From Chaos to Clarity: Your 3 Step Financial Plan for Remodeling Success

Kyle Hunt: Now I tend to bring some energy. I bring some energy to my recordings, my podcasts. You may notice that. Hopefully you appreciate it. Hopefully feel that. This Eric Fortenberry guy with JobTrend, we did a recording on From Chaos to Clarity where we dug into annual budgets and then we dug into marketing spend and sales process and cost per acquisition. The guy was on fire. Thanks for tuning into the Remodelers on the Rise show. Whether you're listening or watching, I appreciate you being here. If this was helpful, make sure you're subscribed so you don't miss the next one. We're putting out new episodes every single week focused on helping you build a better remodeling business with real stories, practical ideas, and things you can actually take and use. If you're on YouTube, hit that like button and turn on notifications so you know when new episodes drop. Here at Remodellers on the Rise, we've worked with hundreds of remodeling companies. And one of the patterns we see again and again is this. When a company fully implements job tread, their business gets clearer. They know their numbers. They know where the jobs stand. They know what's making money and what's not. We've watched members go from guessing about profitability to having real-time visibility into their projects. That changes how you price, how you plan, and how you lead. The guy was on fire. I just felt like running through a brick wall after I listened to it. If he said, Kyle, run through that brick wall, I'd be like, yes, sir. And I just run right through it. If you're wanting to get fired up related to getting the financial in particular side of your business in order, you need to listen to today's podcast. Take some notes, clear takeaways, write them down and then get to work with it. Enjoy.

speaker-0: I'm real excited to talk about this. I think that this is such an incredibly crucial ⁓ aspect for building a great business. It's about, you know, managing your finances, creating an annual budget.

Kyle Hunt: If you're listening on a podcast app, a five-star review goes a long way and helps more remodelers find the show. We've got great links below or in the show notes where you can connect with us, check out our remodelers community and learn more about our coaching and resources. Appreciate you very much. See you on the next episode. JobTread brings estimating, scheduling, job costing, and invoicing into one connected system, and it works great. If you want more clarity and better control of your business, check out JobTread at JobTread, T-R-E-A-D, JobTread.com.

speaker-0: You know, this is and what we're sharing here today, it's what we call the financial playbook. We have used this and all of my companies, you know, this essentially is the foundation for how we do our financial planning with Job Tread. And, yeah, excited, excited to share it with you all. A little background on me, because I guess our marketing company, our marketing team put this put this in here. Yeah, you know, we built and sold a global education company in 2015.

Kyle Hunt: today's podcast.

speaker-0: You know, I took over construction business in 2018 and I built out the first version of JobTread. I grew that company from five to eight million in sales, increased their gross profit by 43%. Really excited about that. was I think in 2023, they broke 20 million for the first time, which is really incredible. But, you know, again, I was only there for a year, so I can't really take too much credit there. But we did. We officially started JobTread 2019.

Kyle Hunt: I want to tell you about something that we see all the time in our coaching work. A remodeler joins, remodeler's on the rise, feeling overwhelmed. Projects feel scattered, financials feel fuzzy, systems feel patched together. Then they implement JobTread. And over time, things start to change for the better. Their estimates get tighter, their schedules get clearer, their job costing gets more accurate, their invoicing gets more consistent. We've watched JobTread help our members move

speaker-0: You know, really excited that, you know, we've had so much ⁓ traction and just so many people have joined us. We're actually about to hit 9,000 customers for the year. Probably in the next week or two, we'll hit that, which is ⁓ really crazy to think we've got over 9,000 businesses all around the world using JobTread. But again, this isn't about JobTread, not about me. You know, really, I want to give you guys some financial ⁓ knowledge and insights.

Kyle Hunt: from chaos to control, not overnight, but in a sustainable way that supports growth. It's an all-in-one platform built for remodellers who want to run a real business, not just stay busy. If you're ready for a better system, better decisions, learn more at jobtread.com.

speaker-0: One of my favorite quotes here by Peter Drucker, know, what gets measured gets managed. So I'd love to see in the chat real quick, how many of you have a formal annual budget in place at your company? Give me a yes or whatever excuse you want to share. ⁓

speaker-1: You're feisty today, Eric.

speaker-0: ⁓ am I? I kind of feed off your energy Kyle. Alright love it. Looks like we got a bunch of yeses so far. Yes, yes. Very good. Well maybe my talk is not actually needed.

speaker-1: Good, it's good. No, we're gonna, we're gonna, it's a good reminder we're gonna get into KPI stuff, there's plenty of value.

