70% commercial, 30% residential. But you know, try to do that at 20 million, 30 million, 50 million. Um, it's just more complex, it's doable, but more complex. You have to be one hell of a CEO to do it.

SPEAKER_00 8:42

Yeah. Yeah. And you have to have the managers and and the sort of field operators out there that can that can be efficient and and with hand with withstand like a high volume of work because with residential comes uh, you know, a degree of volume. You spoke a few minutes ago about, you know, I'll come in, I'll have a five million dollar company. They're doing, you know,$250,000 in profit a year, which seems pretty thin. And then they they grow to, you know, a year, two years later, they grow to$10 million and they're$300,000 in profit. Can you walk me through your coming in once they become$10 million, right? And and you sort of saw the past three years, and profit's the same, but revenue's increasing. What are the main line items that you see where you're like, I can save you six figures here?

SPEAKER_01 9:31

Like, I mean, this is yeah, it's always in the now there's the balance sheet too, which we'll talk about, but there's really two reports to look at, and there's seven numbers that matter, and only four of them are on the PL, and three are on the balance sheet. And on the PL, the after revenue, because you have to have revenue, that's a ticket to the game. And the type of revenue you have matters. And we do a deep dive on sources of revenue. How do you create a dollar? But the number one important number is gross profit margin in this business. That's where fortunes are made and lost. Uh, when an owner is looking at a PL, all numbers aren't created equal. And I just have this fantasy kind of like conversation that they would have. Like, you know, they see$700 in um, you know, monthly uh software fees and they and they blow a gasket. Meanwhile, they're losing 5% in material waste on the job that could have made them multiple six figures. So it's all about it's all about the gross profit margin. And the best way to test that is I ask a simple question. I say, what's your gross profit margin? And the typical answer is it depends, which I totally get. I said, but yeah, think of it like a sports game, though. It's over. You're looking back 12 months, you're looking back 90 days. What was it all together? They don't I I don't really know. I said, I get that. Uh, and they might say 30% or somewhere around there. And I said, but I want you and everybody in your company to know that number like it's your birthday. Because when you know, when you know that number, then you can start moving it and having strategies and tactics. And so I'll I'll close with this. The example I always give is I was at a talk for the um Concrete Foundations Association and I asked for a volunteer and I said, I won't, I won't embarrass anybody or whatever, but like I need a I need a volunteer willing to open up. So this gentleman stood up and he I said, What what kind of uh and these are concrete guys and I said, What what what was your revenue last year? Common question. He's like th 30 million. So what's your gross profit margin? And he said, Depends. And then we worked through that.

SPEAKER_00 11:23

Yeah.

SPEAKER_01 11:24

And he said, and he said somewhere around 30%. And so before I went into my whole thing, I just said, and I won't go into my whole thing here, I just said every one percent of a$30 million company in gross profit is$300,000.

SPEAKER_00 11:38

Yeah.

SPEAKER_01 11:39

And and I know every consultant just says improve your gross profit, but like three percent, which is reasonable, and I walked through within the next 15 minutes on how to get that three percent, is 900 grand. And he was not he was not a millionaire contractor. And I said, without another dollar of revenue, you could be a millionaire contractor. And after that meeting, and I was blessed. After that meeting, I had a number of people waiting in line to talk to me. I ended up getting some clients from that. And I like one of these guys uh in um who's out west, he'll be a millionaire contractor this year because he's doing like 40, he's doing 40 million, but he wasn't making a million, but he will be this year. So in the gross profit.

SPEAKER_00 12:17

Let's dig in on that because I know you you had mentioned uh four income statement items and three balance sheet items. Um, but the let's talk about gross profit for a second and let's talk about concrete because you you mentioned concrete. You got a$20 million concrete company that's company A, another$20 million concrete company, company B, Company A, and let's assume that they're calculating their gross margins properly, right?

SPEAKER_01 12:43

Big assumption, but yes, we have to.

