Episode 51: The 10 Professional Builder Levels Explained With Russ, Sky & Andy

In episode 51 of the Professional Builders Secrets podcast, we’re joined by Co-founders of the Association of Professional Builders Russ Stephens and Sky Stephens, along with APB’s Head Coach, Andy Skarda. Throughout this episode, the trio explain APB’s 10 professional builder levels.

 

Inside episode 51 you'll discover

• The definitions of APB’s 10 professional builder levels
• Where your building company ranks 
• The milestones you need to accomplish to progress through the levels
• How long it takes to become a Certified Professional Builder
• How to reach the ultimate goal for builders
• And much, much more.

 

Listen to the full episode to uncover exactly what makes a professional and successful building company.

 

Russ Stephens - Co-founder

Russ Stephens is a Co-founder of the Association of Professional Builders, a business coaching company dedicated to improving the residential construction industry for both builders and consumers. Russ is a data analysis expert who has introduced data-driven decision making to the residential construction industry. Russ is also a proud member of the Forbes Business Development Council.

Connect with Russ

 

Sky Stephens - Co-founder

Sky Stephens is a Co-founder of the Association of Professional Builders, a business coaching company dedicated to improving the residential construction industry for both builders and consumers. Sky is a proud member of The National Association of Women in Construction and she was also recognised as one of 2021’s Top 100 Women. 

Connect with Sky

 

Andy Skarda - Head Coach 

Andy Skarda has owned and led businesses in South Africa, the United States, South-East Asia, and for the last decade, Australia. With 30+ years of business experience, Andy heads up the coaching team at the Association of Professional Builders (APB), helping business owners in the building industry identify and implement the skills and systems they need to be successful, without needing to go back to school or more importantly, without going bust.

Connect with Andy

 

Timeline

1:46 What are the professional builder levels?

5:00 Levels 1 through to 10 

27:34 Certified Professional Builder and progressing to the next level

36:43 How long does it take to work through the levels?

42:44 Where you can find these levels

 

Links, Resources & More

Professional Builder Levels

APB Website

APB on Instagram

APB on Facebook

APB on YouTube

Join the Professional Builders Secrets Facebook group for builders & connect with professional builders world-wide.

Andy Skarda:

There's a difference between building a house and building a business. 

Andy Skarda:

One of the things that you've got to have, if you want to sell a building business, is profit.

Sky Stephens:

If you are specialising in new homes, you need to be hitting above 25% gross margin.

Andy Skarda:

But a lot of the money sitting in your bank account belongs to your subcontractors and your suppliers.

Russ Stephens:

It is very, very easy to scale an unprofitable building company.

Bosco Anthony: 

Hello and welcome to the Professional Builders Secrets podcast, a podcast by the Association of Professional Builders (APB) for building company owners, general managers, VPs and emerging leaders. Here, we discuss all things running a professional building company, from sales processes to financials, operations and marketing. We have another exciting episode from the Professional Builders Secrets podcast. I'm joined today by Co-founders Russ Stephens and Sky Stephens, as well as Head Coach Andy Skarda for APB. Sky, lovely to have you join us as always.

Sky Stephens:

Thank you, Bosco. Great to be here.

Bosco Anthony:

Russ, great to have you back again.

Russ Stephens:

Hey, Bosco. How are you doing?

Bosco Anthony:

I'm doing well, mate. And Andy, a pleasure is always jamming with you again.

Andy Skarda:

Always a pleasure, Bosco. Nice to be here.

Bosco Anthony:

At APB, you have a really interesting way to guide a building company through success, and it's called the Professional Builder Levels. I'm just curious, what are they?

Russ Stephens:

The Professional Builder Levels are a structured pathway for a residential building company, in order to grow safely and securely. Typically, when builders think of growing their building company, they instantly are drawn towards lead generation, or they certainly were before COVID hit. Then we had a boom where sales were easy. But generally, when builders think about scaling their building company, they think, “If I can get more leads, I'm going to get more sales. If I get more sales, I'm going to get more revenue, and more revenue, well, that leads to more money.”

Russ Stephens:

The trouble is, that's not necessarily true. It's very important that you scale a residential building company in a structured way and in a particular way to ensure that it does grow safely and securely. Of course, the goal at APB is all about profit. We're not chasing the vanity of revenue. It's profit that we really care about. The objective for the Professional Builder Levels is to get builders to a 10% net profit after drawing a salary at market rates.

