https://www.youtube.com/watch?v=RC1qnl2O9vgIf you’re the smartest person in the room, you’re in the wrong room. Today, we’re chatting it up with legend, Randy Stanbury, who has been in the entrepreneurial game for over 30 years. He has been helping contractors level up their business and navigate the pitfalls of owning a startup which includes pricing. In this episode of the Trades Secrets podcast, Randy dishes out gold nuggets of wisdom that, as a business owner, will help you get off the hamster wheel. Dive in with us and get ready to level up! Episode Covers:
- 7 common pricing mistakes business owners make
- Why profit before growth is such an important principle
- Understanding misallocation and uncovering where the cracks are
- Why a thorough review & evaluation is necessary after estimates
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Transcription:
Amanda Joyce:
Hi, I am Amanda Joyce.
Devon Hayes:
And I’m Devon Hayes. And today’s topic is, Seven Common Pricing Mistakes That Are Crippling Your Business, and here’s why you should care. If the title wasn’t obvious enough, these pricing mistakes are hindering you from growing your business and are definitely impacting your bottom line.
Amanda Joyce:
So, to go over these, we are joined today by Randy Stanbury of 4 Level Coaching, so let’s dive in.
Devon Hayes:
Welcome to Trade Secrets, where we demystify digital marketing to help contractors get the most bang for their marketing bucks.
Amanda Joyce:
This is for you if you’re a contractor looking for actionable marketing insights.
Devon Hayes:
Learn from home services industry experts to elevate your business through simplified marketing strategies.
Amanda Joyce:
Let’s dive into today’s trade secret.
Amanda Joyce:
Hi, everyone. We’re really excited to welcome Randy Stanbury from 4 Level Coaching.
Randy Stanbury:
Hey, everybody.
Devon Hayes:
Welcome. Oh my gosh, we’re so excited to have you on.
Randy Stanbury:
Awesome. Let’s do this. Let’s have some fun today. Get into some good content too.
Amanda Joyce:
Absolutely. So before we hop in and really dive in on some of these seven pricing mistakes that we want all of our contractors to avoid making, we figured we’d have a little bit of background on you, Randy, and kind of where you cut your teeth in business and how you came to be a coach for the trades for people on trades in general.
Randy Stanbury:
I started in, well, let me go back even further than when I started. I knew there was something wrong with working for someone else and I couldn’t see myself long-term doing that. When I was 23, I had an idea to start a logistics business. And so I spent the next year and a half educating, and which I think a lot of entrepreneurs miss, is we jump into something because we’re good at what we do, but we miss the business side. For whatever reason, I just felt like I needed to understand the business side. You guys familiar with this one? Yes.
Devon Hayes:
Oh yeah, yeah.
Randy Stanbury:
Right. And that’s what we see all the time. And what we help people do today is we don’t help them necessarily with what they do in the field, what they do in the field, they know that part, they got that down. We say that’s the what we help you with the how so the business side of it. But regardless, I started in ’95, or sorry, in ’93 to just start educating and figuring out what I needed to learn. It was about a year and a half process, started in ’95. By ’98 I realized that I … Or let’s say, I knew enough to know that I didn’t know nearly enough, and that’s when I went and got a business coach myself. Actually, I just took a phone call and received the call in and said yes to go out and meet this guy. And really, life changed from that moment when I really just started to see that there was a whole lot more that I didn’t know. And I found these blind spots that we often talk about, right?
Amanda Joyce:
Yeah.
Devon Hayes:
Did a business coach cold call you and find you?
Randy Stanbury:
Cold call, yeah.
Devon Hayes:
That’s incredible.
Amanda Joyce:
Yeah.
Randy Stanbury:
I mean, maybe in ’98 that’s what they did, right?
Devon Hayes:
Yeah.
Randy Stanbury:
They don’t do that as much today, I’m sure.
Amanda Joyce:
And you were like, what, 26 when this was happening?
Randy Stanbury:
At the time I was 28 when I took that call and it was just like I wasn’t really sure when and investigated, but everything changed. The doors opened up, the world opened up, and really I was sitting in rooms with mostly the people that were 10, 15 years older. There was a lot to learn from and experience rooms that I was in. Anyway, regardless, fast-forward to 2007. In that time I had figured out that I wanted to get myself removed from the business entirely, and so I was able to remove myself by 2007, put a president in place, vice president, had all the management layers in place, and at that point went and started another business.
