We have been misled about the idea of culture.
After poorly thought out ideas of free-Friday-lunches, bean bag chairs in the break rooms, ping pong tables, open office concepts, and incentive compensation plans, team members are still disengaged and frustrated.
We are trying to solve a pervasive, soul level challenge, with the oscillating fan of surface level ideas, rather than dousing the underlying flames of cultural disconnection with the quenching water of cultural satisfaction and engagement.
Often we hear business owners complaining about the pending generational work ethic, or lack of, followed by a throwing up of hands and a resignation that “my generation is the only generation that knows how to work.”
When speaking to groups of small business owners, this is a typical refrain, “nobody wants to show up and work.”
My response, in a kind and forceful way, “no, they just don’t want to show and work for you… because you have already given up on them.”
The great challenge of a sporting coach is to recruit, develop, and game plan in a way that maximizes talent and outcomes.
The same is true of a business owner. Too many business owners are resigning to the cancerous idea that “if I want it to get done right, then I must do it myself.”
NO!
We must allow that mindset to die in the graveyard of pride and hubris, and instead, embrace a growth mindset… a mindset that believes that each generation and each person has a unique brilliance to bring to a well-defined and clear mission.
All businesses, generally, want great culture and yet great culture is not the default.
Culture is not a business term, but has been borrowed for business from science.
Culture is a biology term.
Go back to middle school science when you saw your first petri dish. That little glass dish would hold some biological element, and then over time when subjected to heat, moisture, and any other environmental elements would grow the fruit of whatever elements were inside.
Business culture is no different, install the elements of bad culture and bad culture will grow.
Install the elements of good culture and good culture will grow.
If your business plants the seeds of unpredictability, lack of communication, no team meetings, little documented process, and scattered vision…then don’t be surprised at the fruit.
If your business (ahem, you) plant seeds of predictability, repetitions, agendas, written and tracked goals, shared vision, mission, and values… then don’t be surprised at the fruit.
Here are three elements to a great culture that engages people and makes time for the things that matter.
First, write down your vision, mission, and values and commit them to repetition and memory.
Vision unites, a vacuum of vision scatters.
It’s a natural law.
If you write down a vision of what you see and share that vision, your team will either run towards it, or run away from it, but either way, it will be clear.
If you write down and memorize a less-than-ten-word mission statement and five or less unique core values, then your team will have great clarity on why they are heading in that direction, and the boundaries to remain in.
You must commit to writing it down and sharing it regularly if you want the seeds of great culture.
Second, you will need to maintain a written calendar to repeat those agreed upon elements of great culture.
How often do you read back through your vision, host team meetings, host personal check ins, celebrate birthdays, family anniversaries, and team member work anniversaries? When do you write annual letters, host annual team discussions, and get feedback from your team on progress?
Create one simple spreadsheet with a line of weekly dates across the top, and then line out all of the elements you want to see in great culture along the side; team days, team lunches, individual gatherings…all of it.
Finally, if you want a great culture… don’t be a jerk.
Be kind, be visionary, be appropriately confrontational, be helpful, be humble, be inquisitive, be aggressive… but don’t be a jerk.
The livelihood of each of your full time team members is tied to your leadership, and much of that person’s discussion when they go home is around their work.
Don’t be a jerk.
The bad news is that you as a business owner directly impact culture.
The good news is that you as a business owner directly impact culture.
Plant the seeds for good culture… rinse and repeat.
If I were to walk into your office this week, pick an employee at random and ask them where you’re headed as a business over the next year or so, would they be able to answer correctly? I’d wager they may be able to nail a few small things, but would probably fall short of where you’d like them to be. So how do we communicate those things and effectively put the bullseye on the wall for the whole team to chase after? Well, it starts with a team vision day. Let’s talk about it!
Thanks so much for listening in today, Thomas Joyner with Business on Purpose here.
About a year ago we sent out an employee survey to all of our clients. Just told them to forward it on to their employees, because we were curious how many of them could answer this question. “What’s the goal of our business?” And many similar questions like that. Just give them a chance to answer and see what came up.
Now, it was fascinating to read the responses. Things like, to make the most profit we can, or to build perfect houses or even to make sure our customers are happy.