Bosco Anthony:

Okay. Why did you come up with these levels when you were determining this in the first place?

Sky Stephens:

Following on from exactly what Russ said, we needed a way of very evenly grading any building company that we came into contact with. There's a lot of different ideas, even if you count revenue or size of projects, and it's very easy for us to be talking to one builder about their unique building company. But they've potentially seen case studies or success stories about other builders working with us, but they're so much bigger than them or they're so much smaller than them. They always found a way to communicate to us that it wasn't relevant to their building company.

Sky Stephens:

We work with so many different sizes of building companies from the smaller companies to quite large organisations, and we needed a way to benchmark each one of them. It's not just on margins, it's not just on revenue, it's not just on client happiness. We've put together these Professional Builder Levels that are 10 unique levels that a professional building company can work through to ultimately become a Certified Professional Builder. You know that they've got a robust, profitable and professional building company that doesn't only have the systems in place, but it has the profit to back it up, and it's a proper business because it is investing in marketing as well.

Sky Stephens:

So, it's a very sequential, natural progression through those 10 levels, and it's given us a way of grading and moving through any building company to ensure they've got a robust business.

Bosco Anthony:

Can you walk me through these levels; and how do you avoid people getting their feelings hurt? Because they might come in with their own perceptions about what level they should be, and then all of a sudden they get a reality check. I'm just curious to know how you manage the egos in the room.

Andy Skarda:

Bosco, you are so special. How do we make sure their feelings don't get hurt? You're talking to a South African. What are feelings? No. Let me be serious for a second. As Sky has said, what we looked for was a way to benchmark where somebody is on the journey. We are not, for one second, saying that's good or bad. We're just saying that's real. If you follow these steps, you will get to where you want to be in terms of a profitable business that has some value. On previous podcast episodes, we've spoken about selling a building business, and one of the things that you've got to have if you want to sell a building business is profit. Nobody wants to buy a business that's running at a loss.

Andy Skarda:

You asked if we can walk you through the levels. At level one, we look for a builder to be calculating their Work in Progress Accounting Adjustment (WIPAA) accurately every month. There's obviously three pieces to that. They've got to understand what the WIPAA is. They've then got to work on the fact that it's accurate and it's reflecting the real scenario. And then, it's got to become a habit. It's got to happen every single month.

Andy Skarda:

Anybody who's listened to the episode where we spoke about this particular accounting adjustment will know that it is focused on making sure that we can accurately determine exactly how much profit the business is making. As Russ said earlier, we want to make sure the business is profitable. We are not going to help anybody scale until they are. Therefore, we need to know right at the outset, off the bat, are they profitable or not, and is it a genuine profit? That's level one.

Andy Skarda:

In terms of keeping the business running, once we know that they are profitable, we've got to get them away from this concept that what's in the bank is actually their money. Because the truth is, in a building business, in 99% of the cases, they're often actually running in a payment in advance scenario. That means that a lot of the money sitting in their bank account belongs to their subcontractors and their suppliers. Therefore, we've got to make sure that they have the cash to cover that upcoming liability, make sure they can pay their bills in addition to being able to make profit.

Andy Skarda:

So, the second level is that they must have the liquid cash. They must have the resources in the bank to be able to cover the WIPAA liability they are carrying. That's levels one and two, both focused on profitability and making sure that they are financially sound.

Bosco Anthony:

It sounds like a lot of this is financial awareness, and then, usability of that financial awareness and how they manage their funds.

Andy Skarda:

Yeah. And moving their mindset from money in the bank equals “I'm doing well,” because money in the bank isn't theirs, and therefore, they might not be doing well.

Bosco Anthony:

Take me through the next step. We got through one, two, and three. What happens next?

Russ Stephens:

Well, that was one and two. Level three is when we start to talk marketing, and that's because marketing is linked to margins and that's all because of supply and demand. Level three is about creating a lead generation website, a high converting website that is also content-rich. Now, I don't think I've ever seen a building company operating at scale that was profitable, without a good website behind them. By profitable, I mean that they were generating decent net profit. I don't think I've ever seen a company operate in our industry without a good website behind them. It is fundamental. It's where people will go to research you. It's how you create awareness from your blog, and that's what we mean by content-rich, and it’s fundamental to the success of a building company.