SPEAKER_00 12:44

And we can get back to that improper calculation, but let's just assume for kicks and giggles here that they're doing it properly. Company A is generating a true 28% gross margin, right? Company B is generating a 15% gross margin. What as you look at those two companies, what in your experiences, what are the two or three levers that they could, you know, company B, like what is what is company A doing right that company B is not doing purely on the gross margin uh side?

SPEAKER_01 13:20

Yeah, and I'll preface it by saying there's the field side of it, and then there's the finance side of it. And we're and operators are already doing the field stuff. So once they dial in the finance stuff, it's like a dartboard. We're now we're now aiming for bullseyes. Uh they just get better in the field and they might have to hire someone for some help in the field. But so what happens is I do quick math. So 28%, the other guys at 15%. So that's 13% on 20 million. So 13 times two, 13 times two uh, you know, is 26. That's like 2.6 million dollars, you know. Yeah. That they're not.

SPEAKER_00 13:55

I'll give it an extreme example just for exactly.

SPEAKER_01 13:58

But that happened but that happens. And there are industry benchmarks. And so the industry benchmark for like a$20 million contractor like that is probably like in the mid-30s. And not every dollar is created equal. Because if you're a$50 million contractor, you can operate at a thinner gross profit margin, but it's greater dollars, right? So so with that, we just we really look at, I say, let's talk about how do you create a dollar and then how do you keep more of it? So if you create a dollar and it and you have a let's just use a gross profit margin of 40%, because I can do the math easy. Yeah, that means it that means it costs you 60 cents to create a dollar and you kept 40 of it. Then that 40, as you know, pays your overhead, your rent, your utilities, that kind of those fixed costs. Yep. So how how do we get it to 45? So let's take the guy that's at 15. You know, we have three levers. How much I charge for the job, how much is my labor, and how much is my materials. Now I know you want to bill gas and a lot of stuff to the job, but let's just kind of take those as the three main levers. Um, we really do a deeper dive on revenue. Like maybe our client selection just sucks. Yeah. Uh oftentimes that's not what I find. Oftentimes what I find is they're waving a report from uh ProCo, I mean, um any of the any of the software's out there. Um, and they're they're waiving some report saying, I'm bidding this job at 35%. But accounting, when it gets to the PL, it's it's at 18%. And they're like, I I don't know what the problem is. And then there's a fight. There's a fight in the organization. And I say you need a single source of truth. So what's it gonna be? Are you gonna file your taxes based on your whip report or some other report? No, you're gonna use your PL and you're gonna use your balance sheet. And if you go to the bank and you want a loan or you want to get work from mobile, get help from mobilization funding, you're gonna look at other reports, but you're gonna look at the PL and balance sheet. And you're gonna, and if you're gonna go buy or sell a company, you're gonna look at those reports. So let's like get that aligned first. So what I find is, oh, I wasn't putting all my labor in there. So I thought I was at a 40%, but I really wasn't. Oh, I wasn't putting all my materials in there. I've got that, I've got rental equipment, which is a big cost. I've got that below the line. So we have to get all that stuff in there.

SPEAKER_00 16:10

And then we see that all the time, by the way. We we see line items. I mean, I'll see sometimes 35% gross margins, and I'm like, that's a little high for this industry. And then I'll look below the line and I'm like, there's three or four hundred thousand dollars in here that need to be in growth.