And lots of times we talk about freedom and getting freedom in our business. For me is not about going to lie on a beach, but go and take the next challenge. Because if we’re truly entrepreneurial. For most of us there’s something else inside of us that’s niggling all the time to that we can’t avoid and we want to get there, but we’re so sucked up in our own business that we can’t seem to get free from it. Whatever it was, I figured out how to get free from it. The next 10 years until 2017, I never worked one day in that core business, went and built another business, actually built two at that point in time, because I immediately got freed from the second one. It was all, and what I realized is that what I pulled off was extremely difficult to do. And I’d figured something out that most haven’t been able to figure out.
Now I just took that. And over these years, by the way, I think before the podcast we chatted a little bit about since then I’ve always had at least one, if not two and three different business coaches that I’ve worked with and still do, that it’s just commonplace for me today. Every professional athlete, whether they’ve hit peak or not, there’s always another level. We’re always looking for that next edge. I’ve just been doing that all my life. As an entrepreneur, lifelong learner, just continuing to up the game and look at the next level. And that’s what we share today. I created this program back in 2019. I sold my core business, by the way, in 2017 after not being there for 10 years. It was very sellable because I wasn’t part of it. I wasn’t the value in the business anymore, right?
Devon Hayes:
Yeah.
Amanda Joyce:
Yeah.
Randy Stanbury:
It was extremely sellable, high level, multiple on my EBITDA, which is how they will look at if anyone’s out there thinking about selling. They’re going to be looking at you and the value and what value you bring to that business. The less value you bring, the more valuable the business is, right? And so that’s what we teach and help guys do today is really get themselves freed up, whether they want to go lie on a beach or whether they want to go start something else. Or get freed up so that they can start working on the business and not in it. Anyway, that’s the story in a nutshell.
Amanda Joyce:
Awesome.
Devon Hayes:
It’s a beautiful path.
Randy Stanbury:
And how I got into, because I know you wanted to touch on this, so I transitioned from logistics. I did start a renovation business during that time. I’ve always loved this business myself. And now I’m part of seven other businesses across the country where we have ownership stake in businesses that we have developed since from 2019. And at this point, it’s just what we do and that’s all we know, and that’s all we’re focused on. I love it. It’s one of these things where I believe that every one of your listeners has a winning lottery ticket in their pocket. They just don’t realize it and don’t know the formula to cash it in yet. What you guys do and what you’re sharing and the content you share, if you’re listening close enough, then this is the formula. Everything that you guys are talking about is the formula cash in that ticket to me.
Amanda Joyce:
Yeah.
Randy Stanbury:
And hopefully we can share some good content today to do the same.
Devon Hayes:
Yeah.
Amanda Joyce:
Yeah.
Devon Hayes:
Yeah, absolutely. And so for those listening, we have tons of contractors and folks in the trades, would you say primarily, I know you mentioned renovation and remodeling companies, would you say you have contractors across the board in all different trades and verticals?
Randy Stanbury:
Yes. And see, everyone of the builders and remodelers that we work with, deal with mostly subs, right? And they’re all trades. And so therefore, everything that we do relates to and focuses with the trades as well, because to me, we have to create one ecosystem job sites. And one ecosystem job sites mean that we’re all more effective, efficient, and profitable together. Where if we miss that link, everyone in the chain just does not succeed as well as they could. And so to me, this is not for each their own, it’s a game we must play together if we’re going to be extremely profitable together. Yes, 100% everything we do relates to and focuses with the trades.
Devon Hayes:
I love it. That’s a beautiful thing. I think having someone experience in your niche, we experimented with a business coach who was so far outside our niche that while some basic principles are there, ultimately having someone who’s really niched down and really understands your business is ultimately part of what I think makes a good working relationship with a business coach and makes it successful. Because the more you put in and the more they put in, obviously the more both of you get out of it. But when you’re teaching your coach about your business, at the same time you’re like, “I’m paying to teach you about this isn’t working, this isn’t great.” I love that. Yeah, I love that you’re niched down and really know and understand our listeners’ pain points. That’s a beautiful thing. Let’s dive into that.
Amanda Joyce:
I do want to point out real quick-
Devon Hayes:
Oh yeah.
Amanda Joyce:
… before we move on, I just wanted to point out that for those that are interested in just hearing more of Randy’s brilliance, we’ll touch on this towards the end as well. But he does also host his own podcast that really continues to share this information as well. It’s called the-
Devon Hayes:
Really, really great podcast.
Amanda Joyce:
… Building Freedom Podcast. We’ll touch on it again towards the end. But just if you’re leaning in and wanting to know how you can get more out of Randy, that’s a really quick way to go start educating yourself around all of the great things that he and his team have to offer.
Randy Stanbury:
Awesome, thank you.