Russ Stephens:

So, that is level three, and it comes early on. Of course, we've got a very structured systematic approach to what makes a successful website and, of course, we've got preferred partners as well that we work with that follow our processes that we can guide our members to, which shortcuts the process for them.

Russ Stephens:

But once the website's in place, level four, the next step is all about amplifying that content. This is where we want to see the building company achieve a level that is investing 3% of their revenue into marketing and advertising. Now, the exact breakdown of that 3% can vary from company to company. It will depend on their niche, it will depend on their strengths and weaknesses, but this is where our Executive Coaches give our mentoring clients a lot of guidance on exactly how they should be spending that.

Russ Stephens:

Typically, as a rough guide, it could be around 2% on advertising and 1% on marketing. It could be another quick easy ratio, 1% on the handover process, which we spoke about on an earlier episode, 1% on marketing, 1% on advertising. But it really does come down to the strengths of the building company as to where they need to be diverting more of that revenue. Of course, if they're in a strong financial position – having calculated their WIPAA and having the cash to cover it – and they are in a position to grow even faster, they could ramp up that 3% to 4% or even 5%.

Andy Skarda:

I think, Bosco, if I can just jump in on something that you said earlier. These levels are not necessarily sequential. Particularly in the Private Mentoring program, we will often be already starting to work on creating that content while we are monitoring the WIPAA. So, they're not necessarily a linear process, but some builders can actually get started with, say, level three before they've finished level two. That's quite possible. But what we are making sure is that the fundamentals are in place and there is profit that can be invested. Then, obviously, we'll go from there.

Sky Stephens:

That's a really good point to make actually, because if you were to only work on the next level as you get there, it's going to take a lot longer. Obviously, if step number one is calculating your WIPAA each month, it's a simple calculation that's not going to take too long. You're not going to do nothing else for that whole month. So, you can look ahead at the rest of those levels, and like Andy says, if level three is creating a content-rich website, you can start putting all of that in place. It doesn't mean you're a level three builder; you're still on level one until you nail it. But you can look ahead and start preparing and working on so that, by the time you get to work on it, you can tick it off a bit faster.

Russ Stephens:

It's a fine balancing act too, as well, isn't it, really? Because this is where the expertise of the coach comes in, because it'd be very easy to think, “It makes sense for me to work on all 10, so I'll just get there more quickly.” Of course, this dilutes the resources and doesn't give you a clear objective there. So, this is where the expertise of the Executive Coaches will guide the mentoring clients as to exactly when they need to be opening up a new front and opening up a secondary direction.

Bosco Anthony:

We've got levels that focus on the financials. We've got levels that focus on the marketing, and then reinvesting some of that marketing budget back into the plans. What's next?

Sky Stephens:

Level five is where we come back into financials, but specifically on margins. To clarify, levels one and two are very much to do with accurate financial data. That's the basis of work in progress. We've done a whole episode on it. So, the WIPAA is ensuring that your accounts are correct, so that you can start making a lot more informed decisions for the building company as you're working through the rest of the levels. Once you've got level three in place, as Russ said, a high converting website that's content-rich, you move on to level four and start paying to amplify it. It's very specifically put in this order because by the time you get to level five, this is where you need to start increasing your margins.

Sky Stephens:

Level five in the Professional Builder Levels is having your gross margins exceed industry benchmarks. We focus on gross margins first. As Russ said, margins are linked to marketing. We couldn't put this level before the content-rich website and before investing in marketing and advertising; it doesn't work like that. You can't just put your prices up and expect people to pay them. You need to make that investment so that really by the time you've completed level four and you're starting to work on level five, it's not going to take you an eternity, because you've got a lot of stuff backing it up.

Sky Stephens:

So, when your building company's gross margin exceeds the industry benchmark, you are reaching level five. Obviously, if you are specialising in new homes, those benchmarks need to be hitting above 25% gross margin, which as we know, means your markup is over 33⅓. And if you're completing renovations or you are a remodeller, your gross margins need to be over 33⅓%. Just remember when we talk about margins, we're not talking markup.

Sky Stephens:

Level five is gross margins. At level six, once you've achieved those gross margins, you need to really focus on your net profit margins. Your net profit margins need to be in excess of 10%. That is level six in the Professional Builder Levels. Now, when you are going through all our financials trainings, it's almost like it should be hit at the same time, level five to then going into level six, because you always want to be monitoring your fixed expenses as a percentage of your revenue. Naturally, it will unfold quite logically. However, sometimes you just need to systemise the building company a little bit more in order to hit it. So, step number one is gross margins, step number two is your net margins. That's levels five and six.

