1 00:00:00,000 --> 00:00:04,440 I ended up writing a client a check for $200,000 because I 2 00:00:04,440 --> 00:00:08,100 made a pretty big mistake. I call my my lawyer. I'm like, 3 00:00:08,100 --> 00:00:11,160 hey, you know, what did we miss? And he goes through our contract 4 00:00:11,160 --> 00:00:14,700 and goes, you need to have an exhibit in your contract that 5 00:00:14,700 --> 00:00:16,020 states the billable rate. 6 00:00:18,480 --> 00:00:22,280 Welcome back to the modern craft Podcast. Today we are going to 7 00:00:22,280 --> 00:00:26,480 dive into two things. One, a recap of our most recent 8 00:00:26,480 --> 00:00:31,520 contractors coalition Summit, and two, more exciting labor 9 00:00:31,520 --> 00:00:35,180 burden. What is labor burden? It is the total cost a business 10 00:00:35,180 --> 00:00:39,800 incurs to employ a worker beyond their direct hourly wage or 11 00:00:39,800 --> 00:00:43,300 salary. It includes all additional expenses associated 12 00:00:43,300 --> 00:00:45,760 with that employee, such as payroll taxes, insurance 13 00:00:45,760 --> 00:00:50,020 benefits and other indirect costs. So many of us are not 14 00:00:50,020 --> 00:00:53,380 accounting appropriately for labor burden. So Nick and I are 15 00:00:53,380 --> 00:00:57,760 going to dig into mistakes that we've made, what it's cost us 16 00:00:57,760 --> 00:01:01,680 from a financial perspective, and how we account for the labor 17 00:01:01,680 --> 00:01:05,640 burden associated with employees, both, as per Nick's 18 00:01:05,640 --> 00:01:07,980 business and my business, because they are a little bit 19 00:01:07,980 --> 00:01:14,940 different. And then we are going to give you the offer of a free 20 00:01:14,940 --> 00:01:17,400 labor burden calculator if you're signed up for the 21 00:01:17,400 --> 00:01:21,320 newsletter. So definitely hang around. Talk a little bit about 22 00:01:21,320 --> 00:01:25,580 CCS, how much fun it was, what you missed out on, and why you 23 00:01:25,580 --> 00:01:29,420 should sign up for Chicago. And then also diving into labor 24 00:01:29,420 --> 00:01:32,120 burden and how, if you are not accounting for that, you are 25 00:01:32,120 --> 00:01:34,940 leaving a ton of money on the table and most likely putting 26 00:01:34,940 --> 00:01:37,040 work in place that is not profitable. 27 00:01:37,100 --> 00:01:39,260 With that being said, This podcast is brought to you by 28 00:01:39,260 --> 00:01:41,860 Andersen windows. If you're building with vinyl windows, 29 00:01:41,860 --> 00:01:44,200 there's a better option that could actually help you save 30 00:01:44,200 --> 00:01:48,160 time and cost over the long run. 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No, I think maybe it was 79 00:04:43,600 --> 00:04:48,220 just me and about three or four people, but I was comparing 80 00:04:48,280 --> 00:04:51,340 Omaha to a lot of different places, and basically saying 81 00:04:51,340 --> 00:04:56,860 that they were similar to Omaha, but Nick and I and Morgan and 82 00:04:56,860 --> 00:05:01,080 Brad and Mark and Doug and a bunch. Bunch of other team 83 00:05:01,080 --> 00:05:07,980 members were just in Omaha, Nebraska for the seventh CCS 84 00:05:08,040 --> 00:05:12,720 event. I believe seventh or eighth, they said, Yeah, which 85 00:05:12,720 --> 00:05:17,400 was fun, different than other events. I think maybe we'll just 86 00:05:17,400 --> 00:05:22,760 take a few minutes to recap your perspective of the event, how it 87 00:05:22,760 --> 00:05:26,540 went, and then, just like some of the takeaways, I think for 88 00:05:26,540 --> 00:05:30,860 me, one of the biggest things that I recognize with this 89 00:05:30,920 --> 00:05:34,580 event, I guess, being more comfortable, being more engaged, 90 00:05:35,780 --> 00:05:39,560 talking to everyone who was there, sponsors, you know, 91 00:05:39,560 --> 00:05:44,980 attendees, partners, everything else. This was the most fun I 92 00:05:44,980 --> 00:05:48,880 had had at any event. And I was looking back on it, and I was 93 00:05:48,880 --> 00:05:54,160 like, we pretty much, like, we worked, we we did a fair amount 94 00:05:54,160 --> 00:05:58,780 of educational training sessions, but like, I feel like 95 00:05:58,780 --> 00:06:01,920 we were all laughing the entire time with everyone, yeah. 96 00:06:02,700 --> 00:06:07,200 I mean, I couldn't agree more. I think, you know, we we ran the 97 00:06:07,200 --> 00:06:10,500 structure is a little different this time, but we still managed 98 00:06:10,500 --> 00:06:13,980 to get through everything that we wanted to. But, yeah, I 99 00:06:13,980 --> 00:06:20,540 think, I mean, it's funny what happens when there's not ideal 100 00:06:20,540 --> 00:06:24,320 situations. And in this particular scenario, it was 105 101 00:06:25,460 --> 00:06:28,940 degrees with 40 mile an hour winds 102 00:06:29,000 --> 00:06:30,020 and humidity 103 00:06:30,080 --> 00:06:33,500 and humidity, and it literally so you're outside, it literally 104 00:06:33,500 --> 00:06:35,900 feels like you're standing in front of a hair dryer. It was 105 00:06:36,140 --> 00:06:41,080 insane. And at one point, you know, it was just hot. We were 106 00:06:41,080 --> 00:06:44,140 done with education for the day. We're gonna go do this event. 107 00:06:44,140 --> 00:06:47,320 And then we're like, you know what? We sent out an email. 108 00:06:47,380 --> 00:06:52,180 Everyone back to the pool. Tabs open, come eat dinner and enjoy. 109 00:06:52,600 --> 00:06:56,380 And I had no plan. I mean, I brought a swimsuit, so I guess I 110 00:06:56,380 --> 00:06:59,200 did plan on going in the pool, but I didn't really think I'd 111 00:06:59,200 --> 00:07:02,880 spend much time in the pool, if at all, and what we end up 112 00:07:02,880 --> 00:07:06,060 spending until like, 10 o'clock that night. And it was, yeah, it 113 00:07:06,120 --> 00:07:11,520 was cool because it was this, you know, the education sessions 114 00:07:11,580 --> 00:07:13,800 are super intense because there's a ton of information 115 00:07:13,800 --> 00:07:18,120 everyone is like, you know, feverishly, you know, taking 116 00:07:18,120 --> 00:07:21,020 notes and trying to ask the right questions at the right 117 00:07:21,020 --> 00:07:26,060 time. And you know a situation, you know where it's after dinner 118 00:07:26,060 --> 00:07:28,820 and everyone's hanging out and chilling, there's so many good 119 00:07:28,820 --> 00:07:32,360 conversations where it's, you know, we just get to know each 120 00:07:32,360 --> 00:07:37,820 other at a deeper level. And you think 30, over 200 people now 121 00:07:37,820 --> 00:07:42,280 have attended CCS, which is insane to me. I told Mark, I was 122 00:07:42,280 --> 00:07:44,440 like, I've really thought we were going to do Nashville, and 123 00:07:44,440 --> 00:07:49,060 that was it, yeah, and, you know, now 200 people have shown 124 00:07:49,060 --> 00:07:52,000 up, just just, you know, attendees, never mind the 125 00:07:52,000 --> 00:07:55,240 countless vendors and plus ones and everything else, like, 126 00:07:55,240 --> 00:07:59,140 that's a lot of that's a lot of people, and to be able to have 127 00:07:59,140 --> 00:08:03,600 one on one conversations and just kind of, you know, build a 128 00:08:03,600 --> 00:08:06,540 a strong community. And that's really what, what it's about. 129 00:08:06,660 --> 00:08:10,380 Yeah, I think for for this one, it just seemed as though all of 130 00:08:10,380 --> 00:08:13,680 the guests there with everything that was going on with whether 131 00:08:13,680 --> 00:08:17,040 it was, you know, just audible and heading down to the pool and 132 00:08:17,040 --> 00:08:22,640 hanging out that everyone let their hair down and right, like 133 00:08:22,820 --> 00:08:27,020 a lot of times, it's a short amount of time, you're probably 134 00:08:27,020 --> 00:08:30,740 not going to be as vulnerable as you should be to maximize the 135 00:08:30,740 --> 00:08:34,100 return on the investment, to open up the window to your 136 00:08:34,100 --> 00:08:36,140 business, to your to your personal life, to who you are, 137 00:08:36,140 --> 00:08:38,240 right? You're going to show up and you're going to have a 138 00:08:38,240 --> 00:08:40,720 straight face, and you're going to act professional and ask the 139 00:08:40,720 --> 00:08:44,080 right questions and say the right things, and it wound up 140 00:08:44,080 --> 00:08:47,860 being with like, the weather, you know, having to change some 141 00:08:47,860 --> 00:08:51,220 plans and somewhat flying by the seat of our pants when things 142 00:08:51,220 --> 00:08:56,200 didn't go in as anticipated, that everyone was like, oh yeah. 143 00:08:56,500 --> 00:09:01,980 Like, everyone, nobody's perfect, right? Right? You can 144 00:09:01,980 --> 00:09:05,340 see into what's going on. You can see into how we're trying to 145 00:09:05,340 --> 00:09:09,480 make this as great as possible. And I think that everyone just 146 00:09:09,480 --> 00:09:14,220 kind of let their guard down a bit and connected on a more 147 00:09:14,220 --> 00:09:18,360 personal level. And yeah, there was professional connection as 148 00:09:18,360 --> 00:09:22,040 well, but I think that it just made for, I don't know, a bunch 149 00:09:22,040 --> 00:09:25,520 of banter, like inside jokes, camaraderie between everyone. 150 00:09:25,520 --> 00:09:29,720 And it got me thinking that for future events, like, to me, this 151 00:09:29,720 --> 00:09:34,160 seemed like a social event, a mini vacation, and also the 152 00:09:34,160 --> 00:09:37,520 educational aspect of it. And I'm like, That's the ticket. 