October 13, 2025 • 58 mins
We lay out a simple, construction-specific system for paying yourself with discipline using a three-account waterfall, then dive into owner pay, distributions, and the rules that keep taxes protected and jobs funding themselves. We share red flags to watch and a weekly cadence to build healthy reserves and reduce stress.
• profit first adapted for construction cash flow
• three core accounts with weekly sweep rhythm
• strict rules for taxes, COGS, and personal pay
• owner wages versus owner distributions clarified
• milestone versus guaranteed distributions compared
• pricing structure that funds labor and profit
• equipment treated as overhead, usage billed on jobs
• red flags on margin, overhead creep, and low reserves
• tight-cash playbook to freeze draws and cut burn
• weekly and monthly finance cadences that compound
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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.
Welcome back to podcasts.
SPEAKER_02 (00:16):
Welcome back to podcast world.
SPEAKER_00 (00:18):
I'm Ploop Turner.
SPEAKER_02 (00:20):
Thanks for joining us.
Welcome to Contractor Cuts.
I'm Clark.
That's James.
If you don't know us, that's onyou.
All right.
So this week we are doing oursecond week of financial
management, how to pay yourself.
Paying yourself.
Uh if you didn't listen to lastweek, this is one of those that
I really don't want you tolisten to this week until you
(00:42):
listen to last week.
Last week we talked through.
In fact, he forbids it.
I forbid it.
You have to pinky promise thatyou listen to last one before
this one.
Now, this one is once you geteverything organized and you're
looking at your numbers, you cansee your gross profit
percentages, you can see howmuch your revenue is.
You can you have a game plan topay yourself as an employee of
(01:04):
your company and a separatepayment as owner of the company.
That was last week how to setall that up.
This week we're talking aboutpaying yourself the buckets, the
the how to pay, the what type ofpay.
We're gonna dive into how we doit in our companies.
And James does it differentlythan I do it, and there's not a
right and wrong.
We're gonna talk about each ofour styles of distributions and
(01:24):
the pros and cons of each one.
Um, so I think it'll be a goodone.
Thanks for joining us.
So to the first spot that we'restarting at is gonna be the five
different uh, and this is thisis kind of a book report on the
Profit First uh book.
Um the main thing about ProfitFirst, uh, if you've read that
(01:46):
book, if you haven't, I've I'veI should be getting uh
commission on it because I pushit so much.
But it is just a greatsimplistic way to look at and
and really it struck and strucka chord with me when I read it
because it was a book that Iwish I had in the beginning,
because I've always put myprofit back into the company.
So I never took out a lot.
I always took out the minimumsand I I I grew the company off
(02:10):
of the profits, which was good,but I also didn't have a game, I
was too risky in on the first 10years of this company.
It was, and when I say toorisky, I didn't plan for the bad
times and I didn't put moneyaway for the bad times because
hey, if we're doing 100 thismonth, we should I bet we could
do 150 next month.
And if I can get us to 150, thenwe could do two.
(02:32):
And so all I got to do is keepputting money back in to grow,
because then if I put all thismoney back in, I'll get double
it back out.
Right.
And so I was a full-timeinvestor in this company, which
is a good thing.
I I want to be my own investor,but I was risky with those
investments, and some of therisk didn't pay off because I
was flying too too close to thesun sometimes.
Ah, it cares.
(02:53):
Yes.
And so it it's it's somethingthat if I in retrospect, the
what we're about to talk abouttoday, if I would have done
this, it would have built inself-control around money as the
company owner, which I learnedthe hard way.
Uh, I've been six-figuremistakes and costly, costly
things that through today I'mstill paying for from bad, bad
(03:14):
decisions 10, 15 years ago.
Um, that hopefully I'm out ofvery soon.
But that being said, this is away that I want you guys to set
up your companies, yourfinances, and to view it.
Um so I'm gonna cover the fivebuckets, the five bank accounts
that they say to use in profitfirst.
I'm gonna suggest for thesmaller companies, if you're
(03:36):
under six to eight million, Ithink three bank accounts is a
better way.
I'm gonna do a kind of aconstruction spin on his profit
first because it's not so blackand white in terms of dollars
coming in and out of a company.
Um, you know, there's if you'rein a marketing company, we
create, we invoice along theway, you pay what we're doing,
and it's in and out.
There's no cost of goods ofmaterials that you're buying.
(03:59):
There's not uh big deposits orbig final draws or bank draws
where I'm getting paid 60 daysnet terms to where I don't see
my money for like there's a lotmore moving numbers in
construction, which is a badthing, but it's a it's a the
devil you gotta dance with,right?
Like you have no choice.
It's right here.
It's the only way that you cando business.
(04:19):
But you want to dance or not.
But it really sets you up tofail if you let the numbers run
the if you let the dollarscoming in and out decide the
company.
The biggest failure I see in inconstruction companies that I
coach is the pot system, whichwe've talked about before.
All the money comes into pot.
(04:39):
I spend the money out of thatpot, and I hope that there's
money left over.
And part of that spending is Itake some out and I gotta pay
me, I gotta, I gotta pay mybills.
And so at the end of the month,oh, this pot is empty and I
still owe that sub 10 grand.
Hey, buddy, I'm gonna get younext month.
I promise doesn't work.
That guys can't survive on that.
And that and then they're suingyou or putting a lien on your
(05:00):
client's house, and it just goesdownhill from there.
And so as soon as you startoperating that way, it that's
how you have to operate in thefront end.
Uh, it feels like that guysthink it's just, I know, I I
invoiced the job, I went out anddid it, I got this money.
Okay, I gotta go do another job.
I spend out of that money, Iinvoice for the next one.
And when you're doing one job ata time in the beginning, it is
(05:23):
it is the the system becauseit's like all the money in my
account is for this guy's job,and I spend the money on his
job.
Then you start doing two, three,four jobs, and all of a sudden
my bills are stacking up, and Iborrowed money from my uncle
because I needed to get thisstuff done, and now I got to pay
that back, but that's coming outof what I need.
SPEAKER_00 (05:40):
Or this guy paid you, and this guy you're gonna
invoice next week, and you'relike, oh, that's great.
Then you invoice that guy nextweek, and he's like, Well, I'm
not paying you because X, Y, Z,and you get into a dispute, and
that money actually doesn'tcome, and when it does come,
it's$7,000 short.
Yep.
And now you are literally havingto use other people's money to
(06:01):
pay for this guy's job.
SPEAKER_02 (06:02):
Yes, yeah.
Well, and uh it it feels like byno fault of your own, right?
Like I did everything I wassupposed to do.
This guy says, Well, I Iremember one client early on, I
did the work, it was aninvestor, I did the work on his
house.
The end of the job, he was like,Cool, awesome.
Like he owed me 30K.
Like I did, knocked it out realquickly, did everything.
(06:22):
It was a flip.
Hey, I need to get this on themarket.
At the end of the job, he'slike, Hey, as soon as it's sold,
I got you paid.
I was like, What?
He was like, I don't have thecash.
As soon as it sold, I I got youpaid.
Oh, thanks.
Yeah.
And so I'm literally like Ididn't know I was an investor
with the and so I like I I tryto pull out my my my big guns.
I'm like, well, I'm gonna put alean on now.
She's like, Yeah, please do.
(06:43):
We'll pay, we're gonna pay youat closing.
SPEAKER_00 (06:45):
And I'm like it was yeah, it was it was uh Say his
name on the I'm not gonna sayhis name.
SPEAKER_02 (06:51):
But and I mean this was even before Jared, it was
when I was one man show and uhhe was out of state investor.
Um and I I mean it was when Iwas probably making$35,000 a
year doing this.
And so like he owed me, I mean,I I don't remember the exact
number, and it wasn't it wasprobably 18 to 20.
I don't think, but again, thatwas eight-month salary for me.
(07:12):
Yeah, right.
And like I I literally had to goto people and borrow money to be
able to fund this.
Um anyways, all that all thatbeing said is we have to have a
plan.
And this also ties in, I mean,everything we do ties together.
This ties into the way weinvoice, right?
We talked about this a number ofweeks ago, probably a couple
months ago now, about how weinvoice this week for what's
(07:34):
getting done next week.
Because if he can't pay that,like if I would have been doing
running the company how we donow back then, I would have
never started that job.
But instead, I trusted him.
Yep, all right, get going, I'mgonna get it done.
I can knock this out in twoweeks, make so much money, um
$20,000 job, and just getscrewed.
But so all of this ties togetherwith that.
But if you're invoicing theright way, like we always we
(07:55):
always preach, it's gonna allowyou to manage your money and not
let other people borrow from youunexpectedly like that.
SPEAKER_01 (08:02):
Yeah.
SPEAKER_00 (08:03):
So let's go over the can I Yeah, please.
At request one thing.
Instead of running through allthe five, can you give us the
two that we're not gonna betalking about first?
SPEAKER_02 (08:15):
We're gonna be doing all five.
I'm just combining.
Oh, okay.
I'm I'm grouping them.
So I'm gonna lay out how you dofive, and I'm gonna group a
couple of them, and then as yougrow bigger, you can separate
them out.
Okay.
So let me I'll just run throughthem, just name them off, and
then I'll talk about what I'msaying.
Okay, it'll make more sense.
So the five that they theysuggest in profit first is an
(08:36):
income clearing account.
So all the deposits land in thataccount.
You're not spending money out ofit, it's just where all the
money comes into.
That's number one.
Number two, a cost of goodsaccount, which is materials and
subpay come out of there.
Where all of our expenses tocost of goods only comes out of
(08:57):
that second account.
Account number three is you'reoperating an overhead account.
That's where I'm paying my rent,my vehicles, my admin, my
software, my insurance, um, youknow, all of all of the non-cost
of goods expenses, all of myoverhead, my my pay as a project
manager, all coming out of thataccount.
Number four is our taxesaccount, where we're pulling the
(09:21):
taxes out of the profits andputting it into that account.
That's the untouched, separatebank account.
No, what one of my keys to thetax account, no online access.
You can put money into it.
I can't pull money out withoutgoing in person.
That way I can't just borrowfrom it one night at 11 p.m.
when I'm stressed.
Uh, and then number five isgoing to be owner pay and
(09:44):
retained earnings.
So those are the five that theysuggest.
And in a large-scale company,when you're doing 10 million
plus a year, those are really,really good accounts to have set
up.
Um some guys even, and again,this is if depending on your
bank, and if you can do subaccounts within an account, do
the income clearing separate itout in sub-accounts by job.
(10:05):
Right.
If I'm doing if I've got fourjobs that are all six figures
running, I'm gonna havesub-accounts where I'm gonna
deposit that money into theaccount and move it right into
that sub-account every singletime.
Again, the question is how muchextra time do you have for
accounting?
Once you have an office manageror someone managing your
finances day in and day out,this good, this is a lot easier.
(10:27):
But as a one-man show, athree-man show, a four-man show,
it's very difficult to managefive separate accounts because
of the construction industry andthe money moving.
The way that we do the invoicingreally substitutes the need for
some of this.
And that's why I'm okay withcombining some of these.
And that's what that's what I'mabout to talk about.
(10:48):
So when I say combining, I Ireally combine the first three:
the income, the cost of goods,and the operating and overhead.
When I'm getting started, thethe three accounts are those
three combined.
And then my second account'sgonna be taxes, and my third
account's gonna be the owner payand retained.
I really like it that way.
(11:08):
Uh, and then that's that's kindof the three accounts separated
out.
If you start growing, you canseparate it into four and
separate the incoming uh and theclearing account and your cost
of goods.
That way, I'm only I'm I'mpurposefully spending set moving
money from my income accountinto my cost of goods tied to
that job.
And we'll talk about that in asecond.
(11:30):
But the the main reason that Icombine those first three, the
income clearing, the cost ofgoods, and the operating
overhead, is because of the waywe do our invoicing.
If I'm invoicing this week and Iget payment by Friday, I'm not
going to pay myself until nextFriday, but I have all of my
cost of goods go out immediatelyover the weekend and early next
(11:52):
week for materials.
I'm queuing up all my subpay byTuesday, Wednesday for labor.
And then by Friday, whatever'sleft in the account is pretty
much that third account.
It's my it's my operating andoverhead that I can pull out of.
So by the end of the day Friday,we're we're doing incremental
weekly uh financials.
You know, money in Friday, moneyout Monday through Friday.
(12:16):
And by the end of the day,Friday, it's sitting there of
that's pretty much I can movethat money into my taxes and my
owner pay and retain earningaccounts.
So that's why I say threeaccounts when you until you get
to a size that we have someoneto actually their full-time job
is managing the money, managinguh pay.
I mean, we got you know, when wegot uh Melissa and um eventually
(12:38):
uh Emily were doing it, but likewe all of the Home Depot
accounts and Lowe's accounts,and we need to move this around
to that, and if this is goingthat, this is coming due.
We need like all of that stuffis a full-time job for someone.
That being said, until you getto that spot, I'm okay with
having those three accounts.
Having the one main account, themoney comes in on Friday, we
(12:58):
spend through the week for whatjust came in, what's going out.
And I want that account to havekind of a base number.
We keep it at 10 grand.
But by the end of the day,Friday, I'm funding the tax
account and the owner pay andslash retained earning accounts.
And that way it's a one-weekcycle on all your cash.
It's and it's just kind of intoone account, spend out of it,
(13:20):
move it out of that account.
That makes sense.
(14:24):
So again, as you grow, thoseseparate five make sense.
I I've I've tried this, I'vetried it as a one-man or
three-man show.
