September 9, 2025 • 39 mins
Cody Daniels shares his knowledge and strategies for tax in the construction sector and reflects on his entrepreneurial journey. He discusses the benefits and challenges of running a business, the importance of community, and managing strong personalities. Topics include common tax mistakes, construction accounting strategies, and compliance issues with retirement plans. Cody highlights the significance of EOS, quarterly goals, and balancing core tasks with growth and technology. He explores AI's impact on construction and accounting, business survival rates, and misconceptions about accounting and IT services, offering advice for contractors on tax management.
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Episode Transcript
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(00:00):
Yeah, that's an awesome thought, Justin.
(00:04):
It's really, that's how I approach, I guess,maybe sales pitches or conversations that I'm
having with folks in the industry.
There's, to me, like there's two buckets ofknowledge that we can bring to the table,
right?
There's rules and laws that are specific toconstruction and really truly only apply to
that industry, right?
So that's like the accounting methods that Ispoke to.
(00:28):
That's gonna be similar for other industriestoo.
I mean, if you're a manufacturer, there's goingto be accounting and tax rules that apply
specific to manufacturing, right?
So there's things like that, but then there'smore like general concepts, but how do you
apply that to construction in the mostbeneficial ways?
Something that always jumps out to me is likeretirement, right?
(00:58):
Construction companies scale their business?
Or have you ever wanted guidance on how to getmore growth, wealth, and freedom from your AEC
company?
Well, then you're in luck.
Hi.
I'm Will Foratt.
And I'm Justin Nagel, and we're your podcasthosts.
We interview successful AEC business leaders tolearn how they use people, process, and
(01:19):
technology to scale their businesses.
So sit back and get ready to learn from theindustry's best.
This is Building scale.
Hey, listeners.
It's Will here.
Our mission is to help the AEC industry protectitself by making technology easy.
If you've ever listened to our show, then youknow that the three pillars of scaling a
(01:41):
business are people, process, and technology.
So if you suspect technology is your weak link,then book a call with us to see where we can
help
Hey, everybody.
Welcome back to another episode of BuildingScale, specifically the building connections
(02:05):
series where I get to interview, people or talkwith people.
I always say interview and I always feel likethat's such a weird thing because it's more of
a conversation, especially in these as we dropinto a conversation I had with, Cody Daniels,
who's the founder of builders tax group.
So CPA specifically for the built world, whichwas, we, we literally met through LinkedIn
(02:28):
through somebody I did not know, that said,Hey, you just need to talk to this person,
which is always an awesome thing where it'slike, they see, they're like, I know you enough
that you need to talk to this, not even me talkto somebody else.
So I love that.
He was at a bigger firm, you know, fast growingfirm twelve years and then chose
entrepreneurship and said, Hey, I can go do theCPA life by myself and just focus in the built
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world, the built environment life's too short,know, and he wanted to, Hey, I want to run my
own, my own thing, my own shop.
As I mentioned, niched into construction, whichis literally why I was like, Oh, I need to, I
need to bring you on because this is a areathat I know very little about.
And people always have questions about taxstuff is, what I'll say, there's a little bit
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of a pain in the ass, you know, for all of us.
So, some industry specific stuff we talk aboutwhen you think of like percentage of completion
versus completed contract or, you know, missedlike interest look back and deferral strategies
and all this kind of stuff.
So it's fairly, tactical almost in that regard.
Not like it's gonna, he's gonna walk youthrough here's how you do this, but like, here
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are just areas that like you should startpaying attention to, and just to improve cash
flow, which is obviously the blood of the builtworld, the life of it.
So, yeah, this was a fun conversation I hadwith Cody and I hope you enjoy it as well.
And I hope you learn, a little bit about taxand, and some stuff that you could possibly do
(04:00):
in your company.
Yeah.
So here it is.
So Cody, you were doing tax before you decidedto go off on your own.
What made the big jump?
Why the decision to say, Hey, let's go down theentrepreneurial path because like generally in
firms, usually partnership is a possiblepathway for most.
(04:22):
So why do the jump and go off on your own?
Yeah, great question.
It was a couple of things for me.
My old firm was growing tremendously.
When I started, they were about 50 employees.
I was there for about twelve years.
By the time I left, they were well over 200employees.
So, it experienced a bit of a cultural shiftthere in terms of, just the way the firm
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operated, the types clients they were workingwith.
And, you know, so couple that with some thingsthat I was going through in my personal life
where I was just sort of having this, I don'tknow, sort of kind of decision to live my life
in more of a way that I was just approachingeverything as though there's a bucket list that
(05:06):
I need to complete.
I think, you know, I had some family membersthat had some health issues and it really sort
of brought some things to light for me as faras like, I have things in my life that I need
to accomplish and life is short and I need toreally start going after those goals.
And as part of that kind of reawakening, Iguess, so to speak, I was reminded that when I
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was a kid, I always envisioned myself running abusiness.
And I felt that making partner at a smallaccounting firm would give me that
entrepreneurial experience.
But as my old firm continued to grow, it becamefor me apparent that at a firm of 200 people,
it's not the same as being the one and onlyperson making all the decisions.
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So I knew that I wasn't going quite get thatexperience at a large firm.
And so I had to make the choice to, to jumpinto entrepreneurship and, really see for me if
like, that was something that I was excitedabout, something that I was capable of.
And, really, yeah, just sort of cross that,cross that bucket list item off of my list
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before it's too late.
Got it.
So you decided, Hey, I'm going to jump in andhow are you happy?
I guess that's maybe the first question.
So far so good.
Or what should we look at here?
Yeah.
So we're right around about a year that I'vebeen doing this.
I kind of went public with the launch.
Around this time last year, I was splitting mytime for a little while.
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I was working part time with my old firm, whileI ramped things up here.
I felt like that would give my old clients andmy old teammates the best transition, provide
them with plenty of time to find new people totake over and transition, all of my old clients
to the new folks while getting things ramped upfor me.
So, I was splitting time there for a littlewhile, but, yeah, I've been full time now for
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about six, six, seven months or so.
And it's been awesome.
Really, really enjoy getting to do more thanjust the work, you know, to work on the
business and not in the business so much.
Out there networking, sales calls, things thatmaybe I wasn't doing as frequently at my old
firm.
You know, I've been able to take more controlof my schedule.
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And so that's allowed me some freedoms thatmaybe I didn't have as a nine to five employee.
I've lost a lot of weight, honestly, since,starting my own firm and that's been
a congratulations.
Thank you.
I didn't know that that was part of theentrepreneurial you know, what happens when you
go off on your own.
I would think that's not the normal course ofaction and that for other people, it may be the
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opposite as you're dealing with new stresses.
But for me, I think a lot of the stress I mayhave experienced as an employee was due to lack
of control and being able to sort of take thatcontrol over, has helped me just approach
things in a more sort of healthy manner, getcontrol of my diet, get control of my exercise.
And so that's been, maybe a not common, but avery welcome side effect of, launching the
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business.
So yeah, it's been, it's been great.
All right.
So you're literally living your best life asthey say.
I guess.
Yeah.
Okay.
So, why also go to builders?
Why construction?
What was the purpose there?
So the listeners know, you decided, Hey, I'mgoing to niche down.
Not that I'm just going to do tax, but I'm alsogoing to do the builders tax group is the name
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of the company.
So inherently dealing with builders.
So what was the why?
It is simple.
Yeah.
Yeah.
It's kind of a twofold answer.
Probably like most of my answers are going tobe a little multifaceted, but when I was at my
old firm, I had an opportunity early on in mycareer to specialize in construction.
They had a real strong client base inconstruction and they had partners on the
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assurance and accounting side of the officethat had industry expertise there, but they
didn't have anyone on the tax side of theoffice that had that same expertise when it
came to tax services and advisory.
So early on, I had that opportunity, But beyondjust the opportunity, it was an industry that I
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felt like I had a real connection with.
I have a lot of family that works in thetrades.
My grandpa was a union carpenter for decades.
My other grandpa was a welder.
I've had uncles that have worked in electrical,plumbing, road construction, and now my
cousins, their kids are getting into the tradesas well.
So I have a cousin that works in HVAC.
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And so it was just like an industry that I grewup around.
My family's blue collar people through andthrough, and I'm kind of the oddball that went
sort of the white collar, a desk job, sort ofroute.
But when you have an opportunity to jump onsomething early in your career, plus it's an
industry that you have familiarity with and,you know, you're, you're passionate about.
Was really, kind of the, the, you know, perfecttiming with everything.
