Alright, welcome to another episode of Your Business Unleashed. I’m super thrilled to have one of my mentors on the call today. Scott Connors. Welcome, Scott. Thanks for being here.
Scott Connors (00:46):
Thanks for having me.
Clayton Achen (00:47):
So Scott’s got a pile of experience in business ownership and leading leaders, CEO C-suite level folks. He works for some of the biggest employers that I’m aware of and helps our leadership figure stuff out. And so I don’t know how else to say it, Scott, but thank you very much for being here. Why don’t you give us a little bit of a bio on yourself and what you do and why I should listen to you for the next 45 minutes.
Scott Connors (02:35):
My role in the world really is to change companies, to get them off their X, where they are to their Y, their WHY. And I do that really through a mindset of understanding that every single company in the world, regardless of industry, regardless of shape or size or geography, every company in the world has one thing in common. And that’s culture. And if you can focus and change culture, which is what I do in those that I’m honored to serve with in an engagement, then companies flourish. Then you become the rocket ship that you all want to be. And that’s what I do for work.
Clayton Achen (03:20):
When I first heard you say that, I went, yeah, yeah, fluffy crap, right? Just culture, blah blah, right? Let’s just go make some money and why can’t I just install some processes and whatever and have it go? I now am a firm believer in great leadership and a solid culture. I can’t even express the difference that that has made in my life and in our business, which since we’ve known you, has nearly tripled in size. And I think we’ve grown from six to 22 people. And without focusing in on our culture, maybe we would’ve gotten there, but it would’ve been a way bumpier ride and I wouldn’t be enjoying it certainly as much. And so for anybody who’s thinking, okay, these guys are going to talk about Ru crap for the next 45 minutes, as Chuck would like to say, yeah, we certainly are, but this is the stuff that works. And if you want some good examples, why don’t you throw out just a couple examples of companies that people would recognize that get culture and it’s contributed to their success.
Scott Connors (04:23):
There’s many companies out there that get culture and most of them you’ll never hear of because they do it themselves and they do it quietly and they do it in a professional manner that isn’t about rah rah. And the ones that you hear about that get culture are the ones that are trying to recruit for scale. And so when you think about culture, it’s what we have and what we do every day together in our world without having to broadcast it out there into the social media world or the public eye. But there are a couple of companies that get culture that are at scale, but that culture that they get isn’t really what you see on the surface. And I’ll give you an example, and that’s Amazon on the surface. Amazon’s got turnover and layover and warehouse issues. That’s the surface and they’re valid issues, but underneath Amazon is a universe of, I think it’s now up to 1,631, small, nimble operating units like hr, like real estate that pick up and deploy bubbles wherever they’re needed next.
Also within Amazon, transferring to a different department to further your career is encouraged. If you want to go somewhere else, it’s encouraged to go find your passion within that enterprise. Those are some things that get culture right. Those are some examples you’ll never see or hear about. I think another one is UPS, and I’ve had the honor to get to know them lately, and UPS is really about advancement. It’s really about encouraging you to learn to go get that continuing education. If you’re in the warehouse, you want to learn tech, learn it. If you have a great idea, speak up and we’re going to action it. And then there’s some Canadian companies up there. Aram Sleep Products in Edmonton is something, an example that comes to my mind. And Falo Ture does a great job up there. I think you guys at Achen Henderson do a great job, thank you in how you’re building your culture.
I think Sonata Designs, which is in the construction industry, which we’re going to talk about today, has a great culture where they want people to be themselves and speak up and lean into the jobs that they’re doing and how can they make those jobs better for everybody else and really focus on the customer. I think Fence Line Rentals is another one also in Edmonton, which rents temporary toilets and temporary fencing and does waste disposal. And they’ve worked real hard on their culture to make it people first and customer centric and employee focused, and that’s where culture starts.
Clayton Achen (07:03):
This is your business now. What else have you done?
