How to implement processes that will get your construction business to the next level

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How long could your company function without you? If the answer is not longer than a few days, you need to listen to this week’s episode. Find out how creating and implementing processes in your business opens up the door for growth, quality of life, and more of the clients you want to work with.

Considerations we cover in this episode include:

  • How systems and processes allow you to stay consistent
  • How systems and processes encourage growth and allow you to scale up
  • Finding opportunities for early yardage with processes
  • Which processes to define in your construction business
  • Why you should create processes in your areas of strength

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Rob Williams, Profit Strategist |
Wade Carpenter, CPA, CGMA |
Stephen Brown, Bonding Expert |


[00:00:00] Rob Williams: Welcome to the Contractor Success Forum. Today we’re talking about why contractors need processes. And here on the Contractor Success Forum, we talk about how to make your contracting business more profitable. And with us, we have Wade Carpenter, Carpenter, and Company, CPAs. And we have Stephen Brown with McDaniel-Whitley Bonding and insurance company. And I am Rob Williams with IronGate Financial Management and authoring the Pumpkin Plan for Contractors. So today we are talking about systems and processes and why do we need these things? , guys?

[00:00:45] Wade Carpenter: Stephen, you wanna start us off?

[00:00:47] Stephen Brown: Well, why do we need them?

Systems and processes allow you to stay consistent

[00:00:49] Stephen Brown: The whole idea is to develop systems and processes that allow you to leave your company for a while, and it continues to run. It also helps you to be consistent in everything you do. So you have good things that you do and bad things that you do. So you wanna take the good things that you do and develop systems and processes so that you do it over and over again. They say the secret to running a good restaurant is to have the food quality consistent over and over again. So I go into this place and I like this sandwich that they’re serving. When I go in there, I want it to taste exact same over and over and over again. That’s what they say the key to running a restaurant is. And it sounds easy, but it’s hard.

[00:01:34] Wade Carpenter: Yep.

[00:01:34] Rob Williams: Just like a coach. That’s awesome. Coach Brown.

[00:01:38] Wade Carpenter: I see that a lot in, these contractors that, they, they have people like I’ve mentioned before, estimators or whatever. You got three different estimators and they all bid it slightly different. One does it on the handwritten thing, one does a spreadsheet, one’s got a program they used off the internet.

And I guess we can talk about several problems it causes. It leads to poor profitability. It leads to poor ability to, continue and follow somebody if somebody leaves. There’s a lot of things that happen when you’re not consistent.

[00:02:09] Stephen Brown: Yeah, and, and whether you have a large company or a small company, you’re using systems and processes. I guess the key is to use them consistently, isn’t it?

[00:02:18] Rob Williams: Yeah. Yeah, it is, it is. And documenting these processes and having a list of them, because most of us as contractors, especially when we start out and we’re smaller, we have these processes up here in our head, so we’ve gotta get them down on paper.

Systems and processes allow you to grow

[00:02:34] Rob Williams: But one more thing that we were thinking about, one of the other reasons that we talk about a lot in the Pumpkin Plan is to be able to grow. You don’t grow your business by working harder. You grow it by building these processes and getting other people to work harder. The company can work harder. I’m talking about the owner cannot grow his business just by working more hours. He can grow it, but once, 12, 14 hours a day, he’s limited by that. Get back down and have your processes in place so your people can do the things that you’ve been doing and you have more time to work on growing your business. And have more time to spend with your family or do other things that you, you might need to do.

We talk about Contractor Exit Value in the book some, and when you grow and you put these processes in place, if you have somebody wanting to buy your company, if the whole company is relying on you doing these and you don’t have the processes, that buyer’s gonna be very hesitant to feel confident that the company’s gonna perform without you. We see that a lot and it, I guess Wade’s probably seen this more than I have. Whether the company can even sell or not. A lot of people can’t sell their contracting business because they are the business.

[00:03:53] Wade Carpenter: Absolutely. I see it all the time and it doesn’t matter whether it’s a contractor or any business owner, they need to get it out of their head. That’s what Michael Gerber talked about in The E-Myth Revisited. Taking the time to work on your business versus in it.