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And so I led the, construction and real estatetax team at my old firm for many years.
And I knew that when I left, I wanted to, youknow, continue working with, with the blue
collar businesses, with the trades businesses.
It's a unique sort of mix of business owners.
I think there's a, you know, some strongpersonalities in the industry, but I like
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working with those types of people.
You know, it's, they're just, it's a greatindustry overall.
Overall, it's very like community focused, Ithink more so than maybe other industries that
someone could specialize in.
They take care of their own.
I mean, the businesses I worked with for years,you know, they, they take care of their
employees and, yeah, they're just, it's
just great people.
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Got it.
You mentioned opportunity.
So I want to kick off some questions that,would be helpful for listeners that are in the
space and saying, Hey, we have a expert in thisspace when it comes to tax.
So inherently, what are some opportunities thatare either missed, or what are common mistakes
that you kind of see throughout either yourhistory of, new clients coming to you, or you
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just see an industry in general, where it'slike, man, like you're just leaving a ton of
dollars on the table in credit or in anotherway.
Yeah.
I mean, there's a lot.
I actually, I wrote an ebook on this.
It's 10 Tax Strategies for ConstructionBusinesses.
Maybe we could throw that up a link to that inthe show notes.
That might be of interest to folks that arelistening, but, yeah, I think when I really try
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to think through the most common, I don't know,mistakes or missed opportunities that I've seen
in the industry.
And this is going to get fairly technicalpretty quickly, but it's accounting methods.
So most business owners are aware of like theaccrual and the cash methods of accounting.
Even if you're not an accounting expert, youknow, just as a business owner, you get
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accounting to know that those two options existfor you.
Beyond accrual in cash, there are a multitudeof construction specific methods available.
Some for financial statement purposes, others,you know, really only available for tax
purposes.
And there's a lot of missed opportunitiesaround there.
There may be requirements to utilize a certainmethod.
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Like there are certain businesses that have touse the percentage of completion method for tax
purposes.
And if you're not aware of that, you're goingto file your tax return incorrectly because
you're not going to use that method when you'rerequired to.
But there are a ton of exceptions that areavailable to that.
Again, if you're not well versed in theindustry, may overlook.
And so you may overlook an opportunity to use amethod like completed contract, which allows
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you to defer the gross profit on your job untilthe tax year that that job is completed.
So you're not necessarily recognizing incomethroughout the years that it takes you to
complete the job.
You recognize it all at the back end.
So there's incredible opportunities fordeferral out there.
If you know how to take advantage of theseconstruction specific methods.
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Interesting.
So if you were building a stadium or a datacenter, something massive, something really
big, there are tools or strategies that youunderstand.
Certainly I don't understand, but youunderstand to help your clientele to get them
to, Hey, these are different ways that you canapproach how you're filing your taxes or what
you are essentially claiming in that given yearthat then help both cashflow and I'm sure all
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kinds of other aspects.
Yeah.
Yeah, totally.
And it's, it's not just the, you know, those,you know, the stadiums or the data centers or
those massive jobs.
I mean, it could be, you know, you're a homebuilder and you're doing single family
residences.
Well, if you start, you know, a job here, inlate twenty twenty five and you finish it up in
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early twenty twenty six, well, depending on themethod of accounting that you're using, you may
be recognizing some of that income in 2025 andsome of it in 2026, or you may be able to defer
all of it to 2026.
So it's not just for the massive contractors.
It's for your mom and pop shops as well.
Interesting.
Are
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these things that you understand because youhave been working with the industry?
Cause that's always, you know, we get this allthe time at Spot where it's like, is an IT or
cybersecurity all the same?
And it's like, yeah, there's there's lots ofstuff that is similar.
That's not to say that there's not, but thereis little nuances, that really just play
towards certain industries.
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Industries.
Like if you are, you know, in construction,cashflow being important, it's like, well, how
do you structure a deal to not hit yourcashflow because, Hey, you're going need a
server, you know, at some point in time, Hey,that's a huge cost.
Okay.
Well, how do we make sure that like, that kindof goes across the whole year in comparison to,
here it is, it's November and we need to put ina $50,000 server.
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And then that becomes a huge headache where, ifyou work with somebody that understands the
industry, it's like, well, we have ways aroundit.
We have ways that we can help you deal withthat because we understand your needs and the
uniqueness of the BUILT world.
Yeah.
That's an awesome thought, Justin.
That's how I approach, I guess, maybe salespitches or conversations that I'm having with
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folks in the industry.
There's, to me, like there's two buckets ofknowledge that we can bring to the table,
right?
There's rules and laws that are specificconstruction and really truly only apply to
that industry, right?
So that's like the accounting methods that Ispoke to.
And that's gonna be similar for otherindustries too.
(15:36):
Mean, if you're a manufacturer, there's gonnabe accounting and tax rules that apply specific
to manufacturing, right?
So there's things like that, but then there'smore like general concepts, but how do you
apply that to construction in the mostbeneficial ways?
Something that always jumps out to me is likeretirement, right?
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Like, okay, what sort of accounts can we set upfor retirement for our employees and ourselves
as business owners?
Okay, well, have like a four zero one ks, wehave profit sharing.
We might have like a SEP IRA or simple IRA or acash balance plan.
Well, depending on your construction business,those plans that are broadly applicable, any
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business could implement any one of those plansmay get greater advantages from one versus the
other.
So if you're a union con you may be able asowners of a union construction business, you
may be able to set up a cash balance plan,which is like a traditional pension plan,
essentially.
It's kind of like an old school pension.
You don't see it used as frequently anymorebecause the cash requirements are astronomical.
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But if you're a union contractor, all yourunion employees are covered by the union
pension plan.
So you could set this up and as the owners ofthe business participate, and you would be
required for any non union employees to includethem as well.
So you may have some office you know, kind ofadmin staff that might participate, but you, as
the owners are going to be the mostcompensated.
You're going to have the most years of service.
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You're going to be able to put away significantdollars for retirement through that plan, much
greater than you could do in like a four ksplan or anything like that.
You know, you're going have caps that are goingto apply to those other plans with this cash
balance plan.
Depending on the size of your business, youcould easily be putting, you know, 6 figures a
year away for yourself.
Wow.
Okay.
Current year tax deductions.
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So you're getting the tax deduction in thecurrent year.
So it's reducing your current year income andthe bulk of those dollars are going to you as
the owners, as opposed to, you know, your otheremployees.
That's not going to work in every industrybecause you're not going to have the ability to
exclude the bulk of your employees.
This really works well for union contractorsbecause those union employees are by default
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excluded.
So yeah, that's just an example of, okay, thisis a broadly applicable opportunity out there,
but how do we apply it to a specific contractorand take advantage of it for them?
Wow.
That's super intriguing.
So these are some opportunities, certainly.
What are, what are things that are justmistakes that you say?
Like, what were you doing?
(18:07):
This?
Yeah.
Obviously you don't have to name any names, butyou just walk in and you're like, what the hell
is this?
Yeah.
Yeah.
Another great question.
Going back to that kind of topic of methodsthat I mentioned earlier, I think there are
some missed, there are misapplications thereagain, where you may be required to utilize the
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percentage of completion method on specificjobs.
And if you're not using that method, you'retechnically out of compliance.
So that's an area and there's something thatkind of goes along with the percentage of
completion method of accounting that I seeoverlooked on a lot of returns.
This is not a business owner problem.
This is a problem with my industry ofaccountants not understanding construction.
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There's this concept of interest look back thatthe IRS requires you to calculate if you're
using the percentage of completion methodwithout getting too deep into the weeds on it.
Percentage of completion method is based onestimates.
So you're estimating your income throughout thelife of a job.
Based on the costs that you think you're goingto incur, but that number is not defined until
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the job is done, right?
So, you're using estimated costs throughout thelife of the job.
Because you're using estimates, a creativeperson could manipulate the estimates to defer
income into the future for tax purposes and notpay the tax on that until a future tax year to
partially mitigate the manipulation that couldgo along with those estimates.
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The IRS says, well, if you push a bunch ofprofit into the future and you're not
recognizing that in the tax year that youreally should have, we're going to charge you
interest.
Like you're going to make you recalculate thetax that you should have paid back in year one,
and we're going to charge you interest on that.
So arguably you're still getting some benefitof keeping the cash in your hand into the
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future tax year, but you will ultimately haveto pay some interest on those profits that you
deferred.
So that's something that I just don't see donefrequently on tax returns when I'm looking at
onboarding a new client.
What are some, maybe some other mistakes?
