Every business has a sweet spot. Recognizing and operating in yours means business growth and operations stop being difficult. This week, Donna Leyens of Pumpkin Plan Your Biz joins us to talk about identifying and getting to your construction company’s sweet spot.
Topics we cover include:
- What it looks like to operate in your business’s sweet spot
- The three factors that overlap to create your business’s particular sweet spot
- How to identify your most profitable clients (not just the ones that bring in the most revenue)
- Why so many people are afraid to specialize and why you shouldn’t be
- Why so many businesses fail when they diversify too early
Fill out the form below to instantly receive the free Pumpkin Plan resource mentioned on the show.
GET THE DOWNLOADS
Subscribe for free resources and to be notified of future episodes at contractorsuccessforum.com/subscribe
Find all episodes and related links at ContractorSuccessForum.com.
FIND US ONLINE
Rob Williams, Profit Strategist | IronGateESS.com
Wade Carpenter, CPA, CGMA | CarpenterCPAs.com
Stephen Brown, Bonding Expert | McWins.com
[00:00:00] Rob Williams: Welcome to the Contractor Success Forum! Today, we’re discussing how to find your business’s sweet spot and why that matters. So we have an amazing guest on today. We have Donna Leyens. She is the actual co-founder and president of Pumpkin Plan Your Biz. So the Pumpkin Planning strategy’s about sweet spots. So this is amazing. She is on a mission to save small businesses from extinction. Welcome to us, Donna.
[00:00:38] Donna Leyens: Thank you so much for having me. I’m excited to be here to talk to your audience about finding their sweet spot and growing their business while getting their time back.
[00:00:50] Rob Williams: Well, that is awesome because here at the Contractor Success Forum, we discuss financial strategies for running a more profitable, successful construction business, which also it’s we say financial, but that includes finding your sweet spot.
And our other wonderful Contractor Success forum hosts are Stephen Brown with McDaniel-Whitley bonding and insurance company. bonding dude here. Yeah. And then we have Wade Carpenter with Carpenter and Company, CPAs. He is a job cost accounting CPA that can do this remotely. It’s amazing for you contractors. And I am Rob Williams, your profit strategist with IronGate Entrepreneurial Support Systems. So thank you. And welcome to our show.
Guys, I know Stephen, you’re always talking about how important finding a sweet spot is for contractors and stuff. And can you believe we have Donna on our show? This is amazing.
[00:01:49] Stephen Brown: No, it’s perfect timing, Rob. And thank you, Donna, for coming on the show. The most important thing with my customers, and a lot of contractors I deal with in the bonding business, is going after work that’s not profitable. And a lot of my customers just don’t seem to get the stress part of it.
They know there’s stress, but they don’t talk about it. They keep pushing through. And I always mentioned to him, you need to manage your company, not have it manage you. You rarely take vacations. That’s just the construction lot life and it doesn’t have to be that way. Does it?
[00:02:22] Donna Leyens: No, it doesn’t have to be that way. And I have actually seen a lot of contractors use the Pumpkin Plan strategy and the Sweet Spot strategy to totally change their business and their lives for the better. And you talk about going after business and what business do you go after? When you know your sweet spot and you’re operating in your sweet spot, business growth stops being hard and business operations stops being hard.
Can I just take a minute to tell you what that sweet spot is? How we define it? Okay. Okay.
So if you could picture three rings, a Venn diagram that are three rings overlapping, sort of like only three of the Olympic rings or something. But you have three rings and they all overlap in the middle. And those three rings represent three of the most important elements in your business. The first ring is your top clients, not just who are your ideal clients. I’m sure you’ve heard a lot about ideal clients, which sometimes can just be a fantasy client that doesn’t exist. We like to talk about your top clients, your actual best clients. Who are they and what do they want and need from you?
And so you need to know who your best clients are. And those are also your most profitable clients. And then the second ring is your unique offering. What makes you different from all the other contractors out there that are competing for the same business, or are competing in the same area that you are?
What makes you stand out? But, because we’re talking about your sweet spot, that needs to overlap with your top clients. Meaning, what makes you unique and different needs to match what your top clients really care about. What they want and need from you. So those are two of the three rings.
The third ring, and this is really important is systemization. So, if you know who your top clients are, and then you know where to find them, and what your unique offering is. So they care about what you do and you stand out to them. But let’s say you don’t have the systems and processes to deliver what you’re offering. Then you’re going to get stuck. So you need that third ring. You need the systems and processes that will deliver your unique offering so that you could teach it to other people. You have good training systems, you have good checklist systems to make sure everything’s getting done. You have redundancy in your business. So you’re not reliant on any one single person.