Um, it just was nothing but Iended up abandoning one account
because money was coming intoone account on Friday, and I had
to start buying materialsFriday.
And so I was literally waitingfor the deposit to clear before
(14:44):
I could move it over to thesecond account for my cost of
goods account, and then I startspending out of there, but and
it's just it became more workthan what was necessary because
of the way we're doinginvoicing.
Yeah.
Um, now if you are taking a 40%deposit up front, do it this
way.
Have the separate accounts.
You're taking a big draw upfront.
I want to make sure that thatstays in my incoming and I'm
(15:06):
controlling what I'm bringingover as my cost of goods.
And then what out of thataccount is profit that I can
move into my operating andoverhead account.
And then it flows from thereinto my operating overhead
account into the taxes andowner, ownership, and retained.
Does that make sense?
So that's kind of the thewaterfall.
(15:27):
The way that I listed them isthe waterfall.
It's everything comes into here,it goes into these other
accounts, and this one goes outto the vendors and subs, and the
other account goes into ourprofits and taxes.
Cool.
Here are some rules aroundthose.
Number one, I'm never payingmaterials or subs out of my
owner pay retained.
(15:48):
I'm never paying materials andsubs.
I'm never paying my cost ofgoods out of the retained and
the owner pay.
If I need money, it's going tobe for operating an overhead
that I might have to borrow fromour retained earnings.
If it's like we've had two badmonths and we got payroll coming
(16:09):
up, that is something that I'llcheat out of our retained
earnings.
But if I owe, if I got to go buya lumber package for a job and I
don't have any money anywherebut my retained earnings, that's
a problem because that jobshould be paying for its own
materials.
So if I don't have the jobs thatare depositing money and the
income account paying for thatoverhead and materials, that is
(16:32):
my biggest red flag because weare crashing hard at that point.
And so that's one of the one ofthe big rules that you write
down.
I'm not going to ever pay out ofmy retained earnings account to
man to pay for labor andmaterials on a job site.
Number two, I'm never payingpersonal from operating.
(16:53):
I don't want my, I don't wantincome clearing, people
depositing money, and I say,hey, I need a paycheck, I'm
going to pull money out ofthere.
Because that money has got tofeed labor and materials and
then overhead before it gets tome.
And it has to go down that flow.
Because if I'm like, well, Ineed to get paid$12,000 this
month, like that's what I take.
(17:14):
Well, you you're taking morethan you deserve and have
earned.
If you if it doesn't flow downthose other accounts and land in
your own or pay account, youdon't have the money to pay
yourself that.
You're not earning that as acompany.
I'm sorry.
It's it you it's not there foryou to take.
It's not your money.
You're literally stealing totake that money out of that
account and put it into your ownpersonal um uh personal pocket.
(17:38):
Are you following me?
I feel like I'm in.
I'm in.
I um good.
Um next, another rule.
I'm gonna fund taxes beforeanything else.
Now, I the odd part is I saythat's taxes are the fourth out
of out of fifth account down thewaterfall.
But if you think about it,everything before taxes is tax
deductible.
(17:59):
So if I invoice 100 grand thismonth and my cost of goods and
overhead are 90 grand a month,I'm only gonna pay taxes on 10.
And so before I pay myself orget retained earnings or
anything else, I want to pullthose taxes out into the tax
account.
And then that last amount ofmoney can go.
So I pull$2,500 in the taxaccount,$8,500 goes into the
(18:20):
retained earnings and owner payaccount.
Last rule, I'm gonna build uh mygoal is I'm gonna build a
retained account of one times mymonthly revenue.
So if I'm averaging a$100,000 amonth, but I'm looking by the
end of this year to get to$150 amonth on average, I'm gonna go,
(18:40):
my goal is to get$150K in thatin the retained earnings
account.
Not in my income clearing,because I want that to be a
password.
I want that to come in and feedout.
So when I invoice a job for$50,that's in that account, and I
spend out of it until it's timeto invoice again and I refill
it.
Um, but I uh what I want to dois build that retained earnings.
Now, I I mentioned this lastweek.
(19:02):
My retained earnings account, Iwant to average my monthly uh
revenue, but I I'm okay, andagain, this is cheating a little
bit, but I'm okay.
My monthly revenue needs to atequal my retained earnings plus
my accounts receivable.
An accounts receivable account,if you don't know what accounts
(19:23):
receivable is, that is moneyowed to me that I've spent on.
So those are those 30-day netpay.
This client owes me 50K.
So that 50K that that clientowes me, I've spent all my money
on their job side.
I'm waiting for that check toclear from that commercial
contractor that's coming in inthree weeks from now.
That 50K plus my 50K in myretained earnings equals 100K,
(19:45):
which is my monthly.
So that that's safe for me.
Um now you got to be reallygood, and when that money comes
in, it goes straight, passeseverything, goes straight into
the back to make sure it landsin retained earnings.
But I want my retained earningsplus my accounts receivable to
equal my monthly revenue.
(20:06):
Okay?
About to move on.
Does all that make sense?
I feel like that was a lot oftechnical talk.
Um No, I th I think I'm I'm withyou.
What's your do you have anyfeedback on that, on your
experience, on what you like,what you don't like, on that?
SPEAKER_00 (20:22):
Uh the one you mentioned where uh your invoiced
plus your retained earnings.
No, your invoices are accountsreceivable.
Your accounts receivable plusyour retained?
Is it retained or was it theincome?
SPEAKER_02 (20:40):
No.
SPEAKER_00 (20:41):
Retained.
SPEAKER_02 (20:41):
Retained earnings, just profits that are sitting in
the company plus the money owedto you.
SPEAKER_00 (20:47):
So that one, the money owed to you, that's the
one we mentioned it earlier,that can get a little dicey in
construction because if ithasn't been paid, there's always
that possibility that theclient's gonna say, yeah, I'm
really not happy with how thisturned out.
You might either either have tospend more money to fix XYZ or
(21:11):
in some cases uh not charge thefull amount and you're gonna
walk away five thousand lessthan what the actual invoice
was.
Yeah.
And so that's one that's like ifI'm cutting five thousand
dollars off of this invoice,that's profit.
That's just pure profit that I'mhaving to consider cutting off.
(21:34):
Yeah.
And so that can kind ofdepending on the size of company
you are, that could be prettyproblematic, or at least like,
man, that's like my wholepaycheck.
$5,000 is a lot of work to nowjust kind of freely give up.
SPEAKER_02 (21:47):
Yeah.
Well, I think two things onthat.
Number one, where guys miss onthat is when I'm building an
estimate and we cut$5,000 out ofit, I'm cutting$4,000 of labor
on that.
When I'm trying to get yourprice from your our our
estimates at$105 and you can'tspend over a hundred.
Well, what are we gonna not doout here?
(22:07):
So I cut it down to a hundredbecause we're we're not we're
lowering from high-end fancycountertops to some basic
granates, right?
And so we cut the the price downfive grand.
Well, that's all that's only athousand bucks out of my pocket.
On the back end, hey, I I need afive thousand dollar discount on
this.
Well, that's five grand out ofmy pocket, which I'm making 30%.
(22:32):
So that's$15,000 of the totalwork we did because I've I've
managed$10,000 worth of work toget that five grand profit.
Right.
And so it feels the same becauseit's five grand on the front
end, five grand on the back end.
World of difference.
It's three times as much.
And so guys like, yeah, justthey're so desperate to get
paid.
Just pay me that.
(22:53):
That's fine.
Keep your five grand.
Well, you literally lost a ton,right?
It you didn't lose, you didn'tdo five grand less of work, you
lost 15 grand of work that wasthat you did for free.
Um, secondly, what what you justsaid, why this is so good with
this with the with the waterfallof accounts is I've got that
(23:14):
money owed to me and they needme to come back and fix some
stuff.
I'm gonna pay that out of myincome clearing and my cost of
goods account, even though I'vealready they owe me the money.
And so that's less money thatwill waterfall down into my
profit account.
But when they finally pay me,that fills up the profit
account.
So I'm not stealing from myprofits to pay for that job.
(23:36):
I'm trying to just pay myselfless profits from that bank
account that had all my money,the the the incoming and the
cost of goods account.
Does that make sense?
So it's it's like, yes.
Again, it's it's some of it islike you're saying this, and
it's kind of the same thing.
Um but it's it's the mindset ofwhere that money's coming from.
(23:59):
Uh, and and the value of fivegrand is a lot different at
different points of the job.
Yeah.
All right.
So let's move on from thosebuckets and let's talk about
kind of what to do with thoseand and and define some stuff.
Number two, let's talk aboutowner pay.
So we've got you as a projectmanager running your company.
(24:20):
And then we've got owner pay asyour second paycheck that you're
gonna get.
Um now you don't have to cutyourself two checks.
It's fine.
We need to separate out inQuickBooks as two different two
different categories that themonies go into your check.
All that being said, and this isa great setup because you know,
a little behind the curtain forJames and I, James is the
(24:41):
general manager of our company,he gets a paycheck for being a
GM of our Austin branch.
Um, I don't get a paycheck forworking in that company, but
then we have distributions thatwe both get out of that company.
So as partnerships go, this issuper important.
When you're a one-man show, it'svery important to do as well.
But partnerships force it thisway.
(25:02):
Uh, and this uh if you're if youdo a partnership, uh, this is in
my coaching, this is how I setit up of like you need to get
define your role.
And James can get fired as GM ifhe does a bad job of his role.
He's still getting his ownerdraws because he's still the
owner of the company, right?
And so James gets paid a certainamount for GMing the company,
and that's part of our overhead.
That's James.
If if James quits tomorrow,we're gonna hire someone with
(25:25):
that paycheck that James isgetting to run the company.
And then the ownerdistributions, me and James meet
uh every other week uh asowners, looking at our company.
Um, and we do, and we dodistributions a certain way,
which we're about to talk about.
But that is, hey, we've got inthat distributions the owner pay
(25:45):
in the retained earningsaccount, right?
Like I said earlier, or I said,I guess it was the last podcast,
we've got$10,000 that falls intothat account.
I'm okay with distributing fiveto owners, and five stays in is
retained earnings.
Because that we need thataccount to keep building because
we want that to equal ourmonthly revenue and we want our
monthly revenue to grow, right?
(26:06):
And by next year, I want todouble in revenue.
Well, that account has a doublein size, right?
So all this being said is oh,hold on, we got a phone.
But all that being said is whatwe want to do is set is James,
and it's great because we'rekind of set up this way, even if
we're both working in thecompany, James and I are getting
paid out of the overhead accountas employees if we're partners
(26:28):
running this together.
Later, we're gonna assess theowner pay in the retained
earnings account, and we'regonna start dividing that up.
Now, one thing I don't want towant you to do, not to get
caught in the weeds, is keepdividing the retained earnings.
What I mean by that is we've gota hundred grand in the retained
earnings account.
I'm gonna distribute 50 to 25 tome, 25 to him, and there's a 50
(26:51):
left in that account.
Then we get another 50 grandbuilt up and there's 100 grand.
I don't want to distribute the100 grand and leave 50 in there
and distribute 50 out.
What I want to do is say, okay,that retained earnings of 50
stays.
We made 50 more, so we couldsplit that.
We could distribute 25 of that,but now in the retained
earnings, we got 75, right?
(27:12):
So don't keep cutting yourretained earnings in half.
Uh make sure that that staysseparate when you're tracking
it.
All that being said, is wethere's there's really three
types of ways to distributemoney out of this owner's pay
account, the owner pay andretained earnings account.
Number one, guaranteed payments,a weekly, every other week draw
that just happens.
(27:32):
Uh, we're gonna take 1,500 uh uha week for owners.
Number two, quarterlydistributions, uh, or really
milestone distributions isreally how we do it.
Um, which is like, hey, uh everyquarter or after this milestone,
or once we get to this amount ofmoney in that account, triggers,
right?
As soon as we hit this X amountof dollars, that triggers a
(27:56):
distribution.
That distribution, whether it'smonthly, quarterly, milestone,
no matter what it is, that is ahundred percent the decision of
the general manager.
So in those decisions, I don'thave a say, I have an opinion,
and James will listen to myopinion, but he's running the
company.
And we set this up in writing inyour in your agreement because
(28:20):
the hands-off owner of thecompany should not dictate how
much of the legs of the companyget knocked out from underneath
it.
What we want to do is distributeonly enough that whatever's in
the account it can keep continueour growth and doesn't harm our
growth, right?
And so what I've seen is ownerswho are hands-off say, hey, I
(28:40):
need 10 grand.
Uh let's distribute.
And the guy running the companywho might not have as much
profitability in it, uh, I thinkyou, I don't know if you know
the company I'm talking aboutthat did this really, really
poorly and ended up going under.
Um, the guy running the companyis like, well, I need that
money.
Like, we need cash flow.
I got this big job coming up.
And like, well, I need that, Iwe need to distribute.
We're distributing.
(29:01):
And the owners voted todistribute, they distribute the
money, and then they startedborrowing from Peter Paul, Robin
Peter, PayPal.
And it just goes that way.
So you have to have the generalmanager running the company
who's in charge of growth be thefinal decision on how much gets
distributed.
Now we want to do a 50-50.
Sometimes we can only do 10% ofthat because we got some big
(29:24):
stuff coming in.
I mean, I remember when we'vetalked distribution before,
you're like, I've got three bigjobs that we're in the middle
of.
Let's wait to distribute forabout a month and a half because
I want all three of these to getthe final check before we
distribute.
All right, cool, do that.
