Blue Collar Business Podcast
Welcome to the Blue Collar Business Podcast with Sy Kirby. Dive deep into the world of hands-on entrepreneurship and the gritty side of making things happen. Join us for actionable tips on scaling your blue-collar business, managing teams, and staying ahead in an ever-evolving market. We'll also discuss the latest industry trends and innovations that could impact your bottom line. If you're passionate about the blue-collar world and eager to learn from those who've thrived in it, this podcast is a must-listen. Stay tuned for engaging conversations and real-world advice that can take your blue-collar business to new heights.
Blue Collar Business Podcast
Ep. 46 - Cash Flow Clarity: Funding Big Jobs Right
The most successful construction business owners know a secret that others learn the hard way: understanding cash flow is the difference between thriving and barely surviving. In this powerful conversation with Scott Peper, CEO of Mobilization Funding, we unpack why so many blue-collar businesses show healthy profits on paper but struggle with empty bank accounts in reality.
Scott brings thirteen years of experience financing specialty contractors and analyzing thousands of construction cash flows to explain why the construction industry faces uniquely challenging cash flow cycles. He walks us through the perfect storm that occurs when expenses accelerate while payments drag, and delivers a masterclass on the critical difference between margin and markup that every contractor must understand.
You'll discover why adding a 10% overhead allowance and 10% profit can actually leave you with negative cash flow during project execution once retainage is factored in. We also explore why commercial construction projects create such intense cash flow pressure and how to prepare your business before taking that next big job.
The heart of our discussion focuses on practical solutions: finding industry-specific financial professionals, implementing proper reporting systems, building redundancy in your crews, and most importantly, giving yourself grace during the growth process. Scott shares the profound advice to "treat your business like a baby," prioritizing its needs and protecting its growth without expecting immediate returns.
Whether you're just starting out or working to scale your blue-collar business, this episode provides the framework and information you need to make better financial decisions. Stop guessing about your numbers and start building the foundation that will support your business for years to come.
Ready to gain control of your cash flow and transform your business? Hit subscribe, share this episode with a fellow contractor who needs this wisdom, and implement these strategies to build a financially sound future.
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Hey guys, welcome to the Blue Collar Business Podcast, where we discuss the realest, rawest, most relevant stories and strategies behind building every corner of a blue collar business. I'm your host, cy Kirby, and I want to help you in what it took me trial and error and a whole lot of money to learn the information that no one in this industry is willing to share, whether you're under that shade tree or have your hard hat on, let's expand your toolbox, guys. Welcome back to another episode here at the Blue Collar Business Podcast, sponsored and presented by podcastvideoscom. This team been with them almost since the start, other than the first five to 10 episodes, and they have transformed what this show is today and how it's presented to you guys on all your podcast platforms. But you can also listen or watch directly from wwwbluecollarbusinesspodcastcom and just leave it running in the background. You don't have to have a subscription to listen to every single episode While you're on the website. Subscribe to that newsletter so you can get a preface into your email inbox every Wednesday when we go live with a new episode at 5 am Today.
Speaker 1:Guys, I have been looking forward to this for some time. This gentleman has not only already been a help to me in ways he doesn't understand, but the willingness and the product that he has is helping guys just like me and all you guys listening today Coming from corporate America and helping the blue collar man and woman in America today. I can't thank you enough, mr Scott Pieper, ceo of Mobilization Funding. Thank you so much for being here, brother. You're welcome man. Thanks, si, I appreciate you having me on A little background for you guys that I've learned.
Speaker 1:Mr Scott started entrepreneurial pretty much his entire life, spent a lot of it in corporate America and has learned a lot of things that me and you are going to learn about today. But our main focus and topic here that he has learned that is so crucial of a monster that we're going to talk about an entire episode on and nobody better to talk about it with. But we are talking about cash flow today, guys, and the monster that it can become, and nobody better, seriously, than the man himself to talk about it. Can you just start off with? Give us a brief synopsis of what is cashflow to that one to three-year guy that really doesn't even know. He hears the term all the time but he doesn't really understand the impact.
Speaker 2:Yeah, Well, I like to think. A lot of times you hear cashflow represented as the lifeblood, but you called it the monster of business. I guess they're both accurate, but depending on how you want to frame them up. But look, cashflow if you're talking about the person that's in the one to three year stage of business. What cashflow is is essentially it's the differences to why. You put your bid sheets together, you have profit built into it, you execute the job, you get paid, but yet you still feel like you have no cash. And you look in your bank account and you're like why am I not making any money? That's what cashflow is. That's what it is for the one to three-year business guy.
Speaker 2:Now why does that happen? Well, it's just a combination of timing between when your expenses go out the door and when you actually collect the money from your customer. And if you only did one job at a time and then never did anything else, it would all catch up with itself pretty quickly. But what happens in business, especially when you're doing what you're supposed to be doing, is you jump from project to project, so you're always starting a new one. You also happen to start taking on bigger projects, so they have more cash needs. Sometimes projects take longer to get paid. So you have a drag on the back end in terms of of when money's coming in and you have an accelerant on the front end of when money's going out, and it's the perfect combination to create cashflow issues. You know, look, cy, if you did a job every single day, went there, did the job, soup to nuts and got paid and walked home the only thing you're waiting for is a check to clear every night. Okay, like that doesn't feel like pain right At all. But that's not what happens here. It's just not the way it works. It's the reason why a lot of commercial construction businesses that happen to have residential departments or service-based work tend to be a little bit cashflow. They tend to cashflow a little better depending on the size of the residential department or service business compared to the commercial business. But it's one of the reasons why they can kind of float overhead or you can layer.