When all of those things come together, you are operating in your sweet spot and that gives you the ability to control your growth. You can decide I’m ready to grow bigger, or I’m right where I want to be. But you have that control. It’s not random: oh, I had a great month this month, but a terrible month next month.
[00:05:36] Rob Williams: That’s amazing. And look in the show notes, we have the handout on that right there in our show notes where you can click on that and you can get that handout so you can see those three circles and understand what that means. So I can confidently say that in advance right now that it is there in the show notes, because we will do that in the future after this.
[00:05:58] Stephen Brown: So Donna, how do you apply that to, say, a general contractor that negotiates work and also has to bid their work?
[00:06:07] Donna Leyens: So the first thing that you want to do is really define who is your best customer? How many different kinds of jobs could you do as a general contractor? You could do residential, individual custom jobs. You could do residential, but like a condo. You could be the builder for a condo complex where you’re building, everything’s the same. It’s not custom. You could do commercial construction where you’re only working on businesses, or maybe you specialize in working with hospitals, which might have different specificity than another industry or another type of building.
So the first thing that you want to do is define who are your best customers. Because if you’re trying to do all of those things, it would, unless you are a huge company with different divisions, it would be very, very difficult for you to have expertise in all of those different areas.
And it’s also very difficult for you to get in front of all of those different types of customers. So if you decide, okay, I’m looking at all of my jobs and these are my best jobs, then you can focus in on just those types of customers. You know where to find them, you develop a reputation, and then obviously, you go through the bidding process. But you get very efficient at that type of job.
And that should help you in your bidding and your building and being profitable. So that’s the first piece of it. And that also feeds into making you unique. So let’s say you decide my best customers are medical care facilities. You can develop the expertise, the ins and outs of building for a medical care facility and you develop that reputation. And so, I don’t know all the rules of when somebody is hiring a contractor, but that may carry some weight. Not just the lowest bid, but the company that’s going to do the best job. So you need to figure out where you fit in. So that in other words, you get more narrow about what you do, which makes you stand out more in the marketplace because you become the company that does that kind of work. I know maybe for the past 20 years, there’s been a rebuilding boom in my town. Meaning lots of 1950s and sixties houses getting knocked down and McMansions going up, basically. We call them McMansions.
[00:08:55] Rob Williams: Yeah, we call them that too.
[00:08:57] Donna Leyens: Yeah. It’s big house on a half acre lot. But there are certain contractors that have the expertise in that level of custom building. So you wouldn’t hire somebody necessarily who normally does construction for like municipalities, let’s say. Or for some other type of construction, because they don’t necessarily have the carpenters that are going to do the custom carpentry work that you want and… you see where I’m going with this? That you stand out in a specific marketplace.
And then of course, the systems and processes have to be in place if you want to scale up and you need to hire. And I know that hiring is a challenge in the construction industry. If you want to hire, how do you make sure that you can maintain the quality control? That’s where your systems and processes come in.
If everything’s in your head as the general contractor, you’re going to have a much harder time controlling the quality of your work and how smoothly things go and you’ll spend all your time putting out fires, et cetera.
[00:10:05] Wade Carpenter: Well Donna, you know, one of the things I noticed trying to find that type of work that you do, a lot of contractors chase the top line. They want the top revenue, but a lot of times those are not the most profitable jobs and they don’t have the job costing systems to really find out what is profitable.
So can you comment on that from a construction standpoint?
[00:10:27] Donna Leyens: Absolutely. Because this strategy is all about profitable growth. So you want to find those customers that are going to give you the biggest profit. So that is actually part of our top client analysis that we do. So we’re looking at the factors that go into making your clients profitable or focusing on your top 20% of profitable clients. Profitability is impacted by a lot of things, including how much of your time does that client take up? Or that customer.
So If you are building a house for somebody, and all day long, they’re calling you with problems, your top line might’ve looked great. But now I have to redo this, and call insomebody to fix that. And this person is not happy with this and they’ve changed their mind about that. That’s not a good customer for you.
So really knowing how to dive into who’s your best customer is the first step in profitability. The unique offering piece is the second step, because there are definitely areas where you can charge a premium. And if the customer believes you’re worth it, they will pay it.
But you also, the job costing. Those are your systems. You need to understand the value of your time as the owner and make sure that gets factored in as well. Because your breakeven includes your time. If you don’t include that in your breakeven analysis, then you’re losing money before you even break even. And then you have to factor in a profit for yourself, or getting paid yourself.