speaker-0: All right, all right, all right, we'll keep going. So, I know that finances, they can feel intimidating, but trust me, with the right approach, it can be extremely empowering. So we're gonna dive deep into how to build a financially strong, sustainable, thriving business. This isn't just about the numbers though, it's about the strategy, the processes, and taking control of your company's future. I've learned a lot over the years, building multiple companies and I want to share those insights with you all. And again, this business or this financial playbook that we've got, this is the culmination of just all of that experience, the lessons that we've learned, the strategies that have proven successful for us. So my goal is to give you actionable steps and tools that you can immediately apply to your business today, right here, right after that call. It's perfect timing because we're at the end of the year. Hopefully everyone's starting to look forward into 2026 has already got their plan built out, but maybe this will help you. So let's get started. Let's explore how we can help you build a financially sound company. So again, I want to quickly just ask you all, what do you think the reasons are? Why do you need an annual budget? We can throw them out there in the chat. ⁓ Super interested to kind of see what the most pressing reasons that everyone might. might feel like they need that annual budget in place. Targets to shoot for, excellent. Set some goals for yourself, love it. Anything else? Hiring staff. Love that too. Exactly right. Really helps you to figure that out. All right. Fail to plan, plan to fail. Love that saying, Mark. Absolutely. 100%. Know your cost. Another great one. Establish labor rate. Marketing. Man, it's like the reading my mind here about what we're about to talk about today. I think y'all just literally covered the entire presentation. But yeah, look, your budget. You know, this annual budget, it's your financial game plan for the year. It drives every decision that you make. You know, it's going to project your revenue, your expenses, you know, and even your profits month by month, helping you to build a much better business, to make better decisions, track your progress, like stay in control. You know, I know so many times, like, you know, when entrepreneurs start to actually have, you know, success and they're gaining traction, It can also feel like the wheels start to spin out from under you and like you feel like you're starting to lose control because everything just is increasing and compounding and you got more jobs, you got more revenue coming in, you got more bills, more expenses. So the benefits of budgeting, again, it allows you to set clear targets and goals for yourself and for the company. And you can track and control your expenses through this budgeting process. You can plan your hiring, create benchmarks, manage cash flow. Proactive decision-making is really important and by having you know that framework in place it gives you that ability You know I think when you think about like the real cost of not budgeting You know lack of visibility into your profitability like why are you losing money? What's happening? You know poor cash flow management? You know a lot of people don't realize you know not managing your cash whether it's too much cash or not enough cash like just cash flow Management is so important. I cash is king and the people who can't manage their cash flow are the ones who will struggle regardless your size. You have to be able to manage your cash. You need to not be reactive to situations. You've got to be proactive, be ahead of the curve. And so I think those are a lot of those benefits of doing this budgeting process. So what's in the budget? Again, I just want to kind of set the groundwork here. I'm sure a lot of you, I hope all of you, given that you're part of Kyle's group, already know all these things, but let's do a quick little recap. So you got your revenue. The total amount that you expect to make from all of your jobs, this is the money that your customers are paying you that actually hits your bank account. We've got our cogs, our cost of goods sold. This is the direct expenses related to completing a job. They can include your labor, materials, subs, equipment, permits, things like that. Your gross profit, that's the money left over after covering all of your direct job costs. This reflects your job level profitability. Very important to understand gross profit is not net profit. This is after those job costs, what have you got left from the jobs? And when you talk about your gross margin, that's as a percentage there, that this is your job level profitability expressed as a percentage of your revenue. All right, now after that, we're gonna go down. We got our overhead, all of our administrative, operational costs that aren't tied to a specific job. And then at the bottom, the bottom line, we got our net profit. These are the profits that are remaining after all the expenses have been paid. This is often referred to as your bottom line. This is like the true metric of how healthy, how profitable your business is. It is your net profit or your net margin. It's again, the net profits expressed as a percentage of your revenue. So really, really important that we understand kind of the groundwork here. These obviously should not be new terms to anyone, I hope, but wanted to run through them real quick. All right. So what does an annual budget look like? You know, this is, this is the template I'm actually going to share with you at the end. You know, you can take it. We've, we've essentially kind of tried to create a, a, an example of how you can build a financial model, you know, for your business. Well, you can, you can clone ours, you know, modify it, do whatever you want to do with it. Just, again, I wanted to give people a starting point because like, I know, you know, sometimes it is very hard to know where to start and how to get going. You know, I don't expect people you know, especially in the construction industry, like, you know, you don't have MBAs, you don't really even need a degree or business, you know, a background to be able to create and build a successful construction company. But I want to give you this tool because I think it's so important, you know, so this is going to look fairly similar to your income statement if you've been looking at that, you know, except the difference is that this is forward looking, you know, we are projecting into the future. We're not looking back. These are not actuals. These are forward looking. projections and plans and goals that we're putting into place. again, when we look at the top line here, we've got our revenue. This is our sales by month, by job type, however you want to break this down. And you can get, again, very detailed and have a lot of different categories if you want. I've essentially just kind of taken, hey, here's our, in the most simplest approach, we've got our top line revenue. Now, if you're a home builder and you also do some remodels, You might want to actually break this out into those different line items so that you can see what your revenue is from new builds versus remodels. If you have maybe different types of remodels that you do, maybe you want to see by kitchen, by bath, additions, however much detail you want to get into, you're certainly able to do that. I would suggest to if you have not ever done this budgeting process, if you've never built a financial model, keep it simple. Keep it very, very simple. ⁓ You know, but but this is going to let you again establish those growth goals, you know one one thing to think about You know in an even simpler model here. You get a literally said hey my goal for this next year is is X I'm gonna divide that by 12 and you got a very you know Just even goal every single month what you need to hit now The reality is that's probably not the best way to do it, you know, because there is seasonality There's cyclicality like we have to take into account that like not every month is gonna be the same as every other month. You're gonna have better months, better seasons, and you're gonna have slower months and seasons. And so you do eventually, if not right away, eventually you wanna take that into account so that you're planning for those down months, for those slower months, and really thinking through what can you do to actually try to pump those up? Are there different strategies? Are there different techniques? understanding that, again, you will have a ⁓ cyclical seasonality. you know, incorporated into your model is very important to recognize. Now, when we, when we talk about forecasting our revenue, you know, the revenue forecast, it forms the foundation for your entire budget. And it starts with understanding how much work you expect to sell. So from a budgeting per for budgeting purposes, like, you know, revenue is a function of leads, your sales conversions, and your job size, your average job size. And so when you think about that, if again, you multiply the number of leads times your conversion rate, how many can we convert into customers times that average job size? This is a technique for how you can forecast what your revenue will be. Now, let's take it a step further though.

speaker-1: me think about- Hang on Eric, go back to that last one. All right. Back to the last one. For a lot of you, ⁓ tracking this and paying attention to leads and how you define leads is important. Is leads anybody who reached out? Is leads for you more qualified leads? They are in your trade area and they're wanting a project that is one you offer. If you haven't been tracking that, and or you haven't been tracking your conversion rates, that might be a good 2026 goal to start tracking that. So you have that data and using job tread or using QuickBooks and dividing it out by the number of projects that you have. That average job size, I would say if I ask 10 remodelers, hey, what's your average job size? Maybe one, maybe two will have some confident answer to that. ⁓ really important metric to pay attention to, especially in Eric's case here of trying to forecast what your revenue is. So that could be a takeaway for them right there.

