September 29, 2025 • 36 mins
Starting a contracting company doesn't require a huge nest egg—smart cash flow management and the right systems are more important than having six figures in the bank.
• Commercial contracting requires significant cash reserves due to 30-60 day payment terms
• Residential contracting has more flexible cash requirements, especially with weekly invoicing
• Basic startup costs include licensing ($200-500), insurance ($1,500-3,000/year), and minimal marketing
• Weekly invoicing strategy: bill for next week's work to maintain positive cash flow
• This approach creates natural client checkpoints and prevents end-of-project issues
• Capture all non-billable hours in your pricing (estimates, material runs, bookkeeping)
• Avoid unnecessary startup expenses like new trucks, office space, or expensive software
• Focus on essentials first: QuickBooks, Google Workspace, and basic marketing materials
• Set up proper systems from day one rather than trying to fix problems later
• If you're young with few responsibilities, now is the time to take the entrepreneurial leap
Ready to get started? Visit prostruct360.com or contractorcuts.com and contact us for help setting up your systems correctly from the beginning.
Join us January 11–13 in Nashville for the Chart the Course 2026 Planning Retreat. Sign up now and get three free coaching sessions before the event to finish 2025 strong and hit 2026 with a clear game plan. At the retreat, you’ll tackle systems, hiring, marketing, and leadership alongside ambitious contractors, leaving with a blueprint for growth. Spots are limited—visit prostruct360.com to learn more!
Have a question or an idea to improve the podcast?
Email us at team@prostruct360.com
Want to learn more about our software or coaching?
Visit our website at ProStruct360.com
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_00 (00:01):
Welcome to Contractor Cuts, where we cover
the good, the bad, and the uglyof growing a successful
contracting company.
SPEAKER_01 (00:13):
Welcome to Contractor Cuts.
My name is Clark Turner.
And I'm James McConnell.
Thanks for joining us again thisweek.
So today, we are talking abouthow much cash do you need to
start a contracting company?
This is more for the startups,for the younger guys or the
older guys that are starting.
If you've been doing this for awhile, we're going to talk about
some money management skillsthat whether you've been doing
(00:35):
it for 20 years or you know, 20days.
20 minutes.
20 minutes, 20 seconds.
How should you be managing 20?
How should you be managing yourmoney?
Really, less about moneymanagement, but more about what
do you need to start a companyand where do we, how do we get
companies off the ground whenwe're not making a lot of money?
(00:58):
So buckle up.
It should be a pretty good one.
All right.
So a lot of people think I gotto have a ton of cash to start
my company, right?
A lot of guys are if I'mstarting a company, you know,
what?
I got to put 100 grand awaybefore I can get started.
There's different types ofcompanies in construction that
you're starting.
Um if you're into commercialjobs, yes, you got to have a lot
of money.
You gotta commercial are usually30, 45, 60 day net pay, which
(01:22):
means it once you complete thework, you submit your invoices
and you're a month away fromgetting paid.
So from start work to payment,you might be 60 days to 90 days.
Um so when you're doingcommercial projects, it is all
about cash flow.
Uh most of the companies that Icoach that are commercial, they
either have a bunch of money inthe background, large lines of
(01:46):
credit, or they're they'rehamstrung on what they can say
yes to until they build thisnest egg of money.
Um, and so they kind of workwith different GCs that they're
under, or you know, they're notreally GCing a lot themselves
because those are the guys that,but those companies, when you're
doing commercial work, are justas much a financial company as
they are a construction company.
(02:06):
Uh, because it's moneymanagement, it is cash flowing,
it's borrowing, it's lines ofcredit, it's dealing with the
with your clients and trying tomake sure the payment structures
and filling out all the formsand submittals and all that
stuff.
So on the commercial side, it'sa lot more difficult.
Sorry.
On the commercial side, it'svery difficult.
(02:28):
I would say you can't start acommercial construction company
without dollars behind you.
Um, next we go to theresidential side, uh, light
commercial and residential.
Uh on those, there's really kindof two different types that
we're dealing with.
On the jobs that you do wherethere's a lot of lending
involved, like our VA jobs, uh,anywhere that that you know it's
uh new construction where you'vegot a bank doing lending on it,
(02:52):
most of the time those jobs aregonna have to have some cash
behind it.
Maybe you got 20 to 30 grand,you know, you don't need
$200,000, but I need to be ableto cash flow those to where I
can get to an invoice spot andstill wait 10 more days before I
get paid.
Right.
And so, you know, on our VAjobs, what would you say?
20%, 40%, 30%, what how much ofa job do you think we gotta have
(03:14):
cash flow for that job on a$100,000 job?
What would you you budgetpersonally?
SPEAKER_00 (03:19):
Um, well, the VA is pretty specific with their
stuff, and some jobs are likewell, for instance, we have one
job that's a$30,000 job that wejust finished, and then we have
a job that we're in the middleof right now that's like an
eighty thousand dollar job.
But the thirty thousand dollarjob we uh we decided to just go
(03:44):
straight we're gonna finish itand then invoice for it.
Because it didn't make sense tobreak it up any and the cost was
I don't know, fifteen orsomething like that.
So we were able to we were ableto handle that one, but the
eighty thousand dollar one, thecost was like you know, fifty
fifty forty-five, fifty-five.
(04:05):
So uh that one we broke up intothree invoices.
Which slows the job down, makesit where you can't start the
next job.
It slows it down, but we uhmapping it out is and honestly,
I like those jobs because itkeeps everything clean and
honest, and you end up with cashat the end.
Yeah.
(04:26):
And you have if you if youmanage it right, then everybody
gets paid, everybody gets whatthey need, and then at the end
you get a chunk of money thatyou can then okay, great.
Now I have this, I can do this,this, this, and here's the
profit we put aside.
SPEAKER_01 (04:40):
It's almost forced budgeting, because like you
break even throughout the job,yeah, and then boom, I got a
thirty thousand dollar check atthe end that's all straight
profit.
SPEAKER_00 (04:47):
Yeah.
Yeah.
Which is why it's nice when youhave a couple, when you have
like a couple jobs that arerunning that are cash jobs, and
then you've got one that you'redoing lending on.
Yeah.
It's a really nice way to kindof even out the the books
because you're keeping it you'restill tight until that one job
closes finally and you get thatbig chunk of cash at the end.
(05:07):
It really just forces you to bemore diligent about mapping out
your I've got one client out inCalifornia that he uh he runs
this company.
SPEAKER_01 (05:17):
They do residential and commercial, but they're
doing one commercial job at atime because it's that same way.
It's like the residential aremaking them paying their bills
uh to where they're you knowthey've they've got money coming
in off that.
The commercial is kind of theside job that puts money in the
long-term bank, right?
To build to where they caneventually say yes to two
(05:38):
commercial jobs at a time.
Yeah, but they're not that moneyis free money for them.
It's not like I need thatcommercial job so I can pay my
bills.
We got the residential that arepaying the bills, and then I got
cash flow in the background, andit's kind of my side hobby to
grow that commercial, which isthe same as like what you're
talking about.
And I think one of the one ofthe notes on that is on that
(05:59):
$30,000 job where you're out ofpocket, 18, 20, somewhere in
there, 15, somewhere in thatthat area.
That is like, hey, we can sprintand knock this out in three
weeks, or we can make it intothree draws and it's gonna take
six weeks.
And so not only is it helping usto get through it, we can start
another job and have another jobbehind it for another three
(06:21):
weeks.
And so in six weeks, instead ofdoing 30 grand, I'm now doing 60
grand.
Right.
And so we start looking at thatway of it's not just I need the
cash flow, it's also time ismoney and opportunity cost.
Time is money, babe.
Opportunity cost.
So it's it's a if I can getthese done quicker, what how how
long can I go?
And also who am I working with?
(06:42):
What if I'm working with Bank ofAmerica versus the VA, those are
two different monsters that I'mdealing with.
If I'm working with a locallender or a credit union, it's a
totally different animal whereI'm talking to the guy that's
releasing the funds.
Right.
And so understanding the lender,understanding who's the
borrower, understanding.
No, I I remember we actually hadsome a number of years ago that,
(07:05):
like, hey, we can't cash flowthis job.
And so we go to the client, say,listen, you're gonna give us a
deposit, and then on the backend of the job, we refund the
deposit.
Remember that?
There was there was one guy thatwe did that where it's like, we
need more cash flow, so we'rewe're gonna let the client cash
flow his own job.
And we we we sold it less of wedon't have money and more of
like, hey, we'll give you adiscount if you want to do it
(07:26):
this way, because borrowingmoney for us is what we do for
the cash flow, costs us money.
So we'll give you a cheaper jobif you want to cash flow it
yourself.
He gives us 15 grand up front atthe end of the job.
We refund that 15 grand out ofthe final check cash flow deals
great, right?