See in this may be a little bit, less of anissue now that we have a 100% bonus
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depreciation available to us.
So part of the One Big Beautiful Bill Act thatwas passed back in July, it reinstated 100%
bonus depreciation.
So, that effectively means for contractors,most of your vehicles, equipment, heavy
equipment, even small tools, things like that.
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All of that, you're gonna be able to write off100% in the year that you make that capital
expenditure.
Okay.
There may be some exceptions for certainvehicles, you know, if you're going out and
buying a Porsche or something and using that asa business vehicle, there's going to be limits
that apply there.
But, what I had seen for years when 100% bonusdepreciation is not available is that a lot of
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people don't realize that your pickup trucksand your like work vans, you know, things that
like a contractor may have a fleet of thosewould typically have those would not be subject
to the same limitations as other vehicles.
And I would see people applying those limitsincorrectly.
And so you're not getting the full deduction onyour really any like 1,500 series and up truck
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or a work van, you know, like a sprinter van,things like that.
Those vehicles should be depreciated withoutlimitations.
And I would frequently see people applyingthose same limitations that you would have on
your Porsche to your construction vehicle.
So again, on my industry for not knowing therules there, but definitely an opportunity that
has gone missed, as I've, again, reviewed othertax returns over the years.
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Yeah.
Well, that's, you know, that's why you're, youexist, right?
Like you say that all the time.
If Microsoft was perfect, we wouldn't have ajob because that's essentially how IT works,
right?
For our end.
But I noticed the book traction behind you.
I know we talked a little bit about EOS alittle bit.
Obviously you've gone off on your own.
So what is, what have you learned from tractionor what have you, what thoughts, what key
(22:08):
components to be taken out?
Have you been able to implement anything or isit just, Hey, this is a thing that I read to
further my knowledge in that entrepreneurialknowledge base?
Yeah.
So obviously traction is meant to work forbusinesses of a certain size.
A key component of traction is theaccountability chart and making sure that
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people are working on the things that theyshould be working on.
So not something to perfectly implement for aone person business.
But I still like a lot of the concepts and tryto utilize the frameworks that I can modify to
a small business, as much as I can.
So for me, like quarterly rocks are huge, youknow, every, every quarter you know, I kind of
(22:51):
set somewhere between like three and six, kindof goals for myself.
Some of them, you know, typically centeraround, like business development goals, like,
you know, how much revenue do I want to bringin, in the next ninety days?
You know, there's a lot, around, you know, kindof software implementation and, you know,
improving processes, things like that.
So, yeah, I believe firmly in the rocks, youknow, giving yourself a short to do list for
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ninety days and, you know, setting deadlinesand holding yourself accountable, I think is
huge as a small business owner.
Nobody's holding you accountable to anythingwhen you're the person in charge.
And so having some form of structure orframework to help you accomplish goals and to
stay accountable to yourself and to your team.
(23:35):
You know, I think it's really important.
And whether it's traction or, you know, one ofthe other frameworks out there, I think
Pinnacle's starting to see some, some growth,at least I'm becoming more familiar with
businesses using that.
I'm sure there's others out there, but yeah,having structure, I think is just really
important as a business owner.
I like the VTO as well, the Vision TractionOrganizer.
(23:58):
So that gives you some one year goals, threeyear goals and ten year goals, and kind of
helps you just define your business overall.
Not quite like a mission, vision and values,but very much along those lines as well.
So yeah, those are just a few of the elementsthat I've sort of cherry picked out of the
overall framework that I'm implementing as asole practitioner.
(24:21):
Yeah, absolutely.
Once you start growing more and more, I'llintroduce you to our employer who's in Chicago.
So yeah, we've been in The U.
For six years, I think.
It's awesome.
It's amazing.
It's helped us.
We mentioned structure.
I believe that everything is structured inlife.
Obviously if they have the right mindsets ofthings, but you can structure everything in
(24:42):
your life.
And to your point, we love EOS because we're onEOS, but, great game of business scaling up,
Cultivate Advisors, PetroCo.
There's, I mean, there's so many of them.
So, yeah, it's super important to think aboutthings on the business.
You actually mentioned earlier, not working inthe business, working on the business.
The rocks are a good example of that.
(25:03):
Like, how do I move something forward?
Like for me this quarter, a new website,hiring, marketing resources, pushing out X
amount of lead magnets.
Like there's a bunch of stuff that I have goingon and it's, oh, implementing new CRM.
Literally it's like, oh wow.
How do we just do these big gargantuan thingswhile also still doing the day to day stuff
(25:24):
that's required to make sure that the businessproduces revenue?
Yeah, it's hard.
For any small business owner, I mean, you're,you're probably wearing a dozen different hats,
you know, trying to get everything done.
It's, it's really easy to focus on what am Idoing?
You know, for me, maybe it's, tax returns andmonthly accounting.
Maybe that's the bread and butter, but, youknow, I got to be getting out there and making
(25:48):
that next sale.
Right.
And I got to be staying on top of newtechnology.
I'm not one to comment on AI and how that'sgoing to shake up the workplace.
But now I'm seeing opportunity out there.
I'm seeing, you know, new tax and accountingsoftware is rolling out that are utilizing AI.
Like, well, I don't, I have to be the firstperson to use it.
I don't necessarily want to be the the adopteris the right term.
(26:10):
There's kind of like tech, sort of cycles at,you know, but I'm not a Luddite either.
Right.
I want to be, I want to be early to the stage,but I don't want to be the one that's burning
up all of my cost testing things.
Want to get in when things have been vetted alittle bit and, you know, take advantage of
those.
So, you gotta, you gotta somehow find time tomanage all the other aspects of the business
(26:32):
beyond just the, yeah, this is the core thingthat brings, you know, money in.
And that's obviously critically important, butyou gotta always be looking ahead to what's the
next thing that I need to get done to.
Yeah.
Well, they say that tax code is, really as mostpeople probably not maybe for you, tax code is
like the most difficult thing to understand.
It's harder than Arabic essentially for anEnglish speaker.
(26:55):
And it would be very interesting to see whatthe impact AI has in that realm of things.
Think it's gonna be interesting to see whathappens on impact on everything, including the
construction industry, which we've seen.
We've had lots of people on the show that havecreated estimating agents where it's like,
estimator used to go on-site for two days andnow it's like, they're on-site for like two
(27:17):
hours and it's getting done.
It's just a wild, wild time to be alive as theysay.
Yeah.
What's interesting about your comment there isthat the estimator was on-site for two days.
Now they're on-site for two hours.
The estimator hasn't lost their job yet.
Right?
I mean, it's, it's I don't know, hopefully, I'mright about this.
I think it's going to be a tool for a lot of usto use to make our jobs easier and more
(27:40):
efficient and not necessarily going to betaking everybody's job.
Like some of the fear mongering out there mightindicate, but again, I'm not an expert.
Yeah, well, it's certainly, it's for me, it'sabout being better.
One of our core values is continuousimprovement.
It's like, how do you get better?
Right.
Not how do I remove somebody?
(28:02):
How do I pull somebody out of a job?
It's like, how do you make them better?
Because if they're better, they're inherentlygonna be able to do something.
Like, is that the same exact thing that theywere doing?
No, maybe it's three levels up, or maybe it issomething that has a completely different angle
to it.
But the point is when you get better, right?
So you have a structure that gets you toimprove continuously.
And I think tools are a good way to do that.
(28:24):
And AI should be seen as a tool, notnecessarily seen as the, the boogeyman.
I guess the easiest way to put it.
But yeah, a lot of people have a lot ofconcerns about that going forward, but as a
single entrepreneur, a solo entrepreneur, AIcould be a massive tool for you to utilize.
Cause it's like, you do only have so much timein a day and you can only do too much, so much
(28:46):
stuff.
So some things you have to do, there's no wayaround it.
But are there things, I don't know, can youutilize that tool or, you know, obviously
resources, other resources, but, talking aboutAI, like, oh, those are ways that you can get
smaller businesses to be able to competefaster.
I think that's the other part people forgetlike, oh, well, this is actually going to help
small businesses as well, be able to be morecompetitive in the industry.
(29:10):
Yeah.
I actually, I got a couple stats that I wantedto share because this came up in a conversation
I was having just a couple of weeks ago with abusiness coach that works with contractors.
And these are a little bit dated.
I think these are from 2023, but these sort ofcame from '2 different meetings that I had.
When I thought about the two statistics or setsof statistics together, was kind of an
(29:33):
eyeopening thing for me.
This is from a Bureau of Labor Statistics.