speaker-0: No, that's, that's, that's a great point. And look, I'm, I'm again, I'm kind of walking through this model. I'm, I'm, I'm giving you, you know, sort of the, the, the foundation, the basis here, but like at the end of the day, like you're going to end up having to make a bunch of assumptions. And I can promise you, you are going to be wildly wrong. Your assumptions will be absolutely, undoubtedly just not accurate, but I'm going to tell you that's okay. If this is your first time doing this exercise, that is Okay, the point is that you're going to be able to have this plan and then you can look back every single month, every single quarter, every single year, and you're going to understand now why you missed your goal. You made an assumption that was wrong and what can you do next period to correct that? know, like just again, setting goals where you're just pulling numbers out of thin air, like that's, that's, That's kind of worthless, you know, like because you're just making things up, but at least here now we have very specific assumptions that we've made and we either accomplish those assumptions or we didn't. So like, we'll talk a little bit more about this, but like it's a really important thing that like, don't let the fact that you don't currently have historical data to prevent you from building a model and projecting your revenue or any of the rest of this. Like you cannot let that stop you. This is not a chicken or the egg type situation. Like You have to be able to do this. How would you like to add any more thought? All right. So we're going to move from again, forecasting a revenue here down to, really like let's, let's drill into that sales funnel again. You know, so, you know, you, you, you can work forwards or you can work backwards to get to this. You know, let's, let's just say, for example, sake, you know, our target is $1 million in sales. You know, we, we, want to, you know, have, have, have $1 million there.

speaker-1: That's good, keep it up. All right.

speaker-0: and our average job size is $50,000. So that means we need to have 20 jobs, 20 times 50K, that's a million. So now, if our lead to customer conversion ratio is let's say 10%, then that means to get 20 jobs, we need to have 200 leads. Now again, there's a lot of, like Kyle already brought up, could look at leads, could look at qualified leads, we could look at proposals sent. So not every single lead is gonna be a good fit and not gonna be qualified and you're not even gonna talk to them, you're just gonna disqualify them. And the ones that you do talk to, you still might not end up sending them a proposal, maybe the job's not a good fit, maybe they're not a good fit, whatever the reason is, you gotta understand, we gotta have a big top of the funnel. Fill the top of the funnel. You know, and if you don't have a good handle on that, then we're going to talk about that in a second, but like, you got to make sure that you are constantly filling the top of the funnel and understand and track, you know, how many leads are you getting divided by the number of customers that gives you your conversion rate. This is one of those assumptions that again, you may or may not be right, but at least it gives you a starting point to benchmark. How did you perform each month? Did you accomplish that goal? Did you convert? the number of leads that you needed to, you know, and again, to come up with the average job size, just take your revenue from last year, you know, or whatever previous period and divide it by the number of jobs as the most simplistic way that you can do that. The other thing I want to, I want to mention here is as you go, as you track more of this data and you get more concrete actual data, your assumptions are going to continue to improve and get closer and closer. to what will actually happen. It takes that historical data to really keep refining how you're looking at all of these metrics and these goals and these numbers. But again, for those of you who are brand new or you're just starting your business, whatever it is, we've got to start somewhere. So maybe just, again, can ask Chad GBT what the industry averages are, things like that. Just get comfortable with the assumptions you're making and be prepared to hold yourself accountable to those assumptions and do everything you can to hit them. So, you know, again, how often are we able to convert those leads into customers? That is our conversion rate. That is going to be a very, very helpful assumption that we're gonna make here. Now, wanna kinda just go on a slight little tangent. You know, again, marketing, that is what is going to drive your leads. We need to understand where are our leads coming from. Are they referrals? Those are your cheapest leads. Those are your glengarry leads. They are the hottest leads. They are the best leads.

speaker-1: What if people don't know what Glenn Gehry reference was?

speaker-0: Well, then you're gonna ⁓ need to learn that. The Glingary leads, they are the best leads, they are the leads that are most likely to convert to customers. I think that it's so important though that we understand that every lead is not created equally. We're gonna have different quality of leads, different leads that are more likely to convert, less likely to convert. We need to be able to take all of these leads and understand how much did they cost and how likely are they to convert. So again, the referrals, if you can go out and you can network with real estate agents, with architects, designers, whoever it may be, you want to go do that. And the cost for those activities is almost always going to be the most affordable thing you can do. Go buy some real estate agent coffee. Go buy a networking Event with these architects or these designers go buy their lunch go do whatever you can do to get in the room and get in front of people who can drive referrals to you now even better referrals are gonna be your past clients and just simply asking them Hey, do you know anybody who could benefit from our services? Maybe your friends maybe your neighbors maybe your family like those are the best those are absolutely free, you know But again, we're gonna just go ahead and make a slight assumption that you know, we will spend something on referrals It'll be your cheapest now. We got organic, Organically, those are going to be the ones coming from your activities on your website, from SEO, from social media, just again, having an active presence on your social, creating blog content, doing the day-to-day blocking and tackling that you need to do to keep building your online reputation, getting people to leave your reviews. That's a great way to, again, keep feeding the AI bot. They see constant reviews coming in. they're gonna start recommending you and they're gonna drive people to you. Like these are all great activities. Now again, you're probably gonna have to spend a little bit to make sure that you've got a good looking website that makes sure that you're getting that content constantly created. know, whether you need a social media or a marketing person or a marketing agency or a partner, you know, like it's gonna cost you to get some of this organic going, but look, that's okay. Again, it's not our most expensive, but it's not our cheapest. Now the last bucket here that I'm... Again, kind of breaking this down as simply as I can, like your paid bucket. These are your paid advertisements. These are running Google ads, Facebook ads, Reddit ads, next door, wherever it may be. Whenever you are paying to have an advertisement, you're putting it on a billboard, you're doing mailers, whatever it is, that's your paid ads. Those are the most expensive leads that you're gonna get. And it's very important that you track your customer acquisition cost. You need to know what did it cost you to acquire that customer. And in order to determine that, can, again, look at your marketing spend. You can look at it as a whole divided by the number of customers that you got, and that will give you your overall customer acquisition cost. Now, you can also look at it for each of these different segments here. How much did you spend for all of these referrals divided by the number of customers that came when they were referred over? That gives you your referral customer acquisition costs. Same thing for your organic and your ads. Like it's so important though that you track this data and that you understand how much are you spending and what are the results that are coming in. Your customer acquisition costs as a percentage of your project, that's going to equal your marketing efficiency. How efficient are you at getting customers? You know, the industry average, it should be somewhere around, you know, one to call it one to 5%. You know, 1 % being great, 5 % being acceptable. But the point is like, you need to spend money to make money. It costs money to get these leads, to get these customers to converted, to win the projects. And that is okay. That is great. This is how the engine works. We feed the engine, we pull the lever, we get more customers. You know, that's great. So.