Andy Skarda:

I love the fact that what does Sky do? She tees me up beautifully for levels seven and eight with the word ‘systemised’, and there it is. That's exactly what comes with levels seven and eight. If you look at what you’ve done, you’ve got the company’s numbers accurate, you’ve changed the messaging to attract a different type of client who understands the value you are now adding. Now, you can push up your margin, so now, you've actually got the company solid in terms of profitability. Now, you move to the other leg of growing value, and that is systemisation.

Andy Skarda:

Because the first discipline in that process is selling, the first thing that you want in place is a dedicated sales manual that literally allows a 10-year-old to walk into your office and to work through your process. When I say that, I don't mean we actually expect people to employ children. We're not going back to the Dark Ages. But what we're saying is you want a sales manual that is structured and set up in such a basic instructional way that a 10-year-old can actually understand it.

Andy Skarda:

Now, a little quick anecdote if I may, one of our Elite Mentoring client's daughter's name happens to be Summer. She was 10 years old when I was working with him on exactly these things. He got it straight away, because we could talk about Summer-ising this process so that she would understand it. Really, what we're talking about there is the language. That's level seven.

Andy Skarda:

Level seven is kind of the stepping-stone; it's one of the disciplines. Level eight is building out the rest of your company manual. So, making sure that your other four disciplines and your leadership structure are put into a written format. Essentially, what that now does is it adds that second leg of value. You've got profitability and you've just added systemisation. Now, this thing's starting to cook, and now, it has real value in terms of you starting to think about an exit strategy, which we've obviously covered in previous episodes.

Bosco Anthony:

When you talk about systemisation, does that also include technology or is it just operational systemisation?

Andy Skarda:

You can't do one without the other. Love and marriage, horse and carriage, as the song goes. You literally cannot ‘technologisize’ – and, of course, the real word is ‘automates’, in most cases – you can't do that unless you've got the system in place first. Essentially, all that you're doing with that automation is speeding up the execution of that system by using technology to assist you. That's essential. You must first systemise, and then you can automate.

Bosco Anthony:

What happens next?

Sky Stephens:

Level nine is back into financials. We've talked about this a lot. It's a big backbone of what we teach at APB. Level nine is to have more than three months of your fixed expenses available as working capital. The reason we put such a focus on financials is because, ultimately, the financial health of your building company is what determines if you're going to make it through any kind of downturn, and this is what calms you. We've talked about holding more than three months’ worth of fixed expenses and working capital for as long as we've been around. This is just the beginning, because, ultimately, the goal is to get to 12 months’ worth of your fixed expenses available as working capital.

Sky Stephens:

A lot of people have pushed back on this. A lot of people have said that's too much. Specifically, accountants and bookkeepers say, "You do not want to be holding onto that much. It's too much." However, and this is actually really important, all of our clients who have been with us for a really long time, for as long as we have been preaching this and have been working through before we even created these as official levels, we've been talking about holding more than three months of fixed expenses available as working capital.

Sky Stephens:

As soon as 2020 hit, and there was so much uncertainty, so much fear in not just the marketplace but really the whole world, our long-term members, who had been preparing for this and following that trajectory and advice of running their building company with reserves, as scary as it was, they were nowhere near a 10 out of 10 on the fear factor. There were a lot more reserved. They were able to stay a lot calmer and make better, more informed long-term decisions because they didn't need to worry about short-term cash.

Sky Stephens:

They knew they would actually be okay because they had months, if not a year's worth, of their fixed expenses available to them, so that whatever happened, they could survive for the next year. Now, they made smart decisions but it makes you a lot steadier. You're a better leader. You're a better business owner, and that's why it's a really important thing to have. We made it an entire level, level nine, more than three months’ worth of fixed expenses in working capital. Ultimate goal though, remember, is 12 months.

Bosco Anthony:

Basically, you're operating an arena of safety for the people around you as well, when you're getting to these levels. Because whether it's three months or 12 months, some of the historians will tell you that people have sustained themselves over time because of planning for the worst-case scenario as well.

Sky Stephens:

Well, absolutely. Why would you spend all this time having correct financial information, investing all of this time and money into your marketing, increasing all of your margins to just withdraw everything? You need to then build that secure company.