So being creative like that canhelp you kind of launch these.
But everything we've talkedabout so far, if you've heard
(07:49):
us, it's thinking through,projecting, and making a game
plan before even agreeing toterms.
And I think that's where guysmiss it.
It's like, I just need a yes, Ineed a signature, and I need to
get my guys on site.
And when you start doing it thatway and you haven't thought
through where's this moneycoming from?
Where, what do I have?
If you just look at your bankaccount, it says you got$65,000
(08:10):
in your bank account.
Well, what you didn't accountfor is that next week you've got
$42,000 of bills going out, youhaven't paid rent, you haven't
taken money for your own bills,you don't have$62,000 in the
bank.
Yeah.
Right.
And I think that's that'ssomething that guys are gonna
get shooting themselves in thefoot on, where it's like, you
gotta look at the job.
How are we paying for this?
(08:31):
Let's look at our QuickBooks,let's look at our cash flow,
let's look at what money isavailable for us.
Credit lines, our credit lines.
Hey, that credit line's comingdue.
I, you know, I can't just borrowmore money on it, or hey, we've
got money there.
That's only gonna be for thisjob.
The final invoice from this jobgoes to that credit line.
But being organized by it, andthis doesn't take you five days.
(08:52):
This is one hour, sit down andgame plan this.
Yeah.
Uh it's just thinking through itahead of time.
So that's on those sides.
Uh, if you're starting a companyand you're taking on those type
of jobs, you gotta have cashsomehow.
Um, I don't care if it's a richuncle, I don't care if you've
begged and borrowed and pleaded.
I don't want you to take asecond mortgage on on your
house.
Um but there, there you needcash if you're doing those type
(09:16):
of jobs.
Now, the other type of jobs as aresidential general contractor
(10:21):
aren't as bad.
Now, when we're talking aboutstarting jobs, let's even back
up starting the company.
Let's go through the costentailed with starting a
company, right?
If I'm starting from zero,starting a company as a general
contractor, pausing on that, nota specific contractor, which
we'll get into later.
Yeah.
So there's different types ofcompany you're starting.
(10:43):
General contractor, meaning I ammanaging the job, selling the
job, making sure everything'shappening.
I'm the client representative,running crews.
I'm I'm there's a second type ofgeneral contractor that guys
call themselves GCs, but they'reswinging the hammer.
They're on site, they're doingthe work themselves.
That's a different animal,right?
There's really three day threedifferent categories we're
(11:04):
talking about.
One, straight GC.
I don't own tools.
I don't own, uh, I don't, I'mnot doing any labor.
I'm general contracting.
I'm contracting two crews to dothe work.
I've got subs and vendors, andthat's the standard GC.
That's where I'm trying to getmost guys.
Um, the second category is I'm aGC, but I am the main crew.
(11:24):
I do one to two houses at atime, get on to the next one.
I bring in my flooring guys, Ibring in some HVAC and
electrical, but I do most of thework myself.
I'm a GC.
That one needs more money tostart because you got to buy
your tools, you got to fund somestuff up front.
Insurance is higher.
Insurance is a lot higher.
Uh, and then the third categoryis trades, right?
If you're starting an electricalcompany, when we start our HVAC
(11:46):
company, we got to outfit atruck.
We got to have a truck withwrapped uh or a big van uh our
HVAC van that was wrapped, andwe had probably eight to ten
grand worth of stuff in the backof it at minimum, um, worth of
tools and gauges and you knowthe parts that you need to just
have on hand instead of runninga store.
Yes.
(12:06):
So those are kind of the threecategories of starting in the
residential side.
The easiest one to start is theGC, but you got to have
experience getting there.
Uh and the standard GC whereyou're full contracting.
That's the cheapest as well asthe most lucrative.
When you're doing one job at atime and you're buying all the
tools and you're spending allthe insurance and you're on
site, it's slow, it's a grind.
(12:27):
And that's where guys start, andwe're trying to get them to the
other side.
So today we're talking aboutthat other side, the GC that is
a true general contractor.
I've been swinging a hammer,I've been working with these
other guys.
A lot of stories I hear fromcoaching clients coming in that
when they're just gettingstarted, especially like on our
foundations program, whichstarts like 500 bucks.
(12:47):
Those guys are like, hey, I'vebeen on a crew, I just got this
lake house, I just got thisproject in Atlanta, I just got
this job over here, and it's a$130,000 job.
I think I'm gonna make the jumpand start my own company.
Help, right?
Like I've got a lot of thoseguys coming in.
Those type of guys, this iswhere we start with of all
right, you need to figure outhow to get going.
(13:08):
You need to figure out how tomake the jump, but we got one
big kind of juicy job that wecan use to launch you into this.
Uh, if you don't have that joband you're just going out on
your own, it's a little bitharder because I need some
runway.
I got my own bills that I got topay, I got to do some marketing.
And maybe the first job I get ina couple of weeks, and it still
takes a couple of weeks toactually get on site.
(13:29):
So those are a little bitlonger.
But if we're jumping from beinga sub or doing, you know,
working for a company, being aPM for a company, now I'm gonna
start my own thing and I've gotone job.
Let's go over what you need todo to do that dollar-wise.
First off, licensing,permitting, uh, business
license.
Uh, I mean, you're spending twoto five hundred dollars, right?
(13:52):
It's not a lot of money upfront, but you got to have
something.
We got to get license with thestate.
I've got to file for an EIN.
Uh, I've got to get all of thatstuff set up.
Um, uh usually a businesslicense in the county or city
that you're in, depending onyour jurisdiction.
Um, that's a couple hundredbucks, two, two to five hundred
bucks.
Next, we're going intoinsurance.
Insurance for a GC when you'regetting started should be be
(14:15):
between$1,500 and$3,000 a year.
That's that's very, very small.
You can pay that monthly.
Usually it's a 10-month uhcontract.
Or not contract, it's a 10-monthpayment, and you have two months
where you don't pay wherethey're reviewing and you're up
upping for the next year.
Um, you're paying$150 to$300 amonth for 10 months.
Um, you got to get that in placebefore your first job.
(14:38):
When you grow the company, yougot to monitor that too, because
we get to a spot where you gotto be paying that, you know,
$1,500 to$3,000 monthly becauseyou've grown to that size.
But when you're first gettingstarted, just get the basics,
get the minimums, and and havesomething in place uh to fall
back on in case something badhappens.
All right, so we've got theinsurance,$1,500.
(15:00):
Um, registrations, if you're ina city with contractors' license
requirements, that's kind of thebig hurdle because you can't
just go get that by the weekend.
Um, you gotta have experiencethat takes months to do, but
that's also gonna cost somemoney.
You got your training courses,but let's assume that you
already have that or you're in astate that doesn't need that.
Texas, Kentucky, others.
(15:21):
Others.
Um, all right, so that's that.
The next step, the next list ofstuff is marketing, right?
I don't need you to go runGoogle ads for$5,000 a month.
I don't want you to go wrap yourtruck yet.
I don't want you to be spendingon Facebook ads.
What I want in marketing arebusiness cards and yard signs.
(15:42):
Maybe a handful of shirts.
Give me three collared shirtswith your logo on it.
Um, that's it.
I don't need I don't needmulti-thousands of dollars spent
on marketing day one, especiallyif I have a big project to go
after.
So a couple hundred bucks fromVistaPrint for cards, get some
yard signs, get three, five, tenyard signs that you can just
(16:02):
stick outside that's marketingwhat you do, um, and then get
some shirts.
We're spending 500 bucks onthat.
That's not a lot, that's not abig spend as well, but just a
baseline setup.
SPEAKER_00 (16:14):
And one thing you can do in uh, and this is we
spent a little bit extra moneyon this, but these door knockers
go around to the houses aroundthe jobs that we're doing.
You can do this with a businesscard too.
Leave behind that.
Yeah, but a leave behind whereyou're like, hey, we're gonna be
in the area.
If you have any issues, call mea project manager, and you put
(16:36):
those around all the houses thatyou're working around, and
really good look.
The clients know that you'rereally thinking about their
experience and their yourneighbor's experience, which can
become problematic.
Yep.
You're gonna be parking there,you're gonna be having noise.
And uh that's like a reallyinexpensive way to do grassroots
marketing in the honey hole.
(16:57):
Yep.
You want to land more jobs inthe in the neighborhood you're
in because it's right there.
SPEAKER_01 (17:02):
People trust who their neighbors use, right?
Like if you if the neighbor saidyes, and that means you're at
least you know, you've got somesome wherewithal as a company
that that you're gonna show upand do the work because you're
promoting from a neighbor'sarea.
SPEAKER_00 (17:14):
And if you can if you can fire up a job or two
before you even finish thatother job, the footprint that
you're creating and the uhrecognition that you're creating
in that neighborhood, the samepeople are driving in and out,
and they're like, I keep seeingthese guys, what's going on?
