吃瓜不打烊

Hi, everyone. Welcome to profitability masterclass. Thank you so much for joining us. I’m Kristen Fernandez, the, event specialist here at 吃瓜不打烊. This webinar is eligible three IACRC continuing education credits. So with that, I will bring Chris in, and we’ll get started. Morning, guys. Afternoon for some of you. This is awesome. This is gonna be a, a great event. I will look forward to this one. This one is a little bit of a a special one for me. It’s the first one we ever did in 吃瓜不打烊, but there was a, it it talks to profitability and the pains that you come through, and so we’re gonna we’re gonna cover off a lot of things today. We’re gonna change it up a little bit. So if you’ve been to these ones in the past few years, normally, we go in and we talk about volume and sort of a little bit of the higher level. Last year, I got a bunch of emails that said, hey. This works in an office. So, like like, it was a little bit of a a discussion about, like, that it’s great in theory, but it doesn’t come from the field. So I’m actually gonna show you how I discovered this. Because if you don’t know the backstory of it, you probably won’t understand the pain that it took to figure this out. So I’m gonna share that with you to start. If you have your technicians here who are in out of the field, we’re talking to them too because a lot of it applies to the overall business. So while this is, yes, focused on profitability and the the owner structure, it applies to those that are in the field, doing the day to day and how dollars are put into the business. So this will explain a little bit about that. Then we get into talking about costs and how we manage costs and how I looked at costs a little bit differently than others, and I just share a different perspective there. The dollars that are lost, the things that you can’t see in your accounting sheets. And, I’ll show you how I found that and how it basically changed the way I looked at the business and where we found a lot of missing dollars inside the business. Then we go through profit and how it impacts your growth, and then why sometimes you freeze up when you’re growing. It seems like it gets harder. We’re gonna cover that off. We’ll talk about scaling your business. So taking everything in the lost cost and profit section and putting it into why it and how it’ll affect your business when you go to scale. And then I share just the last part, which is, it is it’s my personal shot back at those that said I built this in an office. I’ll show you some paperwork that I had built and how I came out to where I got to. So, anyway, it’s it’s gonna be a fun one. We got question and answer periods in along the way, and and then we’re gonna be taking those two breaks. So it’s kind of like the fifty minute mark or the hour mark. I don’t know where it actually drops. We’ll take a break, then we’ll take another break, and then we’ll go and finish up the lessons, and we’ll jump into the q and a. And then we’ll just hang out together, and you guys can just rattle it around. Get involved. If your team’s sitting there, have them participate. We got some polls so they’re it’s all anonymous. Anything that we do in our polls, no one can see your answer. Everything just shows up as a generic response, like cumulative response. So, be honest. There’s some polls for the technicians and adjusters and TPAs that that happen to be here, and then the rest of them are for the owners, and so we can have a real discussion. I use that because at the end, when we go into the scaling part, we’re gonna have to look at the calculator and how those changes impact your business and what it means to your business. And then you guys got sent out a calculator that that I just use for just demonstration purposes so that you can understand how those small changes have a big effect on your bottom line. Let’s get started. So, let’s keep going. We got polls. We we wanna start off. This year, we’re starting off with a series of polls just so we know who you are and who’s here. And there’s a number of them there. How many people are logging in with you? It’s just me, two to five, five to ten. We have a viewing party here. Sometimes you guys are doing those big parties where you bring people in from the field. Those are awesome. So that pulls up. Beautiful. And then Looking good. You got the next one. What industry are you in? Restoration, insurance, independent, TPA, or other? So if you’re other, there’s a few questions where I ask about the restoration contractor profit. Don’t answer that. If you’re not a restorer working in the business, don’t answer that question. This is just for the restorers who are there. Usually, we get some insurance and TPAs right now. I’m not seeing any on here. We’ll have a different conversation. No. We won’t. The best, what best describes your company? It’s a national corporate owned, a regional, a franchise, or independent. And I’m gonna talk about how that, how the different models are impacted on the cost side. And when you factor in some royalties or, like, head office payments that go back to the mothership, how you need to look at that when you’re comparing that to an independent. What service area what area do you service? Bar damage, reconstruction, mold, contents, other. Probably one should have said all of the above, but that’s okay. Other is interesting. Which country do you reside in? Canada, US, Australia, or other? We got one Aussie, one other. That’s awesome. I don’t know where you’re coming from. Put it in the chat if you’re from somewhere exotic, like New Zealand. We got United Kingdom. No one from there. And then the last one is, what percentage of your jobs are sourced from TPAs? And, and we’ll get that in there. Of course, you are, Ron. You’re like a different country out on the East Coast. Alright. Let’s, let’s see. We got still still answers pouring in, but I think we got good enough. Awesome. Okay. So a lot of you guys answered. A lot of you are just watching alone. Some of you are in, like, small parties, and then a couple of you are doing five to ten, which is awesome. You got your team in. So I’m gonna make sure we talk to that and then get involved. Just, like, participate in the chat or or ask questions. Kristen’s monitoring it. Law restoration, we have no insurance, no independence, no TPA. So that’s that’s a different discussion today than we’ve had in the past. And then a lot of franchise and independently owned, which is is awesome. We’ve got a whole mix. So I’ll explain some of my experience with those and why you should look at it from a certain perspective. We got water damage, recon, mold, contents, other. Cool. And there we go. Alright. In two thousand five, I started I I started actually, I was hired to do fraud investigation, but I actually started in in underwriting. So, literally, they said underwriting investigations, which all it meant is I was out looking at what type of floor someone had. Is it plaster or drywall? Is it carpet or hardwood? And I would report back, is there any knob in tube? Like, that was my job. And then I got before that, I was a sheriff, so I got pulled in as a fraud investigator, and I was on the insurance side. And I took a course, loved the water damage, and one of my contractors said, hey. We’re looking for a marketing person. And I, like, kind of arrogantly said, hey. If you have something national, call me, and they literally did. So they called me. I had Western Region, and I started to run the West as a as a business development manager. Now what happened from there is I had a a company I was set to go sell franchises in the West, and I met this company, met two guys. I really liked them. And they asked if I wanted to become a partner in their business, and the reason we couldn’t make them a franchise is they didn’t make enough money to pay the royalty. So we couldn’t make them a franchise, but then they were like, hey. Do you wanna come partner with us and help us get profitable? I’m like, yeah. I I’m doing some stuff you’re not doing. So I ended up going and working and moving to Vancouver from Winnipeg to run this large independent. And what was interesting is they had a lot of sales, but they didn’t have a lot of profit. And so I was like, okay. That’s interesting. And in the same time, for the same year, I went to work for another company the following year. The same year, another company had massive massive revenue. So while I was there, these guys had this, like, low dollar, and this company had lost. So they the company I went to work with, the small independent, had made a little bit of money, whereas the big national had lost money. And the year I went in there, I took the the company, and then the next year when I went to the other one, my graphs are off. So I’m I’m gonna tell the story this way. I’m gonna just run it here. So I worked with a small independent, and I hired a a high performance team, and we turned it around, and we brought our margins up. And at the same time when I went to interview, the company that had huge amount of revenue but was losing money couldn’t believe that I actually turned a profit. Because they’re like, there’s no way you can turn a profit in this market, and I did. They had hunted me. I ended up in that organization, and I did the same thing with them. We turned a profit the following year even on declining sales. So that was my start of figuring it out. And the way we did it is we smashed every system. We went in and looked at how our technicians ran. We put our technicians in the training. We did everything you had to do to make them amazing. And so I had this little bit of experience, and I started this company called Restimate. And it was my Xactimate training and field scoping. And in two thousand eleven, I was Canada’s only independent Xactimate trainer, meaning I worked for no company. There was others that worked for Xactware, but I didn’t work for anyone. I worked for myself, and all I did was share what I had learned. What was funny is my friends are like, hey. You you you’re doing something no one else is doing, and I got cocky, and I’m like, oh, you know what? Let’s start that business. And when they say you fake it till you make it, it was kind of that looking back because I didn’t really know a lot, but I knew a few things about a few things like Xactimate. I had a background in marketing and pricing, and so it all made sense to me. But if you wanna see a fake smile, like, right there, that’s that’s the face of, like, that guy, I would not trust him with my business. But I went across the country. I trained restorers. I trained insurance companies. I wrote insurance company protocols. It was a good time. I met this gentleman, Ken Tucker at DKI. He was with business mentors when I first met him in two thousand seven, but then I met him in two thousand eleven in a bar at the exact where conference. And I’ll I’ll tell you Ken’s about as honest as he get, and he’s straightforward. And he’s like, you know what? Your your language is wrong. The way you’re talking to people is just wrong. You you talk like a manager. You would never say those things. Like, I would never cut my bill. I would never reduce an invoice. He’s like, you wouldn’t say that if you were an owner. And and he’s like, listen. You’re good. And I think after he said you’re good, I literally didn’t pay attention to anything else. He’s I’m like, oh, he said it was good. But what he was saying is you you need to have that that real life pressure of the restoration company before you understand restoration. And so a little while longer, I got lucky, and I had about three months later, a customer of mine said, hey. We need to bring you in for some estimating training. I did it. Then they’re like, hey. Would you do some general consulting for us on it? Yeah. I can do that. And a few months later, I was probably I was a partner in the business. So after that, we had some big years. We went in. We did, they had no money. They made no money on about a million dollars the first year. Then I made ten percent with them, then we did eighteen percent. And I’m like, man, this is amazing. Things are going well. At the same time, I was doing the consulting stuff. Now what’s interesting in Canada, and so for those of you from the States, Canada had, like, an RIA sort of lookalike organization. It was called the RCOC. So it was the biggest banners in the industry. And remember, I’m a guy who ran an office in Vancouver. I wasn’t anybody to anybody. I was friends with this guy, Ken Tucker, who was the president of DKI. And the RIA and the RCOC were kind of working on this program and, like, fixed the price so that it wouldn’t be so broken because at the time, Symbility and Exact were it was almost like a race to the bottom. Whoever offered the lowest price, the insurance carriers would pick that program. And all of a sudden, I’m working with the RCOC with one of the presidents, and he’s like, do you think you could figure this out? I’m like, I think I could figure it out. So they hired this big company, Deloitte. Deloitte came in. It’s a big accounting firm for those of you that don’t know, but Deloitte was writing the white paper on everything broken with the pricing systems in Canada. And they asked this one one man band to come in and be the consultant to Deloitte to help them figure it out. And so I put my entire business on hold for three or four months to figure out the pricing. Now what was interesting is Ken’s like, hey. You agreed to be the consultant. Right? And I’m like, yep. And he’s like, you realize that if you **** this up, your business is ruined, so you better make this good. I’m like, oh, yeah. Yep. We’re gonna do it because I’ve already said yes. He’s like, alright. I think you got it. And we spent time breaking every price list down across Canada. We went deep into the price list, and then I fed that information to Deloitte, and Deloitte created this white paper for the RCOC. And so I got all those CEOs on speed dial, and all of a sudden, I was, like, feeling amazing. At the same time, when you do that and you neglect your business, things go sideways. So my partner had health problems. He had a a heart valve, and he was the micromanager in the business. And I when I was brought in, I was brought in as a consultant. He got sick, and I had to then run the day to day operations. But I wasn’t running the day to day operations. I was working with the RCOC and consulting and training, and so I let the business slide. I had a rookie management team that we put in place, and I felt like a loser because our business went from crushing it. Our sales were going up, but all of sudden, we lost money. And if you look at that in the perspective of, like, how much did you lose, that was a four hundred plus thousand dollar swing. So, like, literally, I was sleeping at the wheel. And our management team was doing well, but, unfortunately, our owner, my partner, passed away. And so when he passed away, I the whole company got paralyzed by sadness. The leader who was me wasn’t there, and the company went through a little bit of a hard time. When we got to the end of that, we ended up coming out and we grew our sales. Now we also had our primary client fire us because they had a personal grievance with me, and they suspended us for a month that lasted nine months. I lost fifty percent of our revenue. That year, my team stepped up, and we go ahead and found new revenue, and we grew. So even against that perfect storm, we still came out and did pretty well, but I was left with a company. I was left with my partner’s wife and his partner, and it wasn’t the reason I was in the business. So then what we did is we started looking back and saying what happened. Well, a perfect storm happened when we were actually successful, and it happened when things were going good. And so what we did is we were like, hey. We’re gonna continue to do good. Let’s go build the company because we’re gonna ramp up our sales, and we’re gonna crush it. And we did even though we lost a big client. My training business blew up, and I was on the road a ton. So I wasn’t really paying attention to the company. And then when my partner passed away, I already had a team that was trained, and I had technicians that were trained. But in the fourth year, we didn’t make any money. We’d, like, literally came back to break even. And I had everybody in training, and I was getting a ton of training at the time. And it led me to this question. It’s like, why is restoration harder to run when you have more experience? And it’s a phenomenon that happens across the industry. So if you talk to anyone, you’re like, man, I get more experience, and it gets harder to run. Three, two months ago, I was on a call with a claims manager, and I’m like he’s like, hey. Why are why is this harder to s like, review estimates today? I’m like, it’s an interesting question. Do you have less experience now than you did twenty years ago? And he started laughing. He’s like, no. It should be easier. It gets harder because it gets more complex. And so it’s worth asking if I was mad or I was sad or scared, what’s the question, and why are you doing it? Like, I was asking those questions because I was like, why am I feeling this this incompetence when on one side of my life, I’m crushing it and working with these CEOs, and they’re finding success. And on my personal life, I’m getting crushed. So if your technicians, like, on this call, if you go to training, it’s not easy to come back and put the training into your business. And so how are you feeling with that? Right? If you go in and head out to a training class, when you come back, do you feel like you can actually put that into your business? So my teams couldn’t, and I couldn’t. So I learned all this technical training, and it didn’t work, which then led me to ask this question. What if everything I was taught about restoration was wrong? And it’s kind of a question that we we ask because I’m like, what like, I’m learning this. It’s not working. Every time I send somebody out, they come back, and it seems like we we make less money even though technically we’re more proficient. When I asked that question, I dismantled the entire business. And now I lost my partner, so I dismantled the business. And when I dismantled the business, I found something that was pretty shocking. It was that and I didn’t think it was true because I’m like, I can’t be the only one that that’s thinking this. But I tested my theory, and I rebuilt the whole business going, I think everything I learned was wrong, and it doesn’t fit the business of today. And when we rebuilt the business, we had a wicked crush year. We had, like, a thirty one percent EBITDA. So it worked out to, like, a net profit of, like, twenty seven percent. And what happened there is we, like, retooled the company. I put high performing staff in place. If I didn’t have them, I had good people that worked for us, and and then almost every company we had success, we had good people. So we retrained them. We rebuilt our systems. We went profit centric. Every file had to have a a gross profit percentage beside it, and we reviewed every file. And then we got ready for big things, and and it hit. Then I was like, okay. I I got couldn’t sell that business because we had some bad years, and so you have to sell on a three year average. So it was just better for us to close it down, and I didn’t wanna run. My partner’s wife didn’t wanna run it, so we just closed it. But then a a few years later, I tried chucking a truck with a friend because I was like, hey. You know what? Like, people say it’s pretty fun. We built a chucking a truck business, and we crushed our profits there. But you would do that because you don’t have the overheads of a real restoration company. So we had fun with that, but this is a model you can scale, but it is a model that was just fun to try. That’s the smile of authenticity because I was actually having fun again. And I reinvented how we worked in the field, and it worked at all levels. Well, that transitioned to me coming over to 吃瓜不打烊. And then what I knew is that if I could take some of those systems and put them in the software, I could build the software so I could help a bunch of my friends, and we could still continue to to build these businesses out. So, like, the first sales in 吃瓜不打烊 were me calling up friends going, hey. Try this out because I wanna try this. And so we were building software, and 吃瓜不打烊 was moving forward, and we were like, hey. How can we change the way we build software? How can we change the way we we we think about restoration? And so today, what I’m gonna do is I’m gonna share you share with you how we went through those different transitions and where those those breakpoints happened in my business that led to those bad years and the ones that led to the good years. And then today, you know, I’m not gonna focus on volume because it’s just an amplification. If you’re doing well, you’re gonna do better. If you’re doing poorly, you’re gonna do worse. And so volume is just a piece of the action, but you really need to look at that lost cost and profit. And so when we do that, clarity comes from the experience of focusing on those. So that’s how we got here. I had there’s a saying, I think it’s, I’ve forgotten more than I’ve