How to Actually Make Money in Construction with Will King

Custom builder Will King of High Cotton Homes shares hard-earned lessons on how to actually make money in construction. From markup vs. margin to pre-con agreements and spotting bad clients early, this episode is packed with real talk and tactical advice for builders who want to run a profitable business.

https://www.highcotton-homes.com

Show Notes: 

Introduction and Overview of High Cotton Homes (0:00)
Will King's Journey from Fireman to Builder (3:18)
Joining the Southern Living Custom Builder Program (5:30)
Implementing Financial Management Practices (13:02)
Challenges and Strategies for Increasing Profitability (17:36)
The Importance of Pre-Construction Agreements (29:24)
Advanced Payments and Cash Flow Management (40:09)
Building a Strong Network and Learning from Peers (47:55)
Conclusion and Final Thoughts (51:30)

Find Our Hosts:
Reece Barnes
Matt Calvano

Podcast Produced By:
Motif Media

Transcript

0:00

Welcome to another episode of builders budgets and beers, and today was a doozy, with our good friend will king over at high cotton homes. I say this is a doozy, and I feel like I might have said this already on intros, but the entire crux of this episode is how to make money in construction. We talk about pre construction agreements. We talk about picking the right customer. We talk about the difference in markup and margin, which you should absolutely know. We talk about huge losses and burns that will had come across just from simple practices that he didn't follow. And Will's an absolute open book. So go ahead jump in. Let's get to it and learn a little bit about how to make money in construction. Thanks so much for jumping on, dude, absolutely man. Thanks for having me. Of course, we had some some nice warm chatter here. We just said, Damn, we got to just hit record and get the record and get this thing running for the for the listeners, we'll go ahead jump in. Give the give the listeners a little bit of an idea of who you are. And high cotton All right, yeah, so will King, like you said, high cotton homes is our company. We are a design build custom home building company here in Florence, Alabama, which nobody knows what that is, hardly. So it's Northwest Alabama. We're almost in Tennessee. We're almost in Mississippi. Everybody always thinks we're on the coast. For some reason. It's kind of funny, the complete opposite end of the state, Gulf Shores. Yeah. So there's a city across the river called Muscle Shoals, which is like famous for the Swampers, and it's actually when I went to high school. But when people hear that, they just automatically assume you're at the beach. Yeah, so, but yeah, so we are, I guess we started the company in 2016 so we're coming up on 10 years to celebrate. Of 10 years of what, survival, growth, celebration, business ownership, yeah, yeah. But we are just mainly focused on custom building. Man. We don't do any, we don't really do any spec building at all. You know, I have a little bit of a rental business going on the side, but that's, that's the pride of our company. Our bread and butter is just custom all building. So we're just doing just doing more and more parts of it, so customer experience and beautiful product. Yeah, yeah, we're doing over at high cotton, everybody, that was the episode next year. Yeah, exactly No, dude. I love it. I mean, will a you've been a great customer of ours. Would be like you are who we built this product for? I think, you know, even just kind of piggybacking on our conversation before we hit record. You know, we were talking about the builders that do they build a product very similar to yours, sometimes bigger, better, more passive, more whatever, right? Like, it's always a contest in construction. But we were just kind of discussing, like, the challenges if you could build this killer product but still really not have a strong pulse or really even a clue on what you're making from a financial standpoint. Um, I think just like, generally, like, what's your take? Like, how do you get into a position to build that type of product and not know your numbers? Yeah, I mean, so I guess I can just tell a little bit of the story there. I mean, that's really when I so I was a fireman for 10 years, and kind of later in my fire career, I started building houses. We had been doing some, like, flip houses, and we'd like some more rental property. Then decided that, you know, we wanted to take it, you know, I guess all in, right? And be be doing this. Well, I remember, man, like, my first, first child was born, and we had this house we were framing, and this dude was wearing me out about, like, what kind of house wrap I wanted, right? And I said, Man, I don't know. It's just whatever they bring out to the yard or the job sites, just house wrap. And he sent me this article from a dude named Matt Reisinger. And I was like, well, that's, that's awesome. Who's this guy, you know? And so, but then I realized I didn't know a lot of things, right. And so I started going down a rabbit hole, man of just hours and hours and days and days of reading about perm ratings and weather barriers and how to air seal. And then I really realized that we had this big need for, like, good building sites, good construction in my area. So that was, like, my passion, right? So then for the next, let's say, five years, like that was my focus. Like, I just wanted to build it better, right? I just wanted to make it more airtight, more watertight, crazy design stuff. I loved it, and I still love it, like, there's still a passion of mine. But to your point, I was really just focused on that. I mean, I was kind of just trusting my office and trusting our process, and even though they were doing what I think was a really good job with how I'd set them up, like, you know, I've started to realize years into. It like, Okay, I'm building a cool product, but like, I don't think we're even making money, you know, and like, when that feeling hits you, what is that? It sucks. I mean, because you're like, man, I've been not sleeping. I've been grinding and grinding and grinding to try to get all these projects done and, you know, make everybody happy and get employees set up. And then it's like, at the end of the day, you're like, looking at a P and L statement. You're like, what? Like, how did we lose money? Like, we're, we're crushing it out there. And then, you know, it just, I wasn't paying attention, man, I didn't understand a lot of the things. And so, you know what really flipped for me. I got in, of course, you can see it on my shirt today, but I'm in the Southern Living custom builder program, and love it, man. It's, it's been life changing for me. It's, it's so similar to, like, the nhB, where you've got, like, builder 20 groups, you know? Sure. So well, okay, let me