speaker-1: It is not a badge of honor to not spend any money on marketing. It is actually probably unwise to do that. If you've been in business a long, long time, a lot of you for your reputation, your reputation and just repeat and referral work will bring in a certain amount of revenue pretty reliably. But if you are ⁓ seeing a slowdown in leads and or if you are wanting to grow and or if you are a newer business, you're really going to have to invest some dollars in this, which means you're also going to have to. Add that into your business budget.

speaker-0: Absolutely, you know again, so my final general take away thoughts here on marketing I'll leave you with referrals are the best, know network network network Ask for reviews ask for referrals ask your customers to help you know refer others like do that and do it relentlessly You know to a great looking website is so important this day and age like it is the face of your company You need to make sure that that first impression is a great first impression. This day and age, everybody Googles before they hire, before they buy. is just table stakes that you have to have a great website that is your best salesperson that is converting. Now, beyond that, you need to be clear and provide great, valuable, educational content. Your content cannot just be junk. Do not just post to post. Do not just... add pages, keywords stuffed with the things that you think will drive SEO and drive people to you. Take the time to create thoughtful, educational content that will warm up the deal for you, that will warm up that lead. Again, I'm a big proponent, be transparent. Talk about your pricing. Talk about what goes into a successful construction project. Give them a budget range. Help them understand. What is the difference between a $20,000 project and a $100,000 project? It's not that just this contractor is more expensive than this other contractor. There's a lot that goes into it and this is an opportunity for you to warm those leads. Next, you gotta control your ad spend. Like do not just like, I'll tell you a story. In my very first company, I first got into Google ads and I was like, oh man, I'm gonna just create a $5,000 per month budget and you know, kinda. set it and sort of forgot about it and just sort of assumed it would just work, right? Well, you know, a couple months later when I remembered that I had done that, you know, again, I was 23 years old when I started this first company. So don't hold this against me. But like, you know, I woke up and I logged in and I was like, Oh my God, I'm $50,000 in the hole. And I did not have a single thing to show for it. Don't do what I did. That was one of those, you know, early, you know, young 23 year old mistakes that I made. Like you have to control your ad spend. And if you are not great at ads and understand the mechanics and how these things work, which most people aren't, then you need to make sure that you find somebody who is great at that. And the reality is you may not be at the size or scale where it makes sense to even hire a full-time person to do that. You need to find a marketing agency, someone that you can partner with that can help you that has a bunch of experienced people. know, Danielle Russell, who's, who's on this call today. Thank you, Danielle. Shout out with builder funnel. They are excellent at managing your ads and all of your marketing. You know, you need to find somebody who can help you do that. At the end of the day though, you need to be prepared to spend, you know, what I'll just kind of throw out is my range is anywhere from three to 7 % of your revenue, you know, and again, that's, know, industry standard, if you will, depending on, you know, where you looked at it, but like, you know, you need to be prepared to spend a percentage of your revenue on marketing. That is just how the world works. That is how marketing works. If you're not spending enough on marketing, then you could actually be holding yourself back. and hurting yourself in the long run. Invest in marketing, find a marketing partner. That is what will drive our revenue.

speaker-1: Bam, take a sip of water. Three takeaways so far. Number one, you're bringing the energy. I like it. Number two, I have not done a good job related to conversion rate. I want to study my conversion rate from leads to signings. That's one of my takeaways here. My other takeaway is I'm kind of excited to do my CAC, the customer acquisition cost. ⁓ I have chosen to do it at the end of the year and kind of add up, ⁓ kind of tally up everything. We've been tracking. those metrics so I'm excited uh... kind of over the next couple weeks to run that back and study that and compare it to the previous year. Those are a couple of my takeaways uh... while Eric moves on to the next thing go ahead and put in the chat box all of you listening this now several of listening on the phone so don't do it if you're driving but for the rest of you think through what you've heard so far share a takeaway in the chat and Eric you keep cruising. We're at the halfway point.

speaker-0: good. Here we go. All right. So we're going to build our revenue model. So in this, you know, this, this Google sheet that

speaker-1: I also didn't understand what Danielle said, heck yeah, because you gave her a shout out. But then she, I was looking at the emoji she put in there. machine? Yeah, I think she was saying fax, like you were preaching fax. Oh, got Yeah. Thank you Danielle for translating that. for coming. I'm not hip.