Devon Hayes:
Yeah, we’ll link to it in the episode notes for sure. Today’s topic, we’re going to dive in seven common pricing mistakes that contractors make. Randy, this is your brilliance here, what’s number one?
Randy Stanbury:
Number one is that we are pricing with a markup, utilizing a markup without understanding and knowing our overheads, our overhead expenses for our business. And here’s the thing, 96 to 98% of small business, and I believe contractors, tradespeople, renovators, subs, are on the higher end of that percentage. We’re talking 98. And how do we know that? Well, one, it’s a fact, right? But two is we see it every day, and literally we see 98% of the people that we see don’t look at financials on a regular basis. And if they are looking at them, they don’t fully understand them and know what they mean to their business and how to make good business decisions from them. And so therefore, we’re throwing out numbers on our pricing without really knowing the effect they will have on our bottom line and what they’re going to do to help our business grow.
And that is first and foremost, and the number one thing what we talk about is profit before growth. Because I think far too often we’re trying to get to the next level. We’re trying to grow our business, we want to add more revenue, but it’s all leaking out the back end because we don’t have a tight system to be able to be profitable. And if we don’t have profit, then what the hell are we doing trying to grow the business yet? We’re just creating more chaos and frustration along the way and not making the right money to grow the teams, right?
Devon Hayes:
Absolutely.
Randy Stanbury:
That’s a big, big pricing mistake. Your clients that you work with, what do you see from, and I don’t know if you get into their financials at all or ask those questions, but do you see any of that? What’s your thought?
Devon Hayes:
We don’t get into that side of it. We definitely have conversations around the ROI on the leads that come in from the services we provide to try and help them track the value of what we’re providing.
Randy Stanbury:
A 100%, yeah.
Devon Hayes:
But what I like what you said in there, you said 98% of the time you know that this is an issue. That’s just another testament to why you would work with a niche down business coach who has the experience across. And it’s like, every time I work with a contractor, I see this, let’s start here.
Randy Stanbury:
Right?
Devon Hayes:
It’s like another great reason to go with someone who’s like-
Randy Stanbury:
Yeah, yeah, fair.
Devon Hayes:
Because you’ve seen it across the board. Yes, I mean we want to prove the value of what the services are that we provide to them, but we don’t know-
Randy Stanbury:
Which is your is ROI though. And so you are hitting ROI, the return on that investment. And here’s the thing, I believe that-
Devon Hayes:
But we are part of their overhead, so, so it kind of ties together.
Randy Stanbury:
But here’s the thing though. You guys are bringing this service, you’re helping them get leads, you’re helping them get to that next level. But if you’re doing that and not being profitable on the business that’s coming in, there’s this total disconnect that’s happening in the backend that they don’t fully understand. And this is just part of, I’m just bringing the seven common mistakes. At the end of the day when we’re making this mistake in our business, it’s one, what I hope guys that are listening, pull over in your trucks, get a pen, writes this stuff down, listen to this when you get back home, because most of us are listening in our vehicles when we’re job to job. Which is fantastic. But guys, these seven here, if you can change these seven, you’ll change your entire business, period. And now it takes something to do that. But understand that this is the stuff that’s really holding you back and keeping you stuck on your hamster wheel. It really is.
Devon Hayes:
Yeah.
Randy Stanbury:
Because without getting profitable, we are unable to build the teams that we need to build to free us up to take our business to the next level. Therefore, we hit ceilings, we are stuck in the hamster wheel, we’re frustrated, overwhelmed, and can’t find out how to get past it. That’s a huge one, number one.
Devon Hayes:
That’s a strong number one. All right, who has to follow that one? What’s number two?
Randy Stanbury:
All right, so number two to me is we’re misallocating the expenses we have in our profit and loss or our P&L. In our profit and loss or income statement or P&L, they’re all the same, they’re called different things, misallocating those expenses. Our cost of goods and our overhead expenses. When we misallocate them, we’re not being able to extract the data we need from those numbers. It’s like your numbers. If your numbers are not understood to the client of what your numbers are telling them, then there’s a whole disconnect on your success of helping them get to that next level with what you do.
Amanda Joyce:
Absolutely.
Devon Hayes:
Absolutely.
Randy Stanbury:
Misallocating is a huge mistake.
Devon Hayes:
Okay. Yeah. Yep.
Amanda Joyce:
And when you’re working with folks, do you guys actually get in there and help them identify that? Or is that something you lean them towards just you go check it out with your bookkeeper? Or do you guys actually get in and weed through it and help them identify?