back up. So living is, like, obviously the brand, right? The magazine, everybody knows, selling living it's obviously a very famous brand, and one of the most popular, if not the biggest, magazine in the country. Love it. But they put together a custom builder program. They have, like, this huge website for House plans. And there's about 80 builders, 85 builders. And so you claim your territory, you apply, they interview you, and then you, you know, hopefully you qualify to join. And then, sure, you basically just a network, right? So then we share a lot of things, and inside that, we've got a builder 10 group. And that's where I really started, you know, I got talked into that, so I wasn't even going to join it. And then I had, I had basically this phone call with our Tom, the guy who puts these builder 10 groups together, and they finally taught me to join in. And then guy, we're gonna have a first meeting. We're gonna share financials. You're up and like, I was embarrassed, like I was like, Oh my gosh, I can go toe to toe with these guys on the air ceiling and talking about all that, but I don't have a freaking clue how they came up with 13% net income. Should be a goal for your company. I'm like, What does that even mean? Like, I don't even know what you're talking about. And so that's when I was started asking questions. And I'm like, oh, okay, we got to get serious. So gotta get serious, okay, so, like, you laid the foundation with the building science, which I think is justifiable. I mean, if you're building a product, like a house and a very high end product at that building science should be absolutely yes, but I think it kind of takes those, those vulnerable moments, those accountability checks of kind of opening your eyes, like, this isn't status quo, like you need what was it you said 13% is what you should be, yeah, yeah, that was the number that we were all talking about. And I'm like, yeah. Again, I'm like, what down there's got to be listeners out there. There's got to be listeners out there that are like, think of the same thing. Like, what, what is the 13% that you're talking about? Where were you at when that conversation was brought up, how'd you get out of it? Let's thread up. Yeah. Well, what was funny is that we what we thought we were at was more like 15 or 16% based off how we were doing our statements, okay, but then we literally realized what we were calling, you know, above or below the line. We were kind of jacked up on that. And so then when we really recalculated and got input from my group, we were more about, like six to 7% so we were performing about half of where we needed to be, yeah, and so that, that sucked, you know, of course, you know, there's, there's good years, there's bad years. Everybody has ups and downs, a work in progress. But, yeah, that that was what, you know, but, but, you know, I also had to remind, remind myself that, like, okay, at that point we were like, a, you know, five years, six year old company, yeah, okay. And we had managed to get up to about seven or $8 million a year in revenue, and then we had 10 employees at the time. I mean, so really, I wasn't as bad as I thought I was, but it just I was embarrassed, like, I just, I don't like, I don't like not winning. Let's just be honest, right? You gotta win if you're gonna play ball. Sure. So, yeah, I mean, that's, that's when, I guess my attention got flipped, and then we started, you know Madison, who works in my office, she's our in house, accountant, controller, now, where we started focusing more on meeting. I wasn't even asking for pmls, you know, I wasn't even like, hey, let's meet quarterly, let's meet monthly. Like, I was just like, hey, we good. You good. All right, let's get out and focus on building science. Yeah. Sell houses. Yeah, yeah. Go ahead. So and I will say, like, just to clarify, but then to go, like, I do think it's a hard line to say like, which one you should focus on first. I mean, really perfect world. You focus on both. But I am really proud that we started off focusing on just building a good house, because I don't want to be the builder ever who's just focused on money and not building. A good house, because without the reputation and without people like, you know, around here now it's like, when there's like, Oh, that's a hot cotton house, like, oh, like, you know, and that's exactly where I want it to be, you know, totally. Whereas there's other contractors that, like, if they say, Oh, that guy built it, everybody's like, Ooh, yeah, I don't want to be that guy. I'm glad we focused on that, but, but, yeah, that group really made me start paying attention to, you know, an actual P and L and looking at, hey. Like, why are we paying so much in all these subscriptions? Like, that's one that comes to mind. Like, you know, stuff that we had canceled stuff that was running away from us, like QuickBooks fees that I didn't even know we were paying that, like, didn't make any sense. You know, there's like, horrible stories attached to that one, yeah. So there's just, like, before you know it, like you're just paying out more and more and more things, like subscriptions to softwares that you thought you canceled maybe you didn't. And then, you know, whether it's not even just keeping up with your field, just tracking your feel like, I mean, I wasn't paying attention, man, like I just, you know, wait, said again, and maintenance, like vehicle maintenance, I didn't realize how that we were getting crushed on taking trucks shop, dude. So I want to, I want to backtrack this because you had met Did you call it 13% net income, like a net profit? Is that you called it right? So I hear it all the time. Have been for years, builders saying I'm a cost plus 20, yeah. Like that 20% is, like, that's what we mark everything up. And that's what builders think. Is the take home, Oh, yeah. And then they always get juiced and they sleep on, like, the overhead, the operating costs, the maintenance, all the stuff that you don't think about. And that's typically what I hear, is what gets builders heavy, and that's when they start clearing that 456, percent net profit, yeah. And they're just like, stuck. They're like, How is this possible? We're marking everything up 20% we're building beautiful homes, huge top line. Like, we should be crushing but, yeah, don't. So get specific on yours if you remember, yeah, yeah. So was it chewing up or what? Well, one thing that we started doing is we reevaluated our we have a lot of in house labor, right? Well, let's start there. So, so we were, we were pretty I started the company. We were like, cost plus 10% and that's markup, not margin, okay, so, and that's going to depend on where you're building and that kind of thing. And so then, you know, we were like, Okay, well, let's go to 12% let's go to 13% and 13 is about