SPEAKER_01 (17:29):
Four signs that I drove down this road with that
person.
SPEAKER_00 (17:32):
In here, we might as well look into it.
SPEAKER_01 (17:34):
Yep.
Uh next, next when we talkworking capital.
Um, we got gas that we got topay for.
I got my bills I got to pay for.
Outside of that, there's not alot needed in it here.
I mean, we've got on like Isaid, the residential side, when
you're doing that, there's not alot of working capital because
the way we invoice, the way thatwe set up our systems and
processes from day one.
(17:55):
And the and the the quick30,000-foot view of that is I
invoice this week of the workI'm doing next week.
Next week I invoice for the workI'm doing the following week,
which is gonna roll into whereI'm going with everything of how
we manage our money to make surewe start building that nest egg
and the savings and the cashflow in the background.
SPEAKER_00 (18:13):
Now, if you have any issues with clients that uh when
you're trying to pitch that ideaof I I need you to pay me for a
week ahead of time for the workthat's about to take place, the
easiest way to just kind of killthat conversation is that's
totally fine.
If you want us to do the 30% or50% up front for the project,
(18:37):
that's the other route we couldgo.
I I don't like that routebecause I'm holding more money
than I need to be holding, and Idon't have seven uh checking
accounts to separate all thismoney into.
So the reason I like to get theweek ahead of time is so I don't
have to ask you for too muchmoney.
I'm just asking you for the workthat we're about to do and then
(18:57):
we're invoicing from there.
So it's not we don't have thisuh set schedule of when we're
invoicing.
If this week that work doesn'tuh uh plane out and we actually
have to work until Wednesday toget that amount of work done,
your invoice for this comingweek is gonna look different.
Yep.
So it's it's a it absolutelyprotects your client from
(19:21):
mismanagement of money and itprotects you from mismanagement
of money.
SPEAKER_01 (19:25):
And it naturally creates a check-in weekly with
your client about progress.
And that's kind of the the thehidden bonus of it because when
I'm invoicing weekly, the clientbrings up and says, Hey, you
know, I know that you think thatthe paint's done, but I thought
we need one more coat in here.
Oh, well, let's go look at that.
(19:46):
Let's talk about that.
And I show up and we're like,You're right, we're gonna do one
more coat.
Thanks for bringing that up.
Now, instead of three monthsdown the road, when we think,
when I say, Hey, we're done, weput the floors in, we did all
the trim, we did everything thatwe need to do, and they say, I
think we need one more coat ofpaint.
Well, crap, I gotta cover thefloors, I gotta get my painters
who've been gone for threemonths.
I probably are I might not beworking with them right now, and
(20:09):
so I need to pay additionalpainters to come in and paint,
right?
So I get too far over my skisand I'm spending a ton of money
at the end of the job, right?
And so these weekly invoices arethe check-ins as well as the
cash flow.
And what's great about it, Iinvoice$10,000 this week for
what I'm doing next week.
I get paid$10,000 on Friday.
Guys show up on Monday.
(20:29):
I've already ordered materialson Friday, I spend a couple
grand on that.
Guys do the work, I spend sixgrand on that.
By next Friday, I've got two,three thousand dollars left in
my bank account.
That's profit.
That's mine.
Put it in my pocket.
I can spend that and not feelnot not have to go sell another
job to finish this job.
Because go ahead, go buy thattruck, right?
Yes, you've got to uh don't buythat truck.
(20:53):
Uh I'm gonna make a hat thatsays don't buy that truck.
Don't buy that truck.
Uh so that being said, doing theinvoicing like we're talking
about, and it there's a lot ofintricacies what we're talking
about, and we'll dive into thatif you come into the coaching
program.
That being said, this is thebest way to build that nest egg
because I invoiced 10, I spentseven, I got three left over,
(21:14):
and that's my money.
I can I I need two grand for mybills this week.
I'm gonna put a thousand in thesavings account, let's do the
next job.
I invoice ten, I and so it'sbite-sized knowing of where my
money is and what is my moneyand what isn't my money.
It's not I I took a a$50,000check up front for a$120,000
(21:35):
job, and I've got to make surethat over the next six weeks I
keep that money to pay my crewsand materials.
Because the the temptation isgonna be perfect.
SPEAKER_00 (21:45):
I've got my I've got my Chase card, I need to pay
that down, that's five.
I got my Home Depot line, Igotta pay that down, that's
three.
SPEAKER_01 (21:53):
My transmission went out.
SPEAKER_00 (21:54):
Transmission went out, I gotta have that to work.
And then by the time you needthe cabinet down payment, that's
twenty thousand dollars, you'vegot fifteen, and now you're kind
of like now you're invoicing forsighting, so you can pay for the
cabinets.
Yes.
It gets so it gets so messy.
SPEAKER_01 (22:08):
Yep, yep.
So working capital-wise, this ishow we suggest doing it.
It feels basic, it feelstedious, it feels like a lot of
paperwork.
It is not any of those things.
It's easier because it's it'ssaving you so much of the
reactive paperwork and thereactive headaches and the
showing up and the arguments andthe lawyers, like all of that
(22:28):
goes away.
So, yeah, I spent more time thisweek making seven invoices for
the seven projects we're on thanI would have if we just would
have done it every few weeks aswe get to spots.
Yes, it took me an extra twohours this week.
That being said, those two hoursI spent this week is saving me
two weeks at the end of the endof the job when I can't get off
the job, clients pissed off, Ican't get the next job because
(22:51):
I've got three bad reviews.
Like, it's it we're not sayingto do it this way because we
like spending your time.
It's because this is the waythat works.
So start start trying trying todo it this way.
All right.
Next, one thing that guys don'trealize though, sweat equity.
I think something that I seewith guys starting up companies
is they invoice and they theybid for the time they're gonna
(23:14):
spend on the job.
I can do this job in four days.
I charge 500 bucks a day.
So I'm gonna envoy, I'm gonnacharge you, I'm gonna quote you
$2,000 for this work.
What about today when you'resitting there doing an estimate?
What about when you got home andspent another hour on the
estimate?
What about collecting materialson Monday before we started
Tuesday?
(23:35):
What about chasing them down forthe five?
Like, it's not a four-day job.
That's a seven-day job whenyou're gonna be on site for four
days.
Yeah.
So we need to capture that extratime I'm spending.
Uh one one coaching clientearlier this week, uh, we were
talking about they had one jobthat it was a small job.
They were kind of facelift on abathroom, uh, had a crawl space
(23:57):
underneath it.
They were just, you know, newtoilet, new tile, new uh vanity,
new light, right, and paint.
Small job.
They had they this company hasan on-staff crew.
I don't suggest it.
That's what they want to do.
I'm a coach, I'm not an owner.
They have an on-staff crew.
Their crew is in there doing it,and the homeowner said, Hey, you
know what?
It'd be great if we can movethat toilet over six inches to
(24:20):
be right up next to the wall.
So we we capture that extraspace.
They're halfway through the job,right?
And so they said, you know, tomove that toilet, I gotta pay my
plumber 800 bucks to come overhere and do that.
Great, do it.
Well, their crew has a pull-off,their plumber comes in two days
and fixes it.
So the crew is now three dayswith no work.
(24:40):
Who's paying for that?
Right?
You can't charge 800 bucks forthat change order because that's
that's lost time that you're notcharging for.
So on instances like this, andI'm getting a little off script,
but that being said, instanceslike that, that's a$5,000 change
order.
And and they were when I wastelling them that on the
coaching, like, I can't charge$5,000 and move that over.
It's super easy.
(25:01):
I'm like, that it doesn't,that's what it's costing you.
Like, you got three days withthe crew not doing work.
And so you've got to set that upbeforehand in the client
engagement agreement, let theclient know this is why change
orders get so expensive.
And then if that happens, tellthe try to get the crew on
another job, but I've got themoney to cover if they're just
at home because they're onsalary, right?
So we need to make sure thatthose lost times get captured,
(25:25):
whether it's your personal time,whether it's your cruise time,
whether it's your shopping time,whatever it is, that's part of
my quote.
I'm not gonna do that for free.
And my bookkeeping time.
I'm doing quick books andorganizing it.
Who's paying me for that?
Right.
So we need to make sure our ourour quotes and our pricing
accommodate extra time for thejob and that I need to be
(25:46):
spending on it.
SPEAKER_00 (25:46):
And that brings up a good point.
Um, one one thing that youshould absolutely spend time
talking about in your CEA andthe client engagement agreement
is the cascade effect of pausingwork, change orders, that type
of thing.
Because when you especially ifyou don't have an in-house crew,
(26:07):
which again it you shouldn't fora lot of reasons.
I'm sure it works for somepeople.
Um when you stop me working tomove this toilet over, and now
that crew has to stop.