Yeah, I’ve owned four different companies that I scaled and sold. One was a restaurant enterprise, which I scaled on the franchise model. One was a construction company in the HVAC space. One was an executive recruiting firm and then one was a mortgage company. So I’ve kind of run the gamut a little bit there in the ones that I’ve had the privilege to lead others and own and scale and then sell.
Clayton Achen (07:41):
Well, I’m not sure you’re selling this business. Maybe you are. I’m not sure what your plan is here, but this is now what you’re doing and why do you do this? Why is this your thing? I know, as I said, you’ve worked with some pretty big outfits with a lot of employees and c-suite level people. I’m always humbled when you come and work at our level at small business level and you’re always eager to do it. I don’t think you’ve ever said no to me on that. So tell me why you’re doing that. What’s your why on this?
Scott Connors (08:11):
It’s my life’s passion to make people’s lives better by improving the culture at the places they work. And I know that sounds fluffy, but that is absolutely my life’s passion. I can’t get enough of it.
Clayton Achen (08:21):
Yeah, yeah. Well, I mean, I can testify that that’s what, that’s actually what it is and that you do a good job of it. Let’s talk about construction. So we’ve got experience working together on a number of construction companies, and we see this as pervasive in the market where you start out swinging a hammer in the journey of owning a business and you’re swinging a hammer for someone else and you go, you know what? I can swing this hammer and do what my boss is doing a little bit better and keep more of the cut and have more and do all the reasons that we enter entrepreneurship. And then they get into sales and they’re good at sales and their business scales, but their business doesn’t grow up with them. And so they end up hitting a wall at some point. Usually our experience is it’s been between five and 10 million somewhere where the business has not grown up with the business and now there’s a wall there and everything comes crashing in, cashflow blows up the processes, you got high turnover, the processes are imploding, nothing seems to be working, and eventually a lot of these construction companies fail.
Why does that happen?
Scott Connors (09:34):
Yeah, it’s not pervasive just to the construction industry, but the construction industry has a better failure rate or a higher failure rate. I shouldn’t say better failure rate because it’s a microclimate, but we’ll get to that. Every business starts as a small business. And the mindset in a small business is just do it. And the next thing you know, you can’t just do it from a bank statement, now all of a sudden you have to have QuickBooks or in a small accounting software. And what happens is as you have a mindset, as a small business, as your revenue gets to that first million and you’re like, wow, we did a million dollars in business, what you’re not doing is understanding the health of your business, which is like a doctor’s checkup in your balance sheet, but also in your profit and loss statement. And what does it mean and what am I seeing in this million dollars?
I just worked my tail off and my people just worked their tail off and we went from one job to the other. Sometimes we were double booked and we are just in a place now where we’re just too busy to focus on the business, so we’re too focused on the work. And that’s the problem. When you get from about 1 million to 3 million, you start to become a company and not a business. And what happens is, as a construction owner, you’re making all the decisions, but as you get past that one and into that three and million dollar mark and you start to continue up in the revenues, you have to decentralize that decision making. You have to have others that you’ve brought along and you’ve led and you’ve trained and you’ve trained them how to lead and how to make decisions with a leadership mindset. And because you’re so busy working and swinging that hammer, you aren’t taking the time to work on the company. And when you don’t work on the company, you find yourself in this three to $5 million range where you’re too big to be small and too small to be big. And I call that the danger zone.
Clayton Achen (11:41):
Why does that happen? Why is it unnatural for us as business owners to stop swinging the hammer and focus on the business? Because this isn’t just construction, but let’s focus on construction. Why is that?
Scott Connors (11:54):
Because you got into the business, you were good at swinging the hammer, but now others have to swing the hammer as well as you do. And along the way, you forgot to make everyone else better than you. And so you’ve been a craftsman, but you haven’t been a company leader. And there’s no training in that methodology of swinging that hammer that says, I’m going to watch that superintendent, or I’m going to watch that foreman, or I’m going to watch that president of that big construction company that I’m subcontracting for and see how he does it. So we don’t find heroes and we don’t find mentors, and we don’t put our mind into a space that says, I need to learn how to run a company instead of just running a business.