where I was when we joined the son of Living Program. And now that's again, that's markup. And then, you know what, once you take out all the things, because I started adding, you know, I was trying to get health insurance, and I was trying to add all these benefits to have to retain employees, which I think you have to do, by the way, like, if you want to retain good employees, you have to do those things, or they're gonna leave. But then we really started focusing on our pre construction agreements. And I know that sounds crazy, but like, we now bring in a some income, basically, in pre con. That goes to the bottom line, which is good our margin on our in house labor. So instead of saying, like, you know, here's the at cost rate of this employee plus our contractor fee, we just came up with composite rates. So we just have like, a 25% margin built into our in house labor. And that varies, of course, depending on pay scales, but that's what we shoot for, is toward that 20 to 25% margin on the in house employee. We know that helped a lot. We started, we upped our design fees, like, so we're drawing house plans. So we we went up on that started changing, like we even check, went from, like, heated square foot to covered square foot. Small change, small change, small change. That helped the bottom line that was, that was something that really caught my attention to, like, we weren't even really paying for the draft at that point, wow, before we changed it. You know, it's like, well, I just need plans to build, but let's make money doing it right. What else? We started doing a lot of dirt work. That's one thing we brought in house, was a lot of the excavation. So we, like, we'll dig our own basements, we do our own lot clearing, we demo houses and, you know, being able to charge for that on the front end, with our equipment and all that. It's not that we're charging unfair rates, because we're not, but it's, it's just more income, right? So it's so ancillary stuff, I guess, is where this conversation is going totally well. And that's what I was going to say, is so it sounds like to insulate yourself, to get up to that net profit that you're looking for, you started bringing in more or adopting more service that you could sell. That's right, yep, yep, yep. We did. And you know, and then, depending on where we're building now, because now we're covering like Southern Middle Tennessee as well. Like our, our builders fee has gone up, you know, we have a spread now from like 15 to 20% and several of those are now margin, not market. So that helps, that helps push, push us right? And then we started playing with some project management, monthly fit, monthly stuff, you know, monthly fees, depending on, again, how far the travel is for the job, because totally, you have to recoup some of that. And, you know, so it's just little things like, you I just, I just struggled, because I was like, man, you can't just say, Okay, well, I'm cost plus whatever, 15% but obviously say, Oh, I'm cost plus 20. Well, the guy, the customer you're talking to is probably going to walk out of your office, right, right? So trying to recoup things like general liability, which we were already doing, but I know builders that don't do that, right? I mean, so that's a significant amount of money per project that you're losing if you're not collecting that back. So it's really easy just to add it into your contract, or add it into your estimate, or both. It's not like you're hiding it, but it's just a percentage. You know, I think ours like point oh, eight, 5% what we charge? Okay? So it's like, what point 8% of 1% would be way to say that. So, but like, recently, I put together like, a whatever,$5 million proposal, and I think the GL fee alone was like almost 40 grand, 3037, grand. So you're gonna lose that, right? I mean, so that, that kind of stuff, like we've strategized, even though, like delivery fees, like adding more stuff, adding more numbers to our estimate for things like building cleanup site, work, labor, stuff, that's just general labor for our in house employees, because otherwise they're just straight overhead, like, if you're not billing them out, right? So that helped collect. So we just started, we just really tried to start paying attention to all the little things that we could do, that we were already doing we just weren't charging for. Well, and I think so I'm not going to sidestep here, but I have a change order example that I want to explain, yeah, and I think ultimately, like, what I'm hearing from this is, as you started bringing in more service, you started looking at what you were providing as an actual service. And that's where I start to say there are builders, and they typically, there's, like, typically two lanes. It's like, one lane is they're monetizing a hobby, right? Some of their massively passionate about they love being bags on. They want to build a great product that they don't necessarily view their business as a business. And then from there, it's like, it's either you're monetizing a hobby or you're running a business. And that's what I hear like, kind of that progression of you doing is you started evaluating your business, of like, how do I generate more income? How do I provide more service in house that I can generate income on and I can actually run a profit margin on but I think the second piece, and this is where the change order example comes through. And I want you to correct me on this if you think it's bullshit, okay, but when what you're explaining to me is is you're looking at everything you're doing and you're marking it up respectively, okay? And when I typically hear it with change orders, is, builders will lose on change orders because they don't mark them up appropriately. Typically, they'll hang on to like a markup that's consistent with what was in the contract, or whatever it might be, but they don't take into consideration all the administrative, all the expedited shipping, or what's going to happen if we have to we just installed recessed can lights, and we want to tear those out and we want to put something else in. Are we including all that demolition and labor and everything has to go into it, and that's usually where they get scorched. It's not just we have to buy track lighting instead of recessed cans, yeah. Is that fair? Like you start to view it as, how do I make it is going out, and if I made honest, that's like, that's the next step for us right now, like, we're actually in the middle of evaluating how we handle that and our contracts and how we can charge for that. So, you know, you have the ability to charge a change order fee, or you can charge a higher percentage, like, you know, let's just use numbers, for example. Like, if you're whatever cost plus 15% and then cost plus 20. Let's just say it's common for builders to then