And yet, there was something missing in most of the responses. Well, a lot of things missing, actually. Things like how big do we want to be and who our ideal client is. Things like what we want the culture to feel like and how much business we want to take on. The size of the team. The gross revenue. The ways we want our clients to feel when they do business with us. All of that.
And so how do we take those things, write them down and communicate it to the team effectively so that they hear it and take notice?
Hear me say this… don’t overcomplicate it! Have a Vision day, or in our opinion, multiple Vision days throughout the year. We have 6, yep that’s right, 6 Vision days over the course of the year. Hour-long meetings where we do nothing but read through the vision of where we’re headed and who we want to be while headed there.
The other day I sat down with a client and he brought up prepping for their quarterly team meeting where they read through their vision story. I was so proud and he went on and on about how much it’s changed their business. They commit to reading through it once a quarter so that their team is never confused about what’s important. They see the core values and how it connects with end goals. They can recite the mission and know their why.
It’s such a powerful way to engage their team and connect the dots so that no one every has to guess at where the endzone is. They know it because it’s constantly in front of them multiple times a year.
So, how do you start? Well, the vision needs to be written down. One of our favorite quotes comes from the book of Habbakuk in the bible. “Write the vision down so that those who read it may run!” That’s what you want your team to do, see the vision, and have it read over them so that they can run full speed after it!
What a powerful picture!
Then schedule a date to start it. Don’t overcomplicate it. Just read through it and let your team ask questions along the way. Then, after the first time reading through it ask this simple question…”So, after hearing our vision, are there any questions about where we’re headed?” If yes, answer them! They are super important.
If the answer is no, ask this. “After the first time reading through our vision, what would you say is important to us?” This is crucial in them retelling you where you are headed and how you want to do business moving forward. You have to know what they heard you say and make sure it sunk in! And if they missed the mark, rework your vision until it communicates what you want it to towards your team.
That’s vision that moves people forward! Schedule a few more times throughout the year. You want your team knowing what you are going to say before you say it. That’s when you know the vision has truly sunk in.
Alright, what are you waiting for…put pen to paper and write it down so your team can run after it. Then put it on the calendar and get the entire team there and engaged!
Then let us know how it went. Thanks for joining today I can’t wait to hear about your Vision day!
A few months back I was driving the most beautiful stretch of interstate on God’s green earth, I-26 between Orangeburg and Columbia…and I’m on one of those long stretches where it’s 40-ft tall pine trees as far as the eye can see and I start to notice some clouds stacking up in the distance. Cars just disappearing into it a mile or so out and here I am driving 70+ mph right at it.
Kind of an eerie gray about it and I can’t even remotely see through it, what’s on the other side, what’s inside… none of it! And the closer I got the more questions popped into my head. And it was fine, it was a bad storm that we had to slow down for, but we made it through to the sunshine on the other side.
And as I think about the state of business right now, that’s the collective feeling we get. We can see a long way out. A lot of us are booked months, maybe a year or more into the future. And yet there’s this big cloud out there and this buzz word we keep hearing, “RECESSION”. That for some reason no one can really identify what it’s going to look like once we arrive at this thing. How bad is it going to be? Will we be able to drive our business through it normally? Are we going to have to slow down? Should we be nervous or just push through as quickly as possible to the other side?
Here’s what we do know…none of us know how bad it will be. We do know there are some changes and we’re going to have to deal with those changes in our exhausted state of just getting through the past 2+ years of a post covid reality.
We also know that we can prepare for whatever that storm looks like. We can get our business ready so we can do more than just white knuckle it all the way through.
4 questions you need to answer today to prepare for whatever is around the corner…
1. “What are the rhythms to equip our team with so that they are free to run full speed towards the vision?”
I coached high school lacrosse at Hilton Head High for 6 years. Every year we would have a parent meeting and outline the full year of what we needed to do to ultimately win a state championship.
-Fall weightlifting and conditioning…here’s the times and places. Commit to it.
-Tutoring Tuesdays/Thursdays after school so your grades are in line
If we can plan a year of high school lacrosse with that kind of intentionality, why can’t we do the same with our business? What rhythms do we need to equip our team with so they are free to run full speed towards the vision?