Andy Skarda:

Our granny taught us, from the time we could understand, that we need to save for a rainy day. The reason she did that was that, strangely enough, it rains occasionally. So, the bottom line here is creating those reserves. I always tell the clients I work with, “This is your sleeping tablet.” You sleep well at night when you know that you've got up to 12 months of the running costs of your business available to you at any time.”

Russ Stephens:

I can remember when COVID hit in March, and probably more severely in terms of business, in April 2020. Someone said to me, "Are you concerned about your builders?" Because at that point, sales funnels were emptying quite quickly. I said, "No. Our members have been preparing for this moment for the last four or five years." It was more of an exciting challenge, and we practise what we preach ourselves. We too hold strong reserves, not just in the company but personally as well. With the uncertainty that hit in April 2020, we immediately suspended our own drawings from the company to protect the company. We could do that because we had 12 months’ reserves of our own.

Russ Stephens:

We also looked at battening down the hatches on the fixed expenses, which meant all of our staff and their futures were secure for the next 12 months, because regardless of what happened in the business, we knew that we could ride this out and see our way through to the other side. At the time, we were thinking this could go for around about two or three years. Little did we know that the economic boom that we experienced was coming. It was a different kind of challenge that we ended up hitting.

Russ Stephens:

But it's exactly what Andy said, we could sleep at night. It didn't matter what black swan event was coming out and hitting us, we knew that we'd been preparing for it, and we were ready for any challenge, which I guess then brings us to the finale, to level 10. For a building company to reach level 10, they will be consistently producing 10% net profit after drawing a market salary. Now, typically that market salary is going to be in the region of about $500,000+, because the owner is going to be running a $10+ million building company by that stage. I think what's really important is they grew their building company profitably all the way through.

Russ Stephens:

Now, it doesn't mean they're capped at $10 million. Yeah, we’ve got clients who do $50, $60, $70, $80 million. But the fundamentals are the same. It's not about the revenue that they're achieving. It really is about the net profit, and it has to come in line with the market salary as well, because there's no point in sacrificing your own salary to artificially boost your net profit. You're not kidding anyone when you do that. 

Russ Stephens:

In fact, it reminds me, we did a live event recently where this guy, they weren't members but they attended it, and they had a reasonably successful building company that was doing about $5 million. They were operating on about 5% net profit, although it wasn't clear if they were actually drawing a market salary or if they were drawing a salary at all. That could just be $250,000 that was being drawn out as a salary, which would be about the rate really to run a building company of that size. 

Russ Stephens:

They couldn't comprehend when we spoke about 10% net profit. They just did not feel it was realistic or possible. It didn't matter that we've got members who have come through and actually demonstrated that they've achieved this. It doesn't matter that you can look up public records of any residential building company – not so much in Australia, they're difficult to get hold of – but if you look at places in the US or the UK where you can access that financial information, you'll see that the benchmarks are 10% net. The benchmark for the fixed expense ratio is 15%.

Russ Stephens:

If you talk to any accountant who understands construction, they will tell you the fixed expense ratio is in the region of 15%. Sometimes it can go up, sometimes it can go down, depending where you are on the growth scale. But these are fundamental ratios. We didn't invent these; we didn't create them. They are fact. This is how the industry operates. So, you’ve simply got to follow them and benchmark your building company against what the rest of the industry is doing, and then simply do it better than they are.

Andy Skarda:

I think, Bosco, just to amplify what Russ has just said, we get a lot of people frown at us when we quote some of these percentages and numbers. We just had a really interesting case in the Private Mentoring program with a client who joined the program and openly admitted that he did not believe that what we were saying was actually possible. In the Private Mentoring program, he's been working at the process for five months, and he's just sold his first contract at exactly the 25% gross margin that we told him was possible. He wasn't a believer, and now he is.

Russ Stephens:

I suppose you could even argue that mindset should be a level, but really, it's not a level, it's a prerequisite. Because if you don't have the right mindset, you can't progress through these levels; you'll get stuck.

Andy Skarda:

I think, Russ, we are going to maybe argue with you a little bit for a change, as mindset doesn't affect skill. A lot of what we are talking about here is actually developing the necessary skills to run the business professionally. But absolutely, mindset is critically important.