Speaker 2:You hear the things like I layer all my overhead on on the service business and it allows me time to do the commercial work. So what that? What they mean by that is all those like your overhead and in terms of insurance or staff salaries and you know everything from like pens and pencils and computers and things that cost money in your business that you don't allocate to a specific job. If you put them all onto a service business or you didn't even do it intentionally, but the service business, because of the nature of the cash flow, is paying for those things it will allow you to feel a little bit more comfortable in terms of when you're looking at your commercial side of the business and a commercial project and it's taking longer to get paid and you have that bid and you know what profit is, which really is really no more than your gross margin on that job. No more than your gross margin on that job. It will allow you to not feel as much of the pressure.
Speaker 2:But unless you have a thriving service business that has a totally different, quicker cash flow or a residential side that might have a quicker cash flow. It's what I explained in the beginning. It's that pain that you feel where you just don't feel like you have any money but yet you're completing work and doing it and then the double rammy comes at the end of the year when you do your taxes and they actually like show that you made the profit too, but you still haven't realized it. And then you got to pay taxes on the profit and then, by the way, if you don't show that you made a profit, then you're never going to get out of this race because you'll never get financing. If you show it, your business is unprofitable. All because you're just trying to save money on taxes, which is certainly reasonable, but it doesn't help you when you're trying to get access to cash in an industry that has a horrible cashflow problem because of the nature of the business that you're in.
Speaker 1:Man, you talk about a snapshot of all of it wrapped up in one. You just hit it Because I got to probably tell on myself starting right off the bat yeah, I had that resi work. I had jumped into commercial lane and I found a lane that was monthly, getting a check or two a month. Obviously, doing a lot of volume of work comes with a lot of volume of money. That's great.
Speaker 1:But if you're not sitting there watching profitability on that cashflow which I also want you to talk about a little bit, because I think a lot of guys get kind of confused, especially if they've been listening to this show long enough oh, you got to have margin, you got to have margin, you got to have margin. Well, you do, you absolutely do, especially on these big commercial jobs. But on that resi work or your cash flow, at the same time you have to have margin on to cover indirects and overheads, like you were speaking of, and maybe talk a little bit about that too, scott. But you don't have to have as much margin as these back and forth. You know what I mean On that consistent coming in and out. You know what I mean.
Speaker 2:Yeah, it's interesting. It all depends on how you want to tackle the problem first. So if I were to start with, I think I want to tell everyone you should give yourself some grace, because here's just some facts for you. Take all the businesses in the world and all the industries in the world and construction folks, especially owners, are tough on themselves. Like you know, they're grinders. You're getting after it. It's not easy. You have a lot of discipline to push yourself to do it, make it work and get accomplished. There's a lot of assumptions made in construction too, of what we don't know, what we think it's supposed to be like, what we are, what everyone else is doing and you know this is the industry is no different. Everybody's lying to each other about what they're actually doing and what they're not, cause we're worried about our egos or pride. Okay, so if we're going to cut through it, where I'm coming from on this, is I mobilization funding real, just to back up. Where I'm coming from on this, is I mobilization funding, just to back up.
Speaker 2:We've been in business 13 years. We finance construction contractors, specifically specialty contractors in the commercial trades, and what we focus on is providing mobilization funding, loans at the beginning of projects to help people get from the start of a job to the point in which a project cash flows. Well, how do we know that? Well, we build the cash flows out. So we know and see numbers. And because we're not a construction company but we work with hundreds or even thousands of construction companies at this point and we analyze anywhere between 25 to 50 plus projects in a given week, sometimes we've seen a lot of cash flows and we've also financed a lot of projects. So our reps in terms of the math are just really high. It doesn't mean that we're the greatest in the world. We just have a lot more reps than everyone else because of the nature of what we see. So we've learned a lot over that decade to 13 years.
Speaker 2:So why I'm telling you this isn't because I'm like the greatest. If you put me on a site or a job site, I would mess this whole thing up and I would make it look like a complete train wreck in this heartbeat. But if you told me how to make more, see how the math works, that I can tell you from experience. So where I'm coming from on that is, you have to give yourself some some grace, because it is literally one of the most difficult cashflow cycles, if not the most difficult cashflow cycle in all industries, and for a few reasons.
Speaker 2:One it's a lot of money. Okay, so we're not selling like widgets that cost 10 bucks and we can figure out how to finance them on a credit card. That's number one. So it's a lot of money. With a lot of money comes a lot of risk. With a lot of risk comes a lot more rules. With a lot more rules comes making it a lot harder. Okay, that's number one. Number two you're typically outside, okay, and like you got weather, you got extraordinary conditions. Number three you have a lot of employees and like, the more employees, the harder it gets. It's just like any other business. It's not like an AI company where you're just like a paper folder and you're just moving paper around. It doesn't work that way. So those are hard.
Speaker 2:So now that we've established why it's hard, you can give yourself some grace that you're dealing with a hard industry in the nature of the way cashflow works. So knowing that it requires you to have more information and the right information, and then you can make great decisions. So then you're like, okay, well, what information do I need? Well, if no one shows you what reports to have and how they'll use those reports, then you're just winging it like you did when you first started, and that's not wrong with that.
