#130 - How to See the Bottlenecks in Your Construction and AE Firm

Hello, and welcome to a, another episode of the construction quarter podcast. I'm Dylan, I'm your host joined by my blue collar. Bad-ass Matt. How's it going, man? Things are good. Things are very good. We're, uh, you know, in the midst of very busy construction season, but, uh, so far, uh, it's been a great year and weather is, uh, not really cooperating this week, but, but things are still getting done.

[00:00:26] So it's all fun. It's uh, since I've not been looking at houses anymore, we decided to hit pause on moving this year. Uh, my wife and I were having a conversation yesterday that it feels like just cause I'm not in the middle of the whole housing craziness that it like settled down and she's like, no, still, still bad.

[00:00:54] Like she still gets all the updates on. Houses in our area and it's still like crazy houses sell within like a week or two. It's just still totally insane. Which for us, right in the construction industry is, you know, it's great economic indicator that things are, are still going really well for people to be, you know, buying and selling houses so quickly.

[00:01:19] Yeah. I like it for that reason. Um, houses around here are selling before they're even listed. I mean it it's it's insanity. And, uh, my sister and brother-in-law are looking for a house currently and they were saying they, they put in like 10, 15 offers and, and they're limiting time. Now to 15 minutes, you get to go view a house.

[00:01:40] And if you don't make an offer in another 15 minutes, forget it. I won't even talk to you. But these they're getting, you know, 15, 20, 30 offers in a day. It. Uh, so it reminds me of like the countdown timers for like any website too, like in marketing or, or like the show storage wars or something like that, where they've got an auction and it's just an auction now.

[00:02:05] Like you make an offer, it's not your Sol come again. That's exactly what it is. I, uh, I may have spent some time in my, in a previous life doing the storage auction things. And you want to talk about crazy times, man. When they open up that door, the clock starts ticking. You better either get it or leave.

[00:02:28] And yeah, I mean, so it's from a like marketing and psychology perspective. It's great seeing that the real estate market finally has like a fear of missing out component associated with it in, uh, in doing this. And I think it was partially by necessity, right? In, uh COVID and limiting, you know, viewing times and all that kind of stuff for agents where you can only have one showing versus like a mass.

[00:02:54] Hysteria thing of everybody showing up at the same time to view a place. Now it's like, you got a slot best offered, hope you win. It is not for the, uh, the weak of stomach that's for sure. Or checkbook. Yeah. Right, right. Uh, which kind of goes into, you know, the big topic that. Uh, we wanted to bring up and go through today and for construction companies, this is going to be in really engineering a whole industry.

[00:03:27] This is going to be a very different way of looking at your business is going to be a new way to think about it. Uh, in marketing it's, it's thought about very frequently and how really people flow through because you have a lot of data analytics, things like that to track as people move through your. A funnel or distribution sales channel and in construction, we just don't have that.

[00:03:50] Right. You've got five, 10 clients at the most for, for a lot of it, which is, again, the thing that we also have to remember in construction is there's a lot of marketing things that don't apply. And there's some things that we need to apply very selectively in how we. Implement them into our businesses for engineering, for construction.

[00:04:15] Because again, we don't have a lot of clients or our marketing looks a lot different. It's a very high touch, uh, type of marketing efforts for the most part. There's a lot of, you know, social and other things that are kind of light touch just to keep in front of people. Um, but the thing that I wanted to bring up was it's really looking at it as bottlenecks.

[00:04:35] And if you've ever read, uh, The book, the goal by gold rack. It's about bottlenecks in that book in terms of boy Scouts. And it's uh, have you ever read the goal by? I haven't. So it's, uh, like industrial engineering kind of one-on-one, it's a plant, it's a story of a plant manager and then he's got like a boy scout group that he leads is kind of the.

[00:05:03] You know, uh, correlation to the story plan has a bunch of problems, but he looks at it in terms of bottlenecks. And one of the ways that you could see a bottleneck is you needed the fastest thing to, or the soulless thing to kind of be upfront. So in terms of boy Scouts, and again, this book was written a while ago, but you put the fat boy scout upfront, uh, so that, you know, he was the slowest one, but then everybody stays together.

[00:05:27] Versus if he's in the back, you gotta, everybody goes and you wait and then you go, and then we go in the week. But when we look at bottlenecks across the organization, it's, uh, segmenting, you know, pieces. And the thing that I want to like first address is, is sales. And we've already kind of touched on this and Matt, I know I want you to, to jump in on, on some of this for kind of some of the things that we had talked about, uh, last week in just high touch, right?

[00:05:56] Being yourself, all those types of things in sales and. Where in construction, I feel that we, one, having a presence online is like still not a thing that most people do. So to have that content put out projects, highlight your people, I think are very key things that we need to be doing as an industry, again, to bring more people into the industry, but also to show clients, right.

[00:06:20] It serves two purposes, uh, for it. And then, so is one. And then if you want to touch on some events and things that. You've done on in-person that really ended up making a big difference in how we sell really the start of everything that we do in kind of casting a vision and all that type of stuff. So I think you, you touched on a good point, right at the, off the get go here and that, you know, we don't as an industry market very well or very often, because most of us, myself, especially.

