Episode 73: The Real Cost Of ‘Mates Rates’ With Andy Skarda

Professional Builders Secrets brings you an exclusive episode with Andy Skarda, Head Coach at APB. Throughout this episode, Andy explores ‘mates rates’, the concept of offering a discount or better price to friends and family than what they’d pay on the open market, and its detrimental impact on a builder's bottom line.

 

Inside episode 73 you will discover

• The popularity of mates' rates in construction and its real cost to your building businesses
• The drawbacks of discounting and better ways to create value
• Strategies for staying competitive without reducing prices
• The importance of pricing and quoting the right way to protect your margins
• The benefits of being picky with the type of buyers you deal with
• And much, much more.

 

Listen to the full episode to learn how you can offer great value to your mates without putting your building company at risk!

 

Andy Skarda - Head Coach at APB

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

1:48 Why mates' rates so popular in construction

5:01 How critical mates' rates are to a builder's financials

5:58 What are the real cost of mates' rates to a building company

8:46 Better alternative to mates' rates

15:58 How builders can stay competitive and protect their margins during these hard times

26:35 How APB helps its members to price and quote for great value

 

Links, Resources & More

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Andy Skarda:

I don't think anybody's real mate would want to cause the builder's business to go bankrupt. 

Andy Skarda:

The reality here is, if you are finding the right clients for whom the value that you offer is the solution they are looking for, you remove price from the equation. 

Andy Skarda:

Cutting corners in the construction industry never really works well for anybody. 

Andy Skarda:

The fact that if you take on a job that's only going to deliver 2% margin while you are building that job, it stops you building another job where you could be making 5%, 6%, or 10%.

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. 

Bosco Anthony:

We have another exciting episode from the Professional Builders Secrets Podcast. Joining us today is my pal, Andy Skarda, Head Coach for APB. Andy, lovely to have you on again.

Andy Skarda:

Thank you Bosco. It’s always good to see you. It’s always good to talk about these incredibly interesting subjects that you come up with.

Bosco Anthony:

Well, I'm really excited to talk to you today about ‘mates’ rates’ and it's something that I see constantly. I actually started seeing it a lot more in Australia, but why is the concept of mates’ rates so popular in the construction industry?

Andy Skarda:

Well, I think we maybe need to do two things. One, just for the audience that's not from Australia, maybe just explain what mates’ rates is, and secondly, just to dive into the fact that I think it's really popular everywhere. What we are talking about here is somebody getting a special price on something and particularly a better price than what they would pay in the open market. 

Andy Skarda:

To be honest, I don't know whether it's really that specific to the construction industry. I can think of other examples, even in things like the US election campaigns, there were examples like “Why aren't we paying $5 for a t-shirt and manufacturing it in the US instead of getting it for a dollar because it's manufactured offshore?” I think it's just a natural human reaction to want to spend as little as possible on the things that we have to buy. So why is it popular? I think we all like cheap stuff. That's the real reason.

Bosco Anthony:

As I said, I heard the term mates’ rates when I moved to Australia, but there's obviously a global concept around cheap rates. Some people call it discounts, some people call it a better deal or deals. We hear a lot of this around Black Friday in the retail world. So is this another cosmetic to the word ‘discount’ really when you hear mates’ rates?

Andy Skarda:

Yeah, absolutely. Like you, I've lived in a few other parts of the world. I had five years in Singapore, and if there are any Singaporeans listening to this, the concept there is called ‘low bung.’ Can I get a low bung? We talk about a box that fell off the back of a truck. We talk about people asking to hook me up with X, Y, Z. So I think it's a pretty universal concept, and I think it tends to go a little bit deeper than discount in most cases. We are almost looking for better than a discount rate. I think that's really where it takes us to.

Bosco Anthony:

So what's the overall verdict, my man? Is it a good, a bad or an in between notion to promote it in the building industry? What are your thoughts?

Andy Skarda:

I think it's dangerous.