Speaker 2:But if we all first started as a technician and you're going to go, let you're in the concrete trade, right, well, okay, maybe you start paving driveways. Okay, well, you got a residential driveway, like you can mess some things up there. But like, how bad, can you really mess it up where? If you're gonna go pour a pad for an amazon date, um, you know fulfillment center, like yeah, you could screw that up pretty, pretty good, it could cost a shit ton of money, you know. So like there's a lot of work that goes into the prep and everything and the same thing in the site work. You know you go clear off some land for someone to build a residential home Okay, go clear off some land to build 200 residential homes Okay, a little different, right, like it's the same concept. So just think that's what I mean by the scale and size of it.
Speaker 2:So now that you've given yourself some grace, you need just reports that you can manage and lead and those projects. If a project takes just a day or a week, you can remember what happens today, tomorrow and three days from now, but if a project instead of a week takes three months, you can't remember what happens over the course of 12 weeks and try to forecast that. You need to have info coming to you. So now that you understand that aspect of it, like you've given yourself some peace. It's all about the reports and the information, and that means now you have to have the willingness to go. Get that help.
Speaker 2:Bring on the accountant early. Bring on the right accountant construction accountant, not like a family member that got a CPA license. Not every accounting firm can do construction accounting either, by the way. So you got to find the right people. And then you got to lean on some mentors early that have been where you're at been through the first three to five years. If they could save you half the mistakes you normally make in a five-year period, you'll be wildly successful.
Speaker 2:And then the last thing I would tell you, if I was going to just sum this up for you, is don't think about top-line revenue, think about bottom-line revenue. And if someone says I want to hit a million dollars, your question should be like bottom-line or top-line, and you should only be interested in the bottom line million dollars, not a top line, because I've seen more businesses that are two or three times the size of another business and they make no money. And a business that's a quarter of the size makes a ton. So those are the kind of summations I would give you on the basics of cashflow and things to be thinking about. So the next question is like how do you cashflow your?
Speaker 1:business right. That's the goal of the take down, that's where I was, that's literally where I was going with that is. But you hit something so specific that I say on here all the time and it's so nice to hear from somebody else that has the experience and the knowledge set that you do is go to that industry specific CPA early. I sit here and I tell these guys not because I know, I know now you know, and so I luckily went through four or five really wrong CPAs and it costs you a lot of time and money to get there. So, yes, go to them early.
Speaker 1:And then most guys were like well, I can't afford a full-time CPA, well, we're not asking you to. There is so many fractionals out there. But the other thing I ran into, scott, is this is exactly why this podcast is here. Is that hell? Two years ago I didn't even know what a fractional anything was. I thought I had to keep bringing full-time employees on, train them, which is the most expensive thing for any blue-collar industry to do, or any industry with employees, for that matter. Training is expensive. And so once you finally get there, and then, if it's not anyhow going a little off the rails there, but find that industry specific CPA and cut your losses early In three months. If you're not getting the proper reporting and they're not talking to you about what you even if it's what you don't want to hear half the time, that's what you do want to be doing, because they're telling you the hard, honest truth and going hey man, look, you got too many machines. Hey man, you got too many people, and I wish I would have had that so much earlier on in Saigon and I tried to trust the right folks, led down the wrong path a couple of times, but be willing to cut your losses early. Go find that construction industry specific even maybe fractional CFO or bookkeeper or accountant or whatever level you need there's fractional spots for each and get yourself reports every 30 days.
Speaker 1:I can't tell you how many years, guys, that I sat there myself. I'm not sitting here talking at you, I'm talking with you, guys. I need you to understand that I, in just the last couple of years, have figured out that inside accounting and inside internal 30-day reporting is everything and that the executive level accounting and a project per project level of accounting there needs to be separate. There's executive and there's production. Anyways, I'm going a little far off there. But I really wanted to hammer that home brother, that you highlighted that, because there's so many times I hear I can't afford. No, I understand you can't afford a high level $100,000 CPA to just handle your one to two or $3 million annually. I totally get that. But there is a lady or a man out there that's handling four or five of those companies that would love to take you on and probably give you some direction. But yes, my next question would be is how do you cash flow a business sir, with those four beautiful points you gave us, yeah, Look, every business is different.
Speaker 2:Where you're starting from now, not at the beginning, if you're two, three years in, if you had a bad project, a problem, the bottom line is you have to start with a good foundation and in the first set of foundation you have to get is your information. Where are you at truly right now? And once you can figure that out, the good, the bad and the ugly, no matter what. There's no such thing as no solution. There's always a solution and a plan. But you have to be starting with honest information at where you are. And so, again, without having a specific example on, like a demo here in front, and say, oh, this business and this is how you do it, because every business is a little different. But let's just speak in generalities. Get the right information first. So find out where you are. And before I go into this, let me rephrase, let me reframe this for you. I think sometimes, in this world and industry specifically, we think about things in too short of a time period. I think if you were to say I want to be wherever it is you want to get to, okay, think of it five years from now. And if you set the pace like, that's where I'm going to be five years from now. And then you walked into it and said, okay, I'm not going to get there though 20% at a time. The first year I might get only 5% of the way there. The second year I might only get another 15. I might be 20% of the way there. Third year, 30% of the way there. Fourth year, I'm 50% of the way there. And then the fifth year you actually make up the whole other half. And it was 10 times easier in year four and year three to make up that 50, 60% of the goal you're trying to get to. Then it would have been the first three, but what you're doing in those first three years is you're learning the mistakes that you're going to make, the issues you're cleaning up. They're going to be at a much more palatable number. They won't kill you. They'll wound you but they won't kill you the likelihood of them killing you. And then, by the time you get to that five-year point, which goes by fast anyway, and unless you're like 65 years old and you only got five years and you're like, well, I'm burning it down, then you've got time. You're going to work past that. So I think if you set that standard up front, you'll have a lot more likelihood of being successful and even beating that number. When I say successful, meaning like successful to hitting your goal.
