Episode 77: Construction Financials Benchmarks With Jacob Oelofse

Professional Builders Secrets brings you an exclusive episode with Jacob Oelofse, an Executive Business Coach at APB. In this episode, Jacob discusses the importance of benchmarking your building company and how you can effectively track and analyse your metrics.

 

Inside episode 77 you will discover

• The importance of tracking financial benchmarks and how they can help improve your businesses performance
• How you can track these benchmarks using the SORCI report
• Financial metrics and benchmarks that building companies should track, and the tools and resources available to help them do it
• How benchmarking your building company can help identify your areas of improvement
• And much, much more.

 

Listen to the full episode to learn how you can get a competitive edge in the building industry by understanding your building companies financial benchmarks.

 

Jacob Oelofse - Executive Business Coach at APB

Jacob joined the APB team in 2021 when he moved his family from South Africa to Sydney. Jacob has coached hundreds of building company owners over the last 15 years. He enjoys stakeholder relations, financials and risk, sustainability, growth, marketing, and maximising profit margins in a company.

Connect with Jacob

 

Timeline

3:35 Why benchmarking is important to builders and what they should focus on

7:17 How can building companies benefit from effective financial benchmarking?

9:15 What financial metrics should builders track?

10:48 What tools and resources can help builders store and analyse metrics?

18:31 How often should benchmarks be reviewed?

25:30 How many clients or members are getting their benchmarks right?

 

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Jacob Oelofse:

You want to be in a position as the owner of a building company to make informed decisions. 

Jacob Oelofse:

You want to be able to monitor and assess your performance. You want to continually improve it, and you need to consistently plan and set new goals to achieve that. 

Jacob Oelofse:

I think it's all about a habit and a rhythm. 

Jacob Oelofse:

As an executive coach working with our guys, there’s at least a minimum once a month, overarching look at most of your benchmarks. 

Jacob Oelofse:

I say if you're going to be honest with me about what the situation is like now, then the path forward will be realistic.

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 Jacob Oelofse, Executive Coach for APB. Jacob, thanks for being here again. It's been a while, but it's great to seeing you again.

Jacob Oelofse:

Yes. Like we always say, I love jamming with you, so it's always fun to be back.

Bosco Anthony:

It's good to have you on the podcast, my man. So let's start off with what are some construction financial benchmarks and why should everyone care about them?

Jacob Oelofse:

It's good for us to talk about this. It's an interesting topic for me, and I think we need to start with financial benchmarks and what is the point behind them. I think we need to make a reference or a standard against something as a builder. So we need to measure ourselves, and that's where this term ‘benchmark’ comes along, and I think it's important. A lot of builders don't give this the attention that is needed. But I do also think when we look at it from a different perspective, you want to compare your performance against another company's performance. I think that's where builders will ask, “Okay, so where do I even start by doing that as a builder?” Because builders don't talk, so makes things difficult.

Jacob Oelofse:

But I think it's important for guys to look at their benchmarks, specifically financial benchmarks. By definition, benchmarking is the term used for a company’s or an organisation’s performance and to measure that against the performance of another company or a group of them, a bit of a sample size.

Bosco Anthony:

Why should builders focus on these benchmarks today?

Jacob Oelofse:

The reason for that is, first of all, probably it would come down to understanding your company's current condition. “Where am I at? Am I healthy? Am I doing well? How am I stacking up against what's happening in the industry?” It also provides a bit of a competitive analysis. So when you are in this industry, it's competitive. The clients make it competitive. The industry itself is quite competitive. But also you want to be in a position as the owner of a building company to make informed decisions. So it comes down to, “How can I make an informed decision if I don't know what my benchmarks are and how do I stack up against the industry benchmarks?”

Bosco Anthony:

Why is benchmarking important to a building business? We've talked a little bit about builders focusing on this, but why is it so important to building businesses now?

Jacob Oelofse:

When it comes to that, from looking at an industry, we need to also realise that the building industry is like no other. When it comes to the benchmarks, there are various elements we actually start measuring. I come from a background in trades; I've worked with a lot of trades as well. In the building industry, I've worked with retail companies and it's one of a kind. There's no other industry like the building business that the listeners are running; most of our listeners should be in the building industry. So as a building business, it's very, very different to any other business.