Bosco Anthony:

All right, tell me why.

Andy Skarda:

Well, I think it's fine with a commodity. If I'm buying a t-shirt and it's the same t-shirt and it's the same quality and everything else, and I could spend $100 on it, or I could spend $30 on it, as long as nobody is getting harmed in me spending $30 on it, why shouldn't I? In other words, if all that's happening is there's an exorbitant markup being added onto somebody else's labour for the final press, I think in that commodity world, it's fine. The danger in the construction industry is that cutting corners in the construction industry never really works well for anybody. We're not talking about a commodity here. We are talking about essentially a significant physical asset, and I just think it's dangerous to be applying t-shirt type economics to something as big as what we're talking about here.

Bosco Anthony:

Let's dig a little deeper here because I feel like that term might be overrated as well because sometimes it's potentially adulterated on commercials. You see it on TV commercials, you have a season for Black Friday sales as well. If you're not paying attention to this, how critical could this be to the overall financials for a builder?

Andy Skarda:

Huge. Going back to what we were talking about earlier, Black Friday in most cases is an opportunity for retailers to significantly discount slow moving stock to get it out the door, but they're never going to discount it below a price at which it's at least breaking even. The danger in what we are talking about here is that it can cost a builder significantly more than just break even if he gets into this space. So that's the danger we've got to be careful of here.

Bosco Anthony:

So Andy, the theme of this interview is what is the real cost of mates’ rates to a building business? I'm going to ask you that question anyway. You've alluded to the fact that this can be a pretty dangerous situation for a builder, but what is the real cost of mates’ rates to a building business? How bad can this get?

Andy Skarda:

It can get as bad as possible. I've seen this go from, “Oops, I didn't realise I was investing in my mate's house,” to “My business is barely up now because I've done too much of this.” The danger, Bosco, really is that some builders don't know their numbers, don't actually know what's going on financially within their business, and that can be a very difficult thing for a lot of builders. 

Andy Skarda:

There's a lot of moving parts in building a house, and a lot of builders are building multiple houses at one time, and it can be fairly complicated, and some builders don't know what's going on in their financials. I've had a number of clients, even in our Private Mentoring program, so clients who are not beginners by any means, and we've analysed some of their past jobs. 

Andy Skarda:

I in fact had a client, and if he's listening, he'll know exactly who he is, because when we did an analysis of his previous year's jobs, we found that he had literally invested $50,000 into his friend's house. He'd built a house and he'd done it at mates’ rates. And because he wasn't in touch with his real numbers, when we did the analysis and looked at the actual numbers, there was $50,000 in that house that he'd actually invested. So in other words, it wasn't that he hadn't made a profit, he'd made $50,000 less; he'd actually built the house at a loss to himself. He had covered $50,000 of what had gone into that house. So there's one example. 

Andy Skarda:

When we keep it at mates’ rates, it keeps it light and airy because it's your friend, it's your mate. The problem is when this starts to happen with somebody who isn't your mate. Now you end up in a situation that to get the job, you thought you'd do something to give you that inside line, and now there is no way of recovering it, not even in relational capital down the road. This can turn really ugly. This is the stuff that lawsuits are made of.

Bosco Anthony:

And obviously, if you're honouring it for one mate, the chances are you're probably accumulating it over a period of time for a few mates, and that's when it starts to get really out of hand because four mates, five mates, now you're compounding that $50,000 across different mates, and now all of a sudden, you're at a loss of two, three, $400,000. Right?

Andy Skarda:

There you go.

Bosco Anthony:

So yeah.

Andy Skarda:

That's exactly the problem.

Bosco Anthony:

All right. Well, we know what the dangers are, so what's a better way or an alternative to mates’ rates? Is there an alternative for our listeners out there? What's their saving grace?