2. “Knowing our Mission…What would we do in response to our primary lead source drying up?”
We’ve been talking about this cloud that’s out there, right? This storm that may be short, long, intense, not so bad…who knows? How do we pivot in the midst of that.
And what would happen if your primary lead source, your primary faucet of business shut off or rapidly slowed down?
I’m not saying it will, but how do we diversify your business and allow for change in the future?
3. “What would need to happen if something happened to me?”
This is something we spend a ton of time on. Hopefully, nothing ever does…but the business needs to be ready! What processes do you need to record? What systems need to be built? What happens if someone gets promoted within and you need to train their replacement? This stuff happens all the time and businesses are set back because they aren’t ready. Things aren’t written down.
So ask everyone in your business that question and let the answer push you to get things written down.
4. “How does my role directly affect the financial health of the business?”
This one is huge. Have a simple conversation with your team around what makes you profitable. Helping them understand that they play a key role in profitability. Show them what happens when a dollar enters the business and what is left over at the end. (Insider information…you don’t make 100% profit, but that’s what they think!) Show them your COGS and your insurance expenses and payroll taxes. It’s helpful for them to see it all written out.
Listen, we don't know what is around the bend, but we do know we can prepare in these 4 key areas. With our people, with our Purpose, with our Process and with our Profit.
Once you touch on all 4 of those, you will be well on your way to being prepared for whatever this recession looks like!
Have a great day.
There’s a new generation of kids hitting the workforce. So, with thousands of options, how do we attract them to our business? And how do we make sure we have enough runway in front of them so they don’t just jump at the next available job that pays a little bit more?
Well, let’s talk about that today! Good morning friends, Thomas Joyner with Business on Purpose here.
We met last week with about 125 business owners and key leaders to plan out the 4th quarter. One of the resounding issues that kept coming up was attracting talent in the trade industries. Now, about 70% of the businesses we work with are in the trade industries, so we asked them to go a bit deeper into the problem.
Well, there’s this huge push for high school kids to go to college. Which is great! But, when they get a random business degree or marketing or some other generic degree in communications that they have spent good money and 4 years of their life on, they fully expect to be compensated at a higher rate and to find a job in their field. There’s tons and tons of trade work to be had that does not require a 4-year degree, but those kids aren’t attracted to some of what we have to offer, and seem to not be celebrated as much for working with their hands.
And they’re not wrong. Generation Z is coming out of high school or college with an inflated idea of the return on investment from education. They often think, oh I’ll get a degree in X and should make a good living right out of school! Even though that’s not close to how it works. Meanwhile, there are jobs paying 18/20/22 bucks an hour that you could start tomorrow…WITH A SOLID CAREER TRAJECTORY.
Now, don’t hear me say college is not important. It absolutely is and higher education should be applauded. But, it should not be some hoop that kids are forced to jump through with no direction. That’s a waste of money.
But back to the issue at hand. Plumbers, electricians, contractors, roofers…you name it. All of them are struggling to attract talent. People that want to work in those trades. Gen Z looks around and sees people making Tik Toks, podcasts, food blogging, gaming, anything BUT working with your hands and making a stupid amount of money to do so.
But I think the question we should ask is not how do we compete with that pay. Good luck with that one. The question we should ask is what is attractive to Gen Z about all of those jobs?
Well, it’s notoriety. It’s having a voice. It’s influencing people and being heard. It’s also the freedom to be creative and self expressive.
Well, you say, that’s tough to give kids all of that as a beginning plumber.
Yep, I agree…but can we get closer to that? So many of us are stuck in the ways that the trades have worked for the past 50 years and not willing to innovate or change at all. So no wonder kids don’t want to work with a bunch of grouchy 50-year old men who are “stuck in the old days!” It sounds miserable.
So how can we get them excited about being heard, using their creativity, innovating, serving people…etc.
I think the question we need to start asking is…”What are the employees I’m looking for, looking for?”
It’s a simple question, but until we learn how to answer it, we will be stuck waving our fist at the waves upon waves of Gen Z employees who chose to work elsewhere. We can stick our heads in the sand and say, “man they just don’t make 'em like they used to!” Or we can be proactive, recognize the change in the market and get excited about the strengths this new generation brings.