Clayton Achen (12:41):
Yeah, thank you. I mean, I’ve already made your head big enough as it is, but that’s really what, and you deserve it, by the way. But that’s really what you helped me with is going, okay, Clayton’s time to stop doing tax returns for a minute here and start teaching other people or surround yourself from people that are better at doing tax returns than with you and inspire them, right? And you’re right. That’s the difference between, as we say, owning a job and owning a business, right? Yeah, no, you’re right. And you’re so bogged down in the day-to-day, and I think for me, one of the biggest parts for me to make that transition, it was terrifying because the next person I have to hire to swing the hammer to do the tax return that’s in Canada for a decent senior manager, you’re looking at six figures and where’s that going to come? Well, that’s going to come directly out of my paycheck, so I need to keep swinging the hammer. And that’s scary stuff. That’s scary stuff.
Scott Connors (13:39):
And that’s the danger zone. That’s what I mean by the danger zone. But there’s two things that you touched on there that are super important that every leader needs to hear, especially in the construction industry. There’s two things that you have to take care of. Number one, you need to eliminate, and the second one you need to learn. The first one is ego. The ego is not your amigo. And what happens when you have ego is that you put yourself in a place where you have to be right all the time. And what you realize in leadership is you never have to be right. You just have to ask the right questions. That’s what helps people learn. So we got to eliminate the ego, and we do that by learning humility when we say, I don’t know, I need help. I’ve got to figure this out.
I don’t know how to read a P and L. I don’t know how to bid a job this big. I don’t know how to order materials at scale. I don’t know how to have a warehouse of lumber and buy for my entire year to 20% discount to take care of my margins. I don’t know how to think strategically. So we have to eliminate the ego by learning humility, and we got to focus on strategic. And when we do that and we do those things, we learn, we must decentralize decision making. My foreman have got to make the decisions. And that’s the difference between a good leader and a great leader. And the difference is that difficult decision-making is made downstream. If you don’t have to make a decision all day long, you are a fantastic leader because your enterprise is making those decisions on their own.
Clayton Achen (15:22):
It’s a good point, but I’m still sitting here going, yeah, that’s all nice to say, but capital’s limited. My resources are limited and I’d love to do all the things that you’re talking about. We just don’t have enough money to do it.
Scott Connors (15:37):
And that’s a fallacy. That’s a fallacy that it takes money. It’s what it takes is engagement. What it takes is going to your people and saying, I need help. I need you guys to start to own the workspace. I need you to own those battle spaces that are the jobs that we’re on in this construction industry. I need you to focus on cost. I need you to focus on productivity. How can you help me do that? What do you need? That doesn’t take any money. It takes humility.
Clayton Achen (16:04):
Well, and when we talk about de-risking, because it’s risk, I’m risk averse, money’s scary, I don’t understand it, and all this stuff takes an investment. And so for me, it took, I know that you’re invested in your military because you’ve had me read a lot of military leadership books, and there’s a lot of great military leadership books that are directly on this point exactly on how to decentralize your decision making, et cetera. And what I can say in terms of de-risking, and what I mean by that is I’m scared to spend money to grow. So how do I get over that fear? Well, you create some certainty. And how do you create some certainty? Well, you go and learn from the people who have done it before. And once you start understanding and getting into this and investing in what you’re talking about, Scott, my experience has been it’s not risky. It’s a process and it’s a fundamental of business. And once you start following these fundamentals in this process, it’s going to work out because you’re doing it. It’s not a maybe.