Andy Skarda:

Well, I don't think anybody's real mate would want to cause the builder's business to go bankrupt. And if they’re really your mate, I would think they’d want the best for you. So I'm pretty certain there's somewhere you can meet in the middle. And where would that be? There are a number of ways that a builder could supply expertise and not charge for that expertise.

Andy Skarda:

At APB we talk a lot about a sales process, including a builder being paid for concept designs and preliminary building agreements, those kinds of things. A builder could choose to donate their time for those things to a friend and save them money upfront. But the problem is once you get into construction, the timber costs what the timber costs, and the concrete costs what the concrete costs, so the only way to discount that really is for you to cut your margin.

Andy Skarda:

You’re going to have to pay for the timber and the concrete and the tiles and the tapware and so on. So the danger is we’re back to the thing that you, Bosco, and I often debate as soon as you start cutting margins, and the general public has this opinion that builders make exorbitant amounts of money. They don't. 

Andy Skarda:

Builders handle, in some cases, large amounts of money, but the actual margins that most builders are working at are really, really tight. And what builders are now saying is, “Well, let's cut into that,” which I think is dangerous. So for me, if somebody was saying to me, “How can I offer my mate something that makes this better than the guy in the street would get?” I'd be focusing on that pre-construction design process and obviously donating my expertise to make sure that he gets the best deal possible. That doesn't destroy my business.

Bosco Anthony:

Now you're also talking a little bit about creating value. So what are some of those other value areas that you could produce other than reduce pricing? Would it be that consulting or education or knowledge? Where are some of the areas that you could tap into?

Andy Skarda:

Well, that, and particularly in the design stuff, we talk about the fact that over 70% of architect designed homes are never built. Part of the reason for that is that the motivation often from an architect's perspective is to create something that is a monument to his design ability and meet the client's requirements, but often that's not cost-effective. 

Andy Skarda:

So a builder who's able to get involved with one of their mates from the word go on the design side and literally identify those areas of the build where savings can be achieved, and then make suggestions on alternative building methodologies, different materials being used, knowing where to go to get the best price on that multi-head shower that the guy wants to install, those kind of things, I think would definitely add value in that they wouldn't necessarily reduce the overall price of the home, but he would end up with significantly more features in that home for that same amount of money.

Bosco Anthony:

At the end of the day, people in the homes are not necessarily designers or builders, so I'm sure any insights given during that process could really be a good thing. It could exactly help people as well because everyone has blind spots, right?

Andy Skarda:

Yeah.

Bosco Anthony:

All right.

Andy Skarda:

And we don't know what we don't know.

Bosco Anthony:

Yeah. Well, let's take a peek into the mentoring and coaching calls as well, because you and your coaches yourselves are probably hearing this quite a bit from builders saying, “But Andy, we have to use discounts to survive. It's such a trying time right now.” How do you create inspiration for builders to look beyond discounts? Does it come down to the numbers?

Andy Skarda:

Yeah. And I think Bosco, in our case, it comes down to proof. The beauty that we have as coaches and the beauty we have at APB is that we've got years and years of data from actual builders all over the globe. And because of that, we've been able to come up with financial benchmarks that we know are tried, tested and applicable everywhere. You can chat virtually with any one of the coaches. In fact, as we were talking about off-air before this, we've just come back from the International Builders Show in Las Vegas.

Bosco Anthony:

IBS.

Andy Skarda:

A little bit earlier in the year, not to date this particular podcast, but we've had a couple of occasions where we have presented our financial benchmarks in those educational settings and had builders come to us afterwards and say, "The kind of margins that you are quoting are impossible to achieve. Nobody could achieve them." In fact, we had somebody come into the Private Mentoring program where their stated reason for coming was to prove us wrong. And of course we proved ourselves right. 

Andy Skarda:

So the reality here is if you are finding the right client for whom the value that you offer is the solution they are looking for, you remove price from the equation. If price is not there, then discount does not even come into the discussion. The danger for a builder is to stay in that space where you are quoting plans that have been given to five other builders. As I alluded to earlier, you're all buying your concrete and your materials from the same suppliers, pretty much. You've got the same cost of labour to run with, so the cost to build that house is going to be pretty much the same for all five of you. 