I gotta bring the plumber in.
Who who are the guys behind theother crew once they can get
(26:28):
back going?
You don't own their schedule, soyou can't say, okay, we'll just
move every we'll just shifteverything over three days.
You gotta talk with that guy.
There's time there, you gottacoordinate with him.
You then gotta coordinate withthe glass guy because they've
already done their uh templateand they're supposed to install
it next week, but now they'regonna have to push that to the
following week.
Yep.
You gotta talk with thecountertop guy, all of these,
(26:51):
all of these lead time items,you have to push those down.
And so that three-day break,yeah, work is gonna get started
after that three days, butyou've actually lost another
three days four days from thatday, and then next week.
Yeah, yeah.
And so there's a cascadingeffect because the crews that
you need to come in after thoseguys, you don't own their
(27:13):
schedule and you need toreorganize the calendar.
And so it's not just that day,and but they don't understand
that.
SPEAKER_01 (27:21):
Well, and I'm not having to pay my painter extra
to postpone them to next Fridaybecause he can't come back
Monday.
He's got another job, so it'sgonna he's gonna come back next
Thursday and Friday.
It doesn't cost me anything topay the painter to reschedule.
But what it did cost, theunbillable hours that it cost
me, is I could have been offyour job by this Friday and
(27:41):
starting another job on Monday.
Instead, I'm now walking yourjob next Thursday again and next
Friday once the painter's done.
And so I'm now doing, I'mdriving out there three, four,
seven extra times.
SPEAKER_00 (27:53):
And I'm explaining to the client every time, like
what's going on today.
It's like it's you did a changeorder and now everything's
messed up, is what happened.
SPEAKER_01 (28:02):
Part of that too, and I've I I mean, I'm beating a
dead horse here because I saythis on every podcast.
What a horrible image.
Oh, I'm tickling on a live pony.
I don't know what to try to say.
I'm beating a dead horse onsaying this every single time.
If you don't spend the time inpre-construction preparing the
(28:24):
job, it's costing you money.
And this is what we're talkingabout.
If I will lay out all of thisstuff, if I do the CEA, I lay
out this, I organize all thisand say, listen, just so you
know, we need to lock into thisyour design.
Not they wanted a new bathroom,I quoted it to them, we signed
it, and we go.
Instead, hey, let's talk aboutthis.
We got to get this locked in.
If it, if, if it pushes on days,it's gonna cost you a lot of
(28:45):
extra money.
Uh, use that toilet example.
That's in$5,000 change order.
If we decide it right now, it'sgonna cost you$800.
So you're gonna lose$4,200 tomove that toilet next week.
Right.
And so we start laying that outso they understand that.
So when it does happen, A,they're like, you know what?
I'm not even gonna suggest Idon't know, I don't want to pay
that extra money.
And B, if it does happen,they're like, I get it, I know I
got to pay the extra money, butit's worth it for me.
(29:07):
Either way, I'm I'm not the badguy anymore because I spent that
pre-construction time talkingthrough it, thinking about it,
thinking, hey, what if we movethat toilet over?
I'm getting an upsell, I cancharge them extra, I'm making
the bathroom what they want, butI've spent the time, I'm not
rushing to get the job started.
So, all that being said, there'sso many lost billable hours,
(29:28):
non-billable hours on these jobsthat I see when you're
inefficient and when you don'thave this the client engagement
in place, as well as the readyfire aim mentality of let's just
get out there and get the jobdone.
You gotta be able to capturethese billable hours, let
non-billable hours, lay it outto the client beforehand, get it
in agreement, and let them knowhey, we're starting tomorrow.
(29:51):
Any changes after tomorrow isgonna cost a lot more.
Any final thoughts on this?
Lay those out and we're we'rewe're good to go.
All right.
So the other things I didn't Iactually didn't mention on
startup costs, I want you to getGoogle Workspace, Google my
business.
I want you to set up a Clark atcompany domain.com.
I don't want it to be you know,Clark's Construction at
(30:13):
gmail.com.
It's very cheap.
You're paying eight bucks, tenbucks a month.
I'm gonna get Gmail set up.
I'm gonna get that tied in.
SPEAKER_00 (30:21):
Um, I'm also what are are these lights flickering
every once in a while?
SPEAKER_01 (30:27):
No, I'm not saying that.
SPEAKER_00 (30:28):
Are you having a stroke?
That's my question.
SPEAKER_01 (30:32):
James's gonna lay down on the floor while I finish
this podcast.
Uh, anyways, the the things Idon't want you to spend money on
super expensive softwares.
I know I I sell software, superexpensive softwares.
What I want is QuickBooks.
We've got a light version that's89 bucks a month.
QuickBooks and our light versionis all you need.
You don't need fancy softwares,we don't need to spend$1,500 a
(30:56):
month on builder trend.
You don't even Need our higherend software.
Don't, don't, don't spend on theProTre 360 high-end stuff.
We don't need it until you startgrowing beyond where it makes a
lot more sense.
What I need you to get on is ourlight version,$89 a month, a
QuickBooks version.
Those we're gonna set up now.
A lot of times there's like,well, I'll set up QuickBooks
(31:17):
when I, you know, at the end ofthe year when my account needs
it.
We're we're already setting upyour processes wrong.
Let's get how we manage moneyset up day one so it doesn't
become this huge hornet's nestby the end of the year.
Um, what we're not buying, newtruck.
Don't buy a new truck.
Don't buy a new truck.
Stay in your truck.
I've still got my 10-year-oldtruck and I love it.
(31:39):
Paid off.
It's a free truck to drive.
I love it.
Don't don't rent office space.
You don't need office space.
You got Starbucks, you got yourliving room, you got your job
sites.
Do not rent office space dayone.
Office space is needed once youhave employees.
And even then, it'squestionable.
So do not do not go, all right,we're gonna get the company
(32:00):
going.
I'm gonna rent an office, I'mgonna get this stuff set up, I'm
gonna have a storage space forall my tools.
I'm gonna rent like I'm gonnabuy the Costco pack of pens.
Yes.
Like, no, don't.
Just don't do it.
Like we're gonna spend moneywhen we have cash to spend, not
if I spend it, the business willcome.
We're we're we're not doing itthat way.
Um finally, I think my lastpiece of advice is that guys use
(32:25):
money and cash as a barrier tosay, yes, I'm gonna get going.
Don't let that happen.
If we can help you get this setup, and again, I'm uh this is an
anti, this is ananti-commercial.
Don't hire a consultant yet.
Don't hire a coach yet.
Let's get you going.
I've got some free stuff I'llgive you if you're starting a
company.
Come on our retreat in January.
(32:47):
We'll figure that stuff out.
There's stuff you can do to getsome basic structure, let's get
you going.
Our like our foundationsprogram.
I wouldn't even say get thatgoing yet.
Let's get you some money to payfor that.
But that's basic stuff to helpyou get your structure in place.
And it starts at 500 bucks.
So there's some basic stuff todo to get the structure in
place, some bare bone skeletonof what you need to do, and
(33:09):
let's start growing from there.
Once you get the cash, then wecan spend on stuff.
But I don't want you to spend onthat.
I don't want you to come intocoaching yet.
Let's get some systems, basicsystems in place, basic
paperwork in place, figure out aCEA.
We'll we'll work on that withyou.
But make sure you understand youdon't have to have six figures
in the bank to get a companystarted.
(33:31):
It's it's a risk.
It's I do it early.
You know, a lot of guys wait.
I'll do this, you know, later onwhen I have the money, and all
of a sudden they're 35 with twokids.
And it's like, bro, if you goout on your own and doesn't
work, where are you buyingbuying formula from for your
kid?
So if you're in your 20s andyou're considering making the
jump, make the jump.
(33:51):
Now's the time.
Explore, fail, lose.
That's okay.
You're in your 20s, do thatbefore you you have a lot more
responsibilities.
If you're in your 30s, 40s, andyou're looking to do it, let's
get a game plan together.
If you got responsibilities, ifyou got people depending on you,
let me help you with that.
But it doesn't take a lot ofcash to start a contracting
company.
So don't let that be a barrier.
(34:12):
That's all I got.
You got any final words on that?
SPEAKER_00 (34:17):
No.
SPEAKER_01 (34:19):
I I think it's a manage your money well, get some
systems in place that you'refollowing.
I think one of the biggestthings to think about is uh that
I hear that's the wrongstatement from guys is if I I
will start doing it that wayonce I get there.
And it's like you're not gonnaget there unless you're doing it
the right way.
Yeah, you you you're gonna hit aceiling and your whole
(34:40):
foundation of what you've uh themetaphor that I always use, like
beating a dead horse.
Beating a dead horse, tickling aunicorn.
Uh no, the foundation is such agood metaphor of like, hey, I'm
gonna pour the foundation once Ibuild the structure of the
house.