come in on a change order, and it's in their contract that change orders will be charged that cost plus, say, 30% 35% and that's, that's money that you're losing. And I've got a really good friend in in Florida that's doing that, and it's been amazing how much money that they're bringing in from change orders. And it's because here's the thing, if you don't bring it in, you're really losing it, and that's what I think I'm realizing more and more now, you know, because it's like, you're gonna, it's brain power, right? It's, it's, it's schedule delays, which means if you're not billing, you're not making money. So if you're delayed, you're losing money. So you're really losing it if you're not charging for that, and that's what we've been doing, if I'm being really honest, you know, I've always struggled with, like, what's specifically a change order and what's really just a selection, right? Because I'm like, Let's do. Your light. Example, track light, can light, okay, let's just pretend like they selected can lights. And I know the right answer is like, Oh, they've selected it. Then that's a specification. Then that's what they're doing. If they change the track lighting, then it's a change order. But let's just say we're still framing right, or maybe framing is wrapping up, and they're like, hey, you know, really been thinking about it. We want to do the track lights instead of the can lines. That's a hard spot as a builder, right? Is that a change order, or is it really just them changing the selection? It doesn't impact you. I mean, what do you care? Right? It's just buying this light versus that line. So that's, that's part of the debate that we're in as a group right now. It's like, that's a fine line of being like, Captain butthole here and saying, Okay, well, I'm gonna charge you an extra three grand Charlie, because, you know, you changed your mind. Right to me, if we installed the can lights, and then it was like, hey, we want track lighting, then I think you're obviously in change or territory. But there's builders that treat it the first way, like there's for sure, yeah, that exists totally but I think that even goes back to your comment earlier, of like, wanting to just not be the just lack of a better term, like the money hungry builder, right? Like you actually do care. You wanted to build a brand. You wanted to focus on the build science, but even more so to your guys' conversation. Because I think it's a great conversation. I candidly haven't heard it, and I think that, like, is there any logic to that decision making, being and setting expectations with clients in pre con of being like, Look, if there is reasonable belief that the change you're suggesting or potentially suggest is going to throw off more than one to whatever Excel process, then it will be issued as a change order. Because I think that's where the cost happens. Right to your point. You have to finish on time. And if you've already got electricians lined up, they've already got material purchased, like, they've got all this stuff going, and it's like, a week out, yeah? And if changing from recess to track is going to be that big of a deal, rip them for a change order. Yeah, yeah. I think you're, you're out on the money. I think there's that got to be a good set of parameters, or whatever, where it's like, okay, if, if it delays us more than two days, three days, whatever that threshold is to be, you know, if it, if it causes a subcontractor to take work down, if it, you know, whatever that did, yeah, then that would have to beat it. So I think to me, you have to really identify that though, in your contract, because if not, it's just a gray area, and you're going to get destroyed on it, right? So I think that's the that's the difficult part. I mean, also feel like, with us doing design in house, like it's really our responsibility to get ahead of those things and like, have design figured out before we need it, and not, you know, and really figure it out, not just concepts. And then you get to rough ends and everybody changes their mind. So, I mean, totally, we're doing better and better and better at that. And I think that's, that's one of the reasons I brought interior design in house, by the way, it's because I want to be able to control that. That's a whole, that's a whole episode, if you want to go there one day. Well, I think so, like to this point, like, I think this is great, because I think, like a lot of our conversation, it doesn't necessarily go around for builders adding in additional, we'll call it revenue streams, right? We're not adding in excavation. We're not adding in or thinking about project management revenue stream. My question to you is, for the builder that doesn't want to do that, right? For the builder that doesn't want to increase their net income or their net profit, right? What can they do just to make sure that, like, I'm gonna build this house, and my goal is to hit a 10 to 15% net net on this thing, what can they what can they do just without adding in revenue to really stay on top of that? So if you're not gonna increase your volume, you know? And you're not going to try to do additional streams of income, like self performing work or whatever it might be. It really just comes down to your overhead and then what you're charging, right? So you're going to have to run a tight ship, right? You may not. You may be the project manager, the salesperson, the warranty guy, and I don't know, maybe even the designer at that point. I mean, because that's, that's a, that's a that's a tough one. I think I was there for a while doing that, and I was miserable. So I mean, hats off to you if that's, if that's the path you're on. But I think you're gonna have to just learn to, you know, figure out how you can increase your your contractor fee. And I tell you one thing that you can do just thinking as I'm talking, but if you don't know the difference between markup and margin, you need to right? So there's a difference, right? So, and if you you know, for the sake of that, you know, an easy conversation, like, if you're charging 10% markup, you take the cost of construction, so it's $100 of construction cost times that 1.1 right? So it's 110 bucks. But if you wanted to do margin, you're going to take that, that $1 that$100 and you're going. Divide it by point 90, and then it's going to get you a higher if it's actually, like, really, what you're making as income off of that contractor fee. And you're not changing your contractor fee, you're just calculating, you know, margin versus markup. And then, you know, so like, a 15% margin ends up being like a 17 and a half percent market. So okay, so I think this is worth going into. Yeah, it's a big it's deep, totally well. And I think that this is, like, where a lot of people go, and I'm certainly not a mathematician by