[00:06:58] We build what a handful of projects a year, and that keeps us quite busy. You know, whether that handful is five, 10 or 20, it doesn't really matter. It's different if you're selling widgets. Right. And you're just trying to, to boost sales by volume. So. Any marketing that we do has to be very, very targeted or it's a giant waste of time.

[00:07:21] And time is, is one thing in our industry, especially that no one has enough of, especially in the springtime, uh, when things are running like crazy. So, you know, you really gotta target what you do and you really have to target who you're talking to. Um, you know, the social thing you mentioned, we, I have started doing that in the last year.

[00:07:43] More frequently. And it's really just, just to keep our name out there. Right. We have a core group of people that are now following along all the silly crap that I put out there, you know, but it's a way to follow up on projects and showcase things. But, uh, you know, for the most part, the, the marketing we do is like what you said, it's in person.

[00:08:06] Um, you know, you mentioned events, we don't do a whole lot in terms of. Of career type events. We're, we're, we're, you know, we're getting youth and, and doing that route, but, but we certainly do a lot of sponsorships and, and this time of year, especially, um, in, in our market and the Southeast Michigan market golf outings are huge, you know, and anytime you can get out with people and start doing actual real face-to-face old school networking, shaking hands, you know, drink a beer or two.

[00:08:39] Handout those old fashioned business cards that that's really how, how deals are done still in at least here. And that's, that is by far the single best way to get your name out, to, to stay on top of or in front of people stay on top of mind and to really grow kind of organically the old school organic way.

[00:09:06] And that it's one of the things that, and I've worked in. A lot of firms I've run my own now for a few years. And in, in any world, I must feel we didn't do enough of those types of events. Right. We, we had our five, 10 design clients that we went to, whether those that was higher ed or healthcare or schools are a little harder, like the K-12 markets, a little harder to do outings and stuff with.

[00:09:33] Just now that you can't get anything more than like 25 bucks or something worth of stuff. The outings become a little more, uh, difficult to be a part of, but there's other ways that are free touches that you can do without taking people to lunch and things like that in other markets, uh, like healthcare and, uh, higher ed, those were no problems.

[00:09:55] And then obviously with private clients kind of do what you want, but, um, In like the public sectors become a little more difficult if you're doing government or anything like that. Um, it becomes, uh, kind of harder but easier in a way. You just got to be a little more creative in how you play it. But far too often, like we didn't there weren't those touches there, weren't those like email campaigns to like best design practices.

[00:10:20] What do you do for, you know, all these various things that you might have occur within your. Within your building. How do you do preventative maintenance on this or that, like, how helpful would that be to an owner to have those types of follow-ups? And I think far too often, we as an industry because we couldn't, so this is another thing historically.

[00:10:44] So architects and engineers, uh, but I think architecture historically could not advertise. So in the seventies, And sooner, I think 75, it got repealed or sometime in that timeframe, the internet can correct me here. Uh, but sometime in that, like before 1975, let's just say it was unethical to market. Same with lawyers and a lot of professional, uh, degrees.

[00:11:12] It was against your licensure to market. So you weren't able to actually mark it had to be face-to-face hand to hand. And that was it. So now in this new age of kind of I'll call it the wild west, but like you can kind of do whatever you want. Uh, there's still a lot of old mentality in it and it works. I mean, it's worked for a long, long time.

[00:11:38] But there's other things in the design community, especially in the crackdown and like, or I'm going to say crack down, but in the public sectors where you like, you can't take people to lunch, you can't gift anything. It's, you know, $25 limit and you still gotta write out paperwork for it. Right. So in that type of environment, it becomes very hard to do anything outside of meetings, scheduled things.

[00:12:04] So you gotta be a little more creative for those sectors. Where you can still take, you know, hospital clients launch, like that's, it's not a big deal or higher ed or especially private clients. Right? You can do those outings, you can go to those things and it's totally fine. So it's knowing your market, but also being a little more creative and just consistent in your messaging.

[00:12:25] You'd be surprised. And the, the other thing too, is that I think a lot of people don't understand or given enough time, is that in construction? Right. Our timelines are years. So just like you talked about on a previous episode where it took you six years for what's going to be your biggest project, how, you know, how long are people putting in the time of marketing right.

[00:12:52] Of consistent social effort to then see a return. Cause again, like, look at your fees on any one of these projects, right? Guaranteed. It's at least on a grant, if not a million, if not five or 10 million, depending on what you're doing for a given client. So is the free social media networks and the time and effort you spend put a post out worth a million dollars in a year.

[00:13:24] It certainly can be, you know, it all depends on how you, how you play it. And. Know, real quick before we get away from it, you brought up the whole, you know, taking people to lunch thing. One of my, one of my favorite electricians, I was at a meeting in his office. I don't know, about a month ago. And cool guy, you know, kind of quirky does his own thing.