Again, if we're living off thesalaries that were that's coming
out, those distributions arewhere we pay for vacations,
(29:45):
where we get our savings, wherewe start savings for the kids
and our retirement.
The kids' retirement, the kid,you know, like weddings, like
all like I want to set thecompany up where those
distributions are my icing onthe cake.
I'm not living off those.
Because if I if I need that tocome in and we have two bad
months, I'm like, James, I needthat distribution, I need I need
(30:05):
a distribution.
It he's in rock in a hard place.
Like, Clark, I can't do it.
You can't pay your mortgage, Iguess, right?
And so what we want to do ishave if I'm operating in the
company, I get a paycheck forthat.
And then the distributions comeabove and beyond that.
The last type of owner pay iswhat we call an annual tune-up,
where at the end of the year weassess and say, hey, you know
(30:26):
what, we got so much money inhere, let's distribute it.
Or, hey, you know what?
End of the year, let's changehow we pay.
And for the next 12 months,let's distribute five grand for
ownership every single month.
That's kind of, we like to lookat that our annual retreat if
you're if you're in apartnership.
Um, but yeah, that's that's kindof the owner pay distributions
and and how we do that.
(30:47):
The rule don't raise guaranteedpay until you have hit your
target margins plus reserves forthree straight months.
And what reserves are is myoverhead.
I need at least.
My overhead for three months inthat account for if things go
sideways, I can use that moneyfor the overhead.
Now I'm not using that for acost of goods because that flows
(31:08):
down that way, but we're gonnabe able to not have to fire
people if we missed if we hadone bad month.
All right, that was section two.
That was a lot.
Any questions about that?
No.
Let's talk about this.
So James and I have twodifferent views on what we how
we like to distribute ownershippay.
James likes to do let me buildthe account up, and when I feel
(31:31):
in a comfortable spot and we'vegot good money, I'm gonna drop a
ton of money in your bankaccount.
I am like, well, I'd rather dofive grand a month all year long
and at the end of the year getget extra if we have it.
Because then it's like, hey,it's consistent.
I know it's coming in.
I can, you know, that that sortof thing.
I think there's pros and cons ofit.
Tell me why you like the waythat you the the the milestone
(31:54):
way.
SPEAKER_00 (31:55):
Um I like the milestone way because I'm a
squirrel by nature.
Yeah.
And I once you send the moneyout, once the distribution is
made, if something were tohappen that it's like, hey,
(32:15):
we're starting, we didn't landthese two jobs that I thought we
were gonna land.
We're going into the wintermonths, and we just did a
distribution of$20,000 uh whichrepresents allowing us to keep
running for a month or two.
Uh once you're in that position,getting that money back is a
(32:37):
whole hell of a lot harder.
Rivers don't flow upstream.
Yeah.
So I really like having uh jjust building this chunk and
then saying we're good, we'regood.
That's great.
Let's keep growing that.
Let's start thinking about adistribution, let's forecast
down the road and see what doesincome look like in three, four,
(32:59):
five months down the road.
And is it a good time to do adistribution?
Also, on top of that, I like thechunks because in just your
personal finances, it's a loteasier to say, okay, here's the
money.
And I can make much I can makemuch more sound financial
decisions when I have thischunk, and I'm like, okay,
(33:22):
great, let's put this here,let's put that there, and let's
put this here, and then we cansplurge a little bit with this.
So when it's coming in like youknow,$1,500 a month or$2,000 a
month, it's almost it's it's notenough to move the needle, say,
okay, stop.
What do we do with this money?
Yeah.
$2,000 goes into your accountand just gets used like
(33:44):
everything else.
You got to dinner a couple moretimes than you normally would.
You might buy that thing thatyou wanted to buy that's you
know a couple hundred bucks.
When it's a when it's a chunk ofmoney, like this is valuable.
Yeah.
And you can use it more, Ithink, efficiently.
SPEAKER_02 (33:58):
I I I think I mean when I'm looking at pros and
cons, the pro of doing it thatway is that when it's coming in
monthly, people all of a suddentheir outgoing expenses start
rising because they've got thecash monthly.
So maybe I end up getting thatnicer truck.
Maybe I go get that$120,000vehicle when I should be getting
the$60,000 vehicle.
(34:20):
But I got this income.
I got five grand a month comingin.
That's part of my income.
I'm making this much, like I gotit.
Uh, I want I really want thatRV.
I really want to do this.
I really like, and so theirmonthly outgoing starts going up
to equal the monthly incoming.
And then all of a sudden, Jamessays, hey, we got to pause
distributions for three monthsand and lick our wounds.
We had some issues.
(34:41):
Uh, we can't pause.
I need that money, man.
Yeah.
I need it.
You can't pause on that.
I need my money, man.
Yeah.
Where's my buddy, Brian?
Where's my buddy?
But well, that so that's that Ithink is the is the really good
part of that.
Um there the negative for me ofdoing it that way is twofold.
Number one, you gotta be asquirrel like James mindset, or
(35:03):
it doesn't work because it thenbecomes a piggy bank.
I've seen it become a piggy bankfor guys where it's like, oh, I
really want this cool.
Uh, I'm gonna get a jet ski.
All right, I'm gonna distribute.
I'm gonna I need that.
Oh, I really want, and soinstead of seeing it, and and as
a partner, it helps out becauseyou got some accountability on
it.
As a one-man show doingmilestones, it turns into this
(35:25):
like, ooh, we want to go on atrip.
Let's let's distribute.
Well, no, no, no.
We distribute because we're wework backwards into the
distribution distributionbecause we know how much money's
in the count.
And it's not like, hey, I wantto take my family to the beach
for the for spring break.
I need eight grand.
I I don't care what you need,what can you distribute?
(35:45):
What's in the count?
Let's look at what is actuallydistributable and let's not harm
the company because you want togo on a beach trip.
SPEAKER_00 (35:50):
And even if you're gonna use it, let's say you're a
one-man show and but you do havea company and you've got people
that are dependent on you, andyou've got uh$90,000 in the
retained funds or whatever.
Uh or wherever it's gonna beused.
You you're like, well, you knowwhat, invest investment
(36:12):
properties.
I'm gonna take forty thousanddollars of that, we're gonna do
an investment property, we'regonna flip it as the company.
But you're you're going belowthe threshold that you set for
yourself.
And even though the idea is,well, we're gonna we're gonna
make good money on this, andit's gonna be a positive thing,
(36:34):
you are going beyond yourthreshold, and now you are you
you're beholden to the market.
Yep.
And that is not that's not theif you're trying to build
something, that's not the bet tomake.
Correct.
SPEAKER_02 (36:48):
And it it's it's my old saying of true
entrepreneurship is not chasingevery opportunity, but a
ruthless elimination ofopportunities to where I'm only
going after the best andbrightest, and which is I don't
want you flipping houses.
I want you training a newproject manager, right?
(37:10):
And so distribute the money andon the side, nights and
weekends, do that.
Do that.
Don't justify the time that I'mpaying you to be a GM here, that
we are paying you to be a GM,that you need to be investing in
these guys and justify it tochase a hobby.
A really good opportunity, butit's not a great opportunity.
We need to eliminate those,right?
And so that that's number one onwhy the the downside of doing
(37:33):
large distributions is you startviewing it as what do I need,
not what's best for the company.
Number two, the flip side ofthat.
Because I used to do that,that's how I ran in the
beginning.
But what I said earlier is Ikept saying instead of
distributing the profit firstway and getting my money, I
leave it in the company.
Let's make another hire.
(37:54):
Let's leave it.
I'm gonna reinvest.
And I felt like I'm a greatentrepreneur because I'm
reinvesting my money into thecompany.
But at the end of the day, I hadzero savings.
Like, like I talked to guys whoare like, hey, so like what's
your do you invest?
Like, what's your savings?
What's your portfolio?
All that I'm like, oh, I justhope this company works or I'm
screwed.
Like that, because that's whereI was.
Like I didn't have a savingsaccount.
(38:14):
It was just like, just leave itin.
I'm only taking out what I needand everything else, let's all
in.
Let's keep it here and let'sgrow this thing.
Let's build a software, let's dothat.
And and everything was aboutthat.
And I didn't have a healthybalance of safety, security.
I need to put this money awayfor this.
I need to start saving for this.
I need to go on a freakingvacation with my family that I
(38:35):
didn't do for like three yearsstraight because it was like, I
don't have the money for it.
I'm investing in growth, right?
And so it's the other side ofthe of the coin in terms of like
you're never distributingbecause you're letting the
company eat all of your cash.
And so the the milestone ones,it's like, well, once we get to
a hundred grand, I'm gonnadistribute 50.
(38:56):
Well, as soon as we get to 80,I'm like, what if we got a fleet
of trucks?
Uh that 80 went down, right?
What if we do this?
What if we started thisdivision?
What and so I would entrepreneurmyself into no money because I
would never distribute moneyuntil, I mean, the only times I
ended up distributing when youwere an employee like you know,
a while ago, was at the end ofthe year when I missed my tax
(39:18):
mark because I was going so hardin the paint on on investing.
It was like, oh crap, I need 30grand for my taxes because I
didn't pull any money out.
I was literally just quoteunquote reinvesting in the
company.
And then I need, I'd pop intothe office and be like, hey, I
need 30 grand to pay our taxes.
Like, what?
We don't, oh, okay.
Right.
And so then it uh it all goessideways on that of pulling that
(39:39):
money out that we needed for theother thing.
So there's two sides of it.
There's I spend too much out ofit and I distribute too early
because I just want something,or I never distribute because I
don't hit the milestone that I'msaying.
So I would, I would almost saylook in the mirror, have have a
coach or accountability or aspouse that's that that that is
(40:02):
might be more financially mindedthan you, be a second set of
deciding on you.
Like some guys, their spouseswill be like, hey, let's
distribute everything.
And some people, some spousesare on the other side of like,
keep it all in the company.
If you have a uh anaccountability partner, really a
coach that says, you gotta letme approve your distributions
(40:23):
and let's set a goal.
And even if you want to reinvestin the company, we got to
distribute and reinvest out ofyour retained earnings and start
having those type ofconversations.
I think that's that's what makesthe milestone checks a lot
safer.
Um, the other way, theguaranteed payments kind of
stops you against those out.
(40:44):
But but again, if you do theguaranteed payments, the
downside is and the risky sideis I'm gonna increase my
outgoing monthly.
And now I it's not a guaranteedpayment.
Now that's part of my salary.
I got to get paid that.
So that being said, if you'redoing the the monthly guaranteed
payments or the bi-monthly,whatever it is, you can get
raises as a PM in your company.
(41:06):
Raise that up and spend out ofthat.
And hey, you know what, we'redoing pretty good.
I'm gonna bump myself as thegeneral manager here and now
maybe, maybe I'll make 95 nowand I'm gonna get that going a
little higher.
And that means I won'tdistribute as much into
guaranteed payments, but all ofmy cash flow makes sense.
Right.
And so I if I need to increasemy my outgoing expenses, I want
a little bit nicer of a house,and my daughter is almost 16, I
(41:28):
got to get her a car.
Let's look at you getting paidmore as your project manager GM
role in the company, not let'sspend that out of guaranteed
payments.
All right.
That's I think that's that's theone of the biggest points I
really want to hit in is youneed to understand yourself
financially and where you'restrong and where you're weak.
(41:49):
You know, if James wasn't asquirrel the way that he does
it, I would not like the the waythat we're doing the
distributions.
But I'll tell you, when I get atext from James every single
time I get that little like, youknow, the the birds in your in
your stomach, oh, is is he gonnadistribute something?
Like, is there is there moneycoming my way?
So yeah, it it's I like it.
I've I've liked it more sincewe've been doing it that way.
(42:11):
Cool.
I was against it in thebeginning.
I know.
Um but it was also my baggage ofI always try to do it that way,
and I never distributed.
And and so I, you know, it'sit's working well.
So good job.
Um, all right, pricing thatfunds your pay.
We talked about this last week,but I want to hit it one more
time.
Every line item, you need tohave your labor rate plus your
(42:35):
profit margin, and you can payyourself that profit margin.
If you're swinging the hammer,if you're not, if you're not uh
like a full GC, but you're alsodoing your labor, pay yourself
the the market rate for thelabor that you're doing and have
a markup that goes into yourretained earnings that flows
down into our overhead and landsin retained.
(42:56):
We really need to separate thosetwo things out.
Also, the this this is probablya full podcast that we can talk
about.
So I'm gonna hit it real quick.
But equipment, trucks, backhoes,that anything that you're buying
that you're utilizing in thecompany, I see guys spend those
because they really want thatcool toy.
They want they want thatexcavator that's owned and
that's theirs.
(43:18):
But you're justifying it bybeing cost of goods.
That I like to put that in myoverhead.
And if I bill for those cost ofgoods, which you should bill
every time you use yourequipment on a job site, that's
just free money.
That's bonus money.
But I need to cover in myoverhead cost, that monthly
payment on that backhoe.
I need to cover in my monthlyoverhead cost because next month
(43:40):
I might not use it.
And so it really is just anexpensive overhead that I've got
sitting there.
So again, equipment, if you'rebuying that, I am strong against
not buying that.
But if you're in a HVAC company,if you're a plumbing company, if
you're in a law, you have tohave some of that equipment, and
that's okay to buy, and that'spart of those, those, those
setups.
But I want to be able to coverthat in my overhead so I don't
(44:02):
have to get a job that uses thatparticular piece of equipment to
pay for it this month.
All right.
Um finally, let's watch for somered flags.
Here, here's some three redflags that you know, uh, when
I'm coaching, I'm kind ofkeeping it in the back of my
head when we're talking aboutstuff.