Scott Connors (17:10):
And that’s a mistake that the construction companies, especially smaller ones make all the time. They’ve got this contractor mindset. So we’re a subcontractor on this job where a general contractor on this job, we’re kind of a hybrid on this job, so they have a great mindset to bring in contractors and to utilize contractors, but when it comes to their head office, everyone’s an employee and those never thought about it that way. And those employees are limited in scope to the small business mindset, and there’s a loyalty there, don’t get me wrong, but those people need to be trained. Hey, you’ve been great at the books, but we’re going to need to leverage here, and I don’t even know what that means. So can you go learn what that means? Can you get some help? Call your accountant firm. I’m a huge believer, and I believe this more and more as we get into this next economic cycle and it will be a downturn.
I’m a huge believer that you need to outsource your bookkeeping 100%. And if you can put your bookkeeping, I know this sounds like a sales pitch, but I truly believe this. If you can truly put your bookkeeping in your accountant’s hands, you don’t have to worry about the CRA, you don’t have to worry about financial reporting, and they can take the time to explain to you and nurture you to become a company leader versus a small business owner
Clayton Achen (18:32):
Accounting is somewhere where we consistently see people get bogged down, particularly in the construction industry. I think one of the reasons, and we’re going to dive into the specific mistakes and things that owners can do here as we go along, but one of the reasons that I, and I’m biased here obviously I own an accounting firm, is people by and large don’t value their accounting function properly. I think when you’re really small, you’re going, that is an expense item on my p and l. It’s something I have to deal with to keep the government off my back. What I’m really concerned about is how much cash is in the bank and anything beyond that. It’s like, yuck. Let’s just go find the cheapest bookkeeper we can on Kijiji or worse, let’s go hire a bookkeeper in and expect them to do the job of ACFO and a controller. And here we’re going to take a $60,000 bookkeeper and place them in a $250,000 finance department and expect them to cover it all and then wonder what’s not working out in six months when it doesn’t work out for you. Anyways, that’s my bias. I just see that happening a lot.
Scott Connors (19:45):
And so you got to remember, construction is high volume, low margin, and so you’re rolling the dice every time you go into a high volume job or multiple jobs and a low margin business. So you have to manage your margins. So you don’t need a bookkeeper for that. You need a controller. You need someone who can look at job costing and update you on job costing, update your foreman on job costing. And everything you do financially in a construction company is all about job costing. And if we hold every construction company in Alberta and said, raise your hand if you have job costing, it’s going to be a very small number of construction companies that raise their hand.
Clayton Achen (20:30):
And then of the ones that do the follow-up question is who’s happy with it and confident in it? And that’s a pretty small window as well.
Scott Connors (20:40):
And then take one more step forward if you’re actually forecasting. So what we’ve seen is we’ve seen an evolution from bookkeeping to finance. So there’s the old adage that says, take your bookkeeper and make that bookkeeper a controller, and what does that mean and how do we bring someone in or train our personnel to think in terms of job costing? It’s not about our p and l, it’s the microclimates of all the individual p and ls by job.
Clayton Achen (21:13):
So let’s dive into that a little bit because I bet you that that’s a problem that you see quite often is how do we understand what we’re making on a job? And when we talk about what’s by margin, it’s pretty easy. At the end of the year, we’re three to six months over the year end, we’ve met with our accountant and they presented us with financial statements six months after the year ends closed three months after the year ends closed and goes, here’s your margin for your company last year. And that’s basically for a lot of construction company owners, the only time that they really get somewhat, I don’t want to say accurate picture, it’s not accurate, it’s at a point in time way long ago, and we’re not including accruals. So what is the holdup with people getting job costing right in the construction industry? What can they do better, and why does it matter? Talk a bit about that.