learned, or I’ve learned more than I’ve forgotten one of those ones. I forgot more than I learned. So in two thousand twelve and fifteen, you went back to that business where I was on an up streak, but then I I dipped. I wish I would have looked at it because in university ninety seven or ninety eight, a long time ago, I had a professor who was, like, all gung ho on on these on profitability. And and and the profitability, you can’t see. The invisible profitability. And he talked about it, and then I think it was Peter Drucker, or might be a different author, that he was really focused on. And what we did is we looked at everything in the business as a cost. So if you were in a business and if you’re a technician in the business, but you see all these big numbers on the estimates, but really, you’re only keeping, you know, three, five, ten percent of that estimate. There’s lost dollars, and those are the dollars that you can’t see no accountant can see. So if you’re a private equity company, you have no idea if this if this money left the company. There’s no way for you to see it. And those are the dollars of missed opportunity. Effectively, mismanagement and missed opportunity. And then you have the profit. And that’s the things that you can see as a result of all the good behaviors that help you with your managing your loss and your cost dollars. Then you get your profit. And profit is kind of a scary word for some people, but it’s it’s one of those that without it, you die. Your business crumples up if you don’t have profit. So profit, if you look at it as, like, greed is one side, and that’s how people look at it if you’re not an an owner. And if you are an owner and you have that greed mentality where it’s like, hey. It’s kind of greedy to to charge. Think of it as survival. It’s the survival of your business. It’s future, the existence of your business. And and if you start thinking of it that way, it’s like, okay. Well, if I wanna give employees bonuses, I need profit. If I wanna buy new trucks in about four years, I got I need profit to be able to afford it. If we wanna take my family on vacation because I live in my business, I I need profit to do it. So you can’t you look at it as a as a dirty word. It’s literally how your business survives. So look at survival and how how much survival do you want. If you change your mindset, it’s a little bit of a better, a better perspective when you go forward. Let’s this one’s for those in those little watch parties. If you’re not a restore or a restorer, here’s what here’s what you’re gonna do. The first question for you is for technicians, TPAs, and others who do not own a restoration company and are not involved in the financials, how much do you think a restoration company makes? And restoration contractors lose money. They make zero to four percent, five to ten percent, ten to twenty percent, or twenty or more percent. And so if you don’t know, no coaching owners, like, if these people like, let them let them guess because this is a normal phenomenon that happens when you’re when you’re when you have restoration companies that are sorry. You have employees or you have adjusters. Like, we had adjusters, TPAs. I’d I’d wanna see their answers here because you would have a bunch of information coming in that sort of distorts the perspective of what a business is. And we’ve got a bunch in here. We got oh, there’s a lot lot of people that aren’t involved in the financials. A lot more survey than I was expecting. So I’ll just let it keep going because the answers are are coming in, and this is pretty interesting. And thank you for being honest, by the way. I I do appreciate that. Alright. Give it two more seconds. Three two, one, and we got it’s still flying in. There’s, like, a lot of non owners on there. This is or or tied to the financials, so this is great. Alright. Kristen, can you kill that pole? Oh, there’s it’s all ah, ****. There’s a bunch of them. I didn’t realize we had the other questions below. Okay. The the restoration but you guys filled it out. So I appreciate you reading above or reading below. The restoration contractors lose money. Two percent said that restorers lose money. Then we had twelve percent say zero to four. Twenty nine percent, they’re five to ten. Thirty four percent are, like, ten to twenty percent making some bucks, and twenty three people percent said, hey. They’re making twenty points or more. And then the next question was how much does your company make how much does revenue does your company do? And we got a lot of small companies. Thirty percent are under a million, thirty one percent are one to three, and then the majority of you are three to six. So you’re kind of, like, under six million is the majority, and we got a couple of whales in here who are bigger than ten. And what was your net profit, not your EBITDA? And we had I lost money, ten percent lost money. Zero to five was a twenty eight percent. Five to seven, fifteen. Seven to ten was twenty six, and ten percent or more feeling like a hero. Those numbers are better this year than they were in past years. So in past years, we had eighty percent of people under ten percent. And this year oh, no. This year, we’re we’re eighty percent or under ten percent as well. So I’m doing the math on the fly here. Interesting. So we’re still in that under, but we have a little bit I’m gonna say we’re we’re more skewed. Like, zero to five is a third a third of the companies are less than five percent. Forty percent of the companies are between five and ten, and twenty percent or above. So our average on there would be, like, say, five, six percent, not twenty. And that’s a misperception. If you’re not in the business, you think everybody’s making money, much more money than there is. And so this is important because when we get into the costs, this is where we’re gonna really dig into this. So thanks for filling that out. Alright. We’re gonna use those numbers. Because when you look at a business and in restoration or any business, cost is, like, eighty five to ninety percent of your business. If you have costs over a hundred, you lose money. So anytime you see a company that’s lost money, their costs are over a hundred. Lost dollars, your accountants can’t see. So that’s things that don’t hit your books. That’s profit that you lose or cost that you lose that you can’t see. And then profit is the future life of your company. And if we think about it that way, it’s it’s less greedy, but it it’s an easier way to to envision it. It doesn’t matter on how big your company is. So if you’re a small company, we have a lot of of under a million dollar companies or, like, zero to a million. It doesn’t matter if you’re a two hundred thousand dollar company or eight hundred thousand dollar company or two million or a billion. Right? The it doesn’t matter. These pies are all gonna be the same. Percentage wise, they’re gonna vary a little bit, but the pie is your revenue. So when we look at that, we say, hey. This is our sales. That entire pie, everything inside that circle is our revenue. It’s important that we have that because when we start to look at things like cost of goods sold, all the costs that are directly related to finishing the job. So that’s your technicians going out. As a technician that’s going out to the field, if you’re a carpenter that’s going out to the field, that’s your your COGS, your cost of goods sold. It’s equipment rental materials and consumables. All of that gets jammed into the cost of goods sold. So the when we look at this, it represents a large bucket of cost. If I’m an owner, I look at cost of goods sold and see if I can bring those costs down through efficiency or savings or cost cuts to get the price down so we can make more profit. We spend a lot of money there. Now everything after that is called gross profit, and that’s the number you probably see. So if you see the number and you’re like, hey. I see a gross profit, like, forty five percent. Well, that’s because you’re seeing the number of there’s a bunch of companies still to run, but we take the cost for the job out, and then this profit is left. And it looks like this if you were to look at it as, like, numbers. Let’s say we have a five million dollar company. The costs are the dollars that we pay to staff and trades and all that, and that goes out of the company. Then the company is left with two million dollars, and you’re like, that’s really good. That’s a lot of money. Okay. So that’s the first checkpoint on the way to net profit, where the owners that were on the survey said, hey. We’re kinda like five to ten percent or three to ten percent. We’re sort of we’ll average at five. Couple guys are doing really well. Couple guys are are not doing so well. We’re gonna say it’s five percent. Then we look at overheads, and overheads are things like your shop. If you don’t sell anything this year, you still have to pay rental on that shop and heat and utilities. So we have that, and then we have some fixed and variable costs. So fixed are your your shop. Variable might be like your cell phones, staff that are in there that are working in the office. If you’re really busy, you add more staff to it. So what we do is we look at that, we say, well, there’s a whole bunch of company that doesn’t get attributed to the job, but we charge it out. So you see gross profit, and then we have these fixed and variable costs, and they flow below it. So when you see a profit and loss statement and your owners are looking at it, then they’re like, oh, and then I got all these other costs that aren’t tied to a job. And so we’ll say it’s fifteen and fifteen. It’s it’s usually a different, split, but for this example, we’re just gonna even them out. For those of you that are in the franchise networks, you pay royalties, and we always grumble when we pay royalties. I hate to pay royalties. You’ll hate paying royalties. But royalties are part of the business. And if you look at the franchise business, let’s say it’s a franchise and they charge five percent and they make ten percent. Well, spend four and a half percent on marketing and operations and supporting you and then they make a small percent. So if you pay five, think of it as like you really gave up point five percent in profit because they’re not making a ton of money on the franchise or they just get a nice steady revenue off of sales, but they’re not making five percent. They’re making a sliver of that five percent. So they’re a lot of that investment is in your benefit. When you look at that way, what happens is we put that royalty in above the line because it comes off every sale. So if you’re working for, like, a service master, Paul Davis, Servpro, you’re getting royalties that are going up to the the franchise. So that comes off every sale, and and that helps with, like, national marketing and other initiatives. What we do is we look at that and that lowers your gross profit. That number goes up, and then where I’m gonna take it from just for today, because just for simple math, is, like, it’s variable cost. Like, my marketing cost got shifted up to royalties. It depends on your brand. So I’m gonna just make the adjustment. We just move it up, and now your cost of goods goes up. Your your gross profit goes down. But what’s interesting is that you get to this profit number, and this profit number is what’s left after. And in in twenty eighteen, it was seven percent. In twenty twenty four, it was five. And, like, right now, it’s, like, maybe five to seven. So we’re kinda, like, staying even or maybe a little bit down. And some organizations will have more, which we saw. Like, you saw some owners said, hey. We did better than ten. And you have some organizations that lost money, and they feel like they ****, and and that’s alright. That’s why you’re here. The last category that you focus on is it’s a different profit. It’s called EBITDA. So you’re like, oh, cool. We made ten percent. No. You didn’t. Because that ten percent is profit, and then you have to pay interest taxes depreciation amortization. And I wanna say it’s about thirty percent. It could be more or less depending where you are. And then you get to that profit, which is called net profit and that is the profit in a company. So when these owners said, hey. I’m, like, three percent, five percent, six percent. It means for every dollar you put in the company, three cents come to you or come to the owner or come to the business. They come to the business. So when we look at the business, there’s not a lot left. In our survey today, it looked like about five. Five cents came to the bottom line, and that is for every dollar you do, five cents comes to the bottom line. Just that’s all you have to remember. Put a dollar on the table, take a nickel out. That’s the amount that the company keeps at the end of the year for every dollar they run. Alright. Now there’s this dollar that you can’t see, and this is where as a technician or a project manager or an estimator, everyone needs to be focused on. It’s the lost dollars. And the lost dollars, you never hear an owner say, hey. You know what? We had a rough year. We made too much money. But you will hear them say, hey. We lost money, and these lost dollars is usually where you lose the the your profit. A private equity firm who are really good at managing numbers, they aren’t trained enough or skilled enough to understand where these dollars are missing. And if you’re not built for that, you’re gonna have a bunch of dollars go out the back door that you don’t know. Now it happens in independence. If you have general managers or technicians that aren’t well trained, these dollars leave your company at an extremely fast pace, and you can’t see it unless you’re in the day to day. So we have a slogan at at profitable restore. We every dollar counts. It’s cost, it’s lost, or it’s profit. And the reason why is if you’re not focused on all three of those, your business is not gonna make money. So it’s mostly cost. There’s some loss, and then the little bit that’s left is profit. And so we wanna extend that or expand that as much as possible, and that’s how we’re gonna start today’s conversation. So if you’re a technician here and you didn’t understand how business runs, that’s just like the high level. But I wanted to give you that perspective because now what it does is now when we talk about cost, it’s where you guys are in the field. You are a cost in the field, and you deal with costs in the field. And so you are the first line of defense for being able to protect a restoration company’s profit. And if you think about it like survivability, you’re protecting the survivability of the business. Alright. It didn’t matter. So when I when I when I had the large independent business, we brought in a high performance team. I I brought in an operations manager oh, sorry. A mitigation manager, construction manager because that’s where we were losing money. We had people pulling staff away, and our inefficiency was through the roof, and our schedules were off. So we fixed inefficiency within the business. We invested in the business on spots that we were really poor at. When I went to the forty million dollar company, we got rid of a bunch of overhead. Every job that we were taking for some of our project managers was losing us money. So we actually lost revenue to make profit. So we got rid of all the costs that we were actually paying to do work, and we quickly got rid of that type of work, and we increased our bottom line. We drove efficiency. We invest in training. We did a bunch of things that were good for the business. Now I have a different view on costs, and I’m gonna share that with you because when you work for private equity, it’s all about head count. But I look at staff a little bit different than than some people. So I look at it as as as I look to put an a list team together, a high performance team. It’s a different management style because you don’t have to manage as much because you got independent workers. It cost you more, but the result is you should be earning more. So when we look at cost, not all costs are are valued the same. But there’s a ton of costs that make up that that business. Right? We’ve got fixed, variable, and cost of goods sold. So in our cost, we have staff, trades, materials, we’ve got overheads, equipment, we’ve got vehicles and fuel, and then we have mistakes and chargebacks. And mistakes and chargebacks are things like where you damage the floor, then you were walking over, and now you gotta do something with it. We have effort. Where do you put twenty percent of your effort to get eighty percent of your result? So it’s just looking at if I need to get some quick wins tomorrow, which when you leave here, you want quick wins. How are you gonna start focusing on that? So I look at good costs. Now these are are costs that I look at as an investment staff. And in university, I had this professor. So I had a really influential professor, John Melnick. I worked with him over a number of years, and we’ve he was like a Peter Drucker super fan. And so in my my younger life, I was reading about how people were valued as an asset, not as a cost. And it was a different way because when you went to accounting class, they talked about people as, like, their cost of goods sold, their cost in your business. But Drucker looked at them as you invest in your staff. And if you invest in your staff, you look them as an asset, then you treat them differently, and you invest in the long term because you want the asset to grow. It’s kinda like if you ever coach sports. Right? If you were to look at staff like a like a sports team, you get players that have some natural ability where they don’t know how to play the game. You coach them. You build them up. You show them the things you know. You get them to some skills, and hopefully, they move up your team to that first line or that top position. In sports, they leave your team to go to another team that is better. And and then as a coach, you’re trying to get to that new team. In business, you’re trying to move your team up to that next level. So you’re taking that top tier of talent and moving the entire company up and bringing the people through the ranks. So it’s a little different in business, but I look at staff as something that you put your time and energy into. Trades, I put in there as well. And and back in the day, we would have said, you know what? Trades are are important, but Drucker had another another amazing philosophy that there’s, like, front of house, do what you do, like your business. If you’re a mitigation company, you’re water damage company. Hire your substrates for rebuild because you’re not that. And so it was an interesting philosophy that came full circle from back in the days with John is if you do what you do really well, then you should make a lot of money there. And if you hire somebody who does something that they do very well, you should make money there too. And I like sub trades because they’re in high demand right now. They’re hard to get good skilled ones, and they’re always searching for good cash flow. Doesn’t matter how good your trade is. They’re normally not really well run businesses. They’re they’re smaller companies typically, the ones we deal with. They need some help on cash flow. And so what I do is I look at this as how do you invest? And I invest my time and you perform our core services. We look at putting our our team focused directly on the things that we can do really well that we learn and we’re experts in. You invest in them, you coach and mentor them, and you build a career path. That’s just like if you do that with good people, you’re gonna do really well. Trades are a little different. You need a reliable partner. It shows up. You have to provide them structure. So here’s how you invoice it. It’s, hey. Can you please invoice us on the Thursday before? Because when you invoice us on Monday, you don’t get paid for a few weeks. You coach and mentor them. Do you really need to buy a new truck every year? Or you know what? If you buy a truck every three years, it’s gonna be easier for us to do business. How they operate, you can coach them. You’re you’re a bigger business. I’m a three million dollar business. I’m a million dollar business. I I do five hundred grand. It doesn’t matter. They’re doing fifty grand. Coach them. Hey. When you’re when you’re looking at vehicles, you shouldn’t be buying a new vehicle every year. There’s trades that drive around in, like, the biggest jacked up trucks. You don’t need that every year. You know? That truck will last you five, six years. And then accountability. If they screw up on a job, who’s paying? You or them? In my company, it was always them. I hired you to do the job. When you screw up, you’re gonna pay for the fixes on it. I don’t fix it. So I lock in my margin, and then it’s up to them to run the job. I’m not them. I’m not I’m not drywaller. I’m not gonna I don’t know if you’re gonna make money on this or not, but you should know you’re the expert. So that’s how we look at them. And then I help them be profitable. Right? I wanna cash flow them. I’m gonna work with them. We’re gonna help them be profitable. Why? Because I need them to survive to keep doing what I do. And if I keep doing what I do, which