any stretch of the example, but how I've always explained it, and again, correct me if I'm wrong, but it's really the way to look at markup is going to be, I've got a million dollar home market up 20% I'm going to sell it to the customer for 1.2 right? That 200 grand, about 50% of that is going to be towards overhead, and about 50% of that should be towards your bottom line or your net profit. Sure, that's how I've just simply explained it. But I think from like your math and like this, where I've always got hung up on markup and margin is you, I understand the markup of your number times the 1.1 to get your markup number, but then the point nine divided by or the number right, you're dividing it and instead of multiplying it, right, right, right. So if it's a 10% margin, you take one and you subtract that 10 Point, point one from it, or whatever. And so then you you end up with point nine, sure. And so then you just divide by that. And I know it's crazy, but I would encourage you to, like, literally, get on chat, GPT, get on Google and just like, there's videos of, like, explain markup versus margin as a builder, there's 1000s of videos. I had to clarify the contract in my the language of my contract about it, you know, and I, what's interesting, though, is, like, it's, it's very well received. It's not an uncommon way to calculate things in our industry, especially like in the commercial world, it's more accepted there, or more more common there. It's accepted here, too. But I would encourage everybody to educate their stuff on that, because, you know, that's one thing. I'll give Tom credit. So Tom's a retired builder. Tom, was it? He's like the moderator for our builder 10 group, okay? And I remember he asked me, like, hey, what do you charge? It's like, 13% he's like, markup or margin. Like, 13% you know, like, I don't know. Like, and he's like, You don't know the difference. I'm like, I don't have a clue what you're talking about. And so, and then, you know, go around the horn and hear everybody else. And there was a mix of people that did markup versus margin. And so, you know, it's just, it's one of those things, like, it's, it can be, I find that a lot of times customers, they all get hung up on, like, what's the house cost per square foot, which they ask you that in the first phone call, like, they're probably not your customer. They're not my customer, typically, yeah. And then they also, then they get down to the wire on builders, they want to just look at the percentage, right? They don't. They don't really look at that point. They're not even playing. So there's is no cost estimate. They're just looking at. So it's not, I mean, it's a fine line, I guess, but I mean, we don't hide it like you were very clear with what it is, and they understand it. But I think it's better received than then going up to say, 17 and a half percent markup, you know, and then it's to just run a 50% margin. So that's something I think it's received so well. Why do you like? I think it makes sense. Where my head goes is, is like, I mean, if just for the average consumer, right? They're not buying building homes regularly. Of course, people that will do multiple in the lifetime, but the majority like, that's just a one time transaction for them. I think most people look at this and they go, like, the business has to make money. Like, if I go and buy a shirt from Shiels, do you know what sheils is? It's like, it's like a sporting goods or call it Cabela's whatever. Okay, like you assume that there's probably, like a 30 to 50, maybe 60% markup on it, and, like, you just kind of like palette and digest that as the consumer, and you buy it, and you move on. Right? Do you think that the consumer is like, way, okay, talking about margin and like, what you're actually going to be marking this thing up and making because they assume that you have to make a living too, and you have to make money. Because I think a lot of builders get scared of that, and they're like, Yeah, over what I'm making and building this house. And I think that I was never a fixed cost builder. Okay, so I've always been cost plus. So it's always been a conversation with us. Now I've had to explain to people that we don't really make 15% like, that's not what I take home, right? I mean, there's times that I have to explain that more than others to clients, but I mean, they get it right. I mean, they know that. Here's the thing, if a customer doesn't value that and value what you're bringing to the table. Well, then you're you're building for the wrong people. Like, that's just straight up, if that's the those clients are going to buy spec home that's built to the lowest builder grade cabinets and everything else in that house. And that's where you just build that dude as fast as you can do your thing, and then just sell it on the MLS. Like, sell the real estate agent and move on. But if you're gonna try to live in the custom world that we're doing, you've got to find clients that value what you bring to the table. I mean, if you're not gonna, I don't think you could survive if you don't find those clients, because they're gonna destroy you, like it's you know, they want you to make money because they want you to be successful, and they want you to continue to deliver them a good house and bring ideas to the table and just take care of them. You know, I think a lot of the clients that we build for, they just want, they just want trust that you're taking care of them, and they know that you have their best interest. And that's probably first and foremost with a lot of the clients we build for now, you know, totally, totally No. I think that's, I mean, just with this episode largely being about making money, right? Yeah, yeah. Is it all starts with the with the customer, or the process that point, yeah? Like, maybe, like, from an action item standpoint, is, like, I think probably, like, learning the right customer happens over time. Like, maybe correct me if I'm wrong. But you might have to get burned by one or two to, like, really have conviction in those red flags. Yeah, yeah, that's a good that's a good, good way to go here. I mean, I think learning to say no is important, just by the way, you never heard that before. You know, if you have that customer that's doing all that. Because here's the thing, like we I like to date customers before I marry them. Totally okay. That should be written like, somewhere in a board in my office, like we're going to date you before we marry you. Yeah? Because, you know, you can, you can figure out in that pre con, you know, because, yeah, I think if we're, if we're drawing plans and all, you know, that whole pre con experience, that's, that's six months minimum in that timeframe, dealing with them, delivering plans, getting feedback, welcoming them into your office, talking about