It followed about 70,000 or so constructionfirms that started up in the early two
thousands.
56% were in business after three years, 26.6%were in business after ten years, and 17.2%
(29:53):
were in business twenty two years later.
After three years, almost half of theconstruction businesses had failed.
After ten years, about three quarters hadfailed.
Now I was at an accounting conference just acouple of weeks ago and they were sharing some
interesting statistics as well.
So here we have, 70% of small businessesoperate without an accountant.
(30:15):
90% of business clients are interested inadvisory and consulting services from their
accountant, but more than half of them admitthey're not fully utilizing their accountants
for the breadth of services and insights theycan offer.
60% of small business owners feel they aren'tknowledgeable about accounting.
To me, two separate sets of statistics, right?
(30:36):
One of them says that it's very hard to besuccessful in construction.
Right?
The other one says this is broadly, this is notspecific to construction businesses, but
overall small businesses are not utilizingtheir accountants to the fullest extent.
Many of them not utilizing accountants at all.
I'm not necessarily saying that if you providebetter service, that you're guaranteed to help
(30:59):
your construction clients be successful.
But I think there's, I think there's somethingthere, right?
You know, I think even as a small business, youmight be just getting started.
I think getting an expert in your corner asearly as you can budget for them as possible.
As soon as you have the additional funds tobring that expert into your corner, I think
that's gonna increase your odds of successtremendously.
(31:23):
Yeah.
We
see this with the tech side too.
Same thing where it's like, there's, you know,it's seen as a cost.
You know, and I'm sure that that's a little bitof accounting side too, where it's like, it's
seen as a cost.
Like, I don't need this thing, but certainlywhen you scale and certainly when you get
larger, and not like crazy large, you startgetting growing people, it becomes so apparent
(31:43):
that like, oh my God, I absolutely need this.
There's no way And around we just saw this withour internal, finance team where it's like,
wow, like the amount of processes and all thesedifferent things that we put in place, it's
like, it's interesting how long you, businesswill go without fully embracing some of these,
like, if it's, you know, accounting or if it'smarketing or if it's IT, you know, these, yeah,
(32:08):
I call it business units.
Right?
Yeah.
Even though there's such a structural componentto any business, it is always baffling to me,
but that's, it's stats are the stats.
Yeah.
I mean, I would like to think that, whetherit's accounting or, you know, IT related, it
should be very possible to run a return oninvestment, analysis on that expense.
(32:29):
And I can't speak for your industry, but I canspeak for mine.
Like we're, we're going to come out aheadvirtually every time.
Right.
You know, it's we pay for ourselves many timesover in terms of the tax savings or you know,
just business advice, you know, giving you goodfinancials so you can get a good interest rate
from the bank or you can get bonded to do thatjob or whatever it might be.
(32:50):
You know, we're going to pay for ourselves.
We find that it's easier for us to showcasethat value in two, two major ways that are very
obvious that it's like, it's not even aquestion anymore.
It's like one, once they start doing morepublic work that has more, scrutiny when it
comes to their cybersecurity.
It's like, Hey, I can't even do these jobs nowif I don't have the right stuff in place.
(33:14):
Super easy.
It's like, well, how much of those jobs do youwanna do?
And how many would you have won?
And now, know, that's an easy one.
And then if that there was any form of breach,that's another place where it's like, well, how
much did this cost you?
What would you have spent had you had somethingin place that was a proper, you know,
cybersecurity practice?
Right?
So those are the very easy.
(33:35):
It gets into the productivity of IT becomesthe, well, like we've done this with, we walk
in and say, okay, well, it's just time how longit takes you to do things.
Just based on the technology.
And it's like, okay, here's, you know, fiveseconds, here's half a minute, here's three
minutes.
And it's like, okay, how many times do you dothese things?
And then you just come out and say, okay, basedon your average hourly, here's the amount of
(33:57):
money that you're losing just simply based onyour technology sucks.
Like, that's very, very simple that way.
And what we've found is like, people are alwaysbaffled and it's like, yeah, you've been just
living this way though for a very long, like,that's just kind of, you've become numb to it,
essentially.
You say, ah, that's just how it is.
It's kind of like the, you know, why do we dothis?
(34:17):
Because that's the way we've always done it.
It's like, that's always the worst answer.
Yeah.
Yeah.
Yeah.
All right.
So, okay.
So what, what, we don't have so much time lefthere, but what, kind of closing advice would
you give, to a contractor that that's eitherfeels like they're not having their taxes done
right, or they're overpaying or, you know, whatthey feel like there is an issue when it comes
(34:41):
to their tax account.
Yeah.
I mean, as an entrepreneur, taxes are thelargest personal expense you're going to incur
during your lifetime.
So I think, you know, I guess first to yourpoint is acknowledging that maybe there is an
issue here acknowledging like, okay, yeah,maybe maybe my current provider is not
providing me everything that I need.
Maybe I need to step it up.
(35:03):
Maybe I'm doing things myself to save money andmaybe that's not the area that we should be
saving money.
And because to your point, whatever time you'respending on it is not efficient.
So it's not only the potential cost of mistakesthat you could be making, but also just the
time that you're wasting on things.
So I would say, you know, we're here, you know,coming up on the end of Q3 now is when I start
(35:26):
reaching out to my clients to say, Hey, we needto start doing year end tax planning.
We just had a major tax bill passed in July.
There's elements of that tax law that are ineffect for this current tax year for 2025.
There are other elements of that that are notgoing to be effective until 2026.
So like, Hey, we need to have a conversation.
(35:46):
We need to break this down, see how this isgoing to impact you.
Yeah, just my advice is, you know, beproactive, look for a relationship that a
person's going to be proactive back with you.
Don't don't expect that the CPA that you hireis necessarily going to be doing all these
things like, you know, make sure that you havemeetings with them that you're, you know,
(36:10):
getting in front of them before the end of theyear.
We can add a ton of value if we talk to youbefore the end of the year.
Once the calendar moves over to January, ourhands are a little bit tied.
There may be some strategies we can implementafter the close of the tax year, but for me,
it's just, yeah, it's just, you know, beproactive in finding that relationship and find
a relationship where that person's going to beproactive with you.
(36:32):
And we all, we exist to help businesses be moreprofitable.
And sometimes that's going to be by saving themtaxes.
Sometimes that's going to be, you know, theseother areas where we're, you know, helping you
make business decisions, you know, should yougo out and buy that next truck?
Should you hire that next employee?
You know, we want to have good financial dataavailable to make those decisions.
(36:54):
But I think at the core of it, you know, asCPAs, we want to help, you know, our clients
run more profitable businesses.
And so, yeah, I think just, you know, find thatrelationship where you're going be in touch
with somebody throughout the year and you'regoing to be doing planning and staying on top
of things things and, you know, it'll work out.
No, that's awesome.
If somebody wanted to get ahold of you, what'sthe best way for them to do that?
(37:15):
Yeah.
I mean, I'm not super active on social media,but LinkedIn is the one where I probably am
most active.
So you can add me on LinkedIn.
We could, we could certainly have aconversation there or I mean, I'm sure we can
put the link to the website in the show notesand all over the website.
There's, you know, the kind of contact me orget in touch links.
I think every page has multiple places.
(37:36):
So it's all over, www.builderstaxgroup.com and,you know, fill out a short form and, we'll jump
on a call.
I'm happy to, do kind of free, complimentarysort of tax analysis, for prospective clients.
Just take a look at prior returns and give yousome advice on opportunities that you may have
missed and be happy to schedule a call withfolks.
(37:59):
Awesome.
Awesome.
Awesome.
Awesome.
Anything else you'd like to tell the peoplebefore we say goodbye?
Yeah, I don't know.
I mean, it's crazy times to run a businessright now.
And there's a lot of things that are happeningand we want to be there to help you.
So do not, I guess, take an accountingrelationship lightly.
(38:20):
I've learned more about tax today than possiblymy entire life, which is maybe a bad thing, but
that's a good thing for you, a bad thing forme.
So, thank you a ton for your time, Cody, untilnext time.
Thank you.
Thanks for listening to Building Scale.
To help us reach even more people, please sharethis episode with a friend, colleague, or on
(38:41):
social media.
Remember, the three pillars of scaling abusiness are people, process, and technology.
And our mission is to help the AEC industryprotect itself by making technology easy.
So if you think your company's technologypillar could use some improvement, book a call
with us to see how we can help maximize your ITcybersecurity strategy.
(39:06):
Just go to buildingscale.net/help.
And until next time.
Keep building scale.