is, like, run the trades, and I’m gonna go do wire damage, and I gotta put do the putbacks because that’s how I get more volume. Well, then I need this to focus on my on my my craft, damage, and I need them to to be there to support me. And so I’m willing to take less dollars here to be able to get that full service. That make sense? So I put those guys as, like, our top two good investments. People, you can’t replace it. Then I have the bad cost. And in there, put materials. Now it’s not that materials are there, but it’s because I hate paying more for materials than I should. So on materials, they’re just a commodity. I don’t like paying fifteen percent more for a piece of two by four at one store versus another. I’m gonna get the best deal. And, normally, you’re just like, a two by four is a two by four. Right? Except for when you go Home Depot and they get them from twisty trees and they’re all spiral. But I I a two by four is a two by four. I want the best deal on it. I don’t really care where it comes from. It doesn’t change the quality of my build. Scheduling it might, so maybe I’ll pay a little bit of a premium to get delivered or to get the material in when I need it. But as a general rule, it’s just find the best price. Shop it hard because they don’t get upset when you shop it hard. Tomorrow, that material still stays on the worksite and doesn’t call in sick because you negotiate it hard. You get what I’m saying? Then what we do is we look at chargebacks. Now chargebacks is usually a management failure, process failure. So a chargeback is there wasn’t enough direction on a job. There wasn’t enough clarity. We didn’t finish the product to spec. No one inspected it for quality. We went from drywall to finish, and no one caught the problems along the way. And now we have a chargeback because we have to go back and fix things. Those are some of the most dangerous cost to your business because you’re getting damaged reputation, you’re getting complaints, and you’re eating real dollars out of your bottom line. Every dollar you spend on a chargeback comes straight out of your profit. Like, one hundred percent of them come out of your profit. So if you made five percent and you have a two percent chargeback, you now made three. It, like, eroded all your profits. And so you have to avoid these, which is any mistakes and chargebacks. Like, that’s just unacceptable when we have time to communicate. So that’s one of the ones I put as, like, the bad cost. You don’t want those in your business. The other ones is equipment, vehicles, and overheads. Three expenses I put in the middle. Why? Shop them hard. I’m gonna negotiate these really hard because they’re still commodities. But the reason I I care more about this is my equipment. I need high quality equipment. I want the best equipment on the job site that’s reliable. It’s gonna run. It’s gonna perform. It’s gonna do what I expect it to do. So if I’m buying dehumidifiers and air movers, I’m not buying the Chinese knockoff gear. Tell you that right now because you can’t build an aggressive pricing strategy around cheap equipment. Now I’m not saying that everything that comes off the blue and red lines are the best, but I’m gonna rely on them to put quality equipment out and that it does its job. I need the performance of that. I need the the security of that so I can build pricing around that material and that equipment, and I need my staff to have stuff that works because I got can’t drag jobs out. Right? I can’t drop, drag that time out. Now you might disagree with that statement and say, hey. Well, there’s a there’s a benefit to buying equipment for half price. I don’t think there is when you look at the performance of your gear. It’s just you’re you’re spending a lot of time spinning your tires and arguing over why it took eight days to dry something when you probably could drive it in four or five with with good gear. I get premium equipment. Now my vehicles is the other one, and you can disagree with me on this one, but a vehicle is a delivery tool. So the equipment is a tool for the technicians and my staff to execute good quality equipment that runs. My vehicles, a lot of times, we were in these terms like the people movers. Hate the term because it’s not you’re moving people. You’re not moving what makes the business run. We need to deliver equipment, materials, consumables, and people to the job. When you just get people movers, you’re now hamstringing yourself that you can’t get the equipment into the job. So when you’re twenty four hour on call is driving a Dodge Caravan, which I ran by the way, and you need to move some equipment to the job, what are you fitting into that Dodge Caravan? And you got people mover, but not an equipment mover. Like, maybe four air movers and a dehumidifier and one scrubber. That’s what you’re moving. That’s your revenue that you’re putting on that job. If you were to drive a Dodge Sprinter and you rolled in with sixty thousand dollars a gear in the back, guess what? If that job needs more money more equipment, you’re gonna make more money. Does that make sense? So equipment is or vehicles is where I’m spending my money to get the right tool to do the delivery of the equipment and materials that I need. The fuel is just the cost of doing business. The thing you don’t see, Dodge Caravan shows up with five pieces of equipment. Sprinter shows up with twenty five pieces of equipment. That drops off five pieces of equipment. You get the margin off the job of five pieces of equipment being delivered. You can’t tell that the Sprinter was gonna make you more money. That’s why those lost dollars. So the people that go in and like, oh, we’re gonna get electric cars. Cool. I don’t think they can haul what you can haul with gas or diesel. So just my I’m a I’m a vehicle snob. I won’t put electric in because we’re twenty four hour service. If you go to a cat zone, are you gonna roll in with with temporary batteries in the back? No. You’re gonna roll in with temporary gas in the back of your truck, and you’re gonna run your equipment off of that stuff. It just doesn’t make a lot of sense in what we do. I want my services to be a hundred percent ready to go and go anywhere that we need to go so we can make money. Then you have overheads. Overheads are you can think of it like the shop. Like, do you have the prime location? But look at, like, things like Internet, phones. Because your cell phone’s, like, six years old, you’re like, hey, guys. Can you document the field with the oldest phone possible? Or are you actually putting, like, high quality tech in their hands so that they can do their job? Do you have monitors? Like, I just bought my team forty nine inch monitors because I want more efficiency out of them. So I want the better work experience for the for the staff that we have. If I’m a restorer, I’m looking for, like, how much more time can I get out of my project management assistance? How many more files can they handle before I have to hire another one? Overheads is all about efficiency. It’s about driving the company for efficiency and getting the most value out of your overhead and look at it as a support. So this is how I want you to look at it. Staff and trades are the most important part of your business because that’s how work gets done. Equipment vehicles and overheads are the things that support that team. So I want to invest in good quality stuff to help them. Materials and mistakes, those are unacceptable. Like, that’s how people get fired is by not paying attention to that, and that’s how you lose money over there. And we come back to the twenty percent effort on eighty percent of the results. Now I’m a big Jim Rohn fan because I found this quote, and I’m like a super fan of it now. Don’t spend minor time on major things, and don’t spend major time on minor things. So if you come in and you’re like, you know what I should do? I should negotiate with these sub trades. Yeah. You should. Go negotiate. That’s a major thing that you can save a few percentage points on. Do I go in and and nickel and dime every trade on everything like an adjuster or like a TPA? No. I said, have a deal with you, and I’m gonna honor the deal so we can move forward because we wanna be partners. I might be unfair to the TPAs and and the adjusters, but I’m not nickel and diming every job. Like, I’m there to do a job. And and I expect my trades to be there, and we’re gonna treat them with, if I say I’m gonna do something, I’m gonna deliver it. Now a bunch of you came back where there was a ton of questions pre on how do you value labor? And so I was like, okay. Well, I’ll just throw this in for you. But this is also good if you’re a technician on this call or or someone who works in the business like, hey. How how come some people get paid more than I do? If you look at the value versus wage, then you look at what is the value of a slow skilled labor, and the value to a company starts high when I pay you less. As I pay you and your low skill more, the value to my company becomes less and less. And so your value and my need will meet at this intersection. And if I overpay you, you get more value and I take a loss. That’s just how it works. Somewhere in this intersection line is where your wages. You’re either lower paid or higher paid within that skill set. So you might be a labor I’m gonna use a number, like fifteen dollars. And someone makes seventeen dollars and someone makes thirteen dollars. Well, well, Jerry, who’s making thirteen dollars, has a bad attitude, never ties his boots, and looks like he just got dressed every morning with his bed head. Sam, who’s who’s showing up to the job, has a great attitude. Customers love them, but they have the same skill set. So the attitude is where I’m gonna I’m gonna overpay because I value that more than I do someone that I have to tell them to tie their shoes every morning. You get what I’m saying? So inside the same skill set, there’s there’s a little bit of a range. When you move to, like, a higher value skill set, so someone with more experience, the range gets bigger. And then companies lose people, and they’re like, well, I don’t know why I lost somebody, and I don’t know why a company pays more for somebody than what I paid. I paid all my estimators x. I don’t know why they went over to another company. Well, another company, you might value poor behavior or bad attitude as, like, very low. You put them on the bottom of your scale. Someone else who has nobody is like, I will take that person and put them on the top of the scale because I need to get someone with a bad attitude in. I just need someone to do the work. I don’t care what kind of attitude they have. But if you would build a high performance organization, then you’re like, I’m I’m gonna pay top dollar for the best attitude, and I’m gonna pay less for those that I have to manage. And so a high performing group, whether you’re a labor and you come in and kick *** and do your job, I’ll pay you more because you make my life easier, and you actually take care of problems, and you throw the garbage out, and you don’t put coffee cups all over my shop. Those are the things that piss me off. Right? Coffee cups all over the shop, like it’s just randomly put it on my shelf. But you keep my shop clean. You’re you’re sweeping up when you come in at the end of the day. I value that more than someone who’s trying to punch out early. On the estimator side, I appreciate the estimator who’s willing to call up the adjuster and have, a reasonable conversation and spend fifteen minutes more justifying our charges than the one that’s gonna sit there and complain that they’re not getting paid because they didn’t put any information in the estimate. Like, there’s, yes, you can do the job. You can work the system. I need that revenue to come in. And so that’s what we’re looking for, and that’s why you see these these values of why high skilled workers the business can support it in some cases if you have everything else functioning. So value of an employee, the cost of an employee will vary even within the position based on the other things that they do. So if your skill set is estimating with exact, like, cool. Who’s got a better grasp of it? That’s why you’re gonna get paid more. You show up and do your job? Do I have to manage? That’s why there’s there’s that that difference in in wage. If you bring someone in who’s like no skill and you pay them a large amount, you just have made a decision. I’m gonna teach them the skills. That makes sense. Alright. We’re gonna do another poll. This one is for the business owners or people that know the prices. The next two polls will help determine the revenue. So I’m gonna we’re gonna take the revenues into the next, next discussion. What is the average size of your mitigation job? Two or less, two to five, five to ten, or ten or more. And this does not include rebuild. And then what is the what is the average size of your rebuild job? Five or less, five to ten, ten to twenty, twenty or more. Yeah. This is awesome. Yeah. Yeah. You could include fire. Yeah. Why not? If you guys are, like, a fire company or a mold company, what’s yeah. Jam it in there. Fuel charge is no longer considered a cost of doing business according to Verisk. Yeah. Well, you know what? We’ll get into we’ll get into that because because I’m I’ve got a different opinion on the estimating systems, and I’m not I’m not restricted to say what I think anymore. Actually, I was never restricted when I was in circle. I’m talking about something different. So I’m not I’m not under the new brand, profitable restore. I I don’t care what people think. I’ll tell you, like, how it is and how we actually see it. And if a company that designs software doesn’t like it, then that’s that’s their problem. Alright. So a lot of average job size is sitting at, like, seventy five hundred. I’m gonna say five to ten, like, seventy five and three to five. So it’s, like, sixty five hundred on mitigation. And on rebuild, we’re sitting somewhere, like, twelve thousand, fifteen thousand maybe. Ten wipes out. Yeah. Fifteen thousand dollars is about where we’re at. Perfect. So this is important because when you do when you do rebuild or you do anything, mitigation, rebuild, there used to be a term. And the average job we said is is about six thousand dollars for mitigation, about twelve thousand or or fifteen thousand for rebuild. And when you look at that, you say, hey. If I save a dollar, I earn a dollar. So every dollar of cost goes to your bottom line. Right? So if we don’t damage someone’s floor, that dollar moves to the bottom line. If we damage the floor and we have to take five hundred dollars to repair it, it all comes out of that pennies on the dollar, and we have to ship that money out. So save a dollar, earn a dollar. It means that you keep the dollars in the bottom. There’s another saying here, which is charge a dollar, earn ten cents. And what’s interesting about that is that the the saying was charge a dollar, earn ten cents means for every dollar you charge, you make ten. But we know that’s not true, and, actually, it was pretty close. It’s that you earn five cents. And so for every dollar, you earn five cents. Now on the call, it’s we had people that were losing money. So you’re actually losing money on jobs. You’re taking jobs that you lose money on. Others were making, like, twenty cents or fifteen cents or more on the job. But for an average, it was like you make five cents on every dollar. You could think of this as earn a dollar or earn net profit per dollar, and that’s how an owner will look at it. So when we go back to reducing costs, and and I appreciate, Cruz’s comment there, You got all these costs in here, and I I I screwed up. So I had staff and vehicles. I really don’t I I like I pick the vehicles I want, and I hire the staff I need. But I had it set up like this. Actually, I’m wrong because I negotiate my fuel, and I go get fuel cards, and I negotiate my vehicles hard because I don’t care. I just pick the right vehicle I want, and then I negotiate that. So this is just wrong. I I would save some money on my vehicles and my fuel, but I like the vehicles I have. So I made a mistake there on that on that slide. But here’s what I want you to think about. In your business, if you’re losing money, today is the day you gotta think about this. So if you’re losing money or you’re making money, it doesn’t really matter, but it it means a lot more when you’re down on the bottom end. Costs are how do you cut so you don’t damage your business? So if I’m dealing with trades, do I cut their bill? No. It doesn’t feel good when an insurance company cuts your bill. If the insurance companies gave me a chance to get paid faster, I’d take that so I could cash flow my company. I would give up some dollars of borrowing so I could run my my my business faster and leaner and have more cash in my bank. Your sub trades absolutely use this. And so you do quick pay discounts, or you do a volume discount and a quick pay discount, you can negotiate trades. You have to be a financially stable company. So those of you that had a higher profitability year this year, you’re in a better position to act as, like, a payday loan for your trades and make sure that they get their cash fast. But there’s a discount. They’re gonna pay you a premium two to ten percent. So you negotiate maybe a volume discount. You’re gonna do a hundred, two hundred grand with them. You want five percent off. And then if they want their pay faster, you knock another five points off. You save ten. On material, I’m grinding materials every time. Like, if I get a five thousand dollar job, I’m sending it to the lumber yard to get bid because I know that they can lower the price beyond what’s on the shelf or beyond the blanket discount I get. I can get specific discounts based on different types of material that we submit. So if you are running reconstruction and you decided to go in house, I would be hammering the material deals. Now I would also hammer the material deals if I was running sub trades and they weren’t big enough. I’d be like, hey. I’ll buy the material. You do the labor, and I’m gonna get the the discount on material, and I’m gonna save that ten, fifteen percent on my material. Equipment’s harder. Equipment, you normally don’t CapEx or or have a capital expenditure. You normally don’t put that into play when you’re you’re doing your budgets. If if you’re not cash flowing very well, if you’re on the lower end of, like, making money, you buy equipment when you need it. If you’re on the higher end of making money, you buy equipment when it’s the best deal and you make more money. So when do you buy your equipment? Well, when the there’s nothing going on in the industry. When the industry is dead and the equipment manufacturers and the retailers need to sell gear, go in and negotiate at that time, and you’ll save some money. But I don’t push this one too hard. I I go brand name gear. I’m gonna get it for about the same price. Sometimes there’s, like, deals where they’ll throw an air scrubber in or something else of value. That’s how I’m saving money. Overheads is all about driving efficiency. Although I told you about those monitors, I save fifty points or forty points on my monitors. I got a good deal on my monitors, and I increased my production. So I was, like, super happy I got them. Those monitors, things like buying a good computer, buying good monitors, getting good cell phones for teams. If I can get more work per day out of my staff for the money the money I’m paying them, if I can get more out of them, the value of that staff member goes up for me because of the things we put in their hands. I make their jobs easier. So in today’s world, maybe they need to get to a soccer game. So if I can save them an hour, I can get that work life balance together, and then they can get to a soccer game after work because they’re not doing all the work during the day. So if those tools improve the quality of life of my my valued staff, then I’m gonna pay for it because I want it. And then at certain times, it’s gonna be like, well, we can do more work with it as well. So to win win, it’s all about driving that efficiency. And then we have the mistakes, and those come straight off your bottom line. So where the other ones are adding to your bottom line, the mistakes and chargebacks ripped bottom line out. And if you have a big loss, in two thousand nine, I had to pay a hundred and thirty six thousand dollars to redo somebody’s hardwood floors because the water techs, and it wasn’t their fault, it was a project manager, sanded hardwood floors when it had cut. They sanded it, and then it crowned. And then they’re like, well, we should sand it again. And or there was another water damage. It cupped again. They sanded it again, and then it gave it, like, a super a super crown. I had to replace the floors. He couldn’t fix it. And so it’s a hundred and thirty seven thousand dollars off my bottom line, off my bonus, off the company’s revenue. Not a good day, but you had to make it go away because we screwed up. And so that’s where you look at mistakes and chargebacks as knocking your profit rate out. It will erode your profitability. That’s why trades and staff are more valuable because they gotta prevent