Andy Skarda:

So what do you do? You decide to cut the only thing you can cut, which is margin. And when you don't get that job, the next one you cut a little more and you cut a little more and you cut a little more. And then that job runs over time, in other words, longer than scheduled, and now you are donating and investing into that home. If we turned this around and said, "Well, I'd like you to take a job where you work 60 hours a week or 90 hours a week and you pay in for the privilege," nobody would take that job.

Bosco Anthony:

No.

Andy Skarda:

And yet when you cut margins in that sort of scenario, that's what you're doing. That's what you're putting your hand up for.

Bosco Anthony:

And to confirm, I've had plenty of builders who have been on this podcast who have said to me that they joined the mentoring program because they didn't believe in the notion of the rates and margins and everything else, and they were proven wrong. A lot of them were proven wrong. So that actually is a valid story there where people don't know what they don't know, like you said.

Andy Skarda:

Let's balance that, for the people who are stuck in the world of, “I have to quote plans,” there isn't another option because the driving force in that decision is price. So while you keep the buyer's driving decision on price, the only way to be competitive is to do it cheaper.

Bosco Anthony:

Yeah. I just want to ask you a question there because what you're really saying is to focus on the experience in the building process.

Andy Skarda:

Absolutely.

Bosco Anthony:

Now, should builders look at this? Because you're going to get some of those builders saying, "Well, how do we stay competitive?" What's your response to that?

Andy Skarda:

The beauty is you're no longer competing on price, and therefore this whole discount question goes away. How do you stay competitive? You are better at offering and delivering value than the next guy is. It really comes back to having a very clear picture on what type of client with what type of build will give you the kinds of margins that make your business sustainable and able to grow for whom you have the perfect package to solve all of their problems. At the end of the day, in the building industry, largely we could take the word ‘sales’ and throw it out the window because the most successful builders don't sell their clients anything. They help their clients realise the dream that they have for the budget that they have. That's what they're doing.

Andy Skarda:

In terms of delivering value in this space, that's really what it's about. It doesn't really start when you put the first spade in the ground. It starts at the first discussion six months before that, making sure that you understand exactly what is driving this client into making the decisions, you are helping them get the best design, the best process, et cetera. That's really where the competition comes in, being prepared to go that extra mile upfront rather than trying to shave money out of the margin and delivering a poor service along the way.

Bosco Anthony:

Now, I'm a bit of a nerd, as you probably know, and I recently bought a 55 inch work monitor.

Andy Skarda:

Okay.

Bosco Anthony:

And there's a story here. It was fairly expensive and I upgraded, and I loved it because I could have five to six different workstations open up at the same time. The person who got me through this experience said, "Listen, I've got this ergonomic chair, and if you are going to get this, I highly recommend the ergonomic setup, and we'd do this for you at no cost." He didn't use the word ‘discount;’ he didn't use the word ‘free.’ He said, "We'll set up the ergonomics so that you don't have any neck problems when you're working out of this thing."

Bosco Anthony:

He ended up getting two transactions from me because I was at that age where I was looking at my back and my posture and everything else, and I was thinking that was a pretty smart move. I went in with one entity and he talked about another entity. What are some of those terminologies that are valued that should replace ‘mates’ rates’ in the future? You talked a little bit about the design process. You talked a little bit about an architect's vision and industry knowledge. What are some of the terms that you're seeing in today's market for the people who you are not going down that whole mates’ rates park?

Andy Skarda:

Yeah. It's a combination of all those things that you've just touched on. It's a builder with decades of experience knowing intuitively, this type of design is going to be more expensive than this type of design, and the difference between them in the final analysis, in other words, in the lifestyle that they will deliver is so minimal that to spend an extra $50,000 to have that versus this, you're going to be disappointed. We have members and mentoring program members who get frustrated because they say, “People don't want to listen to us.” What happens often in those kinds of scenarios is that the client will go away and go to another builder.