Your margin is lower than 25%for more than one month.
(44:24):
You're gonna have a bad month.
Everyone does.
Two, three, by the third month,if our margin is below 25%, we
have to fire people, we have tocut bait, we have to sell us
some equipment, we have to moveout of the office.
We need to figure out why you'rebelow 25% month over month.
But that that's where it goesfrom a one-off bad month to a
permanent um, this is this iswe're we're crashing right now.
(44:48):
Number two, overhead creep.
Again, if we start making moremoney, all of a sudden overhead
starts going out more and more.
And so instead of making moremoney in the profits and the
retained earnings for thecompany, I'm just spending more
because I'm making more.
Right.
So I'm getting more toys, I'mupgrading trucks, I'm now gonna
move into an office I can'tafford.
But, you know, the money thinglooks like I can afford it, but
(45:11):
I can't.
Right?
Like, let's let's not create,let's make financial spending
and overhead decisions at theend of the year with a third
party, with your coach.
Like, hey, I'm thinking about anoffice.
Tell me why I should orshouldn't.
Let me let outside, I've got noemotional investment.
I don't care about your egowanting to have an office for
people to go to.
(45:31):
What I care about is you makingas much money as possible and
protecting your company.
Um, so overhead creep happensall the time.
I we started making more moneyfour months in a row.
I'm making 10 grand a month onaverage more than normal.
I'm gonna go and get that truck,and then winter hits, and now
I'm turning the keys back inbecause I can't afford it.
Uh and then final, final big redflag for me is big revenue and
(45:54):
tiny retain.
When I when a company comes intocoaching, I'm looking at the
revenue and they're doing sixfigures plus, and I look at
their bank account, they goteight grand in the bank.
Uh, that's a big red flag.
Like, where is all your moneygoing?
Let's if you have larger andlarger revenue and your retained
earnings, your bank accounttotal in the background, when
you look at your balance sheet,which is a whole other
(46:16):
conversation, but you're lookingat your balance sheet and it's
not going up, what's going on?
What's happening?
You're you're mismanaging,you're not handling as well.
So big big revenue, tinyretained is gonna be probably my
biggest red flag uh in thecompany.
All right, so when cash getstight, what do we do?
We freeze distributions, right?
We're living off the minimum wecan pay ourselves as the general
(46:39):
manager, project manager of ourcompany.
Um, and we're gonna live withinour means on that.
If things get tight, thatdistribution, maybe we're not
going to the beach, maybe we'regonna uh have a fun week at the
pool during spring break becausethose distributions aren't
coming.
Um next, we're gonna protecttaxes and cost of goods at uh at
all uh all levels.
(47:00):
Uh uh when things are tight, doI don't know how hard to hit
this.
I can't hit any harder thanthis.
Do not touch your tax account.
If you put money in there, youit's gone.
It's do not touch.
I said earlier, do not haveonline access to your tax
account.
You can drop money into it fromyour bank.
To pull money out, you got to goin person.
(47:23):
You got to get a uh cashier'scheck from them to pull money
out of it.
If it's that hard to get to themoney, you're not gonna
accidentally, oh, I need athousand bucks to float for this
month.
I'll put it back next month.
Okay, I'm gonna steal athousand.
That never gets back in.
It just doesn't, it doesn'thappen.
Because you have bigger issuesif you're having to steal from
that, that account.
(47:44):
Uh when cash gets tight, we gotto start trimming overhead
immediately.
A lot of times, this was, Ithink, one of our biggest issues
in in growing our company inAtlanta was I would not fire
people when we should.
I loved them.
I had some sort of thought thatI could rehab somebody and work
them through it.
And I think I mean, I rememberthe the one time on the retreat
(48:06):
where we added up 55 or 60people that we had fired and
looking at them like six monthstoo long, eight months too long,
six months too long, four monthstoo long.
And it's like we had probably$500,000 of extra pay that we
should have fired people over.
Um, you know, it it's it's hardto fire.
It's very hard to fire becausethey're friends, you know, you
(48:28):
you feel responsible for them.
Um it's hard to sell your truckand get a crappy truck.
It's hard to do these things,but it's even harder to file
bankruptcy.
And so you gotta you gottaunderstand we gotta cut overhead
early and as much as possible.
Get out of what you can.
I'm I remember one company thatI I'm coaching, if they're
(48:49):
listening, they'll they'll knowit's them, because they were in
uh they had a rent of about$12,000 a month.
And I looked at them, I waslike, guys, why?
Well, we need this, and we gotthat, and we need this.
I'm like, your your numbers,when I'm looking at percentages
of what your rent should be, youshould be paying no more than
three grand a month of rent.
Uh and they're like, well, we'rewe're in for another two years
(49:10):
with this landlord.
I was like, you go to thelandlord and let's show them
your QuickBooks and say, eitheryou find me another, because
their landlord had a bunch ofeither you find me another place
and I'll lower my rent and stillrent from you, or I'm going
under.
Like I can't continue this.
Like I can't pay you either way.
So do you want me to pay youthree grand a month instead of
twelve?
And they're like, he's not gonnago for it.
(49:31):
They went, he was like, Yeah,don't worry.
I actually want to sell thisbuilding, so that's perfect for
me.
Why don't we do X, Y, and Z?
Then literally the next monththey were in their new office.
SPEAKER_00 (49:40):
Bingo.
SPEAKER_02 (49:40):
And and again, it's like, well, that's they just
picked up eight grand overnight,right?
Because they asked and theythought about it and tried to do
it and sacrificed because theydidn't have the big warehouse
space and they didn't have this,but the company's doing better,
right?
So we're cutting overheadquickly.
Um I think one thing guys areafraid to do is rate price raise
prices.
I think you don't need, you'renot raising prices and
(50:04):
overcharging people.
You're actually charging themthe actual value of what you're
giving them and and changing themindset of scarcity, mindset of
I gotta, I let me just chargethis much because I need the
cash, I need the job.
You've got to say, I gotta paymyself labor, I gotta pay for
the profit, and this is my pricetake it or leave it because
(50:25):
we're not gonna work for freeand we're not gonna pay someone
to let us come work for them.
Uh, and then you're gonnare-sequence draws into
milestones.
If those draws monthly aredraining you, let's go to a
milestone.
Let's just don't draw.
Let's look at it at the end ofthe year.
I'll help you with that.
Let's look at quarterly, let'sfigure out what milestones we
got to hit to start draws again.
But we're we need to make surethat you can live off your me,
(50:47):
live within your means on whatyou're getting paid for the
labor you're doing for yourcompany, whether it's project
managing, general managing,swinging a hammer, whatever
labor you're doing gets paid,draws are separate.
All right.
I've got a checklist of what youneed to do today, listening to
this, and then we're done withthe podcast.
I feel like I've been justverbal vomiting.
(51:07):
Hey, we're here for it.
All right, number one, open yourseparate bank accounts.
Talk to your banker, figure outhow to do that.
They're gonna try to charge youmonthly per account, whatever.
Figure it out how to do it.
I need your three base ones.
I need your tax account, I needyour draws and uh retained
account, and then I need youroperating account.
(51:28):
I need minimum those threeaccounts.
If you are a little larger sizeof a company, you probably have
some of those already set up.
Um let's let's break it intopotentially four, maybe five
accounts if we've got a lot ofcash flow going through the
company.
Um that fourth, that thirdaccount, the retained earnings
owner, is usually a savingsaccount that we set up.
And the tax account is usually ayou've got to force them to turn
(51:50):
it off on your online banking.
I don't want my tax accountonline.
I want to be able to drop moneyin, transfer money one way on
that, and they can set it up.
Most banks can set that up foryou to where and they're like,
why do you want to do this?
Well, because I don't trustmyself.
I this is this is how I want tomanage my money.
Um number two, minimum weeklyfinancial meetings with
(52:11):
yourself, 20 minutes.
It's gonna take it's gonna takea couple hours, day one.
But I want you to get yourQuickBooks set up.
I want your ProStruck softwareset up, and I want you paying
your labor through the softwareand managing your materials
expenses in QuickBooks.
I will show you how to do it.
It's not hard, it's notdifficult, it's just some hard
work.
And then once you get doing it,it's 20 minutes a week.
(52:33):
You're I mean, you how much doyou spend a week on tying
materials to jobs?
SPEAKER_00 (52:39):
Um It's probably like 30, 45 minutes.
SPEAKER_02 (52:44):
Yeah.
And it's a decent sized company,and you're that's all you're
doing weekly on it.
And that gives us really tightnumbers that we can run what's
going on with that, whathappened with this job.
We get the red flags ahead oftime instead of behind you know,
two months later.
Um, so get in minimum 20 minutesso we know your revenue, your
gross profit percentage, youroverhead, and job costing is so,
(53:06):
so important.
Um, and then set monthlymeetings first week of the
month, repeating the firstTuesday of every month on your
Google Calendar.
You can set that up repeating.
I'm going to look at my ownerpay and my retained earnings.
I'm gonna make that transfer.
I'm gonna manage this money astight as I can.
That's the day I make mytransfer over into my savings
account.
Uh, and at the same time, Imight also distribute to me from
(53:28):
that account.
I want it all over there.
I want this distributions tocome and flow out of that
account.
I don't want you to bypass itand just pay yourself.
Uh, and then finally, I wantbids today.
Uh oh, bid today's estimates atyour target margin.
You need to know the numbersyou're trying to hit, not just
what what so many guys startcoaching.
(53:50):
I'm like, well, you know, how doyou build your pricing?
Well, I just charge people whatI can.
What does that mean?
You know, we need to know yourmargins, we need to know your
your target that you're goingfor.
We need to have a game plan onbuilding the estimates from the
money aspect of how we're gonnamanage that money and what we
need to make for this job tomake sense for us to say yes on.
(54:11):
Oh, that was a lot.
Any any any thoughts, commentsthat you have?
SPEAKER_00 (54:22):
Um, I no, there's there's a lot of need here.
SPEAKER_02 (54:29):
Yeah, yeah.
It's that's why we broke it upinto two, and it's still a lot.
It might be a uh listen throughit twice.
Uh one thing is your salarylives or dies by margin
discipline.
I wrote that down just as a noteat the bottom.
Like your salary, the money thatyou're gonna make, the money
that's going to fund fun stuffthat's gonna pay for your kids,
(54:50):
school, whatever it is, is alldecided by your discipline on
your margins and managing thismoney.
You can be, you can work yourbutt off, you know, 60 hours a
week.
And if you don't aren'tdisciplined and know this stuff,
you're doing it for nothing.
Like you're you're not in maybeyou got cash at the end of the
end of the year.
That's great.
(55:10):
You're not gonna know if you door not, and you're gonna pull
money out and you're gonna haveno control or discipline over
that.
So I learned that the hard way.
I was not disciplined forforever on the financial side.
I'm not naturally that way.
I know numbers, I'm great withmath, but I'm just like, yeah,
we'll figure it out.
Let's let's just go, let'sinvest in that.
Yeah, let's buy that, let's dothat.
So you're your margindiscipline, disciplined on
(55:32):
making the margin above andbeyond, where you're running
your company like it's Amazon.
You're serious about it, you'relooking at every dollar, every
penny.
We know where it's going, whereit's coming from.
And finally, let's build thatreserve.
One month of revenue is whatwe're going to.
That's going to give you freedomto breathe and scale.
If we can have one month ofrevenue that keep grows with our
revenue in the background, youare going to be able to go to
(55:56):
sleep at night.
You're going to be able tobreathe.
You're going to be able to getthat scale that you want to do
to grow into next year.
So if you want to work on any ofthis, if this some of this stuff
didn't make sense or youdisagree with it, go to
ProShark360.com and go tocontact us and set up a call
with me.
If you want to come on aretreat, I'm going to do this
part with you over the nextthree months.
(56:16):
My goal for everyone coming tothe retreat is that they know
their numbers when they show up.
We're going, I've got aworksheet that we're going to go
through.
I'm going to do three coachingsessions if you sign up now.
Uh, might end up being two ifyou wait to sign up, depending
on how close we are to theretreat.
But we're going to, I'm going torun you through this and then
we're going to meet again andlook at it.
I'm going to assess what youdid.
So when you show up at theretreat, we know all of your
(56:39):
numbers and you have it allfilled out to where we're not
spending three hours trying tofigure out your numbers.
Last year it kind of got gotcrazy with people trying to find
their numbers and do that.
So we're going to do that allpre-retreat so we can hit the
ground running and really getthe retreat going.
On this retreat, we're going tolook at your numbers.
We're going to look at yourefficiencies.
We're going to make a game plan.
And then we're going to plan out12 months of your company.
(57:01):
We got a planner that's comingthat you're going to take home
with you, that you fill outmonth over month goals, kind of
our anchor goals of what we'regoing to be doing each month.
And then we're going to have aplan on how to execute this one
bite at a time for 2026.
And so if you're in the coachingprogram, this is what we're
going to go through all year.
So you got to come on theretreat from the coaching
program.
If you're not, you just come onthe retreat, take it, learn from
(57:23):
it, launch it, grow your companyoff of it.
Uh, and hopefully we can be partof that process at some point.
So thanks so much.
Go to contractrequest.com tosign up for the 30-minute call.
I want to hear about yourcompany before you sign up for
the retreat.
You it's an invite-only typething.
You you will be invited.
This is an exclusive, but itreally is something I want to
talk to you about before youcome.
(57:44):
It's a small group of guys thatcome and girls, women and men
that are there, but it's a verytight-knit group that um you we
want to make sure that you'reready for something like this
before signing up for it.