[00:13:49] We're starting off the meeting and we're talking about a project and he goes, oh, oh, hold on a second. He runs in the backroom and he, I can see him and he's messing around in a freezer and he comes out. With a chicken, frozen chicken, whole chicken, it's huge, biggest chicken I've ever seen sets it on the table.

[00:14:07] And then he sets a couple packages of, uh, of pork chops, some hot dogs and something else. And I'm like, what the hell is this? He goes, hear me out, hear me out. He goes back in the day, because the only way we could get on your bid list was to take you out to lunch or you'd forget about us as well. Yeah.

[00:14:25] Maybe I get that. And he goes, but how long do you remember that lunch? So I, I don't know until I get back to the office, maybe he goes, exactly. He goes, I give people food that comes off of my farm. It was, how long are you going to remember the fact that I gave you a frigging in chicken? You got me. I will probably be telling this story for the end of time, so complete sidebar, but I thought it was a pretty, pretty neat and unique though.

[00:14:55] Right? I've told this story now to, I can't tell you how many people and usually it, it has his name wrapped up in it. So, you know, there's, there's always creative ways to get your name out there and to stay ahead of the game. And as far as marketing goes, that's just it. Tell, tell good stories, be unique, be the person that remembered and figure out ways to do that in.

[00:15:22] You know that chicken, frankly. I mean, it's going to be more expensive than, uh, anything store-bought, but at the end of the day, right, it's worth like, think of how many bid options or, you know, bid lists. He's going to be on moving forward because of that damn chicken. Yeah. I was impressed, you know, and.

[00:15:45] And going back to what you were saying with the, especially with municipal clients, we, we don't serve a ton of municipal clients, but we do have some, and it's always kind of a tricky thing. Even if it's, you know, get the, the, the reasons they put the crack down in place are, are real, are they were so get those out of the pictures though, but just something as innocuous as, Hey, let's go grab lunch.

[00:16:10] You know, now you have to always be thinking about that in the back of your head, you know, who's. Who's going to have a problem with you going to lunch now, which, which, you know, reporter or which, you know, negative Nancy is going to see you having lunch with the mayor or, you know, uh, a trustee or something and, and, and throw a shit fit over it.

[00:16:30] And it's, it's absurd really that we have to worry about that, but it is definitely a reality. Yeah. And it's unfortunate, but there's. Again, like email is progress, pictures over delivering on those projects, you know, good word of mouth. Because again, those people have probably a pretty good network. So it's, you know, over-delivering on your projects being, you know, above and beyond on what you do.

[00:16:57] And then it's just, it becomes a word of mouth client, but also following up electronically and in a free, you know, free to them type of thing where like there's no monetary value associated with reports or. Um, like just talking well about their buildings or the city or whatever that they're a part of, you know, that's free and Goodwill type of advertising.

[00:17:21] Yeah. And we, you know, that community center project that I'm always talking about where we market for them quite frequently, you know, and, and it's. It it's a, win-win obviously if they do better and they, they talk about us and then that goes on the line, but for us, you know, it it's, for me personally, it's, it's a really cool feeling to drive by that place and see it full of people and, or to walk in and see, you know, a bunch of people playing basketball and using it.

[00:17:48] So there's a lot of, of community benefit that can come with kind of being strategic in that sense. Yeah. And again, like it's. You got to give something to get anything right. And sometimes, and again, we're talking, we're talking a million dollar fees here. We're talking, uh, 1895 widget, right? We're not, we're not talking about selling a bottle water.

[00:18:12] You know, that's not what we're getting at here. This is construction. This is big money. And you know, if you're going to win, you need to be able to willing to put in the time, the effort and do it for a long period of time, right. To. To get that project. Cause at the end of the day, that's what we're looking at and payoffs it's, you know, if you show up for say a year, two years, I mean, I just tallied up all my views for showing up consistently for the last two years, three years on LinkedIn, I'm at half a million views across LinkedIn.

[00:18:47] So in that, right. But it's, you got to show up for a long period of time to hit like that type of content and those types of metrics. That again, you got to track them, you got to follow up and then, you know, at the end of the day, you might not know exactly working from, but you can't discount any of the efforts that you've put in along the way.

[00:19:09] And, you know, I gotta say you're way better at this than I am. And maybe it's difference in industry. Maybe it's difference in personality or, or both. I don't know, but I mean, I've been doing it. Yeah. Semi-regularly for about a year. And I still get excited by the number of thumbs up and likes I get. And that's, that's the only metric I really give a shit about because the rest of it, again, it.

[00:19:32] For me for what I do. It's not going to sell me a building. You know, it's not going to necessarily produce the next client, but it keeps my name out there and it, and it hopefully keeps us relevant. Um, now in, in your case, I think it could be the total opposite, right? I mean, you, you could have that, that purchase made because of a video you did or something you posted.

[00:19:56] So, you know, I think it just, it just depends on. Uh, knowing your target market and knowing how to reach them the best. And they're very different ways of doing that depending on who you're serving. And if we look at this as a funnel, right, you look at the marketing funnel and a funnels have been around for awhile.