Jacob Oelofse:

When you start listening to other people giving advice, accountants, the media as well, it's sad, they're a bit misinformed because they compare us to other industries and we are not the same. It's completely different. The benchmarking for a building business is very specific. There are specific metrics we want to go deep into, and you can't let your ears go and wander to all these other things. You're not a retail business, you're not a wholesale business, you're not a manufacturer. That's usually where the confusion comes in. People treat us like manufacturers. You are manufacturing something, but you are manufacturing it in front of the clients’ eyes. It's not like a car that you're building. So we are very unique in the building business.

Bosco Anthony:

You've been coaching for a long time. Is there process or framework that helps you identify these benchmarks?

Jacob Oelofse:

Ooh, that's a deep question. It becomes difficult because we are so unique. But I think to approach that, you need to first go back to the start and systematically compare your performance in a specific area of your business to a well-defined, researched set of standards. So you need to find first that point of contact. You want to make objective judgments about your performance, and you want to plan the necessary improvements that are required. So you need to go and find a place to start off with.

Jacob Oelofse:

Now obviously I can't go beyond this question to say, “Okay, what's the framework?” We've got the SORCI report; now if you don't know what the SORCI report is, the State of the Residential Construction Industry report; we do that as an annual report. That's a good place to start, because you've got a group of builders, professional guys giving information. Some are part of our membership and some are not part of our membership. So you can compare what's happening out there, and that's the framework. There's probably about a hundred questions we ask, so it’s quite detailed, and that's the process and the framework we've used because there are the key metrics, but it's also the subconscious, those little things that builders don't think of even looking at in their business.

Jacob Oelofse:

So, I wouldn't say there's a step-by-step process, but the framework to identify that is definitely there. Go to something like the SORCI report, broaden your horizon a bit. What is your local government reporting about the building industry? Definitely compare it and verify that data. Don't just take it at face value. So be sure whoever you're talking to or looking at, the information is weighted and verified. That's quite important.

Bosco Anthony:

It's interesting because typically when you think about benchmarks, you're only thinking about your data, but there's also that other industry data that the SORCI report provides that gives you industry benchmarks as well.

Jacob Oelofse:

That's the thing. I think that's where a lot of guys fail: they have a barbecue, talk to their friends, and their friends are doing well and they're charging 10%. So that's the benchmark, 10%. Based on what? Where did they get that 10% from? So I think it's good to have a broad spectrum, and that's why I mentioned the SORCI report. It's not in isolation, it's quite broad.

Bosco Anthony:

So what you're also saying is that they shouldn't be inviting their friends over for barbecues to talk shop. They should just be about everything else.

Jacob Oelofse:

Let's talk shop after you've gone through the SORCI report. There's a good conversation.

Bosco Anthony:

Fair enough. How can building companies benefit from an effective financial benchmark framework? You've talked a little bit about sourcing this, but let's talk about what some of those benefits are out there.

Jacob Oelofse:

I think to go back to that other discussion we had regarding informed decision making, I think the benefit here is when you’re making decisions or you’re making a new direction for your business, if you need to make a bit of a change, it comes about from monitoring and assessing your performance on a regular basis. So that's the first thing, when it starts for you as a building company owner to say, “Okay, wait a minute. I need to monitor and assess, am I performing the best that I can? And if not, what's the gap there?” But also, that leads to continuous improvement. Because if you start identifying the gaps where you’re not performing well, how can you start improving that? So it's this mindset of, “I must continually improve my business, day in, day out and periodically look at it.” And that leads to the next step, which is planning and goal setting.

Jacob Oelofse:

So the moment you know what to monitor, what to assess and what to improve, now you need to plan this out. You’re talking shop at the barbecue, so that’s not the way you’re going to do this planning and goal setting. You need to be clear and say, “These are the specific benchmarks I’m measuring my building company against. This is the gap. How long would it take me to get there? What resources do I need? What is the specific goal I’ve got in mind?” And there’s a couple of things that will surface. 