SPEAKER_01 16:26

Uh and it's not to it's it's yeah, and it's not to shame anybody because they're not in the business to do that. So I'm like, let's get a bookkeeper that knows construction, let's get an accountant that knows construction. But like, we got to know our numbers, right? So I always use the scale example. If you set your bathroom scale back 10 pounds, who are you lying to? Just yourself. Yeah. So let's c let's calibrate the number first because a business owner kind of thinks of it as like, well, it all comes out in the wash anyways, you know, left pocket, right pocket, you know. And I was like, yeah, but if you want to improve a number, you got to know that number, right? And so you're really good at that on the job site, you know, when you look at a set of blueprints, you can't be 90 degrees is 90 degrees. It's not 89 degrees. Like we got it, it's got to be plumb, buddy. And they know that. So we we plumb up things and on the on that side and we really try to dial those in. And so we have a conversation, and it isn't just, you know, you got to charge more. Um, we start benchmarking, you know, labor in your industry is like 30% and you guys are like at 35. Like I'm not saying pay the guys less, but if you're on a job for seven days, um, but it actually goes to 12, there's an efficiency problem. And so it leads because I always tell people the numbers just represent what the game you played, your people, your processes, your clients, everything else like that. And so there's no judgment or anything like that. It's just like, let's just work backwards from the number. Tell me about what's going on. And usually we spend, if I spend four weeks with the client um on an engagement, three weeks are on the gross profit margin.

SPEAKER_00 17:51

Yeah. No, and it's so important because yeah, I mean, you could go to the client and say, hey, you need to charge more or you need to get different clients, but it really doesn't end up being that more often than not. Your, your, your gross margin is really a reflection of how effectively you deliver your product. Of course. And secondly, you have to do an audit of how you are, you know, in what fashion and are you optimally delivering that particular service or product. The second thing I think about with gross margin and why it's so important is in any business engagement, whether you know, the customer and the sub, the GC and the sub are trying to capture a portion of that economic value, right? And the gross margin really is that benchmark for how much economic value of this transaction and is it even worth my time, right? Because I I would also say like, make a gross profit margin hurdle, right? And then all the inputs you put into bidding your job, make sure that you take the jobs that hurdle that gross profit margin uh that hurdle. And also if it goes below that hurdle, that better be a business decision that you make and not a financial decision.

SPEAKER_01 19:10

Yeah, and it's a number everybody can rally around. I was with, and this comes up a lot in contracting. How much information should owners share with their employees? And how do we hold people accountable? And I was like, maybe you don't want to share that whole PL. Maybe you do. I know some people that do. I was on a call with a guy yesterday. They've been transparent all the way through, but not everybody understands, you know, all those numbers and what they represent. But if we say a job switch to be at 35% uh gross profit margin, uh, if that's our corporate goal, but we decided this was a bigger job in dollars. So we did it at 29 or 30, like that's okay because we we consciously did that. And if we do a smaller job, we got to do it at 40. But overall, we have that benchmark and and we look back over 90 days and we say, are we hitting that benchmark? And I feel like it's one of those numbers that like I kind of have this thing where like someone's walking down the hall and you say, Bill, what's our gross profit margin goal? And he turns around and he knows it. I'm like, what's the power of that? What's the power of everybody knows that number and is accountable? So back to my concrete guy, I asked him, uh, I said, okay, materials. Can we can we save 1% in materials and can we get 1% better in labor and 1% better in revenue? So he agrees, yes, revenue charge 1 more percent. Patrick, you're a genius. Great. Thanks for your help. We should pay you a lot of money for that kind of consulting help. And and he didn't say that, but there's skeptics in the room, right? And I said, okay, let's talk about the other components. Materials. He goes, listen, man, we source our materials from good suppliers. We have great relationships from our suppliers and vendors that we do business with. I don't, and prices are going up, not down. I don't see myself saving 1% on materials. And again, it's concrete. I said, Well, uh, care enough. I said, but is there ever any waste on the job? And he says, God, we got five yards of concrete and we poured two of it onto the ground because we ordered too much. Yeah. And I said, How much is waste on your job? And he goes, it could be three to five percent. I said, So we could probably find I said, we can probably find one percent, right? And now everybody's starting to lean in. And then we get to labor sync thing, you know, it's labor is probably you probably talk to people on your podcast, it's probably the number one biggest challenge for contractors hiring and retaining talent. And I'm like, no, you're not gonna get cheaper labor, probably, but back to my other example, do you have jobs that take longer than they should because of inefficiencies? Yes.