speaker-0: Yes. All right. So look, this is another tab in that model that I'm going to give you. And again, there's a lot of different ways that you can model out and build your revenue model. But we're going to look at this example. We're going to pull it all together here. So here's how you will do it. You will set clear sales goals for your business. And you're going to tie your lead generation directly to your monthly revenue goals. You know, so you have to understand your average deal size and your close rate to be able to do that. And so in here, anything that you see in blue, these are your manual inputs. You know, I've got our paid marketing is in black because that is a formula that is automatically tied to our, you know, the different inputs that we have below, but it's directly tied to our marketing spend and our conversion rate. you know, again, the marketing spend to support your sales. is very, very important that you understand that. Invest in your lead generation strategies, your website, SEO, ads, partnerships, referrals. Track your marketing spend and your cost per lead, your cost per customer. These are all very important metrics that as you get more and more data, they're gonna really help you understand what is working and what is not working. And then you're going to be able to invest and double down, triple down on the things that are working. because that is what is driving the revenue. But again, how many referrals can you get per month is going to be a function of how active are you? Are you networking? Are you asking for them? Like, you know, again, you're going to make an assumption and then as the year goes, you know, in another sheet, you're going to start inputting your actuals and you're going to be able to compare them. You know, this, this stuff is not going to be easy to do when you haven't done it before and you don't have historical data to compare it against. So start somewhere. and then start tracking and comparing and understanding this. So how do you collect this data, right? Again, you can use Job Treads, set up web forms, you can track your lead source, qualified leads, appointments. You can use a real marketing CRM, like a HubSpot or a Go High level. There are a lot of different tools out there, and it's very important though, at the end of the day, that you are tracking. I will tell you that I spend a lot of time beating it into my salespeople that like, hey, what is the source? How did they find out about us? And I know it is sometimes very, hard to get that information, but it is so important that you track it because it will all tie back to your budget, to your performance, and will help you to build a much better financially sound company. So start tracking that data. Now that's kind of our revenue bill. That's how all of that sort of came up into that top line. You know, the next section here, it's our cost of goods sold. You know, this is again, kind of where job tread really helps you to track all of this information. to understand what is going to go into cogs and ultimately what is your gross profit, you know, your revenue minus your cogs, that's your gross profit, you know, very, very important. So, you know, cogs again, the most common things are going to be, you know, your trade partners, your, your material costs, your labor, you know, if you have internal labor, ⁓ you know, any machinery, equipment, permits, design fees, you know, commissions sometimes, you know, depending on kind of how your CPA wants to do it may or may not be considered a cog. ⁓ you know, again, it's, anything that is directly related to the job is considered a variable cost. is something that like, again, if you did not sell that job, you would not incur that cost. You know, it is, it is, it is considered a cost of goods sold. You know, these are not any direct costs. These have nothing to do with any overhead or, you know, keeping the lights on. Like these are the things that are related specifically to your job. Now, when we look at our gross profit, you know, again, like the, gross profit margin is one of the most important drivers of profitability. When you're building your budget, like don't guess, you know, look at your historical performance and ask the fundamental questions about your business. You know, like this is why using a tool like job tread, you know, not saying it has to be job tread. mean, at the end of the day, you know, again, it's important that you use something, you know, for your estimating for your job costing. Like this is so crucial because this is what will help you understand how did you perform. This is what will help you not just kind of at the end of the month or end of the year, kind of, you know, have, you know, your bookkeeper tell you how you did because again, like that could, who knows if it was, you know, related to one job or just overall performance, yada yada. Like these, you know, systems like job for will give you the data that will help you to budget smarter and to manage your margins with a lot more confidence. You know, so, you you may be wondering, you know, how do I know what my target gross margin should be? You know, well, I would say that, you know, I would ask it, actually at first I'd like to know, is anyone in the audience, would you be willing to share what your target gross margin is on your job? when you think about pricing your jobs, what are you targeting from a gross margin perspective? Let's see what kind of some numbers we get here. 40%. All right. 35, 38. 35, 50, love it. 42, 40, 44, 42 to 42, good. Okay. 38, average client sits around 30, okay. I mean, look, at the end of the day, as you see, there's a wide range. And it's very hard to say like, here is the magic number that everyone should target. Because it really, it depends on the type of job you're doing, the size of the job you're doing. You know, if you're selling a, you know, a $20,000 job versus a $20 million, you know, job, you're not going to have the same profit margin. You know, it's just not realistic. And so like you have to understand based on the size of the jobs and the target, you know, the customer kind of where you have to like, you know, again, I would say in the remodeling space, you know, I would say anywhere from 30 to 50 % would, be a great target, you know, hopefully more towards the 40 to 50, you know, and again, you're going to want to take into account the there may be things that are going to come up that did not go as planned. And when you have a healthy gross margin built into your price, then that gives you a cushion so that when the unforeseen happens, when those, those tough situations occur, you know, you've got a little bit of give so that you're not ultimately digging into that, that, bottom line and affecting, you know, how you perform, like, you know, build in a little bit of cushion there, take that into account. But look, at the end of the day, like I like to say, be conservative. You know, your margins are, it's an assumption that you're gonna make and it needs to be realistic, but you want to be conservative. You wanna protect yourself when things don't go as planned. You know, if I,

speaker-1: Yeah. Yeah. If I'm in job trade and I'm doing across the board margin of 33%, when I create my business budget, especially if you are new to really locking down your job costing, especially if you've got some clunkiness in the field, you probably ought not build your budget based on a 33 % gross profit margin. You probably ought to do 30%. And that's the conservative aspect you're doing. Now, if you're dialed in, if you're like, look, we sell it at 33, we've got grippage, a lot of times it's coming in. that then you can hold on to that. But really pay attention, maybe knock it down a couple percent just to give yourself a buffer because when you've got revenue minus cost of goods sold and you get the gross profit dollars and you got that percentage next to it, you want those dollars to be pretty realistic because what you're showing next, it's got to cover your overhead expenses and that beautiful net profit.