Jacob Oelofse:

As you sift through your data and your benchmarks, comparing it to industry benchmarks, you’re going to realise, “Wow, to achieve that specific part, it's going to take me 18 months to get there. It's not a walk in the park, three week fix up, silver bullet, I'm done and dusted.” You need to plan that in quite a lot of detail, probably over the next one to three years. So it's quite a detailed process, but that's the benefit. You want to be able to monitor and assess your performance. You want to continually improve it, and you need to consistently plan and set new goals to achieve that.

Bosco Anthony:

Now this might be a hard question to answer, but what are some of those financial metrics or benchmarks that a building company should track? I'm sure that's an open-ended question.

Jacob Oelofse:

Yeah, I think that is. There's probably a million metrics and a million things you can start measuring. If you go to all the smart guys out there, the accountants, the financial guys and marketing gurus, everybody's going to have an important metric. I think the important thing for our industry is keep it simple. Start with the basics. 

Jacob Oelofse:

For me, it always comes through this conversation in my private sessions with the clients. “What is my gross profit? What is my net profit?” So it's those margin benchmarks. That's always the starting point. It's sometimes the most interesting conversation, but for some builders, it's probably the scariest conversation they're going to have with someone, because now they need to be open and honest and say, “Well, I planned to make $X, but did I actually achieve that goal number one?” So that's probably the starting point.

Jacob Oelofse:

There's a couple of important benchmarks we can jump into, but I would keep it simple there. You need to know your gross profit margin, and you need to know your net profit margin, and then measure those against the benchmarks. Now we know at APB there's a 10% net profit benchmark minimum if you're building new homes, gross profit percentage of 25%. But I want to add something here. It must be a true 10%, a true 25%, not a thumb suck. Because a lot of guys, when you ask them, say “Oh no, I'm making 25%,” but when I start digging into that, then they realise, “Oh well that's actually more realistically, 16 or 17%.” You need to be confident that you're actually doing what you're saying you're doing.

Bosco Anthony:

Right. What are some tools or resources today that can help you store and analyse these metrics? Because obviously now you're talking about archiving data as well, because you're doing a comparison, maybe a yearly comparison, or quarter by quarter comparison. Are there any safe tools that builders can rely on? Are there systems that APB looks at?

Jacob Oelofse:

Yeah, I think there's a couple. I think we can't be ignorant. In the market there's probably a dozen tools that we can mention from a list of construction software, your accounting software, and all of that. But I cannot pass by this comment to mention the WIPAA calculator, which is the Work in Progress Accounting Adjustment. You should be familiar with that, Tim, if you've been listening to our podcast. And if you look into that where I'm talking net profit and gross profit, it lives inside of that calculator. And that's a consistent monthly activity you do.

Jacob Oelofse:

But then there's the next one, the pricing for profit calculator. So even if you go to your accounting software or you go to your construction software, the details inside of the WIPAA, the pricing for profit, they live inside there. That's where you're going to get that information from.

Jacob Oelofse:

But there’s also the age-old profit and loss statement (P&L). A lot of guys generate a P&L, hopefully more than once a year. But do they even look at it? That's such a powerful source of information. Do you take an hour to sit down with your accountant? Do you take an hour to sit down with your business board and just ask, “What is my P&L telling me?” It's a simple tool that's there, but many builders don't use it. 

Jacob Oelofse:

Again, going back to the WIPAA and the P&L, that information is there. I just don't think the guys see it. They don't use those easy, accessible tools that usually they already paying for. You don't have to go and get all the fancy extra tools. When you become part of a membership with APB, that becomes a standard: WIPAA, pricing for profit. That's the minimum stuff we expect you to be able to understand and do on a regular basis.

Bosco Anthony:

Now, how does APB work with its members and clients to benchmark these metrics effectively? Obviously, you have the coaching program, but take us through some of your processes when you're working with your clients.