that from happening. And so those trades and staff that do that, that prevent that from happening, I value more than the ones that keep coming in and be like, sorry, boss. I put a hammer into the wall. That’s bottom line dollars going out. I don’t value that very much. Okay. Quick poll. Based on this, how much do you think you could put into your business just based on these ideas? Nothing. We’re already optimized. One to two percent, two to four, four to six, six or more. Right? I love the answers coming in. I love you guys participating. Thank you. And the chat, I I I can’t read the chat very often, but when I do, I I love seeing it. Beautiful, guys. So this was this was when I when I looked at my business, I was like, well, we have business as usual costs. So it’s like, well, this is this is how business is done, and it’s business as usual. And and one of the the fears that we had, when you don’t have money, you value your cost. You hang on to those dollars tight. When you get profit and your business gets a little bit liquid, we get a little loose with our spending. It’s just natural behavior. You need to ship that cash out of the company into another, like, bank account so that you never have that big number sitting in the bank because it’s really easy to spend and get yourself into trouble. Alright. Let’s see what we got here. We got nothing. We’re optimized. Two percent said, hey. I think we’ve got that dialed in. That’s awesome. Those are probably the the people on the high side of the twenty. One to two, loving it. Two to four, four to six, six plus. Yeah. So I’m gonna say seventy percent of us think we can get more than two percent average it out. Let’s split the average and say five percent. Five percent’s monster. That’s a monster gain in a business, especially when our average was five. And just on cost savings, we could do five. So just using averages. It’s it’s gonna be different. But let’s if you look at that, that’s double your profit. That’s one hundred percent pickup on profit if you can just find five cents on every dollar to save. **** it. Kevin says I love it. K, guys. Here’s the warning with this. Like anything oh, it’d be good if things work for me. If you cut too deep, you actually harm your business. So you go back to that Jim Rohn. Don’t spend major time on minor things. If you’re cutting an area where you just keep hounding on it, like, it’s it’s good to be that person to a point. And so then you’re like, well, you know what? We’re spending a lot on gas, or we’re spending a lot on on two by fours. Okay. Well, you know what? You’re you’re saving now a penny or two per two by four. It’s not worth your time. Your return on your investment, your return on your time is not worth it. Okay? So at that point, you have to change how you’re doing things and and start slowing up. Go focus on something else. K. Kristen, let’s let’s crank it up. Let’s go to q and a time. Alright. Ready. We got some great questions coming in. So first one is, what is the industry average or goal for cost of goods sold? Hard one to answer because it depends on what you’re doing, and it depends how you set up the business. So it’s easy to say, well, you know, you should be getting seventy or eighty percent on water damage. And, you know, if you’re getting fifty, you’re probably a little low. It’s easy to say that, but you don’t know how you’re how you’re maximizing your numbers. Like, you have to break it down and be like, okay. Well, what is your cost of goods sold first? Because how I do my bookkeeping and you do yours, do I put my non billable hours as cost of goods sold on every labor hour, or do I bury it in my overhead? So it it it’s gonna deviate from there. And and, really, the only true metric that you can look at is what is your net profit. Now I say that if you get a group of people together where we all sit down and say, okay, here’s how you you do your book so you can kinda normalize it. You can normalize your books and then you can have that discussion. So now I’m gonna answer that dangerous question where the dangerous answer is that there’s not a general cost of goods sold, but you’re gonna see a smaller cost of goods sold typically on water damage because we do a bunch of false accounting. We don’t account for the warehouse space that our equipment sits in, so we don’t create a contribution margin to attach to that. And so there’s a lot of like, it’s it’s technical accounting, but I won’t do it here. But it’s just it’s a conversation when you get into, like, hey. I really wanna focus on that, my numbers, then that’s, like, a deep dive into accounting and how do you set up your accounting practices and, like, which is the best way to look at it. If you’re struggling with profitability, though, I would say, yes. That’s where I would look. Is it wages, or is it how you buy your materials? Is it how you store? Like, are you always going to Home Depot to get or are you always going to one of, like, Ramscore John Don to get your supplies, do you bring it into the shop and set up a little consumable room so you don’t burn those hours up and then you can get more time in the job? Like, there’s a whole bunch of factors that come to it. So it’s a tough question to answer. There’s no there’s no one answer that fits it. And as a rule to pay for labor, if we’re paying techs twenty five dollars per hour and we are charging a hundred with all the expense of vacation, health care, paid sick time, nonproductive training, it all adds up. So what are your thoughts on this? So pricing schemes are hard, and it depends. So so is that rate and material? Is that Xactimate? Is it value pricing? Is it cost plus? Like, there’s a whole bunch of systems that we’re talking about. So I’m gonna just assume we’re talking exact to make for the or rate material. Let’s just say it’s rate material because it’s it’s locked in. If I have a profitability goal at the end of the year, I have to run it against everything. So exact where and Symbility for that point don’t necessarily put margin on top of material. So they say your drywall cost, let’s say it’s it’s eight dollars. A board of drywall is eight dollars, and in the in the program it says it’s eight dollars. Okay. But I need forty percent to, like, hit my numbers. So that drywall has to go up forty percent. It needs to be fourteen or thirteen dollars so that on every board, I’m getting paid my profit. And if it’s not there, that has to be on labor. So the the pricing scheme or the the pricing mechanics that you put in play has to account for how are you charging. So if you have a hundred dollar labor hour charge, what is the margin you’ve got on your materials? So it’s not like a definite answer. Does that make sense? Although the way you described it would make sense. What are you getting on those materials, or is your labor offsetting the material cost because you’re giving your cost away on your materials? So your your your logic there doesn’t make it’s not it doesn’t it doesn’t sound wrong to me. It just would in the bigger picture of, like, how do we price the entire business, it might not be an accurate answer. And so what if your company is only mitigation and doesn’t do recon? Recon? What should that breakdown look like? Yeah. So so, again, so you’re narrowing it down. So let’s say we get rid of recon. We’re down to mitigation. Are you do you have a lot of downtime? Do you have other services like you’re doing carpet cleaning so that you can get those walls? Like, in restoration, you get spikes right here. You get these spikes. So if you go, like, mitigations like this. Right? Rebuild is like this. Wherever you have a spike in in well, technically, you get a spike here, and then it goes up. You get a spike here. We’d love to see what you’re working on. You can’t see it? No. We go. It is. Alright. Let’s go back and show you that. Sorry. Hit the wrong button. K. If you’re looking at mitigation, mitigation goes like this. And so who’s paying for this downtime in between? So what what should your number be? Well, in there, your number is is based on how are you covering off these costs. These spikes have to pay for these downtimes. After a spike in mitigation, your rebuild comes in and you get these rebuild humps that come out of those losses. So if you’re a blended company, your profits are gonna change. But it’s depending on how you’ve set up everything. Like, what would I expect on a water damage job? Depends if it’s category three. Do I have stabilization? Like, you could get as high as eighty five percent gross profit where you have a little bit of labor and stabilizing and you have a lot of equipment rental, and then you go in and you do a proper clean. So then you get a a lower margin on that on that labor, but then you get a a bigger margin on the drying portion. So, like, less than fifty is pretty tough. If you’re doing it right, fifty to seventy five is is sort of where you need to sit. And, again, if I have a technician or a project manager that’s at fifty and I have one that’s at seventy five, I value that seventy five percent margin more than I value the fifty, right, when we come to the wages. Thanks, Kristen. Yeah. For sure. No problem. Do you wanna take a few more questions? Yeah. Let’s go let’s go two more questions and take us to twenty five. Sounds good. So, this question, I haven’t seen much about marketing sales costs. We’re being tapped more and more for sponsors, etcetera. I’d love to know what a reasonable percentage of sales, would be to spend effectively. Yeah. So marketing is interesting. Right? If you looked at, like, a pair of Nike shoes and then you were looking at a a just a pair of dollar store shoes, like, what’s the difference between them? It’s pretty much marketing. They’re they’re not high quality. Now the materials might be better in a Nike shoe, maybe not. What differentiates them is the amount you spend on marketing. So in in our business, when you do insurance work let’s say you do program work. Program work, they’ve actually taken a lot of the marketing effort out for you. You did the marketing, you got the contract, and now you don’t have to market. You have to service. But if you do, like, plumber programs or other programs where you’re spending money on your marketing effort, if you’re spending those dollars on that marketing effort, that’s a cost of doing business, and you build it in to your job. So you would have a custom price list that you would build in, and you kind of come back and you’re like, okay. What am I what do I wanna spend? How am I spending my money? Am I doing, you know, in person broker meetings? Am I taking them to baseball games? Am I getting in there and and doing education sessions? Just build your cost into your price, and it becomes part of an entire it’s not just creating your own price list. Like, that’s that’s that’s actually not the method that you would do to get a company profitable. Like, great. You raise your prices. Did you raise them the right way? You can now actually put your marketing in as an expense per dollar that you generate in revenue, or you just say, I’m gonna spend it and move it as a fixed cost. I’m gonna spend a hundred grand this And that hundred grand is gonna be focused on all this, and I’m gonna drive new sales in off of that that expenditure and those new sales that come in off that silo. Let’s say let’s say I’m not doing property managers this year. I’m gonna add those costs in, or it’s just part of building that book of business. It’ll depend on how you want to account for it. But to say that it gets a cost of doing business and it eats out of your profit, it doesn’t have to. You just have to build a a pricing scheme that includes, I’m gonna go hard on marketing, and I’m not taking the vendor program deals. And so I’m gonna spend my money on that. Now when you look at franchises, franchises a franchise fee effectively does that for you. They spend an aggressive amount of money on marketing to drive revenue. So if you’re an independent doing small work, you’re not doing anything different or you’re you’re a franchise locally doing it, you’re not doing anything different. You just have to account for it. Okay. Let’s do one more question. This is a situational question, so I’m sure this would relate to the rest of the group. So we’re about to go live for mitigation through TPAs. We just need to choose our price point, and the benchmark is around forty percent below Xactimate pricing. Do you have a recommendation percentage for starting out? I was thinking thirty percent above benchmark, which would be a ten percent discount to exact pricing. So I gotta be careful here because we’re talking price like, you’re talking, what is it was a competition act. You you gotta be careful when you when you talk pricing in a situation like this of, like, directing price. So here here I’ll answer in a general term. When you look at your margins and you’re taking work in that way, I would look at that that revenue stream as, like, what is that revenue stream doing for your business? Why are you giving such a big discount? One, you you might just be like, hey. We just wanna get started, and we wanna get people busy. That’s that’s a great way to do it. You’re giving away the farm if you’re doing a dramatically lower rate, and you’re taking on all that liability of basically doing jobs wrong. Like, you’re walking into category three. You’re walking into hazardous materials, and you’re gonna be submarineing your prices. Part of it is what is your value of, like, your company and your time versus the work that you’re getting, and can you do something else with that? So if you had a home services business and you were gonna market the tar out of that that list that you get in from the water damage, damage is a little bit of a lost leader for us. I’m gonna market carpet cleaning and other repairs. Maybe if it was your sole business, you’re gonna do a lot of churning of business to make less dollars, and it’s just a decision you have to make. If or or maybe it’s twenty percent of your business, you’re like, hey. We’re gonna run that just to keep busy because we wanna keep people active. Hard to come up with a price. Like, exact to me pricing is already low. So if you’re gonna then go in and be like, hey. I wanna go lower. That that’s a that’s a business decision for you. And just be careful because, like, these businesses have laws, and someone has to pay for that that down point. The the false you know when we did the survey at the beginning and we say, hey. You don’t know the restoration business? How much do you think we make? They think that there’s thirty or forty percent extra dollars there that you don’t need to get paid. And the reality is if you look at the numbers that that were showing up on the survey, most owners are under ten percent. So for you to give a forty percent discount, you just gotta do the math. Alright. Lost dollars. And this could this could it might tie into that last question. So the worst types of dollars that you can lose are these lost dollars, and they’re the ones that you can’t see that you lost them. They’re ones that you don’t know should be there. So when I look at private equity firms, there’s a lot of them that struggle because there’s dollars that leave. And when you put that pressure on the business, even if you’re having, like, a bad year, you put the pressure on the business, it’s these dollars that you can’t touch. They don’t show up inside that circle that will hurt you. And the way I found this is I never ran an office. This the the one company I ran, I never was close to my office. I was seven hundred miles away. So my commute looked like this to get into the business. Now you have to think back in two thousand ten and eleven, there wasn’t very good systems for remote managing. So as I was going around, I was losing touch with the day to day. I lost touch with the field of business. I’d come in and I’d be in the office doing office stuff. I’d get out to the field, but you just didn’t have the field of business. You didn’t see the seven rush. You didn’t see how people were acting. You didn’t see attitudes. You didn’t see smiles. You didn’t you couldn’t get the feel. And then in two thousand fourteen, I was like, know what would be even better is if I just added three hundred miles to that trip, and I went and did this flight. And so when you get that far away and then you’re only in the business one week of the month, things are gonna slip. And I should have expected it, but I was scared losing money that I invested in the business. And at the time, I actually were buying a house, so I had my dad’s money on the line. I was like, hey, dad. You wanna put a line on like, I I can’t put my house on and then get a line of credit. Can you put the business loan on your line of credit? And he did. And so then you had that financial pressure as an extra motivator. It’s like, hey. Be a little awkward at Christmas. Hey, dad. I lost I lost that line of credit, and you have to pay for me. But that pressure creates a bunch of initiative that you have to go find some dollars. And what we found is that when we were managing at distance, I looked at the financials and went, well, those numbers look good. Those numbers look normal. Those numbers don’t add up because we kept getting into a position where the money’s going out, the numbers on the on the sheet. I’m like, man, I thought we would have done better. And what I didn’t know is that when I had a sick partner and then when I had a rookie manager and then when we had a bunch of, like, staff that we turned over because we didn’t want it, when I lost the business, I lost my book of business, and we focused strictly on going getting new business. And then I wasn’t focused on any of I was focused on the consulting and training and helping other restorers. I was enjoying the fund to run business, the one that was getting a lot of action from from other restorers. But I was getting rid of the textbooks, and I found that one that said it’s lost dollars. And so when I’ve looked at that lost dollars, I was like, oh, man. That’s exactly what’s happening here. I gotta go back and fix it. And sure enough, I started reviewing our estimates a little closer. I was like, well, the estimates look good. But then what I started doing is looking for the estimates for the lost dollars. Be like, wait a second. We didn’t size this job right. And so all of a sudden, it’s dollars I couldn’t see on the bottom line. And I’m like, oh, man. I like that job. We lost fifteen hundred dollars on a three thousand dollar job. Of course, we’re gonna hurt on that one. Because our pricing schemes was based on Xactimate, and that was based on our technicians knowing what they were doing, and it was based on the project managers and estimators knowing what they’re doing. But the problem was is I didn’t sit down and say, hey. Like, don’t let those dollars slip, and I wasn’t watching it. And so lost dollars are incredibly hard to find unless you know where they are. Now there’s a difference between lost dollars, like costs, and lost dollars. So lost dollars, there’d be, like, costs. Like, your TPA example would be a perfect example. You do the job for an agreed amount, and that’s your cost, and then you run your cost against it. The lost dollars is the amount that you could have charged for it. And you’d be like, wow. That’s a big number. And then when you compare it to your profit, you’re like, well, that that that actually would change the way we do things. It’s like we we had to put all these pieces of equipment on, or we rent our equipment normally for seven, like, per day. But in this agreement, we only do three days or four days of rental, so we lose three days of rental. Well, normally, in most businesses, if you make a business decision like you have a daily rate if I have a seven day daily rate, normally, my price is low for seven days. It’s an for what you consume. If I had a four day rate, my four day rate would be higher because I’m like, well, four days normally equals seven, so I’d have a five, six day rental rate built into four. Like, I changed my pricing scheme. When someone takes your seven day and just says, cut those three days off, it’s fat, you’re getting four at the lower rate, That’s where you have to be in charge of your pricing. Those are lost dollars. Does that make sense? So another lost dollar would be, I show up on my Dodge Caravan. I put five pieces of equipment in tonight, and I don’t go back to the shop to get the other fifteen. Why? Because I don’t wanna do three trips at two AM. Those are lost dollars. Then tomorrow, I come back with the same caravan, and I only put one load in, and I don’t put the third load in until the second or third day. And now we already lost all of our money. But you can’t see it because on the bottom line, it’s like, hey. We got ten days of rental and then added to our profit. K? That’s lost dollars. Those ones are outside of your your revenue. It’s revenue that you lost. And what lost dollars is, if you wanna look for it, it’s missing charges. So estimating, we have our missing charges. You have the wrong system. You used a unit pricing system when you had no idea what the efficiencies of the job were. And so you’re like, oh, you know what? I think on this water damage job or smoke damage. Right? Smoke