Take the time to document your processes

[00:04:06] Wade Carpenter: And we say, you probably heard that all over the place, but just taking the time to write down what these processes are and making people follow it. And it’s a big undertaking. And it’s not something that you do once. Technology changes or systems change and you have to revisit every now and then.

[00:04:24] Rob Williams: Yeah.

[00:04:25] Stephen Brown: So what y’all are saying is if you wanna grow, you gotta get it down low. Outta your head.

[00:04:32] Rob Williams: That’s right. Get it down low on the table there.

[00:04:34] Stephen Brown: You wanna grow, get it down low. All right.

[00:04:37] Rob Williams: Yeah. So what do we do? Without going into actually telling our contractors what the system needs to be, how do we list this and start documenting, what does this look like? I know in Scaling Up, in that training, we have a a chart called the Process Accountability Chart, and that’s one of the first places you start. And it’s basically, you don’t need to go get that list.

I’ll tell you what, you just start listing about four to nine of your major processes that get most of your work done. We talk about the Pareto Principle. I know Wade said that on here a couple of times, and we’ve talked about it, that 20% of your processes get 80% of the work done. And those are the ones that you want to start and you wanna work on those 20% of the processes.

And I know we say it’s usually four to nine processes and you get those and then, well, we’ll talk about redoing them in a minute. But if you list those down, list the name of the process, the name of the person that is responsible for it. That doesn’t necessarily mean it’s the boss, it’s the person who’s gonna be accountable to make sure it’s happening. And have a key performance metric on there, KPI, that will say it’s let’s say either cost, time, or quality is usually, think about those three things and you can usually put a KPI that’s one of those things. How many dollars is it spending or is it, how fast is it? I think in the contractor– that’s what we think about a lot of the time is how fast something’s happening.

But then is there some kind of quality score that you can come up with and figuring out a way to measure that? But those are the three factors that each one of those. So just picture you start your list. If you can get your first four down, that’d be great. And then probably keeping it under 10 is what they usually say to have that, although you’re gonna have lots of little procedures, but the major process– that’s the other thing. They call a process is the big picture thing, and then the procedures are the little things that you do within the processes.

Where can you get early yardage?

[00:06:49] Wade Carpenter: When I sit down with a contractor, and any business probably should think about this, but I know it can be overwhelming. And instead of just doing the first 10 or whatever, I usually say list every single process you can think of.

And when you do that, it’s easy to get overwhelmed by that. But what I then tell them to do is go back and look at that. And where can we get early yardage? Early yardage means either can we save time or can we save money? Especially if we can save time, we can generate some time to free up to work on some of these other things.

But sometimes it’s a cash flow thing, so where can we, free up money so we can get some cash flow in or things like that. But sometimes that’s the way I approach it is like, what can we get early yardage?

[00:07:36] Rob Williams: I love that. That’s a great process. Yeah. That, that makes it easier to think about. And that a lot of times, yeah. You can write it down on there and then just start ranking them. What we do in our Friday meetings, you, you write down everything you gotta do and then start circling the ones that you think are important.

And then if you know it’s not gonna be a top 10, you can cross it out and that’ll leave you with a smaller bundle and then just start ranking them. Usually we rank them by the top three. Because it’s hard to rank all seven or eight. But if you can just rank three, I just put the check marks next to those three, and then rank those 1, 2, 3. And that’s where you start.

When you do this, you wanna take one after you get your initial ones in there, you wanna take and redo one of those every quarter. So like every two years, you’ve revamped and completely redone one of those.

So you don’t let it go more than two years. It doesn’t mean you don’t redo them if they need redoing in the middle, but every quarter you’ve got to reexamine them. So that’s another time schedule to keep, I guess, your process of processes. Of making the processes.

[00:08:39] Wade Carpenter: Stephen, want to chime in on that?

[00:08:41] Stephen Brown: If you wanna grow, you gotta get it down low.

[00:08:44] Wade Carpenter: Okay. Well, that’s, that’s his theme of the day, I guess, but.

[00:08:47] Rob Williams: Yeah.

[00:08:49] Stephen Brown: No, I, I appreciate you including me, Wade, because I’m sitting here listening to the two of you. And as always, the business books that you both read, just, it’s, it’s, it’s your hobby. You do it 24 7 in your spare time. I could never catch up with you.