Jacob Oelofse:

As I mentioned, we use the basic tools, WIPAA, pricing for profit and we've got some other tools, construction stock planning and revenue forecasts and that. But I think it's the magic of bringing those things together. So there are workshops; we do business planning workshops, which are very effective, where we really get into the nuts and bolts of it. Yes, like you mentioned, there's the membership and coaching program that we follow, but I think it's also just open discussions. 

Jacob Oelofse:

I think a lot of times we just need to open up that forum, attending a bit of a workshop and coming together. With our members at APB, we drill down to that business planning workshop, because that touches on what I said earlier: if you’re going to monitor, if you’re going to control what you’re, you’re going to assess your performance. You need to do goal setting, you need to do planning. That's critical to do it.

Jacob Oelofse:

But it's also getting a rhythm here. When we work with our members and the clients that we've got, we actually go a bit deep and ask what is the rhythm that you are creating? “What is the sequence of how often should I be measuring myself against the benchmark? How often as an APB member should I be going into specific conversations, like completing the SORCI report? Am I doing it every year and measuring my past year performance into this year's performance?” 

Jacob Oelofse:

Now there is something we go quite deep into: we use targets. So we look at last year's performance, and ask what you’re aiming to achieve this year. On a quarterly basis, we actually measure what you are achieving against the target for this year. So it is a lot of goal setting and targets for the next 12 months at least. Obviously, hopefully, you can do it a bit longer than that because then it becomes a bit of a more realistic picture.

Bosco Anthony:

How can you tell when your clients are performing or underperforming, as well as the business? Is it typically in the financial side of things?

Jacob Oelofse:

Look, that's probably one of the key parts, but I think there are other ways to measure it as well. You want to compare yourself to other professional builders. And that's why I mentioned that SORCI report because we know a lot of our members complete it, and other professional builders also actually participate in it. So that's the first part. You want to compare yourself there. 

Jacob Oelofse:

But then you also want to look at what's happening in the industry. The biggest thing everybody goes straight to is, “Am I making money? Am I making my margins?” That's the first point. But then there's these little subconscious things that are happening. What is the client, what is the market telling you about how you are performing?

Jacob Oelofse:

Now you might think it's only to do with how many leads you create, but what about your lead conversion? What about your image? What about how a potential new staff member looks at your business? So it's all these little elements of the business, your HR function, your marketing, even the construction process. What do the neighbours say about you when you are building there? There are so many metrics you can start measuring and ways to manage those metrics. Coming back to your question, how you can tell when you are performing or underperforming in your business is by setting a clear rhythm of when to check. And you have to start collecting the data.

Jacob Oelofse:

Now this is a big question when you realise, “I don't have any data because I didn't gather this data.” The best time to start is today. Start putting in the details you've got, because surely you've got at least some information for the last 12 months. You know how many people you've spoken to, even if it's a thumb suck to start with. That's your little benchmark you've started with. Then you can compare it against the industry benchmark, which you can get in the SORCI report. So you have to start doing it. Because delay, delay, delay is not going to help you in the future. In any case, you have to start with what you have and then just build on it.

Bosco Anthony:

Now the theme of today's conversation is around financial benchmarks, the keyword being ‘financial.’ Are benchmarks always financial? You did talk about all these different types of metrics, and I know that the SORCI report has different types of sales and marketing data as well. Can benchmarks be in other formats?

Jacob Oelofse:

Oh, definitely. The financial ones are obviously the most important, because they’re almost like bottom line conversations. And in reality, most of your benchmarks eventually end up at a financial point because it's a ratio or there's a dollar amount or a percentage in some way. But let's look at it. 

Jacob Oelofse:

I’ll give a simple example. Everybody knows sales. So the way we can benchmark is by asking, does your sales process deliver the results comparable to global standards? So is it the same timeline? Does it take the same number of weeks or months to convert a lead? Do you handle your objections the same way another building company does, or do you do it better? So that's an easy way, because everybody does sales. The first question is, do you even have a sales process? Do you start there? So that's the benchmark. It's so simple. Do you have a process, yes or no? If your answer is no, you’re not measuring a minimum standard. If you have one, what's the next level?