Randy Stanbury:
I love that you asked that question, because I would say when we first started, I don’t think I realized how big of an issue this was. But we since have created, we’ve just created a four-week program that’s strictly for anytime you want to start working with us in any capacity. We have to go through this first four weeks and this first four weeks is going to uncover all of these things that we’re talking about here, financials, pricing, we want to see estimates, we want to see how we’re getting to those numbers. The rough work. Because again, profit before growth, if we’re going to help you grow your business, we got to get profitable first. Let’s focus on it.
The four weeks is all about basically peeling back the onion, getting into the core of the business and seeing where the, we call it the cracks are, because every one of our businesses is what we see all the time is minimum $50,000 leaking in the business of cash in areas that is mind-blowing. And when you get up to a million, two million plus, we’re talking easily a hundred, 150,000. And we see it all the time, so that’s frightening. And then we wonder why we can’t seem to build our teams or take our business to the next level. It’s right in these mistakes. If we don’t understand our numbers in our business, it’s like flying a plane without understanding the dials in the cockpit. Now, none of us would get on a plane if a pilot didn’t understand the dials yet. We’re flying the plane of our business every day doing that.
Amanda Joyce:
Yeah. Wow.
Devon Hayes:
Yeah. Oh, I love that analogy. I’m like flying the plane while you’re building it kind of thing.
Randy Stanbury:
Yeah. And you’re trying to build this thing-
Amanda Joyce:
Piecing it together.
Randy Stanbury:
It’s not working, right?
Devon Hayes:
Yeah.
Randy Stanbury:
That’s a big issue.
Devon Hayes:
That is, yeah, that’s a great one. Okay, so what’s number three?
Randy Stanbury:
Number three. Now, for a lot of the trades, we might not have project management, although some of the trades will be doing large projects for … Even custom builders. If they’re doing large projects, then hopefully they have at least a site super or a project manager of some kind. But number three is not capturing a project management fee in our expenses of our COGs, so our cost of goods. Basically we’re putting any project management site supervision into our overhead expense, and therefore we don’t see it as a cost to the project, therefore we don’t price it into the project as a cost, and therefore we have left a pile of money on the table project after project after project.
Amanda Joyce:
Wow, absolutely. And it’s interesting too, because we actually have some of our clients talk about that being one of their … Having the onsite superintendent is something that they’re really proud of and they use it in their sales-
Randy Stanbury:
Absolutely.
Amanda Joyce:
… process. Then to fail to include it in your pricing if someone’s going to come lean on you because that makes them more comfortable to go with your bid over someone else’s. You can certainly include the price tag for it in there too. And-
Randy Stanbury:
A hundred percent.
Amanda Joyce:
… they shouldn’t scoff at it.
Randy Stanbury:
And the challenge is, I think a lot of guys see that as well, that’s just a cost of me doing business. But here’s the thing, if that’s always a cost of doing business and it comes out of your gross profit. When we understand how to read P&Ls, we’ll understand how the flow of our sales to our minus our cost of goods equals our gross profit. Our gross profit is there to pay for our operating expenses. If we don’t have enough gross profit to pay for those things in our business, like site supervision, we can’t afford to have it. Therefore, our business won’t run as effectively and we’re letting clients down and there’s where we have problems, can’t get to the next level. These are all the things that snowball and keep us on that hamster wheel. And so this is a big one. I mean, hey, have all three not been big ones so far really?
Devon Hayes:
Yeah. I mean, they really have, because you’re right. Because I mean, I’m thinking about this project management and if your managing, I don’t know. Say you’re, GC-ing something and you’ve got four trades that you’re managing, but you don’t have a fee allocated to that and you get another project coming in the door and you haven’t thought about the hours allocated toward that project management, then you’re bidding out this other, who’s going to manage that project? How is that going to go? Then you’re like, oh, we didn’t charge enough for this. Now we need another person to manage this other one because this guy’s over here. Yeah. I mean, there all big and it’s all like … What’s so funny is that some of it is like, well, yeah, but then when you think about it’s like, well, do I have have a line item for project management fee?
Randy Stanbury:
Right.
Devon Hayes:
Maybe, probably not.
Randy Stanbury:
And one of the challenges is getting in our mindset that how am I going to be able to sell that and charge that if competitors aren’t doing that? And another topic we talked about was getting into selling jobs and closing deals at higher price points. Because it’s critical that we’re able to do that. Maybe on another podcast we’ll do that, but it’s critical that we’re able to actually sell the value of what we bring to the table. Because if we can’t sell that value, well, your lead that you got us, the opportunity of getting in front of someone just went out the window because of our inability to show our value.
Amanda Joyce:
Absolutely.