From a construction standpoint and understanding processes and systems, I like the fact that you talk about, how to get started. Throw them down, get them down, and then Rob, like you were saying, when you have to evaluate them.

So, can y’all gimme an example of just walking a contractor through just one process?

[00:09:27] Rob Williams: Well, I’ll do, do the simple way that in years. I can tell you a story. 20 years ago we had the car plant PhD guys from University of Alabama come into our factory that were running the car plants. And we had all these computer things and these models and we were so sophisticated and they were like, throw all that stuff away. We come in here in the conference room, we had a big whiteboard and he, he had sticky notes. And he said, what do you do first? And he started putting these sticky notes on a whiteboard and we called it the spaghetti diagram because you would not believe, this was our contract flow of it was our sales process that we were working on.

And you would not believe the mess. They called it a spaghetti diagram because we had all these stickers, these post-it notes up there and then the communication lines of lines drawn between them. It was just insane. So we spent so much time till we finally got that, that process, I guess you could call it smooth, smoother. But we, we got it into a straight line at least without so many different things.

[00:10:34] Stephen Brown: So it’s like straighten that spaghetti out like before you cook it.

[00:10:39] Wade Carpenter: And get it down low, right?

[00:10:41] Rob Williams: Yeah.

[00:10:42] Stephen Brown: You wanna grow Wade.

[00:10:43] Rob Williams: Yeah. But, but it’s funny. You

[00:10:45] Stephen Brown: Down low.

[00:10:47] Rob Williams: Yeah. Yeah. If you wanna grow, get that low. Maybe that should have been the title of our episode. But you can see back here, this is sort of a process as I’m writing my book to the post-it notes. But when I went up to training a few months ago for the Scaling Up coaches training, they’re still doing the same thing.

We had all these advanced spreadsheets and everything that you do. But to get your brain going, we were back on the post-it notes. And you put these post-it notes up and it something in your brain to physically do this. And we use mural sometimes also, on the computer, if you’re a virtual company, or some of your guys are working virtually, and you put it up in there and that works okay.

But something about these physical notes, when you put them on your, the board and you start moving these around something, I think it’s the action that you’re doing, it, it, your brain starts triggering and it teaches you what these next things are going to do. It’s amazing how in 45 minutes you can get so much done with post-it notes on a whiteboard.

[00:11:49] Stephen Brown: No, it makes, it makes sense. It’s how your brain operates. And you may think a post-it note is not high tech. It is going down low. Mm-hmm.

[00:11:59] Rob Williams: Put your post-it notes down low.

[00:12:01] Stephen Brown: Well, or up high. I don’t know. Go ahead, Wade. So you were gonna give us an example, Wade too.

[00:12:06] Wade Carpenter: Not so much an example, but I’ve used that same technique with certain things like process flow and stuff like that with the, the post-it notes. But where I see a lot of contractors or any business owner, they get stuck on this stuff because they get this analysis paralysis. They think I gotta write this in so much detail and I think about all these exceptions, and what if this and that and they never get anything done. And we talked about Michael Gerber just a minute ago, but our Profit First Hero Mike Michalowicz also wrote Pumpkin Plan, but he also wrote Clockwork.

In the newest version of Clockwork, I think he does a great job of explaining a process that he says that, you should get it down on paper or, or maybe, just throw it out there and let somebody that’s never done it before do it. And then rewrite. But if you never get anything down, never get anything started, it never goes anywhere.

But somebody that’s never done it is gonna think about all these other things. And if you start going off on all these tangents, on all these exceptions and things like that, you never get it done. So that’s my suggestion. And as well as go read the newest version of Clockwork Mike Michalowicz.

[00:13:20] Rob Williams: One other thing that Mike says to do, which is really good is record it. If it’s an office type thing in the computer, you can do screenshots. I had a new sales flow we were trying to do with a, a product and the invoicing and things, and I was trying to write all this out and then I actually wasn’t sure what to do, so I went back and looked at something I had done.