Here’s the last thing I’ll point to. This Gen z group of kids does not have the tangible skills that previous generations had. So we have to double down on 3 things…
Alright! I hope this is encouraging and is a conversation started with your team. What are the employees we’re looking for looking for. And how can we become that. Not until we answer that in a real way and communicate it to the oncoming work force can we hope to have our hiring holes filled by the incoming work force.
Get to work!
Marketing and I have a love-hate relationship.
The results are powerful when the results exist, yet too often, the results are more aligned with vanity than they are with actual growth.
Marketers are like business coaches (of which I am one) and gypsies, each profession has a low bar of entry and the results are often quantified and masked by generalities.
I can’t speak for gypsies, but marketers and business coaches have real opportunity to move the needles for businesses IF the needle is well defined and well tracked.
Our business coaching firm has been growing over the years as we work with business owners (75% of those are contractors or contractor-related industries) between 2 and 50 employees to help build systems, process, and purpose using our Business On Purpose Roadmap in an effort to liberate business owners from chaos so they can make time for what matters most.
The majority of our business has grown through intentional word of mouth and direct referrals. Growth has not been haphazard, but also not opened to the masses.
We realized that our mission could serve a wider audience if only we had a scalable way to share our value proposition with that audience.
Enter the need for a marketer.
We define marketing as that activity within a business that tells the world, “we’re here and this is the impact we could have on your life…here, try a sample.”
Before I lay out the solution, let’s define the challenge…the elephant in the room.
Marketers have a reputation for obsessing over minor vanity metrics, and foregoing the more important numbers.
We have spent hundreds (at least) of hours and tens of thousands of dollars working with marketers in the past and the primary return has been a volume of likes, views, and impressions.
That is all fine and good, but the primary return on your marketing investment should be the right leads that convert to a sales opportunity.
Be wary of the “branding strategy”, especially when you are a small business. Early on branding comes through the excellence of your work to clients and customers, not the proficiency of your message to non-stakeholders.
Of course, you need a succinct and targeted message. You need clarity and consistency. Early on you can be the one to ensure your message is constant with a clear mission statement, a simple branding guide (standardized colors, fonts, and logos), and as many testimonials as you can get.
As those tools are built you begin building marketing assets that a marketer is able to leverage when the time is right.
The time to invest in a marketing manager is the time that you need to scale your growth in a way that requires more than word-of-mouth marketing.
There are three things that you should have in place prior to recruiting a marketing manager.
First, you should understand the marketing gap that exists in your business. What is it that the marketing manager will do that you, or someone already on your team cannot do?
That leads to the second thing…a written job role with clear and written key results. Resist the urge to search for a marketing role online to copy and paste. Pause, ask yourself, “if this marketer was successful for our business, what would she need to produce regularly?”
When thinking through compensation, every dollar that you invest in a marketer, and the budget for their role, should return three to four dollars in revenue.
You will need to do some calculation, and then have an honest conversation with the marketer about why the compensation is structured as it is. You will want this role to cash flow quickly.
Finally, to prepare yourself for recruitment ensure that you have thought through your existing assets, metrics, and marketing efforts. These are invaluable experiences that will give momentum and runway to your new marketing manager.
As you go on the search for a marketing manager, sharpen your eye towards a few key elements.
First, obsess over the key results areas.
Make sure your marketing candidates understand that vanity metrics are just that; vanity. Your business is making this investment for one reason, to generate leads that convert to sales opportunities.
Everything else, for now, is a distraction.
Second, ask your marketing candidates for past results in other marketing roles.
What channels have they used? What strategies have worked in different environments?
Third, let your marketing candidates know that they will be required and 100% responsible to create and implement the marketing plan. Your marketing role is not a social-media-manager role, although managing social media will play a part.
All appropriate channels of marketing will be expected to be either leveraged or dissolved based on the marketing plan they draft and hold to account.
Finally, ask for a written marketing plan prior to hiring them. Be very clear, you are hiring them to create the plan and implement it, you will be an advisor and asset to leverage, but you will not be the marketer and ultimately the buck stops with them to turn targeted leads into sales opportunities.