Russ Stephens:

You do have to have a growth mindset, an open mind in order to learn and develop and acquire those skills.

Andy Skarda:

Yeah, and even believe it's possible I guess, which is a very valid point. So, Bosco, there you've got it. Those are the 10 levels. At the end of that process, the builder is then what we call a Certified Professional Builder. As Sky mentioned earlier, really all that certification means is that they've now put all of the fundamentals in place that are required for us to be able to comfortably say this business is now safe and secure. What it then does, above all else for our members, is it now gives them choice and options. They can now decide what they want to do from this point onwards, both internally within the business and then externally on a broader scale.

Sky Stephens:

The way we think about our Certified Professional Builders is that they now just get to focus on growth, the annual growth of their building company. They've achieved or unlocked all 10 levels. Think about it like they are now the real owner of the building company who gets to build out their circle of influence, kind of the Richard Branson of the company. They are working on deals that take the company forward, but they're no longer involved in the day-to-day.

Sky Stephens:

I'll tell you what's really special about these levels. Nowhere in any one of these 10 levels have you heard us say the words getting off the tools, employing these kinds of people, having this kind of an org chart. It's not about that. If we can focus on numbers, they are measurable, and you know whether you did or didn't hit it and it's still applicable with all of these ratios. If you are a $2 million building company or an $80 million building company, it will all still apply. We didn't need to talk about getting off the tools or hiring X number of people or anything like that, because you will not be able to do what you need to do to unlock a level if you do not progress and grow as the owner of a building company.

Sky Stephens:

I remember one of the live events we hold for non-members, like Russ was talking about before. We have notepads and pens so people can write notes as we're presenting. There were some builders who were there, who left the event and they left their notepads on the table. It’s just always interesting to go and see what notes they were taking down, what was getting written down, and they were passing notes to each other. There was one note in there and it was written as we were going through the presentation where we talked a lot about numbers, we talked a lot about margins and growth and how to move through these levels.

Sky Stephens:

One of the notes was, “How are you supposed to run a building company with all this data rubbish? It's taking too much focus off the important thing of building. How are you supposed to run a company if you're focused on all of this stuff?” It was just perfect. Obviously, they weren't the builders for APB. There was no alignment. There was no match there. This is how you run a successful building company; it's about the numbers rather than anything else.

Andy Skarda:

Yeah, that's such a good point. I think, Bosco, we've covered this to some degree in previous episodes as well. There's a difference between building a house and building a business. We are not sitting here saying every person who wants to build houses should or must necessarily build their business. But what we are saying is if they want to, we've come up with a step-by-step process that will allow them to do that safely and securely.

Russ Stephens:

Yeah, it's a good point, Andy, because I think, really, we probably only appeal to maybe the top 20% of residential home builders. We are not an association that sets out to recruit every builder in the industry. That's not our goal, and that's not what we're about. We're all about attracting the guys who do want to grow both themselves and their business and of course their income. But that's not for everyone. That's not to say what the other guys are doing is wrong. If you've reached a point in your life and you're quite happy and you don't want to grow, that's fine as well. But if you do want to grow, they're the kind of building companies that we work with.

Bosco Anthony:

I want to explore a little bit about how you unlock the levels. How does a builder progress to the next level? Is that something that the coach comes to the table with for the builder? Is that something the builder comes to on their own measurements and says, "I'm ready for the next level"? How does that work?

Andy Skarda:

Well, it's a bit of both. Obviously, the coaches are trained and focused on moving their clients through these levels. As coaches, we review on a monthly basis who's moved and which levels they've moved from and to. Obviously, the beauty of those levels, as you would've heard, is that they're practical things. Don't tell me you're calculating your WIPAA because I can go and check the calculator. If it hasn't been done, and of course we've been around a bit, so we don't just accept that it's been done in their KPI workbook, which all of our mentoring clients get as part of their program, we always ask to see their profit and loss statement.

Russ Stephens:

We trust but verify.

Andy Skarda:

Yeah, there we go. Trust but verify. That shows us that the journal entries that take that work in progress into account have actually been processed, and we check that every month for three months. We've also got processes where we actually get builders to list their bank balance at the end of every month. We don't need to know the total amount that's in the bank. We just want to see $1 more than their WIPAA liability in terms of confirming that it's there. If you think through all of the other levels, we can literally track them actually in reality, and we then work the clients through that process step by step.