If you’re just turning over money, right? Like the money comes in and the money goes out. I’m paying all the subcontractors and everybody else. And there’s nothing left over at the end of the day, you’re right. That’s not a profitable business. But having those systems in place that can give you the reports that you need, that can track your jobs and track your expenses and you can give a proposal that actually is going to be profitable for you is key. If you’re doing it on the back of an envelope, you’re going to have trouble growing.
But on the flip side, when you put those systems in and you can consistently rely on them, you also can find efficiencies in your business. And you become more profitable. You can see where you can save time, where you can save on materials costs, where you can maybe switch one product out for another and get the same result. There are a lot of things when you start looking at the interior systems of your business, that will suddenly become much more clear to you. But I understand the tendency to want to close your eyes and not look at the bank account. I have gone through periods of time where I go like this. When I open my, when I opened my bank account statement to see. I’m like, do I want to see it?
[00:13:36] Rob Williams: Yeah, I’ve been there many times. So it’s, in the growth part, I’ve made that mistake, especially earlier in my career when I was really young. I’d just take as many things as I want. But I love when Mike Michalowicz talks about the Survival Trap, going from A to B. If you’re going from where you are, and where you want to be, there’s a gap in between there. So when you pick something, are you getting closer to that?
And what I’ve seen happen so often are people getting that big job. And actually I’m thinking of myself, it’s not another example of taking these jobs that were outside of the thing. I remember we bid stuff like for the government over in the Middle East and all these crazy things. We just felt so honored that we were to the top three. So that meant we got to give free advice for weeks and we never got picked, but it was just, it was like an ego stroke thing. And when you’re looking at your expansion, you think you have to do all these things outside of your realm.
And I remember I had one contractor in here. It was actually a landscape company. And we looked at what would happen if he had consistent growth. He wanted to do these big things. It was like, oh my gosh. And he had already lost all his equipment once from a turn in things and, and done that. And so he wanted to do these big things where oh yeah, we’ll, we’ll get the million dollars. And we put together just a little spreadsheet of a 20% growth.
He said, well, that would be easy. I’ve got people I’m turning down all the time. And he was actually going to be much more profitable working on his flywheel, as Jim Collins calls it, to stay in your thing. And compounded growth is actually almost always much more profitable than that one-time big win.
And not only when you get that one-time big win of a different job, it actually puts a big old brake on your flywheel because you ignore it. And you may not even take some customers. You may lose some of those customers you had, and then that compounding growth, it doesn’t even have to be doubling growth or any, I mean, 20% growth can do amazing thing, especially if you scale, instead of doing not smart growth, which we’ve talked about.
[00:15:46] Donna Leyens: Well, that brings a lot of things to mind. I worked with one company years ago that when they did their client analysis, they realized that their biggest client, and this was like, this client was double the revenues of any other client. They realized that their biggest client was also their worst client and was actually costing them money because of all the issues that they constantly had with them, including scheduling issues.
When you have a company where you’re scheduling your employees or your subcontractors, you have to be here on Tuesday and here on Thursday and here next week. And then your client says, oh no, wait, there’s a delay. And then you have to juggle your whole schedule again, and then maybe you have people that you’re paying who are not doing any work. And then now I have too many jobs for next week. And so it really becomes a nightmare.
So they let that larger client go. They said, we can’t do work with you anymore. They gave, whatever reason was, you know, an acceptable reason. They didn’t just say you suck, go away. But they, they nicely said, we’re, we’re moving in another direction.
And they very quickly replaced that large client with several other clients that were in their sweet spot that were really good clients. And they got to the point where they had a waiting list of people waiting to work with them. So then their next issue was scaling up so that they could take on more clients.
So that’s a much better situation than every day coming to work, having a headache that you have to juggle everything that’s going on in your business. So sometimes your biggest revenue client could actually end up being the client that’s taking away, like you said, from your profitability and from being able to focus on your other better clients that you’re really doing your best work for.
And when you talked about the landscape company that brings to mind for me, I know a landscape company that used to offer a huge variety of not just services, but options. So for example, if you were going to do a patio, they had three or four different types of pavers, or whatever they’re called that you could use. Different because there are different product lines. But each one of those product lines takes a certain expertise to know how to install them.