Marketing has left a bad taste in the mouths of many business owners, but it doesn’t have to. Marketing is a value-add to a small business if a marketer is willing to do the hard work of generating targeted leads into valuable selling opportunities.
I don’t know about gypsies, but marketers and business coaches can have a major impact on the world of small business if we can only resist the sugary-urge of vanity metrics and target the more substantive and transformational work of actual sales opportunities.
Every day you are waking up and chaos seems to reign.
Material delays.
Pricing volatility.
Subcontractors and vendors not pulling their weight.
The labor pool seems to be vanishing, and recession is on our doorstep.
Those aren’t the greatest challenges, though. We know what the greatest challenge is. All of these elements are leading you to question whether or not you are even in the right business because as much as you try to be present at your daughter's softball game, or your son's soccer match, or simply focusing around the dinner table… you aren’t present because the chaos is consuming you.
You wonder, “how can I keep going if all I am doing is robbing Peter to pay Paul?”
“How can I have plenty of work, but not plenty of cash?”
“Why do those other contractors seem like they’re crushing it while I’m wasting away, just trying to keep up.”
Some of you, like TJ, have asked, “what happens to my business if something happens to me?”
The professional chaos is taking a toll on your personal life.
That stops today.
Most business owners are convinced they are not generating enough revenue. In reality, that is usually not true… the cause of their cause stems not from the volume of revenue generated, but instead from the amount of that revenue that is retained and kept… the proverbial back door of profit is WIDE OPEN!
Most career contractors do not have a revenue problem, although growth in revenue can be valuable. Most career contractors have a numbers problem… in other words, you don’t know your numbers day to day so your expenses creep up and up while revenue fluctuates up and down… and profit drips out.
We live from big receivable to big receivable, living life like a real-life roller coaster complete all the while feeling sick and green.
There are at least 3 techniques you can deploy to improve profits and margins.
The first technique to controlling your costs and knowing your numbers is to subdivide your bank accounts.
When we first met Steve, he was running an $7mm custom homebuilding company in a prestigious market in California.
In the first week of 2020, he had $64,889.85…$65k to run $7mm worth of projects during a year where his local municipality would eventually shut down construction for 6 weeks due to COVID protocol.
That same year, his volume contracted from $8mm to $7mm. In other words, he would LOSE revenue in 2020, would LOSE six weeks worth of billing in 2020, and to make matters worse, of the $65k he had in his accounts… he only really had access to $32,720.14… the rest of it was already scheduled to be spent on subs, materials, and other payables.
Steve was going into an already uphill year of 2020 armed with a water pistol and a kit kat bar for nourishment. Needless to say, Steve was freaked.
But one thing Steve now knew, that many of you don’t, and it’s leading to the chaos you feel.
Steve KNEW how much he had available to pay his taxes, to pay his subs, to pay his team, and to pay himself.
Most of you are looking at the money…and you are missing the true story…STEVE KNEW because Steve had a system.
Steve made one decision, and this decision is spelled out beautifully in Mike Michalowicz’s important book Profit First For Contractors.
In short, when a dollar comes into your business, immediately subdivide it so you know exactly where that dollar has to go…starting with yourself.
There are four barriers you must overcome before you make this shift, and yet the shift will be SO worth it.
The barriers are…
Ok… let’s for a moment suspend our disbelief, and instead embrace the idea of subdividing bank accounts.
Remember, not knowing your numbers is causing frustration and distance with those you love…so let’s do something different.
The second technique to controlling your costs and knowing your numbers is to create a simple dashboard that tracks your cash each week.
Steve said, “but my online bank statement tells me how much money I have in each account, and Quickbooks tells me how much I’m owed.”
Yes, technically you are correct Steve…BUT…
In order to understand your profit and your margins we need a means of tracking those numbers looooooong term. It’s nice to know your cash, or receivables, or payables, or Cost Of Goods on any given week…but it’s even BETTER to know those each week over months and years where you can watch trends.
We feel the same about the weather, that is why forecasters constantly tell us where today’s weather compares with weather from the previous week, month, year, decade, and century…it gives context and helps us make decisions.
The Level Two Dashboard is a tool we have built and installed in hundreds of businesses around the world from Architects to Remodelers, to Plumbers, to Lawyers.