[00:20:16] Russell Brunson is probably he's the king of funnels and click funnels. But when you talk about a funnel, right, you talk about leads. You know, the people that are coming in that are. Cold. I don't know who you are that don't know anything about you. They need to be educated and what you do, who you are, what you can offer them.

[00:20:34] And then they become interested. So now they become like qualified in what you do and what you offer. They know who you are, they know your product, but they're not clients yet. They're not people that have bought. So again, it's still an education process, a training process of what you can do, what you can offer them and building that trust.

[00:20:54] And this. I mean again for a bottle of water, there's a lot of people put in the time and effort to like, you know, get you to trust that this thing is going to, you know, not kill you. So depending on where you are in your market, you got to still educate people that you can do what they're looking to do and construction and engineering.

[00:21:14] It's if you're moving from let's just so good examples from K-12 to higher ed, right? You've been doing K-12 projects forever, and then you want to get into higher end market. Well, you're going to start in the higher ed market or would that client with some really, probably crappy projects, you're going to do bathroom renovations.

[00:21:30] You're going to do simple little whatever, but it's to understand that it's proving that you can work in their environment, meet their standards, and that you're a good person to work with. They might, and it might even take a while to get those, you know, $5,000 fee. Projects to again, earn the trust to then do the stadium project that earned you, uh, you know, $1.5 million fee.

[00:21:53] So understanding like where that, you know, the value ladder is that Russell Bronson explains, um, or describes, but it's, you know, escalating a client up. And typically that just means doing bigger and bigger projects for them over, over a period of time. And that's so that's like the simple piece of the funnel, right?

[00:22:13] You get. Cold leads and you educate them. They become clients, maybe small clients at first, and then, you know, leading into bigger projects with them doing bigger work for them, and then using that to leverage into other clients. And they, you know, again know like, and trust you. And then they just continue to do business with you.

[00:22:36] That's it. We could end the show right there. It's the know like, and trust, right? The little jobs we call them, resume builders around here. Um, sometimes you have to do that, but, but the whole goal in doing that is to build that trust because in construction, especially for whatever reason, we still have this connotation globally that the contractor is trying to screw the owner.

[00:23:01] But. Architect is trying to screw the owner and everybody's out to get everyone else. Usually I think this is pretty unfounded. Um, but it's still there. So to build trust is the absolute key in, in anything we do. I think it's probably the same with, with the design side, with the construction side. Even with the owner side.

[00:23:24] Cause frankly on that, to that end to the kind of the inverse there, I won't work for someone that I don't trust if I meet with someone. And I think, you know, they're kind of a slime ball and, and it doesn't do me any good to have a bad project under my belt. That's a headache that doesn't go away for a long time.

[00:23:42] Um, and I, I worked a long time ago for a guy who would always tell me that the best projects are the ones you walk away from. And they should have it tattooed on my arm because it's, it's absolutely true in the times when I didn't trust my gut. And I knew I didn't trust somebody, but I still got engaged with them.

[00:24:04] It never ends up. Well, it's never fun. It's you know, those are the stressful projects that, that make you not want to do construction anymore. So. But so all across the board, you know, we all need to, to focus on building that trust, whether it's from the provider or the vendor or the receiver, frankly,

[00:24:27] and trust is built in a lot of ways, right? One of the big things is finances and I in construction, like money is not talked about enough. And how things are structured. And I know I bring it up a lot because I don't think it's heard enough in how things are structured, the transparency, the payment terms, the margins on all these projects.

[00:24:51] I mean, let's just get this straight, everybody in constructions, margins suck. They're not good there. And this is like, so I saw posts on here on LinkedIn where one of the guys, uh, that I followed that. And bill knew from, he came out and said it that a lot of his, so he's principal owner of an engineering firm.

[00:25:15] And a lot of his, or some of these people said it, like they had 50% margins and it's like not even close to true, right? Like it's most of these firms are operating. Like if you go and look at AECOM Jacobs, any of the publicly traded firms, WSP, Stantec, like they're all publicly traded. All their financials are.

[00:25:35] Out there. They're not line item, but you get the gist they're operating on. Well, like I think eight comms, like a 1% or half a percent margin. Granted they do billions, but you know, on a half a percent margin, like that's pretty thin, right? Like in any project it's near me not make money. So when you look at like a lot of these firms in the financials, like the margins are one to 5%, maybe 10% on some projects.

[00:26:02] Yeah. You might do better, but. You need to do a lot of work for the dollar volume to be there. So the margin percentage, you know, frankly, is fairly small. You just have to do a lot of work to make that dollar volume actually matter in terms of, and that's profit. So we're talking straight up profit on the like retained earnings in the company, not like, and that's, so that one to 5% is after.

[00:26:29] Payroll taxes, insurance, lawsuits, like everything else that comes with construction on all sides of the table. So it's understanding that like margins are thin and finances, and I think that's one transparency that I will continue to hammer on in that, you know, understanding that building this trust goes a lot of ways and understanding where everybody stands like financially, I think is very misconstrued just because there's a lot of money in it.