Speaker 2:So in the beginning, there you find out where you are. What does that mean? Well, okay, like if you actually bid a project today and executed that job and finished it, are you comparing exactly to the penny what your actual costs were, what your execution was, what your labor cost was, what was your? We call it a gain fade analysis. Did you actually hit it right on target? Did you overachieve, underachieve? What were the cost structure? Was it labor, was it material?
Speaker 2:Here's a fun fact for you, and a friend of mine, scott Kimplin, told me this from FMI Corp. They are been in business forever. Amazing. He's a great follow on LinkedIn, has amazing information. He told me that many businesses that are even in that 50 plus million dollar range they still don't track their gain fade and reporting accurately. They look at it overall and they actually realize, oh yeah, we were right on track. But what they don't realize is you usually save 10 or 20% on your material and vendor costs, but it's labor that overruns a business and so you think you're doing well, but reality is you save 10 or 20% on your material and vendors but never made it to the bottom line because you blew your labor budget out by 25, 30%. Now if you get stung on a project, all of a sudden you go 25 or 30% over labor and you can run a project over. You can run your profit out in two seconds.
Speaker 2:So if you don't know these things and you can't readily see them, you don't know how you're executing to it. You don't have a report card on each project, whether it's weekly, monthly tracking, depending on how fast it is, and let alone your financials. It's hard to ever know what you're doing. And if you don't know how you're doing to what your plan was, then yeah, you can survive and move, but you're never going to make progress because you don't know what you can tweak. It's all going on gut feel and folks, it's just gut feel is never going to work. When you start scaling a business to seven figures, it just doesn't work. Let me tell you, yeah, because you can't do everything.
Speaker 2:And let me tell you, I learned that lesson in my own business here at Mobilization Funding the hard way. You can't, you just can't. So there's no business is immune to that what I just said there. You got to have the right information. So once you build that foundation of information now, you can start to build on it. Now here's the good news, and I can tell you. I learned this from even spending 20 years in corporate America with two different medical device companies. Both are publicly listed. One is Stryker Orthopedics Everybody on earth's probably heard of Stryker Orthopedics, stryker Corporation, and the other one was AngioDynamics. Tons of smart people with all the brains and finance, and you put all those people in the room. Let me tell you something Making decisions was very rare to hear anyone make an effective, congruent, specific decision Talking to construction business owners of all sizes, whether a couple million dollars a year or less, or even up to 30, 40, 50, 100 million dollar businesses.
Speaker 2:When they have the right information, they make clean, clear, crisp decisions and execute on them. Like 99% of the time, they know exactly what to do. And what I learned by that? What I learned by this, is it's not these decisions that everyone gets beat up about in construction or you beat yourself up about. It's not poor decisions. It's the lack of information that led to a poor decision. Because you didn't have the information, you're just flying blind, like with your gut. When you have all the information right, they look at it and they're like, oh, this is a problem, this is the solution. I'm going to go do that right now and they come back and fix it. And that happens all the time. Right now, and they come back and fix it. And that happens all the time. So that's why I'm so confident when I say, like the right information, every construction business owner can have a significantly greater chance of succeeding into their goals and what they're trying to accomplish with the right info. So that's really the first step.
Speaker 2:Where am I setting up the right foundation of reports and information? The right team members, which means inside the business. That's going to be a good bookkeeper, at a minimum, maybe controller. It's going to mean great project management, superintendent, an estimator following a system and a process. And your estimators.
Speaker 2:Everybody beats up the estimator about how much money was made, but really truly like an estimator? At the end of the day, shouldn't they just know what your costs are and then you, as the owner, go and figure out what you want to add to it or not. Right, that's the important thing. So get that team right, get your outside team right. Find a construction lawyer that can read your contract so that, if and when a big problem occurs, you're in the best possible situation you can be in and your accountant can give you the reports you need and build what's the foundation of reporting for you, and then in that reporting we'll get you information. That's what your bookkeeper is going to put in, and then your accountant is going to give you the reports you need and then you can make decisions. That's really the key. And then the rest of it's time. Don't rush it. Let time bake the cake.
Speaker 1:Blue Collar Performance Marketing guys. They are the team I have been with in our marketing campaign as a whole. They help the podcast videos team, but they also help on the YouTube side of things. Strategy the value Ike and his team bring to Cyclone Excavation in a help in regards of marketing has truly been something different for me to experience. I know a lot of you guys out there are questioning oh, marketing this, when do I need it? When do I need it? And then you spend the money and you never see any results. Results are everything. Every 30 days you're getting results and you're making strategy off of it. Same topic of the day of Mr Scott's cashflow analysis that we just spoke about. If you have the right information going out, it'll come back. So get with Blue Collar Performance Marketing bcperformancemarketingcom backslash bcbpodcast. They'll give you a full analysis, completely free of overview, of your entire marketing package. So get with them, guys. But back to it here, scott, I've got. I've got it. You were hitting all the nails on the head directly for the where I've been through in the cashflow side, but you're right. You can't in the cashflow side, but you're right.
