Keep 12% More Revenue With This One Trick
Ep. 85: Keep 12% More Revenue With This One Trick
Did you know that you can keep more revenue without changing prices or cutting costs with just one trick? Kyle Hunt says that the most important thing you can do for your business is knowing your numbers. By doing so, you can maintain up to 12% more of your profit than if you just kept your numbers up in the air. Kyle is the owner and podcast host of Remodelers On The Rise, where he coaches and trains remodeling contractors on how to generate more profit, understand the numbers, and make better decisions to win in the game of business. Tune in to his chat with host Ryan Englin and get practical tips and action items that can improve the way you do business and bump up your profits through better financial understanding.
Keep 12% More Revenue With This One Trick With Kyle Hunt
You heard me talk about the importance of giving your people numbers, scorecards, metrics, KPIs, or whatever words you want to use for that. The people on your team need to know how they are being measured. They need to know what they have to do to win. Why is it that so many businesses at the leadership level don’t know their numbers? Our guest throws me off a little bit. We’re going to talk about sales and things, but when I asked him what is the most important thing business owners need to do, he said, “Know your numbers.”
Our guest is Kyle Hunt with Remodelers On The Rise. He coaches and trains remodeling contractors on how to generate more profit, how to better understand the numbers to make better decisions about the jobs they take, and at the end of the day, win in the game of business. We’re going to talk about the shift that needs to be made in order for you to use your financial statements and the information you have on job costing to help you win in business.
Kyle, thanks for joining me.
It’s a pleasure to be here.
I’m excited about this conversation. We have known each other for a long time, and I have been on your show. I want to apologize publicly for not bringing you on sooner because I know you have a wealth of knowledge. This is going to be a great episode.
You have apologized a few times. It’s no big deal. I lost sleep. I’m like, “When is Ryan going to invite me?”
I’m apologizing to our audience now. This is going to be a great episode. They are going to learn a ton, and I’m apologizing to them for not having you here sooner. As we jump in the way I like at the beginning of every show, you work with a lot of owners in remodeling. That is your sweet spot. I’m sure that there is something that you see or deal with on a regular basis. It’s some head trash or a myth that these owners have bought into, and it’s holding them back. What is that myth that you want to break down now?
You did a fine job of sending me over some questions ahead of time. I’m a big fan of five P. Proper Preparation Prevents Poor Performance. That is already a good takeaway for people if you can get the five P acronym integrated into your business, Proper Preparation Prevents Poor Performance. It’s originally from the British military, and what a fine day to be bringing that up as the Queen is laid to rest. It’s September 19th, 2022. Were you watching it?
I was not.
As I was thinking about what I wanted to share now, there were many myths that I could go into, but the one that I picked was the myth that if you take good care of your people and your clients, everything else will take care of itself. When we think of it, if you’re good at taking care of your people, some people would argue, “Your people, employees, and trade partners are your most valuable thing. Focus on them first, and then they will take care of the clients.” You don’t disagree with that. I don’t disagree with that, but the last part that everything else will take care of itself is a big fat myth.
Break it down. Explain it.
Not to give too much away from where we’re going, but the part that I was thinking about when I shared that was everything else will take care of itself in particular. Where I’m going is all of the financial aspects will take care of themselves. You will make all the money that you want to make. You will be as profitable as you want and things will go smoothly. There is no doubt that if you have great people and you treat your clients well, that is a great foundation for success in your business. That does not necessarily mean that everything else will take care of itself. I have seen many business owners who do well for their clients and employees. They are working their faces off and are not making much money for all of that hard work and effort.The myth is if you take really good care of your people and your clients, everything else will take care of itself. Click To Tweet
When you break it down like that, I think about the financial side of it. Many people in the audience right now were like, “My entire team knows all the economics of the business. They know how the money works, how it comes in, how it goes out, and how we control expenses.” I don’t know about your clients, but I know a lot of people I talk to don’t have that open-book mindset to share all that. Without that information, I can see why even if you have the right people and you have great customers, that’s not going to take care of itself.