[00:26:59] Doesn't mean that there's a lot of profit.

[00:27:04] If you show me a construction company making 50% margins, I wouldn't believe you, you were, you were doing black magic or something, you know, to get even close to that. I forget it. You know,

[00:27:24] there's, there's so much in this industry that. Is based on old school, ways of thinking. Um, and that's one of them that the contractor, whether it's a GC or a sub, uh, or a vendor supplier that they're making these obscene numbers and that they're, they're, you know, skimming money off of everywhere, they can, it's all bullshit.

[00:27:45] And it, it doesn't have to be such a hard thing to understand, you know, to your point. That's that's one of the ways that we win business is we just open up everything and say, here it is, this is exactly what I'm going to make on your project. This is exactly what you're going to pay me. This is what I have to pay my people.

[00:28:05] And at the end of the day, I'm going to make this little nibble of cheese here at the bottom. So take it or leave it right. It's going to be this today. It's going to be this tomorrow. It'll be this in seven months, eight months whenever. And. Maybe more people shouldn't do that because it would make it harder for me.

[00:28:22] But, you know, just from a, from overall building trust in the industry, we got to get away from that shit away from the guys that, you know, will come in at a obscenely low fee on paper. And then either just quite literally try and kill their subs or, or beat everyone to death with change orders, just to make it back up to that level of, of acceptable margin, acceptable profit.

[00:28:48] We're all out here working, you know, everybody deserves to make a reasonable amount of money doing what they're doing. We all do way more than we're paid for. And that's, that's part of being good at what you do. But, you know, they're just, it gets me infuriated because I know where this stuff comes from.

[00:29:09] And I see it. I see it all over the place, but. It's just, it's such an easy thing to change or it would be, I think it was easy for me to implement it. It's just honesty and it's, it's just not being, not being shady. Right. It's not difficult. Yeah. I mean, this was like on a design side and even on design margins, like it's, they're not that high, you know, like your people are, I mean, it's fixed everything right on, uh, for.

[00:29:42] Engineering firms yeah. Of your people are fixed. Your overhead is fixed. You need to pull in that many projects to pay for everybody to not fire anybody. I mean, and you have typically a very big, you know, nut to crack on a monthly basis to just do payroll, let alone, you know, equipment, software, and everything else to do that.

[00:30:05] And I think again, financial literacy in general. Not just construction is pretty poor, but then you add in like construction specifics and what our actual margins, like what's how much money do we need to like generate in revenue to pay for payroll? Like, let's start there. What's the break. Even, especially in like a design firm when you're you're staffing a ton of people to do work that may or may not be there.

[00:30:34] Right. And like, and the same with subs, right? Like. I mean, and you guys have your own staff too, but like a lot of subs. I mean, that's the somewhat of the benefit of the union, but like still a lot of them they're, they're employing a big payroll. A lot of people, they've got a big shop space, big overhead that they, I mean, they need to do work just for cashflow purposes to stay in the game and this, uh, so which we're kind of all right, so the big thing today was bottlenecks.

[00:31:03] Um, but this is one of those things to educate your people on. Is financials, financial literacy in your company, and which goes to all your numbers and really in bottlenecks, finances are such a big one that I cannot emphasize enough truly in so many ways. Because again, like, do you know what you pay for a lead?

[00:31:25] Do you know what you pay to be in front of somebody? Do you know, what you pay to acquire that customer? Did it cost you a thousand? Do you even know, are you, you know, was it a hundred grand and your fee was five, you know, like what are your numbers to like get in front of that person? And what's the lifetime value of a customer worth to you?

[00:31:45] And this is the other thing, like when you start talking to municipalities far too often, people do the project and they leave. They never talk about it ever again, they don't show up to anything and then they wonder why they never get the next project for that municipal customer. But if you treated everybody like lifetime value, so what's this municipal district, what's this K-12 school district.

[00:32:06] What's this higher education client going to do over the next. Let's just say, 20 years, you know, what does that number look like? And. Rough terms, right. You're not going to be spot on, but are they going to build 10 million, a hundred million billion dollars worth of construction in 20 years? What's your fee on that?

[00:32:26] I mean, you can do the math pretty quickly on what that looks like, right? Like it's, this is not that hard, but you need to think of it in. Very like con what is this customer worth to us? If we are to stay in front of them. And again, you can do the initial marketing is going to cost you something up is going to cost you something every year to go to events, to do golf outings, do all that other stuff.

[00:32:48] There's a lot of free things and marketing or CATIA 10 bucks a month to be in front of them, or just send an email or give them a call, right. That doesn't cost a whole lot. It's a lot of time for sure. But if you're able to then evaluate, you know, okay, this. This customer 20 years is going to be a a hundred million dollars to us, right.