I pulled up an old invoice. And it was like, okay, what do we need to do? And then I was like, wait, why don’t I just take a screenshot of this and put it in our process? It’s oh my God, if I just saw the old one, I didn’t really need to put any words down. I just need to make it look like that.

It just saved me tons and tons of words and everything, just having that screenshot. and put it into our process flow, which, after you take the post-it notes, you do need to figure out how to write this down some way, and I’m not gonna recommend a particular thing. Some people have Excel spreadsheets, some people have advanced process flow software. I have a little process flow software that I use. But just do it, is the important thing.

Oh, one thing I did forget to say. The key thing when you’re putting. , those post-it notes up there. Don’t forget to take a picture of it. Take a picture of that so you’ve got it documented before you take it down. Because inevitably, inevitably you’re gonna say, wait, what was it again? You know, later on. And you need that picture. And you can just take it down to getting stages. Sometimes you actually define a new way to do it, and you say, that’s not gonna work, and you want to go back to where you were.

And oh, also the other thing is make sure you got some milestones because when you do the process flow, one of the biggest things that– these things get overwhelming. And I know we drew boxes around them and that really helped us a lot.

And at the beginning and the end of each box, if you can find a milestone, you can break that process down into smaller processes. Like that one process is really four stages of a process, and once you can bring that down into a much smaller box, it’s much easier to define. Because once you put all that in one clump, it just gets so amazingly difficult to think about it all.

So, so–

[00:15:30] Stephen Brown: Break it down.

[00:15:32] Rob Williams: Break it down low. Yeah.

[00:15:35] Stephen Brown: Yeah.

[00:15:35] Rob Williams: Yeah. So remember you’ve got your list. Let’s see. You’ve got the, those processes on there. What else do we do, Wade? I was gonna say, I tried to come up with, you know what I would think a generic company– don’t follow these.

Processes contractors should consider defining

[00:15:49] Rob Williams: But I tried to come up with seven categories for construction specifically to think about. I don’t wanna get into specifics about how to do them, but really just to spark their imagination because sometimes they’re not sure what categories to do. I know I went through that when I was trying to figure this out. It’s what? What is it? So just some examples.

Like for me, the first one is your bidding and your sales process. Which may be two processes for a lot of companies. Your estimating may be completely different than sales. And some people have a quick method of doing it. Some people do the full takeoff and they’ve got everything before they do the sales. So, I’d just say a bidding and sales process is, I think everybody should have that.

[00:16:31] Wade Carpenter: Yeah. Contracts and change orders.

[00:16:34] Rob Williams: Yep.

[00:16:35] Wade Carpenter: We just gonna throw them out there or what?

[00:16:37] Rob Williams: Yeah, that might be, yeah. And that, and then see that could be, I, I didn’t have it separated. Each company’s gonna be different the way they break them down. But is that part of your sales process or is that a separate process? And I think a lot of the–

[00:16:49] Wade Carpenter: Well, obviously change orders are, that can be a huge process.

[00:16:52] Rob Williams: Oh yeah. Is it a–

[00:16:53] Wade Carpenter: Billing and collections, that’s another process. Was–

[00:16:58] Stephen Brown: I gotta throw out risk management.

Insurance and safety.

[00:17:01] Rob Williams: Yeah, yeah.

[00:17:03] Stephen Brown: That’s what I do. So.

[00:17:04] Rob Williams: Another one that we forget a lot of times is a hiring process. You might call it onboarding, you may call it hiring. That could be from some of the bigger companies, the way that you recruit and the way that you go out, or it might just be as simple as making sure you get all their documents for the accounting department and whatever else makes it legal. But sometimes it’s an onboarding. I–

[00:17:26] Stephen Brown: Project management.

[00:17:27] Rob Williams: That was, I was about to say that one. Yeah.

[00:17:30] Stephen Brown: I beat you to it. I knew that was coming. Okay.

[00:17:32] Rob Williams: And that’s really the first thing that everybody kind of, project management is when we say document a process, to me that’s probably the first one that everybody thinks about. Yeah. At least me.

[00:17:43] Wade Carpenter: I, I gotta say accounting too, but accounting can be broken down into the big things are receivables and payables, job costing, receipt management.