Where I would go next with that is the thing that’s holding a lot of business owners back is they don’t understand their numbers. You don’t need to be a financial wizard, but you need some financial acumen. You need some understanding of it. I work with remodelers. A lot of guys and gals are doing kitchens and bath additions. To be any kind of contractor and to do it well, you have to be a pretty quality person. In home remodeling, we are in there for an extended period of time, “You plumbers and electricians. You guys have it easy. You go in, you put on a little show, you do your thing, and you leave.” Once you try hanging out there for a month or two with all these different moving parts and pieces, remodeling is hard.
What I see is that a good remodeler has a strong heart. They want to do well by the people. We do take care of our clients, employees, and our trade partners, but we also stink and make money for all of the hard work that we’re putting in. What’s holding a lot of business owners back is truly knowing their numbers. Can you pull up your profit and loss statement and explain it to me clearly? Can you tell me, “Here are my top-line sales and my total sales revenue? Here are all my costs of goods sold. Here are the different line items in there. This is my gross profit.”
Let me tell you about gross profit. What that means is we have our overhead expenses, and then we have our net profit. The net profit is already after I have paid myself a salary. You see where my salary is showing up there. Owner draws come out of net profit. We get into the whole realm of job cost reports. We get into the whole realm of knowing how much you are charging, what your markups are, what your margins are, and knowing your numbers. It’s holding people back.
I had a mentor one time and he coached me for a whole year. All we talked about for a whole year was how to use a P&L and a balanced statement to make good quality decisions about my business’s current state, some of the mistakes I have made in the past, and how to use it as a forecasting tool to make those right decisions. I’m sure there are probably a lot of people out there. I’m one of them. If I knew how much I would have had to learn about the financials in a business, I would have gone to work for someone else. I will let someone else deal with that.
I have to interject this because some people are going, “I didn’t know Kyle was going towards numbers and stuff. This is boring.” In remodeling, there are 8 or 10 solid coaches and consultants. I have been a coaching consultant in our industry for 14-plus years. If you line all of us up, every single one of us is talking about numbers, “You got to know your numbers.” Why is it that every coach and consultant that is worth anything is focusing their clients on numbers? There is a reason for that. There are a lot of people that get into contracting and remodeling because they love what they do. They are good at it. They are great with working their hands.
If you want to be in the top 10% to 15% of your industry, there is nobody in that top 15% to 20% that doesn’t have a solid handle on their numbers and that can articulate how the P&L works, and why they charge what they charge. They have fought and worked hard to make sure that their job costing is in place. You can’t ignore it.
Sometimes it gets to the point where somebody was like, “I’m sick of working hard. Where is the money going? We bring all this in and it goes out. I’m dishing out raises. We got inflation. Where is the money?” They get to the point where they say, “It is now time that I am going to fully understand my numbers.” At that moment and what comes after that is when you start to take off as a business. It’s a lot more fun to be much more profitable.
You talk about the numbers. You started this with when you have the right people and you have great customers, everything else will take care of itself. We coach our clients. When you’re hiring good people, rockstars, A-players or top performers in the industry, they have one thing in common. They all want to know what it takes to win. In any game, how do we determine who is winning and who is losing?
There is something being measured.
It’s a scoreboard. If your employees don’t know how they are being measured and if they don’t know what it takes to win, they are never going to meet your expectations. You have probably seen a sports team warming up, scrimmaging, and getting ready. All of a sudden, the game starts. The energy from the players is transformed. It’s at a level that is unattainable by many people. The only difference is we’re now keeping score.
You’re a big fan of participation trophies for kids. Is that what you’re saying?
Absolutely not. I do not like participation trophies. It is healthy for people to know that they are not performing. It is healthy for people to know that they came in last place. What I learned growing up was that second place was the first loser. That’s how I was taught.
I had my sixteen-year-old son and two of his buddies in the car. They were talking about they tied in football. I said, “Do you know what a tie is like? It’s like kissing your sister.” It is pretty similar. I was like, “Is that what you guys did? You didn’t get it in the end zone again. Stinking ties was like kissing your sister.” I thought it was funny.