Scott Connors (22:04):
So let’s talk about that small business to company piece where the mistake is made. That’s where the fatal flaw comes in, okay? Because you go from a mindset of bid it right? When you’re really small, you bid it right, and you have a craftsman’s mentality, which you should never lose. Then all of a sudden cashflow gets tight. You’ve got retention on two or three jobs at the 10% holdback. Now you’re bidding it to win it, and as soon as you bid it to win it, you lost because now you’re just trying to keep the cash in the account. And I’d much rather have no money in the bank and profit on the horizon, then have a bunch of cash in the bank but owe a whole bunch of money. And that’s where we find ourselves in accounts payable. So what you need to do is you need to be mindful of your accounts receivable, which is your first bookend in construction. Are we keeping our accounts receivable tight? And as you grow, you have those processes in place to make sure your accounts receivable are tight. As soon as you get into that big job that you want and you’re all excited, but they pay you every 90 days, you’re done. If you don’t have a line of credit, it’s over before it began. And that’s where they fail. They fail in that, and that’s the wrong time.
Clayton Achen (23:21):
That’s the wrong time to ask for a line of credit. By the way, you need that line of credit before you bid the job, but how do you get the line of credit before you bid the job credit?
Scott Connors (23:30):
You need to go get your line of credit when you never think you’re going to need it because your balance sheet is so strong and oh my gosh, we’ve got $90,000 in the bank. That’s as much as we’ve ever had. That’s when you go get your line of credit. And I’ll tell you something else, and this is really important for construction companies. They look at the microenvironments of their economics, they look at that home builder, they’re servicing or they look at that commercial GC that they’re servicing. What they don’t look like is the bigger horizon, the macro climate interest rates going up, house prices going down. When banks look at macro climates and you’re looking at a microclimate, banks are never going to lend you money in a flat or declining macroeconomic environment. And if we don’t understand what construction company is forecasted to be next year and how we take a piece of that construction spending, we don’t look at the macroeconomic environment as a trade. We’re putting ourself at the mercy of the economic gods and that never works out.
Clayton Achen (24:31):
Let’s talk a little bit about big jobs. You’re out bidding the big jobs and you’re bidding it to win it. And I like that line by the way, because we’re going, you know what, if I make no money on this, I’m going to juice my p and l at least the top of it, and that’s going to be attractive for some reason or another. I’m going to see a bunch of cashflow through my bank even though it’s not actually mine, it’s already spoken for because my margins are so thin. There’s a mentality though that I need those great big jobs. And that is a very common mentality. And you start working with big builders, and guess what? Big builders have the power to delay you 90 days. And if you don’t have a lot of credit, you’re in trouble. And I’ve seen builders in Calgary go to 120 days, and we just passed some laws in Alberta, by the way, that allow contractors to put liens on builds if they don’t receive payment.
I think it’s 30 days, which is pretty tight, but nobody’s going to enforce that because then you lose your contract with the big, they’re just not going to hire you anymore if you go and start pulling those triggers. And so you’ve gone out and you’ve bid a huge job, you’ve leveraged yourself on this job. You have to go and put a bunch of resources into this job in terms of time, labor, materials, whatever. And now you’ve got a collection cycle problem because they’re not paying for 90 days. Is it worth it? Is it worth it dealing on those and why is there such a, why are we foaming at the mouth to go after these great big jobs, right?
Scott Connors (25:59):
And if you’re listening to this podcast or watching it however you’re getting the information, hit the rewind button to where Clayton just started talking. He said, I need this job. This job will look good on my P and L. What did we just do there? We’re in the what we’re in that keep cash coming in trouble mindset. So we’ve already failed. That’s one and two ego, I got the big job. You don’t want the big job. You want the right job with the right GC that has a mindset that says we take care of our trades. Dawson Wallace is a great example at construction company at Edmonton. They take care of their trades, they understand that their trades are their lifeline. We want to work with GCs like that. We don’t want to work with the billion dollar REITs that are looking at earnings per share and we’ll take one electrician and put ’em out to 120 days and they fail and they just bring in the next electrician. So you want to work with the GCs and you want to work on the jobs where the actual payees, the ones that are paying you have a vested interest in your success. So it’s not about the job, it’s about the partnership.