153 00:09:37,520 --> 00:09:39,620 Like, it's the perfect blend of all three, right? We could 154 00:09:39,620 --> 00:09:42,460 create an event where everyone's coming and it's just business, 155 00:09:42,460 --> 00:09:46,840 no talking, no phones, 10 hours a day, where we're just grinding 156 00:09:46,840 --> 00:09:50,260 it out. Or we can create a mini vacation where there's really 157 00:09:50,260 --> 00:09:55,060 great social aspects of it, having some fun, staying loose, 158 00:09:55,360 --> 00:09:59,560 laughing. And again, I look back at this and I'm like, I don't 159 00:09:59,560 --> 00:10:03,060 think. Not at work aside. Like, I don't think I've laughed that 160 00:10:03,060 --> 00:10:06,540 much in a while, like, I'm still kind of smiling thinking about 161 00:10:06,540 --> 00:10:10,860 it was just, it was really enjoyable. Yeah, I had, don't 162 00:10:10,860 --> 00:10:16,260 know if I need to go back to Omaha, might be set there, but 163 00:10:16,260 --> 00:10:20,540 it, it was fun. It was, we love you Omaha. Yeah, I had a lot of 164 00:10:20,540 --> 00:10:21,260 fun, yeah, 165 00:10:21,740 --> 00:10:27,020 no, I'm excited. I think you hit it, you know, we were, we were 166 00:10:27,020 --> 00:10:31,040 there, and it was exactly as you said. It was like a social 167 00:10:31,040 --> 00:10:34,580 event, you know, and be being able to hang by the pool and 168 00:10:34,580 --> 00:10:36,500 just chat, that was super cool. 169 00:10:37,580 --> 00:10:39,680 I think, I think what happens is, right, you're, you're 170 00:10:39,680 --> 00:10:43,060 charging money for this event, and you're trying to deliver and 171 00:10:43,060 --> 00:10:46,780 quantify, like, how much value is there, from like, a 172 00:10:46,780 --> 00:10:52,120 deliverable standpoint, when you like, this was, this was social 173 00:10:52,120 --> 00:10:55,540 proof to me that there's more than just, like, the tangible, 174 00:10:55,540 --> 00:10:58,960 quantifiable deliverables. And there's a lot to be said for 175 00:10:58,960 --> 00:11:02,100 letting your guard down and developing actual relationships. 176 00:11:02,100 --> 00:11:06,480 Well, you're spot on because, you know, we've done it well, 177 00:11:06,720 --> 00:11:09,240 not we've always had the social aspect of it, but there's 178 00:11:09,240 --> 00:11:12,840 definitely been past events where it was more structured and 179 00:11:12,840 --> 00:11:14,880 I didn't build those relationships, and we just 180 00:11:14,880 --> 00:11:17,760 didn't keep in touch after where it's, you know, I have a list of 181 00:11:17,760 --> 00:11:20,720 people that were, you know, I keep in touch with now, and I 182 00:11:20,720 --> 00:11:24,080 plan to follow up with because I want to either, you know, 183 00:11:24,500 --> 00:11:27,200 there's kind of mutual help. It's like, hey, they're working 184 00:11:27,200 --> 00:11:29,780 on something. I want to continue to be a resource. I was talking 185 00:11:29,780 --> 00:11:32,000 to someone. I was like, my biggest thing with this is I 186 00:11:32,000 --> 00:11:35,060 want to make sure that when you leave here, you can implement 187 00:11:35,060 --> 00:11:38,000 it. Yeah, you know what are going to be the missing pieces 188 00:11:38,000 --> 00:11:41,080 that are preventing you from actually implementing this stuff 189 00:11:41,140 --> 00:11:44,800 in the business so well. With that being said, we're heading 190 00:11:44,800 --> 00:11:49,960 to Chicago, November 7 through the 10th. And I mean, if you 191 00:11:49,960 --> 00:11:54,400 want to come, I would urge you to book your ticket. I know we 192 00:11:54,400 --> 00:11:58,900 threw a banger of a discount. You know, a couple weeks ago 193 00:11:58,900 --> 00:12:01,800 when we were in Omaha. Unfortunately, that discount has 194 00:12:01,800 --> 00:12:04,980 expired, but if you want a modern craftsman discount, you 195 00:12:04,980 --> 00:12:08,280 can shoot us a DM and we can get you a discount code to sign up. 196 00:12:08,760 --> 00:12:12,420 But we'd love to see you in Chicago. We're excited to, yeah, 197 00:12:13,200 --> 00:12:16,260 I haven't been, I actually have not been to Chicago. Oh, really, 198 00:12:16,320 --> 00:12:18,060 yeah, I'm excited to be there. 199 00:12:18,480 --> 00:12:22,760 I've been maybe twice. It was a while ago. I really enjoyed it. 200 00:12:22,760 --> 00:12:27,200 It's a nice city, pretty clean city, so I had fun. I'm looking 201 00:12:27,200 --> 00:12:28,400 forward to it, yeah, 202 00:12:29,540 --> 00:12:32,960 well, so we I want to get into something, because I told a 203 00:12:32,960 --> 00:12:37,460 story when we were in Omaha that I think I had a lot of people a 204 00:12:38,180 --> 00:12:44,140 little bit surprised, just based on the the nature of it. So just 205 00:12:44,140 --> 00:12:47,740 to cut to the chase, I ended up writing a client a check for 206 00:12:47,740 --> 00:12:53,380 $200,000 because I made a pretty big mistake. And that mistake, 207 00:12:53,680 --> 00:12:59,200 it was, you know, we were, well, I want to preface this the right 208 00:12:59,200 --> 00:13:03,420 way. We were doing this project. It was a big renovation project, 209 00:13:04,140 --> 00:13:09,060 and we it was essentially this evolving scope. By the time we 210 00:13:09,060 --> 00:13:11,880 finished the project, the project grew by four times the 211 00:13:12,000 --> 00:13:15,900 original contract value, and there was heightened 212 00:13:15,900 --> 00:13:18,900 frustrations, because, frankly, we weren't even the only 213 00:13:18,900 --> 00:13:22,160 contractor on the job site. We this was a job that we kind of 214 00:13:22,160 --> 00:13:26,840 took mainly because of the time in our career that we needed a 215 00:13:26,840 --> 00:13:31,100 project, and some unforeseen circumstances in the market that 216 00:13:31,100 --> 00:13:34,220 prevented us from continuing some other projects, whatever, 217 00:13:34,220 --> 00:13:37,940 blah, blah, blah. All that to be said is we were getting towards 218 00:13:37,940 --> 00:13:43,600 the end, and the client started getting very upset that the 219 00:13:43,600 --> 00:13:46,960 project wasn't done, but it was this evolving project, and 220 00:13:46,960 --> 00:13:50,440 actually threatened one of my guys and said that he was going 221 00:13:50,440 --> 00:13:54,820 to put us out of business. And, you know, I, obviously my guy 222 00:13:54,820 --> 00:13:57,700 calls me and says, Hey, this is what's going on. I'm like, What 223 00:13:57,700 --> 00:13:59,560 in the world are we talking about? You know, we're we're 224 00:14:00,100 --> 00:14:02,640 there every day. We're to look like this place looks amazing. 225 00:14:02,640 --> 00:14:08,160 What is? What is? What is going on? And he essentially said that 226 00:14:08,160 --> 00:14:12,180 our contract was stated. Contract stated one thing and we 227 00:14:12,180 --> 00:14:16,620 were doing another. Again, not really sure what we're talking 228 00:14:16,620 --> 00:14:21,320 about. I give him a call and come to find out we had been 229 00:14:21,320 --> 00:14:25,040 billing our billable rates for all of the labor on the job 230 00:14:25,040 --> 00:14:28,940 site, and in our contract, it state it didn't say anything 231 00:14:28,940 --> 00:14:32,480 about billable rates. So what that means is, I was billing out 232 00:14:32,480 --> 00:14:35,480 someone, say, $75 an hour, which would be, you know, anywhere 233 00:14:35,540 --> 00:14:39,140 from 75 to 100 is a market rate for a good carpenter in Boston. 234 00:14:39,140 --> 00:14:43,780 So we're billing our carpenters out at 75 to $100 but we didn't 235 00:14:43,780 --> 00:14:47,320 have that labor rate defined in our contract. So our contract is 236 00:14:47,320 --> 00:14:51,760 cost plus means we can only build the actual cost. So we got 237 00:14:51,760 --> 00:14:57,820 audited on this project, and they went through all of our 238 00:14:57,880 --> 00:15:01,500 financial records. We. I just gave up. I was like, Hey, I'm 239 00:15:01,620 --> 00:15:04,260 full transparent. I'm not doing anything wrong. Yeah. Like, 240 00:15:04,260 --> 00:15:06,720 here, here, here you go. Here's all the, all the, all the 241 00:15:06,720 --> 00:15:09,420 receipts. And they came back and they said that you've charged, 242 00:15:09,420 --> 00:15:14,220 you've overcharged just $200,000 and we expect you to pay that 243 00:15:14,220 --> 00:15:18,120 back or we will come after you. And I literally wrote him a 244 00:15:18,120 --> 00:15:23,000 check for 200 200 grand, and sent it back to the client, and, 245 00:15:23,780 --> 00:15:26,060 you know, moved on. The 246 00:15:26,060 --> 00:15:31,940 problem the discrepancy this the between what you were charging 247 00:15:31,940 --> 00:15:35,840 they were saying that $75 an hour isn't the cost of your 248 00:15:35,840 --> 00:15:38,360 employee, like you were paying them less than that 249 00:15:38,420 --> 00:15:41,500 exactly. So they were like your your your chart, like you pay 250 00:15:41,500 --> 00:15:45,040 them say it's 35 bucks an hour, right? W2 so then I went through 251 00:15:45,040 --> 00:15:47,740 and it was like, Yeah, but here's the actual burdened rate. 252 00:15:47,920 --> 00:15:51,160 So we'll get to that in a second. But we were making a 253 00:15:51,160 --> 00:15:55,480 profit on the labor, as we should be. So of course, I'm I 254 00:15:55,480 --> 00:15:58,720 call my my lawyer, I'm like, hey, you know, what did we miss? 255 00:15:58,780 --> 00:16:02,100 And he goes through our contract and goes, you need to have an 256 00:16:02,100 --> 00:16:06,000 exhibit in your contract that states the billable rate, and 257 00:16:06,000 --> 00:16:08,940 because, since you're especially being that your cost plus, so 258 00:16:08,940 --> 00:16:11,760 cost plus means you're charging the cost plus a predetermined 259 00:16:11,820 --> 00:16:16,380 percentage fee or predetermined fee, whether that's $1 amount or 260 00:16:16,380 --> 00:16:20,160 fee, I mean a percentage, but if you're going to charge a rate 261 00:16:20,220 --> 00:16:23,540 for something, you can charge a rate, but that needs to be 262 00:16:23,660 --> 00:16:27,380 defined in the contract, specifically or explicitly. 263 00:16:27,440 --> 00:16:32,120 Yeah, so you know it, whether that's labor or say you're 264 00:16:32,120 --> 00:16:36,260 charging an insurance fee. You know you can set a 2% insurance 265 00:16:36,260 --> 00:16:38,960 fee, but it needs to be defined in the contract and agreed upon. 266 00:16:39,500 --> 00:16:43,840 So we, you know, from that point, we spent a couple $1,000 267 00:16:44,140 --> 00:16:47,260 with our lawyer, rebuilt our contract, and now, you know, we 268 00:16:47,260 --> 00:16:50,440 have exhibit in our contract that states every rate. It also 269 00:16:50,440 --> 00:16:54,100 states when those rates can change for fluctuation. So you 270 00:16:54,100 --> 00:16:58,540 have a multi year job like the rates can go up, etc, etc. But 271 00:16:59,380 --> 00:17:02,880 in this exercise, I realized, you know, I wonder if I'm 272 00:17:02,880 --> 00:17:06,420 actually accurate in terms of what this employee costs. 