You can't do that.
You can't build the structureuntil you have that foundation
(35:00):
poured and set at the rightsize.
So let's build a foundation.
That's why we have a foundationsprogram, but let's get some
systems in place, basic moneymanagement that you're
committing to uh someaccountability, whether it's a
spouse, a friend, or us, towhere this is how we're managing
money.
We're not gonna spend on stuffthat we don't have money for.
(35:21):
Uh, and we're gonna reallyutilize our jobs to fund
ourselves, not us to fund ourjobs.
If you want to help set that up,go to proshook360.com, hit us up
at the contact us, we'd love tohelp you out.
Go to contractorcuts.com.
We'd love to talk to you.
That's all I got.
Thank you guys for listeningthis week, and we'll talk to you
next week.
Bye.
Bye.
Welcome to Contractor Cuts, where we cover
the good, the bad, and the uglyof growing a successful
contracting company.
SPEAKER_01 (00:13):
Welcome to Contractor Cuts.
My name is Clark Turner.
And I'm James McConnell.
Thanks for joining us again thisweek.
So today, we are talking abouthow much cash do you need to
start a contracting company?
This is more for the startups,for the younger guys or the
older guys that are starting.
If you've been doing this for awhile, we're going to talk about
some money management skillsthat whether you've been doing
(00:35):
it for 20 years or you know, 20days.
20 minutes.
20 minutes, 20 seconds.
How should you be managing 20?
How should you be managing yourmoney?
Really, less about moneymanagement, but more about what
do you need to start a companyand where do we, how do we get
companies off the ground whenwe're not making a lot of money?
(00:58):
So buckle up.
It should be a pretty good one.
All right.
So a lot of people think I gotto have a ton of cash to start
my company, right?
A lot of guys are if I'mstarting a company, you know,
what?
I got to put 100 grand awaybefore I can get started.
There's different types ofcompanies in construction that
you're starting.
Um if you're into commercialjobs, yes, you got to have a lot
of money.
You gotta commercial are usually30, 45, 60 day net pay, which
(01:22):
means it once you complete thework, you submit your invoices
and you're a month away fromgetting paid.
So from start work to payment,you might be 60 days to 90 days.
Um so when you're doingcommercial projects, it is all
about cash flow.
Uh most of the companies that Icoach that are commercial, they
either have a bunch of money inthe background, large lines of
(01:46):
credit, or they're they'rehamstrung on what they can say
yes to until they build thisnest egg of money.
Um, and so they kind of workwith different GCs that they're
under, or you know, they're notreally GCing a lot themselves
because those are the guys that,but those companies, when you're
doing commercial work, are justas much a financial company as
they are a construction company.
(02:06):
Uh, because it's moneymanagement, it is cash flowing,
it's borrowing, it's lines ofcredit, it's dealing with the
with your clients and trying tomake sure the payment structures
and filling out all the formsand submittals and all that
stuff.
So on the commercial side, it'sa lot more difficult.
Sorry.
On the commercial side, it'svery difficult.
(02:28):
I would say you can't start acommercial construction company
without dollars behind you.
Um, next we go to theresidential side, uh, light
commercial and residential.
Uh on those, there's really kindof two different types that
we're dealing with.
On the jobs that you do wherethere's a lot of lending
involved, like our VA jobs, uh,anywhere that that you know it's
uh new construction where you'vegot a bank doing lending on it,
(02:52):
most of the time those jobs aregonna have to have some cash
behind it.
Maybe you got 20 to 30 grand,you know, you don't need
$200,000, but I need to be ableto cash flow those to where I
can get to an invoice spot andstill wait 10 more days before I
get paid.
Right.
And so, you know, on our VAjobs, what would you say?
20%, 40%, 30%, what how much ofa job do you think we gotta have
(03:14):
cash flow for that job on a$100,000 job?
What would you you budgetpersonally?
SPEAKER_00 (03:19):
Um, well, the VA is pretty specific with their
stuff, and some jobs are likewell, for instance, we have one
job that's a$30,000 job that wejust finished, and then we have
a job that we're in the middleof right now that's like an
eighty thousand dollar job.
But the thirty thousand dollarjob we uh we decided to just go
(03:44):
straight we're gonna finish itand then invoice for it.
Because it didn't make sense tobreak it up any and the cost was
I don't know, fifteen orsomething like that.
So we were able to we were ableto handle that one, but the
eighty thousand dollar one, thecost was like you know, fifty
fifty forty-five, fifty-five.
(04:05):
So uh that one we broke up intothree invoices.
Which slows the job down, makesit where you can't start the
next job.
It slows it down, but we uhmapping it out is and honestly,
I like those jobs because itkeeps everything clean and
honest, and you end up with cashat the end.
Yeah.
(04:26):
And you have if you if youmanage it right, then everybody
gets paid, everybody gets whatthey need, and then at the end
you get a chunk of money thatyou can then okay, great.
Now I have this, I can do this,this, this, and here's the
profit we put aside.
SPEAKER_01 (04:40):
It's almost forced budgeting, because like you
break even throughout the job,yeah, and then boom, I got a
thirty thousand dollar check atthe end that's all straight
profit.
SPEAKER_00 (04:47):
Yeah.
Yeah.
Which is why it's nice when youhave a couple, when you have
like a couple jobs that arerunning that are cash jobs, and
then you've got one that you'redoing lending on.
Yeah.
It's a really nice way to kindof even out the the books
because you're keeping it you'restill tight until that one job
closes finally and you get thatbig chunk of cash at the end.
(05:07):
It really just forces you to bemore diligent about mapping out
your I've got one client out inCalifornia that he uh he runs
this company.
SPEAKER_01 (05:17):
They do residential and commercial, but they're
doing one commercial job at atime because it's that same way.
It's like the residential aremaking them paying their bills
uh to where they're you knowthey've they've got money coming
in off that.
The commercial is kind of theside job that puts money in the
long-term bank, right?
To build to where they caneventually say yes to two
(05:38):
commercial jobs at a time.
Yeah, but they're not that moneyis free money for them.
It's not like I need thatcommercial job so I can pay my
bills.
We got the residential that arepaying the bills, and then I got
cash flow in the background, andit's kind of my side hobby to
grow that commercial, which isthe same as like what you're
talking about.
And I think one of the one ofthe notes on that is on that
(05:59):
$30,000 job where you're out ofpocket, 18, 20, somewhere in
there, 15, somewhere in thatthat area.
That is like, hey, we can sprintand knock this out in three
weeks, or we can make it intothree draws and it's gonna take
six weeks.
And so not only is it helping usto get through it, we can start
another job and have another jobbehind it for another three
(06:21):
weeks.
And so in six weeks, instead ofdoing 30 grand, I'm now doing 60
grand.
Right.
And so we start looking at thatway of it's not just I need the
cash flow, it's also time ismoney and opportunity cost.
Time is money, babe.
Opportunity cost.
So it's it's a if I can getthese done quicker, what how how
long can I go?
And also who am I working with?
(06:42):
What if I'm working with Bank ofAmerica versus the VA, those are
two different monsters that I'mdealing with.
If I'm working with a locallender or a credit union, it's a
totally different animal whereI'm talking to the guy that's
releasing the funds.
Right.
And so understanding the lender,understanding who's the
borrower, understanding.
No, I I remember we actually hadsome a number of years ago that,
(07:05):
like, hey, we can't cash flowthis job.
And so we go to the client, say,listen, you're gonna give us a
deposit, and then on the backend of the job, we refund the
deposit.
Remember that?
There was there was one guy thatwe did that where it's like, we
need more cash flow, so we'rewe're gonna let the client cash
flow his own job.
And we we we sold it less of wedon't have money and more of
like, hey, we'll give you adiscount if you want to do it
(07:26):
this way, because borrowingmoney for us is what we do for
the cash flow, costs us money.
So we'll give you a cheaper jobif you want to cash flow it
yourself.
He gives us 15 grand up front atthe end of the job.
We refund that 15 grand out ofthe final check cash flow deals
great, right?
So being creative like that canhelp you kind of launch these.
But everything we've talkedabout so far, if you've heard
(07:49):
us, it's thinking through,projecting, and making a game
plan before even agreeing toterms.
And I think that's where guysmiss it.
It's like, I just need a yes, Ineed a signature, and I need to
get my guys on site.
And when you start doing it thatway and you haven't thought
through where's this moneycoming from?
Where, what do I have?
If you just look at your bankaccount, it says you got$65,000
(08:10):
in your bank account.
Well, what you didn't accountfor is that next week you've got
$42,000 of bills going out, youhaven't paid rent, you haven't
taken money for your own bills,you don't have$62,000 in the
bank.
Yeah.
Right.
And I think that's that'ssomething that guys are gonna
get shooting themselves in thefoot on, where it's like, you
gotta look at the job.