Bosco Anthony:

Is it only your members that can be on a particular level, or can builders in general be on different levels?

Sky Stephens:

Any builder can slide on into any level. These aren't exclusive to any of our members. We set up these levels, but even if you're not a member of APB, you can go and reference them and see where you actually fit. As Andy was saying, the benefit for our private clients is that they get verified by the coaches. It's an independent verification. For example, when we first launched the levels, one of our clients said, "I'm looking at the levels... Oh, I'm a level five builder," because their gross margins were at the industry standard. We said, "Yes, well done. You do have good gross margins, but you don't calculate your WIPAA every month." 

Sky Stephens:

Technically, you could have mix and match. You could have a level six just because you're getting your great net margins, but it doesn't actually mean you're on level six. Because unless you do level one, which is calculating your WIPAA accurately every single month, you can't progress. It's a great way of bringing people back down and working sequentially. Because at the end of the day, how accurate is that 10% net profit margin if you don't calculate it?

Russ Stephens:

That's the point, isn't it? You might think you're on level six, but if you are not calculating your WIPAA, in all honesty, you don't even know. It's probably not a level six, probably not even a level five.

Sky Stephens:

Exactly. There's one client who stands out to me, but I'm sure it happens to multiple clients in mentoring. You'd know, Andy, because it's just you either do or you don't, and that's the best part about the levels. You are or you are not. You can work through it. But to answer your question, Bosco, no, you don't have to be a member of APB to be on a particular level. I'd encourage every builder to look at the levels right now and see where they do fit in. The benefit of being a member is it's probably just on your mind a bit more, especially in mentoring or even elite mentoring. You've got it verified and you’ve got a coach pushing you to keep going and keep going forward.

Russ Stephens:

I think, as well, you've got the solutions in the members’ portal to get you through that level and onto the next level.

Sky Stephens:

That's a good point. Yeah.

Andy Skarda:

I think that's a very, very important thing for us to stress, Bosco, that, although we’re talking about the levels today, these are backed up by nearly 50 training programs that are available to all of our members, which help them to understand why this is important, and then show them exactly how to implement what they need to do to achieve this. When you say is it only members, no, it's not only members, but it's going to be a whole lot easier for our members because they get the support that they need in order to achieve them.

Russ Stephens:

It's like a self-diagnostic, isn't it, really? The levels show the gap, and then the members’ portal contains the solutions and the pathway.

Bosco Anthony:

I love the training. I affectionately call the training the ‘Netflix for professional builder training’, because there are so many different videos and so many different training programs that I've already been accustomed to. 

Russ Stephens:

Netflix without the ads.

Bosco Anthony:

Yeah, Netflix without the ads. I've got a question for you, and this is for the competitive business owners in the room. How long does it take to work through all these levels, and has there been a builder who you can think of who has exceeded expectations from the average benchmark?

Andy Skarda:

Yes, no and maybe. There we go. The answer unfortunately, Bosco, is that it is entirely dependent on where they are when they start. Because the truth is, very few people join APB even knowing that the WIPAA even exists. So the truth is, and Sky touched on this, we could very easily have somebody who has 90% of a sales manual in place. They might be, even once we check their WIPAA, be close to achieving the industry benchmarks. They may have a company manual in place. So, it's quite possible that somebody could come in, have to work on levels 1 and 2, and then have 3, 4, 5, 6 and 7 90% ready to go and then bang, bang, bang, bang, bang, those things happen very, very quickly.

Andy Skarda:

What do we aim for? We aim that everybody has worked through the levels in our Private Mentoring program in somewhere between 18 and 24 months, and then we move them into what we call an optimisation phase. Realistically, if somebody was looking at how long this is going to take, it's going to probably take you three years to get all the way through, starting from scratch. Now, some people take longer, quite simply because of the way their business is set up; we've got to undo some of what's going on and then rebuild from scratch. Some people will join the Private Mentoring program to get specific pieces of it done because that's lacking in their business. It's a difficult one to say, “Give me six weeks of your life, and I'll make it happen.”

Andy Skarda:

You spoke about the competitive guys in the room. They love this because they get to move to the next level, and that in itself is a motivator. The beauty is there's no downside. That competitiveness is simply taking you to a better place in terms of your business. So, that side is fine, but we don't make it competitive. Our focus is really to make sure that each step is in place before you move to the next one. You'll hear this from all three of us; we live it because it's the truth. This must happen safely and securely. We want to minimise risk; there's enough risk in business just generally. We don't want to add to it; we want to, in fact, reduce it if we can.