SPEAKER_00 21:24

So everybody pretty much agreed, like, you know what, there really is money within my company without and like you can you can like I mean, you said three to five percent spoilage on a$20 million company. I mean, that is incredibly impactful. It could be, is that high?

SPEAKER_01 21:39

Right. Because just because you and so if you're in the field, your job is to monitor waste because you care about the gross profit margin. So you can draw your contribution directly back to the company by saying, I'm helping our company. And so then the company can decide hey, if we hit these kind of gross profit margins, we're gonna bonus. Well, you know, you can and now you can start to have conversations to help. Everybody else benefit from the effort that's above and beyond. Because when the owner's goals and the employees' goals are aligned, and often oftentimes they're not, uh, it's pretty doggone power, it's pretty doggone powerful. So it's fun to do this work because I'm not a field guy. This guy I worked with Jerry Allaberti, who you're gonna have on. Did you already have Jerry? Yeah, we had Jerry.

SPEAKER_00 22:20

And actually he made it that you're getting to right now.

unknown 22:23

Right.

SPEAKER_00 22:24

But he's great at the end in the field. Yeah, you gotta have the project manager or or or or or superintendent involved in the pre-con process and even the estimating process because they have institutional knowledge of execution in the field. And that particularly informs you on how can we actually deliver this project, right? How can we actually deliver this product in in such a manner that it's economically uh beneficial for us, hits those hurdles, et cetera?

SPEAKER_01 22:55

Yeah, because that's leads into my whole thing on the seven numbers. So if I talk to a business owner, and you've probably had these conversations all the time, and you say, Hey, how was last year? And they give you like, oh, we did 20 million in revenue. Hey, what's your next question I always ask? What's your goal for this year? Oh, 25. And where do you hook to be in a year or two? And they're like, well, maybe that's the same, or maybe it's 30 or whatever. Everybody has a goal around revenue. And I'm like, what's your gross profit margin goal? What's your net cash flow goal? What is your accounts receivable turnover goal? And I don't say these things to quiz people or put them off. I say that these are all reasonable goals to have. And that's how I end up helping people by by just setting some benchmarks. And then I show them the industry. There's industry benchmarks, as you know. So I talk to a contractor, and this is a whole nother topic. I said, How long does it take you to collect AR? I'll say 45 days. 45 days. And then I measure it. It's like, how much do you weigh? And then you step on the scale and you're like, oh no. So it's like you say 45 days, and then I measure it right in front of them, and I'm like, it's 60. And then I say, but but tell me about your billing. Do you do work before you bill? And they go, Yeah, about 15 days, and then we bill, and then it's but the invoice isn't even due for 30. I said, Oh, so it's really like 90.

SPEAKER_00 24:02

Yeah.

SPEAKER_01 24:03

And you and you're telling yourself it's 45, but you know it's not. Let's just be honest with ourselves. And they're like, okay, so we measured it's like measuring how much I weigh. Well, now what are we gonna do about it? We can't, yeah, we can't prescribe until we diagnose. And so then we like, we come up with some tactics, some pretty simple ones. And I'm like, man, if you shave off five days of your AR, you'll have another hundred grand in the bank. Would that help for payroll? And they're like, Yeah, you're damn right at what and that's what launched my business. Because I didn't know.

SPEAKER_00 24:30

Explain to our audience the math on that. And I'll just start off by saying, like, the difference between collecting, like truly knowing your collection cadence, right? Or your AR turn. The difference between 45 days and 60 days is turning your AR, you know, I believe, like, uh, what is it? You know, eight times versus six times, right? Right. So, um, so I mean, talk about, okay, if you shaved off three days off your collections or five days off your collections, right? What cash impact that has on the business for payroll or overhead or whatever, or starting another project? Can you explain sort of the calculation or the math behind that?

unknown 25:13

Yeah.