speaker-0: Exactly. Thank you for that great transition because again, you know, at the end of the day, like you have to make sure that your gross profit is going to cover your overhead and that will ultimately tell you how much you need to make on these jobs so that you can, you know, pay yourself, pay your people, keep the lights on and also have a healthy net profit for the business. so let's look at again, our, our, our overhead, you know, these are our fixed costs. These are the things that it does not matter if you sell a job or not. Thank you. They are going to be incurred by your business.

speaker-1: Wait, who'd just think?

speaker-0: Riley he got me some more water. I can I can just do like little hand signals and things

speaker-1: Aw, thanks Riley. Do you just have like four job trend employees that literally just stand out of that glass office and stare at you and you have, you're like, do just have like a baseball coach, you do these little moves and they just bring you stuff?

speaker-0: Quite, but here let me, you know, I do have right outside my office is like the main kind of kitchen. actually setting up for a happy hour holiday party. So I figured they, you know, they weren't too busy where they couldn't, you know, grab me some water. so, so anyway, speaking of overhead and payroll, as I showed you some payroll, literally, you know, again, it's, it's, it's, it's very important that you understand these are your, this is your overhead, you know, your payroll, your rent, your utilities, vehicles. Insurance, marketing, software, professional services, any other overhead, you need to have a good handle on what are those costs. And those are usually the most easy to figure out because you've been paying them consistently to keep the lights on and keep the business going. payroll is one of the things where again, it's gonna grow and it's gonna change and we're gonna get into that here in a second. again, overhead is everything it takes to run your business. You know, think of it, think of it this way, like cogs go away if you don't sell a specific job, you know, but overhead is there regardless. Tracking your overhead is as important as tracking your cogs. You know, they're, they're reoccurring. They're expenses that every single month they're going to come in and they're going to come right out of the bottom line month after month. You know, so, so again, like it's, it's important that, you know, you, you understand what is the cost to operate your business because that will help you make sure that when you're pricing your jobs, you have set the right profit margin to cover all of those expenses. And this is also gonna, again, this can be a gut check to some people. When you look at your cost and you start to see something kind of increasing over time, like can you cut costs? Is there something that you are spending more money than you need to be? Are there ways that you can be more efficient? This will help you to plan your future growth. when you understand and you're tracking all of these costs and you start budgeting that. You you can use your overhead number to determine, you know, what your target gross profit needs to be, but you have to track your overhead to understand that first. Now payroll, you know, payroll is your most expensive overhead item. It is critical to get this right. If you get payroll wrong, then, you know, it'll just totally sink your profits. You know, you get it right though, and it's going to fuel your growth. You know, and so like when we think about payroll, like ultimately like this really comes down to clearly defining the roles and the responsibilities for every single person in your company. You need to list out those roles that you need as you keep growing. You know, you can't just make the assumption that we can keep payroll the same, yet we're driving more and more jobs and running, you know, more deals than we have ever done. You know, you need to plan to hire. your estimators, your project managers, your field supers, like just because you can sell a job does not mean that you can actually execute on that job and achieve that target margin and do it while delivering an exceptional customer experience that will in turn give you more referrals and lead to more business. Like you have to manage your growth and you do that by managing your team and your hiring. You you need to clarify what does success look like? for each role that you bring on and be very intentional about bringing on the right people at the right time to make sure that you can continue to grow while not sacrificing your quality and the experience that you're delivering for your customers.

speaker-1: And this is a huge part of the annual budget is it's scary to hire somebody, especially if they're a new overhead position. So show me on paper, show it to me on the budget of how you're going to pay for it. I'll give you just a breather for a second. Jessica asked, are you considering payroll as a cost of good or overhead? Or is that the employment taxes are your overhead and the hourly of your cogs? You should, Jessica, have on your profit loss statement, payroll field. and payroll office or overhead. And you should also be the granular where you have ⁓ payroll taxes field in cost of goods sold and ⁓ payroll taxes office or overhead. So you want to divide those two out.