And he decided, you know what, I’m going to just use one product line. And what happened when he cut down the number of offerings was that it made it easier for his customers. They didn’t have to decide between different products, they just picked their color. And it was much easier for his employees. They only had to learn how to install one type of product, and that was much more scalable and systemizable. And he did that with a lot of his offerings and some of his offerings he cut out, and his profitability went through the roof. His production numbers, in other words, like how productive he is per square foot is at the top of his industry because he pays attention to those things and he narrows what they do instead of expanding it.
[00:19:04] Stephen Brown: I really like the fact that you explained to us this concept of your top client is not necessarily your most profitable client right now. I think of a general contractor, customer of mine, has a huge client that just kills them because they give them a lot of work. They make money, they expect more of them, including, hey, I need you to come by my house and where you do my driveway. Just all kinds of stuff that they lose money on and they lose money on it because if they try to charge a normal price that this large company would do a favor, they’re not priced to do it. But that’s just one example.
And I know that in the past, when I’ve fired customers, They’re the ones that hold onto my neck and will never let me go. I say, you’re fired and they’re like, no, no, Stephen, we love you so much. We’ll never let you go. And I’m like, yes, you will let me go. It’s over. It is over. And so I really, really appreciated you explaining that because the stress that comes with those clients, when you sit back and you reflect on what they do, they never take your advice and they never pay their bills on time. They take up all your time. They’re worriers, they drive you crazy. And when you try and relax and try to de stress, it’s absolutely impossible.
[00:20:26] Donna Leyens: Yeah, and, and stress is a major issue in your life. And it’s very hard to even think clearly and make good business decisions when you’re stressed all the time. So we shouldn’t dismiss this as something that you just have to live with. If you want your business to be someplace where you can go and feel fulfilled and happy, then you absolutely need to address the customers and even the employees that are causing you a huge amount of stress and are not aligned with your mission, your vision, your purpose, your values. And when you kind of start to eliminate that, it is a huge feeling of a weight off of your shoulders.
And you mentioned like a lot of these large customers, maybe they don’t pay on time. I’ve seen that all the time, where you’re a small business, and you rely on, if somebody owes you money, you need that money to pay your bills. And when they’re not paying you, that is a huge problem for your business.
When we do our top client assessment, we have a whole chart. That is one of the factors that we have you grade your clients on, or your customers on, is do they pay on time? And we actually have a calculation that we do that even if you don’t charge them by the hour, we calculate their hourly wage. Meaning, how much money are we really getting paid for the time that we spend on this client?
So you could have two customers that are paying you the same amount of money, and when you look at the amount of time that you spend on each one, the profitability could be very different, because that same customer that’s paying you, let’s say they’re paying you a hundred thousand dollars, one could be taking up a hundred thousand hours of your time and your staff’s time, meaning in a, kind of in addition to what you would normally expect. They’re taking up more than their fair share. And when you do that calculation you start to see that yes, this customer is paying me a lot of money, but look at how much of my time and my resources that they’re taking up.
They’re really not as profitable as I thought.
[00:22:47] Rob Williams: Wade, I think about you when she’s talking about that, being the job cost accounting, cause you see those hard costs are in there, but I know that you are really in tune and aware of these things. And being that Profit First, Stephen and Wade probably knows this, but the Pumpkin Plan, Profit First is one chapter out of the Pumpkin Plan. That’s where Profit First was actually born, was out of the Pumpkin Plan. That was a neat thing that I didn’t really realize. I knew that it came first, but that was really good.
But anyway, back to the question, Wade. CPAs that are not quite as involved– or bookkeepers– as you are, what do you think about those indirect costs?
[00:23:27] Wade Carpenter: Well, we talk about it all the time on this podcast, but you know, a lot of contractors don’t have a good handle on what the jobs actually cost. And they don’t realize that, chasing that top line revenue could be torpedoing the business. And, I think about, it was a concrete contractor. They may have some jobs that were like $2 million, but they found, they looked at their jobs and said, well, these like, half a million dollar jobs we can get in, get out, get our money. And they were a lot more profitable.
But, you know, Donna, from my perspective, I guess I think about the sweet spot is not so much just bidding the right type of job, because a lot of my contractors want to bid everything they can get their hands on. But it’s sometimes knowing what not to bid. Can you comment on that?
[00:24:19] Donna Leyens: Yeah. When you know who your ideal client is, you also get a profile of the opposite of that, who your nightmare client is, and you start to build kind of a series of tells. Okay, what is telling me that this client or this customer is going to be a problem? So that could be a category of a type of job, but it could also just, it could be factors that are happening during the bidding process.