their dogs, talking about whatever it is, you can figure out who they are, I mean, and then you can decide, and if there's red flags, get out right. And we've done it. I mean, we've done it, we still do it. You know, learning to say no is probably one of the hardest things as a builder to really understand why you should do it, you know, let's hear your script. How do you do it? How do you dump a customer? Oh, man, you know, I've had it both ways. I've had it to where, like, it was kind of the ugly breakup, you know, I guess that's like, you know, yeah, I had a we were doing a pre con, so during our pre construction agreement. So like, we're drawing plans, we're designing your house. We're building your budget, your estimate, with you. But also, like, if there's, like, a house to demo or trees to take down, like we self perform that stuff. And so we were going out to basically clear this lot. And, you know, I told this guy, this is probably, like, a $2 million project right the house. And, you know, he's like, I need to know exactly what it's gonna cost before you go out there and clear this lot off so the surveyors can work. I'm like, Man, I mean, we're talking about a range. It's probably gonna take us about eight hours on the machine, whole day's worth of work for operator and a laborer, you know. So whatever you're talking three, $4,000 like, maybe five. I said, it depends on what all we run into. We just don't know till we get in there. Dude, he, like, lost his mind, like he's just wanted to know, like, to the penny, and he called and got violent on the phone with me, and I said, let me just stop you right there. Yeah. I said, I'm not your builder anymore. Yeah. And it was, like, it was one of those things, like, the veins are like, popping on your neck and your blood's boiling, and you're like, Oh my gosh. I probably shouldn't have said that. He's like, What do you mean? I said, I'm not your builder anymore. Yeah, you're gonna act like this before we even get started. I'm not your builder. I'm out. You need to find somebody else. And we packed up our crap. Oh, man, it was like, so that was like, kind of an ugly breakup, pre con, yeah, the other ones have been, you know, you were too busy, you know, look, it's gonna be like, our schedule's gotten crazy. We've taken on more work. We had somebody leave the company like, I'm really sorry, but I think you'd be a better fit with this guy over here. And I'll try to make a recommendation. I mean, sometimes that's kind of like, probably, I'm sure those guys appreciate the send off, but, you know, and sometimes we have to break up with them because we don't have time, right? I mean, I really like, it's not a profitable enough job, it's too far away, and it's just not a good fit for us, and so we have to just have that conversation. And it just depends, man, sometimes you can kind of like, I'd say, price your way out of it, but, I mean, it's one of those, like, if. If that's where you need to do it, where it's like, okay, if we're going to take this project, it's going to be good for the company. If it's not a good fit for the company at this margin, then, sorry. And so sometimes those things take care of themselves. Yeah. So yeah. I mean, I would say it's case by case, but I definitely, I've had a big range of breakups, of course, so I Yeah, so of course, it's not, and, yeah, certainly not to be suggested. It's easy. But that is, I'm not your builder. That is what I hear, like, most commonly in the rough breakup, yeah, like I've had, we had another episode with, I think it was Scott bland. It might have just been a conversation I was having with Scott. He's a builder down at Waco, and the same thing, it was like, got the plans on the desk. Gal walked in the office, if I'm remembering correctly, it was like barking orders. Scott started getting red red flags, and he just rolled up the plans, handing it back to her, and said, I'm not your builder, like, you got to go find someone else. And they're always kind of like dumbfounded, because they got called out finally, but to insulate yourself, and what I think you said, which is the most important the business, those conversations have to be had, especially when we're talking about profitability. How do you make money on jobs? It's like you cannot set yourself up at the beginning of a project trying to make money with that type of customer. Yeah, and let me throw this in there too. So I guess I'm just thinking about the listeners that are, that are, I guess, somewhat new in their business. They're trying to figure out how to make money and not waste their time. Because if you're wasting time, you're losing money. So when I first started, I was not doing pre construction agreements like I was just like you come in, we could talk. We could talk 47 times. You could just keep coming back, and we'd talk some more, and then I'd price it, then I'd price it again, then I'd price it again. And next thing you know, you've been dating this guy, whatever, 1010, months, 12 months. And then they're like, oh, yeah, we can't afford that. We're out brutal. And so that happened to me time and time again. And then I remember, I forget who it was. It might have actually been Jake Brewton, somebody I was talking to. I can't remember. They were like, Oh yeah, you got charged pre construction agreement. That's like, What the crap is that? You know? Yeah. They were like, oh yeah. You just gotta get a deposit from them. And then if they they walk away. Then then you keep the money, yeah. And I'm like, Oh crap, you know, how can you do that? Like, so I remember, I put, I've, like, found this agreement, like, you know, it's pretty, pretty short, like, it's a one page or maybe two pager, and it basically just says that, like, This deposit is going to cover these services. And it's like, you know, client meetings up to so many hours it's going to cover, you know, your estimate. It's going to cover any site meetings with professionals like surveyors, blah, blah, blah. And then associated with that, you know, is this the amount of deposit. And then mine has a line that says, you know, within 12 months, if we build your house, if we start your house, within 12 months, we'll give you X percent of it back as a credit. And I remember, man, that first time I asked somebody for 2500 bucks, like, I was nervous. I remember, man, I was like, Oh, man. I'm like, close. I'm trying to get through this sales meeting, and I'm like, trying to enter, like, what's the next steps? And I remember, like, well, you know, we've got this agreement that we signed next so. And they were like, okay, yeah, no problem. And it's like, without checkbook. And it was like, Oh, here you go. We'll do it today. And I'm Yeah, well, that was easy. And you're like, I just saved so much heartache. Yeah, asking yeah at the time, I was