Andy Skarda:

Six months later they’ll contact our member and say, "I wish I'd listened to you." The problem with this industry, as I said, to go back to where we started, is this is not a commodity. This is a big deal that we are putting together here. You can't just undo it and start again, if four months into a build it goes pair shaped. You’re stuck pretty much with the outcome. Most professional builders would be very hesitant to step into a 60% completed mess and try and fix it and it would probably end up costing significantly more anyway.

Bosco Anthony:

Right.

Andy Skarda:

It's a long way of saying it, but I think the real focus is on a professional builder who invests the time upfront to make sure that the design is cost-effective for what that client wants, and then executes the build according to whatever that is, efficiently and on time and on budget. Put those two things together and a discount is unnecessary. It's automatic. It's built into the process.

Bosco Anthony:

Now, what do you say about the cynics or critics who say that there's a future of hardship and competitiveness, and we're going into this uncertain potential recession globally? What are your thoughts around it? Because I would think that you'd still want to protect your margins going into these hard times?

Andy Skarda:

Even more so. What I think a lot of builders forget about or maybe ignore is opportunity cost. The fact that if you take on a job that's only going to deliver 2% margin while you are building that job, it stops you building another job that you could be making 5%, 6% or 10% on. So there's this double whammy, again, because it's not a commodity, because it's going to tie up your resources and your capacity for 6, 8, 9, ten or twelve months. You need to be very, very careful that you are taking on the right jobs for the right reasons. So again, coming back to the question of is there going to be competition? Absolutely there is, but professional builders are going to be competing on the things that matter.

Andy Skarda:

At the end of the day, I think you and I have discussed Tiger King and the fact that in my opinion, that program is the biggest waste of time there is on the face of the earth. If I had the choice of spending six months building a house that I was going to lose on, I'd rather watch Tiger King for six months – and I think that's a fate worse than death, actually. But the point I'm trying to make is being busy for the sake of being busy is not a good option for a professional builder. A professional builder wants to make sure that he's investing his time and effort into something that's going to give him an adequate return. And if he's doing that, there's no financial hardship.

Bosco Anthony:

One can also say that the more you discount, the more desperate you show your hand attaining business, which then sends the wrong message to anyone out there.

Andy Skarda:

Absolutely. I think you've spoken to my friend Ryan Stanward.

Bosco Anthony:

Yes, I have.

Andy Skarda:

Ryan shares this wonderful story about in his early days as a builder. He would quote four jobs, win one, and then get this cold feeling of dread in the pit of his stomach because he thought he left something out. As in, for him to win the job he must have forgotten to cost something. When he told me that story, it was with a group of other builders around him, and I expected them all to frown and point at him and laugh, but they didn't. They all nodded. And that's scary. That's where the hardship is going to come when you've already shaved everything to the bone and then it takes longer, now you're into dangerous territory.

Bosco Anthony:

I give a shout out to Ryan. I've had him on the podcast as he’s got a great story, and I've seen him in the last few years. His business has progressed and progressed, and he credits the mentoring program and the support of APB for a lot of his growth as well in the last few years. But that's a classic example of someone who's had to say, “You know what? Enough's enough, and we're going to do it the right way.” 

Andy Skarda:

Yeah.

Bosco Anthony:

So I give a shout out to our friend Ryan there. What are some of those trends that you're seeing in the market when it comes to creating value today? You come across so many builders who are in so many different stages of their business journey, where do you see the future of builders who are actually applying the systems and actually applying your mentoring and coaching? Where do you think they're going to put their value, I guess, in moving forward?