[00:33:08] That they're going to do billion dollar, you know, $50 million. Cause they're doing a billion in construction and we have a 5% fee right there. Very straight up easy math is to get 50 million, which no one ever does this math. They don't know their numbers, but to get 50 million, is it worth making a phone call every month to this guy?

[00:33:32] Probably shouldn't be. But how often do you not right. Or this people just don't make the call, but you got to think of it in those terms. What's the value of this customer? Is it worth 50 million to make it call a month? You know, so you're talking 20 years, 240 calls.

[00:33:55] It's because of this general illiteracy of finances and that you mentioned, you know, and, and. The cashflow cashflow is like a beast, a beast that lives down in the basement and the bigger you get the hungrier that beast gets. And you have to feed that beast every single day. And people don't recognize what that, what that looks like.

[00:34:18] I mean, you started touching on some of it between the insurance and the shop or the office and all the overhead, all the salaries, all of the cell phones and laptops. And that beast is hungry, man. And it is a. Unbelievable amount of food that it eats every single day. And if you don't recognize that and understand it and have a very intrinsic knowledge of what that number is, if you don't look at any other number at all, and we've talked about numbers a lot, but if you look at now nothing else, at least know what your cash flow looks like, what your, your, what your beast has to eat in a daily, weekly, monthly, annual basis, or.

[00:34:59] You won't be listening to this anymore. Cause you'll be out of the industry. It's it's as critical as that. And so very few people get into it. Um, you know, I would suggest we try and, and, and kind of push it on our employees. Also like here, you need to know what this, what this costs to do. This thing we're doing at least have a, a cursory understanding of it.

[00:35:25] Right. It's, I can't even stress how critical it is and how scary it is the first time you see those numbers. It's like, w wait, what, what, what happens if we stop producing? Well, you stop producing and the beast gets really pissed off and bad things happen. Yeah. I mean the first thing to get cut salary.

[00:35:49] Right? So if you don't produce well, I mean, you touch on it. Most employees, again, this, this. I saw posts. Some employees thought that their comp their engineering for maybe 50% margins, it's just like, that's laughable. And I comment, and I was like this financial stuff. It needs to be hammered on far more often.

[00:36:10] People need to know. Cause like I remember working for a firm and somebody. Got all upset that the owners got new cars and they weren't, they didn't get a raise or something. The end of the year. I'm like, they've owned that firm for 20 years. They probably, yeah. Their bonus might've been 50 grand or whatever to pay for the car.

[00:36:33] Yeah. You probably didn't get a bonus. And this person in particular, I was like, Uh, I know you didn't do anything above what your job was to, you know, deserve a bonus, let alone like improve the financial bottom line or bring in more work to earn a bonus. Because again, you just did your job. And this is the other thing too, that drives me insane.

[00:36:56] And my younger self was super guilty of this too. But my first job out, my boss actually outlined, Hey, you become competent in these five things. You'll get a, a race. It was a salary race. And then like, I did have to remind him after like six months, like, Hey, I think I've, I've qualified here, but it was actually outlined in far too often.

[00:37:20] People don't, they don't do more. They don't bring in revenue and they don't understand that. Like you need to generate revenue in order to get more money. And these are the, I mean, basic things that like the owners deserve fricking like, uh, again, if it's a new car, like you don't know what they do, they finance the whole thing.

[00:37:43] Did they pay cash for it? It's a $80,000 BMW and their bonus was 50 on a hundred and whatever person engineering firm, I'm sure had 10 million in revenues. Like. You know, like this is somewhat simple math to understand, like as an owner of a firm, you're going to get paid more. You took the risk, you own the overhead.

[00:38:06] And again, if it's 50 grand, like, okay, you make two thirds of the payment on a car, you know, like in your you're making whatever 70 grand in the Midwest, which is still like fairly decent. But again, that guy took a lot more risk or the owners took a lot more risks. Then you did, and they're responsible for every, you know, again, a hundred percent, like just simple things that I think again, but the owners never conveyed that either.

[00:38:35] Right. And people just got mad or a lot of things that should be more transparent in like, but again, it's a privately held firm. They totally don't have to talk about it. They don't want to it's. Totally their rights. And I think a lot of people just get lost in these very basic things of there's a hundred people here, like live around at salaries.

[00:38:58] I'm pretty sure, you know, they're probably making 10 million a year to just cover salary, you know, or revenues 10 million, you know, margins of 5%. So simple math.

[00:39:18] I saw the poster referring to, and I, I didn't comment on purpose because I would have been the asshole. Like I don't, you're, you're a lot better at being, uh, eloquent with that sort of thing where I tend to just rip the bandaid off, you know, and maybe that's the construction guy in me or whatnot, but I don't.

[00:39:41] Mess around on, on a lot of those topics. It pisses me off to no end. When, when people who don't know what the hell they're talking about, start running their mouth. I'll just leave it at that. I try not to do it when I do it. I mean, it happens when I do it and start talking about things. If I don't stop myself, somebody else should.