speaker-0: So for the purposes of budgeting in this particular model, I have payroll as the total cost for your employees as an overhead cost because look, at the end of the day, you don't sell any jobs, you don't make any gross profit, it really doesn't matter. You're still paying your people that salary that you've committed to. So again. I'm not an accountant. It depends on your account and your, your, your, your accounting strategy on, could you take some of that, you know, the, the, the field guys, you know, could you take some of your project managers, some of their comp and associate it and, and, from a, know, from an accounting standpoint, put it up into cogs. Sure. You know, at the end of the day though, again, we're, we're, we're just looking forward. We're not dealing with actuals here. Like I'll leave that to the, to the bookkeepers and accountants because you know, obviously they've got their opinions and they're going to say, well, you're wrong, Eric. And You know, that's totally fine. Again, we are forecasting and projecting our growth. And so it is important that at the end of the day, they're like, you understand your compensation. You know, what are the salaries, the bonuses, the benefits, everything needs to be taken into account. And I would encourage you as an aside, as best you can, you tie performance to compensation, tie their comp to their performance. You know, like, you know, again, at the construction company that I took over, very first change I made is that I said that our salespeople and our project managers, they're both going to get a 10 % commission on the gross profit of the job. I aligned sales and project management to the success and the outcome of every project. And I'm a big believer. I love the eat what you kill model. The people who are naturally driven, hungry, whether you're in sales, whether you're project manager, when you can give them the ability to control their own compensation, you know, then, then man, you know, the real, the real winners are gonna, they're, they're gonna go and they're gonna just run with that and they're gonna make a ton of money. And that is awesome because that means that you made a ton more money. anyways, understand how are you going to compensate your people, take that into account, use your budget to confirm the hiring timelines. Like you have to forecast your labor costs based on your expected revenue. You don't just feel that you're overwhelmed one day and you feel like you need to hire somebody and you feel like the first person that walks in the door is going to help solve all your problems. That's not the case. You need to be very methodical and strategic about knowing what's coming up and making sure that you have the team in place to be able to deliver on the goals and to hit those goals. You know, you have to, again, take this into account and start looking for people ahead of time so that you have the team in place to be able to accomplish your goals. You know, again, calculate when new hires, you know, are, you know, are, are going to be affordable for you. You know, again, I see so many times when people just over hire, they, they, they, they just bring anyone and everyone on cause they had a great month or a great quarter and they think, you know, certainty is, know, that we're going to keep at that, at that same pace. And they just hire a bunch of people and then they have a down month or down quarter and they over committed. They literally, you know, now have this huge nut that they have to pay in payroll. yet they aren't hitting their goals. Like you don't want to do that. You want to be again, as, as controlled growth as you can have, it is so, so important only hire when the monthly sales consistently support the added overhead. Do not risk missing a payroll that a single-handedly. The one worst thing that can happen is if you miss payroll, you know, like again, like confidence in your, in your, in your company from your, from your team just dwindles. And again, 23 year old Eric will tell you, I actually had a situation in my first business where I was about to miss payroll. And thank God for my dad, who was my CFO, he actually came in and he essentially bought our accounts receivable. He factored our receivables and that enabled us to make payroll. And then when we actually got paid, we paid him back. You know, again, I was very fortunate, very lucky. That is not the case always. You know, again, you can go and take your receivables to the bank. I don't recommend it. ⁓ you know, unless you absolutely have to, know, but again, like that means there's, there's some other issue at hand and you're not controlling your cashflow. You're not controlling the business. You know, you do not want to be in that situation. The first company, the construction company I took over, you know, we had over $800,000 in accounts receivable when I took over that business. That's, that's crazy. That should never have happened, but they were taking their AR to the bank. They were taking out $200,000 lines of credit to make payroll. Like do not do that. Collect your receivables. Do not over hire. Make sure you're getting paid. Make sure you bring on people at the right time. I think I've beat this enough. What do you think, Kyle?

speaker-1: I love it. Well, first, we like to respect everybody's time. So you got 10 minutes left, which I think is perfect. Number two, what I love is that, you know, the slides, I'm like, ⁓ we're going to go through the business budget, which we have, and that's good. But I've loved your emphasis on several things. Taking marketing serious. Taking what you just mentioned there is no, you're stinking. numbers people, you are running a remodeling business where your family and you rely on it, where your team members rely on it. You cannot be running your business unless you are locked in on your numbers. If it's fuzzy, start studying, dig into it. There's a reason that he's emphasizing that so much. So I've really appreciated you going down these kind of business coaching lessons as you've gone. ⁓ Yes, you beat this one enough. Move on to the next one, please.

speaker-0: I'll laugh.

speaker-1: And also, and also I was clever. I use that fax machine as you were preaching there. I've got, I got four laugh emojis. Also we've, we've had nobody leave. Every, but a hundred percent of the people that have come are still here. You guys are about to get asked a question for me and I demand a very clear answer after, well, after a couple more slides. I want you to be thinking, what is my big, maybe you have two, maybe what is my big takeaway or two? What am I actually going to do as a next step based on what I'm hearing? Go ahead. All right.

speaker-0: Last, last metric real fast. know, you can look at a thing called your labor efficiency, which is your revenue divided by the number of employees you have. You know, the industry average is around 150 to 250,000. So again, that's, that's another just kind of metric that you can look at to help make sure that you don't get out of whack based on your, revenue and your growth. All right, moving on our net profit. You know, again, this is the bottom line. What remains after all expenses have been paid, you know, it reflects the true financial success and the health of your business. Set a realistic target percentage for net profit. Something 10 to 15 % would be very good. Your net profit fuels your future growth. It gives you the capital to invest in your business. And it allows for owner distributions and for additional compensation that's beyond your salary and your bonuses and things. Consistently tracking your net profit ensures the long term business sustainability. You are in this to make a profit. So everything you do needs to ensure that you protect the net profit of your business. Now, again, how do we do this? This is where I'm gonna come back to, and I would love to actually poll the audience one more time, like how many of you are reviewing your budget versus your actuals every single month? Let me see, a yes or no. So while that's coming in, if you're not hitting your goals, then I want to ask you why. Why are you not hitting your goals? You can very clearly answer this if you will take the time to compare your budget to your actuals. It's that simple. You already laid out a plan every month, every quarter, every year. But so many people as we see it's great y'all had an annual plan, but like if you are not taking the time to reflect back, then what good are you doing? You know, are you, are you over invested or you under invested? If you're not able to report on your actuals monthly, you know, then you need to hire a bookkeeper or maybe you need to hire a new bookkeeper. Like they should be able to do a monthly closeout and within a week get you the numbers. This is how you operate your business and it should be You know, just a hard, you need the data, you know? And then when you get that data, you plug that into your budget and you compare as you're going your budget versus your actuals. You know, again, here you're looking at the screen like it's very simple. Our revenue budget and our actuals. What was our variance? What was the percentage? Are we over or are under? Anything green is good. Anything red is bad. You know, do that all the way down. So important, you know? And again, one more note on closing your books. Like we highly recommend closing your books and reviewing your performance on a monthly basis. Schedule a specific time each month to do this yourself or to work with a qualified bookkeeper who can help you do that. Don't get lost in every detail, you know, but focus on the gaps that matter. Ask yourself what's causing the variance and whether there was a deeper business issue that you need to address. It is so important. Like this is how you can continually improve as you go. You don't need to wait till the end of the year to say, man, we really screwed the pooch. Like, no, like as you're going, understand where are you getting off track and what can you do today to fix that? And, and, and lastly here, like, you know, set KPIs that like KPIs your key performance indicator. These are simple metrics that will show how you're performing against your budget. You want to give you a couple of examples here. You know, again, you know, what are you, how many leads looking at the leads that are coming in, you know, what sales are you generating your close rates, your gross profit margins, your net profit margin, your average job size, your labor efficiency, you know, your overhead is a percentage of revenue. Your marketing is a percentage of revenue. Like there are so many different KPIs that you can come up with, figure out the right ones, have a very small set of KPIs that are going to make the biggest impact on whether you were going to hit your goals or not. You know, KPIs are so important, but like they need to be simple, trackable metrics to measure the performance of your business. They help you to understand how you're performing. They help you to easily compare your actuals of your budget. You can spot these problems early and course correct. They can prove to yourself that you're improving, that you're making the right moves, or they can show you that you're not. You know, but like the point is you can clearly track the success. in the performance of your business by leveraging these KPIs that are directly related back to your budget, to your plan, to your goals. And I would encourage you to be as transparent as you possibly can with your entire team. Communicate these KPIs and let them motivate your team to hit them. Like if you come to our office and all of you are welcome anytime you're in Dallas, like you will see we have dashboards everywhere. We literally share everything with our entire team. And this is a motivator. This is how it's not just on me to hit our goals that we set forth or my leadership team. It is the entire company's goal together. We work together, we track our KPIs and we hit our goals because of that. So again, use your budget, know, use your KPIs, you know, you can build some phenomenal dashboards and job tread, but again, this isn't about job tread. You know, again, I, I, well, I'll kind of just sort of. skip through here, you need to build these dashboards, put them on the wall, focus on them. Obviously I didn't get to my live demo here, but ⁓ we do have a spreadsheet that we're gonna share with you.