Jacob Oelofse:

Another good example, and I think we've spoken about this in a couple of episodes before, is about people. Is your recruitment process as good as it could be? When we go and investigate that, you might say, “Oh well now there is a benchmark. What's my staff turnover rate? And how does that compare to the average industry benchmark? So if the average builder employs two people a year and only loses one, how do I measure up to that?” That's not an actual benchmark, it's just for the example. But if you start measuring that, yes, eventually it comes to a financial benchmark. But that's quite a high-level benchmark. “Is my staff turnover rate good or bad? Why is that? I've got a good onboarding process. How long is my onboarding process?” So it's definitely not just financial; it's like a bit of a spiderweb analogy. You can go very deep into benchmarking. So it's very, very interesting.

Bosco Anthony:

And how often should you review metrics for benchmarks? You talked a little bit about how you're hoping that builders look at their P&L at least once a year, but how often do you recommend metrics and benchmarks be looked at?

Jacob Oelofse:

Hopefully I didn't touch a nerve there with some of the builders to say they're only looking at it once a year. But I've seen it. I've seen guys who don't even look at it at all. They just trust their accountant. But I think it's all about a habit and a rhythm, here. There's obviously lead and lag indicators you need to check weekly, monthly, quarterly and yearly. But for me as an executive coach working with our guys, there's at least a minimum once a month, overarching look at most of your benchmarks. And that comes down to financials. That's a definite must once a month. But then your HR process, that might not be every month, but that might be twice a year. So it's a bit of a rhythm. But when it comes to financial metrics, no less than once a month.

Jacob Oelofse:

In the beginning, it wouldn't harm you to look at it a bit more frequently, just to get to know the numbers a bit more. But we must also be realistic here. We're in the building industry, so a lot of things take some time to give us the results and that's where patience comes in. If you’re measuring your activity monthly, suddenly you’ve got a quarter to measure, suddenly you've got two quarters to measure. 

Jacob Oelofse:

Over time, you've got 12 months to measure and then you can do year on year measuring. But the consistent, monthly measuring, I think that's the best rhythm that I've seen. It just gives you enough data to measure it a bit because after a week, not much has changed. After two weeks, not so much, but month to month, if I've got 10 projects on the ground or 15 projects or even two projects, a lot can change in 30 days on that specific building site.

Jacob Oelofse:

So that would be my advice, a minimum of once a month. But it would be a little bit dependent on what stage of evolution your building company is at. If you have been in the business for 10, 20 years, you should be doing it at least once a month, if you're not, maybe once a quarter on some metrics, but everything else at least once a month.

Bosco Anthony:

What are some of the trends that you are seeing around benchmarking today? Obviously you're around this a lot more often with the coaching side of things, but are there any trends that we should be paying attention to?

Jacob Oelofse:

Obviously, working with the builders quite closely, I talk to them daily. I see clients in my private mentoring sessions and I work with the members as well. So building companies and owners and even their staff and their team, they don't verify what they look at. They usually make a bit of an assumption. When I talk to them, the sentence would start like this, “Oh, I heard…” Then I say, “Whoa, that already for me is a red flag. Where did you hear it from? Who are you listening to? Do they have the facts? Do they even have the data or the numbers to back it up?” The scary thing as well is people go out there and they don't really know what they're talking about. And now you listen to them.

Jacob Oelofse:

We're in this world of digital information and short videos on YouTube and things they listen to. It's very important for me to bring it down to the basics. First of all, are you looking at things from a benchmark perspective as the owner of a company, or are you just winging it? You need to keep in mind that the definition of a benchmark is the minimum you should be achieving. There’s a trend I've been picking up, where guys think that's the ceiling. If we at APB say you need to have 25%, they think, “Oh okay, if I get there, I'm safe.” But that's what we say is the minimum acceptable standard. You need to surpass that benchmark because then it means you're better than the benchmark.