273 00:17:06,480 --> 00:17:11,820 So before we get to that, can we take a step back? How could we 274 00:17:11,940 --> 00:17:14,880 have avoided this? There's the exhibit right, where you have a 275 00:17:14,880 --> 00:17:17,940 billable rate, or a market rate, or not a market but like a 276 00:17:17,940 --> 00:17:24,980 billable rate, or, I guess, you could have had your cost plus, 277 00:17:24,980 --> 00:17:29,180 but then you would have had to had within your contract or 278 00:17:29,180 --> 00:17:33,620 within your invoicing cost for all of the cost associated with 279 00:17:33,620 --> 00:17:36,020 that employee, right? So, like, you would have had to have 280 00:17:36,020 --> 00:17:40,360 either a percentage, percentage or an hourly cost for payroll 281 00:17:40,360 --> 00:17:43,420 taxes, workers comp, general liability, all that stuff. So 282 00:17:43,420 --> 00:17:46,120 that's the other way that you could have avoided this. You 283 00:17:46,120 --> 00:17:49,180 didn't have either you just you were charging a billable or a 284 00:17:49,180 --> 00:17:52,480 market rate, and they were basically saying, well, this 285 00:17:52,480 --> 00:17:55,180 isn't the actual cost, because you didn't spell out that there 286 00:17:55,180 --> 00:17:58,300 were costs above and beyond, right? Just what their W, what 287 00:17:58,300 --> 00:17:59,500 you're paying them. 288 00:17:59,680 --> 00:18:06,240 Yeah, right. So you know, that project goes, we learn from it, 289 00:18:06,240 --> 00:18:10,800 and we, we dig in real hard on All right, what's the true cost 290 00:18:10,800 --> 00:18:14,040 of this labor? And I want to, I want to say something, you know, 291 00:18:14,640 --> 00:18:18,240 like high level, if you're, if you're self performing labor, 292 00:18:18,720 --> 00:18:21,860 you should be making a profit on that. And I'll give you an 293 00:18:21,860 --> 00:18:25,160 example before we dig into like, the specifics of burden. But I 294 00:18:25,160 --> 00:18:28,220 had a client after this, like, after that, client a couple 295 00:18:28,220 --> 00:18:33,980 years later, say, Hey, are you charging me a labor rate that 296 00:18:33,980 --> 00:18:36,920 includes profit for your labor, and then you're getting your 297 00:18:36,920 --> 00:18:40,840 cost plus on top of that? And I said, I am. And the client said, 298 00:18:40,840 --> 00:18:43,420 That's double dipping. I said, Well, I don't really love that 299 00:18:43,420 --> 00:18:46,600 term, but I guess if you want to look at it that way. And she 300 00:18:46,600 --> 00:18:49,480 said, Well, I don't want to pay a markup on a markup. I said, No 301 00:18:49,480 --> 00:18:53,980 problem. I said, what we can do is, and rather than use our in 302 00:18:53,980 --> 00:18:58,540 house labor, I'll just, I'll sub everything out. And she said, 303 00:18:58,540 --> 00:19:00,580 Well, what do you mean? I'm like, I'll just sub it all out. 304 00:19:00,640 --> 00:19:03,600 It, you know, the market rate for a carpenter is $75 so I'll 305 00:19:03,600 --> 00:19:06,540 just sub it out that way. When I transfer it over to you, you're 306 00:19:06,540 --> 00:19:08,820 paying the exact same price, but at least I'm not making 307 00:19:08,820 --> 00:19:12,540 additional profit. And she She smirked, and she said, Well, 308 00:19:13,080 --> 00:19:15,540 that doesn't change anything. I said, right? I said, the 309 00:19:15,540 --> 00:19:16,560 additional profit, and 310 00:19:16,560 --> 00:19:20,900 that's because when a subcontractor gives you a number 311 00:19:20,900 --> 00:19:24,200 that you are paying them, they have profit in it for 312 00:19:24,200 --> 00:19:27,680 themselves, right? And then you're having your company 313 00:19:27,680 --> 00:19:31,040 profit on top of that, right? And so that's like, what 314 00:19:31,040 --> 00:19:33,980 essentially you're doing, even with in house labor, you still 315 00:19:33,980 --> 00:19:37,160 are accounting for your profit, but then you have your plus on 316 00:19:37,160 --> 00:19:38,180 top of that, right? 317 00:19:38,180 --> 00:19:41,680 And as you should, because if you have in house labor. You 318 00:19:41,680 --> 00:19:45,580 know, there's costs that go into keeping those guys in house. 319 00:19:45,880 --> 00:19:48,460 It's everything that goes above and beyond training them, the 320 00:19:48,460 --> 00:19:51,700 culture, the work parties, the work events, the bonuses. 321 00:19:51,880 --> 00:19:55,420 There's, you know, and just then, you know, that's the 322 00:19:55,420 --> 00:19:59,320 overhead associated with it that doesn't necessarily always get 323 00:19:59,320 --> 00:20:04,380 captured in. And the the rate, but then the profit you're 324 00:20:04,380 --> 00:20:07,620 taking the risk of having employees, you're like, that's 325 00:20:07,860 --> 00:20:10,800 you should be that is a risk that you're incurring, so you 326 00:20:10,800 --> 00:20:14,280 should be profiting for that. And so the client ultimately was 327 00:20:14,280 --> 00:20:16,620 like, well, that doesn't make sense. I'd rather work with your 328 00:20:16,620 --> 00:20:19,920 guys. I said the price is the same either way. Yeah, you're 329 00:20:19,920 --> 00:20:22,160 gonna get your note, you know what you're going to get with my 330 00:20:22,160 --> 00:20:25,040 guys. You know, we're a company, you know, the company with the 331 00:20:25,040 --> 00:20:28,640 company culture. And she was like, Okay, understood that 332 00:20:28,640 --> 00:20:31,940 makes that makes sense to me. And never, never had an issue 333 00:20:31,940 --> 00:20:37,460 beyond that. But we went into this kind of we literally 334 00:20:37,460 --> 00:20:41,260 printed out a year's worth of transactions, 1000s of line 335 00:20:41,260 --> 00:20:44,560 items, and just went through and basically said, you know, is 336 00:20:44,560 --> 00:20:48,400 this associated with we did two exercises, we this is when we 337 00:20:48,400 --> 00:20:52,240 really started digging into the cost of running a job versus 338 00:20:52,240 --> 00:20:56,440 running the business. And basically, like said, if we 339 00:20:56,440 --> 00:20:59,620 don't need, if we had no projects going on, would we have 340 00:20:59,620 --> 00:21:03,060 this cost? And if the answer was no, then it was a job cost. We 341 00:21:03,060 --> 00:21:05,100 made sure we were billing for it. But we did the same thing 342 00:21:05,100 --> 00:21:08,340 for labor, and we just kept going through line by line and 343 00:21:08,340 --> 00:21:11,940 highlighting things that were associated directly with an 344 00:21:11,940 --> 00:21:16,860 employee. So, you know, obviously payroll tax for 1k 345 00:21:17,100 --> 00:21:21,800 contribution, health insurance, you know, dental, vision, all of 346 00:21:21,800 --> 00:21:25,520 that stuff is kind of pretty straightforward, yeah, but then 347 00:21:25,520 --> 00:21:29,300 it was the vehicle. And so then we built out this spreadsheet 348 00:21:29,300 --> 00:21:32,480 that, you know, okay, well, how much is the vehicle, you know, 349 00:21:32,480 --> 00:21:35,120 what's the monthly payment on that vehicle? What's the 350 00:21:35,120 --> 00:21:38,240 insurance rate for that vehicle? How much are you spending in 351 00:21:38,240 --> 00:21:42,340 fuel per month? And we basically built all this stuff out on a 352 00:21:42,340 --> 00:21:47,440 monthly cost, and that way we'd have a monthly cost, and then we 353 00:21:47,440 --> 00:21:52,300 could divide it down to week, day and per hour. But that, as 354 00:21:52,300 --> 00:21:54,640 we continue to do it, and we do that, we look at this thing 355 00:21:54,640 --> 00:21:59,380 every six months. As we continue to do we kept finding things. So 356 00:21:59,380 --> 00:22:02,280 I'm actually, I'm going to pull it up, because I just wanna make 357 00:22:02,280 --> 00:22:02,460 sure 358 00:22:02,520 --> 00:22:06,120 you have different burden rates for different types of 359 00:22:06,120 --> 00:22:09,360 employees. Or are you averaging that for all employees, 360 00:22:09,600 --> 00:22:13,980 different different rates, uh, different rates for different 361 00:22:13,980 --> 00:22:17,640 roles, different roles. Yeah. And I'm gonna explain, and there 362 00:22:17,640 --> 00:22:21,380 can be a swing in what our markup is. I'll get that. But so 363 00:22:21,380 --> 00:22:25,400 just going down the list, we have cell phone like, are we 364 00:22:25,400 --> 00:22:28,640 paying for their cell phone their vehicle? Are we giving 365 00:22:28,640 --> 00:22:31,940 them an allowance, or do they get a company vehicle? You know, 366 00:22:31,940 --> 00:22:35,420 how does that break down software? So we essentially, we 367 00:22:35,420 --> 00:22:40,960 found that about $1 per hour is what it costs us for the 368 00:22:40,960 --> 00:22:43,900 software stack that each of these employees have, and 369 00:22:43,900 --> 00:22:48,040 that's, you know, their project management platform. License, 370 00:22:48,340 --> 00:22:54,700 Adobe, license, Blue Beam license, the the $8 a month I 371 00:22:54,700 --> 00:23:00,660 pay for their custom email, you know, an amortized cost for 372 00:23:00,660 --> 00:23:06,600 their laptop, iPad, so on and so forth. Workers Comp based on 373 00:23:06,600 --> 00:23:09,540 what their role is. Their workers comp is different, you 374 00:23:09,540 --> 00:23:12,780 know, a super versus a carpenter, verse, you know, 375 00:23:12,780 --> 00:23:17,520 office, their workers comp rate changes, yeah, and same thing, 376 00:23:17,520 --> 00:23:21,080 which in general liability, their their general liability 377 00:23:21,080 --> 00:23:24,080 changes based on that role. So then we have this direct cost, 378 00:23:24,080 --> 00:23:28,280 which, you know, we now we understand, oh, you know this, 379 00:23:28,280 --> 00:23:31,460 this employee, just for example, like, you know, hey, this guy 380 00:23:31,460 --> 00:23:34,640 makes, you know, we pay him $24 an hour, all right, that 381 00:23:35,120 --> 00:23:39,140 actually costs the company so far 30 bucks an hour. And then 382 00:23:39,140 --> 00:23:42,220 we factor things in, like, how many company holidays are they? 383 00:23:42,460 --> 00:23:47,620 How much PTO do they get per year? And then we make sure that 384 00:23:47,620 --> 00:23:51,820 we understand the PTO cost, so that $30 just turned into $35 385 00:23:53,140 --> 00:23:56,500 and then we look