Getting back on topic. The numbers are super important. I have that cringe moment like, “We’re going to talk finances today.” I’m sure that most people have figured out that just because I made $1 million in 2022, top line, it does not mean I got to put $1 million into my bank account personally. The amount that usually ends up in the bank account at the end of the year is a small fraction of what you brought in. If you don’t know why, you can’t make it better. That’s where you’re going with that. This is what we’re talking about. This is a mindset issue. This isn’t a math issue. I don’t know about you, but I got to the calculator on my phone which is also a video camera and my internet browser. I got a calculator that will do all the numbers for me.
It’s a mindset issue. If I may smack you guys up in the face. You want to be a professional when it comes to your work and your craftsmanship. You want to be a professional when it comes to the client experience, and you want to be a fifth grader and an amateur when it comes to knowing your numbers? Are you going to continue to kick that down the road because it doesn’t come easily for you or it doesn’t come naturally for you, versus fighting to figure out how to learn it step by step and how to improve it?
You watch a webinar, a recording or training and it doesn’t sink into you. You sit down with your CPA and it’s not clicking. Are you going to continue to push and ask more questions, and go until you fully understand it? I don’t need you, as a business owner, to know how to file your taxes or know exactly what investment vehicle to put money in. I do need you to know why it’s important. I need you to know what questions to ask. I need you to be able to look at a high level at how to understand your financials. I’m going to talk more about job cost importance in a minute. I’m going to hold off on that.
What stood out to me was understanding this stuff. I don’t need to be an expert bookkeeper in order to have good financials, but if I got good financials and I don’t know how to do anything with them and I don’t understand them, that’s a problem. Why don’t people do this? Numbers aren’t fun. I don’t know about you, but having money left over at the end of the year to put in my personal account is fun. Why don’t people do it?What's holding a lot of business owners back is truly knowing their numbers. Click To Tweet
There is a little bit of, “I don’t have the time to dig into it.” For example, job costing is very important when you are doing a project. I’m thinking of maybe a kitchen remodeling project. You should know what your expected gross profit is. Once I have all the money coming in, minus all of my cost of goods sold, materials, in-house labor and trade partners, that equals my gross profit. Everyone should know what the expected gross profit is. We need to know what our actual gross profit is. How did it come in?
Some people say, “Why aren’t they doing it?” Lack of time. Lack of process on it. There are a lot of people that are intimidated by it. There are a lot of things in life that we can be intimidated by or that we were intimidated by that we can work past and work through. I’m pleading and encouraging. On the other side of understanding your numbers is being able to pay your team better because you’re making more, being able to offer more benefits, being able to put more money into your retirement so that you can look at a certain time and be able to retire, and being able to provide for your family in a stronger way. There are a lot of wonderful benefits. Making more money allows you to hire somebody new to take some of the weight off your shoulders and put some of those weights and responsibilities on another team member.
When you are making more money, it unlocks a lot of things that you desire in your business and life. I’m not talking about greedy desire. I’m talking about more stress-free business, less anxiety about things, easier to make investments, and feeling like you’re making progress on things. Why don’t we do it? We get anxious about it. We get frustrated by it. We’re not sure how it works. It doesn’t come naturally to us.
We say, “I know I should be sitting in front of my desk, studying my P&L, watching that training, or working through that, but there is something going on in the field. They need my help.” We go do something that we enjoy more instead of doing the hard work or eating our frog. Your frog every day is the most important thing you need to get done that you are most likely to put off. If you are avoiding financial-related and numbers-related things, you got to get past that. Focus on and put the effort towards it. There are all kinds of help and resources out there if you’re interested, willing and ready.
You brought the eat the frog concept. I don’t know why, but all I had to do was eat a frog every single day, but do I want to sit there and stress about it all day long and go, “I’m going to have to down this thing sometime?” No. I get up before I even brush my teeth or even thought about the day, and I would eat that silly frog to get it over with.
It’s a Brian Tracy thing. He’s an old professional development guy. That’s his whole thing of like, “If you had to eat a live frog every day, what would you do?” The frog is the most important thing you need to get done that you are most likely to put off.