SPEAKER_01 25:14

And if you have availability to put links below, I'll I I have like a little worksheet for that. It's like really simple. It's like, how do you how do you calculate that? And it's just, it's a really simple calculation. So I just pull up the worksheet, which I can't do. I'm on my phone right now, and I just do it in front of people. Yeah. And and then I'm like, man, if you just shaved off five days and you're like a 15 or 20 million dollar contractor, you're like, that's like six figures more in your bank account. And I show, and and I'm like, that says five days. And so then then you start getting granular. Like, you know what? We're really suck at invoicing. I said, when we hang up the phone, that's the first thing you have to fix. Like just like even if we have to delay our work together, like fix invoicing, right? Because that's that's the most important job. And so when someone hires me, they get an invoice within about an hour because that's the most important job. Invoices. So I track just what I preach for even my own class. Yeah, yeah, yeah. So so we we start drilling down to that. And so I show them the math. And I'm like, when you when you see the power of it, now you're motivated. Because when you see how much money's at stake, you're like, you're doggone right we're gonna make those phone calls. So, hey, just want to let you know we're gonna be invoicing next week. And then you call the person in accounts payable again at the company that you know, uh the next week. Hey, like say it's Bill. Hey, Bill, um, just letting you know. I just hit send on the invoice. Okay, you know, and you talk, maybe you talk about baseball or something, or your kids, and then you call a week later, even though it's not due, right? You just instill these processes, which I know sound annoying, but it makes such a big difference. So that's kind of the concept behind it. I know it's kind of a simple concept, but I found most things in life uh they they can smart people make things complex. Really bright people make things simple. So let's just try to make things simple and and figure out what is my AR collection, what's the financial impact if I shave off even five days? And now tactically I'm motivated uh to figure out how to do that. Now, are GCs just gonna all of a sudden send you money sooner? Maybe not. That's why you need to have capital. That's why they need to work with people like yourself so they're not draining all their cash. I mean, you know, there's lots of there's lots of uh, I would call solutions, but we first have to diagnose like what the what the issue is. And so that's kind of that's kind of the what the way I walk through that with clients. And that extra 100 grand that's in their checking account that month means that they're not stressing over Friday payroll. And I'm like, what's the value of that? And that's it's invaluable. It's invaluable. And I'll just quick story. So I had a client, I said, what is it you you want? Which is always a great question. And he goes, Well, I I want a loan. I need like$300,000, want need, whatever,$300,000. And I said, Well, but but beyond that, what do you want? It took like 10 minutes to get what he really wants. And his name is Sean, and he's in Maryland. He's like, Drywaller. So if you're listening, Sean, I'll never forget you for saying this. He goes, Patrick, you know what I want? I want to be able to go to the beach without my phone blowing up. Yeah. And I said, I said, now we're talking. So how do we make it reverse engineer back to your finances so you can go to the beach? And we're working together to we're working together to do that. I think he's coming to Tampa, so we'll have to see if he's doing better. But but that's that's really what it's about. Like the stress and your numbers are in the stress. It's like you go to the doctor and you're like, My heart's racing. They take your blood pressure and you're like, You're doggone right, it is. Yeah. Like, so so so people know. It's not like I tell them something they don't already know, but they don't really know how to fix it. And I feel like, but the fix, it's like pattern recognition. There is a prescription for these things. It doesn't mean it's going to make it any easier. Construction's hard as hell. It's still going to be hard. It's still going to be hard. But let's just make a little more money while we're doing it.

SPEAKER_00 28:42

Yeah. I mean, you hit the nail on the head, and I think I've said this on the podcast before or one of my conversations with uh Scott Pieper, our founder, is, and I tell this to my team all the time. You know, we have folks come to us all the time saying, hey, just like you, like I need$300,000 uh to, to, to finish this job or to to bridge a gap or whatever it may be. And I tell my team, you're you're not selling money. What you're really doing is selling confidence that this person can finish the job and allowing them to sleep better at night, that they know the materials and labor are taken care of, right? And that their cash flow cycle is smoothed out through leveraging a tool. And you're right, in anything in sales, it's almost like you're selling a feeling or an emotion more than you are the product itself. And with you, it's like you're selling clarity and knowledge, which eventually provides confidence and lack of uh less anxiety, I guess it would I would say.