Clayton Achen (27:14):
And that’s so interesting you say that because another thing that occurred to me earlier when we were talking the bid it to win it, you have to do that. It’s such a competitive environment. There’s 40 bids coming through for this job, and it’s not going to be, the mindset here is partially the lowest bid wins. That’s always in the back of your mind. And so what can we do as construction company owners or any trades business? Let’s not just limit it to builders, but anybody in the trades, what can we do to get over that? What can we do to get over that hump of thinking, my only value is in how low I bid this job?
Scott Connors (27:50):
Yeah, great question. And the answer is culture, and here’s why. Every construction company I work with, and I’ve got quite a few, and some of them are very, very, very large. We set up what’s called bid teams. We bring the people in that are actually going to be doing the work. We get their insight into the bid itself. Hey, you know what? This is going to be a winner job. This is going to be harder on the crew. You better consider that we’re only going to get about 80% uptime because of the snow, because an El Nino year in Alberta, we’re going to see a lot more snow. So this job’s going to take longer than the general contractor thinks it’s going to take. You’re not going to know that if you’re sitting in your office with your heater on and your slippers. You need to bring your people in and have them be part of the bidding process.
Then they buy into the number and they are held accountable for the performance of that number. Hey, Bob, you said you could do this for 50 grand. We’re at 35,000 and we’re only halfway done. What are we going to do differently here? So you’re proactive all the way down the supply chain of people that are accountable for the cost side of the bid itself before you even make the bid. And I’ll tell you something else on the other side of bids, a lot more than I’m on the trade side now. We don’t take the lowest number. We take the right number because we don’t want to be over budget on our construction loans. So if I put a hundred thousand in for wall coverings, but my bids are all coming in at 1 25 to one 50, we’re not going to take the hundred thousand dollars bid. We’re going to take the 1 25. We think it’s the right number. We’ve worked with the trade and they’ve shown us why it’s the right number. It’s all in that relationship. It’s not the lowest number. It’s the right number.
Clayton Achen (29:46):
Yeah, some really valuable stuff in there. And I think pretty much anybody who’s listening to this podcast in the construction industry knows that it’s all about relationships. This is a very relational industry, but I think there’s this fear that we just got to get over. We just got to get over this fear of bid and low, right? It’s more about bid and right, and I love that. Okay, is there another way? And so where I would like to go a little bit is I was thinking today about niching, right? And we’ve sort of grown a construction specialty at the accounting and advisory firm because we’ve got resources like you and we’ve got a couple heavy hitter fractional CFOs who’ve got a lot of experience in the construction industry. Well, why would we niche? Why niche? And then I started thinking about my doctor. So I got to go and see a dentist to get a tooth fixed, and it’s like there are niche dentists and there’s the dentist that you go to get the tooth fixed instead of just the generalist. And then I saw a new on the way home, a sign for a foot and ankle person, and I’m like, wow, that outfit just does feet and ankles all day long. And when you look at their success, financial success, we’re talking now, who knows about their other, how they measure success, but if we look strictly at their p and l, those specialists are making way more than a generalist. And so is there some value in talking about niching in this industry as opposed to being a generalist?
Scott Connors (31:23):
I don’t think it’s a question of niche. I think it’s a question of gathering your people together and asking the question as a leader or a founder and saying, what are we good at? That’s your specialty. How do we go from good to great? How can we do this better when we pull up on the job site? Everybody knows we’re the best in the business at this. If we can do that really, really, really well, then we can bring something else online in more of a generalist mindset and do that too, because it’s the process of being great at your trade that separates us from our competition. We don’t want the lowest cost provider. We want the provider that’s going to finish on time, on budget, and passes every inspection. That’s what we’re looking for in this industry. What we’re not looking for is the guy that shows up on Tuesdays and we don’t see him again for two weeks, and he was the lowest bidder. We don’t want to do it. We want to do it right, and we want to perform at our optimum level and consistently look for ways to do it better.
Clayton Achen (32:34):
What else do we get wrong in this industry that we could work on that some low hanging fruit or anything else that we can start looking at?