speaker-1: There's a QR code on the left.

speaker-0: I you the QR code again. This is just, can save it. You can go play with it. You know, in this, in this, uh, payroll here, you can open it up. You can start to plan out when you're going to hire people. You see all your net margins. You got your revenue build. You make in all your assumptions there. You know, so so you got a bunch of different data that I've shown you here. It gives you some instructions, you know? So anyways, I'll, I'll, I'll kind of, you know, skip, skip over that. Sorry, we didn't get to that. I got real excited by a few things, but again, this is the time for you to take action. We have covered a lot. We're at the end of the year, like I hope you're feeling inspired and empowered to take financial control of your future. You have got the tools that you need. You've got the insight and the strategies to implement this, to have a very successful journey. And I want you to build financially sound and profitable businesses, but knowledge without action is just potential. You know, this is the time that you take this playbook and put it into motion. You know, I want to hear from each and every one of you, you know, one year from now, you know, did you hit your goals? You know, I want you to email me December. 2026 and tell me that you implemented this and how did you perform and how did it help you? Here is the QR code that you can scan on your phone, your computer. As a next step though, take this, implement what we've discussed, here is the tool. Now again, this is just one example, one model, but this isn't just a spreadsheet. This is the foundation for building a financially sound and resilient business. You know, so tonight, tomorrow at the latest, like I want you to sit down with this template and I want you to start thinking about what is important to you and your business. You know, start building out your revenue model, your, you know, understanding your lead conversion funnel. How will you track your KPIs? What KPIs take that first step, then take another and take another because the truth is success isn't a destination. It is a journey. And that journey begins with a single decisive action. So again, think about this, like one year from now, where do you want your business to be? These choices that you make today and going into this new year, like they will directly control your outcome. You have the potential to build something extraordinary. I know it. You you have the potential to transform not just your business, but your life. So don't leave here with just ideas. Leave with a plan. Take this template. You know, if you already have one, then improve it, you know, but leave with the determination to make this happen. We're here to support you. Kyle's here to support you. You know, this is a great community that you're part of and I can't wait to see the success that you have. And I look forward to hearing from you one year from today.

speaker-1: Baby, Bailey texted me, she goes, I feel like we should all just like clap at the end of this. If we're at job, try to connect, everybody be on their feet, be like, thank you, Eric, for giving the energy. Couple things, one, you don't have to have that passion that Eric just did, like be yourself, but do you feel how contagious it is when you actually bring energy? Bring your view of energy, but do not underestimate the importance of bringing energy to your team. Take what he said seriously. Dig into this. Do something with this. It's worthless if you don't do anything with it. Number three, if you liked this, a month from now, you should go down to Dallas and come to Job Tread Connect. Not only you get to see me, you'll get to see Bailey, but you'll get to see Eric and his team. It's a great conference. Job Tread Connect. Go to jobtreadconnect.com. You'll see it. Come visit our booth when you're there. I'll be speaking as well. ⁓ And that was excellent. Eric, no, no, no. I'm not blowing smoke up your dockers or whatever you're wearing. What are you wearing today?

speaker-0: Yeah, I got some, you know, I the lights on. Here's the link too, by the way, in case you couldn't scan it. And also just to set the example, like we got UTM parameters on there so that it's important that we track, you know, if you do end up signing up from JobTread, we'll know that you came from this thing. probably would have cleaned up the, we don't need all of these UTMs, but...

speaker-1: That's all right. That's all right. It doesn't have be perfect. But you brought the energy. That inspired all of us. We really appreciate it. We're going to respect everybody's time, including yours, and wrap it up here. Thanks everybody for dialing in. We'll send over the recording as well for you guys. Come to Job Tread Connect. Reach out. Job Tread's excellent if you're fiddling around with spreadsheets or another software. Definitely dig into that. If you have any other kind of coaching needs, reach out to us. And Ross says thanks dudes. And thank you all. dudes and dudesettes. And Eric, thank you so much. That was great. My pleasure.

speaker-0: Thanks everyone.