SPEAKER_01 29:42

Yeah, and I I tell people like, like it's great. I want to help someone become a millionaire contractor, but if money solved all your problems, then everyone in Hollywood would be normal. So we know money is but you know, money certainly helps. And when you go to like, I'll go to um World of Concrete or I'll listen to people like on LinkedIn like Wally and other people who I think you've had on your podcast.

SPEAKER_00 30:03

Yeah, we had Wally, yeah, for sure.

SPEAKER_01 30:05

And you know, I love that he talks a lot about of like mental health and the things that are going on in construction. Like money doesn't fix that, but man, it contributes to its problems. Big time. Yeah, big time.

SPEAKER_00 30:16

All right. So we talked a little bit about gross profit, we talked about revenue, we talked about sort of accounts receivable days on hand, uh, days sales outstanding or accounts receivable churn, the impact of that. What what are some other uh of those KPIs, the seven KPIs that you were talking about that you kind of uh review? And on what financial statement are you are you initially seeing KPI? And just for everybody's reminder, just the uh level set here. You've got really three financial statements. For a lot of our viewers, it's really gonna be two. But you've got the income statement, you've got the balance sheet, and you've got the statement of cash flow. Statement of cash flow, sometimes if you don't use an accountant, you won't, you won't have understanding. But I would suggest building one on your own or have uh more importantly, I'd have Patrick probably build one for you. Um, but kind of talk me through the some of those additional seven, seven KPIs.

SPEAKER_01 31:08

Yeah, I always start with um the balance sheet and the PL. And then as we get more advanced, you know, the cash flow statement. But um I want to first get them really comfortable around those two. So there's there's seven numbers, not 70. And I I um I work with companies that have CFOs. And CFOs are even like, what's the seven numbers? Because they want to show you 70 numbers, which I get. I'm a nerd too. I can I could nerd out on 70 KPIs, but I can't manage 70 KPIs. And the owner does not want to see 70 numbers. So there's four on the balance, PL, and three on the balance sheet. And I tell owners that once you do this for a little while, 90 days, you'll be able to look at your numbers in 15 minutes or less a month and know exactly where you stand. So we're we're gonna quickly scan uh revenue and is that is that and we build a budget for it too, right? So am I I look at my numbers for April, what did I do versus what I say I was gonna do? So numbers have context. So I'm looking at revenue, looking at cost of goods, or I'm looking at gross profit margin. So I've got a number there. The next biggest number is my payroll overhead office payroll, not field payroll, which which is probably five to eight percent of revenue usually for contractors. And then I'm looking at net profit, which we got to talk about because that number lies to you, doesn't tell you the truth, but we reverse engineer and re-engineer that number to make it meaningful. So those are the four numbers. And when we set goals there, if you look at those and they're on, we've turned those numbers to mean to the owner, hey, I want to make 600 grand out of my business next year after I pay my taxes, after my debt, after everything. I want to clear 600, not get a$600,000 paycheck and then have to pay taxes. I want to clear that. So we work from the bottom up to re-engineer those numbers. So if we have a new net profit margin number of, say, 15%, and that means they're gonna make 600, they can quickly look down the numbers and be like, I've just turned that into how much I'm gonna make. So there's a lot more about that. But go over to the balance sheet. Um, we are looking at AR turnover, which we talked about. There's there's one accounting nerdy number, it's called the current ratio, but that's the hardbeat number if you're if you have high blood pressure. And that's the number that tells me if you're sleeping well at night. So we can get into that. But we established the current ratio. That's an important number. And then the last number is equity. How much equity do I want to build in this business? Because one day I'd I'd like to sell it. Uh, another, otherwise, you also need to have a fortress balance sheet because you could be crushing it on the PL, but be so overlevered on the balance sheet. So, like this, the balance sheet also tells me like your help. And I always tell people it's like you go to the doctor, there's a blood work and there's an x-ray. They tell you similar things but different things, same with your financials. So those are the seven numbers, and we benchmark them against the industry, everything but equity, because that's not an industry number for that. And then we set goals around that. And I think when you do, when you do that, and there's other numbers, there's other things that are important, and whip reports are important, and you know, you could start really drilling down. And people that are really advanced will talk about like, well, what's a gross profit margin for employee? And like you can get really far advanced, but for most people at 50 million and under, they don't even have those seven.