[00:17:54] Rob Williams: Yeah, because I called it, I called one invoicing, which on the receivable, just because I know Wade, we, we see that, with the cash flow guys, that is the number one thing that I see. That’s the cash flow problem is the timing and getting that invoicing in and, and when that doesn’t happen, the whole company can go out of business with that.

I think we’ve all heard of the stories that something that happens and then they don’t realize because it’s a 60 to 90 day process that they hadn’t done that and then, then they’re way out. And so they may be without cash for 60 days. And that that’s a disaster.

Then payments, paying it. I do that. A lot of times I think about that is because of, to me and my business and where we were, the security part of that, because I think, we’ve gone through some episodes where 50% of the contractors have some kind of theft and then the other 50% maybe we just don’t know about it. We don’t know that they were. So it’s, it’s always keeping on top of the payments and, and whether you keep that separate from the invoicing.

 Then Wade, I have got financial reporting in there. How that process, particularly for you guys that are bonded. That makes it a lot more of an important process that needs to happen.

[00:19:06] Stephen Brown: Well, what’s more important in bonding is that you have system and process to produce consistent good quality in-house financial information and Work In Process reports that senior management sits down and goes over every X amount of time during the year. Every month, every two months. And then part of the process is who’s gonna sit in on that meeting.

Create processes around your areas of strength

[00:19:30] Rob Williams: Yeah. A really important part about determining which processes you do. We always put processes in place naturally to avoid problems. Where a squeaky wheel is we put a problem in. But if you really wanna get ahead and have your company grow, you wanna put the processes in place on your strong points to make them even stronger.

That’s one of the big lessons in the Pumpkin Plan to grow a colossal pumpkin. To grow a big business is focus on those things that you’re doing right, and document that so you can get those even better. Because the companies that really grow are the ones that can differentiate. They can be the best. The only way you’re gonna be the best at something is to take your strengths and get them stronger. If you wanna be average across the board, you get complacent with where your strengths are, and then you just fix all the broken things. So then you’re just like everybody.

But if you want to stand out and be different and grow and be able to grow your margins because you’re the one that they want to have, and then you can price the way you need to price, grow your strengths. That’s the one of the big secrets to the Pumpkin Plan growth plan is grow and work on your strengths and make them even stronger.

And then maybe those weak parts, you’ll be so busy working with your good clients and the good things that the bad clients, they’re gone. You don’t need them. They’re causing the problems. Because a lot of times you deal with the bad clients just because you’re so desperate for revenue.

So grow those strengths. So put the processes around your strengths. That’s probably the biggest difference if you don’t see that happening. They say, we don’t need a process because we’re strong there. So anyway, I’m passionate about that.

[00:21:18] Stephen Brown: No, that’s, no, that’s great advice. Listeners, if you didn’t catch what Rob was just saying, you need to rewind and listen to it again because it was a great point. You’ve got strengths and you, and you know they’re strong. You can always make them better.

[00:21:35] Rob Williams: All right, well this is good. And now what else we got? I was just looking at the time. We’re, we’re going up there. I was all excited and time just goes by when I’m talking about processes. It’s so exciting.

[00:21:45] Stephen Brown: I’m outta my mind.

[00:21:48] Rob Williams: Yeah.

[00:21:48] Stephen Brown: No, it is exciting. It’s, it’s fundamentally exciting. And, I don’t understand guys why processes sound so sexy and systems is like, bleh.

[00:22:01] Rob Williams: Oh, one of the big things we’re talking about why you want them, I wanna make sure we hit this point. The value of the company, the Contractor Exit Value that I, I like to talk about. And being able to leave your business. And this is where you get your quality of life back. You’re doing these processes not just for the bottom line, but for you as the owner.

So you’ve got an enjoyable business to where you can leave. And Wade, do we wanna talk about the four week vacation, that goal of the four week vacation? That’s a fun thing to talk about.

[00:22:30] Wade Carpenter: It is, but it’s also about getting the processes in. So you can take that four week and–

[00:22:36] Rob Williams: Yeah.

[00:22:37] Wade Carpenter: It’s something that I’ve been working on for a few years to, to get there, but I don’t know that I’m there yet, and it takes a while.