damage is a perfect one. Someone asked about fire earlier. A dry fire smoke cleans at a rate of one. A wet fire smoke cleans four times slower. What type of job are you doing? Oh, I used unit pricing, and I came up and I charged this, but you’re actually doing this. So all of a sudden, you lost dollars. You should have charged four times the amount for the clean, but you use the dry cleaning line items. Here’s the secret. There’s no wet cleaning line items. So your estimating system is built by people that haven’t restored property, because you would know you would need a wet cleaning line item because it’s a different clean. And there’s different light, moderate, and heavy wet cleans. That’s my personal gripe. Operations. You have the wrong people in the business. Right? So you have the wrong people at the wrong spots. They lack skills. So if you don’t have trained people the the biggest shock to me was the amount of dollars I left. I took a training. My training, I took tiered out for, like, about five years. So I go, I’ll take my training. I’ll get a little bit here, and I’ll I’ll take two courses a year, and I’ll get all the training I need. I wish I would’ve went back and, like, powerhouse my training and focused on the business differently when I started because when I got to the end, I got to color repair and and carpet repair and color repair. So carpet repair and color repair were my last two courses. And I was like, oh, **** it. I walked over so many rolled carpets that I could charge a ton of money for. Oh, I walked over pet damaged carpets and stained carpets. I could have made a ton of money on those jobs. That was added revenue. That was lost dollars that went away from my business. Okay? So that’s what I look at is, like, things that you don’t know. If you like if you want a good example, it’s like, let’s say that we’re we’re all restores, and then tomorrow we all wanna go make T shirts. And so we have a T shirt manufacturing plant. We would have no idea where we would lose money in T shirts, like, on the screen printing or, like, the sewing. I wouldn’t have an idea where I would lose money. And so someone who made T shirts for forty years would be like, yeah. You don’t do that because you lose money here. Same thing happens in restoration as you walk over these dollars, and they’re sitting on the jobsite, and they’re earnable dollars, and you just walk over them. You run out people and equipment. This one kills me. So we had a tracker on of how many time how many days we went zero zero gear in the in the shop. Every time you hit zero gear, you lost money. So if you were in a job or you were in a surge event and you had ten days with zero gear, our team would come and track like, hey. There was eight jobs that came in. Okay. Eight jobs. Average job is six thousand dollars. Wow. That’s lost revenue that we lost. Like, we you don’t see it because you have to track it, and it doesn’t show up in your bottom line. So at the end of the year, if you missed your profitability by by fifty thousand dollars, how many days did you go zero gear? So you have to watch out for that. And then the other ones missed opportunities is, like, you choose the revenue streams. Now I’m not gonna talk about TPA revenue streams, but if I was doing residential and I looked at it and went, hey. There’s actually more money in these this commercial carrier. Hey. There’s actually more money in the industrial carrier. If I did specialty drawing, I could make a lot of money, or I could sign up with somebody and take the lowest price that they’re offering me. It’s just if you do that, typically, it’s that you’re looking for revenue volume, and you don’t know how to go market it. Right? So your marketing is like, hey. The easy thing is let’s call them. And so there’s a discount. You’re paying a t p a discount so that they can help you with the paperwork, and they’re gonna give you some volume that you normally wouldn’t get. That’s a business decision. That’s not a bad thing. It’s not a good thing. It’s just when you look at how am I gonna build a profitable organization. I’ll show I’ll show you later when we get to profit why why I would I would just consider how I run a business a little different. Increasing charge offs. So if I look at it, it might seem hard, but this is where I invest in good people and train them. So use standards and laws. It takes a bit to understand this, but IICRC and OSHA is the standards and the law. If I have a green person who’s come out of selling cars last week and this year this week, I think they can be a good project manager. It happens, and it’s not a bad thing. We we will hire good people. Can they capture a hundred percent of scope? Excuse me. Can they capture a hundred percent of scope using the IICRC and OSHA? And then ASHRAE and other NADACA, can they use all the different standards out there to articulate the cost? No. They can’t. They’re they’re too new, so they don’t know how to charge out more. Do you go in and size your jobs correctly? Well, a lot of restorers still go in and go, oh, it’s four air movers, one one dehumidifier, you know, three in a room. It’s crazy. You could have, like, nine air movers in a room and maybe one dehumidifier, and it’s a larger dehumidifier. Or you need two two larges in there. All of a sudden, if you don’t size your jobs right, those are lost dollars. They’re gone. So you need to charge more for them, and this comes back to your lost dollars, or it’s all about charge out. Change orders. This one kills me, and this one we do all the time. Change orders are an administrative task. And when we look at the change orders, change order is a tool that you should be using on a regular basis because change orders increase revenue. If you don’t have a change order process, it’s because it’s administrative. And why do people hate administrative tasks? Because they’re burdens to the mind. We have field workers in the field. Like, I love our technicians. They’re out in the field doing real work. Right? They forget paperwork because it’s not important. The important thing is getting the drywall torn out or extracting from the carpet or putting back the wall that’s there. So they focus on real work, which makes perfect sense. Right? And that’s why sometimes it makes sense to have a supervisor who’s your paper person do all the paper. Oh, insurance companies don’t like paying for supervisors. Well, that’s how you bill because the people that you have doing the job, one, don’t have the experience to know what to do. They may know what to do, but they don’t know how to document it. And so you need that supervisor in there to articulate what you’re doing. And they may be disconnected from how we charge. And so that was one of my problems. I didn’t tell my team how we made money. I just told them what to go do. So when there was things that they had to do that would deliver profit to our bottom line, they didn’t charge for it. They just did it. So they did the work. We incurred a cost out of our bottom line. Different definition of charge out is just how how are you charging out. So your charge out could be your hourly rate is ninety dollars. A charge out is did you detach blinds? That’s a charge out that, oh, I know we never charge for detaching the blinds or the curtains. Well, you you should because otherwise you’re getting them dirty and then you gotta deal with that after. So increasing your your estimating items would be another way of saying it. But standards and laws, why do we refer to them? And that’s because they’re very powerful things. So when I do expert witness work, if I get called in by insurance company, a restorer, or a homeowner, I just look at the standards and go, that’s what we’re expected to do. And if you don’t have the training, if you have a three day water course and you go up against somebody who has to review your file, you’re on for the whole hook. You’re on for all the courses that you didn’t take, and you’re on for the standards. And if you don’t know that, you’re in trouble because they’re powerful because in court, that’s what a reasonable restorer is expected to do. They provide you support and justification. If you’re on the wrong side of it, they’re gonna tell you why you didn’t do it right. So they provide support and justification to someone else saying you did it wrong, and they’re not your opinion. They’re they’re they’re based on restoration, then you can apply opinion to it. Like, this is what a normal restorer would do. In this situation here was why they changed their mind or why they did something a little different. It was an opinion. Is it reasonable? Yes or no. Now the reviewer may challenge the interpretation, but they would then have to come back with, like, okay. Well, I know you quoted OSHA, and you said that based on OSHA, there’s a respiratory control plan, but I think that it didn’t apply on this job. Okay. Based on what? An opinion, or do you have something that you can show me in writing? And that’s how you can you basically get prepared to go to the legal process. Now scoping is interesting. Scoping is where most restore leave about five to ten percent of the scope on. So you worry about reviewers taking one or two percent off. You leave anywhere between five and ten percent on most jobs. When I sat in the review desk for insurance carriers, I watched estimates come in missing, like, complete doors. They have door trim. They have a doorknob, and they miss the door. Two hundred dollars a door times eight doors? Yeah. That’s on you. Right? And so we’re talking to the reviewer. We’re like, hey. An ethical review is they you know they should have charged for doors. You gotta call them and say, hey. These doors are missing. If it’s a two way if it’s an honest peer review, you’d be like, this is what you need to charge me. Here’s what you can’t charge me for. Here’s how I don’t wanna see it. Right? But when you look at it, scoping is is one of the biggest hits that you can do to yourself is you just get incomplete scope. I would rather a I would rather a project manager spend twenty minutes more a job and get the proper scope on-site and capture two to three hundred dollars more per job than I would, right, having to go out and do ten or fifteen or thirty thousand dollars more work to make the same money. Like, the reality is is whatever your margin is, you’re gonna find it on the job, and and it’s probably for things you’re doing anyway. Like, scope of work is probably things that you’re gonna do that you forgot to charge for, so it comes out as a double edge. Right? You didn’t charge for it, but you eat the cost on it or your profit. So if you have low margin, it usually comes down to an estimating issue is the first place I check, and then it’s an operations issue is the second place. You make and lose your money in the field. Very little money is made in the office. Most of the money is actually lost in the office, but you make and lose your money in the field. You’re making and losing your money where your teams are documenting or not documenting what you’re doing and the work that you should perform or could perform, but you don’t perform. So you could perform a carpet repair in a house, but you don’t because you don’t know about carpet repair. Right? I I cried when I watched on, like, how many floors I walked over that have bleach stains. And I was like, oh, I learned the skill. I could’ve charged, like, three hundred dollars a stain for that, and I could’ve helped these people. Or you see the rolls in the carpet. You’re like, what? I could charge them a thousand dollars to, like, fix that carpet. I literally tripped over those and didn’t make that money. So that’s where you have to make your money in the field. Now increasing charge outs, here’s just like my quick list of things I look for. Detaching and resetting blinds. I had an air mover pointed at the bottom of a counter, and our technician has set it up, and we were bouncing a blind off a window for five days. The blind got damaged. The window got damaged. We had to replace both, and we had to replace the matching blinds. So I could have made three hundred dollars on detaching the blinds or or sorry. A hundred dollars on detaching the blinds. I could have saved the window replacement, and I could have saved the drape replacement or the blind replacement. But instead, I didn’t I lost a hundred dollars, and I lost all that cost. Right? Could have easily we got some paid for for detaching blinds. Covering registers. If we’re doing a a water damage and we’re locking out the heating system, cover the registers. That’s five dollars, six dollars a register. Easy money. Cleaning the HVAC unit just used to be standard. It’s not standard anymore. What we start to see is that cleaning HVACs used to get done at the beginning and at the end of the job. You might not even see it on a job now, and that definitely doesn’t follow NADACA standards. Cleaning glass after final repair. So you or after final clean, you do a final clean, and all of sudden, all the glass is forgotten. So a final clean I’m just gonna throw a number. Was like, let’s say it’s thirty cents a a square foot. But then to clean the window is another fifteen dollars or ten dollars, and you got six of them. That’s sixty dollars that you just left on the on the table. Someone’s gonna clean that window. You know they’re you’re gonna incur the cost, but you didn’t get the charge up. Power cords and adapters for spider boxes. So the you got the the heavy duty cord is, let’s say, forty dollars a day. Don’t know what the real price is, but let’s say it’s forty. And then the little power adapter to go into the converter, that’s forty or fifty dollars a day. So those two cords plus the spider box, you’re leaving that revenue on the table. You have to replace those cords occasionally, but that’s just revenue. And you spent five hundred dollars on those cords. They should generate an ROI for you. Wall and floor protection. So almost all estimates, when you look at at estimators that are not trained to make money, they’re basically what they’re looking at is they’re looking at the loss and not all the areas that you have to draw to get from the front door to the loss. So it’s like the front hallway and then through the kitchen and down the stairs, and now you’re in the loss. Well, you have to you have to do site protection there, and probably you’re putting in and taking out site protection every day because the homeowners are still living upstairs. That’s a lot of cost coming out of your bottom line and no revenue going into the hopper. So your margins drop, and then you’re like, well, but on water damage, we did fifty points instead of sixty five. Yeah. Run those numbers and see what your bottom line looks like if you were to charge for it. PPE on cat one, when you have people that are like, well, it’s clean water. Okay. But we have a category one loss, and we’re gonna put in a sixty mile an hour wind into that into that room. We have a particulate increase. Did you have a respiratory program to prevent respiratory contamination? Well, then you would have PPE. Now maybe you’re not wearing full Tyvek, but you would have dermal protection, so Tyvek would be justified. Eye protection, respiratory protection. What’s your site safety assessment say? Well, PPT on cat job or on cat one jobs is is totally justifiable. Precleaning, it’s in the standard. Totally justifiable. Why would I not preclean? They didn’t expect us to come in. We’re gonna dry out a bunch of that soils that got surfaced. Why would you not preclean the carpet before you dry it? Makes sense. We’re extracting. We’re cleaning, and then we’re gonna dry. Why dry a dirty surface? That makes sense. You’re literally making the the cleaning process harder later if you don’t preclean. And then ATP testing. This one’s a little controversial for some people, but ATP testing before and after your cleaning. You have to follow a little bit of a method and and and justify it, but I would do it and justify, hey. Here’s what it was before. Here’s what it was after. That’s how clean we did. That justifies all my cleaning process. Sizing your jobs. How much equipment are you putting in? Well, I wanna earn profits faster. So I want more equipment in, legitimately more equipment in so I can earn my profit faster. I can improve the quality of my drawing. I can save more materials for the customer. I cycle my jobs faster. So when I have Chinese gear, if you got poor quality gear, I’ll just call it poor quality gear even though I call it Chinese gear. If I got poor quality gear and it takes eight days to do what good quality gear does in four, I have to babysit a job for eight days. I have to have eight days of a gear for every job. I have to have that much more gear. But if I have high quality gear, I can get it in and out. And most of us aren’t charging, you know, ten days of rental. Most of us are getting the four or five days because that’s what the program you signed up for pays. But if you do get the the extended time, I’ll earn my dollars the right way. I’ll dry that building, and I’ll have my readings, and they’ll support my drying, and I’m using good gear to do it. I’m not changing my gear out. Yeah. It just doesn’t make sense to me. And then you wanna identify early and delayed drawings where you need more power. So if I need more power to dry a job and it’s like, hey. I can save a lot of money here, but I need more power. I can have that conversation on day one, not on day six. Right? And if the decision is, hey. Don’t put in more power. It’s just gonna be longer to dry. Then we have that conversation. Now I’m not getting paid for three. I’m getting paid for six days. So I’m increasing my revenue, still using my good equipment. The IICRC talks about in the standards. It’s just very quick touch on here. The I the sizing if you said I size it according to IICRC, that’s the starting point. And so if you use 吃瓜不打烊 Hydro, says, hey. Here’s the sizing. It’s this many air movers, this much dehumidifier. Once you start, that’s your starting point. Then the conditions dictate how you’re gonna charge. So if I said I’m gonna keep my temperature between seventy and ninety degrees, I’m gonna have a dew point differential. Meaning, I’m not gonna I’m gonna be fifteen degrees or ten degrees away from condensating the walls. Now I’m now I’m building a drying plant, and all of a sudden, I can justify that I want my relative humidity between fifty and zero or fifty and thirty. So if my relative humidity gets to fifty five, what does that do? Justifies another dehumidifier. If my temperature is is seventy and I need it higher, I can justify a heater. If it’s too hot, I can justify cooling it down. All of a sudden, I have all the justification for all the equipment I need to put in. If I have painted walls, I’m gonna justify putting in an inject to dry. Hey. This house is thirty years old. I’m gonna inject to dry the walls because I got a lot of paint on the surface. You’d start building out your charges based on the equipment you can place in and the work you’re doing, the quality of work you’re doing. In there, if you didn’t do that, you miss revenue. Breeding support the removal of equipment. So if I start drawing, I had a a court case that I was an umpire on. They I guess, not a court case. It was a dispute resolution. They went to look at how much equipment needed to be there. And on the Friday, you could have justified them, like, breaking the site down and making it smaller. But I just went, like, the cost of doing that versus leaving the equipment running was about the same, so it didn’t make sense. But in a bigger job, it might make sense. So you would then justify removing your equipment. And then stabilizing versus drying, it’s a it’s a game changer. And for those of you who dry out category two and three jobs, you’re doing it wrong. So you would stabilize, clean it, then dry it. Right? If you were waiting for an insurance carrier to come up with a decision, you would stabilize, wait for the decision, and then dry it or clean it and then dry it. So stabilization is another area that most restorers don’t even charge for. They don’t even know how to charge for it. Change orders, that administrative process that kills you, when would you use one? Right? When would you use stable or change order? Time. We’re gonna have a time difference on here. Price. The price is changing. We have a quality issue, a quantity issue, so we can’t get porcelain or marble, but we can replace it with porcelain, lesser quality. Okay. Well, we need a change order. You get a credit back of, like, two hundred thousand dollars. The quantity. The quantity is now changing. Well, if the quantity changes, does that impact your price? Does the customer have to pay for more of it? What if the schedule changes? We can’t work during the day. You have to work at night. Well, I have to charge you more for that. So the schedule now dictates a price increase. Material. We were gonna put in tongue and groove pine, but all we can get is tongue and groove cedar. So we’re gonna change the material. That’s the quality, or it’s just changing the material. And in addition to subtractions to the scope, hey. We’re gonna add another room of carpet cleaning. Like, this is the one that kills me. You’re cleaning the