Speaker 1:It's all about accurate information. Labor overruns are huge and if you're not time tracking your guys on a simple software that they can clock in and out from with a location-based that will change everything. Look at your labor report every week. Start making a tally. These things that Scott are saying isn't just completely out there. This can all be done on an Excel spreadsheet but it takes time and dedication. But the estimation and production teams you have to have a certain known cost. You have to know your cost is what Scott's ultimately saying here. Guys, you have to figure that out and that takes some time sometimes. How do you figure that out? By your production rates and analyzing your production rates to give your estimator a good chance of standing against when we go and bid this same production job. So you've got to figure out your estimation. And, scott, I hope you hit on a little bit of indirects and overheads here too, because there's a way that we handle it and percentage base it now. But there's so many guys out there that they're just like, well, material costs, here it is, and they just let it fly and oh well, I put 10% margin on it. So I'm hoping you get into that.
Speaker 1:But the last thing I want to talk about estimation and production. Here, guys, before I let Scott go thing. I want to talk about estimation and production here. Guys, before I let Scott go, two manholes say we've got 20 manholes, we're doing this analogy hit me so hard in the head. Brother. Say we're doing 20 manholes and we've got two guys bid out estimated for it and truck, trailer forms, et cetera. We've got two days per production per manhole. Well, bill goes out there and he actually took Jose and George with him. So now we got three guys on there, right. And so then we get over there and man, we got into three or four manholes and we're actually like four days per manhole.
Speaker 1:So my question in here is and the question that got pointed and directed at me was when did you find out that we were burning four days per manhole instead of that two? And when did you find out that there was an extra guy? When we've only bid for two guys on this job, why has the third guy been there the whole time? And is that at manhole number two? Is that at manhole number 10, 20, six months after the job? And never? And guys, I want to tell you, I'm telling you straight up from me and my experience, there was a lot of nevers. There was a lot of six months after the job, there was a lot of at the end of the year, and then the keys and the tools that Scott is sitting here telling you about. Guys, isn't crazy hard to get going. It takes time and showing a little grace, but I hope you like that analogy, brother.
Speaker 2:It does. I mean you're right, because when you find this first of all, we're going to make mistakes and you're going to have problems, right, so that's happening on anything. But when do you find it out? It totally is an indication of how fast can you fix it and how big of a problem is it. If you're finding mistakes out like right away, well, you can mitigate against those and fix them. Hopefully you can see mistakes coming based on certain behaviors or trends. That's the secret sauce of all businesses, right, and that comes with time. But at a minimum, if you have 20 manhole covers and you track in the first two and you can see that the first one takes four days, okay, no problem, we just got on site, you know everybody's trying to figure it out. Second, second manhole takes four days. Third manhole takes three and a half days. Fourth manhole goes back to four days. Now, like, now start waving the flag like something's, something's going wrong, right, yeah, and so, um, finding that out is the only way you know that is. It's not. Hey, talk to your project manager. How's the project go? He says good, define, good, like what are we talking about? Yeah, so details matter for sure. You mentioned margin and adding margin and markup, right. However, I was going to talk about that. I don't know if that's the right time. I'm going All right. So margin and markup are two completely different things, okay, and so I have an example. I used it in my book that I came out because I was trying to think of the most basic way to do it. So I actually can use it because I haven't memorized, so I'll give it to you.
Speaker 2:Taking a million dollar job Okay, when you're doing a project and you're billing a project to a customer, you put in a bid and it's a million dollars and you win and they say congratulations, you're going to invoice us a million dollars to do this work. And as you do the work, you put up the million, you bid, you invoice against the million dollars, and then the waterfall starts at the million and works its way down. Okay, well, think about the. That is the exact opposite. When you bid a job, you start okay, what are my costs? And you build up from the bottom. So that same million dollar job that you invoice, that you won.
Speaker 2:Let's just say, for example, it has $800,000 of cost, okay, so you look at it afterwards You're like, oh, I'm going to make 200 grand and you say, oh, that's 20%, perfect, no problem. But it's not 20% if you start at the bottom and add 20%, and that's what most people do, and they make the mistake of doing it. So, for example, an $800,000 job where you add 10 for overhead and 10 for profit is a $960,000 bid. Now you might say, well, that I'm going to make 20% on that. No, you're not. You're actually making 16.66%. And why is that a problem? Well, because the retainage of 10% is coming off the 960, which is not 10% anymore of what you thought you had. It's actually taking 96,000 of $160,000 quote profit and putting it into retainage, which we all know. You're not getting retainage to any of it to cashflow your job, though you're not getting retainage to any of it to cashflow your job. So now you're running that job off of a 6.66% cashflow.
Speaker 2:Someone might say, okay, well, I can do that. Okay, great. Well, what if your overhead is a 10% allocation, like you say it is, because that's how you bid it? Well, you're going to have to run this job at a 4%, 3.33% negative cash flow just to execute the job. And what does that mean? That means you essentially have to take every penny that you make off that job and only spend it on job-related costs.
Speaker 2:And before you even have the opportunity to do that, you have to have enough cash probably likely $250,000 to $300,000 minimum, depending on how you're paid to invest into that job, of which you're never going to get that cash back out at all at any point to use again until the very end when you get paid your retainage, which, as you can tell, if you've done this before and you have no cash in your account and you're wondering why you don't have any cash and you spend money, this is exactly how it happens right here, and you did nothing wrong other than you didn't have your numbers in correctly and you made a mistake, thinking 10% addition and 10% for both is going to count up. But then they keep what really is 75% of your profit, because $96,000 against 160,000, I don't know what the quick math is, but it's close to 70%. So 70% of your profit, which is also your free cashflow of the project, is locked into something you're not going to ever get until you're done with that project. So you're hosed-.