at, okay, now what's the market rate for that 386 00:23:56,500 --> 00:23:59,800 particular role? So market rate for that role would be anywhere 387 00:23:59,800 --> 00:24:03,840 from like 50 to $65 an hour. So we'll just call it 65 you're 388 00:24:03,840 --> 00:24:09,420 making 30 bucks an hour on this this role, the as they get, say 389 00:24:09,420 --> 00:24:13,920 they start making $26 $28.30 say that. Say the role that they 390 00:24:13,920 --> 00:24:19,080 fill ranges from 25 to 30. Our rate, our billable rate, doesn't 391 00:24:19,080 --> 00:24:23,180 change. Yeah. And the reason we felt comfortable with that is 392 00:24:24,080 --> 00:24:28,100 essentially, if you're if you're on the low end of that rate of 393 00:24:28,100 --> 00:24:31,580 that that role, you're going to make more mistakes, and the 394 00:24:31,580 --> 00:24:35,840 company is going to be paying for more, basically paying more 395 00:24:35,840 --> 00:24:40,480 to fix things and or or paying for your inefficiencies. You get 396 00:24:40,480 --> 00:24:44,980 paid more based on less mistakes higher efficiency. So you know, 397 00:24:45,040 --> 00:24:48,160 we're not necessarily tracking the inefficiencies, but in 398 00:24:48,160 --> 00:24:50,800 theory, you know the person that's making on the low range 399 00:24:50,800 --> 00:24:54,100 is going to make more mistakes so that that that margin is 400 00:24:54,100 --> 00:24:57,400 larger. So we're we're capturing those inefficiencies in that 401 00:24:57,400 --> 00:25:01,560 larger margin, and as you get to the top end of. That that rate, 402 00:25:01,800 --> 00:25:04,680 that margin, is smaller, but you're making you're essentially 403 00:25:04,680 --> 00:25:05,760 dipping into it less for 404 00:25:05,760 --> 00:25:10,020 mistakes. I mean, you also, from a job perspective, don't know 405 00:25:10,020 --> 00:25:14,340 who's going to be on what job for how long, even if you're 406 00:25:14,340 --> 00:25:16,980 bidding work that's six months out if that employee is going to 407 00:25:16,980 --> 00:25:19,200 be with you. So you have to understand when you're looking 408 00:25:19,200 --> 00:25:23,360 to replace those, those people, if they leave, or if you lose 409 00:25:23,360 --> 00:25:26,840 them, or for whatever reason, that you replace with somebody 410 00:25:26,840 --> 00:25:32,180 who fits within that range. And it avoids having to actually 411 00:25:32,180 --> 00:25:35,360 have, like, an exact dollar number for that employee, and 412 00:25:35,360 --> 00:25:38,000 then saying, you know, it's this much for this employee, this 413 00:25:38,000 --> 00:25:40,840 much for that employee. You're covering a range within that, 414 00:25:41,260 --> 00:25:45,640 that the cost of that employee, I think that something that I I 415 00:25:45,640 --> 00:25:47,800 realize, even with your labor burden that you should be 416 00:25:47,860 --> 00:25:52,540 accounting for, is like downtime and inefficiencies. We don't 417 00:25:52,540 --> 00:25:58,120 work in a perfect environment, in a perfect world. And to bid 418 00:25:58,120 --> 00:26:01,920 something, to price something, to have labor rates that are 419 00:26:03,120 --> 00:26:07,740 based on 100% efficiency, like you might have a job, and if it 420 00:26:07,740 --> 00:26:12,000 rains that day, you're going to have less productivity than if 421 00:26:12,000 --> 00:26:14,880 it didn't. So you should be somehow accounting for that 422 00:26:14,880 --> 00:26:17,520 within your labor burden. If you think that you're going to get 423 00:26:17,520 --> 00:26:21,380 100% 100% efficiency to for 40 hours a week, you're foolish, 424 00:26:21,380 --> 00:26:23,720 and you're going to be losing money. And that's something that 425 00:26:23,720 --> 00:26:27,020 I did for a long time, even as the owner of the business, if I 426 00:26:27,020 --> 00:26:31,580 want to be able to have 40 hours a week on the books that I can 427 00:26:32,060 --> 00:26:35,480 charge my clients, I probably have to work 50 hours a week. So 428 00:26:35,480 --> 00:26:38,840 can I capture those additional 10 hours? There's a lot of 429 00:26:38,840 --> 00:26:42,280 downtime associated with the work that I can't necessarily 430 00:26:42,280 --> 00:26:45,580 bill them for those 10 hours. So how am I building that into my 431 00:26:45,580 --> 00:26:49,000 rate to ensure I'm getting paid for those hours, and I don't 432 00:26:49,000 --> 00:26:53,140 actually have to work 50 hours in order to just invoice for 40? 433 00:26:53,500 --> 00:26:56,800 Well, that's so we have a line item on there called break even 434 00:26:56,800 --> 00:27:01,020 hours. So essentially, you know, based on that margin, assuming 435 00:27:01,020 --> 00:27:04,860 that they are operating efficiently, you know, it that 436 00:27:04,860 --> 00:27:09,180 particular role that I was just giving as an example, they need 437 00:27:09,180 --> 00:27:13,920 to work 21 hours a week to be billable. If they work less than 438 00:27:13,920 --> 00:27:17,220 that, that means we're making, we're losing money on that 439 00:27:17,220 --> 00:27:20,600 employee. If they, if they're any hour that they work above 440 00:27:20,600 --> 00:27:24,380 and beyond that is additional profit. So if you think, you 441 00:27:24,380 --> 00:27:27,500 know, 21 hours is half the week, you know, once they hit half the 442 00:27:27,500 --> 00:27:30,800 week, it's great. Now you're in the profit. You're profiting. 443 00:27:30,920 --> 00:27:34,220 But what that does is it helps capture the downtime, the 444 00:27:34,220 --> 00:27:37,580 inefficiencies, the in between work, the company events, the 445 00:27:38,060 --> 00:27:40,720 you know, the meetings that they're attending as a company, 446 00:27:40,720 --> 00:27:45,220 the what we call general time. And we take this information, we 447 00:27:45,220 --> 00:27:49,060 basically run a report every week and look at every employee, 448 00:27:49,060 --> 00:27:53,440 how many hours they worked, and then what, what, what profit 449 00:27:53,740 --> 00:27:57,460 we're making on those hours. So that way, we can see if you 450 00:27:57,460 --> 00:28:00,160 know, if we're dipping into general time, you know what's 451 00:28:00,160 --> 00:28:02,940 going on. Why are we spending so much time on general and it 452 00:28:02,940 --> 00:28:07,500 might be because that, you know, that particular employee is 453 00:28:07,500 --> 00:28:11,580 working on something that is for the business or or higher level, 454 00:28:11,580 --> 00:28:15,240 or they're in between jobs, but at least we're looking at it and 455 00:28:15,240 --> 00:28:16,800 understanding it on a regular 456 00:28:16,800 --> 00:28:19,800 basis. I looked up the definition of labor burden, and 457 00:28:19,980 --> 00:28:24,740 like in layman's terms, it's the real cost to your business for 458 00:28:24,740 --> 00:28:28,580 every hour an employee is on the clock, not just what you pay 459 00:28:28,580 --> 00:28:31,760 them, right? So you have to understand that another mistake 460 00:28:31,760 --> 00:28:35,240 that I made forever, right? Where it's like people tell you, 461 00:28:35,240 --> 00:28:38,720 Oh, mark them up 15% and then mark that up 15% for your 462 00:28:38,720 --> 00:28:43,480 profit. That it doesn't work that way. You should be 463 00:28:43,540 --> 00:28:47,200 accounting for all of the costs associated with them, and then 464 00:28:47,560 --> 00:28:51,280 your profit and if your cost plus, like Nick, at that point, 465 00:28:51,280 --> 00:28:56,500 you need to have your plus above the line, on top of the on top 466 00:28:56,500 --> 00:29:00,660 of that cost as well some typical labor burden components. 467 00:29:00,660 --> 00:29:03,900 Nick mentioned a bunch of these, but payroll taxes, workers 468 00:29:03,900 --> 00:29:07,200 compensation insurance, General Liability health insurance 469 00:29:07,200 --> 00:29:10,560 premiums if you're paying them, retirement contributions, if 470 00:29:10,560 --> 00:29:14,400 you're paying them, PTO, vacation, holiday, sick days, 471 00:29:14,400 --> 00:29:17,580 training, onboarding, downtime, work, vehicle costs, 472 00:29:17,580 --> 00:29:20,780 maintenance, insurance, fuel, phone, tablet, software, tools, 473 00:29:20,780 --> 00:29:25,940 safety gear and uniforms. So those are a lot of costs that go 474 00:29:25,940 --> 00:29:29,420 into the price of having an employee that if you are not 475 00:29:29,420 --> 00:29:33,680 capturing them, you're going to be losing a lot of money fairly 476 00:29:33,680 --> 00:29:34,220 quickly. 477 00:29:35,180 --> 00:29:39,800 Yeah, and it's, you know, a couple things on on that, one of 478 00:29:39,800 --> 00:29:43,240 them going back to PTO for a minute. You know, you also have 479 00:29:43,240 --> 00:29:47,260 to consider, okay, well, you know, I'm just using that as an 480 00:29:47,260 --> 00:29:53,800 example, but PTO we get this is factoring in, like, two weeks. 481 00:29:53,800 --> 00:30:00,540 So two weeks of PTO equals about $2.40 an hour. That's. Direct 482 00:30:00,540 --> 00:30:03,360 cost, meaning that that's what it costs to send that person on 483 00:30:03,360 --> 00:30:07,620 PTO for two weeks. But something to consider is, if that person 484 00:30:07,620 --> 00:30:11,340 needs to be replaced while that other person is out, or someone 485 00:30:11,340 --> 00:30:14,820 has to take the role of that person, you should be accounting 486 00:30:14,820 --> 00:30:19,380 for that as well. And again, to simplify this, like we I mean, 487 00:30:19,500 --> 00:30:22,460 if you're listening to this when you're driving or working, you 488 00:30:22,460 --> 00:30:25,220 know, well, actually, we actually have a downloadable you 489 00:30:25,220 --> 00:30:27,860 can have this Excel. It's completely free. It's on our 490 00:30:27,860 --> 00:30:32,840 website. We'll put a link below. But the the simple way to 491 00:30:32,900 --> 00:30:36,920 summarize this is, if the only reason you're spending that 492 00:30:36,920 --> 00:30:41,560 money is because of that employee, that's part of the 493 00:30:41,560 --> 00:30:44,740 cost, yeah, meaning, like, that person goes away, that that 494 00:30:44,740 --> 00:30:47,560 cost, in theory, should go away. Maybe it's harder to get rid of 495 00:30:47,560 --> 00:30:50,500 a truck because it's, you know, you can't just return to the 496 00:30:50,500 --> 00:30:52,600 dealership and say, I'm done with it. But, you know, in 497 00:30:52,600 --> 00:30:55,960 theory, that person goes away, the cost goes away. That person 498 00:30:55,960 --> 00:30:58,000 is there. You incur that cost. I 499 00:30:58,000 --> 00:31:01,020 mean, it comes down to being like a direct cost, right? If, 500 00:31:01,020 --> 00:31:04,860 if your cost plus, and you have your direct costs, and that's 501 00:31:04,860 --> 00:31:09,120 what you're putting your your builder percentage plus on, 502 00:31:09,420 --> 00:31:12,300 like, that's a direct cost associated that job. If that, if 503 00:31:12,300 --> 00:31:15,240 that employee is not driving to that job, to work, he does not, 504 00:31:15,240 --> 00:31:18,240 or she does not, need that truck, right? Right? They don't 505 00:31:18,240 --> 00:31:20,600 need the uniform, they don't need the cell phone, they don't 506 00:31:20,600 --> 00:31:25,040 need the software. So that cost is directly tied to the 507 00:31:25,040 --> 00:31:28,940 execution of that project and the production of that project. 