Jacob Oelofse:

It's almost like running a bit of a race. You can't just try and beat 11 seconds because the average is 11 seconds. You're not going to win the gold medal. You need to run nine point something to get the gold medal. So you need to be better than the benchmark. So, I think that the trends are picking up, the conception of, “Oh, I can just get the information anywhere.” That’s a big no-no. And the second thing is, obviously, the benchmark is there as the minimum acceptable standard. You need to actually be better. And a lot of guys don't see it that way. They just say, “Oh, I'll get a 10% margin and I'm safe.” It's not that easy.

Bosco Anthony:

Now you talked a lot about the systems, obviously, that APB has. And, as a podcast host, I've interviewed different guests around the different systems, both on the builder front and on the coaching front. But do you see any technological advancements in either holistic dashboards or AI driven metrics? What are some of the things that are going to make benchmarking more efficient in the market, or what's coming in the pipeline?

Jacob Oelofse:

Well, I think the industry has changed over even the last 10 years, quite dramatically. The life of spreadsheets and notebooks and those things were there. If you're still doing that, I think then you are in the right place; you need to investigate to upgrade that notebook system very quickly. And I think it's important for us to start with the question first: “What am I trying to measure here?” A lot of times you already have these dashboards, these systems; you are already using them.

Jacob Oelofse:

A simple example is your accounting software. Another simple example is your construction software. It's already there, but when I interact with guys, they don't even use 50% of that tool that they've got available. So they always go for the next shiny thing that's available, but they're not even using 10% of their current systems that they've got. So I've seen a big uptick, especially in construction software. There's a lot of guys doing their sales and marketing that's got wonderful insights with their dashboard of conversion rates. That's advanced quite dramatically where you can bring your Google, Facebook, all of these things into one place. So everything is there.

Jacob Oelofse:

The builders think they need to be the expert. You don't have to understand the dashboard completely, you just need to know what to look for and instruct your team or your outsourced partner, “Hey, I want to see these numbers and these are the benchmarks I want to see.” So think of this when you look at your construction software, accounting software, when you start to combine these things, that's where APB’s tools become even more powerful, because now you take that data, which you already have, put it in some of our tools, and now it starts to tell you a story.

Jacob Oelofse:

That's the important thing: what's the story? So is the story a good story? Is it a horror story? Is it a thriller, is it a comedy? What are you looking at here? The moment we start going deeper into that, a lot of guys tell me, “Oh, but that's just another tool or another dashboard I need to look at.” And then I say, “But now you need to really be honest with yourself. What's the story you're trying to tell?” You need to be willing to put in that little bit of work, coming back to the habits, the rituals, checking it once a month. I always ask my clients, “Open your calendar and show me when you're checking it.” They say, “What do you mean?” “I want to see the two hour block you've blocked out every Monday, Wednesday, Friday, whenever you do it to check the benchmark, to check the data.” They don't have it.

Jacob Oelofse:

So it's these little things that actually make the difference. The technology is there, the advancements are there. I just think a lot of guys are either ignorant or they don't want to adapt, so they say, “No, no, my notebook works or my Excel spreadsheet works. There's nothing wrong with it.” But there's something out there that's much quicker, much better, much faster. And I think there's a couple of guys who you've interviewed on this podcast who have shown us these other options. Explore those options.

Bosco Anthony:

Can you tell us a story of any of your clients, or one of your members, or someone that you're mentoring as well, who is getting the benchmarking right? Any big wins that started off this year?

Jacob Oelofse:

I'll keep it anonymous. I don't want to put them on the spot. They'll know who they are when I talk about them. There's a couple of guys I'm working with who are getting the targets, they're hitting the goals so well. It's consistency, I think, that gives it to them. But there's specifically one client I was working with, husband and wife team doing such a good job. When they started with APB, they actually jumped into the mentoring very soon as well. They said, “We have to build 15 homes to make this profit, to make that number, to make that percentage.” We just started with the basics: “Where are you now?” We did an assessment of what's happening at this point.

Jacob Oelofse:

And then we started to look at it, we said, “Wait a second, you don't need to build so many homes. You actually can build far less. Your quality will be better. You've got time to improve your systems. You've actually got time to exceed the benchmarks.” And they're now at a point where they’re asking, “Okay, how do we scale this business?” That took time; don't get me wrong, it's not a three week process they went through, it's a couple of months they've been working on it. They're putting in the long and hard hours. But the beauty of it is, there was a big difference between their perception of what they thought they needed to do in revenue and in number of builds, versus what they actually needed.