Yeah, that's an awesome thought, Justin.
(00:04):
It's really, that's how I approach, I guess,maybe sales pitches or conversations that I'm
having with folks in the industry.
There's, to me, like there's two buckets ofknowledge that we can bring to the table,
right?
There's rules and laws that are specific toconstruction and really truly only apply to
that industry, right?
So that's like the accounting methods that Ispoke to.
(00:28):
That's gonna be similar for other industriestoo.
I mean, if you're a manufacturer, there's goingto be accounting and tax rules that apply
specific to manufacturing, right?
So there's things like that, but then there'smore like general concepts, but how do you
apply that to construction in the mostbeneficial ways?
Something that always jumps out to me is likeretirement, right?
(00:58):
Construction companies scale their business?
Or have you ever wanted guidance on how to getmore growth, wealth, and freedom from your AEC
company?
Well, then you're in luck.
Hi.
I'm Will Foratt.
And I'm Justin Nagel, and we're your podcasthosts.
We interview successful AEC business leaders tolearn how they use people, process, and
(01:19):
technology to scale their businesses.
So sit back and get ready to learn from theindustry's best.
This is Building scale.
Hey, listeners.
It's Will here.
Our mission is to help the AEC industry protectitself by making technology easy.
If you've ever listened to our show, then youknow that the three pillars of scaling a
(01:41):
business are people, process, and technology.
So if you suspect technology is your weak link,then book a call with us to see where we can
help
Hey, everybody.
Welcome back to another episode of BuildingScale, specifically the building connections
(02:05):
series where I get to interview, people or talkwith people.
I always say interview and I always feel likethat's such a weird thing because it's more of
a conversation, especially in these as we dropinto a conversation I had with, Cody Daniels,
who's the founder of builders tax group.
So CPA specifically for the built world, whichwas, we, we literally met through LinkedIn
(02:28):
through somebody I did not know, that said,Hey, you just need to talk to this person,
which is always an awesome thing where it'slike, they see, they're like, I know you enough
that you need to talk to this, not even me talkto somebody else.
So I love that.
He was at a bigger firm, you know, fast growingfirm twelve years and then chose
entrepreneurship and said, Hey, I can go do theCPA life by myself and just focus in the built
(02:53):
world, the built environment life's too short,know, and he wanted to, Hey, I want to run my
own, my own thing, my own shop.
As I mentioned, niched into construction, whichis literally why I was like, Oh, I need to, I
need to bring you on because this is a areathat I know very little about.
And people always have questions about taxstuff is, what I'll say, there's a little bit
(03:15):
of a pain in the ass, you know, for all of us.
So, some industry specific stuff we talk aboutwhen you think of like percentage of completion
versus completed contract or, you know, missedlike interest look back and deferral strategies
and all this kind of stuff.
So it's fairly, tactical almost in that regard.
Not like it's gonna, he's gonna walk youthrough here's how you do this, but like, here
(03:38):
are just areas that like you should startpaying attention to, and just to improve cash
flow, which is obviously the blood of the builtworld, the life of it.
So, yeah, this was a fun conversation I hadwith Cody and I hope you enjoy it as well.
And I hope you learn, a little bit about taxand, and some stuff that you could possibly do
(04:00):
in your company.
Yeah.
So here it is.
So Cody, you were doing tax before you decidedto go off on your own.
What made the big jump?
Why the decision to say, Hey, let's go down theentrepreneurial path because like generally in
firms, usually partnership is a possiblepathway for most.
(04:22):
So why do the jump and go off on your own?
Yeah, great question.
It was a couple of things for me.
My old firm was growing tremendously.
When I started, they were about 50 employees.
I was there for about twelve years.
By the time I left, they were well over 200employees.
So, it experienced a bit of a cultural shiftthere in terms of, just the way the firm
(04:45):
operated, the types clients they were workingwith.
And, you know, so couple that with some thingsthat I was going through in my personal life
where I was just sort of having this, I don'tknow, sort of kind of decision to live my life
in more of a way that I was just approachingeverything as though there's a bucket list that
(05:06):
I need to complete.
I think, you know, I had some family membersthat had some health issues and it really sort
of brought some things to light for me as faras like, I have things in my life that I need
to accomplish and life is short and I need toreally start going after those goals.
And as part of that kind of reawakening, Iguess, so to speak, I was reminded that when I
(05:32):
was a kid, I always envisioned myself running abusiness.
And I felt that making partner at a smallaccounting firm would give me that
entrepreneurial experience.
But as my old firm continued to grow, it becamefor me apparent that at a firm of 200 people,
it's not the same as being the one and onlyperson making all the decisions.
(05:54):
So I knew that I wasn't going quite get thatexperience at a large firm.
And so I had to make the choice to, to jumpinto entrepreneurship and, really see for me if
like, that was something that I was excitedabout, something that I was capable of.
And, really, yeah, just sort of cross that,cross that bucket list item off of my list
(06:14):
before it's too late.
Got it.
So you decided, Hey, I'm going to jump in andhow are you happy?
I guess that's maybe the first question.
So far so good.
Or what should we look at here?
Yeah.
So we're right around about a year that I'vebeen doing this.
I kind of went public with the launch.
Around this time last year, I was splitting mytime for a little while.
(06:37):
I was working part time with my old firm, whileI ramped things up here.
I felt like that would give my old clients andmy old teammates the best transition, provide
them with plenty of time to find new people totake over and transition, all of my old clients
to the new folks while getting things ramped upfor me.
So, I was splitting time there for a littlewhile, but, yeah, I've been full time now for
(07:02):
about six, six, seven months or so.
And it's been awesome.
Really, really enjoy getting to do more thanjust the work, you know, to work on the
business and not in the business so much.
Out there networking, sales calls, things thatmaybe I wasn't doing as frequently at my old
firm.
You know, I've been able to take more controlof my schedule.
(07:23):
And so that's allowed me some freedoms thatmaybe I didn't have as a nine to five employee.
I've lost a lot of weight, honestly, since,starting my own firm and that's been
a congratulations.
Thank you.
I didn't know that that was part of theentrepreneurial you know, what happens when you
go off on your own.
I would think that's not the normal course ofaction and that for other people, it may be the
(07:46):
opposite as you're dealing with new stresses.
But for me, I think a lot of the stress I mayhave experienced as an employee was due to lack
of control and being able to sort of take thatcontrol over, has helped me just approach
things in a more sort of healthy manner, getcontrol of my diet, get control of my exercise.
And so that's been, maybe a not common, but avery welcome side effect of, launching the
(08:11):
business.
So yeah, it's been, it's been great.
All right.
So you're literally living your best life asthey say.
I guess.
Yeah.
Okay.
So, why also go to builders?
Why construction?
What was the purpose there?
So the listeners know, you decided, Hey, I'mgoing to niche down.
Not that I'm just going to do tax, but I'm alsogoing to do the builders tax group is the name
(08:32):
of the company.
So inherently dealing with builders.
So what was the why?
It is simple.
Yeah.
Yeah.
It's kind of a twofold answer.
Probably like most of my answers are going tobe a little multifaceted, but when I was at my
old firm, I had an opportunity early on in mycareer to specialize in construction.
They had a real strong client base inconstruction and they had partners on the
(08:57):
assurance and accounting side of the officethat had industry expertise there, but they
didn't have anyone on the tax side of theoffice that had that same expertise when it
came to tax services and advisory.
So early on, I had that opportunity, But beyondjust the opportunity, it was an industry that I
(09:17):
felt like I had a real connection with.
I have a lot of family that works in thetrades.
My grandpa was a union carpenter for decades.
My other grandpa was a welder.
I've had uncles that have worked in electrical,plumbing, road construction, and now my
cousins, their kids are getting into the tradesas well.
So I have a cousin that works in HVAC.
(09:38):
And so it was just like an industry that I grewup around.
My family's blue collar people through andthrough, and I'm kind of the oddball that went
sort of the white collar, a desk job, sort ofroute.
But when you have an opportunity to jump onsomething early in your career, plus it's an
industry that you have familiarity with and,you know, you're, you're passionate about.
Was really, kind of the, the, you know, perfecttiming with everything.
(10:02):
And so I led the, construction and real estatetax team at my old firm for many years.
And I knew that when I left, I wanted to, youknow, continue working with, with the blue
collar businesses, with the trades businesses.
It's a unique sort of mix of business owners.
I think there's a, you know, some strongpersonalities in the industry, but I like
(10:22):
working with those types of people.
You know, it's, they're just, it's a greatindustry overall.