The truth is, a dollar is not a dollar…that dollar must be artificially subdivided so we know which part of that dollar is ours and which is not.
Steve trains Mindy on how to take 5 minutes each week and update the Level Two Dashboard, and each week the entire team knows…
So far we’ve asked Steve to do two things; a) subdivide his bank accounts so that each dollar goes where it needs to and doesn’t leak out, and b) track all of his cash, and any cash you owe or are owed.
After following this for about 6 months Steve comes back and says this, “this is voodoo…How is that I generated less money than last year, but have more money?
Simple…he made each dollar accountable to its destination.
The third technique is to KNOW your pricing and margin.
Most of you are guessing when you are pricing because there is no repetitive process to your pricing…it is as if you are re-creating your pricing wheel everytime and it is usually dependent on the amount of desperation you feel in the moment.
We must stop guessing, and start KNOWING.
Remember this…pricing should always be based on VALUE.
Here is the same question asked two different ways…
There are two primary filters to run EVERY price through.
First is your own pricing calculator. Where is that tool in your estimating and bidding arsenal where you can plug consistent numbers in and get consistent numbers out based on PREDETERMINED percentages that are healthy and profitable?
The second filter to run your pricing through is the filter of VALUE!
Once you have a final number from your objective calculator, then take that number and run it through a subjective VALUE thought, “is it worth X to the client for this project to be completed in this amount of time?”
One other thing Steve did when he put those money processes in place…he began predictably pricing jobs EVEN in the midst of price increases, and material delays.
Three ways.
He communicated the volatility to clients UP FRONT and throughout.
Steve then RELENTLESSLY followed every dollar that funneled in and out of the job through a simple job costing spreadsheet.
Finally, he understood the difference between markup and margin.
Margin is what is leftover AFTER cost of goods and materials are removed from revenue. That is NOT markup.
When you markup is how much you increase a price to determine its final selling price so you can make a healthy margin.
When it comes to pricing, understand your markup, and you will earn a healthy margin.
When you have a healthy margin, NOW you have options.
Three techniques that all require time and attention.
First, subdivide your bank accounts.
Second, create a simple, tracking dashboard.
Third, price for value and not for time through predictable communication, giving a home to every dollar, and predetermining a healthy markup to provide a freedom-giving margin.
Every day you are waking up and chaos seems to reign.
Material delays.
Pricing volatility.
Subcontractors and vendors not pulling their weight.
The labor pool seems to be vanishing, and recession is on our doorstep.
Those aren’t the greatest challenges though. We know what the greatest challenge is. All of these elements are leading you to question whether or not you are even in the right business because as much as you try to be present at your daughters softball game, or your son's soccer match, or simply focusing around the dinner table…you aren’t present because the chaos is consuming you.
You wonder, “how can I keep going if all I am doing is robbing Peter to pay Paul?”
“How can I have plenty of work, but not plenty of cash?”
“Why do those other contractors seem like they’re crushing it while I’m wasting away, just trying to keep up.”
Some of you, like TJ, have asked, “what happens to my business if something happens to me?”
The professional chaos is taking a toll on your personal life.
That stops today.
Most business owners are convinced they are not generating enough revenue. In reality, that is usually not true…the cause of their cause stems not from the volume of revenue generated, but instead from the amount of that revenue that is retained and kept…the proverbial back door of profit is WIDE OPEN!
Most career contractors do not have a revenue problem, although growth in revenue can be valuable. Most career contractors have a numbers problem…in other words, you don’t know your numbers day to day so your expenses creep up and up while revenue fluctuates up and down…and profit drips out.
We live from big receivable to big receivable, living life like a real life roller coaster complete all the while feeling sick and green.
There are at least 3 techniques you can deploy to improve profits and margins.
The first technique to controlling your costs and knowing your numbers is to subdivide your bank accounts.
When we first met Steve, he was running an $7mm custom homebuilding company in a prestigious market in California.
The first week of 2020, he had $64,889.85…$65k to run $7mm worth of projects during a year where his local municipality would eventually shut down construction for 6 weeks due to COVID protocol.