SPEAKER_00 34:09

So I'm like, let's just say, It's really just getting to the fundamentals. Start there. I mean start there. It's just getting to the fundamentals. It's funny that you use the blood work uh with our team, kind of talking to them about the different financial statements. Um, I've always since a balance sheet is a snapshot in time at a specific moment. I've kind of always equated the balance sheet as okay, you go to the doctor in the beginning of the year, you get your blood work done. That's your balance sheet where you're that's your balance sheet where you are at the beginning of the year, right? And then at the end of the year, you go get your blood work again. That's your balance sheet at the end of the year, right? Good. And then you've got your and then you've got your report card. That income statement is what what got you from balance sheet number one to balance sheet number two. And that's like the work you put in to lower your cholesterol, right? Or what you know, or the work you put in to, you know, lower your insulin level or whatever it may be. So, and because that is that is a that is a review of how you perform from an operational standpoint from from one point in time to another, right? And um yeah, I know that's oversimplified, but that's I loved your analogy.

SPEAKER_01 35:17

I think they work because physical health and financial health are very similar. One, people don't usually get help until they're hurting. And sometimes they're they're too far, you're they're in the ER and you've got the paddles. And I'm like, I I don't know if I can help you. Like you're really jacked up with NCA loans and it's just really far gone. Yeah. Um other now there are the super healthy people that go to the doctor just for the affirmation of you're healthy. I knew it, right? And I I'd say 80% of my clients come to me because they're in pain, because human beings will do something when they're in pain more than they will to pursue pleasure. That's just the way that we're built. About 20% of my clients are are doing well, but it's the good degree. So like I have a client, he's he's he's he's out in um, he's out in the west. Uh no, he's Midwest, he's in Iowa, and I think they're like close to 20 million in revenue. And he was able to take out 600 grand out of his business last year. I'll call him Bill. I was like, Bill, I said, Bill, that's amazing. I don't, I don't, I don't take 600 grand out of my, I don't make 600 grand. And that's that's really good. I said, but at your revenue level, you should be at like a million five.

SPEAKER_00 36:20

Yeah.

SPEAKER_01 36:20

And so good is the enemy of great. And so for a lot of contractors are like, hey, 600 grand, I got a house in Florida, you know, and and they live in Iowa, so Florida's important. Um, and I got a boat, which this guy does, and he's got all these things, and he's doing really, really well. And I'm like, I don't care if you want to practice radical generosity, there's a million five to be had here to build a, you know, if you want to donate to a hospital in your hometown. Like, let's let's not let's not leave that money to the IRS or to vendors or whatever else that gets disappeared on so or equipment. So I feel like there's a lot at stake with that. And so for the the contractor that's listening, that's doing pretty well, like awesome for you. Awesome. Um, but is there more that and it's not just chasing money? Because to be honest with you, at the end of the day, like that's not that important. Um, but I really feel like, you know, what other good can you do in the world as opposed to just burning burning that money through your business? Because it's really hard. I always ask contractors, I'm like, how hard is it to create, you know, whatever, five million in revenue, or if they're 20 million. And they all say the same thing. It's really hard. It's really hard to create revenue. And I'm like, yeah, let's keep more of it, more of the profit. So that's why soapbox.