Randy Stanbury:
But showing our value, we’re going to undervalue what we do. And Devin, you had talked about who project manages that one when we don’t have another project manager for it, me, the owner. The owner goes in, the owner’s always in, the owner’s probably already doing it. And that’s part of the reason why we’re hitting the ceiling on the hamster wheel. These things allow, this is the stuff that frees us. This is the stuff that we just have to get figured out.
Devon Hayes:
I feel the change coming up already here, Randy. What’s number four?
Randy Stanbury:
Number four. It’s confusing markup with gross profit.
Devon Hayes:
Cool.
Randy Stanbury:
Right?
Devon Hayes:
Mm-hmm.
Randy Stanbury:
Far too often we think of percentages and we’re putting markups on a cost of doing a project, a cost of a job. And often we’re throwing a markup and we see all the time, it’s usually somewhere between 20 and 30%. And then I have to go in and during this four weeks that you asked for earlier, Amanda, was, “How do we get into that?” This is one of the things that we have to get into is peeling back that onions and really seeing where, what that markup is going to do to our gross profit. And then is that gross profit enough how we currently run our business to generate a net profit on the bottom line? Because usually we can go in and show where we’re not going to make any money on this project if you price it at that percentage markup.
Now, and we think, “Well, why. We should. I mean, my overheads are only X.” But what we fail to see is that a 30% markup is about a 23% gross profit. And so we’re just missing the mark and saying, “Uh-oh, I thought my markup would be plenty enough to get me a bottom line. I mean, if I mark it up 30%, there should be lots of money there.” And then we go through the exercise and we realize that, “Holy shit, well, maybe you’re operating at 20 or 24 or 5%, and there’s only 23% there. There’s next to nothing left.” And if we make any mistake in that project, underestimating anything, time, scope creeps, it’s gone, and it’s gone like that. And this is why at the end of the day, we go, holy, I have no money. Why is the bank not ever growing and working our off, but it’s not taking us to the next level.
Devon Hayes:
Yeah, I’m laughing, because even in our business, we’ve had to dive in and look at this stuff. And it’s true. You feel like you’re just working so hard, but you said it, you’re like, “Why am I not seeing the bank account grow with me as I’m working?” Went from 40, 50, 60 hours a week now, and we have all these, we’ve got all these projects in the pipeline, we’ve got all these projects going on, and I am just working myself to the bone, and it’s just, the answer is right here.
Randy Stanbury:
Well, and like we say, we’re on the first four, the next one’s going to be a killer. But the first four alone are just holding us back from being able to build our team. We’re constantly, this is when you mentioned, Devon, the 40 gross to 50 and 60 hours a week, and now we’re doing weekends just to catch up on paperwork and we’re meeting clients. And it’s like, “Holy shit, I can’t get out of this. Why?” It’s right here.
Devon Hayes:
Yeah. Yeah. Oh my gosh, okay. Number five. What is number five?
Randy Stanbury:
Number five is understanding that we have a labor burden. So, what is the true cost of our labor? And this one certainly affects the trades. It almost affects the trades more than builders remodelers, because builders remodelers use a lot of subtrades and a lot of builders don’t self-perform a lot of the work, so their labor is a lot less. And they’re counting on the subtrades. And if the subtrades make mistakes on their labor, that doesn’t affect the builder so much, but it certainly affects the trades. And so understanding our labor, what we refer to as a labor burden rate, the truth is, we have to pay for hours when they’re not on job sites and they don’t have billable hours. And if we don’t capture those unbillable hours in our billable rate, our actual true cost. And so we ask this question a lot, “So how much do you pay one of your guys, gals on in the field?”
And the answer’s often, “Anywhere from as low as 20 bucks an hour to 40, 45 bucks an hour.” And let’s say it’s 30 bucks an hour. And we say, “Okay, well if it’s 30 bucks an hour, what does it cost you an hour?” And it’s deer in headlights. It’s like, “Well, I just told you it’s 30 bucks an hour.” There’s the mistake. That’s mistake number five. It costs you far more than that. Typically, a $30 an hour person, if we include labor burden, will be about a 43 to $45 an hour cost. We pay for vacation time. If we give a couple of weeks vacation, if we’re paying any sick time at all, which typically we’re not. But if we are, we have taxes that we’re paying, we don’t capture tax.
Or we have Monday morning meetings, or we have, they’re running for coffees, or any unbillable hours, we’ve got to get covered. We look at an average of maybe billable six hours a day, but you better understand if it’s six or five. If it’s actually five, then we better account for that too. So, labor burden is a big one.