Andy Skarda:

Well, very few builders who come to us need help building homes. In fact, the bulk of the guys that come to us are often multi-award winning builders. I had a recent discussion, in fact, with a potential client who grilled me about my building experience, and he really didn't even want to carry on with the conversation if I wasn't a builder. I just asked him the question, "Do you need help building houses?" He stopped for a second and frowned, and he said, "Well, no." I said, "Well, then how would it help you if I had building experience? What do you need help with?" And he said, "Well, it's everything else." And I said, "Now there I can help you – with those other things." We don't for a second pretend that we could teach a builder how to build a house.

Andy Skarda:

Don't give me a hammer and a bag of nails. That's a dangerous thing to do. But the value that I'm talking about really comes in the entire client experience. So the builder who is able to professionalise their sales process, for example, who in their marketing is delivering high value content, that really helps people coming into the building process to understand what's important and what's not. 

Andy Skarda:

The builder who has a design team that understands where cost comes from and can make suggestions about the most cost-efficient way to achieve what the client wants, those are really the guys who are starting to make traction. The strange part is in virtually every case, as they start to offer that kind of value and they start to understand their numbers and run their entire business more efficiently, their margins automatically improve. And let's go back to where we started.

Andy Skarda:

So you’re a builder and you've got a mate who wants you to build him a house. Can you cut him some slack? Not if every job you've got on your books is cut to the bone, no, you can't. But if you were going to make 5% or 10% out of the job, you might decide to say, "In your case, because you're my mate, on this one job, I'll make 8% instead of 10%." You can do that if the rest of your business is financially sound and you’re confident that you know that you now have some leeway to go, if you absolutely, desperately need to discount, if that makes the two of you feel better. 

Andy Skarda:

But I really believe that the main focus in this kind of discussion should be, “Let me make the entire experience of value to you. Let it be something positive that you would do over and over again, and in that way, I can actually give you far more than you would get if I managed to save you $10,000 and parts of your house fell down six months later.”

Bosco Anthony:

How does APB help its members offer great value when it comes to pricing and quoting the right way? What are some of the systems or tools that you use outside of the mentoring program? Because obviously the mentoring is more that elite coaching as well, and you help design that, but I'm sure you have other resources to help members to understand whether they're even pricing the right way because you've got the SORCI [State of the Residential Construction Industry] report as well, right? So tell me a little bit about what are some of those resources.

Andy Skarda:

We deliberately move the focus. In most of the building industry, the focus is on gross profit, and we think that's too short-sighted. In fact, that's what gets a lot of builders into trouble: they aren't taking into account the fact that while they are building that house for six months, they are paying rent, they're paying insurances, they're putting fuel in vehicles, et cetera. There's a whole bunch of overheads that need to be taken care of as well. If those are not taken care of, then you can't deliver the kind of service on site that clients are looking for.

Andy Skarda:

So we turn around, we call it our pricing for profit system, and really what it's doing is making sure that the focus moves to net profit for the business on every job rather than simply delivering a gross markup or margin on the top end without taking those fixed expenses into account. So there's a fundamental shift there in terms of how jobs get costed and what the true cost of the job is, and once you've established the true cost, then you can look at adding real margin to that kind of thing. So that's one side. The other side of it is making sure that you understand the rest of your numbers. Is your business actually profitable? What sort of gross and net margins are you achieving? How do those compare with the rest of the world? Et cetera.

Bosco Anthony:

Do builders need to also be picky with the types of buyers they deal with? Are you also saying, "Hey, if you're going to be sophisticated in your approach, perhaps you should also say no to certain buyers as well?"

Andy Skarda:

Well, not only to certain buyers, but to certain jobs as well.

Bosco Anthony:

And mates.

Andy Skarda:

Absolutely. I've got a couple of clients who've built for family members and friends where when they've told me what they're planning to do, I've said to them, “How important is it to you that your relationship is still whole at the end of this process?” Because sometimes that's what you've got to decide. Do I want this person to still be my mate at the end of this or not? And to be brutally honest, I know that's unusual for me, but just to go into that space for a second or two, if you want that friendship or that relationship with the family member to stay whole, it is incumbent upon you to make sure that you treat them as well as and in the same way as you would any other client. So that's really the starting point. The second point is don't move into the type of job that you're not good at.