SPEAKER_00 37:35

Well, Patrick, this this was awesome. Um, you provided so much context. I mean, the seven KPIs uh income saving balance sheet, how you sort of uh attack your, you know, attack the the challenges that your clients face every day. To the audience out there, if you need the best to dive into your specialty trade contracting company and provide you even more context and more uh, you know, maybe even if it's just keeping your momentum going, right? And part of leadership is anticipating, hey, I want to grow this much. I know I need X, Y, and Z. Nobody does it completely alone, and there's no better person out there than Patrick to help you on the on the financial side. So um highly, highly recommend. He's been a friend of mobilization funding uh uh for a long time. Um, and we just appreciate you, Patrick, being on on this podcast. And I'd like to say one thing, Patrick, Jerry Ali Birdie, uh also we're hosting the builder to CEO, the cash flow accelerator event right here in Tampa at the mobilization funding offices. Uh Patrick and Jerry will be doing uh some incredible uh sort of seminars and deep dives and value add on how to think about running your company. It's May 13th and 14th. I'd love to see you guys there. There's gonna be a link in this podcast, in the in the notes of this podcast, so you can click on it. Patrick, anything else that you want to add to that uh little pitch on our on our builder CEO of that?

SPEAKER_01 39:09

Yeah, we just do a deeper dive on the seven numbers, and Jerry's the yin to my yang. And so when I talk about gross profit margin on the financial statement, then Jerry's like, well, in the field, here's how it shows up because that's the power of it, right? So you go to a conference like this and you're a field guy, and like I'm talking finance, and you're like, it sounds all great, but like you don't know what I'm dealing with in the field. And Jerry goes, I do. Yeah.

SPEAKER_00 39:31

And so it's linking the two together, which is valuable.

unknown 39:34

Yeah.

SPEAKER_01 39:34

So we're gonna go through the seven numbers. We're gonna kind of talk about that. We've got which is cool, which also, too, you know, mobilization, you guys have great tools. And so I'm looking forward to Drew, you walking us through your cash flow um, you know, document there to help people as well. And I think that for contractors, if if if you're growing, you need capital. And and and the whole thing is, and this is not like a plug for mobilization funding, it's and and if they do business with you, that's what we want. That's awesome. But it's more so just to understand the fundamental, you know, if you have four teenagers in your house, your fridge is under constant assault. So if you're a grown, if you're a growing contractor and you're growing and you look profitable on paper and you're wondering why there's no cash, no, no, no pizza in the fridge, um, it's because your company's eating money like crazy and you need capital to grow. So to borrow a dollar to make$10 makes sense to me. To borrow a dollar so you can send your kids to private school, have three houses, be in debt, like that doesn't make sense to me. No. Uh if you have the money to send your kids to private school, awesome. But like so, capital and using capital well, because it's it's hard for contractors to get capital. There's a lot of people out there that will uh are pretty shady, which I hate. Uh, and so I like to align myself with guys like you or the good guys. Um, and then also if if you're able to get capital, I don't care what size you are, cash flow is a challenge for everybody, even for the biggest GCs out there. So, you know, um there's a lot of really smart people and uh I like to align myself with them because I'm I'm a solopreneur by design. So, you know, I have to I have to work with others to kind of deliver stuff like this. So I'm excited about that. I really appreciate you guys, Drew, stepping up to sponsor and be a partner because you're more than a sponsor, you're a partner, you're hosting us, you know, for that and um and that people, you know, if in this like sports, if you do the basics really, really well uh in your in your contracting business, you know, you'll get repeat customers for life. If you do the basics really well in the financial department, you will become a you will become a millionaire contractor.

SPEAKER_00 41:36

Yeah, love it. We're gonna end on that, Patrick. That's awesome. Thank you, thank you so much. That's episode 140 mobilization mindset. We appreciate you guys listening. We'll see you next time.