508 00:31:28,940 --> 00:31:32,000 So understanding all of those costs that go into your direct 509 00:31:32,000 --> 00:31:36,020 costs to make sure that you're accounting for that needs to be 510 00:31:36,080 --> 00:31:39,500 accounted for. And you know you're you're a smaller company, 511 00:31:39,500 --> 00:31:45,340 maybe your employees don't have all of these, right? They don't 512 00:31:45,340 --> 00:31:48,040 have a truck, they don't you, maybe they don't have 513 00:31:48,220 --> 00:31:51,400 contribution into retirement, maybe they don't have health 514 00:31:51,400 --> 00:31:54,220 insurance, like you have to understand what's going into the 515 00:31:54,220 --> 00:31:57,220 cost of these employees. There's still costs associated with 516 00:31:57,220 --> 00:32:01,860 them, even if it's just inefficiencies that you need to 517 00:32:01,860 --> 00:32:05,220 account for to make sure that you are not bearing the cost of 518 00:32:05,220 --> 00:32:08,940 those employees and your the jobs that you're doing and your 519 00:32:08,940 --> 00:32:10,560 clients that you're working for, are 520 00:32:10,560 --> 00:32:13,080 one of the questions that comes up is, do we use a flat 521 00:32:13,080 --> 00:32:16,020 percentage, you know, to mark all of our labor up? And the 522 00:32:16,020 --> 00:32:20,100 answer is no. And the way we do it is we look at, again, market 523 00:32:20,100 --> 00:32:24,020 rate and and follow up. Question is, well, how do you know what 524 00:32:24,020 --> 00:32:27,140 market rate is? Okay, that's good question. If you were to 525 00:32:27,140 --> 00:32:31,700 hire a 1099, Carpenter, what are they going to charge you? Oh, it 526 00:32:31,700 --> 00:32:34,460 depends. Well, what's it depend on? Well, it depends on who I 527 00:32:34,460 --> 00:32:37,520 talk to. It's like, okay, but that relate is probably related 528 00:32:37,520 --> 00:32:40,040 to their skill level. Sure, you probably have some guys out 529 00:32:40,040 --> 00:32:42,820 there that are charging an arm and a leg because they just want 530 00:32:42,820 --> 00:32:45,700 to charge more money, and they they're maybe they think they're 531 00:32:45,700 --> 00:32:49,000 more valuable. And you probably have the opposite of where guys 532 00:32:49,000 --> 00:32:51,820 are not charging enough for their time. But what is the 533 00:32:51,940 --> 00:32:55,480 market rate if you were to go hire a carpenter on 1099, and it 534 00:32:55,480 --> 00:32:59,620 for us, 75 to 100 sometimes 120 bucks, depending on the 535 00:32:59,620 --> 00:33:02,340 carpenter. Okay, well, then you should be accounting for that. 536 00:33:02,760 --> 00:33:06,300 And at the minimum, just hit market rate. If you feel as 537 00:33:06,300 --> 00:33:09,300 though your guys are better, or you can sell the premium, sell 538 00:33:09,300 --> 00:33:13,020 the premium. But if you know, and what that does is, number 539 00:33:13,020 --> 00:33:16,440 one, it makes it keeps things consistent. But number two, if, 540 00:33:16,620 --> 00:33:21,620 say, your employee does take PTO you know, or has to, you know, 541 00:33:21,620 --> 00:33:25,220 gets hurt, or quits whatever, whatever the case is, and 542 00:33:25,220 --> 00:33:28,040 you're, you're moving in the job, and you have to replace 543 00:33:28,040 --> 00:33:30,380 him. And maybe you can't make a hire, but you can get a 1099, 544 00:33:31,100 --> 00:33:35,600 guy in place now, you now, everything stays the same. You 545 00:33:35,600 --> 00:33:38,420 know that they come in, hey, I'm $75 an hour. Great. I was 546 00:33:38,420 --> 00:33:41,620 billing, you know, billing my guy out in $5 an hour. So it's 547 00:33:41,620 --> 00:33:44,680 the same it's the same thing. Now you're just not, you're just 548 00:33:44,680 --> 00:33:47,920 not necessarily profiting on that, that person, but 549 00:33:47,920 --> 00:33:50,980 ultimately you're because they're a subcontractor and 550 00:33:50,980 --> 00:33:51,760 you're subbing it out. 551 00:33:52,240 --> 00:33:56,560 But this, this is why, like so many times, people want to just 552 00:33:56,560 --> 00:33:58,900 say, well, what are you charging for your employees? What do you 553 00:33:58,900 --> 00:34:01,920 charge for yourself? And it's completely irrelevant, right? 554 00:34:01,920 --> 00:34:05,040 Like you're even if, simplest terms, you're doing market rate, 555 00:34:05,040 --> 00:34:07,500 like your market's different than my market. What you can 556 00:34:07,500 --> 00:34:10,080 charge for your market rates different than mine. But then if 557 00:34:10,080 --> 00:34:12,660 you're looking at it from this, like fully burdened rate, your 558 00:34:12,660 --> 00:34:15,000 burden rate is going to be different than my burden rate. 559 00:34:15,000 --> 00:34:18,060 One, because the employee might cost a different amount. But 560 00:34:18,060 --> 00:34:21,800 then two, your business is structured with different 561 00:34:22,220 --> 00:34:25,100 percentages and different costs that you're putting on top to 562 00:34:25,100 --> 00:34:27,740 get that burden rate. So you have to understand what works 563 00:34:27,740 --> 00:34:30,920 for you and what Nick charges, what I charge, two completely 564 00:34:30,920 --> 00:34:34,100 different things. So asking, you know, what's your what's your 565 00:34:34,100 --> 00:34:37,460 builder's fee percentage for cost plus builder, or what are 566 00:34:37,460 --> 00:34:40,360 you charging as a TNM contractor? Like, it's 567 00:34:40,360 --> 00:34:45,160 completely irrelevant. You the question would be like, how are 568 00:34:45,160 --> 00:34:48,160 you coming up with that rate? Because if you understand how 569 00:34:48,160 --> 00:34:50,500 you're coming up with that rate, if you use this labor burden 570 00:34:50,500 --> 00:34:53,140 calculator, then you can plug your own numbers into it, and 571 00:34:53,140 --> 00:34:59,320 you have a basis, like, for me being TNM, it's closer to, like, 572 00:34:59,320 --> 00:35:02,700 the market. Great type of perspective, but I need to have 573 00:35:02,700 --> 00:35:05,880 what's called a loaded labor rate. So my loaded labor rate 574 00:35:05,880 --> 00:35:09,780 that I'm presenting to the client contractually covers all 575 00:35:09,780 --> 00:35:14,040 of the burden, plus the overhead and profit. So like, I'm not 576 00:35:14,040 --> 00:35:20,060 putting that plus 1015, 20% on top of that labor rate. So I 577 00:35:20,060 --> 00:35:23,840 need to make sure that my loaded labor rate accounts for the 578 00:35:23,840 --> 00:35:27,200 fully burdened rate plus my overhead and profit. So my 579 00:35:27,200 --> 00:35:31,940 number that you see, as far as a labor rate in my contract, would 580 00:35:31,940 --> 00:35:36,380 more than likely be higher than Nick's, because Nick's labor 581 00:35:36,380 --> 00:35:39,380 rate within his contract then gets an additional builder's fee 582 00:35:39,380 --> 00:35:42,220 put on top of it. So you have to make sure contractually, you 583 00:35:42,220 --> 00:35:45,400 understand how you operate as a contractor, how you're charging 584 00:35:45,400 --> 00:35:49,900 and contractually, legally, how those numbers are supposed to be 585 00:35:49,900 --> 00:35:53,980 communicated and written within your contract. But I know mine 586 00:35:53,980 --> 00:35:56,860 is different. It's a loaded labor rate, and there's no 587 00:35:56,860 --> 00:36:00,900 percentage being applied on top of that, so I have to explicitly 588 00:36:00,900 --> 00:36:04,980 state what my low loaded labor rate is for what roles, what 589 00:36:04,980 --> 00:36:09,000 employees, to ensure that I protect myself on the back end, 590 00:36:09,000 --> 00:36:12,240 and I can actually charge for that as far as like this, this 591 00:36:12,300 --> 00:36:16,320 burden rate. And starting to determine that, did you was it? 592 00:36:16,320 --> 00:36:18,720 I know that you had this one job where it was an issue, but you 593 00:36:18,720 --> 00:36:22,460 already started understanding like, what your your burden rate 594 00:36:22,460 --> 00:36:25,340 was, and what you needed a profit. But like, how did you 595 00:36:25,340 --> 00:36:28,220 start figuring that out? How did you understand what to put on as 596 00:36:28,220 --> 00:36:32,960 far as profit goes? Like, what was the discovery process like 597 00:36:32,960 --> 00:36:33,440 for you? 598 00:36:34,580 --> 00:36:38,780 Honestly, I think we just knew that. I mean, early it was it 599 00:36:38,780 --> 00:36:41,440 was nothing, it was simple. It was just, you know, we're gonna 600 00:36:41,440 --> 00:36:45,280 bill a rate. And we didn't. We didn't know. We just, yeah, 601 00:36:45,280 --> 00:36:48,520 we're billing a higher rate, because we knew that labor 602 00:36:48,580 --> 00:36:53,620 wasn't just labor. And I think on one hand, I was lucky in the 603 00:36:53,620 --> 00:36:58,300 sense that I just went right to market rate. But truthfully, we 604 00:36:58,300 --> 00:37:01,320 had, we had some employees that were, we were billing out at 605 00:37:01,320 --> 00:37:04,380 market rate. But when we went back and fully burdened them and 606 00:37:04,380 --> 00:37:07,320 understood what their costs were, we were losing money, 607 00:37:07,500 --> 00:37:11,340 yeah, and I mean, some of like, one of them, I remember it was 608 00:37:11,340 --> 