So you look for signs to weed out the jobs that are not going to be ideal for you. And you could even have a checklist. Like here’s what has to be there when I’m bidding on a job, here are the factors that have to be present. And here are the things that if they are present, we will not bid on this job.
Cutting out those jobs that are not appropriate for you is a by-product of knowing exactly the type of job that you want to bid on. We always say, there are opportunities everywhere, but most of them are shiny objects. They’re not really opportunities. And if you take a job, here’s a perfect tell. If you take a job where you say, well, this isn’t my typical expertise, but I can learn what I need to know. That is a warning flag that you are going to be taking a lot more time figuring things out. You may not completely understand what that job is going to take in terms of materials in terms of expertise, so you may not be bidding it properly. And you also have to understand how– somebody talked about time. How long is this job going to take? How are the payments going to be structured? What am I going to have to invest versus when I get that money in? All of that. If every job is different, it’s very hard to be accurate about those things and to know what, what’s going to ultimately be profitable and what isn’t.
If you are categorizing who your best clients are, then you get really good at that job costing and understanding what a specific type of job is going to take and how you can make it profitable. There are two sides of the coin: understanding your best clients and understanding–
Unfortunately, sometimes it’s trial and error. Like you, you have a job that just goes horribly wrong and you have to do what they call in medicine a post-mortem. You have to go back and say, what went wrong here? What are the warning signs that a job is going to go in this direction, so that I can never do that again?
[00:27:09] Wade Carpenter: One of the big things that contractors I think run into is well, I got a bid this job. That FOMO, the fear of missing out, you know? And I know like in niching my business into construction, my team was like, and some other CPAs said, you’re putting yourself in a hole. You’re going to ruin your business. But I found that we’re a lot more profitable. And so Donna, can you speak to the fear of missing out, fear of niching?
[00:27:35] Donna Leyens: I actually have a presentation that I do about niche phobia and how to get over it. So it’s that fear of that you’re missing opportunities if you narrow your focus. The truth is that as soon as you narrow your focus, you become extremely desirable to that specific audience. If you were a general accountant, you would be spinning your wheels, you’d have to learn a zillion different industries if you don’t specialize and you look like a widget. You are competing with all the other general accountants.
But as soon as you say, this is my expertise– and actually if it’s okay if I mention another podcast on this podcast? So the Mike Up in Your Business podcast, he just interviewed an accountant who specializes in working with people who are mostly Silicon Valley, who got compensated using stock options. And that is how narrow her niche is. Her clients are all people who work for these emerging companies that are about to go public, and she’s helping them figure out their tax strategy and their financial strategy.
She has a huge waiting list. Mike actually asked her to calculate her hourly wage before and after she decided to make this change in her business. And she was very clear. She’s like, I don’t charge by the hour. She said I used to. But if you want it calculated, I used to get between 300 and 350 an hour.
And now if you calculated what I was getting paid, my time versus the package that people are paying me for, I’m probably up around a thousand dollars an hour. So the value of her time, more than tripled, and she’s doing work that she loves. She is the expert in this. She is the expert. People know if they want help for financial and tax planning, and they’re in this specific situation, she’s the one to go to.
So that is what makes you unique from everybody else. And it makes it really easy for your potential customers to self identify, yes, I am a client for you or no, I’m not. And sometimes people will say, well, okay, I’m not in that industry, but I hear you’re great. Will you work with me anyway? And if it’s a similar enough industry, the answer could be yes. But if it’s something totally different, it’s outside of your processes.
Is there a risk in that? Yes. The risk is that if the industry that you serve, so in your case, the construction industry. If the construction industry went into the tank tomorrow, then you may go along with them. There may be a lag. But then what you need to do is take your expertise that you’ve built up and figure out where else can I apply it, or how can I continue to serve my best clients in a different way?
When everything shut down in 2020, what we found was our strategists clients who were operating in their sweet spot, who knew who their best clients were, who had the systems in place, were much more able to pivot their business than those that were sort of all over the place, didn’t know what their unique value was and were feeling very stuck because they had challenges that they hadn’t anticipated. So having that plan and that understanding and that reputation as an expert in a certain area gives you a huge advantage as a small business.