Scott Connors (32:41):
So I call ’em the bookends, the construction bookends, and on one bookend, we’ve talked about it as your accounts receivable. You need to be an animal on your receivables. Oh, retention will come out in 30 days. Go get it right. Go get it because it’s passed every inspection and you’re Do it. Get it now. Right? So the one book
Clayton Achen (33:01):
We should start calling it 15 days.
Scott Connors (33:04):
Well start calling it day one. “Hey, we’re done. When can I pick up my check?” Well, we haven’t done, okay, what do you need? So you can release the check and be mindful of being in that collections business and really focus on those receivables in the construction business. One bookend. It’s got to be a bookend, meaning nothing goes past. It is your receivables. Think about account receivable in the construction industry. They’re going to tell you the story. They’re going to tell you the story of the performance of your enterprise in the receivables. Let me give you some examples. If everything’s at 90 days, it means you’re not doing your job very well. It means your trades are not delivering the right product or the right service in a timely and professional manner. People don’t want to pay you. If everybody’s paying you in 30 days on time, it means you’re not charging enough.
It means that, Hey, just pay it. Pay it. Just pay it. What you want to know is that healthy piece, that piece of that 45 to 60 day mark, where right there, you know that you’re doing it right and that your value proposition is filling the gap between value proposition and value perception. That’s where you know spoke about relationship. That’s when you know that there’s healthy relationships because whomever it is, you’re contracted to work for, respects the job you’re doing and is paying you within 15 days after they’ve submitted for their draw. So one bookend is the receivables. The other bookend is quality control. Did we get the right size lumber? Did we get the right size tin? Do we have the right rivets? Do we have the right screws? Are we within the survey boundaries as we start to build the infrastructure? Is our hardscape concrete to the highest quality that we need to be delivering in changing environments is our quality control meeting, our own expectations? If you get quality control, you get receivables. And if you focus on those two bookends as a construction company, you’re going to be just fine.
Clayton Achen (35:04):
You must have had some experience in some rescues then where the quality wasn’t right. What does that do? What does that do to your business? And did the business owners realize it when you got into them with them? Or was it a light bulb moment? Tell me a little bit about that.
Scott Connors (35:21):
Sure. So first of all, it’s in the receivables. “Why haven’t they paid you?” “We got the concrete wrong. It keeps cracking.” Okay. “Did you inspect the concrete on the first board?” “No, we never inspect concrete. I love Joe. He delivers great concrete.” Well, not this time. So how are we making sure we’re delivering the right lumber with these 2x4s? Half of them were warped, so we had to go buy more. It was a two week delivery. If you QC that lumber, when they hit the job site first, you wouldn’t have had this issue. You’d have gone up the supply chain and reordered and said, get this lumber out of here and bring me new lumber within 48 hours. So you’re on time and you’re on target with quality control…
Clayton Achen (36:04):
And your margins. I mean, you can collect receivables all day long, but if you don’t have margin, what’s the point? Right?
Scott Connors (36:12):
If you got to buy your materials twice, Clayton, you no longer have margin.
Clayton Achen (36:16):
Why don’t I have any cash? My sales are great. That’s why.
Scott Connors (36:20):
Yeah, that’s why. That’s right. Good point. I use the pizza restaurant for construction companies all the time. Oh, I did a hundred thousand dollars in sales. I have no money in the bank. How does that happen? Well, because my cheese cost me 60 grand and my labor costs me 40 grand and rent costs me another five in utilities. That’s why you have no money in the bank. If you focus to those core principles, if you take the ego out of it and you learn humility and you decentralize decision making and you outsource to the professionals on the finance side, and you think job costing as a result of receivables and quality control, you will be successful in the construction business and you will scale.
Clayton Achen (37:07):
Alright. And so that’s a lot to think about because I’m still swinging a hammer, right? I’m still scared and I’m still swinging a hammer. Is there a book that you’d recommend to start with or is it just, what are my next steps to start on this journey? How do I actually action this stuff?