carpets of a water damage, and the rest of the basement’s not getting cleaned on the final clean. Do all the carpets. Add a change order and say, missus Jones, would you like us to finish up? Like, normally, this would be five hundred dollars to clean your carpet, but we’re here already, so we can do it for three fifty. Would you take three fifty? You know why? Because your team’s probably gonna clean the carpet for missus Jones anyway. So do the paperwork, get paid for it, take it off your cost, and put it into a revenue source. It’s just get aggressive on sell upselling your jobs. And why do staff hate it? Well, they hate paperwork. They hate confrontation. They hate negotiations. So I had staff that were really good at this where they would, like, easily run change orders. And what it is is missus Jones, the insurance company will only pay for one wall of painting. If you want the other walls painting, I can do it for three fifty. That is a good solution. Here’s a change order. The other way is, missus Jones, the insurance company pays for one wall. I can do the other three for five hundred dollars, but that’s what we normally would charge. I can do it today for three fifty. Would you like that? And then we can just have the painter do it all while they’re here, and your house will look fresh. And you could submit that to your insurance company and see if they’ll pay for it. But if they don’t, you know, you’ve got all your walls painted. It’s not negotiation, and it’s not hard. It’s just framing it so it’s easy to sell. Just make it easy for your technicians to, like, get you more money. And in some cases, just get your cost covered, and it’s already a win, but I think you should make money on that stuff. Right? Alright. Let’s do this poll. Based on this session, from the break to here, where do you think we sit? How much revenue do you think we can charge? One, two percent more, five to eight, eight to ten, ten or more? Right? Nothing I recharge too much. I love it. Right? Like, you might you might already be implementing these these strategies. You’re like, I don’t know if I could squeeze more. I guarantee you could. There’s a ton of ways that I wish I would have skinned my restoration company. Even in my big year, we we we left revenue. I had equipment sitting on shelves. I had services we weren’t doing that was easy to add to our our roster. It just totally changed the game. Alright. We got a few more people coming in, and then we’ll we’ll shut that down. Then we’re gonna take a break. Take another, like, ten minute break, and then we’ll we’ll we’ll pound through to the end. Alright. We got two to zero to two percent. Hey. If you put two percent to your bottom line, you’ve already increased on a five percent average, like, thirty percent more money in your business. Two to five percent, you’ve doubled up. Five to eight, you now have done way more than double. Eight to ten, so twenty five percent of you think you can get eight to ten or ten or more. Eight eight or more percentage points. I don’t disagree with that. It’s just how we look at it. And when you deal with TPAs and insurance carriers, a lot of the times the review process they put us in sets your mind as, I can’t do this. I had project managers that were working on one program, so they’re like, well, we can’t charge emergency service call out. And I’m like, well, that applies only to one insurance company. Nobody else. Well, yeah, but they don’t pay for it. Okay. I don’t care. That’s a rule. That’s an agreement that we signed to get their work. Everybody else pays it. Charge it. And you had to break that mental lock, and so that’s where you lost dollars. We didn’t charge emergency service callouts on eighty percent of our business that we could. Well, that was three hundred dollars a loss. And then you times that by two hundred losses, and all of a sudden, it adds up to a lot of money that would have eroded our ten percent loss to, like, maybe six percent loss. Doesn’t take a lot to get there. Yeah. And and and, Mark, some of those upcharges, document the upcharges. It’s like some of them is upcharging the customer. They had a laminate counter. I wanna sell you a solid surface. Would you like that? You’re already getting a two thousand dollar discount on it, And I and then you can add more margin to the counter and make a little bit more money too because they’re using insurance credit. It’s like it’s like a coupon. Right? Think of, insurance companies as a coupon. If you wanna upgrade to hardwood floor, you have a four thousand dollar carpet coupon you can use. Would you like to upgrade for six grand? Upsell it and make your margins. Alright, guys. Beautiful. Awesome. Well, you know what? I have a bunch of questions for you, Chris. But first, how great is this, everyone? How are you feeling about it? I’m thinking, like, I’ve got I’m not a restorer. I’ve got so many great ideas just from the first half. So really looking forward to, getting through some more stuff. So first question, is an example question. So instead of going with exact default pricing for containment per square foot, will insurance adjusters accept the line, sorry, the line item change for changing it as a roll plus a fifteen percent upcharge on acquiring this item with a note explaining why? Yeah. So it comes into your contract. Pricing schemes or pricing you you call this scheme. Now it it may sound scammy, but it’s not. An insurance company has a pricing scheme. So a scheme is a program that you come up with or or a strategy around your pricing. If your pricing is like, I’m gonna charge an exact mate line item the way it is. That is a scheme created by a software company based on their knowledge or how they were running the idea around that one item. You could have a totally different scheme. You could go, like, I’m gonna draw a building at figure out all the costs, nine dollars a square foot or ninety cents a cubic foot, and that covers all the equipment and all the consumables required to do a job. And that scheme wouldn’t be like, well, what would the adjuster pay for? Well, that comes in negotiation. So if you’re doing work for an insurance company, then you would be like, well, that’s not how they accept charges because I signed a contract with them. If I’m working with the homeowner, I’d be like, hey. That’s just how we charge. And so this industry is different. It’s like, if you were to buy a cell phone back in the day, you have a monthly unlimited plan, or you can pay by the minute. No one’s telling them, like, hey. When you charge by the minute, you gotta charge me your cost plus a percentage. It’s like, no. You use a thousand minutes. You’re gonna rack up a big bill. You could have paid for the unlimited. So it’s just a it’s a scheme that you build. And where I get I I think a lot of people get tied in is that we’re because we’re so close to that insurance market, a lot of what they say, even though they don’t know how we make money and they don’t know what we do, like, they’re not trained in what we do, but they say this is what we pay for. But that’s not how it works typically. Like, the the policy is not that definitive. It doesn’t pay for this charge, but this charge, it’s your it’s your program rules that make the charges. So it’s kinda hard to answer it in that context of, like, what would you do? Because it depends on what are you doing with the rest of your pricing. So if you’re gonna go in and charge consumables times a forty percent margin, and you’re like, I’m just gonna buy it, and you’re gonna pay forty percent over everything I do. That’s kinda like rate and material. If you go in with the unit price, you’re like, hey. I’m gonna raise the price of my material on the back end to account for the profit. That’s a different way of doing it. So it’s just it’s it’s a more complex question than that. But the answer is if you have a good relation with the adjuster and that’s how they wanna see it, you could do it, or you just be like, I don’t care what the adjuster says. I’m giving my invoice to the homeowner. It’s a different conversation. It’s hard to have it here. Like, that’s a really complex question, by the way. Like, really there’s a lot that goes into building out to, like, getting to the number. Yeah. For sure. And as another question, as people who have ever only used Xactimate as the standard for insurance work, are there good alternatives to bidding out work that people are using for recon? Yeah. So, again, Xactimate is not a bad tool. It’s just so the tool itself let’s say if we just talk unit pricing because there’s the next gear or not next gear. There’s the core logic version, Symbility, or or whatever they call it now, and then you have Xactimate. So those are, the two main tools. And then you got T and M Pro, so time and material, which hard to do. You know, that’s that’s just where you’re charging for a rate schedule. But if you already use unit prices, unit pricing is just one of the more complex systems, and we have two digital systems that have tried to digitize it. You could use a spreadsheet and come up with your own assumptions. And so all unit price is is it just comes up with a cost. A bid is a bunch of unit prices combined together to come up with a giant number, and so it’s just an easier way to do it. Actually, exact where’s model is not a bad model. Where everything falls apart is between the price list and how people think they should use it. That’s where it falls apart. The model is actually a good model. It’s it’s a sound system for, like, ninety percent of the things you do rebuild. It’s a sound system. It’s just how how pricing’s dictated to you. It was never meant as a as a a price list. It was designed as an estimating system, like a starting point. So the way it’s being used right now is, like, that’s the price. That is the wrong way it was supposed to be used. Their user agreement says it. There’s, like their their original way that it was used was not built that way. It’s just unfortunate that we have an insurance industry who dictates pricing, so a lot of people get into that rut. And, and it’s it’s not even inside those insurance programs. It’s not even right on a dictation because, like, you can’t do it. What are you doing? Get a sub trade quote or just change the pricing. And you’re supposed to change pricing. So how can have Go ahead. How can we have documentation for the additional equipment for TPAs? And what if TPAs say they’re not going to pay for the PPAE on a CAT one? So, again, it comes down with the contract saying. That’s where a contract’s pretty vague. I haven’t seen a lot of TPAs that’d be like, yeah, you can’t charge for what the law requires. So if you but most of the time, here’s here’s the breakdown. Most of the time, we don’t document at the beginning of the job saying, here’s the job. Here’s the risks. Here’s the hazard assessment. Here’s what we need to do. If you tell somebody, I’m gonna have to protect my workers with PPE, and then you do it, it’s an expectation. If it comes in at the end, it’s a little bit of one of those things like it was like an afterthought. And then did you actually do it? Because then we see charges for PPE and you see people wearing T shirts. So you’re like, well, there’s a little disconnect there. You should have done it, but you didn’t do it. Part of it is is is documenting that you did do it. So I don’t like having to do it, but that’s the industry we’re in. If a TPA comes back and says, no. It’s not required. Well, by law, it it’s required that those workers are protected based on a site safety assessment. So now it’s now it’s a business decision, and you’ve signed a contract to do work with the TPA or your business signed work a contract with the TPA. It’s you pick the client. If you don’t like the rules, leave. Like, it’s it’s pretty brutal that way, but that’s the way it is is go sell your own work, and then you don’t have to deal with other people’s rules. Awesome. Thanks, Chris. Do we have time for two more questions? Yeah. Let’s give her. Perfect. So how do you charge for stabilization? Stabilization is just like so normally, it’s just the equipment in. You have a you go in. Let let’s say let’s say it’s let’s say, in this case, it’s an insurance carrier that wants to look at the job. It’s a category one job. They wanna look at it and determine if it’s covered. You put your your your dehumidifier in place, and you take a relative humidity and temperature reading and be like, hey. We wanna keep it between seventy and eighty, and we want the humidity less than forty. We put as many dehumidifiers in as we need to get it between seventy and eighty and about forty percent relative humidity. We’re not drying. We’re not doing anything else. Our documentation says we’re stabilizing. Now the problem is is that equipment that you have for stabilizing is the exact same equipment you dry with. So to an adjuster who’s not trained, they don’t know the difference. So you sometimes have to you have to educate them and be like, this is what I’m doing. I’m just preventing secondary damage where, like, the the papers on the wall or the photos aren’t gonna curl because of the high humidity levels. I’m gonna stop mold growing on the unaffected materials. That’s all you’re doing. So you just gotta communicate it, and then you just charge. And and what we would normally do is charge it as a separate, like, estimate or a separate invoice. So it would be just stabilization for four days, and it’s let’s say it’s three grand. Then we do our drying or our cleaning and drying, and then we do the remediation, and that’s whatever bill it is. That’s how that’s the best way to do it. And communicating. We’re gonna stabilize, and the burn rate per day is about six hundred dollars in gear. Well, I should get on that file pretty quick. Well, you save yourself some money because I can go ahead and then start doing the job. Perfect. Thank you so much, Chris. So do you charge the customer for a change order that is an option they want they wanna charge? Do you do you charge the customer for an option? Yeah. For a change order that is an option that they want to charge. I’m gonna say so I’m I’m not quite following it. I’m gonna say yes. Is if I had something that I was gonna put a change order for something that I was doing for them, and then I’m like, hey. I’m gonna charge you for this. This is what I want to charge you for. I would put that in. I’m I’m maybe I’m lost on the question. No worries. Tim, actually, if you wanna put in a clarification question, I would be happy to circle back on it later. Thank you so much. Hey. Can I hit can I hit one can I hit one of those I I gotta say two exact to make questions in the I see a Verra’s stance on OMP? Would you disagree with Verra’s stance on OMP versus job related overhead as outlined in the white paper. And then I have another one from Blaine. Hey, Blaine. How’s it going, buddy? I feel our industry is imprisoned by adopting exactly me. So I I I like Verisk’s attempt at explaining overhead and profit because it’s actually the right way of looking at it based on how they built the price. So they built the price saying that overhead and profit is is an add on, and their overhead and profit doesn’t include project management and toilets and other things that are related to the cost. You have to charge that out extra. The insurance carriers are like, no. That’s included. But you as the restorer would make your own price and say, well, I’m either adding to my techs. Like, I’m gonna charge a hundred and twenty dollars on every technician and that covers project management. Or you’re like, hey. Some jobs require project management to be charged out. Like small jobs where you have ten hours of project management, it’s a bigger percentage of the job value. Whereas if you have a bigger job but still takes ten hours of project management time, it’s a smaller percentage. So it it it’s a pricing scheme, and then you’re like, do you agree with it or not, or do you wanna change it? And the beautiful part about ExactRay is you could change it. Now do I like their white paper? I do. It hasn’t been updated recently, like recently, but I still like it because their system hasn’t been updated. So it it it fits. You’ll see that as an expert, we’ll use those white papers to explain things. I like their terms and and cons, terms and conditions on their services. It it explains what the intent was behind it. So, the other question that Blaine is, like, does it imprison you? Well, no. It’s just we as restorers sign deals. So the TPA question before, if we sign that deal, we devalue the the service. I’m I’m not saying it’s right or wrong. I’m just saying that inside the the program, we use exact and not T and M. T and M, you set your own rates. Exact, you could set your own rates and build a completely different price list. We train that. Like, I I will go in and we’ll build a whole different metrics on pricing, but it’s how do you wanna build your pricing scheme before you get into it. And it’s all about, like, building a strategy around price so that you can service. Like, if you were doing white this is just sorry. I’ll I’ll I’ll get into the presentation. If you were doing white glove service, you’re dealing with billionaires. You don’t deal with, like, a norm you don’t deal with normal homes. You deal with billionaires. If you were to go in and say every piece of equipment gets hand wiped and wrapped in white shrink-wrap, and every piece gets delivered that way, and that’s the white glove service, and I charge x. Well, I would then charge for the time to to clean it. I charge for the time to wrap it. I would charge for the extra carrying and handling of it. Presentation has value. It’s marketing. All of a sudden, my pricing scheme is different for billionaires than it is for the average Joe. And my expectation of service is gonna be higher, so we’re gonna provide more for that value. So it comes into how are you providing value to your insurance carriers, and do they value the work you’re doing? And those that cut your bill heavily don’t understand the value you’re bringing to the service. So you have to make a business decision if you wanna do work with them. And I’ll just leave it at there because it it really is about what’s the value for what price are you being paid. And then we’ll get into profit, and we we’ll we’ll talk a little bit about that. I said I’m not gonna get into volume, so I spent a little bit of time talking about volume in the in the past presentations, and it it really doesn’t matter. The only thing you need to know about volume is if you’re looking at, like, Walmart and IKEA, and you said these are, like, successful low margin, high volume players, can restoration be low margin? So TPA example. That question is perfect example for this. You’re gonna be a low margin mitigation supplier. Now if we look at IKEA and and Walmart, they control everything from the manufacturing. They have special deals with the manufacturers that they get certain goods delivered at certain price points. They know when things are gonna be delivered. They own the distribution channel to get things delivered. They know season analytics. They know when they’re gonna sell. Christmas is gonna be busy. Summertime, we’re gonna move this product. They have so many analytics and so much predictable patterns, and they can affect it by advertising. You are reliant on weather and accidentals. You’re gonna do a hundred to five thousand claims a year, not taking like the big guys like Belfor First On-site. But even they, their work is spread out across the states, and they have to mobilize to different spots. They don’t have a distribution chain to get it there. Neither do you. So a hundred to five thousand jobs a year is not enough to get that volume scale so that you could be like, oh, I’m gonna be the lowest price in the market. If they can’t do it, how can you do it? If the big guys can’t do that, how can you do it? Just gotta ask yourself that. Is that what effectively we’re doing is we’re taking the low volume or the high volume or the low margin approved because we don’t know if we’re gonna get the volume. We signed the deal that will take the low price, but we don’t know if we’re getting the volume. And so that’s the problem is it’s really hard to sustain your business in this and continue to grow your business and continue to invest and continue to get the best staff. It doesn’t normally add up, but it is a play. And so it can work. What you need to understand is how your business scales. So when we look at this, and this was a talk that that you’ll see in any business seminar, but in our business, there was a discussion that happened a few years ago between myself and a consultant, and I I disagreed with them. So when I look at this, every time you you build a business, you build it to a certain percentage, and then you have to reinvest into it. Have to hire more people, and you have to get to the next level. You have to increase the size of your shop at certain stairs like this. So as you start building your business, the goal that you have is to build the business and stay above the line of your cost. And so the yellow boxes is our cost. Now when you do this right, you can build a sustainable business, and it scales. And every so often, you’re gonna hit these