Devon Hayes:
Yeah, brilliant.
Amanda Joyce:
Huge.
Devon Hayes:
Things you don’t think of. Yeah, the non-billable hours for your hourly folks.
Randy Stanbury:
Non-billable Workmans Comp Canada, WSID. What are all of these costs that actually add up? And 43 to 45 is on the lower end. If you go a little deeper, you could be as high as 50 bucks it’s costing us. When we think we’re charging 50, 55 an hour, we’re making lots of money on our guy. He only costs us 30. That’s not just not the true case. So we have to understand labor burden to get our cost and then get our markup and make sure that we have our true markup and we don’t underestimate markup to a gross profit. And it gets confusing, so I don’t want don’t want to over complicate it.
Devon Hayes:
Yeah, yeah. I was going to say, and it makes complete sense as you stated, is that something that is an easy formula, or is it different for every contractor that you talk to and that you work with? Is that-
Randy Stanbury:
No, it’s a pretty easy formula.
Devon Hayes:
… do you need to calculate, or.
Randy Stanbury:
It’s a pretty easy formula. Yeah. I mean-
Devon Hayes:
Oh, good.
Randy Stanbury:
We have a formula and spreadsheet where we just, they can fire in every cost of every employee and tell you exactly what their labor burden is.
Devon Hayes:
Oh, that’s awesome. To me, I’m like, “Oh God, that seems like a lot of math to sit there and figure out”-
Randy Stanbury:
It’s really simple.
Devon Hayes:
But really, okay, well good.
Randy Stanbury:
Yeah, it’s simple.
Devon Hayes:
Beautiful.
Randy Stanbury:
It’s simple if-
Devon Hayes:
I’m the type of person that freaks out at math, but I know how important it is, so I’m like, “Oh, this sounds over my pay grade.” But I know how important it is, yeah.
Randy Stanbury:
Yeah, it’s simple. Well, it’s simple if you have the formula, and this is what we … Did we not talk about before, that every one of your listeners has a winning lottery ticket in their pocket, they just need the formula?
Amanda Joyce:
Yeah.
Devon Hayes:
Yeah, you did.
Randy Stanbury:
And most of us as coaches, whether you resonate with us as a business coach or you resonate with someone else, most of us are just here to give you the formula.
Devon Hayes:
Yeah. Yeah. I love it.
Randy Stanbury:
Now, you better take action on the formula or none of it happens, but.
Devon Hayes:
Yeah, that’s true. Knowing it is one thing, but taking action is-
Randy Stanbury:
Action takers-
Devon Hayes:
… a whole different formula, yeah.
Randy Stanbury:
Definitely.
Devon Hayes:
Number six.
Randy Stanbury:
So, no job review. To me, we need job review system. Are we looking at, we estimated what we thought a project was going to cost us and what we thought we were going to actually make on a project? And often we hear this word, “Well, we’re going to make X dollars.” Well, you’re going to produce a gross profit, but you’re not going to make anything until you pay for your overheads. And this, so we have to remember back to number one is understanding and knowing those overheads, what does it cost to operate my business? So looking at estimates to actuals. When a project’s complete, the problem is we’re usually too busy to even look backwards. It’s only what’s in front of me today, right now, this moment? Not even in five hours, but what’s in front of me this minute, because that’s the shit I got to deal with now, right?
But we have to look backwards and see what took place. Because to me, if we’re not looking at an estimate and figuring out how did we do, how do we know what’s the price tomorrow? Do we just price the same shit that we just lost money on last time and last week and just keep multiplying that? Or do we slow the hell down, review and evaluate, and adjust course, right?
Devon Hayes:
Yeah. Even I think, I don’t even know what number seven is, but stopping to do this, say a project is done, and learning what you just did in one through five and applying that to a project, then you could really probably start to figure out where your losses are coming from and where you’re missing the mark on your estimates mean. And I’m sure seven is gold too, but not reviewing the job and not knowing where those holes are, how can you plug the hole if you don’t know where the loss is coming from?
Amanda Joyce:
That is a very painful reality when you look back at it, but it’s when you’re onto … You’ve just bid out the next one and you’re ready to get started. And it’s like, that is so critical. And to Devon’s point, I just feel like that uncovers so much that maybe even you might be blind to when you’re going through the first ones as well. That’s just cold, hard facts. This is what we bid at.
Randy Stanbury:
That’s the reality.
Amanda Joyce:
This is what we brought in. This was our burden, and this is where we ended up.