Overall, it's very like community focused, Ithink more so than maybe other industries that
someone could specialize in.
They take care of their own.
I mean, the businesses I worked with for years,you know, they, they take care of their
employees and, yeah, they're just, it's
just great people.
(10:43):
Got it.
You mentioned opportunity.
So I want to kick off some questions that,would be helpful for listeners that are in the
space and saying, Hey, we have a expert in thisspace when it comes to tax.
So inherently, what are some opportunities thatare either missed, or what are common mistakes
that you kind of see throughout either yourhistory of, new clients coming to you, or you
(11:06):
just see an industry in general, where it'slike, man, like you're just leaving a ton of
dollars on the table in credit or in anotherway.
Yeah.
I mean, there's a lot.
I actually, I wrote an ebook on this.
It's 10 Tax Strategies for ConstructionBusinesses.
Maybe we could throw that up a link to that inthe show notes.
That might be of interest to folks that arelistening, but, yeah, I think when I really try
(11:29):
to think through the most common, I don't know,mistakes or missed opportunities that I've seen
in the industry.
And this is going to get fairly technicalpretty quickly, but it's accounting methods.
So most business owners are aware of like theaccrual and the cash methods of accounting.
Even if you're not an accounting expert, youknow, just as a business owner, you get
(11:52):
accounting to know that those two options existfor you.
Beyond accrual in cash, there are a multitudeof construction specific methods available.
Some for financial statement purposes, others,you know, really only available for tax
purposes.
And there's a lot of missed opportunitiesaround there.
There may be requirements to utilize a certainmethod.
(12:15):
Like there are certain businesses that have touse the percentage of completion method for tax
purposes.
And if you're not aware of that, you're goingto file your tax return incorrectly because
you're not going to use that method when you'rerequired to.
But there are a ton of exceptions that areavailable to that.
Again, if you're not well versed in theindustry, may overlook.
And so you may overlook an opportunity to use amethod like completed contract, which allows
(12:40):
you to defer the gross profit on your job untilthe tax year that that job is completed.
So you're not necessarily recognizing incomethroughout the years that it takes you to
complete the job.
You recognize it all at the back end.
So there's incredible opportunities fordeferral out there.
If you know how to take advantage of theseconstruction specific methods.
(13:00):
Interesting.
So if you were building a stadium or a datacenter, something massive, something really
big, there are tools or strategies that youunderstand.
Certainly I don't understand, but youunderstand to help your clientele to get them
to, Hey, these are different ways that you canapproach how you're filing your taxes or what
you are essentially claiming in that given yearthat then help both cashflow and I'm sure all
(13:25):
kinds of other aspects.
Yeah.
Yeah, totally.
And it's, it's not just the, you know, those,you know, the stadiums or the data centers or
those massive jobs.
I mean, it could be, you know, you're a homebuilder and you're doing single family
residences.
Well, if you start, you know, a job here, inlate twenty twenty five and you finish it up in
(13:47):
early twenty twenty six, well, depending on themethod of accounting that you're using, you may
be recognizing some of that income in 2025 andsome of it in 2026, or you may be able to defer
all of it to 2026.
So it's not just for the massive contractors.
It's for your mom and pop shops as well.
Interesting.
Are
(14:08):
these things that you understand because youhave been working with the industry?
Cause that's always, you know, we get this allthe time at Spot where it's like, is an IT or
cybersecurity all the same?
And it's like, yeah, there's there's lots ofstuff that is similar.
That's not to say that there's not, but thereis little nuances, that really just play
towards certain industries.
(14:28):
Industries.
Like if you are, you know, in construction,cashflow being important, it's like, well, how
do you structure a deal to not hit yourcashflow because, Hey, you're going need a
server, you know, at some point in time, Hey,that's a huge cost.
Okay.
Well, how do we make sure that like, that kindof goes across the whole year in comparison to,
here it is, it's November and we need to put ina $50,000 server.
(14:52):
And then that becomes a huge headache where, ifyou work with somebody that understands the
industry, it's like, well, we have ways aroundit.
We have ways that we can help you deal withthat because we understand your needs and the
uniqueness of the BUILT world.
Yeah.
That's an awesome thought, Justin.
That's how I approach, I guess, maybe salespitches or conversations that I'm having with
(15:16):
folks in the industry.
There's, to me, like there's two buckets ofknowledge that we can bring to the table,
right?
There's rules and laws that are specificconstruction and really truly only apply to
that industry, right?
So that's like the accounting methods that Ispoke to.
And that's gonna be similar for otherindustries too.
(15:36):
Mean, if you're a manufacturer, there's gonnabe accounting and tax rules that apply specific
to manufacturing, right?
So there's things like that, but then there'smore like general concepts, but how do you
apply that to construction in the mostbeneficial ways?
Something that always jumps out to me is likeretirement, right?
(15:58):
Like, okay, what sort of accounts can we set upfor retirement for our employees and ourselves
as business owners?
Okay, well, have like a four zero one ks, wehave profit sharing.
We might have like a SEP IRA or simple IRA or acash balance plan.
Well, depending on your construction business,those plans that are broadly applicable, any
(16:19):
business could implement any one of those plansmay get greater advantages from one versus the
other.
So if you're a union con you may be able asowners of a union construction business, you
may be able to set up a cash balance plan,which is like a traditional pension plan,
essentially.
It's kind of like an old school pension.
You don't see it used as frequently anymorebecause the cash requirements are astronomical.
(16:44):
But if you're a union contractor, all yourunion employees are covered by the union
pension plan.
So you could set this up and as the owners ofthe business participate, and you would be
required for any non union employees to includethem as well.
So you may have some office you know, kind ofadmin staff that might participate, but you, as
the owners are going to be the mostcompensated.
You're going to have the most years of service.
(17:06):
You're going to be able to put away significantdollars for retirement through that plan, much
greater than you could do in like a four ksplan or anything like that.
You know, you're going have caps that are goingto apply to those other plans with this cash
balance plan.
Depending on the size of your business, youcould easily be putting, you know, 6 figures a
year away for yourself.
Wow.
Okay.
Current year tax deductions.
(17:26):
So you're getting the tax deduction in thecurrent year.
So it's reducing your current year income andthe bulk of those dollars are going to you as
the owners, as opposed to, you know, your otheremployees.
That's not going to work in every industrybecause you're not going to have the ability to
exclude the bulk of your employees.
This really works well for union contractorsbecause those union employees are by default
(17:47):
excluded.
So yeah, that's just an example of, okay, thisis a broadly applicable opportunity out there,
but how do we apply it to a specific contractorand take advantage of it for them?
Wow.
That's super intriguing.
So these are some opportunities, certainly.
What are, what are things that are justmistakes that you say?
Like, what were you doing?
(18:07):
This?
Yeah.
Obviously you don't have to name any names, butyou just walk in and you're like, what the hell
is this?
Yeah.
Yeah.
Another great question.
Going back to that kind of topic of methodsthat I mentioned earlier, I think there are
some missed, there are misapplications thereagain, where you may be required to utilize the
(18:27):
percentage of completion method on specificjobs.
And if you're not using that method, you'retechnically out of compliance.
So that's an area and there's something thatkind of goes along with the percentage of
completion method of accounting that I seeoverlooked on a lot of returns.
This is not a business owner problem.
This is a problem with my industry ofaccountants not understanding construction.
(18:49):
There's this concept of interest look back thatthe IRS requires you to calculate if you're
using the percentage of completion methodwithout getting too deep into the weeds on it.
Percentage of completion method is based onestimates.
So you're estimating your income throughout thelife of a job.
Based on the costs that you think you're goingto incur, but that number is not defined until
(19:11):
the job is done, right?
So, you're using estimated costs throughout thelife of the job.
Because you're using estimates, a creativeperson could manipulate the estimates to defer
income into the future for tax purposes and notpay the tax on that until a future tax year to
partially mitigate the manipulation that couldgo along with those estimates.
(19:34):
The IRS says, well, if you push a bunch ofprofit into the future and you're not
recognizing that in the tax year that youreally should have, we're going to charge you
interest.
Like you're going to make you recalculate thetax that you should have paid back in year one,
and we're going to charge you interest on that.
So arguably you're still getting some benefitof keeping the cash in your hand into the
(19:54):
future tax year, but you will ultimately haveto pay some interest on those profits that you
deferred.
So that's something that I just don't see donefrequently on tax returns when I'm looking at
onboarding a new client.
What are some, maybe some other mistakes?
See in this may be a little bit, less of anissue now that we have a 100% bonus
(20:14):
depreciation available to us.