Jacob Oelofse:

But now that goes quite deep. Now it goes to processes, it goes to systems, it goes to rituals and habits. So that’s a very good story for me. But what happened is their stress went down, their profits went up, they could actually see what they were aiming to hit. Because there's a benchmark. “I want to get better than 10%.” But we had to start with, “Okay, so how much are you making now?” And they were not far off the mark. They were probably about 6.5, 7% net profit, genuine, which is not bad. But when we started to readjust a few things, they realised there's a bit of work to get to that 10%. It's not going to be a walk in the park, but they're hitting it. Probably by the end of this year, they're going to surpass that quite easily.

Bosco Anthony:

I could talk to you for hours, my man, on different topics, but I guess I'll end this wonderful interview with this final question. It's really around setting reality checks. What goes into the mindset of a coach to work with the clients to get them to set these realistic benchmarks, and how do you not let them down but inspire them to be very realistic with their performance?

Jacob Oelofse:

I think it touches a little bit on the example I used; it’s that we always start with now. So the first is, and by no means am I'm degrading a doctor or a specialist, but I treat them like a patient. I say, “If you're going to be honest with me about what the situation is like now, then the path forward will be realistic.” So then we go into it and say, “Okay, you are making 2% net profit. The benchmark is a minimum 10%.” 

Jacob Oelofse:

We are looking at their workflow, we are looking at what they're currently doing and what's on the ground as a builder. How many projects have you got coming in the pipeline, and wrapping up, and handing over? Then we set the clear target for the next probably 12 to 18 months to say, “It's a healthy, safe environment to go from 2% to 5% first. And then gradually from five you can easily then go to eight or nine or 10%.

Jacob Oelofse:

So it's just starting with where you are now. Then you go to a position where you can say, “Okay, now that I am monitoring my benchmarks, I have realistic goals, and they’re specific to my resources.” A lot of guys have a bigger team, they've got more resources, they've got some retained profits they can use, and they've got a line of credit or finance that sometimes they don't even need until they've done the planning. I think the simple answer is that you start with where you are now and determine what is the gap between it and the benchmark? And then what I always add, the question there is, “So how long would it take you with the resources that you've got?” And I think that's where a lot of guys compare themselves to what they see out there without first looking inside.

Jacob Oelofse:

If you look at the builder next door, it's almost like the Joneses; the Joneses can buy the new Porsche, but you don't know how much debt they've got. So don't go and make the same mistake. Just say, “Okay, I can scale my company in 12 months or in three years.” You need to be very specific and say, “What APB guide is available for me to learn a little bit from it? I’ll learn that and then go and implement it.” And how long would it take you to implement? So that's the biggest thing: the timeline. You need to attach that as well. You can't just wish it well. You need to actually say, “This is where I am, this is where I want to go. And realistically, how long will it take me to get there?”

Bosco Anthony:

Jacob, any final words for our listeners out there?

Jacob Oelofse:

I think just be calm. Just be cool and level-headed when it comes to benchmarks. Most of the time that I've experienced is the guys, when they see the benchmark, they say, “Oh, that's not achievable for my business.” It's definitely achievable. If you go look at the SORCI report, you'll see guys year on year improving from this year to that year. It's just the simple things like knowing about software. I saw that was a big update: guys were not using construction software, but now there's a lot more people using it. It's just accepting the reality and then working out a plan to get there. Just think and be level-headed in everything you do with your benchmarks.

Bosco Anthony:

Yeah, I think for me the biggest takeaway is, for the listeners out there who aren't benchmarking, start today, right? I think there's never a greater day than starting from today. So, thank you for your time, your energy and your insights, my man. I look forward to jamming with you again in the future.

Jacob Oelofse:

Thanks a lot. All good. Cheers.

Bosco Anthony:

Cheers.

Bosco Anthony:

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