[00:40:01] And I'll, I'll respect them even more. Yeah. Yeah. So. Again, this whole thing was on, on bottlenecks, but this creates a lot of problems within the organization. Right? If you, so in bottlenecks, right? Sales is one of them. Do you have enough to feed the beast? Right? Feed the cashflow machine. Can you bring in enough projects?

[00:40:23] How do you do marketing? How has that top of funnel look like then? You know, as you go down, right. What do operations look like? Do you have enough people to fulfill on your projects? Do you have enough money to keep things going and understanding what your finances are? I know we got on a big finance tangent, but this.

[00:40:42] To me is a huge, well, a big, big deal that not enough people understand, and it could help to, again, bring back top of funnel clients in order to retain the clients that you have. So they can, again, feed, feed the machine, feed the internal workings of your, your organization, your firm in whatever capacity.

[00:41:03] Again, you want clients for this construction, they're going to build stuff. Right. And typically if a client builds one thing, they're going to build a bunch of things over a period of time. So understand like, this is we're in the career relationship game. We're not in the, we'll sell you a widget today or, you know, sell me this pen.

[00:41:24] That's not, not the game we're in. So, all right. Top of funnel finances, operations is, uh, I think the thing that we'll have the amount of time to cover it today, but is. Getting into operations and making sure that you have enough people for the job that you're doing, you have the right systems in place.

[00:41:46] Um, and systems are a big thing that we can probably do an episode in and of systems themselves. But when we talk about operations, it's, you know, can you fulfill the project that you've agreed to and I'll speak on the design firms side of this is we commit or we. Go and present and, uh, try to when as much work as possible, we win more than the people.

[00:42:15] Well, we have hire warm bodies because you don't care. You didn't plan for it. You haven't built your culture for it. And it creates all sorts of problems on that side of it, or on the reverse. You lost a bunch because you didn't know your win rate, win rate on proposals and presentations that you went after.

[00:42:35] Bad clients, you didn't, you know, uh, go through a approval process for which projects you're going to go after you just went after everything. And then you lost a whole bunch because you didn't spend the time on the ones that you should have won. So then you're stuck with not enough projects scrambling and you ended up firing a bunch of people and then trying it all over again, next proposal cycle.

[00:42:59] Um, so those typically how the, the two ways of design firms go is. Poor, uh, selection process for clients. And then it either way, it goes bad. Uh, rarely is it a nice equilibrium? Construction's not that far off, man. You know, and I see this, I've seen it in firms. I've worked for where typically what happens is, is not that they hire a whole shit ton of people and then have to get rid of them.

[00:43:30] It's they just never hire anyone. And they try and stretch and stretch and stretch and stretch and say, all right, we're going to do 30 million this year with 20 people. And we're going to do 60 million next year with 20 people. And we're going to push a hundred the next year with 22 people, you know, scaling and, and, and operational growth.

[00:43:52] It, it's a hard one to understand because of the beast in the basement. I get it. I mean, we we're at a different scale than some of that, but it's a. It's a scary thing too, to bring new people on because we want to do it the right way. We want to bring people that fit our culture, bring them kind of up in, in our systems and our processes.

[00:44:12] Um, make sure they represent our core values and then kind of let them loose on the construction world. Well, there's this big catch 22 because you know, the, you bring another person on the beast gets a lot hungrier. So, if you're not grabbing more work, you can't sustain to feed them anymore. And, and you know, like we've talked about before, the worst thing in the world is having to get rid of somebody or lay someone off or, you know, any of that sort of stuff.

[00:44:37] So, you know, really understanding how, how your funnel works and, and knowing your numbers, you know, taking the time to sit down and really map out what kind of manpower do you need to, to, to hit the targets you're setting in place? Is it. If you don't do that. I mean, it's real easy to say, I want to do X million of dollars this year, but if you don't take those next few steps and say, okay, and I'm going to do it with five people or 10 people or whatever the number is, you're, you're bound for destruction.

[00:45:11] You know, you're, you're, you're kind of running with a blindfold on, and eventually you're going to hit something. You hit on a couple of good points there that I want to touch on more is. One bringing people into your organization that fit culture, core values, right. That's super unique, right? Nobody does that.

[00:45:34] Um, and then two is having training, right? Uh, bringing people within, know your systems and understanding that that takes time. And the thing in this that I really want to hammer on is that it's an investment. To, to not see your people as an investment is a big problem. And I think far too many firms see their people as an expense.

[00:46:02] Right. They see it as a line item as a thing we can't before. And for sure, there's going to be times where that is absolutely true, but there's also times where, you know, having been bringing people on, they should be able to make you money. Right. At the end of the day, those, especially your senior people, your staff that is client facing.

[00:46:25] If they're not bringing more work in, or if you're not putting him in positions to bring more work in, I mean, that's ultimately on you as a firm owner and an executive to put your people in front of owners to bring in work, to trust them. But also to explain like the backend, the finances to be somewhat transparent with them.

[00:46:46] So that they can go in an educated manner to understand the situation, instead of like, I'm just doing my job. Right. But have nice idea that like, oh, we need more work and ask about that or have the financial incentives like, oh, you brought something in cool. You know, here's our structure financially to reward you for, for doing so.