So part of the One Big Beautiful Bill Act thatwas passed back in July, it reinstated 100%
bonus depreciation.
So, that effectively means for contractors,most of your vehicles, equipment, heavy
equipment, even small tools, things like that.
(20:34):
All of that, you're gonna be able to write off100% in the year that you make that capital
expenditure.
Okay.
There may be some exceptions for certainvehicles, you know, if you're going out and
buying a Porsche or something and using that asa business vehicle, there's going to be limits
that apply there.
But, what I had seen for years when 100% bonusdepreciation is not available is that a lot of
(20:57):
people don't realize that your pickup trucksand your like work vans, you know, things that
like a contractor may have a fleet of thosewould typically have those would not be subject
to the same limitations as other vehicles.
And I would see people applying those limitsincorrectly.
And so you're not getting the full deduction onyour really any like 1,500 series and up truck
(21:22):
or a work van, you know, like a sprinter van,things like that.
Those vehicles should be depreciated withoutlimitations.
And I would frequently see people applyingthose same limitations that you would have on
your Porsche to your construction vehicle.
So again, on my industry for not knowing therules there, but definitely an opportunity that
has gone missed, as I've, again, reviewed othertax returns over the years.
(21:46):
Yeah.
Well, that's, you know, that's why you're, youexist, right?
Like you say that all the time.
If Microsoft was perfect, we wouldn't have ajob because that's essentially how IT works,
right?
For our end.
But I noticed the book traction behind you.
I know we talked a little bit about EOS alittle bit.
Obviously you've gone off on your own.
So what is, what have you learned from tractionor what have you, what thoughts, what key
(22:08):
components to be taken out?
Have you been able to implement anything or isit just, Hey, this is a thing that I read to
further my knowledge in that entrepreneurialknowledge base?
Yeah.
So obviously traction is meant to work forbusinesses of a certain size.
A key component of traction is theaccountability chart and making sure that
(22:29):
people are working on the things that theyshould be working on.
So not something to perfectly implement for aone person business.
But I still like a lot of the concepts and tryto utilize the frameworks that I can modify to
a small business, as much as I can.
So for me, like quarterly rocks are huge, youknow, every, every quarter you know, I kind of
(22:51):
set somewhere between like three and six, kindof goals for myself.
Some of them, you know, typically centeraround, like business development goals, like,
you know, how much revenue do I want to bringin, in the next ninety days?
You know, there's a lot, around, you know, kindof software implementation and, you know,
improving processes, things like that.
So, yeah, I believe firmly in the rocks, youknow, giving yourself a short to do list for
(23:14):
ninety days and, you know, setting deadlinesand holding yourself accountable, I think is
huge as a small business owner.
Nobody's holding you accountable to anythingwhen you're the person in charge.
And so having some form of structure orframework to help you accomplish goals and to
stay accountable to yourself and to your team.
(23:35):
You know, I think it's really important.
And whether it's traction or, you know, one ofthe other frameworks out there, I think
Pinnacle's starting to see some, some growth,at least I'm becoming more familiar with
businesses using that.
I'm sure there's others out there, but yeah,having structure, I think is just really
important as a business owner.
I like the VTO as well, the Vision TractionOrganizer.
(23:58):
So that gives you some one year goals, threeyear goals and ten year goals, and kind of
helps you just define your business overall.
Not quite like a mission, vision and values,but very much along those lines as well.
So yeah, those are just a few of the elementsthat I've sort of cherry picked out of the
overall framework that I'm implementing as asole practitioner.
(24:21):
Yeah, absolutely.
Once you start growing more and more, I'llintroduce you to our employer who's in Chicago.
So yeah, we've been in The U.
For six years, I think.
It's awesome.
It's amazing.
It's helped us.
We mentioned structure.
I believe that everything is structured inlife.
Obviously if they have the right mindsets ofthings, but you can structure everything in
(24:42):
your life.
And to your point, we love EOS because we're onEOS, but, great game of business scaling up,
Cultivate Advisors, PetroCo.
There's, I mean, there's so many of them.
So, yeah, it's super important to think aboutthings on the business.
You actually mentioned earlier, not working inthe business, working on the business.
The rocks are a good example of that.
(25:03):
Like, how do I move something forward?
Like for me this quarter, a new website,hiring, marketing resources, pushing out X
amount of lead magnets.
Like there's a bunch of stuff that I have goingon and it's, oh, implementing new CRM.
Literally it's like, oh wow.
How do we just do these big gargantuan thingswhile also still doing the day to day stuff
(25:24):
that's required to make sure that the businessproduces revenue?
Yeah, it's hard.
For any small business owner, I mean, you're,you're probably wearing a dozen different hats,
you know, trying to get everything done.
It's, it's really easy to focus on what am Idoing?
You know, for me, maybe it's, tax returns andmonthly accounting.
Maybe that's the bread and butter, but, youknow, I got to be getting out there and making
(25:48):
that next sale.
Right.
And I got to be staying on top of newtechnology.
I'm not one to comment on AI and how that'sgoing to shake up the workplace.
But now I'm seeing opportunity out there.
I'm seeing, you know, new tax and accountingsoftware is rolling out that are utilizing AI.
Like, well, I don't, I have to be the firstperson to use it.
I don't necessarily want to be the the adopteris the right term.
(26:10):
There's kind of like tech, sort of cycles at,you know, but I'm not a Luddite either.
Right.
I want to be, I want to be early to the stage,but I don't want to be the one that's burning
up all of my cost testing things.
Want to get in when things have been vetted alittle bit and, you know, take advantage of
those.
So, you gotta, you gotta somehow find time tomanage all the other aspects of the business
(26:32):
beyond just the, yeah, this is the core thingthat brings, you know, money in.
And that's obviously critically important, butyou gotta always be looking ahead to what's the
next thing that I need to get done to.
Yeah.
Well, they say that tax code is, really as mostpeople probably not maybe for you, tax code is
like the most difficult thing to understand.
It's harder than Arabic essentially for anEnglish speaker.
(26:55):
And it would be very interesting to see whatthe impact AI has in that realm of things.
Think it's gonna be interesting to see whathappens on impact on everything, including the
construction industry, which we've seen.
We've had lots of people on the show that havecreated estimating agents where it's like,
estimator used to go on-site for two days andnow it's like, they're on-site for like two
(27:17):
hours and it's getting done.
It's just a wild, wild time to be alive as theysay.
Yeah.
What's interesting about your comment there isthat the estimator was on-site for two days.
Now they're on-site for two hours.
The estimator hasn't lost their job yet.
Right?
I mean, it's, it's I don't know, hopefully, I'mright about this.
I think it's going to be a tool for a lot of usto use to make our jobs easier and more
(27:40):
efficient and not necessarily going to betaking everybody's job.
Like some of the fear mongering out there mightindicate, but again, I'm not an expert.
Yeah, well, it's certainly, it's for me, it'sabout being better.
One of our core values is continuousimprovement.
It's like, how do you get better?
Right.
Not how do I remove somebody?
(28:02):
How do I pull somebody out of a job?
It's like, how do you make them better?
Because if they're better, they're inherentlygonna be able to do something.
Like, is that the same exact thing that theywere doing?
No, maybe it's three levels up, or maybe it issomething that has a completely different angle
to it.
But the point is when you get better, right?
So you have a structure that gets you toimprove continuously.
And I think tools are a good way to do that.
(28:24):
And AI should be seen as a tool, notnecessarily seen as the, the boogeyman.
I guess the easiest way to put it.
But yeah, a lot of people have a lot ofconcerns about that going forward, but as a
single entrepreneur, a solo entrepreneur, AIcould be a massive tool for you to utilize.
Cause it's like, you do only have so much timein a day and you can only do too much, so much
(28:46):
stuff.
So some things you have to do, there's no wayaround it.
But are there things, I don't know, can youutilize that tool or, you know, obviously
resources, other resources, but, talking aboutAI, like, oh, those are ways that you can get
smaller businesses to be able to competefaster.
I think that's the other part people forgetlike, oh, well, this is actually going to help
small businesses as well, be able to be morecompetitive in the industry.
(29:10):
Yeah.
I actually, I got a couple stats that I wantedto share because this came up in a conversation
I was having just a couple of weeks ago with abusiness coach that works with contractors.
And these are a little bit dated.
I think these are from 2023, but these sort ofcame from '2 different meetings that I had.
When I thought about the two statistics or setsof statistics together, was kind of an
(29:33):
eyeopening thing for me.
This is from a Bureau of Labor Statistics.