blocks. And if you don’t know that, then what happens is you try to make money at a time when you’re you’re pushing the limits. Here’s the crazy part. If you’re running a low margin business, you can make money when you’re small. So that question about the TPA, like, hey. We’re just starting out, and we wanna get going. Hey. Guess what? You probably can make money. But anytime you go to scale after that, you’re gonna hit this wall. You don’t have the revenue to invest in your business, so you’re gonna have to borrow tomorrow’s dollars to pay for your scaling up. And what happens is you only make money in the gaps in between your scale. Now it’s not really linear like this. They’re not straight edges or curves. So there’s only gonna be a sweet spot, and you when you lower the margin, you lower that sweet spot on that curve. So when you start to look at this, you’re like, oh, that’s why I was losing money when we went to scale is because we actually had low margin, low profit, and we didn’t have the money to pick it up. Guess what happened when my business tanked? I didn’t know it. I didn’t recognize it. I was there. That’s where my business was. Our margins dropped, and we were scaling. And so I got stuck for a year in this two million dollar about to go to three. Like, I was I actually had built the company to do four or five million. And I was like, oh, yeah. Well, because we we did two this year. We should, like, do two point eight next year, and then we’re set to get to five. And then we got suspended, and then we went and found new revenue. But by the time that revenue came in, we were already too late. That’s what happened. I got stuck at one of these growth areas where we were reinvesting in the business, and we couldn’t afford to. Well, if I would have increased my margins, I would have not experienced that. It would have been, like, breakeven that year. And that’s what you see here where that line touches that that corner. I would have broke even at that two million, two point one million dollar mark. Now if I drive those overheads, we talk about people. If I get my team skilled up and I get my investments into, like, technology and I put it into, the hardware and software, and I and then I buy the right tools to get my people out. If I can do that, I can get more per per project manager or more per project manager, more per PMA assistant, more from my operations team. If I can extend how much revenue we can do with our same overheads, what I can do is I can push that out. I can push those costs up, or I can push that step up further into the future. When I lost money in that two million dollar space, I actually would have made a little bit of money or I could have broke even because my cost would have come when we went to, like, two point five. Now what’s crazy here is that would be what your business is. It’s like you have really good years. So then the the then what happens is the companies that are doing, like, two, three percent on our survey, are you in one of these growth areas? Like, you like, oh, man. Two, three percent . Unless you’re right at, like, that peak where you just invested in your business. You might be a highly profitable company last year. You might have done, like, ten, fifteen percent last year. Now you’re at two, and you can’t figure out why? Because you just reinvested the tar out of your business. And so you’re at one of these growth points, and your margins have dropped, but there’s only gonna drop. Next five hundred grand, you’re gonna get back into good margins. So if you don’t understand that about your business, you’re like, oh, no. Every time we scale, we lose money. No. That means you’re not making enough. So if every time you scale, you lose money, you’re not making enough money. You’re not paying for tomorrow’s survival. Now here’s the crazy part. Good businesses go broke because they get caught in that scaling. Let me show you something here just to give you an idea. Right there. I had a consultant friend of mine come back, and he said, hey, Chris. I got this business. They’re doing, like, six million dollars, but they’re losing four hundred grand a year. I said, really? For how long? He’s like, years. My god. It’s a ton of money. Gone. What happened is they were at the five million dollar my my five million dollar benchmark. They got stuck at six. They had low margin, and they were stuck at a growth rate. They didn’t have enough volume to get past that break. They didn’t have enough volume to cut to that next level. So they were stuck there for two years. Their revenues didn’t go up very much. And he’s like, I don’t know why they’re losing weight. Like, but one, they’re estimating as ****. They’re not charging enough for the work they’re doing. I can see it because it’s low margin everywhere. Two, their overheads are ridiculous because they’re growing. And three, they haven’t moved. They never grew. So they’re stuck in this this spot where they were losing a ton of money. Had they downsize the business, they would have found profit again. Right? They would have dropped the size of the business into the profit mark again, but they didn’t. So we reviewed the company. I’m like, yeah. Their estimating is broken. Their structure is broken. You can see it clear as day when you look at it this way. Does that make sense? Like, if you ever had the business, you know, man, this year should’ve been a, like, a rocking good year. You probably got stuck in one of these cost points where you were expanding and you weren’t thinking about it. You’re just like, oh, I’m expanding my business slowly. And then you’re like, oh, man. Yeah. That’s what happened. You get stuck at these these pinch points. And if you get stuck there, there’s a drought, you overspend, you’re now tied into too many leases, you’re screwed. Like, you’re gonna lose money, and that’s just how it’s gonna be. If you can drive that efficiency into your business, you can avoid those pinch points, and that consistency drives profitability. And that’s the biggest thing. Consistently managing your business is gonna drive that profitability. So if we’re focused on it, do you wanna take a business from ten percent net profit to eighteen percent net profit, it’s not greed. It’s I wanna scale my business. Like, we looked at our profits, I was like, we’re gonna take money out of the company. We’re like, oh, now we go buy another hundred grand a year. And that hundred grand a gear should make us another four hundred grand next year. K. Let’s scale it. And then we can go hire those better technicians. I can get an operations manager, but you can’t do it if you’ve made three percent. Like, you’re just not you know, like, okay. Next year is gonna be pretty much the same as this year unless I do something different. And sometimes it’s hard. I get paralyzed by financial pressure. I just don’t like it. Give me a business that’s running smooth, and I’ll I’ll toy with it, but tell me you were run out of money, and I just I don’t like it. It’s just not my sweet spot. If we’re making money, I’m good. I’ll manage our dollars, but I just don’t like to be in a position where we’re we’re we have no wiggle room. We have no investment room. When you’re there, it’s hard to mentally get into the game. I’m gonna drop into this, guys. This is the profitability calculator. So I do this part. You guys have got sent a copy of this. I’m gonna show you how this works. It’s just it’s a mind exercise because when you leave here, you’re gonna go, you know what? There’s a bunch of things we could do. And I love that you guys put, like, we’re gonna get six, ten percent on it. Don’t shoot for that. Let’s go in. And so here’s how you use this this calculator. It’s in Excel. So you got the cover. You got you got a good looking guy who is thinner. Then you go in here and you go current net profit. What you put in here is what you’re achieving. So I’m gonna still use today’s numbers. So we don’t have to put in, like, make believe numbers. We’re just gonna say today’s average was five. And I think our revenue for the company was three million. So we would say our net profit at five percent, we we we’re doing three million dollars of sales. It trickles down through cost of goods sold and then through a fixed overheads, and we end up with a hundred and fifty If you’re a technician on this job, would you put your family, your life, and all of the eggs in the basket for a hundred and fifty grand where you could lose it all this year? And some of our restorers lost money this year, which means that that hundred and fifty grand, they actually paid money to be in the business. Would you show up and pay money to be in the business? Right? This is just how tight the margins are, and we usually see adjusters being like, you guys make so much money. You looked at our gross profit. You didn’t look at our nets. K? So when we look at net profit, we didn’t actually make that much for the amount of revenue we pushed to the business. The second thing we do is we say, what happens if we increase costs? So if I’m focusing on something and you guys said we could increase sorry. What if we can we could increase cost savings? So a lot of you said, hey. I think I can save, like, three, four, five percent. So let’s say we can save three percent. Nothing big. Three cents for every dollar. Technicians, that’s like you just not damaging one hardwood floor. That’s you, you know, charging out for a little bit more or not charging out for something or no. So it’s cost savings. We’re not gonna damaging something or we’re not incurring cost. We don’t break a tool. Like a like, our drying meter dropped off a ladder and smashed on the floor. We have to go replace it. That’s a cost. K? So if we just come up with three percent, three cents on every dollar, can we save some money? Or can we stop all those those on the rebuilds? Can we stop making mistakes where we have to go back and paint something the second and third time? Do we have to stop redoing texture? I’ve had to pay for texture jobs twice, and it like, when it was our in house team, and that cost me. So in here, if you can find three, you get ninety thousand dollars. It says, in order to do that, you either find three cents on every hundred, or you have to go get one point eight million dollars of new revenue. So what’s easier to make the same money? Find three cents on every dollar or go find one point eight million dollars in new sales. Pretty crazy. Like, when you sit down, you’re like, man, if I just built it. So I have to have to make two hundred and forty grand. I need to build a four point eight million dollar company next year. That’s how you use this. So it’s eight percent, and you’re like, okay. Well, we make two hundred forty thousand. That’s actually feeling like a little bit better business. I actually wanna be in that business. And you’re like, okay. Next charge. What if I increase my charge offs? Now it assumes no cost savings. Just what if I just focus on charges? Now you guys went bananas. You’re like, I think I can get eight and ten percent. Let’s just go and say we can get three. If we can get three percent saving or increased revenue, a technician says, hey. We replaced site containment three times, and we only charge for it once normally. Hey, boss. We can actually charge for it three times. We changed it every day we were in. Cool. I’d like to see it on your work order or your field report. If you do that, it’s the equivalent of making another one point eight million dollars in business. How much marketing and people do you need to get that much more revenue? Well, we almost have we have to more than double our business. So you need more technicians wherever you got in your company. We need fifty percent more. Go find a good talented staff and ramp up. It’s hard. K. The bottom one is what if we do bottom and top line analysis? What if we come in and save a little bit of money on some things and we increase our charge that’s a little bit? Not crazy like we said we’re gonna do. Just a little bit. Well, we would build the equivalent of a six point six million dollar business to get that three hundred and thirty thousand dollars. But if we just find those savings and a little bit of charges, so, like, I tell my project managers, you sell on that job site for an extra twenty minutes, Drink your Starbucks and go find some more money. Like, you need to find more dollars on a job. Technicians, you need to find the charge outs on the water damaged jobs. You need to size the equipment. Could we get three percent? Probably thirty dollars per thousand. That’s what it works out to. So if I have a six thousand dollar water damage job, can I find a few hundred dollars more? Yeah. Easily. Really easy. I bet you you missed that. You go walk on a job, you’ll find that easy. But let’s say we only find that. We don’t find it on every job. We find it on occasional jobs. We could have a six point six million dollar business, but we’re only running three million through revenue. This will explain why your neighbor if you ever had a business where you’re like, man, I started my company at the same time as the other guy, and they’re got new trucks and they’ve got all these tools and equipment. Well, they’re doing the same revenue as you, but they’re putting way more to the survivability of their business. And that survivability of the business is what carries you forward, and that’s why this is important. Now if you do that and then you say, let’s go take on some business. Let’s go take on some revenue. What’s the volume of impact? So what I did is I put up here, I put a a a growth projection piece in there. And so it says, hey. You know what? Let’s grow the business by twenty percent next year. That’s not aggressive. We’re gonna go from three million today to three point six million. K? We’re gonna have that five percent that we currently are making, and we’re gonna add three percent from savings and three percent from cross from growth. We’re gonna build the business from today’s revenue of a hundred and fifty thousand to tomorrow if we did nothing other than just improve our business, it’ll be three hundred and thirty. But if we grow, we’re gonna be almost four hundred thousand dollars. What type of business do you have at four hundred thousand versus a hundred and fifty? Christmas bonuses are easier to write for an owner. Guess what? I also can go buy the equipment and the trucks we need. Hey. We wanna get new tools that all match because our moisture meters are all different. I can do that here. I can reinvest here. It’s really hard to reinvest here. Anything under ten percent, you’re basically breakeven. Like, five percent, that money can get burned up so fast. But if I have four hundred grand and I lost a hundred, I’m okay. We’re good. Like, we’ll survive. But if you’re a hundred and fifty thousand, you lose a hundred, you might not cash flow. So your business is under that extreme pressure. And this is what private equity loves about restoration, is if you can get that consistency where you can find those dollars, they can then grow their businesses. They can grow guaranteed revenues out of the insurance carriers. And so they start looking at it and go, well, what if I had a thirty percent growth? All of a sudden, I almost triple triple my bottom line by only growing the business a third. So those numbers I showed you where my profitability skyrocketed was effectively just us taking our our current business and just fixing it. I didn’t go and look for more. We got more, but I wasn’t looking for it. I was like, no. I’m gonna go fix this part of the business, and I had a dramatic effect to it. Everyone wants to add revenue, TPA revenue. We gotta get all this revenue. Why? Because you could literally go in there and say, you know what? We’re gonna go and add one hundred percent more revenue. And if you’re not doing anything, you’re, like, three hundred grand. I could do that if I just picked up the the missing dollars. Do I need the revenue? Do I need the volumes? The only time you need volume is if you wanna keep people busy. Right? Now if I had three hundred and thirty thousand dollars, could I could I bump technician wages up when the when we’re slow? Yep. I could give minimum guaranteed hours, but I don’t know if it’s coming. Right? So that’s the problem is is there’s a bunch of ways you can run the business. There’s a bunch of strategies to running the business and pricing. And so what you’re starting to look at is if you just break the company down or you just break the business down into, like, simple pieces where, like, I’m focusing on cost savings for the next four months. Do you go too deep? Are you making good adjustments? And that’s where you’re you’re just looking at it. So, anyway, the bottom here, it wrote it like a story because I’m like, okay. Numbers are are numbers, but not all of us are numbers people. I’m a numbers nut. Your business doing exactly what you’re doing today at three million with the changes, you could make as much as money as doing six point six million in total revenue. If you grow your business by a hundred percent so let’s change that back to twenty five because that’s hundred is not not practical. If you grow your business by twenty five percent, three point seven million with the changes you made, you’ll earn four hundred and twelve thousand dollars of profit. If you don’t make the changes, you will need to sell eight point two million dollars of revenue. Not happening. Not even close to make the same four hundred and fifth twelve thousand dollars of revenue or profit. Your profit next year will be two hundred and seventy five percent more or two hundred and sixty two thousand dollars more profit by making these changes. Do I want my entire team invested in this? Yes. Am I gonna help get those people that can actually do it? Yes. And that is how you’re gonna take your profitability to another level. K. Here’s something that let’s see. We’ll finish this up. We’ll get in the q and a. So I keep coming back to this question, and it was what if everything I was taught about restoration was wrong? And the answer I keep coming back is is technically correct. Everything you learn in those classes is technically correct. So it’s not the question isn’t isn’t the right question, but it is wrong if you’re a business person. And the reason why is in today’s business, it’s not effective. K? It’s not effective. The game changed, but the training stayed the same. And so you have to think about your business differently than what you’re being told, and I didn’t realize that until I broke my business down. And you remember Ken? I love his smile. Like, I got a lot to owe to this man, but he said, you won’t understand restoration until you’ve owned a business. I don’t think he ever understood it, but I love the man because it was the best advice I ever received, And he was absolutely right. So I never would have broken the systems. I would have never personally invested all that time into figuring it out, to get the company to succeed because I I probably would have left before. It would have been easy. He introduced me to Paul at 吃瓜不打烊, I would never design the software you guys are using. And then without Ken, I would have never created Profitable Restore. And to the people that said that this is easy to sit and come up with behind a desk, These were my notes, and it’s kinda funny looking back at them. Like, there’s anger into them, and then there’s like, hey. Be positive. But when you’re upside down, you’re not so positive. It was like find energy, be positive, drive the team, and that was the blueprint that I wrote. And then I ended up creating that on my office. And I was like, oh, man. This is this is what it’s gonna take for me to do it. And then I said, if I just stick to it, it’s gonna work. And what’s funny is if I were to do it in a PowerPoint, so if I sat in an office and I made it look pretty, it would look like that. And so that’s what my PowerPoints look like, and it comes from the experience I have. So this came about, you know, the relationships. I didn’t make this up. I walked those hard miles. If you’re going through this, like, you’re the owner on the minus side or you’re the owner on the low margin side, I get your struggle. It’s a struggle to get profit. You’re going through your own pain, and you’re going through your own business. It’s not your fault. The diff there’s different organizations that are building training, software, estimating. They’re all built by these different people, and they’ve never built a high performance restoration company. They’ve never built a restoration company that’s cranking margin. They build pieces of a system that you have to put together, and there’s nobody putting it together. So that’s what I looked at, and that’s where I struggled. And I just was like, man, if you struggle with this, put it in the chat because everyone else is here. When I did the two thousand sixteen, seventeen, I did a presentation at the RA that all not all years are winners. I felt like the biggest loser when I went in. And Chris, I’m doing really good. I got, like, ten million dollar plant. I got twenty trucks. Yeah. And then I found out everyone’s not making money. Like, everyone’s not crushing it. Eighty percent of us aren’t crushing it. So don’t lie to me. We’re not doing