Andy Skarda:

If your sweet spot is building $500,000 custom homes, three bed, two bathroom, single storey, and your mate comes along and says, “Hey, I've got a $5 million home. It's 16 stories with a lift, on the edge of a cliff overlooking the sea,” be careful. It's not just being discerning about the buyer, but it's also being discerning about staying in your lane. We talk about dominating a niche, being really good at one thing, becoming the go-to person for that thing. 

Andy Skarda:

The second piece to this is don't move outside of that thing because one, you're not experienced, and two, probably what that's going to do is through the entire process, including costing it, it's going to mean that you're exposing yourself to unnecessary risk and potentially losing a friend.

Bosco Anthony:

At the end of the day, sometimes those decisions, like you said, have to be made. Builders have to say no in those scenarios. I'm going to throw in a question for you. I just thought about this recently because I've interviewed you a few times, and one of the things that you have a gift at is you are almost a forensic accountant when it comes to looking at people's books. One of the things that all your coaches tell me is that people usually over-embellish or say things without facts. 

Bosco Anthony:

The one thing that really designs a coach's craft is to look at the numbers and really find things. So here's a scenario: you have a person who you know or have a feeling that they're either offering way too many discounts or quite high discounts out there. You onboard them; you're starting to look at their books. What's the first thing you're looking at from a metric perspective? Where do you go? Is it the P&Ls? Is it the pricing? Where do you go to find the forensics to know, "Hey, this discount is really high"?

Andy Skarda:

Well, we probably wouldn't start with the discount, but we'd go and look at what the business as a whole was making: the profit. At the end of the day, any business’s reason for existence is profit. I said this in a coaching call yesterday, even for not-for-profit businesses, their goal is as much profit as possible because the only difference is they don't distribute it to the owner of the business, they use it to fund whatever service they provide to the community. So in fact, in their case, profit is probably an even bigger motivator than in a normal business. But really everything you do in your business is reflected in your financials. I would start at the profit end of the equation and work my way back. Because if you are not making profit, it's only from one of two things.

Andy Skarda:

Your expenses are too high, your revenue is too low, or what is often the hybrid of those two is you are not providing for enough margin. There isn't enough profit in the job to deliver a net profit at the end of the day, which is why our pricing for profit model deliberately goes to that point rather than stopping at the gross profit level. So let me also now nail my colours to the mast: at the end of my school and university career, I'm not sure that my accounting teachers would've agreed with you that I'm anything like a forensic accountant. 

Andy Skarda:

But what I've been able to do because I'm not an accountant, is I've had to learn how to convert those numbers into a story. What story are these numbers telling me about this business? Largely, that's what all of our coaches are able to do, to know where to go and look.

Andy Skarda:

When you know where to look, it's pretty obvious what needs to be done. Really, that's one of the biggest reasons that we find for professional builders coming into the Private Mentoring program. It’s because it's not just about knowing what needs to be done. What is critical is knowing the sequence, the optimal sequence in which to do things, to get the biggest bang for your buck. You’re battling and battling and battling for nine months to get something right, where you could spend six months with a coach and it's completely solved; that's the greatest investment you can make. Instead of you investing all of that time and money and making all of those mistakes, get with somebody who knows how to do it, pay them to show you or to do it for you, and that'll obviously short circuit the process for you.

Bosco Anthony:

Andy, what I love about our interviews is just when you think you know the answers, the questions change. I think you've talked a little bit about mates’ rates, you've covered the client experience, you've covered value, you've covered so many different aspects about running a business in this interview, so I'm really glad that we had some time to jam again, and I look forward to bringing your wisdom back again.

Andy Skarda:

Bosco, it's always a pleasure. Thank you for having me.

Bosco Anthony:

Cheers.

Bosco Anthony:

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