[00:22:44] Rob Williams: Yeah. People have a hard time believing you can even do that. But we’re seeing in our coaching world, this four week vacation is a big trend that’s going around where the owner will actually go on a European vacation for four weeks. Not call in or do anything. But don’t do it until you get your processes down, until you, you feel confident that it can work.

Well, not feel confident cause you’re still probably gonna be nervous. But when you leave and not call in, what we’re finding is most of these owners come back and the business actually performs better without them there.

[00:23:16] Stephen Brown: And even if you don’t care about your own sense of security and peace, a lot of folks in their forties and fifties running construction companies start having a spouse that’s saying, enough. So if you want a wife, you gotta get your life. there’s another saying. You gotta get, you gotta get these systems, I’m sorry, that’s a horrible word, processes in place, working for you to help you have a life outside of your construction company. It’s healthy for everyone. Makes your employees happy that you trust them, that you give them a break. And you’re not micromanaging, which a lot of owners are prone to do. So think about that, listeners.

[00:23:58] Wade Carpenter: Well, I, I would say too that construction owners are particularly bad at this, but a lot of times they’re afraid to take a vacation. They never take a vacation because they don’t feel like they can.

[00:24:11] Stephen Brown: Yeah.

[00:24:11] Wade Carpenter: The concept of even thinking about four weeks off, they, a lot of times there wouldn’t be a business when they got back. I’ve known some people that, a three day weekend was their vacation.

[00:24:21] Stephen Brown: Well, you gotta start somewhere. I guess you gotta figure out how badly can my company be destroyed? Depending on how long, a three day weekend, if you come back and your company’s running a kilter after a three day weekend, you, you, you’re a hot mess. And you really need to re-listen to this podcast.

Get a copy of Pumpkin Plan For Contractors, talk to your great construction CPA like Wade, bounce things off your bonding and insurance agent like me, and get those processes in.

[00:24:52] Wade Carpenter: And get it down low.

[00:24:54] Rob Williams: Yeah, yeah. Get it down low.

[00:24:56] Stephen Brown: You wanna grow.

[00:24:57] Wade Carpenter: And if you want your wife, you gotta get a life.

[00:24:59] Rob Williams: Down low.

[00:25:00] Stephen Brown: Mm-hmm.

[00:25:02] Rob Williams: The– and oh, by the way, that vacation, plan it like 18 months out, too. To have it as a goal. So don’t do it like, oh, I’m okay. Well honey, let’s book a 30 day vacation next month. Hold on, you can’t– it takes a while to get those processes in there built so you feel confident, then you go.

Because when you exit, you’re taking a permanent vacation. So if, if you can’t leave for a month, how confident is somebody gonna be in buying your company? You’re gone permanently. So just think about that, when you’re doing that. I’ve also seen recently some of the best purchases of companies, these companies are not buying the cash flow stream sometimes.

And we’ve seen large companies buy smaller companies that have amazing processes and they had bought them simply for their process. And we talked about that in the Rembrandt in your Attic episode. So go back and listen to the Rembrandt in the Attic episode if you–

[00:25:58] Stephen Brown: Well, if you never wanna retire and you don’t want to keep your spouse, you know, just keep working till you’re dead and forget about it.

[00:26:05] Rob Williams: Yeah. Alright, well that’s a good place to end, isn’t it? That’s–

[00:26:10] Wade Carpenter: I was gonna say on that note.

[00:26:12] Rob Williams: Alright, well on that note–

[00:26:15] Wade Carpenter: –want your wife, get a life.

[00:26:17] Rob Williams: Yeah.

[00:26:18] Wade Carpenter: Get it down low.

[00:26:19] Rob Williams: All right, well this has been a great episode of the Contractor Success Forum. Stephen Brown getting down Low with McDaniel-Whitley Bonding and Insurance Agency and Wade Carpenter with Carpenter and Company, CPAs. And Rob Williams with IronGate Entrepreneurial support Systems, The Pumpkin Plan for Contractors coming to a bookstore near you or Amazon sometime soon. 12 months away. I don’t know. We don’t know when you’re listening to this, but be awhile. It’s under process. So we appreciate you coming here and come back and see us on the Contractor Success Forum.

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