Speaker 2:You're set up to fail before you even get started.
Speaker 1:Yeah, I was literally. When you said the retainage word, you saw my face. It stings, man. You don't know what you don't know. And that's again why we're sitting here today helping these guys, because everybody seems to want to jump from that resi to commercial world so fast. I was a victim of it too. I wanted to do it. I wanted to do it so fast. I wanted to get out of the neighborhoods, not knowing how healthy my business was then. You know what I mean. And so then I jumped into the commercial world and found a good cashflow. But instead of building around that, I used what I had, went strictly commercial and boy, the rocky road commenced. Because my first project, I was like all right, where's that money at?
Speaker 1:you know what do you mean? You're only paying 90%. Well, that's my profit. And they're like well, we know, is this your first time? Yeah, you stupid, like we're going. Is this your first time? Yeah, you stupid Like we're going to hold it until we're done.
Speaker 1:Sir, that's a three-year project. Yeah, we know, you signed the contract. Stupid, did you not have your lawyer look at it? And oh my God, dude, I've been there and just be crushed because if you're just like any other business owner or any entrepreneur, you're thinking six months, 12 months, five years ahead, you've already spent that money as it's coming in and where it's going and how you're going to reinvest that, to buy this machine, to move this amount of dirt for that job. Here's the next one Plug gets pulled and that dirty word of retainage. But yeah, you're exactly right. And I can't tell you how many times I've ran projects on that manner right there and not knew any different until I got to the end of the year and, looking at my P&L that my tax guy finally got to me and I'm like man, last year was rough man. I sure wish I would have known that in month one or three or six. And so these guys, they just don't. Scott and I didn't either.
Speaker 2:I didn't realize what we were doing, and you know why it shows up in a bigger job all of a sudden too. Because you can do 150, probably even 250, $300,000 jobs, right, even if that same job takes six months. And the reason you can float it is because you have access to credit like credit card you can get. You can get a hundred grand on your credit card, right, that you can put, float, that, pay it down and it's all fine, there's no problem there. Um, why it jumps up at you at the half million dollar job, the $750, the million dollar job, all of a sudden you're getting stung is because that material that's normally 100 grand is now 250. And guess what? You don't have a credit card for 250. And guess what? Your supplier, because it's a bigger job, they're not letting you float 250 for 60, 70 days, 25, sure. And you're like what's going on? What are you talking? I thought I have 70 day terms. Yeah, for 25 grand, but not for 250. And that gets back to my original point where I said this is a big dollars. So the credit manager down at the vendor, right, whatever vendor you're buying from, depending on what your specialty is. Yeah, they're all cool with taking some risk on you for 25 grand, but they're not cool taking the same risk at $250,000. And so that's why it shows up on the big job. It's why, if you do these financials and get these reports in the younger stages of your business, you'll know when it's a $50 problem and just start adding zeros.
Speaker 2:Later on in life. You're going to learn it one way or another. It's better to learn it when it's a $50 problem, and so that's the point of why we bring those things up, and it's also the reason why I said in the very beginning think of where you want to be in a five-year period. Get 10% of the way there in year one. Get to 20% of the way there in year two. Worry about taking the biggest chunk of that in year four and five, when you're ready, because that's what you're going to learn. You're going to learn all these little things that you have to learn that no one's immune to in business, myself included. I mean, look, I'm sitting here right now confidently explaining this and they're like yeah, this guy's never been on a site. He said he never did it and you're right. But let me promise you this At any given time, we may have 100 plus different loans that are active with across 70 to 100 customers and they're of all different sizes.
Speaker 2:We work with businesses that are a couple of million dollars a year in revenue, all the way up to maybe a hundred million dollars a year in revenue. Some of them have bank financing, some of them don't, because these growth factors all need extra capital. If you think it's easy to cashflow 75 projects across, you know, a hundred projects across 75 different clients with money coming in and out. I promise you, if you saw our cashflow sheets, that we utilize to manage the cashflow of mobilization funding, because we're not going to the federal government and just pulling money out like a bank does, right, so it's very systematic and organized.
Speaker 2:So in the early days learning this, the first eight years in business nine years even we fumbled around and made every mistake on earth, not knowing what to do, how to do it, and not just on the individual projects. I'm talking about just managing three customers versus 10 customers at a time, 10 customers versus 20. And so it took eight years. We've been in business now 13 years, but the last five years we've really refined that process. And you have to, because every business is cash flow. No one's immune to that, no one.
Speaker 1:No man, you hit it nail on the head again. But I think there's three key points to sum this up, and I'd like you to talk a little bit more about truly mobilization, funding and what it offers. I'm hearing from you and you use those influences with the information, you have to make a plan. And, yes, I couldn't agree with you more. Hey, let's do a growth plan and do 10% here, 20% here in the second year or whatever it may be, instead of, oh, let's just go out just like every other crazy gut guy. Oh, let's just go out and buy some equipment. We got plenty of work until you don't, because you're not concentrating on sales, because your production team can't get off a job. But those were the three main things that I heard, guys. And we talk about relationships. I do believe every single episode nurture those relationships. I do believe every single episode nurture those relationships. I do wish I would have had a few more influences and resources to at least ask questions. These guys can at least throw it in here to the show and if I don't know, I'm going to reach out to resources like yourself and get them an answer. So talk about a little bit.