Um and so we'll I'll do a littleassessment with you and make
sure and hear a little bit aboutyour company.
But love to talk to you.
Contractorcuts.com.
Let's set up a call and we'llwe'll see you guys next week.
(58:05):
Bye.
Bye.
Welcome to Contractor Cuts, where we cover
the good, the bad, and the uglyof growing a successful
contracting company.
Welcome back to podcasts.
SPEAKER_02 (00:16):
Welcome back to podcast world.
SPEAKER_00 (00:18):
I'm Ploop Turner.
SPEAKER_02 (00:20):
Thanks for joining us.
Welcome to Contractor Cuts.
I'm Clark.
That's James.
If you don't know us, that's onyou.
All right.
So this week we are doing oursecond week of financial
management, how to pay yourself.
Paying yourself.
Uh if you didn't listen to lastweek, this is one of those that
I really don't want you tolisten to this week until you
(00:42):
listen to last week.
Last week we talked through.
In fact, he forbids it.
I forbid it.
You have to pinky promise thatyou listen to last one before
this one.
Now, this one is once you geteverything organized and you're
looking at your numbers, you cansee your gross profit
percentages, you can see howmuch your revenue is.
You can you have a game plan topay yourself as an employee of
(01:04):
your company and a separatepayment as owner of the company.
That was last week how to setall that up.
This week we're talking aboutpaying yourself the buckets, the
the how to pay, the what type ofpay.
We're gonna dive into how we doit in our companies.
And James does it differentlythan I do it, and there's not a
right and wrong.
We're gonna talk about each ofour styles of distributions and
(01:24):
the pros and cons of each one.
Um, so I think it'll be a goodone.
Thanks for joining us.
So to the first spot that we'restarting at is gonna be the five
different uh, and this is thisis kind of a book report on the
Profit First uh book.
Um the main thing about ProfitFirst, uh, if you've read that
(01:46):
book, if you haven't, I've I'veI should be getting uh
commission on it because I pushit so much.
But it is just a greatsimplistic way to look at and
and really it struck and strucka chord with me when I read it
because it was a book that Iwish I had in the beginning,
because I've always put myprofit back into the company.
So I never took out a lot.
I always took out the minimumsand I I I grew the company off
(02:10):
of the profits, which was good,but I also didn't have a game, I
was too risky in on the first 10years of this company.
It was, and when I say toorisky, I didn't plan for the bad
times and I didn't put moneyaway for the bad times because
hey, if we're doing 100 thismonth, we should I bet we could
do 150 next month.
And if I can get us to 150, thenwe could do two.
(02:32):
And so all I got to do is keepputting money back in to grow,
because then if I put all thismoney back in, I'll get double
it back out.
Right.
And so I was a full-timeinvestor in this company, which
is a good thing.
I I want to be my own investor,but I was risky with those
investments, and some of therisk didn't pay off because I
was flying too too close to thesun sometimes.
Ah, it cares.
(02:53):
Yes.
And so it it's it's somethingthat if I in retrospect, the
what we're about to talk abouttoday, if I would have done
this, it would have built inself-control around money as the
company owner, which I learnedthe hard way.
Uh, I've been six-figuremistakes and costly, costly
things that through today I'mstill paying for from bad, bad
(03:14):
decisions 10, 15 years ago.
Um, that hopefully I'm out ofvery soon.
But that being said, this is away that I want you guys to set
up your companies, yourfinances, and to view it.
Um so I'm gonna cover the fivebuckets, the five bank accounts
that they say to use in profitfirst.
I'm gonna suggest for thesmaller companies, if you're
(03:36):
under six to eight million, Ithink three bank accounts is a
better way.
I'm gonna do a kind of aconstruction spin on his profit
first because it's not so blackand white in terms of dollars
coming in and out of a company.
Um, you know, there's if you'rein a marketing company, we
create, we invoice along theway, you pay what we're doing,
and it's in and out.
There's no cost of goods ofmaterials that you're buying.
(03:59):
There's not uh big deposits orbig final draws or bank draws
where I'm getting paid 60 daysnet terms to where I don't see
my money for like there's a lotmore moving numbers in
construction, which is a badthing, but it's a it's a the
devil you gotta dance with,right?
Like you have no choice.
It's right here.
It's the only way that you cando business.
(04:19):
But you want to dance or not.
But it really sets you up tofail if you let the numbers run
the if you let the dollarscoming in and out decide the
company.
The biggest failure I see in inconstruction companies that I
coach is the pot system, whichwe've talked about before.
All the money comes into pot.
(04:39):
I spend the money out of thatpot, and I hope that there's
money left over.
And part of that spending is Itake some out and I gotta pay
me, I gotta, I gotta pay mybills.
And so at the end of the month,oh, this pot is empty and I
still owe that sub 10 grand.
Hey, buddy, I'm gonna get younext month.
I promise doesn't work.
That guys can't survive on that.
And that and then they're suingyou or putting a lien on your
(05:00):
client's house, and it just goesdownhill from there.
And so as soon as you startoperating that way, it that's
how you have to operate in thefront end.
Uh, it feels like that guysthink it's just, I know, I I
invoiced the job, I went out anddid it, I got this money.
Okay, I gotta go do another job.
I spend out of that money, Iinvoice for the next one.
And when you're doing one job ata time in the beginning, it is
(05:23):
it is the the system becauseit's like all the money in my
account is for this guy's job,and I spend the money on his
job.
Then you start doing two, three,four jobs, and all of a sudden
my bills are stacking up, and Iborrowed money from my uncle
because I needed to get thisstuff done, and now I got to pay
that back, but that's coming outof what I need.
SPEAKER_00 (05:40):
Or this guy paid you, and this guy you're gonna
invoice next week, and you'relike, oh, that's great.
Then you invoice that guy nextweek, and he's like, Well, I'm
not paying you because X, Y, Z,and you get into a dispute, and
that money actually doesn'tcome, and when it does come,
it's$7,000 short.
Yep.
And now you are literally havingto use other people's money to
(06:01):
pay for this guy's job.
SPEAKER_02 (06:02):
Yes, yeah.
Well, and uh it it feels like byno fault of your own, right?
Like I did everything I wassupposed to do.
This guy says, Well, I Iremember one client early on, I
did the work, it was aninvestor, I did the work on his
house.
The end of the job, he was like,Cool, awesome.
Like he owed me 30K.
Like I did, knocked it out realquickly, did everything.
(06:22):
It was a flip.
Hey, I need to get this on themarket.
At the end of the job, he'slike, Hey, as soon as it's sold,
I got you paid.
I was like, What?
He was like, I don't have thecash.
As soon as it sold, I I got youpaid.
Oh, thanks.
Yeah.
And so I'm literally like Ididn't know I was an investor
with the and so I like I I tryto pull out my my my big guns.
I'm like, well, I'm gonna put alean on now.
She's like, Yeah, please do.
(06:43):
We'll pay, we're gonna pay youat closing.
SPEAKER_00 (06:45):
And I'm like it was yeah, it was it was uh Say his
name on the I'm not gonna sayhis name.
SPEAKER_02 (06:51):
But and I mean this was even before Jared, it was
when I was one man show and uhhe was out of state investor.
Um and I I mean it was when Iwas probably making$35,000 a
year doing this.
And so like he owed me, I mean,I I don't remember the exact
number, and it wasn't it wasprobably 18 to 20.
I don't think, but again, thatwas eight-month salary for me.
(07:12):
Yeah, right.
And like I I literally had to goto people and borrow money to be
able to fund this.
Um anyways, all that all thatbeing said is we have to have a
plan.
And this also ties in, I mean,everything we do ties together.
This ties into the way weinvoice, right?
We talked about this a number ofweeks ago, probably a couple
months ago now, about how weinvoice this week for what's
(07:34):
getting done next week.
Because if he can't pay that,like if I would have been doing
running the company how we donow back then, I would have
never started that job.
But instead, I trusted him.
Yep, all right, get going, I'mgonna get it done.
I can knock this out in twoweeks, make so much money, um
$20,000 job, and just getscrewed.
But so all of this ties togetherwith that.
But if you're invoicing theright way, like we always we
(07:55):
always preach, it's gonna allowyou to manage your money and not
let other people borrow from youunexpectedly like that.
SPEAKER_01 (08:02):
Yeah.
SPEAKER_00 (08:03):
So let's go over the can I Yeah, please.
At request one thing.
Instead of running through allthe five, can you give us the
two that we're not gonna betalking about first?
SPEAKER_02 (08:15):
We're gonna be doing all five.
I'm just combining.
Oh, okay.
I'm I'm grouping them.
So I'm gonna lay out how you dofive, and I'm gonna group a
couple of them, and then as yougrow bigger, you can separate
them out.
Okay.
So let me I'll just run throughthem, just name them off, and
then I'll talk about what I'msaying.
Okay, it'll make more sense.
So the five that they theysuggest in profit first is an
(08:36):
income clearing account.
So all the deposits land in thataccount.
You're not spending money out ofit, it's just where all the
money comes into.
That's number one.
Number two, a cost of goodsaccount, which is materials and
subpay come out of there.
Where all of our expenses tocost of goods only comes out of
(08:57):
that second account.
Account number three is you'reoperating an overhead account.
That's where I'm paying my rent,my vehicles, my admin, my
software, my insurance, um, youknow, all of all of the non-cost
of goods expenses, all of myoverhead, my my pay as a project
manager, all coming out of thataccount.
Number four is our taxesaccount, where we're pulling the
(09:21):
taxes out of the profits andputting it into that account.
That's the untouched, separatebank account.
No, what one of my keys to thetax account, no online access.
You can put money into it.
I can't pull money out withoutgoing in person.
That way I can't just borrowfrom it one night at 11 p.m.
when I'm stressed.
Uh, and then number five isgoing to be owner pay and
(09:44):
retained earnings.
So those are the five that theysuggest.
And in a large-scale company,when you're doing 10 million
plus a year, those are really,really good accounts to have set
up.
Um some guys even, and again,this is if depending on your
bank, and if you can do subaccounts within an account, do
the income clearing separate itout in sub-accounts by job.
(10:05):
Right.
If I'm doing if I've got fourjobs that are all six figures
running, I'm gonna havesub-accounts where I'm gonna
deposit that money into theaccount and move it right into
that sub-account every singletime.
Again, the question is how muchextra time do you have for
accounting?
Once you have an office manageror someone managing your
finances day in and day out,this good, this is a lot easier.
(10:27):
But as a one-man show, athree-man show, a four-man show,
it's very difficult to managefive separate accounts because
of the construction industry andthe money moving.
The way that we do the invoicingreally substitutes the need for
some of this.
And that's why I'm okay withcombining some of these.
And that's what that's what I'mabout to talk about.
(10:48):
So when I say combining, I Ireally combine the first three:
the income, the cost of goods,and the operating and overhead.
When I'm getting started, thethe three accounts are those
three combined.
And then my second account'sgonna be taxes, and my third
account's gonna be the owner payand retained.
I really like it that way.
(11:08):
Uh, and then that's that's kindof the three accounts separated
out.
If you start growing, you canseparate it into four and
separate the incoming uh and theclearing account and your cost
of goods.
That way, I'm only I'm I'mpurposefully spending set moving
money from my income accountinto my cost of goods tied to
that job.
And we'll talk about that in asecond.
(11:30):
But the the main reason that Icombine those first three, the
income clearing, the cost ofgoods, and the operating
overhead, is because of the waywe do our invoicing.
If I'm invoicing this week and Iget payment by Friday, I'm not
going to pay myself until nextFriday, but I have all of my
cost of goods go out immediatelyover the weekend and early next
(11:52):
week for materials.
I'm queuing up all my subpay byTuesday, Wednesday for labor.
And then by Friday, whatever'sleft in the account is pretty
much that third account.
It's my it's my operating andoverhead that I can pull out of.
So by the end of the day Friday,we're we're doing incremental
weekly uh financials.
You know, money in Friday, moneyout Monday through Friday.
(12:16):
And by the end of the day,Friday, it's sitting there of
that's pretty much I can movethat money into my taxes and my
owner pay and retain earningaccounts.
So that's why I say threeaccounts when you until you get
to a size that we have someoneto actually their full-time job
is managing the money, managinguh pay.
I mean, we got you know, when wegot uh Melissa and um eventually
(12:38):
uh Emily were doing it, but likewe all of the Home Depot
accounts and Lowe's accounts,and we need to move this around
to that, and if this is goingthat, this is coming due.
We need like all of that stuffis a full-time job for someone.
That being said, until you getto that spot, I'm okay with
having those three accounts.
Having the one main account, themoney comes in on Friday, we
(12:58):
spend through the week for whatjust came in, what's going out.
And I want that account to havekind of a base number.
We keep it at 10 grand.
But by the end of the day,Friday, I'm funding the tax
account and the owner pay andslash retained earning accounts.
And that way it's a one-weekcycle on all your cash.
It's and it's just kind of intoone account, spend out of it,
(13:20):
move it out of that account.
That makes sense.
(14:24):
So again, as you grow, thoseseparate five make sense.
I I've I've tried this, I'vetried it as a one-man or
three-man show.
Um, it just was nothing but Iended up abandoning one account
because money was coming intoone account on Friday, and I had
to start buying materialsFriday.
And so I was literally waitingfor the deposit to clear before
(14:44):
I could move it over to thesecond account for my cost of
goods account, and then I startspending out of there, but and
it's just it became more workthan what was necessary because
of the way we're doinginvoicing.