And the other piece of it is the marketing advantage. If you’re marketing to everybody, you have to show up everywhere. If you’re marketing to a narrow market, you show up in one place over and over again, because that’s how you get people’s attention. They see you all the time. And if you’re a huge corporation, maybe you can afford that kind of marketing and advertising budget. But if you’re a small business, if you can focus in on one area– and we call them congregation points. Where do your best clients congregate? Where do they hang out where you don’t have to find them one at a time? I know one company, a landscape company or a lawn care company that they figured out that their best customers live in cul-de-sacs, right? Really specific. Their best customers. And there are certain lots on the cul-de-sac that are the very best.
So they do a lot of marketing like, you know, they put out flyers, they send out direct mail to very specific areas. They’re not on a billboard that everybody’s going to drive by. Their marketing is really specific. And the return on their marketing has gotten huge. They have a 65% return on their marketing investment.
Versus, a lot of people don’t even know if their marketing is working. So, that was a very long answer, but I feel, I feel really passionate about this, the idea that if you narrow your focus, you’re narrowing your opportunity. I know it sounds counterintuitive, but it is the opposite.
And you found it yourself, Wade.
[00:33:12] Wade Carpenter: Yeah. I love Mike Michalowicz’s, in the Pumpkin Plan, I think he uses the example of a doctor. You’ve got general practitioners that go their entire lives trying to pay off student loans. And then you got the heart doctor that’s living in the McMansion we were talking about.
[00:33:29] Donna Leyens: And, yes, and people know, if I have a heart problem, I am going to a heart specialist. And it’s the same thing. If you’re looking to build something, you want the person or the company that has the reputation for doing the best work in your area.
[00:33:50] Rob Williams: You know, we were talking about how non-intuitive it is sometimes. I remember back in graduate school and I must’ve been awake one day in finance class when they were talking about diversification and betas and correlations and how you would like to uncorrolate that. And that’s actually one of the reasons that I had so many different companies and interests, is I thought I was diversifying. The idea was to have all these different interests, but they did not have a management class in school to tell us about focusing.
Even Jim Collins, in his book, I had always followed him because he started these back in the eighties at Stanford and the message was to diversify. Take big chances. And 30 years later he wrote The Flywheel and he said, well, maybe I wasn’t right about a lot of that stuff. This is what happened. These guys that focused and focused in there… I could go on a lot of things on that, but can you address diversification versus niching?
[00:34:54] Donna Leyens: Most small businesses diversify too soon. And that’s the problem. We don’t have the resources to focus our attention in five or six or seven or however many different areas. What happens is you might look at a large conglomerate, a large company and say, well, look at all the different lines of business they have and all the different products. But most of them started out with one product.
So I think it was Proctor & Gamble started out as a soap company, and that’s all they sold for many years. So in the Pumpkin Plan program, we address, like, before you start going in a different direction, have you maximized what you’re doing in your area of focus? So have you maximized your opportunities here before you move on over there?
And I understand the desire to diversify to kind of minimize your risk, but the risk to diversification is that you never grow. You may be less profitable, have more headaches, and the lack of resources to focus on each one of those areas is going to hold you back. I think a better way for a small business to manage risk is to manage the number of customers or clients that you have.
I actually was teaching a training session yesterday and this came up and I said on the one hand, You don’t want one huge client who’s responsible for all your revenues, because if that client goes away, you have nothing. But you also probably don’t want 5,000 clients all paying you a little bit, because depending on your business model, that may maybe giving you very thin profit margins per customer.
The goal is to find that Goldilocks level where you have enough clients that you’re not dependent on any one single one. You have potential clients in the pipeline at all times. So you lose one client or you finish a job, you have another one waiting to come in. And you have it priced profitably, but you haven’t out-priced yourself so that you have a huge dependence on just a couple of customers.
So that’s really the better route for a small business. Diversify how many clients you have, not the different types of work that you do for those clients.
[00:37:41] Rob Williams: And in addition to that, Wade, the other controls you can have on reducing risk are things like Profit First and your debt in your cash. And some of these other things that you can look at yourself. So it’s not that we’re being really risky. There are other things, and I love the term downside risk, even when I’m looking at portfolios and investments. But in your business, to control your downside risk is probably more important than getting into three different industries. You can look at that. How is your debt structure? Are all your debt is going to come due at once? I know that happened to us in some shopping centers that really mortified us in 2009. But there are other things, how much cash do you have and how fast are you growing versus not needing that?
Wade I know you love that subject.
[00:38:29] Wade Carpenter: Well, yeah. And I know Stephen said this before, but you know, there’s a limit to how much you can make in profit on a job, but there’s no downside, no, no limit on the amount you can lose. The bigger the job, the harder you really can fall. Usually the losses are bigger, but–
[00:38:47] Stephen Brown: Well, and the more complex the job.