You brought up a great point. It’s not fun. Most people get into this profession and they get into some service or construction business because that’s what they do. They did that growing up or that was the trade they learned. They were like, “I can start a business doing this and bring my friends in. We will have a great time. It’s more fun.” You understand that there is this whole financial side of it that has rules. Business owners don’t like rules. We don’t like rules, and it’s not fun. When we think about what we got to do, the last thing I want to do is sit around at my computer, staring at a spreadsheet or QuickBooks.
It’s not fun when it’s overwhelming. It’s not fun when the numbers aren’t looking good. When he started going through that, Stu popped into my head. He’s a longtime client. He didn’t like numbers. He couldn’t explain his P&L. Stu loves talking about this stuff now. He loves going through his P&L. He loves showing job costing because he now understands it.
He understands that the improvement has allowed him to thrive in his business and life. He has made that connection. He pushed through not understanding how to do it, got training, was consistent with it, and asked a lot of questions. He was frustrated but continued to push forward. It’s interesting that I’m pushing that so much.
My main message so far is if your numbers and your financials are murky, they are unclear, and you don’t understand them well, it’s a mindset thing. You got to click something in your head that says, “I’m hearing it from Kyle. I have heard this time and time again. I need to stop avoiding it. I need to commit to it.” You need to commit to it.
What does a commitment look like? Give me one or two action items that those reading this right now are going, “I hear you, Kyle. You’re the twelfth person to tell me this in my career.” What do they do?
Here are some specific actions. Step one, call your CPA or accountant, and schedule a meeting. Get it on the calendar ASAP. What do you do in that meeting? September or October is a great time of the year to be sitting down with your CPA, and looking at your overall tax responsibilities, and how the year has gone. More than that, sit down and say, “CPA, can you walk me through my financials? Can you start at a basic level and walk me through how each of these things happens?” Ask a lot of questions. That would be one very simple action. Do that.
Another action would be if you have somebody in your local market that you know through your trade association or home builder association, or a business owner that you respect that has been successful, what would it take for you to sit down and have breakfast or lunch with them? Say, “What have you learned in your career?” People are willing to share. If financials are a weak link for you, talk to that potential mentor about how they approach their financials and how they approach understanding that at a stronger level. Those are a couple of ideas.
If you have an office manager or bookkeeper, stick your nose into that more often. Another thing that they should do if this is all murky is to go in for a job that you have coming up, and figure out what your expected gross profit is and what your actual gross profit is. You are selling this project for $10,000. How much are you expecting in the cost of goods sold and gross profit? How much do you have in the actual? What that is going to highlight is you are estimating clear enough that I can see what my expected gross profit is. Are your reporting and job costing clear enough where it can show what the actual is?
If you were expecting $4,000 of gross profit, and you brought in $3,000 of gross profit, that is called slippage. We have $1,000 of slippage. That should make you frustrated and righteously angry to say, “Where is this?” Is it your team in the field that is dragging their heels, and it took them longer than you expected? Probably. Is it estimating, and you need to update your estimating because you didn’t include this and now you forgot that? Are the materials that you put in there as a cost higher than what the actual was?
It’s going to be a combination of those things, but if you pay attention and you say, “How do I get through it?” Job costing is a huge place to start. If you can show me the expected versus actual for one of your projects, it is going to springboard and give you major clarity on your estimating, your production, and how to be more streamlined. That’s the spot where I would start the most, but I also gave a few other options.
One of the questions I want you to clarify for me is as the owner, I have to understand this stuff. I have to know how to look at that job cost report, look at the estimate versus the actual, and be able to go, “Here is why that happened.” I don’t think I have yet heard you say, “I have to be the one to build that report.”
If I did a $30,000 bathroom project, I would probably have a bookkeeper. I might have an office manager that is managing QuickBooks. I might be responsible for the estimating. There are people on my team that probably can feed me the information for sure. If there is not, it’s your way of doing it. Pull out a blank sheet of paper, type in income, and write out the cost of goods sold, materials, labor, etc. This minus these equals gross profit.I don't need you as a business owner to know how to file your taxes or know exactly what investment vehicle to put money in. But I do need you to know why it's important. Click To Tweet
When the actual comes in, “Kyle, we’re not organized.” Grab those receipts and invoices. Total up everything related to that project. They were like, “My team isn’t marking their time per job.” That’s a problem. You need to fix that. If you’re not able to see how much time and hours they put into that particular job, you got no chance of having clarity on your numbers. Go fix that.