00:37:14,460 literally $2 an hour. So basically the company was paying 609 00:37:14,460 --> 00:37:17,940 $2 an hour for that employee. So we said, All right, well, that 610 00:37:17,940 --> 00:37:20,420 employee there needs to become more efficient, or we need to up 611 00:37:20,420 --> 00:37:25,220 their rate, and we ultimately let like leaned on finding more 612 00:37:25,220 --> 00:37:29,120 efficiency to make sure that they were capturing that we were 613 00:37:29,120 --> 00:37:33,680 basically capturing that employees cost against multiple 614 00:37:33,680 --> 00:37:39,920 jobs rather than just one. Yeah, but you know, I think early on 615 00:37:39,920 --> 00:37:42,340 we were just, you know, we weren't considering it as a 616 00:37:42,340 --> 00:37:46,000 profit. We were just considering it as, this is a labor rate, and 617 00:37:46,000 --> 00:37:49,840 it's covering the cost of the, you know, of all the direct 618 00:37:49,840 --> 00:37:52,960 costs related to that. Yeah. But to your point, you know, it's 619 00:37:52,960 --> 00:37:57,340 just like, it's just like, running the business, you know, 620 00:37:57,340 --> 00:38:01,620 until you really understand what it costs you to to do something, 621 00:38:01,860 --> 00:38:04,200 you know, you're just, you're just flying by the seat of your 622 00:38:04,200 --> 00:38:08,160 pants, yeah, and, you know, it's, you know, one of the 623 00:38:08,160 --> 00:38:13,560 examples we brought up at in Omaha was, you know, I had a 624 00:38:13,560 --> 00:38:16,560 year a couple years ago where every job was super profitable. 625 00:38:16,860 --> 00:38:19,500 So when you look at individually, you know, man, 626 00:38:19,500 --> 00:38:22,820 we're killing it. We're making great profit. But then you, you 627 00:38:22,820 --> 00:38:26,180 bring all that profit down, and then you, then you run your 628 00:38:26,180 --> 00:38:29,720 expenses against it. We were spending more. We were spending 629 00:38:29,720 --> 00:38:33,260 more on more overhead than we were collecting in cash. So 630 00:38:33,260 --> 00:38:36,200 individually, projects can look really profitable, but when you, 631 00:38:36,200 --> 00:38:38,600 when you bring it all the way down to the bottom, if you're 632 00:38:38,600 --> 00:38:41,440 spending more than that profit than you are bringing in for 633 00:38:41,440 --> 00:38:42,940 profit. It's gone. 634 00:38:43,420 --> 00:38:47,620 So let's, let's unpack how, like, how that happened for you, 635 00:38:47,800 --> 00:38:51,760 yeah, and potentially how that may happen and for and correct 636 00:38:51,760 --> 00:38:56,020 me if I'm wrong. But one way that that could happen is when 637 00:38:56,020 --> 00:39:00,900 you are determining your costs, whether it's your burden or it's 638 00:39:00,900 --> 00:39:04,200 your builder's fee and your percentage. It's based on the 639 00:39:04,260 --> 00:39:07,740 overall volume of work, or your your revenue that you're 640 00:39:07,740 --> 00:39:10,440 generating in a certain year, right? So you're saying, We're 641 00:39:10,440 --> 00:39:12,960 doing X amount of million dollars, or whatever that 642 00:39:12,960 --> 00:39:17,760 revenue is, and then you're trying to allocate a percentage 643 00:39:17,820 --> 00:39:22,220 per hour, per unit cost of that job that you're applying to 644 00:39:22,220 --> 00:39:28,880 those projects based on a proposed amount of work that 645 00:39:28,880 --> 00:39:33,200 you're putting in place. So if you end up with a lighter year, 646 00:39:33,260 --> 00:39:36,620 say, you sold $10 million the year before, you've now 647 00:39:36,860 --> 00:39:40,480 redefined all of your numbers based on your projections of $10 648 00:39:40,480 --> 00:39:43,420 million or more for the next year, maybe you project that 649 00:39:43,420 --> 00:39:47,620 you're going to sell 12 million and you only sell seven or eight 650 00:39:48,040 --> 00:39:51,640 now, the amount of work that you're putting place, that 651 00:39:51,640 --> 00:39:55,120 percentage markup actually needs to be higher, because you have 652 00:39:55,120 --> 00:39:59,500 less jobs, less unit costs, less direct costs that you can apply 653 00:39:59,500 --> 00:40:03,000 that mark. Markup to so yeah, it all looks profitable, but you 654 00:40:03,000 --> 00:40:06,480 actually are not generating enough direct costs for your 655 00:40:06,480 --> 00:40:11,220 business to apply that that markup to to cover your 656 00:40:11,220 --> 00:40:14,940 overhead. So at the end of the year, you didn't have enough 657 00:40:14,940 --> 00:40:17,760 work to cover your overheads. You actually your jobs were 658 00:40:17,760 --> 00:40:20,400 profitable. The numbers worked out. You managed them correctly, 659 00:40:20,400 --> 00:40:23,360 but you didn't bring in enough direct cost or sell enough work 660 00:40:23,360 --> 00:40:26,480 or generate enough revenue to actually cover your overhead, so 661 00:40:26,480 --> 00:40:28,040 your business didn't make money. 662 00:40:28,460 --> 00:40:31,280 Yeah, I mean, we can bring this back to labor. So that's why we 663 00:40:31,280 --> 00:40:34,820 have the break even number, where every hour, if you're 664 00:40:35,420 --> 00:40:38,660 let's say we're building this guy out 65 bucks an hour, and he 665 00:40:38,780 --> 00:40:43,120 costs the company 35 you know, we're making $30 per hour. That 666 00:40:43,120 --> 00:40:47,320 sounds like a lot of profit, but say he only works 21 hours a 667 00:40:47,320 --> 00:40:50,620 week, or, I'm sorry, let's say he works 40 hours a week, but 668 00:40:50,620 --> 00:40:56,800 only 21 of them are billable to a job. Well, now every that $30 669 00:40:57,220 --> 00:41:01,440 an hour I was making now goes to paying the other 19 hours, yeah, 670 00:41:01,440 --> 00:41:07,260 so at the end of the week, zero profit. And that's what happens 671 00:41:07,260 --> 00:41:10,860 on the bigger scale of overall revenue. Where it's you know, 672 00:41:10,860 --> 00:41:14,700 you're just simply not working. You're not doing enough billable 673 00:41:14,700 --> 00:41:21,500 work. So all of your your your profits are eaten, eaten up by 674 00:41:21,500 --> 00:41:28,400 the general tasks, the non work, yeah. And for me, you know, it 675 00:41:28,400 --> 00:41:31,220 wasn't that I wasn't aware of that at the time. I was just 676 00:41:31,220 --> 00:41:34,880 heavily investing into marketing and basically operating at a $10 677 00:41:34,880 --> 00:41:39,380 million a year company versus, you know, what I was producing 678 00:41:39,380 --> 00:41:40,480 was closer to seven, 679 00:41:40,720 --> 00:41:43,900 yeah, so it's all of those costs that aren't directly tied to the 680 00:41:43,900 --> 00:41:48,520 job, like your direct costs and what would be like, quote, above 681 00:41:48,520 --> 00:41:52,060 the line was all making sense. Your numbers worked out. It was 682 00:41:52,060 --> 00:41:55,120 everything that was below the line, like the overhead of your 683 00:41:55,120 --> 00:42:00,840 business that is not directly tied to job costs that was too 684 00:42:00,840 --> 00:42:04,380 high based on the amount of work that you were putting in place, 685 00:42:04,380 --> 00:42:07,860 right? So if you if your overhead is, you know, a million 686 00:42:07,860 --> 00:42:13,020 dollars for that year based on a $12 million revenue projection, 687 00:42:13,320 --> 00:42:16,560 you have to make sure that as you go each quarter and as 688 00:42:16,560 --> 00:42:20,300 you're lining up these jobs that you are understanding, hey, we 689 00:42:20,300 --> 00:42:23,660 need to sell and generate $3 million worth of revenue each 690 00:42:23,660 --> 00:42:27,320 quarter if we're under that our percentages that we're charging 691 00:42:27,320 --> 00:42:32,660 for our markup, like, what would be your actual plus fee? That 692 00:42:32,720 --> 00:42:36,080 needs to go up, or else you're never going to cover your 693 00:42:36,080 --> 00:42:38,300 overhead, because you're just not putting enough work in 694 00:42:38,300 --> 00:42:42,820 place, right? So that's, that's a very that's as clearly as I 695 00:42:42,820 --> 00:42:46,300 can put it, where it's like, you have to understand what your 696 00:42:46,300 --> 00:42:49,420 projections are for the year, and you have to make sure that 697 00:42:49,420 --> 00:42:52,060 you're maintaining that, or if you're not, that you're 698 00:42:52,060 --> 00:42:54,880 adjusting your pricing, or finding efficiencies if you've 699 00:42:54,880 --> 00:42:58,660 already contracted that work, or finding a way to put that work 700 00:42:58,660 --> 00:43:01,800 in place that doesn't cost You as much money because you've 701 00:43:01,800 --> 00:43:04,860 built an overhead based on a $12 million projection, and you're 702 00:43:04,860 --> 00:43:08,100 only putting $8 million work in place. You will never cover the 703 00:43:08,100 --> 00:43:09,600 overhead of that business, 704 00:43:09,720 --> 00:43:12,960 right? And you know, this goes back to the conversation we had 705 00:43:12,960 --> 00:43:16,140 a couple weeks ago. That's a big reason why. I mean forever. I 706 00:43:16,140 --> 00:43:20,160 just, I just worked. I didn't, I didn't look at what our 707 00:43:20,160 --> 00:43:23,720 projections where I shared an email last week about, you know, 708 00:43:23,720 --> 00:43:28,040 the fact that we lost $2 million off our revenue projections, and 709 00:43:28,100 --> 00:43:31,460 how that, I would have freaked out before, but now I look at 710 00:43:31,460 --> 00:43:34,760 our revenue projections and our cash flow forecast and 711 00:43:34,760 --> 00:43:37,580 understand, Okay, well, all right, we're gonna have a couple 712 00:43:37,580 --> 00:43:41,140 tight months, but and a year Where we'll be good, yeah, and, 713 00:43:41,140 --> 00:43:47,380 and without knowing that it's you, you. I mean, for me, I'm 714 00:43:47,440 --> 00:43:50,620 like, I'm an anxious person. I have, like, if I don't, you 715 00:43:50,620 --> 00:43:53,140 know, I don't think about what's happened to me. I'm not, I don't 716 00:43:53,140 --> 00:43:55,840 slip into depression, but I'm constantly slipping in and out 717 00:43:55,840 --> 00:44:01,680 of anxiety and, and it's self inflicted often. And for me, you 718 00:44:01,680 --> 00:44:03,900 know, I think I, I can't remember if I shared this on the 719 00:44:03,900 --> 00:44:06,540 podcast, but, you