that good. We’re getting our asses handed to us on a lot of days. But I thought I was the only one that was losing money, and I thought I was the biggest loser in the industry because everyone else was growing and making money. So it’s not that way. Now I had this story out. I’ll tell you this. I I was talking to Kristen earlier, and she says, like, hey. You’re really excited for this one. I was like, yeah. I couldn’t sleep last night. In two thousand nineteen, I had a friend of mine, not a friend, a student, a former student called he just called to say goodbye. And I was like, cool. Like, what’s up? And I thought he was leaving the industry, but he was calling to say goodbye because he his business was upside down. His marriage was on the rocks. His business and his house was gonna be repossessed, and he was thinking of offing himself. Actually, he was gonna. And I’m like, dude, don’t do it. I’m like, it’s not that big of a deal. Like, yeah, * year. Big deal. Your family, you you put all your heart in your business. Who cares? Like, let’s fix it. Let’s let’s go fix it. And so we fixed his business, and I did a bunch of the stuff with him. And, you know, I was a little mad that I got the call, but I’m I’m happy that we got him up and running. And then in twenty twenty, I think, was the year that we launched this. And this was like, hey. I’m not alone. He’s not alone, and you’re not alone. So, anyway, guys, that’s where this came from. Yeah. I didn’t make this **** up. This is this is how you earn it, and you gotta go through the hard steps to figure it out. So, if you’re there, it’s not that bad. So let’s jump into questions. So I just wanna circle back on Tim’s question. He did, explain a little bit. So he’s wondering if the industry standard to charge for customer requested change orders. Sorry. What I hear it is. Could you could you ask a question? Hey, Kava. I got just no. Hold so wait. Wait. Hey, Kava. I got I reach out to me. You got my, contact. Just put your number in there. I got you. Yeah. Sorry. Go ahead. No worries. Yeah. I’ll start with the first question. So do you charge the customer for a change order that is an option they wanna change? And then he said he’s wondering if it is the industry standard to charge for customer requested change orders. Oh, absolutely. It’s it’s well, is it industry change order? So it’s not industry changeover. Sorry. It’s not industry standard in some companies. Some companies just are like, you know what? We’re not taking it. It’s too much headache. But I’ll be honest. There’s some people there’s Joseph Cipriano out of Detroit. The guy’s got, like, a show home, and his whole process is take an insurance claim and, like, sell it to more. I think it’s smart, but there’s a lot of businesses that are like, hey. We do restoration because that’s how we identify. What if you’re like, we do restoration when you’re in time of need, and then we do, like, massive high end rentals when when you’re not. How do you take that customer and, like, ramp up the sale value, or how do you take that customer and make more money? Right? So it’s like, I wanna take that customer along a journey. I don’t wanna get as much dollars out of them because it’s gonna go somewhere. They’re upgrading their kitchen or their bath. Why wouldn’t they use us? Hey. They know I know how to deal with water. They know I know how to deal with fire. Why wouldn’t you do your bathroom with us? I have trades. I’ll take your money. And then if I’m doing it and I’m adding value to it, then I’m gonna get you ramped up. I’m gonna make you more money. So I think it’s a sucker’s play to do all the insurance work at low margin and then not go sell it the job’s higher because I can get margin from people if I can find people with value. So I like upselling. I like change orders. Like, I will paint your entire house. Like, I had I tell this story before, but I had a a homeowner that the adjuster said that, you know, they weren’t gonna get covered, but they told the this guy was a beast. He was, like, six two, big stocky guy, and he cornered me in the basement. He’s like, hey. You’re gonna take care of this? I’m like, no. The insurance carrier the insurance adjuster said they weren’t paying for it. I’m like, listen, dude. I’m a contractor. I will literally bulldoze your house down instead of painting the wall if you tell me to. I just need to know who’s paying. And he started laughing. I deescalated the situation that way, but he was mad because they weren’t gonna pay for some stuff that he was doing. So I’ll do anything you want me to, but a lot of us don’t go in and try to upsell the job. So I think change orders, it depends on how you build your business, but I would build my business around, let’s sell it, and let’s make as much money as we can, and let’s get away from the grind that we’re in right now or the rut we’re in with with insurance companies. They don’t value they value you showing up and doing it, but you versus someone else, there’s no value. To that customer, you’re the hero. That’s where the value is. I’d upsell every job I could. Yeah. Great. So how are companies charging a hundred dollars for technicians? Rate for WRT labor are quite low in our area, like forty dollars. Yeah. So so you’re playing by somebody else’s price list. Did you figure out your pricing? Have you have you sat down and went, like, what is our cost on our labor? And then, you know, you can report it to exact where will it change. Maybe. It has to mean that some other carriers have to or other contractors have to report it. You might move to time and material. Just I’ll give you an example. I won’t talk exactly about price in this forum. There’s there’s forums that we can talk about price. This isn’t one of them. But I will tell you this, is that restores who use exact domain, that’s all you know. Let’s say you’re charging forty dollars. There’s someone down the street who’s charging eighty five, And so you don’t know they’re charging eighty five. The adjuster told you nobody else is charging that, but I will guarantee there’s people charging eighty five, a hundred, a hundred and twenty. I guarantee there’s people doing it. Exactamate price is a medium price. They take out the highs and take out the lows, and they give you a median. It’s supposed to be researched. To what level? I don’t know. Right? But you have to come up with your own price. You’re your own business. Xactimate is not a business. They’re not a business management team. They’re not a they just literally put a price list together and say, make it yours. And so we work through. We’re like, hey. One, you need a pricing strategy. Two, you need to get your price list right. Three, you better make some money with that price list. I’m not saying it’s the wrong price list because you have to figure out what your cost is. But if it’s that low, it might be just a bad thing with the program. I don’t know. So what are some top tips for for someone just starting a new company to get initial jobs? You know what? It’s it’s it’s marketing. One, if you’re a new company, you don’t have a lot of experience. So I’d be focused on how do I get a lot of experience like, how do I get my experience and knowledge up? So I want my knowledge base up. Don’t do sucker work like you’re going out talking to brokers, project man or property managers. You might do plumber marketing where you say, hey. If you have a leak, I’ll come in and and service the customer. You’re networking. Everybody’s a potential client, but there’s certain fishing holes that you can go to get more work. Right? Like, I want people to have a lot of doors. Property Property managers have lots of doors. So you if you wanna sound a little bit like a pro, you’re like, hey. How many doors do you manage? That’s normally how they’ll talk to you about. Like, how many units do you manage? How many doors do you have under management? Oh, we have sixteen hundred doors. Okay. Cool. That’s sixteen hundred units. And then you work your way in to be their their service provider. You could sign up for a TPA, but normally, they need you in business for a couple years before you do it. And then you have to make a business decision. Is that the route you wanna go? And what is reasonable for weekly charge on, EQ? Alright. So I’m not gonna talk the actual price, but let’s talk method. If you had if I have an air mover and I’m gonna use a pricing of thirty dollars per day. So my air mover’s thirty dollars per day. Per week, it’s two hundred and ten dollars. No overhead and profit. But if you’re in Canada, get overhead and profit. If you’re in the States, not normally. But let’s say that we’re just talking the equipment rate. It’s two hundred and ten for seven days. If I have a carrier come in and say, that’s a four day rate. Well, my thirty dollars a day is based on it renting every day. If I cut my days down, that piece of equipment might be worth forty dollars a day. And then I’m like, well, sometimes it rents for five, six, and seven, but a seven day week is four days of rental, and I charge forty dollars a day. So I’m getting a hundred and sixty dollars for that week. Or I might be like, you know what? It’s forty five dollars a day, and I’m getting a hundred and eighty for that week. It’s a pricing scheme that you come up with. You’re like, there’s a small discount for weekly rate. But if it’s hourly or or sorry. If it’s daily, it’s thirty dollars a day. If it’s hourly, it might be, like, two dollars an hour because you’re not renting it for as long. It’s like anything. If you wanna add a weekly rate to it, there’s a discount, but it’s not forty percent. I have a friend who’s a he’s a consultant, and he always gets into this like, hey. I the equipment should rent for four days and not seven. And I’m like, the pricing scheme wasn’t built for four on seven. I would raise the price of my four to offset the seven. Like, you can’t just go in and cut three days and be like, that’s now the the four day price or the weekly price. It’s not how it works. You get to determine how many times does it go to six? How many times does it go to five? How many is it actually for? And so then you build your pricing model out of that. So you have to get into pricing mechanics. That’s actually that’s what we’re releasing in April is we’re going through all the pricing mechanics, all the Xactimate training for profitability, all the time and material, or we call it rate material training. Everything that you need to understand about estimating, that’s what we’re releasing. So that QR code is how we’re gonna get you on the estimating part. So if you’re looking for that, that’s what we’re doing. And then we’re tying in all the operations. So, like, everything I showed you today, we’re gonna go and solve that so you don’t have to, but it’s there if you guys want it. Like, too many people are hurting, have at her. But that’s how I would do it is you have to build a strategy around weekly rates, and you have to actually think about it. Don’t let someone dictate your weekly rate to you. It’s it’s like you going to them and saying, hey. I wanna pay my premium, every two weeks or every week, and this is how much I’m paying you. They wouldn’t do that. Nobody does that. We do it. So, anyway, let let’s let’s jump on to the next one. For sure. So this is regarding Xactimate. And I apologize. The question I’m gonna try and read this. Do do many work with find success in altering yields and Xactimate line items to broach slower slower processes slash methods and capture proper costing? So, for example, dry versus wet cleaning previously noted. Yeah. So part of it is is is all of so in Xactimate, they call this thing yield, but in the real world, we call it production rate. What’s your production rate? So your production rate would be that you’re sitting down here. Your production rate is that you’re sitting down and to do one unit we’ll call this a square foot. It’s one by one. To do one unit of cleaning takes fifteen seconds. And you go, okay. Well, then I can do four units of cleaning per minute, and I can do if I just keep rolling that out, I’d be, like, two hundred and forty an hour, but that’s not how it is. It’s like, no. Then there’s breaks and inefficiency. So when I clean, I can do three. I can do four, but when I’m not cleaning, I can do three. If if the unit price only gives you one unit sorry. It says you can do ten units. It’s like, no. That’s wrong. Well, it’s a it all it’s all I can fit on here. If this is what I can actually do and this is what it says I can do, I have to change my rate. I have to change the rate. The the rate has to change because this is all the work I can do, but this is what it says I can do. And it doesn’t work that way. So you have to change your rates. That’s how it was designed. It’s like drywall. So look at drywall this way. If I had a wall and I’m gonna draw this. There’s there’s my art skills in in action. If I had a wall with a window here and here and a door versus a wall with nothing. What’s faster? Well, this is faster. Slap the boards up and rip it. Here, gotta do trim. I gotta cut holes out. It’s gonna take more time. I got more waste. And then they’re like, you know what? Deduct the waste. You don’t you can’t charge us for the waste because we’re not actually putting drywall there. Well, guess what? They’re not putting little patches in here. They’re just gonna slap boards on and cut the waste out, so you have to make the adjustments. So when we look at estimating, estimating is about getting the scope right. So the scope, if you take the estimate, the number out, the scope is how much material are we gonna use here and how much waste do we have on this window. And if you actually looked at scoping right, you’d be like, well, there’s a lot of waste here, and there’s not a lot of waste here. So do my numbers add up? If they don’t add up, you change them. And so that yield is your production rate, and that production rate is how much time or how many units you get per minute, per hour, per square foot out of the job. And so that’s where you’re basically running running your numbers against it. And and, guys, it’s it’s you have to change it. It’s just what if what if you’re doing what if you’re working on, like, a thirty a thirty story building and you gotta go up and down elevators? Either you’re adding hours in or you’re changing the yield or the production rate. So I’m be like, oh, it’s up on the thirtieth floor. It’s twenty dollars a square foot for drywall because we have to go up and down elevators. You could do that or you could say, hey. It’s the same price, but now we have to charge for all that up and down in the elevator. So it’s coming up with the right price and and production rates. Have to charge. You have to change it. Then you have to justify it. So in a in a rebuild, in a quote, that makes complete sense. You’re just like, hey. There’s my there’s my number. Someone else might come in with a different number, and you play the game of, like, what’s reasonable. In mitigation, it’s the communication. So it’s like, hey. I need time sheets to support stuff. I need to document it. I need to explain what we’re gonna do. I need to talk about we’re on thirty floors up, and we gotta take the elevator. And it takes fifteen minutes to go round trip on the elevator when it’s busy. That’s what we’re talking about. So you have to have that conversation. So with insurance, it’s it’s communication. And I would rather know restoration’s bad. We’re like, hey. We’re gonna submit a price, and we’re gonna get paid. That’s not how it works. You get you get arguments. You get reviews. I’d rather know they’re not gonna pay me before I do the job and walk away than to get the job and then lose that money sitting in in purgatory for six or eight months. There’s probably better ways to do business. Again, I might be in a position where I need that revenue, but it’s still I’m not getting it for six to eight months. So it’s kinda like you incurred the cost, and at some point, you’re gonna get paid. Maybe that’s not the best thing for your business. Awesome. Thanks, Chris. So this one’s a situational. My company averages thirty to sixty percent profits on a lot of our jobs. Based on all the numbers you’re giving, I have to assume we are doing most of everything quite well. I only ever get in trouble when we are less than thirty percent. Is that pretty standard? So somewhat. You look at some jobs that get thirty I had project managers again, so it depends. I had project managers that were getting fifty, and I had two of them that were, like, side by side, and they were both getting about fifty percent. And I had one guy who was getting sixty two percent. And I was like, man, that’s, like, that’s that’s good. But then when you broke the numbers down, sixty two percent isn’t, a little good. It’s way better. And so we started to look at it because all those that twelve percent went straight bottom line. So all of a sudden, had like a super PM, and then we went back and reviewed the fifty percenters, and we’re like, hey. We’re actually leaving a lot of revenue on the table. So it kinda depends. Like, you might look at it and be like, hey, that’s good enough. But if you’re looking for survivability of your business in the future, I’d be like, there’s still money on the table. So it might depend, but you might capture all the revenue. Your price list matters. Your cost of labor will will dictate it. Your cost of your overheads dictate it. So, like, how does it actually fit is kind of one of those things that you have to make that decision if it is. But if you’ve left if you left dollars on the table, then then the answer is no. If you captured them all, then it sounds like you’re pretty good. So it kinda depends, but those are those aren’t bad numbers as a general rule. I got on rebuilds. I hear I hear people having eighteen percent on rebuild or sixteen percent on rebuilds. You’re like, yeah. That’s pretty tight. But what’s your cost on it? Right? So I don’t have a whole warehouse dedicated to rebuild. I have an office and a project manager. It might be good numbers. It might work for your business. For someone who’s running big overheads, it might not work for their business. In my old business, we had a about a twenty percent overhead. And so when I had guys doing eighteen percent profit margin, gross profit, we were losing two percent. So why would we even do the work? Like, you’re like, you just cut that out of your budget, and you’re already more profitable, and you don’t have all those overheads. Yeah. Good good question. It’s just it’s when a situation like that, it’s hard unless, like, you’re you give me one fact and, like, here’s my numbers, but I don’t know anything about your business. So as a general rule, I’d say that sounds good, but it might not be or it might be. Awesome. Thank you so much, Chris. So one last question here. Do you glow do sorry. Do you global change and factor it up twenty percent, or do you use a custom price list? How often are you having adjusters push back for not using a standard price list? Yeah. So so that’s a wicked question in in the sense that you know factoring. So factoring is where you go across, you say, add twenty percent to everything on my list. And so that’s a way of changing your price. And it’s it might be good. It’s a good blanket way to add twenty percent across the board. And if you’re not charging overhead and profit, but you’re burying it into the unit price, that’s a perfect way of doing it. I like that. What you get away from is that’s coming up to a price point, but you haven’t put a lot of thought into, like, every part of your price list. You haven’t come up with a strategy. So it’s a good first step if that’s what you’ve decided to do, but I like the strategy of where I I can actually build my numbers in. And then and I can I I have a place to tweak? So if I have a an adjuster I want to work with differently or there’s an adjuster I don’t like I had one adjuster I hated working with, so I literally created my own system to, like, screw with them. Right? I charge by the square foot, all my drying, all my restoration, all in. It was like, I don’t know. Let’s let’s say it was seventeen dollars a square foot, and he’s like, well, how’s this work? I’m like, everything’s in. It’s a one cost price. He’s like, well, this is you can’t do that. I’m like, well, customer signed my contract, and it’s seventeen a foot. When we tuck in and trucked it, that’s what we did. Well, we’re like, you know what? Let’s just do an all in price and see how that works. And we did it, and he went ballistic. He ended up paying the bill because he couldn’t argue it. And so it was an interesting way. I just had some fun with, hey. We’re gonna try some pricing things here, But we got our equipment paid for the right way. We charge for the labor. I just did as a as a as a global unit cost. So I like factoring for some things, but I’m not a big fan of factoring, like, to get my overhead profits and easy ones. Like, that’s how I’m gonna add it in. But if I start boiling a pricing strategy, I would go a little deeper than that. It’s it’s still a good way to do it. Yeah. Good question. Perfect. Well, I think, that’s it for the questions. Again, thank you everyone for joining us. Great session. Have a good one, guys.