Randy Stanbury:
Exactly. And maybe we just figured out, maybe our burden was off and we just realized it actually needs to be this and not that. And if that’s the case, and let’s move forward with the new burden rate and learn something and take that. This is so critical to our business, but why don’t we do it? Because we have so much going on that we’re just got to keep going. And what the hell is the point of keeping going if it’s not producing what it could be and should be? This goes back to our number one point of profit before growth. Why even do another project until we know that?
Amanda Joyce:
Yeah.
Devon Hayes:
Yeah, do you have a trick, or how do you get folks to actually do this? Because I think this is one of those where you’re like, “Eh, I know I should do it, but it’s not profitable to me, that you can see, right?” Tangentially, right? Yeah. So you just, you’re like, “Ah.” I’ll get to marketing. We understand this pain point because as marketers are like, we’re kind of one of those first things that when you’re looking at costs, you cut it because can’t see something immediately. You don’t get the value of branding because you can’t see it. You have tips or tricks or at what point maybe when a final invoice is paid that you tell your clients, “This is when you should sit down and do it. I mean, how would you recommend someone squeeze this step in?”
Randy Stanbury:
And I’ll tell you how we do that is back to what Amanda asked before about this, why do we do the first four weeks? Because it’s exactly this. We can review, evaluate what’s happened, what’s going on, where is the money? And the truth is, what you said, we don’t know where the leaks are. So what we’re doing in those first four weeks is we’re finding all of the leaks. We know we do a 10-point diagnostic during the four weeks. We know those 10 points in areas of the business is where it all leaks. We just don’t know how much in each area.
And so let’s find each area, let’s see what it is, and that’s how we go through it. Now, to go through it on your own, just without us or help, you just have to slow down. You have to realize that the next quote means nothing to you until you get this figured out because that next quote, they want it badly, they want it now, and you’re already three days late getting it to them. Well, I would say, you know what? It’s far more important to not get it to them and wait for the next project and do it right than to just keep going.
Amanda Joyce:
Then to just take credit because you want to stay busy, but you’re losing money again.
Randy Stanbury:
Why stay busy not making money?
Amanda Joyce:
You’re putting their needs before the needs of your own business.
Devon Hayes:
Yeah, that’s great advice. Yeah, it really, that’s great advice. Just let it go and sit down and do this.
Randy Stanbury:
If you have to. Now, if you feel like you’re making money and the bank account’s good, and you don’t need to worry about that, keep going. But at some point you’ve got to do this because even if you’re doing well and you feel like you’re profitable, you can be more profitable than you likely … Well, we know a 100% you can be. I’ve never seen once where we can’t help people be more profitable. That’s just never happened, because you’re not looking at all of these areas. It’s there, so slow down. You have to slow down to speed up, and you have to know your numbers. That’s the number one takeaway if anyone’s taken away anything, it’s know your numbers. Know your P&Ls, know the financials, understand overheads. Get a grip on what your break even is. Number seven.
Amanda Joyce:
Yeah.
Devon Hayes:
All right, number seven.
Randy Stanbury:
Number seven. And by the way, these aren’t the only seven. We’re just covering the top most common.
Devon Hayes:
Where your mind is going to be blown the most.
Randy Stanbury:
Yeah, this is really the big ones. But here’s the big one is we are operating, many, many trades are operating based on false overheads, meaning they’re operating a business. Could be a guy in his truck or maybe they have a team of two or three, and they don’t have overheads, and here’s what they say. I often hear, “I don’t have any overhead.” Oh, we all have overheads. We have some kind of overheads, even if they’re minor and small, but maybe we don’t have an administrative person that’s an overhead. Well, here’s the thing. If you’re not pricing with an administrative person in your overheads, you will never afford to have an administrative person on your team.
Think about that. If you’re not operating a business like a real business, so you’re operating from this “false overhead,” then we are operating in a bubble that we can’t get past, because we’re simply not pricing our jobs accordingly to ever get them, to ever afford them. That is a big deal. I mean, I had a conversation with a guy just yesterday who said, after going through all of this, realized that, “Holy shit, for years he’d been trying to keep his overhead low and not adding these costs.
And in the meantime it’s cost him millions. Just because we hit ceilings. So, he was never able to grow trying to save money.
Amanda Joyce:
Oh my gosh. Completely unable to get out of the business if that’s the way he’s operating, yeah.
Randy Stanbury:
Totally. I mean, hey, there is a mindset of, “No, I’m going to do it myself because I don’t want to pay anybody to do it. It’ll cost me less.” Well, that costing you less is costing you a fortune.
Amanda Joyce:
Yeah, it’s taking you off of the much higher value tasks that you should be focused on. Because you’re having to worry about something that you can pay an admin whatever an hour to do it, to take it off your plate.