know, recently, I just, I was feeling 720 00:44:06,540 --> 00:44:09,660 wildly overwhelmed with stuff on the personal side, and I felt 721 00:44:09,660 --> 00:44:12,960 like I was falling behind, and I had this mountain of mail 722 00:44:12,960 --> 00:44:15,660 sitting on my desk, and I was just like, I know I need to go 723 00:44:15,660 --> 00:44:19,980 through that. And I need to, I need, I need to go through it 724 00:44:19,980 --> 00:44:23,180 and, like, make sure I don't have any past due bills. And 725 00:44:23,180 --> 00:44:25,760 literally, that day, I walked out to my truck being booted 726 00:44:25,760 --> 00:44:30,860 because I had unpaid parts. And that was, you know, it was so 727 00:44:30,860 --> 00:44:34,340 stupid, like, I a friend of mine texted me, goes, they sent me a 728 00:44:34,340 --> 00:44:36,680 picture of my truck. He goes, is that yours? I'm like, Yeah. He 729 00:44:36,680 --> 00:44:44,320 goes, you're an idiot. I'm like, yeah, 100% and I the next, I go 730 00:44:44,320 --> 00:44:48,160 get my truck back, come back. I'm like, I'm sitting here, and 731 00:44:48,160 --> 00:44:51,760 I'm gonna go through all the mail. And it was, I remember 732 00:44:51,760 --> 00:44:54,760 every envelope I opened, I was like, freaking out. I'm like, 733 00:44:54,760 --> 00:44:57,400 this is just gonna be, I'm gonna get, I'm gonna write down a 734 00:44:57,400 --> 00:44:59,800 number that I'm I don't know how I'm gonna pay. This is gonna be 735 00:44:59,800 --> 00:45:03,180 so. Frustrating. And I do go through all the mail. Oh, that's 736 00:45:03,240 --> 00:45:06,960 it. And it's in my mind I made this like mountain out of 737 00:45:06,960 --> 00:45:10,260 nothing, when, you know, the reality of it was, oh, it was 738 00:45:10,260 --> 00:45:13,560 primarily the parking tickets I didn't pay because I'm an idiot, 739 00:45:13,800 --> 00:45:17,580 and then a handful of other things that were fine. And, you 740 00:45:17,580 --> 00:45:20,360 know, and it's the same thing with business. It's, you know, 741 00:45:20,360 --> 00:45:23,540 you go through, you know, anxiously, like, hoping that 742 00:45:23,540 --> 00:45:25,820 you're just going to continue to work, work, work, work, work. 743 00:45:25,820 --> 00:45:29,180 Bring in money, bring in money, bring in money. But, you know, 744 00:45:29,180 --> 00:45:32,720 for me, five years ago, that's all I did. And then I 745 00:45:32,720 --> 00:45:35,180 overwhelmed my team and say, Hey, I need you to go here, and 746 00:45:35,180 --> 00:45:37,340 I need you to go there. And, like, we got to get this job 747 00:45:37,340 --> 00:45:40,720 done. And hey, before you finish that one, go to this job. And it 748 00:45:40,720 --> 00:45:44,860 was a nightmare. There was no organization and sure, like our, 749 00:45:44,860 --> 00:45:48,580 you know, our revenue numbers were up, but did they need to 750 00:45:48,580 --> 00:45:52,180 be? Yeah, I didn't know because I wasn't trying. I didn't know 751 00:45:52,180 --> 00:45:55,120 what we were spending on overhead. Now, you know, I know 752 00:45:55,120 --> 00:45:58,480 what we spend on overhead, so I know based on the overhead that 753 00:45:58,480 --> 00:46:02,940 we're spending, we need to do X amount of dollars per year, and 754 00:46:02,940 --> 00:46:06,240 that number is plastered on the wall, and it's, you know, we 755 00:46:06,300 --> 00:46:10,440 meet every week and say, All right, it's June. We're halfway 756 00:46:10,440 --> 00:46:15,120 through. Did we are we halfway to our revenue goals? I had this 757 00:46:15,120 --> 00:46:18,720 conversation with someone at contractor coalition Summit, and 758 00:46:18,720 --> 00:46:20,960 they were saying, You know what their goal is for the year? And 759 00:46:20,960 --> 00:46:23,540 I was like, Well, what have you done to date? And it was, I 760 00:46:23,720 --> 00:46:27,380 think it was like a quarter of the target. I said you're 761 00:46:27,380 --> 00:46:30,740 halfway through the year. Are you going to do 75% of your work 762 00:46:30,740 --> 00:46:34,640 the last six months of your year? Yeah, well, probably not. 763 00:46:34,640 --> 00:46:38,480 I'm like, right so right now is the good time to adjust that 764 00:46:38,480 --> 00:46:41,500 projection, because if you're going to go the rest of the year 765 00:46:41,500 --> 00:46:44,800 thinking you're going to do, you know, $5 million when you've 766 00:46:44,800 --> 00:46:48,580 only done maybe a million dollars so far, you know you're 767 00:46:48,580 --> 00:46:51,520 going to be pretty short. And you're spending money, you're 768 00:46:51,520 --> 00:46:54,340 spending overhead, like you're going to make $5 million 769 00:46:54,820 --> 00:46:59,380 so I'm looking at, I'm doing, I'm typing some questions and, 770 00:46:59,380 --> 00:47:04,620 like, some prompts right here. So this is why it's so 771 00:47:04,620 --> 00:47:08,220 important. You hear everyone say, to know your numbers, and 772 00:47:08,220 --> 00:47:11,940 it's that's not just, Hey, I figured out my numbers for last 773 00:47:11,940 --> 00:47:15,660 year. I can walk away from that. We're good to go. You have to 774 00:47:15,660 --> 00:47:21,080 constantly be monitoring this and like, I guess it can become 775 00:47:21,080 --> 00:47:26,060 fairly convoluted, and it can become fairly complicated and 776 00:47:26,060 --> 00:47:29,180 overwhelming. But I it's not necessarily like you have to 777 00:47:29,180 --> 00:47:32,360 know your numbers with regard to what's being, the type of work 778 00:47:32,360 --> 00:47:35,240 that's put in place, how much, what it costs you, what you 779 00:47:35,240 --> 00:47:38,720 should be marking up, what your overhead is. But just if you 780 00:47:38,720 --> 00:47:41,260 look at bigger picture, like, you know, understanding how 781 00:47:41,260 --> 00:47:44,680 you're tracking as far as revenue, because everything is 782 00:47:44,740 --> 00:47:47,020 based on that, your overheads based on that, your 783 00:47:47,020 --> 00:47:51,220 profitability is based on that, how much work you should be 784 00:47:51,220 --> 00:47:53,680 putting in place, what you're selling at the end of the year. 785 00:47:53,980 --> 00:47:58,060 And the fear is that you're putting less work in place, 786 00:47:58,060 --> 00:48:00,300 right? So you're not covering your overhead, so you're less 787 00:48:00,300 --> 00:48:03,900 profitable. But there's also risk in doing way more work that 788 00:48:03,900 --> 00:48:08,580 you anticipated. You're bringing in money, right? If you sell two 789 00:48:09,360 --> 00:48:12,060 and a half million dollars work this year, and everything was 790 00:48:12,060 --> 00:48:15,840 based on one and a half million dollars or projections like 791 00:48:16,320 --> 00:48:19,440 you're going to make more money. But what you have to be careful 792 00:48:19,440 --> 00:48:23,180 of is your overhead will probably go up, because in order 793 00:48:23,180 --> 00:48:26,600 to put more work in place, it's going to require more input, 794 00:48:26,600 --> 00:48:30,260 more resources, so your overhead will go up. One of the dangers 795 00:48:30,260 --> 00:48:34,280 there are tax projections right where it's like, you don't 796 00:48:34,280 --> 00:48:38,300 realize you made a million more dollars this year and you didn't 797 00:48:39,320 --> 00:48:43,600 monitor that to Yeah, like, your overhead probably went up, from 798 00:48:43,600 --> 00:48:47,380 a numbers perspective, so the percentage dropped. But like, 799 00:48:47,380 --> 00:48:50,140 what about all of that additional profit that you 800 00:48:50,140 --> 00:48:53,020 didn't account for, that you didn't put money aside for, to 801 00:48:53,020 --> 00:48:56,200 pay your taxes at the end of the year, when you made a million 802 00:48:56,200 --> 00:48:59,080 dollars more, or you had a million dollars more in revenue, 803 00:48:59,320 --> 00:49:03,180 your profit was definitely not a million dollars more. But if, 804 00:49:03,180 --> 00:49:07,680 if, typically, in years past, you've paid $20,000 a quarter, 805 00:49:08,100 --> 00:49:11,280 you probably should have been putting more money in. So if 806 00:49:11,280 --> 00:49:14,100 you're not accounting for that like the dangers aren't just 807 00:49:14,280 --> 00:49:16,920 coming in on the low side of revenue, but also, if you're 808 00:49:16,920 --> 00:49:20,540 going way over understanding how you should be adjusting and 809 00:49:20,540 --> 00:49:24,020 paying your tax liability quarterly so that the end of the 810 00:49:24,020 --> 00:49:27,440 year doesn't come, and you're like, oh my god, I owe way more 811 00:49:27,440 --> 00:49:30,260 in taxes than I thought, and I thought we had money in the 812 00:49:30,260 --> 00:49:35,240 bank, and we were spending money probably more frivolously than 813 00:49:35,240 --> 00:49:38,180 we should have, from a business perspective. So there's dangers 814 00:49:38,180 --> 00:49:43,720 on both ends of the spectrum that you should be aware of. How 815 00:49:43,720 --> 00:49:47,200 are we what's the best way for us to peep to get people the 816 00:49:47,200 --> 00:49:48,760 labor burden calculator? 817 00:49:49,720 --> 00:49:54,460 We'll put it. I mean, if you go to modern craftsman.co, up on 818 00:49:54,460 --> 00:49:55,420 top of the there 819 00:49:56,920 --> 00:49:58,180 should be a drop down. 820 00:49:58,300 --> 00:50:01,140 Yeah, it's so I'm just gonna put. Up the website to make sure 821 00:50:01,140 --> 00:50:04,500 I'm saying it correctly. But yeah, if you go to modern 822 00:50:04,500 --> 00:50:09,660 craftsman.co, shop extras, you can get that. You can click 823 00:50:09,660 --> 00:50:14,340 right on that labor birding calculator, and you name an 824 00:50:14,340 --> 00:50:17,160 email and we'll send it to you. And it's an Excel file, so you 825 00:50:17,160 --> 00:50:21,200 can open it up and everything is self explanatory. It's right in 826 00:50:21,200 --> 00:50:24,200 there, and it walks you through calculating that labor burden. I 827 00:50:24,200 --> 00:50:26,420 think you go through that exercise. If you have questions, 828 00:50:26,660 --> 00:50:30,440 obviously, email us hello@monarcrossman.co I'm 829 00:50:30,440 --> 00:50:36,320 typically monitoring that email. I am monitoring that email, but 830 00:50:36,320 --> 00:50:39,440 why don't we will also attach it if you're if you're not part of 831 00:50:39,440 --> 00:50:42,640 our newsletter, you should be and you should head over to the 832 00:50:42,640 --> 00:50:45,460 website and sign up for the newsletter. But every week, we 833 00:50:45,520 --> 00:50:49,240 send out the show notes and we'll include the attachment in 834 00:50:49,240 --> 00:50:50,020 that email. Are 835 00:50:50,020 --> 00:50:52,360 we, should we do that, or should we make them sign up for the 836 00:50:52,360 --> 00:50:53,020 newsletter? 