That same year, his volume contracted from $8mm to $7mm. In other words, he would LOSE revenue in 2020, would LOSE six weeks worth of billing in 2020, and to make matters worse, of the $65k he had in his accounts…he only really had access to $32,720.14…the rest of it was already scheduled to be spent on subs, materials, and other payables.
Steve was going into an already uphill year of 2020 armed with a water pistol and a kit kat bar for nourishment. Needless to say, Steve was freaked.
But one thing Steve now knew, that many of you don’t, and it’s leading to the chaos you feel.
Steve KNEW how much he had available to pay his taxes, to pay his subs, to pay his team, and to pay himself.
Most of you are looking at the money…and you are missing the true story…STEVE KNEW because Steve had a system.
Steve made one decision, and this decision is spelled out beautifully in Mike Michalowicz’s important book Profit First For Contractors.
In short, when a dollar comes into your business, immediately subdivide it so you know exactly where that dollar has to go…starting with yourself.
There are four barriers you must overcome before you make this shift, and yet the shift will be SO worth it.
The barriers are…
Ok…let’s for a moment suspend our disbelief, and instead embrace the idea of subdividing bank accounts.
Remember, not knowing your numbers is causing frustration and distance with those you love…so let’s do something different.
The second technique to controlling your costs and knowing your numbers is to create a simple dashboard that tracks your cash each week.
Steve said, “but my online bank statement tells me how much money I have in each account, and Quickbooks tells me how much I’m owed.”
Yes, technically you are correct Steve…BUT…
In order to understand your profit and your margins we need a means of tracking those numbers looooooong term. It’s nice to know your cash, or receivables, or payables, or Cost Of Goods on any given week…but it’s even BETTER to know those each week over months and years where you can watch trends.
We feel the same about the weather, that is why forecasters constantly tell us where today’s weather compares with weather from the previous week, month, year, decade, and century…it gives context and helps us make decisions.
The Level Two Dashboard is a tool we have built and installed in hundreds of businesses around the world from Architects to Remodelers, to Plumbers, to Lawyers.
The truth is, a dollar is not a dollar…that dollar must be artificially subdivided so we know which part of that dollar is ours and which is not.
Steve trains Mindy on how to take 5 minutes each week and update the Level Two Dashboard, and each week the entire team knows…
So far we’ve asked Steve to do two things; a) subdivide his bank accounts so that each dollar goes where it needs to and doesn’t leak out, and b) track all of his cash, and any cash you owe or are owed.
After following this for about 6 months Steve comes back and says this, “this is voodoo…How is that I generated less money than last year, but have more money?
Simple…he made each dollar accountable to its destination.
The third technique is to KNOW your pricing and margin.
Most of you are guessing when you are pricing because there is no repetitive process to your pricing…it is as if you are re-creating your pricing wheel everytime and it is usually dependent on the amount of desperation you feel in the moment.
We must stop guessing, and start KNOWING.
Remember this…pricing should always be based on VALUE.
Here is the same question asked two different ways…
There are two primary filters to run EVERY price through.
First is your own pricing calculator. Where is that tool in your estimating and bidding arsenal where you can plug consistent numbers in and get consistent numbers out based on PREDETERMINED percentages that are healthy and profitable?
The second filter to run your pricing through is the filter of VALUE!
Once you have a final number from your objective calculator, then take that number and run it through a subjective VALUE thought, “is it worth X to the client for this project to be completed in this amount of time?”
One other thing Steve did when he put those money processes in place…he began predictably pricing jobs EVEN in the midst of price increases, and material delays.
Three ways.
He communicated the volatility to clients UP FRONT and throughout.
Steve then RELENTLESSLY followed every dollar that funneled in and out of the job through a simple job costing spreadsheet.
Finally, he understood the difference between markup and margin.
Margin is what is leftover AFTER cost of goods and materials are removed from revenue. That is NOT markup.
When you markup is how much you increase a price to determine its final selling price so you can make a healthy margin.
When it comes to pricing, understand your markup, and you will earn a healthy margin.
When you have a healthy margin, NOW you have options.
Three techniques that all require time and attention.
First, subdivide your bank accounts.
Second, create a simple, tracking dashboard.
Third, price for value and not for time through predictable communication, giving a home to every dollar, and predetermining a healthy markup to provide a freedom-giving margin.