Sky Stephens:

That's a good point. When we launched these, it wasn't even for the gimmick factor to get people to compete with each other and have little trophies for everyone. It's completely not the point. We've got over 100 private clients, and we've got five coaches on our coaching team. We needed a way to decide what is our baseline? What is success for these building companies that have all different kinds of revenue and different sized projects? We needed that measuring stick that could work on every building company.

Bosco Anthony:

What's the big incentive for any owner of a building company to follow these levels, and what does success look like to them?

Russ Stephens:

It is fundamentally to grow their building company safely and securely. I can't overstate the importance of that statement enough, because it is very, very easy to scale a building company, an unprofitable building company. It's extremely easy. I think that was highlighted to us a few years ago. I know we've shared this story before, but I think it's worth repeating, and this goes back pre-COVID. Well, everything's like post-COVID or pre-COVID now. 

Russ Stephens:

It was a few years ago and a marketer, a very well-known marketer in Australia, was running an event. He packed the place to the rafters. He's very good at what he does. He's a great entertainer; he has great stage presence. However, as part of his proof of how successful his methods were, one of his examples was a building company that he scaled up into bankruptcy because his techniques were just so successful and so powerful that the company grew too quickly.

Russ Stephens:

We were horrified, but it really does highlight the dangers of scaling the building company before you get the margins in place. As you can see from the levels that we've gone through, it is so important to get a good understanding of the financials and understand exactly where you are. That way, you know exactly where you need to be heading before you start scaling up. Success leaves clues along the way. What we've done here is mapped out the pathway for a builder to be successful without the risk associated with growing.

Andy Skarda:

I think just to talk about some of the stuff we've covered in previous episodes, when you get to level 10, you actually have something you can sell. The crazy part is that at the level that you'll be at, you probably won't want to sell it at that point because it's going to be an absolute dream to be running that kind of company. But we keep talking about the fact that not a lot of building businesses get sold, and the primary reason for that is that there's not a lot of value in them because there's no profitability and there's no systemisation. And really, that's what these 10 levels bring.

Bosco Anthony:

Yeah, I think, for me, the biggest incentive is you are also teaching them how to be a sustainable business legacy. You're leaving a sustainable business behind during times of uncertainty. So, I think there's a lot to unpackage there. For our listeners, where can they find these levels so they can follow the progress of their own building company?

Sky Stephens:

Super easy. It is on our website under resources, but we’ve actually put a direct link to our Professional Builder Levels in these show notes of this episode, so that anyone who’s listening can go look at the levels, recap on what levels one to 10 are, and just see where they fit. They’ll see it has a full description, what the level is, what it means, what they actually need to get done, and what the next level is, so they know what they need to work on to move on up and grow that building company: revenue, margins or both, safely and securely.

Bosco Anthony:

My final question for you is, I’ve been keeping up with the socials on APB, and you recently had a retreat. You’re announcing a future retreat as well. I’m just curious if these retreats that you do with your clients are associated to the levels, and if so, what level do they need to get to, to come and hang out with the APB crew?

Andy Skarda:

16.

Sky Stephens:

No, our retreats are firstly an amazing event. We're headed to Hawaii in 2023. It is sold out. We have a waiting list if you are interested, if we can secure some more spaces. But the retreats are not locked to a certain level. We actually lock a level for our mentoring, so we have a higher level of mentoring. It's called the Elite Mentoring program, but that is a locked level. We do not allow people under a certain level in the Professional Builder Levels to get that level of elite mentoring. But our retreats are actually predominantly focused on legacy planning, succession planning and exit planning, which weaves the levels in so beautifully.

Bosco Anthony:

That's awesome. Well, as always, I want to thank you all for being here today and for sharing so much value in another insightful podcast episode.

Andy Skarda:

Thanks, Bosco.

Sky Stephens:

Awesome. Thanks, Bosco.

Russ Stephens:

Thanks, Bosco. Great catching up with you again.

Bosco Anthony:

Cheers.

Bosco Anthony:

Thank you for listening. Remember to subscribe to Professional Builders Secrets on your favourite podcast platform and leave a review. To learn more about how the systems at APB can help you grow your building company, visit associationofprofessionalbuilders.com. See you next time.