like, Okay, well, I'll give like, 90% of it back if I start your house, like, you know, or maybe 100% like, if I forget what it was. And now, now it's progressed, and now we're like, minimum 10,000 and we give half of it back, you know. And it's just enough to where it's like people, they commit, and if they won't sign it, they won't give you a check, then they're not serious, you know. And so, and honestly, you would be surprised about the people that have paid it, spent time with us in a meeting or two. Maybe they paid for plans. That's a separate agreement, by the way. And then they're like, Hey, man, we bought a house. Like we're not gonna build anymore. Never even ask for their money back, but contractually, they can't get it back. I mean, right, you know, whatever, I'm a nice guy. I'm not if I, you know, understand the situation, I obviously make exceptions sometimes, but, but that helps make money, because you're not wasting your time. It goes to the bottom dollar. Even if you build their house, you know, you still collect a portion of that to your income. So it's totally if you're not doing PCAs, start like, that's, that's like, construction agreement, yes, like that, absolutely. Start that today. If you need one, email me. I'll send you my template. I mean, that's like, 100% like, you have to start doing pre construction agreements, beautiful dude, I think so. And like, I think even, like, how you explain, like, the pre construction agreement and then the plans was, like, a separate agreement, yeah, a separate fee. But I think that's like, probably one of the. Biggest takeaways with like, kind of the umbrella theme of this episode being like, how to make money, yeah, like, even just start, but also like, how do you insulate yourself at the beginning? Last question here, and if you're like, recess is a whole nother episode. That's fine. But when I hear pre construction agreement, I'm hearing service planning, site walks, prep stuff like that. More like, service, yeah, level fees. Then do you, like, once everything's good plans are there, like, everything's locked in, we're gonna break ground, then do you go in for another deposit? Because I hear that with like, material and getting subs landed and all that we do, yeah, yeah. So advanced payment is part of our construction contract. Is what we call that, or AP, and it's a similar deal. So we get it, you know, when you execute our contract and you didn't have to then pay us an advanced payment. We hold that money ourselves, and we use it to stay cash positive, right? Because we're we're buying material, we're paying subcontractors, and then we bill out our customers, kind of in reverse and so, and then also, like, once they sign, like an acceptance letter at the end, there's, like a, I think 75% of that gets applied to their account, and then the remainder we hold for an additional, I think, 45 days. And just to catch, like, straggling bills that come in, you know? But, yeah, that that's been, if you're having cash flow problems, start that too because or anything, if you're not doing it, started because people, again, good customers that are serious, they're going to do it, you know, even if you just get$10,000 like that still helps, makes logical sense. Like, as a consumer, I'm not a builder, right? I'm in software. Like, if someone if I'm like, Yeah, build my house. And I'm like, I know I need a hole dug in the ground and a foundation port in it. Yeah? I wouldn't even cross my mind to suggest that the builder is going to front load that cost. Yeah? And it's one of those. I think what you have to look at, is your your cycle right on your AR, right? So like, how, how often are you invoicing your customers? And you know, you don't want to let yourself get too far behind, right? And because, if you haven't had a customer not pay you yet, you will give it time. It's coming, and it could be because they're trying to be a turd. It could be because they're out of cash and they're waiting on this other account to sell, or they're trying to sell some some stocks, and they're trying to there's always a reason, you know. But if you have advanced payments from people, right? And not just 1789, jobs, however many jobs you got going. You got, you got this pile of deposits. You know, you can withstand a little bit of a storm from people, like, when they get hung up, you know, good, bad or ugly, right? It doesn't matter why they're hung up. They're hung up. They can't pay you this month for whatever reason. It eliminates that panic of like, Oh my gosh. Like, how are we going to make payroll? Or how are we going to so, you know, and then to, if they're, if they're really going to be bad customers, and try to skip out on paying you, you've got this deposit, right? And then, and then you just, you get, the goal was to not let yourself get behind that deposit. So if you got 100,000 so if you got$100,000 from somebody, don't let their account get past that Bill often, you know, Bill often, don't, don't, don't let things just don't be so busy at the end you forget to Bill, and then all of a sudden, find yourself sending them $180,000 invoice and pray and they make that payment right, like that will absolutely bury you if they can. And so, and also too, I find that customers, like, always were like, oh, man, I forgot about that. Like, man, that makes me feel so much better because now, like, I was stressing, like, Oh, that's great, yeah. So, so that's always part of it. But I mean, if you you know, I actually had a good friend of mine tell me, if you're building, like, for cash customers, it's probably even more important to get an advanced payment. And I didn't understand that when he first said it, but after we talked, it made sense he had a guy that was, you know, very wealthy client, cash pay. Basically, at the end was like, Yeah, I'm not gonna pay you. Like, I'm not happy with that, you know, like, sue me if you want to. And it was, like, this total flex. And he like, filed a lien on him, but it didn't matter. Everything was like, there's no financing involved. So he had, he had no leverage, right? And so he's like, it really hurt him bad. And so he realized, then he's like, Okay, I have to start protecting myself and so, yeah, this just also, don't ever let yourself get in a bind like that if you can prevent it. You know, the ways that contractors can lose absurd amounts of money is sickening. It is. It's every step of the way I literally was on the. Phone with another contractor, one of our clients 1000 miles away from you, told me the same story about forgetting to build a customer 180 grand, I think, or something crazy, yeah. And he was like, part of it was the project manager's fault, part of it was our fault. But he was like, I had to go back to the customer, and I asked for half. Yeah, right. You're like, But dude, that's