How are we paying for this?
(08:31):
Let's look at our QuickBooks,let's look at our cash flow,
let's look at what money isavailable for us.
Credit lines, our credit lines.
Hey, that credit line's comingdue.
I, you know, I can't just borrowmore money on it, or hey, we've
got money there.
That's only gonna be for thisjob.
The final invoice from this jobgoes to that credit line.
But being organized by it, andthis doesn't take you five days.
(08:52):
This is one hour, sit down andgame plan this.
Yeah.
Uh it's just thinking through itahead of time.
So that's on those sides.
Uh, if you're starting a companyand you're taking on those type
of jobs, you gotta have cashsomehow.
Um, I don't care if it's a richuncle, I don't care if you've
begged and borrowed and pleaded.
I don't want you to take asecond mortgage on on your
house.
Um but there, there you needcash if you're doing those type
(09:16):
of jobs.
Now, the other type of jobs as aresidential general contractor
(10:21):
aren't as bad.
Now, when we're talking aboutstarting jobs, let's even back
up starting the company.
Let's go through the costentailed with starting a
company, right?
If I'm starting from zero,starting a company as a general
contractor, pausing on that, nota specific contractor, which
we'll get into later.
Yeah.
So there's different types ofcompany you're starting.
(10:43):
General contractor, meaning I ammanaging the job, selling the
job, making sure everything'shappening.
I'm the client representative,running crews.
I'm I'm there's a second type ofgeneral contractor that guys
call themselves GCs, but they'reswinging the hammer.
They're on site, they're doingthe work themselves.
That's a different animal,right?
There's really three day threedifferent categories we're
(11:04):
talking about.
One, straight GC.
I don't own tools.
I don't own, uh, I don't, I'mnot doing any labor.
I'm general contracting.
I'm contracting two crews to dothe work.
I've got subs and vendors, andthat's the standard GC.
That's where I'm trying to getmost guys.
Um, the second category is I'm aGC, but I am the main crew.
(11:24):
I do one to two houses at atime, get on to the next one.
I bring in my flooring guys, Ibring in some HVAC and
electrical, but I do most of thework myself.
I'm a GC.
That one needs more money tostart because you got to buy
your tools, you got to fund somestuff up front.
Insurance is higher.
Insurance is a lot higher.
Uh, and then the third categoryis trades, right?
If you're starting an electricalcompany, when we start our HVAC
(11:46):
company, we got to outfit atruck.
We got to have a truck withwrapped uh or a big van uh our
HVAC van that was wrapped, andwe had probably eight to ten
grand worth of stuff in the backof it at minimum, um, worth of
tools and gauges and you knowthe parts that you need to just
have on hand instead of runninga store.
Yes.
(12:06):
So those are kind of the threecategories of starting in the
residential side.
The easiest one to start is theGC, but you got to have
experience getting there.
Uh and the standard GC whereyou're full contracting.
That's the cheapest as well asthe most lucrative.
When you're doing one job at atime and you're buying all the
tools and you're spending allthe insurance and you're on
site, it's slow, it's a grind.
(12:27):
And that's where guys start, andwe're trying to get them to the
other side.
So today we're talking aboutthat other side, the GC that is
a true general contractor.
I've been swinging a hammer,I've been working with these
other guys.
A lot of stories I hear fromcoaching clients coming in that
when they're just gettingstarted, especially like on our
foundations program, whichstarts like 500 bucks.
(12:47):
Those guys are like, hey, I'vebeen on a crew, I just got this
lake house, I just got thisproject in Atlanta, I just got
this job over here, and it's a$130,000 job.
I think I'm gonna make the jumpand start my own company.
Help, right?
Like I've got a lot of thoseguys coming in.
Those type of guys, this iswhere we start with of all
right, you need to figure outhow to get going.
(13:08):
You need to figure out how tomake the jump, but we got one
big kind of juicy job that wecan use to launch you into this.
Uh, if you don't have that joband you're just going out on
your own, it's a little bitharder because I need some
runway.
I got my own bills that I got topay, I got to do some marketing.
And maybe the first job I get ina couple of weeks, and it still
takes a couple of weeks toactually get on site.
(13:29):
So those are a little bitlonger.
But if we're jumping from beinga sub or doing, you know,
working for a company, being aPM for a company, now I'm gonna
start my own thing and I've gotone job.
Let's go over what you need todo to do that dollar-wise.
First off, licensing,permitting, uh, business
license.
Uh, I mean, you're spending twoto five hundred dollars, right?
(13:52):
It's not a lot of money upfront, but you got to have
something.
We got to get license with thestate.
I've got to file for an EIN.
Uh, I've got to get all of thatstuff set up.
Um, uh usually a businesslicense in the county or city
that you're in, depending onyour jurisdiction.
Um, that's a couple hundredbucks, two, two to five hundred
bucks.
Next, we're going intoinsurance.
Insurance for a GC when you'regetting started should be be
(14:15):
between$1,500 and$3,000 a year.
That's that's very, very small.
You can pay that monthly.
Usually it's a 10-month uhcontract.
Or not contract, it's a 10-monthpayment, and you have two months
where you don't pay wherethey're reviewing and you're up
upping for the next year.
Um, you're paying$150 to$300 amonth for 10 months.
Um, you got to get that in placebefore your first job.
(14:38):
When you grow the company, yougot to monitor that too, because
we get to a spot where you gotto be paying that, you know,
$1,500 to$3,000 monthly becauseyou've grown to that size.
But when you're first gettingstarted, just get the basics,
get the minimums, and and havesomething in place uh to fall
back on in case something badhappens.
All right, so we've got theinsurance,$1,500.
(15:00):
Um, registrations, if you're ina city with contractors' license
requirements, that's kind of thebig hurdle because you can't
just go get that by the weekend.
Um, you gotta have experiencethat takes months to do, but
that's also gonna cost somemoney.
You got your training courses,but let's assume that you
already have that or you're in astate that doesn't need that.
Texas, Kentucky, others.
(15:21):
Others.
Um, all right, so that's that.
The next step, the next list ofstuff is marketing, right?
I don't need you to go runGoogle ads for$5,000 a month.
I don't want you to go wrap yourtruck yet.
I don't want you to be spendingon Facebook ads.
What I want in marketing arebusiness cards and yard signs.
(15:42):
Maybe a handful of shirts.
Give me three collared shirtswith your logo on it.
Um, that's it.
I don't need I don't needmulti-thousands of dollars spent
on marketing day one, especiallyif I have a big project to go
after.
So a couple hundred bucks fromVistaPrint for cards, get some
yard signs, get three, five, tenyard signs that you can just
(16:02):
stick outside that's marketingwhat you do, um, and then get
some shirts.
We're spending 500 bucks onthat.
That's not a lot, that's not abig spend as well, but just a
baseline setup.
SPEAKER_00 (16:14):
And one thing you can do in uh, and this is we
spent a little bit extra moneyon this, but these door knockers
go around to the houses aroundthe jobs that we're doing.
You can do this with a businesscard too.
Leave behind that.
Yeah, but a leave behind whereyou're like, hey, we're gonna be
in the area.
If you have any issues, call mea project manager, and you put
(16:36):
those around all the houses thatyou're working around, and
really good look.
The clients know that you'rereally thinking about their
experience and their yourneighbor's experience, which can
become problematic.
Yep.
You're gonna be parking there,you're gonna be having noise.
And uh that's like a reallyinexpensive way to do grassroots
marketing in the honey hole.
(16:57):
Yep.
You want to land more jobs inthe in the neighborhood you're
in because it's right there.
SPEAKER_01 (17:02):
People trust who their neighbors use, right?
Like if you if the neighbor saidyes, and that means you're at
least you know, you've got somesome wherewithal as a company
that that you're gonna show upand do the work because you're
promoting from a neighbor'sarea.
SPEAKER_00 (17:14):
And if you can if you can fire up a job or two
before you even finish thatother job, the footprint that
you're creating and the uhrecognition that you're creating
in that neighborhood, the samepeople are driving in and out,
and they're like, I keep seeingthese guys, what's going on?
SPEAKER_01 (17:29):
Four signs that I drove down this road with that
person.
SPEAKER_00 (17:32):
In here, we might as well look into it.
SPEAKER_01 (17:34):
Yep.
Uh next, next when we talkworking capital.
Um, we got gas that we got topay for.
I got my bills I got to pay for.
Outside of that, there's not alot needed in it here.
I mean, we've got on like Isaid, the residential side, when
you're doing that, there's not alot of working capital because
the way we invoice, the way thatwe set up our systems and
processes from day one.
(17:55):
And the and the the quick30,000-foot view of that is I
invoice this week of the workI'm doing next week.
Next week I invoice for the workI'm doing the following week,
which is gonna roll into whereI'm going with everything of how
we manage our money to make surewe start building that nest egg
and the savings and the cashflow in the background.