[00:47:09] And again, it's. You need to have those systems as a business owner, as an executive in your firm and your company, it's going to keep people, it's going to keep them happy. They're going to be part of the process, which again, as we've talked about in culture and core values and all that stuff, like people have to be a part of the process.

[00:47:26] If they're not, they just don't fit in the company. Cause they don't, they don't know where they fit. They don't know what, where on the totem pole or puzzle piece or however you want to make that metaphor. They don't know where they fit. And that's a big, big problem in a lot of firms and knowing and telling people, Hey, you fit here.

[00:47:45] This is what you need to do. These are your key metrics. It's a slut, you know, we're going to measure and judge you by, but most don't have those and they have to know where they could go to. Right. They have to have some sort of roadmap and it's different at every firm, you know, on a bigger firm. Maybe it's, you know, they move up from PE to a project manager, to a senior product manager, to some, some down the line on a smaller firm.

[00:48:12] Maybe it's you do really good and you can become a partner, you know, but, but they have to, you, you, as the owner have to display that and have to, to show them very explicitly. This is what our expectations are. And if you perform, like, we really want you to, here's where you can go. And it's just, you know, it's communication.

[00:48:36] We've, we've beaten that to death and other and other episodes, but it's just being open and honest and communicating. It's really simple math, as you say, but it doesn't get it. Doesn't doesn't get done a lot. People don't understand it.

[00:48:55] It's. Yeah. So again, working through like the operational piece of your funnel and fulfilling work, right? Whether that's on the design or the construction side, because that's really what it's operations and you know, in far too many design firms, they're not treating it as operations. It's it's design, right.

[00:49:15] It's art and fanciful, especially in architecture side of the house. Like they don't treat it as production and. The more that you can treat these as systematized. Granted, we have milestones, right? Schematic, design documents, construction arguments. But the more that you can, like, this is how we do it. This is how we go through.

[00:49:34] This is how we set up everything. This is the detailed level that we go on each phase of this project. Right? And the more that you can systematize that to where as Jocko would say, discipline equals freedom that now once these constraints are in place, You now have a lot more freedom to do other things, because you don't have to think about the basics, right?

[00:49:57] I mean, it's like the beauty of our software is you don't, the basics are done now. It's client facing now it's everything else that goes into the project and all the little stuff gets taken care of. And I think a lot of things can be systematized in, okay, this is how we set up projects. This is how you know, in the design world, this is how sheets get set up.

[00:50:19] In the construction world, Hey, this is how we phase everything and plan it out. This is how we do scheduling. This is how we estimate projects and more things like that. There needs to be a system in place for, and again, you're going to have to think which is going to be the hard part. You're going to have to spend some time to go through this very methodically, figure out what works and adjust over time to come up with systems that work for your firm.

[00:50:52] Just got to spend the time.

[00:50:56] If it was easy, everybody would do it.

[00:51:01] There was a good quote that I read this morning that thinking, uh, I don't know if I can find it here. Um, but in, in thinking it's one of the things that you become smarter, uh, Oh, those who know that unless we are willing to think we shall have to work in the less, we think the more we show have to work and the less we shall get for our work.

[00:51:32] There you go. That's a pretty good way to close it.

[00:51:40] You also wanted to bring up the podcast, the other, uh, podcasts giveaway. Yeah. So if everybody could just take a minute after you're done liking and sharing our podcasts with all your friends and associates hop on over to construction junkie.com. Uh, I don't think Shane has opened up the voting yet, but he will be very soon for the, uh, best construction podcast of the year awards.

[00:52:05] We would greatly appreciate the nod. If you guys are enjoying any of this that we do, um, If you're not enjoying what we do, then let us know that too. Uh, you can reach us by all of our channels are pretty easy to find. So, you know, like it share it, let us know what you guys want to hear, what you don't and we'll keep doing it.

[00:52:27] All right, guys, to summarize everything today, and I know we'll cover more of this and other episodes first, definitely go and rate us. Number one, number one, and number one. Uh, next is so again, then funnels, right? You got to go and bottlenecks is figuring out where what's the pinch point in your organization.

[00:52:46] What's slowing you up. What's keeping you from becoming better, right? Whether that's you don't have enough leads, you don't have enough sales. You don't have any budget coming in the top of your funnel. The next is going through, down to operations, creating systems, processes to Olin, Billy, deliver a project and then continuing to work with your clients.

[00:53:07] And. Giving them value. Right? We do as a big value add to our badges, our clients, but our communities, the world around us, we, we design and build stuff, right? So everything that you see ultimately is engineered it's constructed and it's operated. So we need to do our best to continue to provide value to our, our owners, our municipality, to their governments or school systems, everything that we do and serve.

[00:53:33] Uh, in our communities. So again, uh, figure out where that pinch point is for you and your growth. And what's holding you back from becoming the best organization that you can. And again, uh, construction junkie.com go and rate us number one and guys until next time .