Scott Connors (37:27):
First of all, find your hero. Who is somebody in the industry or who is somebody that you respect and admire for the way they run their business? Take ’em to lunch or take ’em to dinner, take ’em to breakfast and say, I could use your help. How do you do it? What do you focus on? What should I focus on? Get a mentor, find your hero. And if you don’t have a hero, reach out to people like you and me, right? Get a coach. When you say to LeBron James after he hit the game winning three pointer, he’s not going to say, I’m the greatest basketball player. He is going to say thank you to my teammates. Thank you to my coach, thank you, my nutritionist, my strength coach, my mental coach. Great people surround themselves with coaches. They surround themselves with people who can help them stay focused on what matters and train and educate them. And if you are not in a learning mindset as you go from small business to company, you’ll fail every time regardless of what enterprise you’re in.
Clayton Achen (38:27):
And it really takes, I hit this all the time with business owners that I run across and I’ve been there. This is not, I love who get, I’ve been said this a few times in the last week at presentations that I’ve done. I love people who get on stage and talk about how great everything is, and they forget to tell all the mud that they had to wade through to get to their, it’s like we have ups and downs, and I still have emotional ups and downs in my business all the time. Last week I had about three of ’em where I was just in the dumps and then I was riding a high, and then I was in the dumps, and then I was riding a high.
Maybe I need to go see my therapist more. But I think it’s pretty normal for people who own businesses to go through this, right? There’s an inflection point that you hit where you’ve got some decisions to make. You can keep operating and operating and operating, and maybe you’ve got a stack of RFPs at your doorstep and you have to turn out that work and propose on that work. Or your alternative is you only have so much time in the day, and so you can focus on building a business now, which requires you somehow to figure out how to not do that for a bit. And I was only able to do it by the good graces of my business partners who said, we’ll, take care of the tax returns. You go help us build this business. And so I owe everything to that to them giving me that breathing room.
But I had partners, I went and found partners and other people and surround myself and took a personal financial hit temporarily to go, you know what? Tomorrow’s going to be better. And so there’s an inflection point there. And so that’s been my experience. You have to actually take that step. And I constantly come across business owners all the time who I’ll even ask ’em to come to a three to five club and just say, Hey, come be a part of the CEO mastermind and let’s talk to some other industry leaders. And they go, you know what? I’m not ready yet. I’m still busy grinding. And that’s regular. That happens all the time. Do you have anything to say to those people in that inflection point?
Scott Connors (40:23):
I do. I think it was the Indigo Girls that said, the hardest to learn is the least complicated. Change your mindset from I to, we have all this opportunity. We need to respond to all these RFPs. We need to bring our people into the decision making, preparation, bidding, ordering, p and l cashflow. We need to bring our people in our circle and we need to do it with humility. And the day that you woke up and you realized that business was an emotional, not an emotional experience, and we need to be able to take our personal emotions, our highs and our lows out of the decision-making process in the business, you were able to scale the business. That’s where you had the humility to lean on your partners. Construction is high volume, low margin. Your playing craps on every job. You don’t have to play craps at the table all by yourself.
Clayton Achen (41:28):
Yeah, yeah, yeah. Really good advice from Scott Connors. Scott, thank you so much for agreeing to be part of Master Built, this podcast series in Your Business Unleashed podcast for construction owners. How do we get ahold of you, Scott, if I’d like to have another discussion?
Scott Connors (41:46):
Yeah, sure. So you can always reach me on my iPhone, which I’m always available on as you well know. And I’ll put it out there, 303-862-0507. Always happy to talk to you. Love getting voicemails from, hi Scott. You don’t know me, but I heard you or I saw you here or there. I love that. I believe that people should talk to people and be with people. And you can always email me at Scott@cranksetgroup.com.
Clayton Achen (42:16):
Thank you so much, Scott. I really appreciate you making the time. Enjoy the rest of your weekend.
Scott Connors (42:21):