[00:38:50] Donna Leyens: Yeah, and I definitely want to add in that the Profit First system can be used, especially if you have a seasonal business, can be used to even out your cash flow. Maybe you have a “Get me through the winter” account or a prepaid account, or you have different accounts that even if it’s a really bad winter and your construction gets delayed or whatever, you’ve got those buffers built in so that you’re not risking your whole business because something went wrong with a client or because it’s seasonal, and how do I pay my people when nobody’s working? That type of thing. You look at that and you create a system for putting cash aside and you build that into your pricing on your jobs.
There’s one thing that I want to just add that I learned in my first business, which was a jewelry company. I knew nothing about pricing and you could tell. What I learned was there is a certain price, and I learned this also in my business coaching, there is a certain price at which it is not worth selling or it is not worth doing the job. And getting the job at any cost will put you out of business, or put you into debt. Remember, your time and your energy and the people in your company have value. And if you are underbidding jobs, then you’re, it’s an opportunity cost. You’re taking away from the opportunity to work on a more profitable job.
Every client is not a good client. Every job is not a good job. And you have to know your floor and know that, okay, because I used to think if I don’t make it this investment level, if I make it any higher, they’re going to say no. And then I realized, if I do it at this price, it’s not worth my time to do it. I’m not actually making money this way.
I had one, kind of, independent contractor job that I was doing, that my husband would call my $2 an hour job because, because of all the things that always came up and just made my time less and less valuable. So remember that a job only has value if it’s profitable. If it’s not profitable, then just getting the job is not, I know a lot of times we think, well, if we build a reputation or we… but what happens is you get a reputation for being the low ball. And then you always have to be the low ball and small businesses never want to have to compete on price if they can help it. Offer value that your customers can see the value. And even being transparent about, well, I can’t do this for less than this, and here’s why. And you don’t want me to, and here’s why. You don’t want your contractor to go out of business halfway through your job. We’ve heard those nightmare stories.
[00:41:57] Rob Williams: Yeah,
[00:41:57] Donna Leyens: Where your construction is halfway done. The contractor goes under and you’re stuck and you’ve prepaid them some amount of money. And now you’re stuck with a half finished construction job. So that’s from the customer side, we don’t want that to happen either.
[00:42:15] Rob Williams: Dad used to give me some advice, which I didn’t really understand it at the time. I don’t know if he understood it. But he used to say the best job that you did was the job you didn’t do. And so I had to put that through my head a lot of times. So I guess what it really meant was the best decisions we made were turning down jobs and just take those good ones because I was doing so many different things.
And also in here, I know we’ve gone way over time, but this has been really good.
[00:42:43] Donna Leyens: I warned you,
[00:42:45] Rob Williams: I knI know! I warned everybody, because I knew between Donna and I both talking, but I did want to make sure on a couple of things to talk about it because I don’t know if everybody knows that Donna has spent eight or nine years making these forms and these courses. She has done amazing things with all these different resources and tools that we have available to us to help you through this. Some of this is intuitive and you can kind of work on it on your own, but your time is money as a contractor. And she has really made this an efficient process by spending that much time going over them over and over and over again. I think there are about 40 forms. That may intimidate people, but you don’t have to use all of them. You can just use a couple of them. But those are some resources to take out there.
[00:43:33] Donna Leyens: Yes. Well, what I’m going to say is when you say there were 40 forms, it’s like people’s heads probably explode if you say you have to fill out 40 forms, right? What they are is their business tools that help you get clarity on all of these areas. Because when you answer the questions and when you see written down, I keep wanting to say on paper, but a lot of us don’t use paper anymore.
[00:43:56] Rob Williams: The screen.
[00:43:57] Donna Leyens: On the screen. When you see it and writing it makes it so much easier to do that analysis and make decisions with clarity. So that is the whole point of the Pumpkin Plan Action Guide Program, where we give strategists like you, Rob, I’m going to give you a plug because Rob is a Certified Pumpkin Plan Strategist. And I’m just going to brag for him for a second. He may have gotten through the certification process the fastest of anybody ever.
[00:44:28] Rob Williams: Yeah, But I was thorough.