Yeah.
Um, now if you are taking a 40%deposit up front, do it this
way.
Have the separate accounts.
You're taking a big draw upfront.
I want to make sure that thatstays in my incoming and I'm
(15:06):
controlling what I'm bringingover as my cost of goods.
And then what out of thataccount is profit that I can
move into my operating andoverhead account.
And then it flows from thereinto my operating overhead
account into the taxes andowner, ownership, and retained.
Does that make sense?
So that's kind of the thewaterfall.
(15:27):
The way that I listed them isthe waterfall.
It's everything comes into here,it goes into these other
accounts, and this one goes outto the vendors and subs, and the
other account goes into ourprofits and taxes.
Cool.
Here are some rules aroundthose.
Number one, I'm never payingmaterials or subs out of my
owner pay retained.
(15:48):
I'm never paying materials andsubs.
I'm never paying my cost ofgoods out of the retained and
the owner pay.
If I need money, it's going tobe for operating an overhead
that I might have to borrow fromour retained earnings.
If it's like we've had two badmonths and we got payroll coming
(16:09):
up, that is something that I'llcheat out of our retained
earnings.
But if I owe, if I got to go buya lumber package for a job and I
don't have any money anywherebut my retained earnings, that's
a problem because that jobshould be paying for its own
materials.
So if I don't have the jobs thatare depositing money and the
income account paying for thatoverhead and materials, that is
(16:32):
my biggest red flag because weare crashing hard at that point.
And so that's one of the one ofthe big rules that you write
down.
I'm not going to ever pay out ofmy retained earnings account to
man to pay for labor andmaterials on a job site.
Number two, I'm never payingpersonal from operating.
(16:53):
I don't want my, I don't wantincome clearing, people
depositing money, and I say,hey, I need a paycheck, I'm
going to pull money out ofthere.
Because that money has got tofeed labor and materials and
then overhead before it gets tome.
And it has to go down that flow.
Because if I'm like, well, Ineed to get paid$12,000 this
month, like that's what I take.
(17:14):
Well, you you're taking morethan you deserve and have
earned.
If you if it doesn't flow downthose other accounts and land in
your own or pay account, youdon't have the money to pay
yourself that.
You're not earning that as acompany.
I'm sorry.
It's it you it's not there foryou to take.
It's not your money.
You're literally stealing totake that money out of that
account and put it into your ownpersonal um uh personal pocket.
(17:38):
Are you following me?
I feel like I'm in.
I'm in.
I um good.
Um next, another rule.
I'm gonna fund taxes beforeanything else.
Now, I the odd part is I saythat's taxes are the fourth out
of out of fifth account down thewaterfall.
But if you think about it,everything before taxes is tax
deductible.
(17:59):
So if I invoice 100 grand thismonth and my cost of goods and
overhead are 90 grand a month,I'm only gonna pay taxes on 10.
And so before I pay myself orget retained earnings or
anything else, I want to pullthose taxes out into the tax
account.
And then that last amount ofmoney can go.
So I pull$2,500 in the taxaccount,$8,500 goes into the
(18:20):
retained earnings and owner payaccount.
Last rule, I'm gonna build uh mygoal is I'm gonna build a
retained account of one times mymonthly revenue.
So if I'm averaging a$100,000 amonth, but I'm looking by the
end of this year to get to$150 amonth on average, I'm gonna go,
(18:40):
my goal is to get$150K in thatin the retained earnings
account.
Not in my income clearing,because I want that to be a
password.
I want that to come in and feedout.
So when I invoice a job for$50,that's in that account, and I
spend out of it until it's timeto invoice again and I refill
it.
Um, but I uh what I want to dois build that retained earnings.
Now, I I mentioned this lastweek.
(19:02):
My retained earnings account, Iwant to average my monthly uh
revenue, but I I'm okay, andagain, this is cheating a little
bit, but I'm okay.
My monthly revenue needs to atequal my retained earnings plus
my accounts receivable.
An accounts receivable account,if you don't know what accounts
(19:23):
receivable is, that is moneyowed to me that I've spent on.
So those are those 30-day netpay.
This client owes me 50K.
So that 50K that that clientowes me, I've spent all my money
on their job side.
I'm waiting for that check toclear from that commercial
contractor that's coming in inthree weeks from now.
That 50K plus my 50K in myretained earnings equals 100K,
(19:45):
which is my monthly.
So that that's safe for me.
Um now you got to be reallygood, and when that money comes
in, it goes straight, passeseverything, goes straight into
the back to make sure it landsin retained earnings.
But I want my retained earningsplus my accounts receivable to
equal my monthly revenue.
(20:06):
Okay?
About to move on.
Does all that make sense?
I feel like that was a lot oftechnical talk.
Um No, I th I think I'm I'm withyou.
What's your do you have anyfeedback on that, on your
experience, on what you like,what you don't like, on that?
SPEAKER_00 (20:22):
Uh the one you mentioned where uh your invoiced
plus your retained earnings.
No, your invoices are accountsreceivable.
Your accounts receivable plusyour retained?
Is it retained or was it theincome?
SPEAKER_02 (20:40):
No.
SPEAKER_00 (20:41):
Retained.
SPEAKER_02 (20:41):
Retained earnings, just profits that are sitting in
the company plus the money owedto you.
SPEAKER_00 (20:47):
So that one, the money owed to you, that's the
one we mentioned it earlier,that can get a little dicey in
construction because if ithasn't been paid, there's always
that possibility that theclient's gonna say, yeah, I'm
really not happy with how thisturned out.
You might either either have tospend more money to fix XYZ or
(21:11):
in some cases uh not charge thefull amount and you're gonna
walk away five thousand lessthan what the actual invoice
was.
Yeah.
And so that's one that's like ifI'm cutting five thousand
dollars off of this invoice,that's profit.
That's just pure profit that I'mhaving to consider cutting off.
(21:34):
Yeah.
And so that can kind ofdepending on the size of company
you are, that could be prettyproblematic, or at least like,
man, that's like my wholepaycheck.
$5,000 is a lot of work to nowjust kind of freely give up.
SPEAKER_02 (21:47):
Yeah.
Well, I think two things onthat.
Number one, where guys miss onthat is when I'm building an
estimate and we cut$5,000 out ofit, I'm cutting$4,000 of labor
on that.
When I'm trying to get yourprice from your our our
estimates at$105 and you can'tspend over a hundred.
Well, what are we gonna not doout here?
(22:07):
So I cut it down to a hundredbecause we're we're not we're
lowering from high-end fancycountertops to some basic
granates, right?
And so we cut the the price downfive grand.
Well, that's all that's only athousand bucks out of my pocket.
On the back end, hey, I I need afive thousand dollar discount on
this.
Well, that's five grand out ofmy pocket, which I'm making 30%.
(22:32):
So that's$15,000 of the totalwork we did because I've I've
managed$10,000 worth of work toget that five grand profit.
Right.
And so it feels the same becauseit's five grand on the front
end, five grand on the back end.
World of difference.
It's three times as much.
And so guys like, yeah, justthey're so desperate to get
paid.
Just pay me that.
(22:53):
That's fine.
Keep your five grand.
Well, you literally lost a ton,right?
It you didn't lose, you didn'tdo five grand less of work, you
lost 15 grand of work that wasthat you did for free.
Um, secondly, what what you justsaid, why this is so good with
this with the with the waterfallof accounts is I've got that
(23:14):
money owed to me and they needme to come back and fix some
stuff.
I'm gonna pay that out of myincome clearing and my cost of
goods account, even though I'vealready they owe me the money.
And so that's less money thatwill waterfall down into my
profit account.
But when they finally pay me,that fills up the profit
account.
So I'm not stealing from myprofits to pay for that job.
(23:36):
I'm trying to just pay myselfless profits from that bank
account that had all my money,the the the incoming and the
cost of goods account.
Does that make sense?
So it's it's like, yes.
Again, it's it's some of it islike you're saying this, and
it's kind of the same thing.
Um but it's it's the mindset ofwhere that money's coming from.
(23:59):
Uh, and and the value of fivegrand is a lot different at
different points of the job.
Yeah.
All right.
So let's move on from thosebuckets and let's talk about
kind of what to do with thoseand and and define some stuff.
Number two, let's talk aboutowner pay.
So we've got you as a projectmanager running your company.
(24:20):
And then we've got owner pay asyour second paycheck that you're
gonna get.
Um now you don't have to cutyourself two checks.
It's fine.
We need to separate out inQuickBooks as two different two
different categories that themonies go into your check.
All that being said, and this isa great setup because you know,
a little behind the curtain forJames and I, James is the
(24:41):
general manager of our company,he gets a paycheck for being a
GM of our Austin branch.
Um, I don't get a paycheck forworking in that company, but
then we have distributions thatwe both get out of that company.
So as partnerships go, this issuper important.
When you're a one-man show, it'svery important to do as well.
But partnerships force it thisway.
(25:02):
Uh, and this uh if you're if youdo a partnership, uh, this is in
my coaching, this is how I setit up of like you need to get
define your role.
And James can get fired as GM ifhe does a bad job of his role.
He's still getting his ownerdraws because he's still the
owner of the company, right?
And so James gets paid a certainamount for GMing the company,
and that's part of our overhead.
That's James.
If if James quits tomorrow,we're gonna hire someone with
(25:25):
that paycheck that James isgetting to run the company.
And then the ownerdistributions, me and James meet
uh every other week uh asowners, looking at our company.
Um, and we do, and we dodistributions a certain way,
which we're about to talk about.
But that is, hey, we've got inthat distributions the owner pay
(25:45):
in the retained earningsaccount, right?
Like I said earlier, or I said,I guess it was the last podcast,
we've got$10,000 that falls intothat account.
I'm okay with distributing fiveto owners, and five stays in is
retained earnings.
Because that we need thataccount to keep building because
we want that to equal ourmonthly revenue and we want our
monthly revenue to grow, right?
(26:06):
And by next year, I want todouble in revenue.
Well, that account has a doublein size, right?
So all this being said is oh,hold on, we got a phone.
But all that being said is whatwe want to do is set is James,
and it's great because we'rekind of set up this way, even if
we're both working in thecompany, James and I are getting
paid out of the overhead accountas employees if we're partners
(26:28):
running this together.
Later, we're gonna assess theowner pay in the retained
earnings account, and we'regonna start dividing that up.
Now, one thing I don't want towant you to do, not to get
caught in the weeds, is keepdividing the retained earnings.
What I mean by that is we've gota hundred grand in the retained
earnings account.
I'm gonna distribute 50 to 25 tome, 25 to him, and there's a 50
(26:51):
left in that account.
Then we get another 50 grandbuilt up and there's 100 grand.
I don't want to distribute the100 grand and leave 50 in there
and distribute 50 out.
What I want to do is say, okay,that retained earnings of 50
stays.
We made 50 more, so we couldsplit that.
We could distribute 25 of that,but now in the retained
earnings, we got 75, right?
(27:12):
So don't keep cutting yourretained earnings in half.
Uh make sure that that staysseparate when you're tracking
it.
All that being said, is wethere's there's really three
types of ways to distributemoney out of this owner's pay
account, the owner pay andretained earnings account.
Number one, guaranteed payments,a weekly, every other week draw
that just happens.
(27:32):
Uh, we're gonna take 1,500 uh uha week for owners.
Number two, quarterlydistributions, uh, or really
milestone distributions isreally how we do it.
Um, which is like, hey, uh everyquarter or after this milestone,
or once we get to this amount ofmoney in that account, triggers,
right?
As soon as we hit this X amountof dollars, that triggers a
(27:56):
distribution.
That distribution, whether it'smonthly, quarterly, milestone,
no matter what it is, that is ahundred percent the decision of
the general manager.
So in those decisions, I don'thave a say, I have an opinion,
and James will listen to myopinion, but he's running the
company.
And we set this up in writing inyour in your agreement because
(28:20):
the hands-off owner of thecompany should not dictate how
much of the legs of the companyget knocked out from underneath
it.
What we want to do is distributeonly enough that whatever's in
the account it can keep continueour growth and doesn't harm our
growth, right?
And so what I've seen is ownerswho are hands-off say, hey, I
(28:40):
need 10 grand.
Uh let's distribute.
And the guy running the companywho might not have as much
profitability in it, uh, I thinkyou, I don't know if you know
the company I'm talking aboutthat did this really, really
poorly and ended up going under.
Um, the guy running the companyis like, well, I need that
money.
Like, we need cash flow.
I got this big job coming up.
And like, well, I need that, Iwe need to distribute.
We're distributing.
(29:01):
And the owners voted todistribute, they distribute the
money, and then they startedborrowing from Peter Paul, Robin
Peter, PayPal.
And it just goes that way.
So you have to have the generalmanager running the company
who's in charge of growth be thefinal decision on how much gets
distributed.
Now we want to do a 50-50.
Sometimes we can only do 10% ofthat because we got some big
(29:24):
stuff coming in.
I mean, I remember when we'vetalked distribution before,
you're like, I've got three bigjobs that we're in the middle
of.
Let's wait to distribute forabout a month and a half because
I want all three of these to getthe final check before we
distribute.
All right, cool, do that.
Again, if we're living off thesalaries that were that's coming
out, those distributions arewhere we pay for vacations,
(29:45):
where we get our savings, wherewe start savings for the kids
and our retirement.
The kids' retirement, the kid,you know, like weddings, like
all like I want to set thecompany up where those
distributions are my icing onthe cake.
I'm not living off those.