Speaker 1:Yeah, you've, you, you've, you've. You've 7,200 customers. That is mind boggling, number one. But for when do you think the point is, since you're dealing with customers from one to three, all the way up to that hundred range, what point do these guys really start? You know how much they're having to deal with in year one to three. What point? Is there a revenue point that they've really got to? Hey, I've got to set everything aside. Until I have this figured out, I can't move forward. I understand that's a really hard pinpointy timeline and it's, in most cases, generalistic terms. Hard pinpointy timeline and it's, in most cases, generalistic terms. But is there a, a guide, I guess per se, for these guys in the first year or two, they're just trying to get this, let alone uh, and complete it, let alone find out if they're doing it profitably.
Speaker 2:Well, here, here's the, here's the catch 22. The earlier stage you are, the more important every single project is, and you really can't do a project without profit. So that's the sad business. And you hear you're talking to a mentor, like, yeah, they say sometimes it's okay to take on that project at a little bit of a lower margin or maybe even a loss because you're gaining the new customer, no problem. Yeah, well, you just talked to a 15 year old business doing $25 million a year and they're talking about a $400,000 project. Well, you're an $800,000 a year company. That $400,000 a year project is 50% of your revenue. You can't do it at a loss. You can take on a $40,000 customer, and so it's these principles that you hear.
Speaker 2:Or you hear someone else say it doesn't mean they were wrong or they gave you bad advice, you just didn't get the right context with it, and so that's one aspect of it I would tell you. But so, if I heard your question correctly, it's like when do you know when is it okay to hit the gas right? When do you know when is it okay to like hit the gas Right? I would say when you know, first and foremost, that you're you're, you can. You can trust that you're going to perform a job for a customer, leaving them with an experience where they would feel, um, they would feel scared not to give you the next job because it was such a good experience for them, it was so easy. When you can replicate that, I would say that's one side on the performance side. When you're performing projects with your team, to where you know that customer is getting such a great experience over and above what their expectations are, and certainly of your competition and certainly of your competition, that's one on the performance side. Number two when you have at least two crews, two managers of crews or two superintendents that you can really count on and trust, because when you only have one, you have none and when you have two, you really only have one, because somebody leaves, you can be totally hosed.
Speaker 2:And I'm going to give credit to, uh, my boy, andy forcilla, who taught me that. I asked him how do you scale business if you guys don't know andy forcilla? He's amazing guy. Jump on the oh man, jump on the mfceo podcast, you can follow him on real af. And he, he taught me that and I was I've been in the arte syndicate with him, learned from. I mean he taught me that and I've been in the Arte Syndicate with him, learned from him a long time. He taught me that straight up. He said when you have one, you have none, when you have two, you have one.
Speaker 2:And it's true, because if anybody's had one of your people leave before you know exactly what I'm talking about. So and why that's important is like if we're being honest with ourselves, like if you think, and why that's important is if we're being honest with ourselves, if you think all your crews operate the same way and effectively create the same job the same way, you're just lying to yourself. That's just not the way it is. So if you have standard pricing and effectiveness for every single one of your crews, well, that's not the way it is. There's no way that's the case. So same thing with your subcontractors. They're not all the same on the same day. Some of them are good at certain projects, some are bad at others. Some are good in flat work, some are better at elevation change. I mean, it just depends. You got to know that stuff. So I would say that's one on the performance side and then on the financial side, which is actually easier and faster than the performance side is get the right infrastructure in place.
Speaker 2:You go to a great construction accountant, cpa, ask him to put the right structure together, as if you are a $10 million company and you're like, but I'm only a half a million dollar company, so what? Build it to? Where you're going? The reporting structure is the same. It's just like a strong foundation. You wouldn't put a footer in to support a one-story building. When you plan on putting a two-story building on it, it's no different. And don't think about the cost you're spending on things like that as too much. Those are investments, and if you think about the mistakes you're going to make in a bad project, in the same regard, as that's too much, those are investments too. So I'd much rather make a proactive investment in what I think is too much in an accountant to set up my right foundation so that when I build and you'll make that cost up in mistakes that you won't make, that's how I would really think about that.
Speaker 2:Once you're in that position and you run through the cycle of half dozen jobs with the right financial foundation two crews instead of one you know that you had bid a job a certain way and you ran it and you're close to your range of effectiveness in terms of what your profitability was and execution, then I'd say, start taking on the fifth job, when you're used to doing only four at a time. Then take on the half million dollar job, when you're used to only doing $250,000 jobs, and see how that box all of us know. If you're talking about business, you got this rattling box. It just shakes. It's like shakes. Sometimes you duct tape it and it goes away. Sometimes it only shakes for a day. Every time you take a step up, the box starts to shake again. And you got to find out where those levels of shake are so that you can calm it down before you start going. If you run through too fast, the box gets going crazy.
Speaker 2:And another mentor of mine told me, like if you treat your business like a baby, you'll always be better off. And I said what the heck does that mean? All right, here it is. A newborn baby can't feed itself, can't live in the wild, can't do anything. Everything has to be cared for. It can't communicate. You have to take care of it at all times. You wouldn't leave your newborn baby next to a lion. You wouldn't give your baby just to anybody. You wouldn't feed your baby, just anything. You wouldn't spare any cost to take care of your baby. And so if you treat your business the same exact way and you would also feed your baby before you fed yourself, you also wouldn't take something out of your baby's hands for the benefit of you if your baby needs it. And so if you treat your business like a baby, you'll have a much more successful business and as that baby grows, all of a sudden that baby will take care of you because it will become an adult and that when it's an adult, then the business, the baby, will take care of you. And you have to be patient to do that that's.