It followed about 70,000 or so constructionfirms that started up in the early two
thousands.
56% were in business after three years, 26.6%were in business after ten years, and 17.2%
(29:53):
were in business twenty two years later.
After three years, almost half of theconstruction businesses had failed.
After ten years, about three quarters hadfailed.
Now I was at an accounting conference just acouple of weeks ago and they were sharing some
interesting statistics as well.
So here we have, 70% of small businessesoperate without an accountant.
(30:15):
90% of business clients are interested inadvisory and consulting services from their
accountant, but more than half of them admitthey're not fully utilizing their accountants
for the breadth of services and insights theycan offer.
60% of small business owners feel they aren'tknowledgeable about accounting.
To me, two separate sets of statistics, right?
(30:36):
One of them says that it's very hard to besuccessful in construction.
Right?
The other one says this is broadly, this is notspecific to construction businesses, but
overall small businesses are not utilizingtheir accountants to the fullest extent.
Many of them not utilizing accountants at all.
I'm not necessarily saying that if you providebetter service, that you're guaranteed to help
(30:59):
your construction clients be successful.
But I think there's, I think there's somethingthere, right?
You know, I think even as a small business, youmight be just getting started.
I think getting an expert in your corner asearly as you can budget for them as possible.
As soon as you have the additional funds tobring that expert into your corner, I think
that's gonna increase your odds of successtremendously.
(31:23):
Yeah.
We
see this with the tech side too.
Same thing where it's like, there's, you know,it's seen as a cost.
You know, and I'm sure that that's a little bitof accounting side too, where it's like, it's
seen as a cost.
Like, I don't need this thing, but certainlywhen you scale and certainly when you get
larger, and not like crazy large, you startgetting growing people, it becomes so apparent
(31:43):
that like, oh my God, I absolutely need this.
There's no way And around we just saw this withour internal, finance team where it's like,
wow, like the amount of processes and all thesedifferent things that we put in place, it's
like, it's interesting how long you, businesswill go without fully embracing some of these,
like, if it's, you know, accounting or if it'smarketing or if it's IT, you know, these, yeah,
(32:08):
I call it business units.
Right?
Yeah.
Even though there's such a structural componentto any business, it is always baffling to me,
but that's, it's stats are the stats.
Yeah.
I mean, I would like to think that, whetherit's accounting or, you know, IT related, it
should be very possible to run a return oninvestment, analysis on that expense.
(32:29):
And I can't speak for your industry, but I canspeak for mine.
Like we're, we're going to come out aheadvirtually every time.
Right.
You know, it's we pay for ourselves many timesover in terms of the tax savings or you know,
just business advice, you know, giving you goodfinancials so you can get a good interest rate
from the bank or you can get bonded to do thatjob or whatever it might be.
(32:50):
You know, we're going to pay for ourselves.
We find that it's easier for us to showcasethat value in two, two major ways that are very
obvious that it's like, it's not even aquestion anymore.
It's like one, once they start doing morepublic work that has more, scrutiny when it
comes to their cybersecurity.
It's like, Hey, I can't even do these jobs nowif I don't have the right stuff in place.
(33:14):
Super easy.
It's like, well, how much of those jobs do youwanna do?
And how many would you have won?
And now, know, that's an easy one.
And then if that there was any form of breach,that's another place where it's like, well, how
much did this cost you?
What would you have spent had you had somethingin place that was a proper, you know,
cybersecurity practice?
Right?
So those are the very easy.
(33:35):
It gets into the productivity of IT becomesthe, well, like we've done this with, we walk
in and say, okay, well, it's just time how longit takes you to do things.
Just based on the technology.
And it's like, okay, here's, you know, fiveseconds, here's half a minute, here's three
minutes.
And it's like, okay, how many times do you dothese things?
And then you just come out and say, okay, basedon your average hourly, here's the amount of
(33:57):
money that you're losing just simply based onyour technology sucks.
Like, that's very, very simple that way.
And what we've found is like, people are alwaysbaffled and it's like, yeah, you've been just
living this way though for a very long, like,that's just kind of, you've become numb to it,
essentially.
You say, ah, that's just how it is.
It's kind of like the, you know, why do we dothis?
(34:17):
Because that's the way we've always done it.
It's like, that's always the worst answer.
Yeah.
Yeah.
Yeah.
All right.
So, okay.
So what, what, we don't have so much time lefthere, but what, kind of closing advice would
you give, to a contractor that that's eitherfeels like they're not having their taxes done
right, or they're overpaying or, you know, whatthey feel like there is an issue when it comes
(34:41):
to their tax account.
Yeah.
I mean, as an entrepreneur, taxes are thelargest personal expense you're going to incur
during your lifetime.
So I think, you know, I guess first to yourpoint is acknowledging that maybe there is an
issue here acknowledging like, okay, yeah,maybe maybe my current provider is not
providing me everything that I need.
Maybe I need to step it up.
(35:03):
Maybe I'm doing things myself to save money andmaybe that's not the area that we should be
saving money.
And because to your point, whatever time you'respending on it is not efficient.
So it's not only the potential cost of mistakesthat you could be making, but also just the
time that you're wasting on things.
So I would say, you know, we're here, you know,coming up on the end of Q3 now is when I start
(35:26):
reaching out to my clients to say, Hey, we needto start doing year end tax planning.
We just had a major tax bill passed in July.
There's elements of that tax law that are ineffect for this current tax year for 2025.
There are other elements of that that are notgoing to be effective until 2026.
So like, Hey, we need to have a conversation.
(35:46):
We need to break this down, see how this isgoing to impact you.
Yeah, just my advice is, you know, beproactive, look for a relationship that a
person's going to be proactive back with you.
Don't don't expect that the CPA that you hireis necessarily going to be doing all these
things like, you know, make sure that you havemeetings with them that you're, you know,
(36:10):
getting in front of them before the end of theyear.
We can add a ton of value if we talk to youbefore the end of the year.
Once the calendar moves over to January, ourhands are a little bit tied.
There may be some strategies we can implementafter the close of the tax year, but for me,
it's just, yeah, it's just, you know, beproactive in finding that relationship and find
a relationship where that person's going to beproactive with you.
(36:32):
And we all, we exist to help businesses be moreprofitable.
And sometimes that's going to be by saving themtaxes.
Sometimes that's going to be, you know, theseother areas where we're, you know, helping you
make business decisions, you know, should yougo out and buy that next truck?
Should you hire that next employee?
You know, we want to have good financial dataavailable to make those decisions.
(36:54):
But I think at the core of it, you know, asCPAs, we want to help, you know, our clients
run more profitable businesses.
And so, yeah, I think just, you know, find thatrelationship where you're going be in touch
with somebody throughout the year and you'regoing to be doing planning and staying on top
of things things and, you know, it'll work out.
No, that's awesome.
If somebody wanted to get ahold of you, what'sthe best way for them to do that?
(37:15):
Yeah.
I mean, I'm not super active on social media,but LinkedIn is the one where I probably am
most active.
So you can add me on LinkedIn.
We could, we could certainly have aconversation there or I mean, I'm sure we can
put the link to the website in the show notesand all over the website.
There's, you know, the kind of contact me orget in touch links.
I think every page has multiple places.
(37:36):
So it's all over, www.builderstaxgroup.com and,you know, fill out a short form and, we'll jump
on a call.
I'm happy to, do kind of free, complimentarysort of tax analysis, for prospective clients.
Just take a look at prior returns and give yousome advice on opportunities that you may have
missed and be happy to schedule a call withfolks.
(37:59):
Awesome.
Awesome.
Awesome.
Awesome.
Anything else you'd like to tell the peoplebefore we say goodbye?
Yeah, I don't know.
I mean, it's crazy times to run a businessright now.
And there's a lot of things that are happeningand we want to be there to help you.
So do not, I guess, take an accountingrelationship lightly.
(38:20):
I've learned more about tax today than possiblymy entire life, which is maybe a bad thing, but
that's a good thing for you, a bad thing forme.
So, thank you a ton for your time, Cody, untilnext time.
Thank you.
Thanks for listening to Building Scale.
To help us reach even more people, please sharethis episode with a friend, colleague, or on
(38:41):
social media.
Remember, the three pillars of scaling abusiness are people, process, and technology.
And our mission is to help the AEC industryprotect itself by making technology easy.
So if you think your company's technologypillar could use some improvement, book a call
with us to see how we can help maximize your ITcybersecurity strategy.
(39:06):
Just go to buildingscale.net/help.
And until next time.
Keep building scale.
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