Because if I if I need that tocome in and we have two bad
months, I'm like, James, I needthat distribution, I need I need
(30:05):
a distribution.
It he's in rock in a hard place.
Like, Clark, I can't do it.
You can't pay your mortgage, Iguess, right?
And so what we want to do ishave if I'm operating in the
company, I get a paycheck forthat.
And then the distributions comeabove and beyond that.
The last type of owner pay iswhat we call an annual tune-up,
where at the end of the year weassess and say, hey, you know
(30:26):
what, we got so much money inhere, let's distribute it.
Or, hey, you know what?
End of the year, let's changehow we pay.
And for the next 12 months,let's distribute five grand for
ownership every single month.
That's kind of, we like to lookat that our annual retreat if
you're if you're in apartnership.
Um, but yeah, that's that's kindof the owner pay distributions
and and how we do that.
(30:47):
The rule don't raise guaranteedpay until you have hit your
target margins plus reserves forthree straight months.
And what reserves are is myoverhead.
I need at least.
My overhead for three months inthat account for if things go
sideways, I can use that moneyfor the overhead.
Now I'm not using that for acost of goods because that flows
(31:08):
down that way, but we're gonnabe able to not have to fire
people if we missed if we hadone bad month.
All right, that was section two.
That was a lot.
Any questions about that?
No.
Let's talk about this.
So James and I have twodifferent views on what we how
we like to distribute ownershippay.
James likes to do let me buildthe account up, and when I feel
(31:31):
in a comfortable spot and we'vegot good money, I'm gonna drop a
ton of money in your bankaccount.
I am like, well, I'd rather dofive grand a month all year long
and at the end of the year getget extra if we have it.
Because then it's like, hey,it's consistent.
I know it's coming in.
I can, you know, that that sortof thing.
I think there's pros and cons ofit.
Tell me why you like the waythat you the the the milestone
(31:54):
way.
SPEAKER_00 (31:55):
Um I like the milestone way because I'm a
squirrel by nature.
Yeah.
And I once you send the moneyout, once the distribution is
made, if something were tohappen that it's like, hey,
(32:15):
we're starting, we didn't landthese two jobs that I thought we
were gonna land.
We're going into the wintermonths, and we just did a
distribution of$20,000 uh whichrepresents allowing us to keep
running for a month or two.
Uh once you're in that position,getting that money back is a
(32:37):
whole hell of a lot harder.
Rivers don't flow upstream.
Yeah.
So I really like having uh jjust building this chunk and
then saying we're good, we'regood.
That's great.
Let's keep growing that.
Let's start thinking about adistribution, let's forecast
down the road and see what doesincome look like in three, four,
(32:59):
five months down the road.
And is it a good time to do adistribution?
Also, on top of that, I like thechunks because in just your
personal finances, it's a loteasier to say, okay, here's the
money.
And I can make much I can makemuch more sound financial
decisions when I have thischunk, and I'm like, okay,
(33:22):
great, let's put this here,let's put that there, and let's
put this here, and then we cansplurge a little bit with this.
So when it's coming in like youknow,$1,500 a month or$2,000 a
month, it's almost it's it's notenough to move the needle, say,
okay, stop.
What do we do with this money?
Yeah.
$2,000 goes into your accountand just gets used like
(33:44):
everything else.
You got to dinner a couple moretimes than you normally would.
You might buy that thing thatyou wanted to buy that's you
know a couple hundred bucks.
When it's a when it's a chunk ofmoney, like this is valuable.
Yeah.
And you can use it more, Ithink, efficiently.
SPEAKER_02 (33:58):
I I I think I mean when I'm looking at pros and
cons, the pro of doing it thatway is that when it's coming in
monthly, people all of a suddentheir outgoing expenses start
rising because they've got thecash monthly.
So maybe I end up getting thatnicer truck.
Maybe I go get that$120,000vehicle when I should be getting
the$60,000 vehicle.
(34:20):
But I got this income.
I got five grand a month comingin.
That's part of my income.
I'm making this much, like I gotit.
Uh, I want I really want thatRV.
I really want to do this.
I really like, and so theirmonthly outgoing starts going up
to equal the monthly incoming.
And then all of a sudden, Jamessays, hey, we got to pause
distributions for three monthsand and lick our wounds.
We had some issues.
(34:41):
Uh, we can't pause.
I need that money, man.
Yeah.
I need it.
You can't pause on that.
I need my money, man.
Yeah.
Where's my buddy, Brian?
Where's my buddy?
But well, that so that's that Ithink is the is the really good
part of that.
Um there the negative for me ofdoing it that way is twofold.
Number one, you gotta be asquirrel like James mindset, or
(35:03):
it doesn't work because it thenbecomes a piggy bank.
I've seen it become a piggy bankfor guys where it's like, oh, I
really want this cool.
Uh, I'm gonna get a jet ski.
All right, I'm gonna distribute.
I'm gonna I need that.
Oh, I really want, and soinstead of seeing it, and and as
a partner, it helps out becauseyou got some accountability on
it.
As a one-man show doingmilestones, it turns into this
(35:25):
like, ooh, we want to go on atrip.
Let's let's distribute.
Well, no, no, no.
We distribute because we're wework backwards into the
distribution distributionbecause we know how much money's
in the count.
And it's not like, hey, I wantto take my family to the beach
for the for spring break.
I need eight grand.
I I don't care what you need,what can you distribute?
(35:45):
What's in the count?
Let's look at what is actuallydistributable and let's not harm
the company because you want togo on a beach trip.
SPEAKER_00 (35:50):
And even if you're gonna use it, let's say you're a
one-man show and but you do havea company and you've got people
that are dependent on you, andyou've got uh$90,000 in the
retained funds or whatever.
Uh or wherever it's gonna beused.
You you're like, well, you knowwhat, invest investment
(36:12):
properties.
I'm gonna take forty thousanddollars of that, we're gonna do
an investment property, we'regonna flip it as the company.
But you're you're going belowthe threshold that you set for
yourself.
And even though the idea is,well, we're gonna we're gonna
make good money on this, andit's gonna be a positive thing,
(36:34):
you are going beyond yourthreshold, and now you are you
you're beholden to the market.
Yep.
And that is not that's not theif you're trying to build
something, that's not the bet tomake.
Correct.
SPEAKER_02 (36:48):
And it it's it's my old saying of true
entrepreneurship is not chasingevery opportunity, but a
ruthless elimination ofopportunities to where I'm only
going after the best andbrightest, and which is I don't
want you flipping houses.
I want you training a newproject manager, right?
(37:10):
And so distribute the money andon the side, nights and
weekends, do that.
Do that.
Don't justify the time that I'mpaying you to be a GM here, that
we are paying you to be a GM,that you need to be investing in
these guys and justify it tochase a hobby.
A really good opportunity, butit's not a great opportunity.
We need to eliminate those,right?
And so that that's number one onwhy the the downside of doing
(37:33):
large distributions is you startviewing it as what do I need,
not what's best for the company.
Number two, the flip side ofthat.
Because I used to do that,that's how I ran in the
beginning.
But what I said earlier is Ikept saying instead of
distributing the profit firstway and getting my money, I
leave it in the company.
Let's make another hire.
(37:54):
Let's leave it.
I'm gonna reinvest.
And I felt like I'm a greatentrepreneur because I'm
reinvesting my money into thecompany.
But at the end of the day, I hadzero savings.
Like, like I talked to guys whoare like, hey, so like what's
your do you invest?
Like, what's your savings?
What's your portfolio?
All that I'm like, oh, I justhope this company works or I'm
screwed.
Like that, because that's whereI was.
Like I didn't have a savingsaccount.
(38:14):
It was just like, just leave itin.
I'm only taking out what I needand everything else, let's all
in.
Let's keep it here and let'sgrow this thing.
Let's build a software, let's dothat.
And and everything was aboutthat.
And I didn't have a healthybalance of safety, security.
I need to put this money awayfor this.
I need to start saving for this.
I need to go on a freakingvacation with my family that I
(38:35):
didn't do for like three yearsstraight because it was like, I
don't have the money for it.
I'm investing in growth, right?
And so it's the other side ofthe of the coin in terms of like
you're never distributingbecause you're letting the
company eat all of your cash.
And so the the milestone ones,it's like, well, once we get to
a hundred grand, I'm gonnadistribute 50.
(38:56):
Well, as soon as we get to 80,I'm like, what if we got a fleet
of trucks?
Uh that 80 went down, right?
What if we do this?
What if we started thisdivision?
What and so I would entrepreneurmyself into no money because I
would never distribute moneyuntil, I mean, the only times I
ended up distributing when youwere an employee like you know,
a while ago, was at the end ofthe year when I missed my tax
(39:18):
mark because I was going so hardin the paint on on investing.
It was like, oh crap, I need 30grand for my taxes because I
didn't pull any money out.
I was literally just quoteunquote reinvesting in the
company.
And then I need, I'd pop intothe office and be like, hey, I
need 30 grand to pay our taxes.
Like, what?
We don't, oh, okay.
Right.
And so then it uh it all goessideways on that of pulling that
(39:39):
money out that we needed for theother thing.
So there's two sides of it.
There's I spend too much out ofit and I distribute too early
because I just want something,or I never distribute because I
don't hit the milestone that I'msaying.
So I would, I would almost saylook in the mirror, have have a
coach or accountability or aspouse that's that that that is
(40:02):
might be more financially mindedthan you, be a second set of
deciding on you.
Like some guys, their spouseswill be like, hey, let's
distribute everything.
And some people, some spousesare on the other side of like,
keep it all in the company.
If you have a uh anaccountability partner, really a
coach that says, you gotta letme approve your distributions
(40:23):
and let's set a goal.
And even if you want to reinvestin the company, we got to
distribute and reinvest out ofyour retained earnings and start
having those type ofconversations.
I think that's that's what makesthe milestone checks a lot
safer.
Um, the other way, theguaranteed payments kind of
stops you against those out.
(40:44):
But but again, if you do theguaranteed payments, the
downside is and the risky sideis I'm gonna increase my
outgoing monthly.
And now I it's not a guaranteedpayment.
Now that's part of my salary.
I got to get paid that.
So that being said, if you'redoing the the monthly guaranteed
payments or the bi-monthly,whatever it is, you can get
raises as a PM in your company.
(41:06):
Raise that up and spend out ofthat.
And hey, you know what, we'redoing pretty good.
I'm gonna bump myself as thegeneral manager here and now
maybe, maybe I'll make 95 nowand I'm gonna get that going a
little higher.
And that means I won'tdistribute as much into
guaranteed payments, but all ofmy cash flow makes sense.
Right.
And so I if I need to increasemy my outgoing expenses, I want
a little bit nicer of a house,and my daughter is almost 16, I
(41:28):
got to get her a car.
Let's look at you getting paidmore as your project manager GM
role in the company, not let'sspend that out of guaranteed
payments.
All right.
That's I think that's that's theone of the biggest points I
really want to hit in is youneed to understand yourself
financially and where you'restrong and where you're weak.
(41:49):
You know, if James wasn't asquirrel the way that he does
it, I would not like the the waythat we're doing the
distributions.
But I'll tell you, when I get atext from James every single
time I get that little like, youknow, the the birds in your in
your stomach, oh, is is he gonnadistribute something?
Like, is there is there moneycoming my way?
So yeah, it it's I like it.
I've I've liked it more sincewe've been doing it that way.
(42:11):
Cool.
I was against it in thebeginning.
I know.
Um but it was also my baggage ofI always try to do it that way,
and I never distributed.
And and so I, you know, it'sit's working well.
So good job.
Um, all right, pricing thatfunds your pay.
We talked about this last week,but I want to hit it one more
time.
Every line item, you need tohave your labor rate plus your
(42:35):
profit margin, and you can payyourself that profit margin.
If you're swinging the hammer,if you're not, if you're not uh
like a full GC, but you're alsodoing your labor, pay yourself
the the market rate for thelabor that you're doing and have
a markup that goes into yourretained earnings that flows
down into our overhead and landsin retained.
(42:56):
We really need to separate thosetwo things out.
Also, the this this is probablya full podcast that we can talk
about.
So I'm gonna hit it real quick.
But equipment, trucks, backhoes,that anything that you're buying
that you're utilizing in thecompany, I see guys spend those
because they really want thatcool toy.
They want they want thatexcavator that's owned and
that's theirs.
(43:18):
But you're justifying it bybeing cost of goods.
That I like to put that in myoverhead.
And if I bill for those cost ofgoods, which you should bill
every time you use yourequipment on a job site, that's
just free money.
That's bonus money.
But I need to cover in myoverhead cost, that monthly
payment on that backhoe.
I need to cover in my monthlyoverhead cost because next month
(43:40):
I might not use it.
And so it really is just anexpensive overhead that I've got
sitting there.
So again, equipment, if you'rebuying that, I am strong against
not buying that.
But if you're in a HVAC company,if you're a plumbing company, if
you're in a law, you have tohave some of that equipment, and
that's okay to buy, and that'spart of those, those, those
setups.
But I want to be able to coverthat in my overhead so I don't
(44:02):
have to get a job that uses thatparticular piece of equipment to
pay for it this month.
All right.
Um finally, let's watch for somered flags.
Here, here's some three redflags that you know, uh, when
I'm coaching, I'm kind ofkeeping it in the back of my
head when we're talking aboutstuff.
Your margin is lower than 25%for more than one month.
(44:24):
You're gonna have a bad month.
Everyone does.
Two, three, by the third month,if our margin is below 25%, we
have to fire people, we have tocut bait, we have to sell us
some equipment, we have to moveout of the office.