Speaker 2:I was like, damn, that is a great analogy. I'm definitely. It all came together for me when I heard that and that's it. And so some there's, sometimes there's still this day I'm trying to make a decision. I think, well, what would I do if this baby was, if his business was a baby? And then the decision comes. It's pretty easy. You know, that's what I would say to scale man. I hope that answers your question. I mean, that's a tough one. I'm trying to give you as best of analogies as I possibly could.
Speaker 1:No, I think you hit it again. I hate to sound like a broken record. Hit a nail on the head, brother. You have made this podcast a pleasure, I've got to tell you because I agree with you. I think the production side of it is way harder.
Speaker 1:I think if they go to that industry-typed CPA especially if you're in the construction trades guys hammer it home all the time. Go as soon as you can. Find that person, year two, year one, year two. Find that person. Let them set you up in a growth path. Hey, yeah, set me up like I'm doing $10 million and then guess what. You have that person. Let them set you up in a growth path. Hey, yeah, set me up like I'm doing $10 million and then guess what. You have that foundation. Go figure out production and you can screw it up because you got financial gurus back here giving you a accurate information every 30 days. Hey, something's going on, something's skewy, something just happened, Not six months down the road, and you don't know what's going on. So I would completely agree with that. I absolutely switching gears here. And I've got one more question for you, sir. I truly enjoy following you on LinkedIn personally, so make sure you go and find him. Scott Pieper and Mobilization Funding on LinkedIn. And where else can we find your brother?
Speaker 2:We have a pretty big YouTube channel, lots of videos anding on LinkedIn and where else can we find you, brother? We have a pretty big YouTube channel, lots of videos and content on there. It's on YouTube Mobilization, funding, and you can also, of course, find us on our website at mobilizationfundingcom I am a big advocate of just a little bit ago.
Speaker 1:Youtube has got a special place in my heart as well and I really hope to see you guys flourish on there as well. Yes, I mean, having thousands of subscribers is a big YouTube channel, sir, so that is impressive and all the information if you want Scott to go off further is on there. Go watch the videos. I've spent a little time. There's 600 plus videos on his YouTube channel and I know how much time and dedication that takes, but it shows how much he cares about me and you and our growth. So, guys, spend some time there. The last question that I ask everybody on the show brother, what's the takeaway for that blue collar worker and I think it's so cool that you mentioned Mr Purcella dude, that guy, motivation king. But what's the takeaway for the blue collar worker who's just sick and tired of being stuck in the mud, whether mentally, physically, emotionally, entrepreneur, or maybe that guy just starting out on his track? What's the takeaways?
Speaker 2:I would say like you're not that special man. We've all been there, so don't feel bad about it, Like anyone telling you they haven't, it's just full of shit. So I would say like it's all good, Like it's part of the game. If you feel like shit, you're probably getting closer to being great. You may, hopefully. That's enough, that feeling's enough to just get you on track. Information's everywhere. You just have to do it and execute it.
Speaker 2:Do you start with doing the things we started with today? Reframe your timeline. It's usually one of the best things you can do. Like if everybody feels like a loser right now, but the reality is like it takes time, man. So like you, just if you reframe your timeframe of what it's going to take, that is a huge help Cause like otherwise you just can be going for 10 years and you feel bad every single day. It's more progress over where you're at, getting the right now. It's more making progress to where you want to go. Measure the progress. And I would say when I say you're not that special, I mean like we've all been there and someone's already recovered from where you're at. Someone's already recovered from way harder place and you could do it too. You already know what to do. You probably know what mistakes you made. Don't make them again. Pick, pick up, place one step in front of the other. It just takes a lot of work and you picked a hard industry, so give yourself some grace. Nothing's easy. That's what I would do.
Speaker 1:Man, spot on and real and raw, and I really appreciate that. You're right, Not all of us have been there, but don't beat yourself up, and I am king of it. You want to talk about and most true, half percenter entrepreneurs they are. They're hypercritical of themselves. That's what drives them to be better. Right, but I agree, For outside of that entrepreneurial ring it ain't that bad Big dog rock on One foot in front of the other. I cannot tell you guys, this has definitely been one of my favorite episodes. Been one of my favorite episodes. I've learned reassurance into what my thinking and the massive turning of the ship of that I've been speaking about, that I've been doing internally within our, you know, within PsyCon, and, uh, having Scott as a resource has already been relieving, I guess. Would say that you know you ain't doing it that bad. You are in a spot, but guess what? You just didn't know. Now you do. Don't make it again. So, brother, I can't thank you enough. I'm looking forward to maybe being.
Speaker 2:I think we're coming up Friday, man, two days from now, it's Wednesday afternoon. We're filming this, but Friday, two days from now, you'll be on our podcast. Yeah, and where can we find that? That is called the Mobilization Mindset. You can find it on any one. You can find it on our YouTube channel, but you can also find it on any place you like to catch podcasts.
Speaker 1:I'm telling you, guys, the resources are there. We're bringing them here to the bluecollarbusinesspodcastcom. Check them all out there and make sure and go find Scott Guys till next time. You guys, be safe and be kind. If you've enjoyed this episode, be sure to give it a like. Share it with the fellers. Check out our website to send us any questions and comments about your experience in the blue collar business. Who do you want to hear from? Send them our way and we'll do our best to answer any questions you may have. Till next time, guys.