coming out of the bottom line. Like, yeah. It's like, we're talking like 10% annual profit bleed, yeah, nuts, nuts, nuts. And you just start to think about, you're like, you don't have to have those experiences, right? I mean, it's almost like, how many badges of honor. Do people have to get for the rest of the community to know that? Yeah, don't have to do that, right? Like, that's like, the difference between success in a business and failing, right? And, like, I get it right. I mean, it's easy to get lost in the weeds of this business. Like, it's easy as a builder, you get focused, like, especially in your first 510, years, like you're just trying to survive. You're trying to get the next sale. You're trying to figure out why Miss Sally's mad about, you know, her sheet rock finish or something like that. You know, you're just stuck in the weeds and you're not paying attention to your accounting system. You're not You're not tracking expenses. You're not have a even just you don't have a good organized system. Like, I mean, I was very fortunate, like, so my father in law helped me get off the ground, not from a financial standpoint, but from just the organization standpoint. Like he he was help. He was helping run an engineering company that he was at, and so he had a really good understanding of, like, file management, even, you know, and even QuickBooks, really, he helped me get all that off the ground. We kind of, like, set our roots in CO construct, we set our roots in Google Drive, and we set our roots in QuickBooks Online and so, but I can understand if you don't have those systems. I mean, you're still the guy who's got stuff stuck in folders. And like, you don't have anybody in your office helping you, like you're gonna forget about invoices. And then, you know, maybe that concrete guy forgot to ask you about it, and the next thing you know, you've closed this job out. And he said, Hey, man, when am I gonna get paid for that? And then you realize that you didn't pay him 70 grand. Like, I hear those stories, man, it's it's mind blowing. It's insane, yeah, yeah, it's a lot. It's wild. It's wild. We have, I probably told this story a half a dozen times. I need to get a new story, just because the podcast, but hand on the Bible, we have one of our her name's Chloe Brown, wildest dreams consulting. And I always give Chloe shit for this, because, like, she's like, a Chief Operating Officer, Chief Financial Officer. She's just like, wicked smart when it comes to processes and accounting. But the point being is, she has a blog with us, and it's going over. One of her clients, they exposed over $5 million in unbilled cost over the life of a business, oh my gosh, in which the owner was confident they were just, like, making great money at work. And it's like, but then you think about, it's like, okay, like, this is like a 20 year old business, or however old they are. And you start to compound 7080, 100k Yeah, right, like half a million on a bad year, big volume year, and you don't have the processes in place, and cost is slipping. Jobs get closed, bills come up. Like, yep, dude, it's nuts. It is. And then that, that's where it goes back and like, are you monetizing a hobby? Are you running a business? Yeah. And I like, as brash as that is, it's the truth. It's like, when you really get excited about understanding the percentages that go in hand with this and the mistakes that you can prevent with solid process, solid teams, solid understanding contracts. We talked a lot about contracts. That's where it gets fun. Yep, and it's not always like, I'm gonna net a million dollars this year, because I'm gonna go and I'm gonna be a millionaire. It's like, Dude, you could net a million and go hire the two employees that you drastically need, or you could invest in consulting or advertising or a new office, right, or equipment, a fleet of trucks, whatever, right, the stuff that you need to continue elevating your business. So, yeah, it's all good stuff, man. I mean, I've just been focused on, trying to grow. You know, I've been, I've been grow mode since I started. I'm still there, even I still like to have bigger plans. You know, there's been years where, you know, we've taken a loss, but it's because we've added more employees. We bought more vehicles. We're like, we're getting ready, like, we're just trying to keep going. And, you know, I don't know, I would just encourage anybody that's like in my shoes, maybe they're before me, maybe they're after me and experience but find a, find a group of people to plug into, right? It you have to, if you're if you're going to grow. First of all, I like that. Yeah, if you're not growing, you're done, right? I had a really good friend who passed away back in the fall, who was a killer builder, and he told me that, and it's like, just stuck in my brain. If you're not growing, you're done. But find a peer group, right? And even if you're not that social person, get over yourself. Find you some guys, what? What I've always like thought to be fascinating about this industry, is it, when you get involved with a group of builders, they want nothing more than to help you, like they're passionate about it. They all want to help each other. I'm not talking about the guy down the street, right? Your competition, but get out of your market. Go to the trade shows, you know, join the nhB and get in the builder 20 group. Or, you know, you don't have to be still living, but there's, there's other groups out there, and just ask for help. Man, people want to help you. People want to help you. Ask grace, hey. Man, somebody I can talk to, because totally, you don't have to reinvent the wheel. Man, people will give it to you. You just have to ask. And you got to get your systems in place or you're going to forget to bill out your client $7 million in the life of your business. Don't be that guy. You know it hurts, and it doesn't have to be that way, right? I hear it, and it's usually guys about, oh, it's just a cost of doing business. Well, it's just a lesson that I learned. It's like, well, they don't have to. And to your point is, like, when you've got these networks, whether it's Southern Living, whether it's a builder 20 group, whether it's a piece of software you use, like adaptive, we talk to contractors for a living, yep, coast to coast, border to border, everyone is on our list. So it's one of those things where it's like, if you've got those interests, you've got those curiosities, yeah, there's a ton of avenues you can take, yeah, but yeah, it's about making money. It's about building a quality product, making money. Oh, man, building experiences. What we say, That's right, exactly. Well, this was a killer episode. I appreciate the hell out of you. Thank you for coming on, and I wish you the best with all thanks, man, I appreciate it. You.