We need to figure out why you'rebelow 25% month over month.
But that that's where it goesfrom a one-off bad month to a
permanent um, this is this iswe're we're crashing right now.
(44:48):
Number two, overhead creep.
Again, if we start making moremoney, all of a sudden overhead
starts going out more and more.
And so instead of making moremoney in the profits and the
retained earnings for thecompany, I'm just spending more
because I'm making more.
Right.
So I'm getting more toys, I'mupgrading trucks, I'm now gonna
move into an office I can'tafford.
But, you know, the money thinglooks like I can afford it, but
(45:11):
I can't.
Right?
Like, let's let's not create,let's make financial spending
and overhead decisions at theend of the year with a third
party, with your coach.
Like, hey, I'm thinking about anoffice.
Tell me why I should orshouldn't.
Let me let outside, I've got noemotional investment.
I don't care about your egowanting to have an office for
people to go to.
(45:31):
What I care about is you makingas much money as possible and
protecting your company.
Um, so overhead creep happensall the time.
I we started making more moneyfour months in a row.
I'm making 10 grand a month onaverage more than normal.
I'm gonna go and get that truck,and then winter hits, and now
I'm turning the keys back inbecause I can't afford it.
Uh and then final, final big redflag for me is big revenue and
(45:54):
tiny retain.
When I when a company comes intocoaching, I'm looking at the
revenue and they're doing sixfigures plus, and I look at
their bank account, they goteight grand in the bank.
Uh, that's a big red flag.
Like, where is all your moneygoing?
Let's if you have larger andlarger revenue and your retained
earnings, your bank accounttotal in the background, when
you look at your balance sheet,which is a whole other
(46:16):
conversation, but you're lookingat your balance sheet and it's
not going up, what's going on?
What's happening?
You're you're mismanaging,you're not handling as well.
So big big revenue, tinyretained is gonna be probably my
biggest red flag uh in thecompany.
All right, so when cash getstight, what do we do?
We freeze distributions, right?
We're living off the minimum wecan pay ourselves as the general
(46:39):
manager, project manager of ourcompany.
Um, and we're gonna live withinour means on that.
If things get tight, thatdistribution, maybe we're not
going to the beach, maybe we'regonna uh have a fun week at the
pool during spring break becausethose distributions aren't
coming.
Um next, we're gonna protecttaxes and cost of goods at uh at
all uh all levels.
(47:00):
Uh uh when things are tight, doI don't know how hard to hit
this.
I can't hit any harder thanthis.
Do not touch your tax account.
If you put money in there, youit's gone.
It's do not touch.
I said earlier, do not haveonline access to your tax
account.
You can drop money into it fromyour bank.
To pull money out, you got to goin person.
(47:23):
You got to get a uh cashier'scheck from them to pull money
out of it.
If it's that hard to get to themoney, you're not gonna
accidentally, oh, I need athousand bucks to float for this
month.
I'll put it back next month.
Okay, I'm gonna steal athousand.
That never gets back in.
It just doesn't, it doesn'thappen.
Because you have bigger issuesif you're having to steal from
that, that account.
(47:44):
Uh when cash gets tight, we gotto start trimming overhead
immediately.
A lot of times, this was, Ithink, one of our biggest issues
in in growing our company inAtlanta was I would not fire
people when we should.
I loved them.
I had some sort of thought thatI could rehab somebody and work
them through it.
And I think I mean, I rememberthe the one time on the retreat
(48:06):
where we added up 55 or 60people that we had fired and
looking at them like six monthstoo long, eight months too long,
six months too long, four monthstoo long.
And it's like we had probably$500,000 of extra pay that we
should have fired people over.
Um, you know, it it's it's hardto fire.
It's very hard to fire becausethey're friends, you know, you
(48:28):
you feel responsible for them.
Um it's hard to sell your truckand get a crappy truck.
It's hard to do these things,but it's even harder to file
bankruptcy.
And so you gotta you gottaunderstand we gotta cut overhead
early and as much as possible.
Get out of what you can.
I'm I remember one company thatI I'm coaching, if they're
(48:49):
listening, they'll they'll knowit's them, because they were in
uh they had a rent of about$12,000 a month.
And I looked at them, I waslike, guys, why?
Well, we need this, and we gotthat, and we need this.
I'm like, your your numbers,when I'm looking at percentages
of what your rent should be, youshould be paying no more than
three grand a month of rent.
Uh and they're like, well, we'rewe're in for another two years
(49:10):
with this landlord.
I was like, you go to thelandlord and let's show them
your QuickBooks and say, eitheryou find me another, because
their landlord had a bunch ofeither you find me another place
and I'll lower my rent and stillrent from you, or I'm going
under.
Like I can't continue this.
Like I can't pay you either way.
So do you want me to pay youthree grand a month instead of
twelve?
And they're like, he's not gonnago for it.
(49:31):
They went, he was like, Yeah,don't worry.
I actually want to sell thisbuilding, so that's perfect for
me.
Why don't we do X, Y, and Z?
Then literally the next monththey were in their new office.
SPEAKER_00 (49:40):
Bingo.
SPEAKER_02 (49:40):
And and again, it's like, well, that's they just
picked up eight grand overnight,right?
Because they asked and theythought about it and tried to do
it and sacrificed because theydidn't have the big warehouse
space and they didn't have this,but the company's doing better,
right?
So we're cutting overheadquickly.
Um I think one thing guys areafraid to do is rate price raise
prices.
I think you don't need, you'renot raising prices and
(50:04):
overcharging people.
You're actually charging themthe actual value of what you're
giving them and and changing themindset of scarcity, mindset of
I gotta, I let me just chargethis much because I need the
cash, I need the job.
You've got to say, I gotta paymyself labor, I gotta pay for
the profit, and this is my pricetake it or leave it because
(50:25):
we're not gonna work for freeand we're not gonna pay someone
to let us come work for them.
Uh, and then you're gonnare-sequence draws into
milestones.
If those draws monthly aredraining you, let's go to a
milestone.
Let's just don't draw.
Let's look at it at the end ofthe year.
I'll help you with that.
Let's look at quarterly, let'sfigure out what milestones we
got to hit to start draws again.
But we're we need to make surethat you can live off your me,
(50:47):
live within your means on whatyou're getting paid for the
labor you're doing for yourcompany, whether it's project
managing, general managing,swinging a hammer, whatever
labor you're doing gets paid,draws are separate.
All right.
I've got a checklist of what youneed to do today, listening to
this, and then we're done withthe podcast.
I feel like I've been justverbal vomiting.
(51:07):
Hey, we're here for it.
All right, number one, open yourseparate bank accounts.
Talk to your banker, figure outhow to do that.
They're gonna try to charge youmonthly per account, whatever.
Figure it out how to do it.
I need your three base ones.
I need your tax account, I needyour draws and uh retained
account, and then I need youroperating account.
(51:28):
I need minimum those threeaccounts.
If you are a little larger sizeof a company, you probably have
some of those already set up.
Um let's let's break it intopotentially four, maybe five
accounts if we've got a lot ofcash flow going through the
company.
Um that fourth, that thirdaccount, the retained earnings
owner, is usually a savingsaccount that we set up.
And the tax account is usually ayou've got to force them to turn
(51:50):
it off on your online banking.
I don't want my tax accountonline.
I want to be able to drop moneyin, transfer money one way on
that, and they can set it up.
Most banks can set that up foryou to where and they're like,
why do you want to do this?
Well, because I don't trustmyself.
I this is this is how I want tomanage my money.
Um number two, minimum weeklyfinancial meetings with
(52:11):
yourself, 20 minutes.
It's gonna take it's gonna takea couple hours, day one.
But I want you to get yourQuickBooks set up.
I want your ProStruck softwareset up, and I want you paying
your labor through the softwareand managing your materials
expenses in QuickBooks.
I will show you how to do it.
It's not hard, it's notdifficult, it's just some hard
work.
And then once you get doing it,it's 20 minutes a week.
(52:33):
You're I mean, you how much doyou spend a week on tying
materials to jobs?
SPEAKER_00 (52:39):
Um It's probably like 30, 45 minutes.
SPEAKER_02 (52:44):
Yeah.
And it's a decent sized company,and you're that's all you're
doing weekly on it.
And that gives us really tightnumbers that we can run what's
going on with that, whathappened with this job.
We get the red flags ahead oftime instead of behind you know,
two months later.
Um, so get in minimum 20 minutesso we know your revenue, your
gross profit percentage, youroverhead, and job costing is so,
(53:06):
so important.
Um, and then set monthlymeetings first week of the
month, repeating the firstTuesday of every month on your
Google Calendar.
You can set that up repeating.
I'm going to look at my ownerpay and my retained earnings.
I'm gonna make that transfer.
I'm gonna manage this money astight as I can.
That's the day I make mytransfer over into my savings
account.
Uh, and at the same time, Imight also distribute to me from
(53:28):
that account.
I want it all over there.
I want this distributions tocome and flow out of that
account.
I don't want you to bypass itand just pay yourself.
Uh, and then finally, I wantbids today.
Uh oh, bid today's estimates atyour target margin.
You need to know the numbersyou're trying to hit, not just
what what so many guys startcoaching.
(53:50):
I'm like, well, you know, how doyou build your pricing?
Well, I just charge people whatI can.
What does that mean?
You know, we need to know yourmargins, we need to know your
your target that you're goingfor.
We need to have a game plan onbuilding the estimates from the
money aspect of how we're gonnamanage that money and what we
need to make for this job tomake sense for us to say yes on.
(54:11):
Oh, that was a lot.
Any any any thoughts, commentsthat you have?
SPEAKER_00 (54:22):
Um, I no, there's there's a lot of need here.
SPEAKER_02 (54:29):
Yeah, yeah.
It's that's why we broke it upinto two, and it's still a lot.
It might be a uh listen throughit twice.
Uh one thing is your salarylives or dies by margin
discipline.
I wrote that down just as a noteat the bottom.
Like your salary, the money thatyou're gonna make, the money
that's going to fund fun stuffthat's gonna pay for your kids,
(54:50):
school, whatever it is, is alldecided by your discipline on
your margins and managing thismoney.
You can be, you can work yourbutt off, you know, 60 hours a
week.
And if you don't aren'tdisciplined and know this stuff,
you're doing it for nothing.
Like you're you're not in maybeyou got cash at the end of the
end of the year.
That's great.
(55:10):
You're not gonna know if you door not, and you're gonna pull
money out and you're gonna haveno control or discipline over
that.
So I learned that the hard way.
I was not disciplined forforever on the financial side.
I'm not naturally that way.
I know numbers, I'm great withmath, but I'm just like, yeah,
we'll figure it out.
Let's let's just go, let'sinvest in that.
Yeah, let's buy that, let's dothat.
So you're your margindiscipline, disciplined on
(55:32):
making the margin above andbeyond, where you're running
your company like it's Amazon.
You're serious about it, you'relooking at every dollar, every
penny.
We know where it's going, whereit's coming from.
And finally, let's build thatreserve.
One month of revenue is whatwe're going to.
That's going to give you freedomto breathe and scale.
If we can have one month ofrevenue that keep grows with our
revenue in the background, youare going to be able to go to
(55:56):
sleep at night.
You're going to be able tobreathe.
You're going to be able to getthat scale that you want to do
to grow into next year.
So if you want to work on any ofthis, if this some of this stuff
didn't make sense or youdisagree with it, go to
ProShark360.com and go tocontact us and set up a call
with me.
If you want to come on aretreat, I'm going to do this
part with you over the nextthree months.
(56:16):
My goal for everyone coming tothe retreat is that they know
their numbers when they show up.
We're going, I've got aworksheet that we're going to go
through.
I'm going to do three coachingsessions if you sign up now.
Uh, might end up being two ifyou wait to sign up, depending
on how close we are to theretreat.
But we're going to, I'm going torun you through this and then
we're going to meet again andlook at it.
I'm going to assess what youdid.
So when you show up at theretreat, we know all of your
(56:39):
numbers and you have it allfilled out to where we're not
spending three hours trying tofigure out your numbers.
Last year it kind of got gotcrazy with people trying to find
their numbers and do that.
So we're going to do that allpre-retreat so we can hit the
ground running and really getthe retreat going.
On this retreat, we're going tolook at your numbers.
We're going to look at yourefficiencies.
We're going to make a game plan.
And then we're going to plan out12 months of your company.
(57:01):
We got a planner that's comingthat you're going to take home
with you, that you fill outmonth over month goals, kind of
our anchor goals of what we'regoing to be doing each month.
And then we're going to have aplan on how to execute this one
bite at a time for 2026.
And so if you're in the coachingprogram, this is what we're
going to go through all year.
So you got to come on theretreat from the coaching
program.
If you're not, you just come onthe retreat, take it, learn from
(57:23):
it, launch it, grow your companyoff of it.
Uh, and hopefully we can be partof that process at some point.
So thanks so much.
Go to contractrequest.com tosign up for the 30-minute call.
I want to hear about yourcompany before you sign up for
the retreat.
You it's an invite-only typething.
You you will be invited.
This is an exclusive, but itreally is something I want to
talk to you about before youcome.
(57:44):
It's a small group of guys thatcome and girls, women and men
that are there, but it's a verytight-knit group that um you we
want to make sure that you'reready for something like this
before signing up for it.
Um and so we'll I'll do a littleassessment with you and make
sure and hear a little bit aboutyour company.
But love to talk to you.
Contractorcuts.com.
Let's set up a call and we'llwe'll see you guys next week.
(58:05):
Bye.
Bye.
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