I would say that if you don’t like it, that’s motivation number one to go find somebody to do this for you.
Also, take responsibility for it.
You have to. I do think there are people that are going to be better at this. There are people that love bookkeeping. They love this stuff. If you’re not one of them, I’m sure you can find somebody by going to your local trade association or going to someone that you look up to and saying, “Who do you know? How did you get started in this? How did you do that?” Your CPA is going to charge you a lot more, but your CPA might be able to help you.
One of the things that you said too about the CPA is I know we’re at the end of 2022, and I don’t know when you’re going to be reading this. I have learned that even every quarter sitting down with a CPA can open up your eyes to so much about what’s going on in your business. You don’t have to wait until December and go, “Here we go. It’s tax season.” You’re stressed and freaking out because you didn’t have those conversations. I do this and I’m going to guess the gentleman that you mentioned that did this. He’s probably sleeping better at night. He’s probably got a healthier company and stronger bottom line.
He is more handsome.
Understanding your numbers helps with that a lot.
You got more mojo, confidence and swagger.
Is this something that I spend the time to get to know this stuff, I understand my job costing reports, I understand my P&L and balance sheet, and everything miraculous poofs? It’s how you started the show.
What starts to happen is you are adjusting your pricing, markup and margin as a result of this. You are improving your estimating and efficiency in the field as a result of this because you’re looking at the numbers. What gets measured gets improved. All of a sudden, if you’re more productive and profitable, there are more dollars in your bank account month in and month out. You said that you got $1 million coming in. Some people are like, “Where is the $1 million I’m putting in my bank?” It doesn’t work like that in the contracting world. What I often see is there are 6%, 8%, 10% and 11% of gross profit and net profit that are just dangling out there. When we start to watch our numbers closer and clean that side of things up, things go much smoother and more profitably.
We got this idea that we’re going to keep selling and producing more, and then we will have the net profit and the results we want. Sometimes, that could work. Oftentimes, we got to understand job by job how the numbers are coming in and make sure that we are bringing in these projects at the profit margins that we’re looking for. When we start paying attention to it, it should fire us up. It should get us going and we start making little improvement by little improvement.
You mentioned confidence. I have worked with contractors who when they go out and they bid on a job are not confident. They either pat it a little bit because they need it. They’re like, “We got supply chain issues right now. I might have to go to a different supplier. They might be more expensive. I got labor issues now. I’m turning over people. I got to bring a new guy in. He is going to have to start.” There are all these things. They take these arbitrary hours, and they were going to add 10% or 5%, then the client was like, “I got this bid over here, and he was a little bit cheaper.”
When you have that confidence, you could probably justify that being a little bit higher price by saying, “We got our act together. We know what it’s going to take to get this done on time, or we could be the contractor that everybody has a joke about. They take your money and don’t show up for six months. Maybe you will get your kitchen back in time for summer, not the holidays.”
I heard a couple of things about what you just said. One is making sure that sometimes an arbitrary number is like, “We’re going to add 10% to this.” If you’re not watching your job costing closely and you know they are slippages, sometimes it is good to put a little contingency in there going, “We know that we got extra cost in this, and that’s going to help us there.” That’s a little messy. Watching your job costing closely shows, “I had ten hours in there for the demo on this bathroom project and it took us eighteen.” I need to know that for next time and adjust my estimate. Job costing and watching your numbers makes you a much stronger estimator. I would say it also does make you a much stronger salesperson.
What you were describing there is if I got my numbers together, I know what it truly costs to do this project and to be profitable as I need to be. When you present that to a prospect, you can be confident in that number. When you’re watching your numbers closely, you’re not going to be sitting there going, “I need to knock $2,000 off this to try to get this job.” What you’re going to be doing is building more value in order to sell that project. That is more of a sales process thing.