[00:44:30] Donna Leyens: He learned it! No, he passed all of the quizzes. He passed. He knows his stuff. And my point is because Rob, when you do something, you go all in and you don’t do anything halfway, is what I’ve learned about you. And what I’m going to say is, if you feel like, okay, this all sounds great, but how do I apply this to my business? The best way to do it is to have somebody from the outside who has the clarity of looking in from the outside– they’re not mired in your day-to-day– to help guide you through it. And we do have all of the resources at Pumpkin Plan Your Biz, which Rob, you have, you and the other strategists have access to to help business owners, to help contractors to apply this strategy in a way that makes sense for your business.
[00:45:24] Rob Williams: Yeah. And they’re in the video training for that, that Donna has actually done. And I know I’ve been creating some as well. But also another resource that all you guys can have is we have recently just formed a LinkedIn group called Contractor Success Forum.
So, well, it may have been out there for a year by the time you hear this. So there may be a lot of stuff on here, but we’ll invite Donna in there too. And we’re there to answer any of the questions, you don’t, you can go start this and learn about it yourself. You don’t have to sign up with us. We’re here to help. We love if you sign up, but we’re here to help. Go find that, join that LinkedIn group. Contractor Success Forum. It’s not just this show. It’s all of our different episodes. We’d love to get those conversations growing and really create value. And that’s a free resource for you guys. Just a thanks for listening and thanks for sharing this program and thanks for Donna and all our guests that come on here. Wade, did you have anything else? I didn’t mean to cut you off, but I know, I know you’ve got to go.
[00:46:24] Wade Carpenter: Yeah, no, I think this has been great. I read the Pumpkin Plan myself several years ago and it definitely helped me define my target market and not even just construction in general, but who specifically the contractors I’m looking for. And I think this has been great. Donna, I really appreciate it.
[00:46:40] Rob Williams: Yeah. And that Pumpkin Plan, that book came out a long time. What is it? 2014 or
[00:46:44] Donna Leyens: We are coming up on the ten-year anniversary. It, it was 2012. The first.
[00:46:51] Rob Williams: But it’s so much deeper now than the book. Cause I read the book a few times, listened to it. But the resources that are out there, well, just like most of Mike Michalowicz’s books, there are all kinds of resources developed behind an initial idea. Then they’re expanded, like growing a great pumpkin.
[00:47:07] Donna Leyens: Yes, the great pumpkin’s. Yeah, and that’s the whole concept behind the Pumpkin Plan Action Guide program is we’re based on the strategies in the book. The book had a handful of tools in it, which are like the key tools, a version of the top client assessment is in the book. We’ve expanded it in our program. So we’ve taken the concepts and built them out even further.
[00:47:34] Rob Williams: Yeah. So you learned a lot over 10 years, so I know how diligent and how, how,
[00:47:40] Donna Leyens: I hope I’ve learned a lot over 10 years.
[00:47:44] Rob Williams: Well, this is great. So, you know, find us on all the resources. Everything will be in the show notes. We’ll, we’ll have some handouts. We’ll definitely put up that favorite one of mine, that three circles that come together to find the sweet spot,
[00:47:56] Donna Leyens: Yeah.
[00:47:57] Rob Williams: And so there may be some more opportunities to get some handouts or something on there too. So, ask us for, see what you’re interested on the LinkedIn group and join that group so you can hear us come see Wade Carpenter, Carpenter, and Company, CPAs. You can find him and our information in the show notes and Stephen Brown with McDaniel-Whitley bonding and insurance company. And I am Rob Williams with IronGate Entrepreneurial Support Systems.
Find us, and don’t forget about ContractorSuccessForum.Com. We have that webpage for our show go rate and tell us how wonderful Donna is on our show today. Give us a big five star rating and join our LinkedIn group. And Donna, is there a place that they can find out more about just the Pumpkin Plan, if they’ve heard me talk enough and don’t want to hear me?
[00:48:45] Donna Leyens: Sure. Well, if they go to PumpkinPlanYourBiz– so Pumpkin Plan Your, like Y-O-U-R, biz, B-I-Z.com. We are giving away a Pumpkin Plan Booster Pack. So a few other tools to help them start to define their sweet spot so they can go get that for free if they want. And We we invite you to just keep learning with us.
If you, once you download that booster pack, you’ll hear from me– not every day. We’re not that kind of company. But you will hear from me whenever we have more good stuff to share with you.
[00:49:24] Rob Williams: All right. Well, that’s great. I really appreciate you being on here. This has been a huge example of providing value today. I think this is a whole seminar in itself today. So, thank you very much and I appreciate you, Wade and Stephen and Donna. So thanks a lot for, for the show today and we will see you again on the Contractor Success Forum.
Listen or watch now:
GET notified of future episodes!
Leave a Comment