SPEAKER_00 (18:13):
Now, if you have any issues with clients that uh when
you're trying to pitch that ideaof I I need you to pay me for a
week ahead of time for the workthat's about to take place, the
easiest way to just kind of killthat conversation is that's
totally fine.
If you want us to do the 30% or50% up front for the project,
(18:37):
that's the other route we couldgo.
I I don't like that routebecause I'm holding more money
than I need to be holding, and Idon't have seven uh checking
accounts to separate all thismoney into.
So the reason I like to get theweek ahead of time is so I don't
have to ask you for too muchmoney.
I'm just asking you for the workthat we're about to do and then
(18:57):
we're invoicing from there.
So it's not we don't have thisuh set schedule of when we're
invoicing.
If this week that work doesn'tuh uh plane out and we actually
have to work until Wednesday toget that amount of work done,
your invoice for this comingweek is gonna look different.
Yep.
So it's it's a it absolutelyprotects your client from
(19:21):
mismanagement of money and itprotects you from mismanagement
of money.
SPEAKER_01 (19:25):
And it naturally creates a check-in weekly with
your client about progress.
And that's kind of the the thehidden bonus of it because when
I'm invoicing weekly, the clientbrings up and says, Hey, you
know, I know that you think thatthe paint's done, but I thought
we need one more coat in here.
Oh, well, let's go look at that.
(19:46):
Let's talk about that.
And I show up and we're like,You're right, we're gonna do one
more coat.
Thanks for bringing that up.
Now, instead of three monthsdown the road, when we think,
when I say, Hey, we're done, weput the floors in, we did all
the trim, we did everything thatwe need to do, and they say, I
think we need one more coat ofpaint.
Well, crap, I gotta cover thefloors, I gotta get my painters
who've been gone for threemonths.
I probably are I might not beworking with them right now, and
(20:09):
so I need to pay additionalpainters to come in and paint,
right?
So I get too far over my skisand I'm spending a ton of money
at the end of the job, right?
And so these weekly invoices arethe check-ins as well as the
cash flow.
And what's great about it, Iinvoice$10,000 this week for
what I'm doing next week.
I get paid$10,000 on Friday.
Guys show up on Monday.
(20:29):
I've already ordered materialson Friday, I spend a couple
grand on that.
Guys do the work, I spend sixgrand on that.
By next Friday, I've got two,three thousand dollars left in
my bank account.
That's profit.
That's mine.
Put it in my pocket.
I can spend that and not feelnot not have to go sell another
job to finish this job.
Because go ahead, go buy thattruck, right?
Yes, you've got to uh don't buythat truck.
(20:53):
Uh I'm gonna make a hat thatsays don't buy that truck.
Don't buy that truck.
Uh so that being said, doing theinvoicing like we're talking
about, and it there's a lot ofintricacies what we're talking
about, and we'll dive into thatif you come into the coaching
program.
That being said, this is thebest way to build that nest egg
because I invoiced 10, I spentseven, I got three left over,
(21:14):
and that's my money.
I can I I need two grand for mybills this week.
I'm gonna put a thousand in thesavings account, let's do the
next job.
I invoice ten, I and so it'sbite-sized knowing of where my
money is and what is my moneyand what isn't my money.
It's not I I took a a$50,000check up front for a$120,000
(21:35):
job, and I've got to make surethat over the next six weeks I
keep that money to pay my crewsand materials.
Because the the temptation isgonna be perfect.
SPEAKER_00 (21:45):
I've got my I've got my Chase card, I need to pay
that down, that's five.
I got my Home Depot line, Igotta pay that down, that's
three.
SPEAKER_01 (21:53):
My transmission went out.
SPEAKER_00 (21:54):
Transmission went out, I gotta have that to work.
And then by the time you needthe cabinet down payment, that's
twenty thousand dollars, you'vegot fifteen, and now you're kind
of like now you're invoicing forsighting, so you can pay for the
cabinets.
Yes.
It gets so it gets so messy.
SPEAKER_01 (22:08):
Yep, yep.
So working capital-wise, this ishow we suggest doing it.
It feels basic, it feelstedious, it feels like a lot of
paperwork.
It is not any of those things.
It's easier because it's it'ssaving you so much of the
reactive paperwork and thereactive headaches and the
showing up and the arguments andthe lawyers, like all of that
(22:28):
goes away.
So, yeah, I spent more time thisweek making seven invoices for
the seven projects we're on thanI would have if we just would
have done it every few weeks aswe get to spots.
Yes, it took me an extra twohours this week.
That being said, those two hoursI spent this week is saving me
two weeks at the end of the endof the job when I can't get off
the job, clients pissed off, Ican't get the next job because
(22:51):
I've got three bad reviews.
Like, it's it we're not sayingto do it this way because we
like spending your time.
It's because this is the waythat works.
So start start trying trying todo it this way.
All right.
Next, one thing that guys don'trealize though, sweat equity.
I think something that I seewith guys starting up companies
is they invoice and they theybid for the time they're gonna
(23:14):
spend on the job.
I can do this job in four days.
I charge 500 bucks a day.
So I'm gonna envoy, I'm gonnacharge you, I'm gonna quote you
$2,000 for this work.
What about today when you'resitting there doing an estimate?
What about when you got home andspent another hour on the
estimate?
What about collecting materialson Monday before we started
Tuesday?
(23:35):
What about chasing them down forthe five?
Like, it's not a four-day job.
That's a seven-day job whenyou're gonna be on site for four
days.
Yeah.
So we need to capture that extratime I'm spending.
Uh one one coaching clientearlier this week, uh, we were
talking about they had one jobthat it was a small job.
They were kind of facelift on abathroom, uh, had a crawl space
(23:57):
underneath it.
They were just, you know, newtoilet, new tile, new uh vanity,
new light, right, and paint.
Small job.
They had they this company hasan on-staff crew.
I don't suggest it.
That's what they want to do.
I'm a coach, I'm not an owner.
They have an on-staff crew.
Their crew is in there doing it,and the homeowner said, Hey, you
know what?
It'd be great if we can movethat toilet over six inches to
(24:20):
be right up next to the wall.
So we we capture that extraspace.
They're halfway through the job,right?
And so they said, you know, tomove that toilet, I gotta pay my
plumber 800 bucks to come overhere and do that.
Great, do it.
Well, their crew has a pull-off,their plumber comes in two days
and fixes it.
So the crew is now three dayswith no work.
(24:40):
Who's paying for that?
Right?
You can't charge 800 bucks forthat change order because that's
that's lost time that you're notcharging for.
So on instances like this, andI'm getting a little off script,
but that being said, instanceslike that, that's a$5,000 change
order.
And and they were when I wastelling them that on the
coaching, like, I can't charge$5,000 and move that over.
It's super easy.
(25:01):
I'm like, that it doesn't,that's what it's costing you.
Like, you got three days withthe crew not doing work.
And so you've got to set that upbeforehand in the client
engagement agreement, let theclient know this is why change
orders get so expensive.
And then if that happens, tellthe try to get the crew on
another job, but I've got themoney to cover if they're just
at home because they're onsalary, right?
So we need to make sure thatthose lost times get captured,
(25:25):
whether it's your personal time,whether it's your cruise time,
whether it's your shopping time,whatever it is, that's part of
my quote.
I'm not gonna do that for free.
And my bookkeeping time.
I'm doing quick books andorganizing it.
Who's paying me for that?
Right.
So we need to make sure our ourour quotes and our pricing
accommodate extra time for thejob and that I need to be
(25:46):
spending on it.
SPEAKER_00 (25:46):
And that brings up a good point.
Um, one one thing that youshould absolutely spend time
talking about in your CEA andthe client engagement agreement
is the cascade effect of pausingwork, change orders, that type
of thing.
Because when you especially ifyou don't have an in-house crew,
(26:07):
which again it you shouldn't fora lot of reasons.
I'm sure it works for somepeople.
Um when you stop me working tomove this toilet over, and now
that crew has to stop.
I gotta bring the plumber in.
Who who are the guys behind theother crew once they can get
(26:28):
back going?
You don't own their schedule, soyou can't say, okay, we'll just
move every we'll just shifteverything over three days.
You gotta talk with that guy.
There's time there, you gottacoordinate with him.
You then gotta coordinate withthe glass guy because they've
already done their uh templateand they're supposed to install
it next week, but now they'regonna have to push that to the
following week.
Yep.
You gotta talk with thecountertop guy, all of these,
(26:51):
all of these lead time items,you have to push those down.
And so that three-day break,yeah, work is gonna get started
after that three days, butyou've actually lost another
three days four days from thatday, and then next week.
Yeah, yeah.
And so there's a cascadingeffect because the crews that
you need to come in after thoseguys, you don't own their
(27:13):
schedule and you need toreorganize the calendar.