I’m looking at contractor A and contractor B, and everything else is the same. They look, talk and act the same. As a prospect, how am I going to decide who to go with? I’m going to go with the lowest price. Why are there contractors and remodelers out there that are able to charge much more than options 2, 3, and 4, A, B, and C? The reason is because they have built more value in their sales process, how they differentiate themselves and how they build the value. That is what allows them to charge more. Sometimes you’re going to run your numbers and start understanding your numbers more and go, “I need to charge more than I’m charging now. That’s why I’m not making any money. It’s yes, it’s this and that, but I’m flat out not charging enough.” You put the proper markup and margin on it. You go, “I got to go sell that.” Yes, you do. Become a better salesperson. Build more know, like and trust. Build more value. You can do it. Others are doing it.
There is a whole other episode in that last little thing you said. We’re running out of time right now. Let me ask you this. You got a giveaway for our audience. I’m sure there are people going, “Kyle, you’re right. I need to learn this stuff.”
I apologize for not being super uplifting. This was a little more serious than why I typically take it. Hopefully, there are two people reading this that hit them between their eyeballs.On the other side of really understanding your numbers is an unlock to being able to pay your team better. Click To Tweet
We’re about creating action here. Sometimes you got to punch them in the gut and people go, “Fine, I will do it.”
We’re doing it out of love.
We want you to be successful. You deserve a 20% or 30% net. With all the risk you’re taking, everything you’re doing, and the opportunities you’re creating for your team and the people in your community, you deserve it. You deserve to have a healthy business with a healthy bottom line that helps you achieve your goals. Sometimes we got to get a little serious about things. I’m sure there are people going, “Kyle, you got me. How do I get ahold of you?” I want you to tell us that. How do people get ahold of you to learn more? You also have a giveaway for them that may help with some of this stuff.
I primarily work with Remodelers, kitchens and bath additions, and that type of work. If you’re somebody that’s in that realm, if you go to RemodelersCommunity.com, that’s a Facebook group that I have. It is probably the best thing that I have built in my fourteen years in business. Unlike a lot of Facebook groups, all we do is help each other and build each other up. You are not going to see a bunch of cussing and smack talking. It’s high quality. Another giveaway is RemodelersVault.com. I have taken a bunch of my templates and tools, several of them being financial-related, employee, burden, spreadsheets, and all kinds of good stuff. I also had a bunch of my clients submit different templates and tools.
I don’t even know what it’s up to, 40 or 50-plus different templates in different areas of your business. You are going to go in there and you are going to be like, “That pre-construction checklist is amazing. Download, tweak, and make it your own. “That email that you send out between the initial phone call and the in-person meeting is a great know, like and trust builder. Here is a job cost report. Kyle is making it easy to make a job cost report.” If you go to RemodelersVault.com, that’s a wonderful resource. I also have a podcast called Remodelers On The Rise. It’s second best in the industry behind Ryan’s, but it’s up there.
Mine is not specifically for remodelers, but we do serve modelers. We had some remodelers that engaged with us because finding good labor, skilled people, and carpenters that could come in and finish the job has been a challenge for a lot of people. I’m sure you deal with that. Kyle, thank you so much for being here. It wasn’t as exciting and uplifting, but here’s the cool part. If you follow this stuff and you get to dial in your numbers in six months or in a year when you do your taxes next year, you’d be like, “I made way too much money. I don’t know what to do now.” It’s all going to be worth it.
If I were to summarize what we shared in a more uplifting way, you are working hard. You’re doing a great job. If all of this is convicting to you and you are always looking away when it comes to financials, let this be the kick in the butt that you needed to move towards better financial understanding and knowing your numbers. There is a whole unlock of business and life thriving that is on the other side of it. You can do it.
Thank you, Kyle. I enjoyed it.
Thanks for having me.
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About Kyle Hunt
I’m the owner of Remodelers On The Rise and creator of Remodelers AutoPilot. I work with remodelers to help them transform their sales process, organize their sales pipeline, and automate their follow-up.
I’ve been a featured speaker at the International Builders Show (IBS), the Remodeling Show, JLC-Live, and dozens of Home Builders Associations and have been a featured writer in Remodeling, Professional Remodeler, and Qualified Remodeler magazines.
I reside in Brighton, Michigan with my wife, Sarah, and our four children.
You can learn more at: www.RemodelersOnTheRise.com
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