837 00:50:53,980 --> 00:50:56,380 Well, if there's that's what I'm saying, if, if they sign up for 838 00:50:56,380 --> 00:50:57,460 the newsletter, they'll get it. 839 00:50:57,640 --> 00:51:00,280 Oh yeah, that's what I'm saying. I'm saying, like, we'll attach 840 00:51:00,280 --> 00:51:03,060 the link to sign up for the newsletter, and you can get it, 841 00:51:03,060 --> 00:51:06,300 but like, we're not just giving them the document, right? Should 842 00:51:06,300 --> 00:51:06,360 we? 843 00:51:06,720 --> 00:51:09,540 No, no, the show notes are only for people that are okay. All 844 00:51:09,540 --> 00:51:12,540 right, perfect, yeah. So we'll put, we'll put a link below the 845 00:51:12,540 --> 00:51:16,440 show, The Show, the show, I'm sorry, the show notes on the 846 00:51:16,440 --> 00:51:20,300 podcast. Yeah, platform of your choice will have a link to sign 847 00:51:20,300 --> 00:51:21,560 up for the newsletter. Yes, 848 00:51:23,060 --> 00:51:26,060 no, you gotta, no, no, yeah, you gotta at least get on the 849 00:51:26,060 --> 00:51:28,940 newsletter. So what we should also do Nick is we should have 850 00:51:28,940 --> 00:51:34,280 one of our workshops where we allocate to explaining how to 851 00:51:34,280 --> 00:51:37,880 use that labor burden calculator. So that if you 852 00:51:37,880 --> 00:51:40,300 download that and you want to know how to use it, we set an 853 00:51:40,300 --> 00:51:45,520 hour aside at some point to hop on and have like a real life 854 00:51:45,520 --> 00:51:51,520 walkthrough of what that is. So all great information, something 855 00:51:51,520 --> 00:51:58,000 that I kind of if you are not accounting for labor burden and 856 00:51:58,000 --> 00:52:02,460 you don't know what you should charge. You don't know your 857 00:52:02,460 --> 00:52:05,220 numbers right now, but you want to get something in place and 858 00:52:05,220 --> 00:52:09,600 start heading in the right direction. I would recommend 859 00:52:09,660 --> 00:52:13,380 whatever you are paying an employee to 2x that, and then 860 00:52:13,380 --> 00:52:16,560 whatever you want for profit on top, right? So if you're if you 861 00:52:16,560 --> 00:52:21,740 are paying an employee $20 an hour, 2x that, they're going to 862 00:52:21,740 --> 00:52:25,640 cost you 40, right? So you're going to break even at charging 863 00:52:25,640 --> 00:52:29,480 your clients or billing your clients at $40 an hour. So then 864 00:52:29,480 --> 00:52:34,640 put whatever you want as far as profit and overhead on top of 865 00:52:34,640 --> 00:52:38,780 that. But like, if you want to get started and right now you 866 00:52:38,780 --> 00:52:41,320 don't understand all your numbers to even get into this 867 00:52:41,320 --> 00:52:43,960 labor burden calculator. That's a great way to at least get 868 00:52:43,960 --> 00:52:46,660 started and make sure that you're somewhere in the ballpark 869 00:52:46,720 --> 00:52:49,900 of charging like, what do I charge for an employee 2x their 870 00:52:49,900 --> 00:52:52,420 number, and put your overhead and profit on top of that. 871 00:52:52,420 --> 00:52:55,960 That's going to be my little bit of a tidbit for you to at least 872 00:52:55,960 --> 00:52:59,440 get you in the ballpark of the right direction. And the one 873 00:52:59,440 --> 00:53:03,600 last thing I want to talk about with regard to this Nick. You 874 00:53:03,600 --> 00:53:09,420 may have something else, but I believe we were in at IBS maybe 875 00:53:09,420 --> 00:53:13,920 two years ago, and this it was an older gentleman. He was 876 00:53:13,920 --> 00:53:17,400 retired at this point, his company did bathrooms like small 877 00:53:17,400 --> 00:53:24,380 bathrooms, $20,000 $30,000 like, not huge jobs, and their 878 00:53:24,380 --> 00:53:28,100 specialty was just turning these projects over really quickly. 879 00:53:28,760 --> 00:53:32,000 Bathrooms are difficult to turn over quickly. So he created 880 00:53:32,000 --> 00:53:36,380 this, like business niche for himself by doing this. And he 881 00:53:36,380 --> 00:53:42,040 mentioned, with regard to labor burden that he realized early on 882 00:53:42,100 --> 00:53:47,020 that he made more money when his guys and girls worked overtime. 883 00:53:47,680 --> 00:53:51,280 And I was like, how does that work? Right? You're paying 884 00:53:51,400 --> 00:53:54,880 whether it's time and a half or double time for them to work 885 00:53:54,940 --> 00:53:59,560 overtime. And what it came down to was that much of his labor 886 00:53:59,560 --> 00:54:05,460 burden would not be 2x when he paid them to work overtime, 887 00:54:05,460 --> 00:54:09,780 meaning you don't need another truck, right? If you have an 888 00:54:09,780 --> 00:54:13,020 employee and he already has a truck and you're paying him for 889 00:54:13,020 --> 00:54:18,060 overtime at 2x you don't need to bring another employee on to put 890 00:54:18,060 --> 00:54:21,860 in another truck, right? So he could pay his smaller amount of 891 00:54:21,980 --> 00:54:27,020 employees an overtime rate, but his overhead of his business to 892 00:54:27,020 --> 00:54:29,900 put that work in place didn't necessarily double. He didn't 893 00:54:29,900 --> 00:54:32,780 need to pay two extra insurance. He didn't need to buy two trucks 894 00:54:32,780 --> 00:54:37,580 for that person. He didn't need to have two cell phones. So like 895 00:54:37,640 --> 00:54:41,200 a lot of the numbers that were associated with that labor 896 00:54:41,200 --> 00:54:45,160 burden don't double when you're paying somebody overtime. And I 897 00:54:45,160 --> 00:54:48,940 was like, I thought that everyone tried to avoid paying 898 00:54:48,940 --> 00:54:51,880 overtime because it made them less money, or they couldn't 899 00:54:51,880 --> 00:54:55,420 capture that cost with regard to what it cost them to put 900 00:54:55,420 --> 00:54:59,380 somebody on a job, when in actuality, there were a lot of 901 00:54:59,440 --> 00:55:03,600 items. Dollars that would be applied as an overhead to this 902 00:55:03,600 --> 00:55:08,040 labor that he doesn't actually 2x even though he's paying the 903 00:55:08,100 --> 00:55:14,040 the rate for them is more right? So if you have two employees and 904 00:55:14,100 --> 00:55:18,900 your your billable rate for them is $35 an hour, whatever it is, 905 00:55:18,900 --> 00:55:21,560 it's 70 bucks an hour. Now if you have one employee that's 906 00:55:21,560 --> 00:55:27,500 paying overtime, what you are paying them per hour may go up, 907 00:55:27,500 --> 00:55:30,860 but the burden, the labor burden, associated with that, 908 00:55:30,860 --> 00:55:33,500 probably doesn't go up. So when you look at the overall hours 909 00:55:33,500 --> 00:55:36,680 going in, it was actually costing him less money to put 910 00:55:36,680 --> 00:55:39,320 work in place by paying employees overtime, which he 911 00:55:39,320 --> 00:55:43,180 wouldn't have known if he didn't understand the labor burden. And 912 00:55:43,300 --> 00:55:45,880 I thought that was just like, a really neat perspective. That 913 00:55:45,880 --> 00:55:48,220 was like, Holy crap. I never thought of that. 914 00:55:48,480 --> 00:55:51,840 Yeah. I mean, it's a similar perspective around 410s you 915 00:55:51,840 --> 00:55:55,260 know, when guys switch to five eighths versus 410s and the 916 00:55:55,260 --> 00:55:59,100 argument is, you've you've lost. You basically reduced the 917 00:55:59,100 --> 00:56:03,600 mobilization, demobilization by two, yeah, now you're doing, 918 00:56:03,600 --> 00:56:06,960 you're working, you know, you're working the same amount of 919 00:56:06,960 --> 00:56:12,225 hours, but not setting up, cleaning up 920 00:56:12,225 --> 00:56:15,405 guys, the only way to know this is to actually measure it and 921 00:56:15,405 --> 00:56:19,965 track it. And you know, you'll hear us talk about that a lot if 922 00:56:19,965 --> 00:56:23,085 you, if you joined us in Omaha, you You heard us, you kind of 923 00:56:23,085 --> 00:56:28,185 beat that into the education and it that's what it comes down to. 924 00:56:28,185 --> 00:56:31,845 Is we've, we've, as you heard in the beginning, I've made some 925 00:56:31,965 --> 00:56:35,685 big mistakes and expensive mistakes, and I want to continue 926 00:56:35,685 --> 00:56:40,230 to share a lot of that here and through our newsletter. I'm a 927 00:56:40,230 --> 00:56:43,470 little bit more open and candid in the newsletter, because you 928 00:56:43,470 --> 00:56:49,710 guys just read it. But the whole point is to share, you know, 929 00:56:50,850 --> 00:56:53,970 what, what, what mistakes we made, and how we learn from 930 00:56:53,970 --> 00:56:58,095 them, and how you can avoid them. So if you want to be a 931 00:56:58,095 --> 00:57:02,775 more profitable business, you know, take it from us. This. 932 00:57:02,775 --> 00:57:06,375 These are these, the little things that can make really big 933 00:57:06,375 --> 00:57:11,175 impacts. Yeah. Well, guys, appreciate you listening. If you 934 00:57:11,175 --> 00:57:14,175 have not signed up for the newsletter, please do so modern 935 00:57:14,175 --> 00:57:18,855 craftsman.co, and if you want to join us in Chicago, you got to 936 00:57:18,855 --> 00:57:21,420 get on that newsletter, because we have discount codes in that 937 00:57:21,420 --> 00:57:24,420 newsletter for you to sign up. Otherwise you're not getting 938 00:57:24,420 --> 00:57:29,820 one. And maybe you, maybe you'll join us by just happenstance and 939 00:57:29,820 --> 00:57:32,760 paying full price. But if you want to be part of the modern 940 00:57:32,760 --> 00:57:35,160 Craftsman Community, and ultimately the contractor 941 00:57:35,160 --> 00:57:38,520 coalition community, sign up for the news newsletter. Stay in 942 00:57:38,520 --> 00:57:42,000 touch with what with what we got going on, and as always, thanks 943 00:57:42,000 --> 00:57:42,900 to our sponsors.