And so it's not just that day,and but they don't understand
that.
SPEAKER_01 (27:21):
Well, and I'm not having to pay my painter extra
to postpone them to next Fridaybecause he can't come back
Monday.
He's got another job, so it'sgonna he's gonna come back next
Thursday and Friday.
It doesn't cost me anything topay the painter to reschedule.
But what it did cost, theunbillable hours that it cost
me, is I could have been offyour job by this Friday and
(27:41):
starting another job on Monday.
Instead, I'm now walking yourjob next Thursday again and next
Friday once the painter's done.
And so I'm now doing, I'mdriving out there three, four,
seven extra times.
SPEAKER_00 (27:53):
And I'm explaining to the client every time, like
what's going on today.
It's like it's you did a changeorder and now everything's
messed up, is what happened.
SPEAKER_01 (28:02):
Part of that too, and I've I I mean, I'm beating a
dead horse here because I saythis on every podcast.
What a horrible image.
Oh, I'm tickling on a live pony.
I don't know what to try to say.
I'm beating a dead horse onsaying this every single time.
If you don't spend the time inpre-construction preparing the
(28:24):
job, it's costing you money.
And this is what we're talkingabout.
If I will lay out all of thisstuff, if I do the CEA, I lay
out this, I organize all thisand say, listen, just so you
know, we need to lock into thisyour design.
Not they wanted a new bathroom,I quoted it to them, we signed
it, and we go.
Instead, hey, let's talk aboutthis.
We got to get this locked in.
If it, if, if it pushes on days,it's gonna cost you a lot of
(28:45):
extra money.
Uh, use that toilet example.
That's in$5,000 change order.
If we decide it right now, it'sgonna cost you$800.
So you're gonna lose$4,200 tomove that toilet next week.
Right.
And so we start laying that outso they understand that.
So when it does happen, A,they're like, you know what?
I'm not even gonna suggest Idon't know, I don't want to pay
that extra money.
And B, if it does happen,they're like, I get it, I know I
got to pay the extra money, butit's worth it for me.
(29:07):
Either way, I'm I'm not the badguy anymore because I spent that
pre-construction time talkingthrough it, thinking about it,
thinking, hey, what if we movethat toilet over?
I'm getting an upsell, I cancharge them extra, I'm making
the bathroom what they want, butI've spent the time, I'm not
rushing to get the job started.
So, all that being said, there'sso many lost billable hours,
(29:28):
non-billable hours on these jobsthat I see when you're
inefficient and when you don'thave this the client engagement
in place, as well as the readyfire aim mentality of let's just
get out there and get the jobdone.
You gotta be able to capturethese billable hours, let
non-billable hours, lay it outto the client beforehand, get it
in agreement, and let them knowhey, we're starting tomorrow.
(29:51):
Any changes after tomorrow isgonna cost a lot more.
Any final thoughts on this?
Lay those out and we're we'rewe're good to go.
All right.
So the other things I didn't Iactually didn't mention on
startup costs, I want you to getGoogle Workspace, Google my
business.
I want you to set up a Clark atcompany domain.com.
I don't want it to be you know,Clark's Construction at
(30:13):
gmail.com.
It's very cheap.
You're paying eight bucks, tenbucks a month.
I'm gonna get Gmail set up.
I'm gonna get that tied in.
SPEAKER_00 (30:21):
Um, I'm also what are are these lights flickering
every once in a while?
SPEAKER_01 (30:27):
No, I'm not saying that.
SPEAKER_00 (30:28):
Are you having a stroke?
That's my question.
SPEAKER_01 (30:32):
James's gonna lay down on the floor while I finish
this podcast.
Uh, anyways, the the things Idon't want you to spend money on
super expensive softwares.
I know I I sell software, superexpensive softwares.
What I want is QuickBooks.
We've got a light version that's89 bucks a month.
QuickBooks and our light versionis all you need.
You don't need fancy softwares,we don't need to spend$1,500 a
(30:56):
month on builder trend.
You don't even Need our higherend software.
Don't, don't, don't spend on theProTre 360 high-end stuff.
We don't need it until you startgrowing beyond where it makes a
lot more sense.
What I need you to get on is ourlight version,$89 a month, a
QuickBooks version.
Those we're gonna set up now.
A lot of times there's like,well, I'll set up QuickBooks
(31:17):
when I, you know, at the end ofthe year when my account needs
it.
We're we're already setting upyour processes wrong.
Let's get how we manage moneyset up day one so it doesn't
become this huge hornet's nestby the end of the year.
Um, what we're not buying, newtruck.
Don't buy a new truck.
Don't buy a new truck.
Stay in your truck.
I've still got my 10-year-oldtruck and I love it.
(31:39):
Paid off.
It's a free truck to drive.
I love it.
Don't don't rent office space.
You don't need office space.
You got Starbucks, you got yourliving room, you got your job
sites.
Do not rent office space dayone.
Office space is needed once youhave employees.
And even then, it'squestionable.
So do not do not go, all right,we're gonna get the company
(32:00):
going.
I'm gonna rent an office, I'mgonna get this stuff set up, I'm
gonna have a storage space forall my tools.
I'm gonna rent like I'm gonnabuy the Costco pack of pens.
Yes.
Like, no, don't.
Just don't do it.
Like we're gonna spend moneywhen we have cash to spend, not
if I spend it, the business willcome.
We're we're we're not doing itthat way.
Um finally, I think my lastpiece of advice is that guys use
(32:25):
money and cash as a barrier tosay, yes, I'm gonna get going.
Don't let that happen.
If we can help you get this setup, and again, I'm uh this is an
anti, this is ananti-commercial.
Don't hire a consultant yet.
Don't hire a coach yet.
Let's get you going.
I've got some free stuff I'llgive you if you're starting a
company.
Come on our retreat in January.
(32:47):
We'll figure that stuff out.
There's stuff you can do to getsome basic structure, let's get
you going.
Our like our foundationsprogram.
I wouldn't even say get thatgoing yet.
Let's get you some money to payfor that.
But that's basic stuff to helpyou get your structure in place.
And it starts at 500 bucks.
So there's some basic stuff todo to get the structure in
place, some bare bone skeletonof what you need to do, and
(33:09):
let's start growing from there.
Once you get the cash, then wecan spend on stuff.
But I don't want you to spend onthat.
I don't want you to come intocoaching yet.
Let's get some systems, basicsystems in place, basic
paperwork in place, figure out aCEA.
We'll we'll work on that withyou.
But make sure you understand youdon't have to have six figures
in the bank to get a companystarted.
(33:31):
It's it's a risk.
It's I do it early.
You know, a lot of guys wait.
I'll do this, you know, later onwhen I have the money, and all
of a sudden they're 35 with twokids.
And it's like, bro, if you goout on your own and doesn't
work, where are you buyingbuying formula from for your
kid?
So if you're in your 20s andyou're considering making the
jump, make the jump.
(33:51):
Now's the time.
Explore, fail, lose.
That's okay.
You're in your 20s, do thatbefore you you have a lot more
responsibilities.
If you're in your 30s, 40s, andyou're looking to do it, let's
get a game plan together.
If you got responsibilities, ifyou got people depending on you,
let me help you with that.
But it doesn't take a lot ofcash to start a contracting
company.
So don't let that be a barrier.
(34:12):
That's all I got.
You got any final words on that?
SPEAKER_00 (34:17):
No.
SPEAKER_01 (34:19):
I I think it's a manage your money well, get some
systems in place that you'refollowing.
I think one of the biggestthings to think about is uh that
I hear that's the wrongstatement from guys is if I I
will start doing it that wayonce I get there.
And it's like you're not gonnaget there unless you're doing it
the right way.
Yeah, you you you're gonna hit aceiling and your whole
(34:40):
foundation of what you've uh themetaphor that I always use, like
beating a dead horse.
Beating a dead horse, tickling aunicorn.
Uh no, the foundation is such agood metaphor of like, hey, I'm
gonna pour the foundation once Ibuild the structure of the
house.
You can't do that.
You can't build the structureuntil you have that foundation
(35:00):
poured and set at the rightsize.
So let's build a foundation.
That's why we have a foundationsprogram, but let's get some
systems in place, basic moneymanagement that you're
committing to uh someaccountability, whether it's a
spouse, a friend, or us, towhere this is how we're managing
money.
We're not gonna spend on stuffthat we don't have money for.
(35:21):
Uh, and we're gonna reallyutilize our jobs to fund
ourselves, not us to fund ourjobs.
If you want to help set that up,go to proshook360.com, hit us up
at the contact us, we'd love tohelp you out.
Go to contractorcuts.com.
We'd love to talk to you.
That's all I got.
Thank you guys for listeningthis week, and we'll talk to you
next week.
Bye.
Bye.
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