Randy Stanbury:
And if you do pay that admin, then you would have that in your overhead. You would understand what that is, and you would know how to price your project accordingly to be able to afford that person to move forward. Now again, you have to be able to go and sell that new price point. That takes something. You’ve got to show up differently than you might be now to be able to charge that. But here’s the thing, people will pay more for the how. We talked earlier about the what and how, what is what we do? But they, people pay for how it will get done. Client experience, they’re literally willing to pay that. And if you have clients that aren’t willing to pay that you likely have the wrong client that’s going to get you to where you want to go.
Amanda Joyce:
Yeah. They’re not the right fit for you. They can go price gouge and get someone who’s not going to have a superintendent on site who’s going to cut the pricing corners. But that’s what they get. That’s what they’re paying for.
Randy Stanbury:
That’s what you’re paying for. And hey, if you want to keep a small team, then you don’t need, don’t lean to listen to what I just talked about. Just if you want to do it yourself and run your business, I mean, that’s fine. There’s nothing wrong with doing that. I think guys can make a good living doing that. You’re just not going to have a whole lot of freedom. You’re going to work a shitload of hours, and you’re not going to create a business that becomes a machine that can free you and make a whole lot more money. And so that’s really what these pricing mistakes keep us, it keeps us on the hamster wheel. It’s as simple as that. And so if anyone’s feeling like they’re on the hamster wheel, it’s likely because of one, if not all of these seven mistakes.
Devon Hayes:
Yeah, absolutely. This has just been so impactful. And when you say them, you’re like, yeah. But I think a lot of guys will be like, “Yeah, I guess I did know that.” But then altogether we’re like, “Oh, I was missing that one.” And that’s just one of those things that completes puzzle. And I know you said there’s more besides these seven, but these are the most common ones. But I think these are massively impactful. Even if you master like these seven and fix these seven, then maybe the next seven are just kind of smaller. They’re maybe not gashes in the hole.
Randy Stanbury:
Right.
Devon Hayes:
They’re just little holes you can kind of plug. Yeah, this has been so good, Randy. If people want to get ahold of you, how, what’s the best way?
Randy Stanbury:
Best way, I mean, they can always email me, Randy@ the number 4levelcoach.com, so the number 4levelcoach.com. You can email me or you can jump to our website for levelcoach.com. Again, the number 4 Level Coach. Check out the website. We have various programs and things we do there. We have different buckets for people, really different layers. If you are under a million dollars, we have what we call our farm system. And the farm system is to help guys crack the million dollar mark. And once you crack that, you get into our main track. And our main program is the next level of everything that we do to really help guys that are from a million to 10 get to 25 plus. And now it’s kind of a little bit mind blowing when you’re at maybe 500,000, you go 25 plus, it’s crazy. But it’s extremely possible when you get the right formula and things dialed in, and it’s incredible how fast it can happen exponentially when you can trust and let go and get your team doing what it needs to do with the right time and systems and people.
Devon Hayes:
I love that. I love that you have it kind of like you understand what somebody under a million dollars needs versus someone. I think that’s just from different trade shows and things like that that we’ve been at is the pushback I hear on business coaches is like, “Ah, they didn’t fit us. They were for someone at the $10 million mark and we’re only at 1.5.” Having programs catered to specifically where you’re at in your revenue and knowing what the next step is. In another complaint we hear is, the jump from level one to level two is too massive. It sounds like you’ve got it figured out what programs and processes need to be in place when you’re at these very specific revenue points. So yeah, I think that’s a massive sell.
Randy Stanbury:
And the thing is, we know under a million, if you don’t have these seven things lined up, you probably can’t afford much of a coaching program either. So, we built our farm system to be, it’s extremely affordable. Because it’s the only way for guys to get to that million affordably from what I’ve seen out in the industry. And to me it just makes no sense. We want to help you get to a million plus so that we can now go to the next level with the right program. It has to work for you and be extremely affordable.
Devon Hayes:
Yeah, I love that. I love that you’ve got options. Well, thank you so much for joining us. It’s always a pleasure talking with you. We were on Randy’s podcast a little bit earlier this year, and I just, a lot of good knowledge being shared back and forth. So, we’ll have Randy’s contact information and his podcast and the episode notes, so make sure to take a look. And thank you so much for listening to Trade Secrets.
Randy Stanbury:
Thanks for having me.
Amanda Joyce:
Until next time. That was today’s trade secret. Thanks for listening.
Devon Hayes:
Did you find this helpful? We’re just getting started. Subscribe, and don’t miss our next reveal. Until next time.
