Episode 116 Podcast Transcript
Speaker 1 (00:00):
We’ve got to work on you as the individual to grow into the person who is feeling worthy of building that $2 million business. And it’s not just the business side, it’s the personal side where you have to physically become a different person. G’day everyone. Rob Kropp and Dan Stones here from Pravar Group, and welcome back to another episode of The Trade Den. Good to have you back, Dan. How are you?
Speaker 2 (00:28):
Hey, Rob. Good to be back. Yes, not just welcome back to another episode, but part two of our series following on from episode 111. So if you haven’t heard that, please make sure you listen to it. But today we’re going to be talking all about the next part of that journey. And what we’re talking about or where we’re going to start with is when you hit a million dollars in revenue. And before we even start, I want to acknowledge something. And that is that you’ve done something most tradies never do, most business owners ever do. You’ve built a real business and you’ve got work coming in, a team of some description, a track record that the delivery serves as proof that your model works. And that’s worth acknowledging. It’s worth celebrating. It’s a real victory and it’s something that not a lot of people get to do.
(01:10):
But a million dollars also comes with something that no one really warns you about. And that is a bit of a trap. It’s what we call the too big to be small and the too small to be big trap. And it’s a real, brutal part to be in because it means you’re too big to be running around doing everything yourself. It’s just not possible. But you’re also too small to have everything in place. The infrastructure you know would make things that little bit more manageable, that little bit more sustainable. So what we get to, if you’ve listened to the last episode, you’ll know what’s coming up is a decision point. And Rob, I think that’s the ideal spot to start today is talk us through that decision point as you migrate from what we call phase one, a tool belt business into phase two.
Speaker 1 (01:56):
Yeah like we spoke on around in episode 111, you’re at that point where it is a bit sweet and you’re at that million dollar mark and you’ve got to decide, road one is, do I just stay in the tool belt business? And there’s pros and there’s cons to that. But road two is, do you have that little feeling inside of you where there’s a calling or there’s an opportunity or something that’s saying, “Hey, there’s a bigger game we’ve got to play here. I want more.” And there’s nothing wrong with more, but it’s like, all right, I’ve got to decide, am I ready to step up and build an owner operator business? And not many people know what an owner operator business looks like or how to get there. They’re just like, “Great, let’s get on with it” and off they go.
Speaker 2 (02:46):
Yeah. And I think like you said before, it’s a decision that needs to be made. You’ll find yourself in the predicament. Everyone does, right? Because even at the tool belt business level, you’re getting more demands for your work. People love what you’re doing. They’ll give you more to do if you do it well. So you will trip over into this phase. But if you don’t make a decision, if you don’t treat it like a decision point, you’ll get sucked into it. And all of those demands and complexities, if you’re sucked into it and you haven’t accepted it, you don’t know what the roadmap looks like, you’re just going to end up in a world of reaction.
Speaker 1 (03:20):
It is. And that’s why when so many guys come to us here at Pravar, this is our sweet spot in coaching terms. Clients come to us at a million dollars plus. They’ve crossed the threshold of running a toolbelt business and they’re like, “I actually want to run a genuine business here and I want to play a bigger game and I want to make more money, have more time, but I’m stuck, Rob. I’m stuck.” And they don’t understand that what they’ve done is moved out of a sweet spot into a dead spot, which is what we call the hamster wheel. We’ll get into that in a minute, but they don’t get it. But you’ve got to, at some point in time, you got to make the decision, “Well, do I be okay with running a toolbelt business or am I going to step up and play a bigger game?” But you got to decide, don’t you?
Speaker 2 (04:05):
Yeah. And you’re making a decision. And the hard part I think is you’re making a decision in a pain spot, in a dead spot, in a place where it’s hard. And everything, we talk about it being counterintuitive, but everything in you screaming, “Get out of there. Don’t do it. Go back, just take it easy.” All of those sort of things that we as humans do. But it’s hard when you’re in that space, but that you’ve got to make that choice consciously one way or the other. You can’t just stay there, you can, but you’ll drive yourself man. And like you said, this dead spot is called the hamster wheel.
Speaker 1 (04:38):
Yeah, you’re right. This is a dead spot. We called the hamster wheel for a reason because you are literally running like a hamster on a hamster wheel going around and around and around in circles and you’re never feeling like you’re moving ahead. And it’s so common for a trades business to hit those 80, 100 grand months and they can’t move forward. It’s almost like there’s this invisible barrier that they can’t break through. And we’ll talk about it today around going back to the big three, but the hamster wheel is real and you’ve got to make the choice to get off the hamster wheel so you can move forward.
Speaker 2 (05:12):
Yeah. And you see it with guys that are exhausted, guys that are always busy. It’s tiring. It’s like, I can’t do much more. And it’s not necessarily about doing more. Like we talked about, there’s three things that we talk about. We’ll come back to them again in a minute, but it’s harder to fix because it’s not something that just shows up and you can go, “Right, I’ll just put this in place and it’s done.” It’s a journey. It’s a phase you must work through. So when we talk about it, for instance, revenue can climb up, but profit stays flat. So you get to that moment where it’s like, well, why am I putting team on? It doesn’t do anything. It’s actually making me worse off. That short-term thinking here is something that really trips people up.
Speaker 1 (05:52):
It is because generally between the dead spot of the one-to-one rough terms, one to $1.5 million, it’s a real turning point. And the turning point is you’ve got to really shift your mindset to be able to go, and we’ll get to identity in a moment. I don’t want to talk there, but..
Speaker 2 (06:12):
Don’t jump, don’t jump there.
Speaker 1 (06:12):
Don’t jump. But it’s like you’ve got to genuinely shift your mindset where what got you here was working your ass off to be able to get the business up out of the ground. And you think like a tradesman, you’re trading time for money, but you’ve got to really shift that mindset of no one’s as good as me, saves me time and energy and money. The longer and harder I work, the more money I’ll make.That’s a real mindset that got your business from the Wild West into a tool belt business. That helps you get to there, but it’s no longer going to serve you to get to where you want to go. And you’ve got to really fundamentally break that mindset, don’t you?
Speaker 2 (06:51):
You do. And I think this is the problem because phase two at the start, when you’re in the dead spot, you’re still in the dead spot when you make that decision. I’m going to go through it, but you’re still in it. And everything feels wrong then. It goes from being a fear about it to being the wrong thing. And you start second guessing yourself, “Maybe I’m no good at it. This was the wrong call. This just isn’t for me. ” You’ve made the right call, you’ve made your decision. It’s how you deal with it and what you know about it that comes from there. And I think it’s not more effort that gets you through it. Like you said, what got you to hear isn’t going to get you through the other side. There’s really a system and a process for that. And we call it the big three.
(07:27):
So again, I think let’s dive in, like you said, let’s start with identity and where does it take us in this part of the journey? How does it shift? And if that’s the way through it, what do we do about it?
Speaker 1 (07:38):
If the identity was at a tool belt business was a good operator, now the identity shift that has to happen is to become a great manager. And because what got you here was hard work, grit determination, grind, what gets you to an owner-operator business is becoming a manager who loves to leverage. Your success comes from the success of your team that you build, not by how many hours you physically work. So your identity shifts from being a problem solver, someone on the tools working hard with your hands to all of a sudden now having to manage people and having to deal with people all the time. It’s a huge shift in an identity that a person has to go through, doesn’t it?
Speaker 2 (08:27):
It’s enormous. And it can burn you out doing that, like going into that stage of being a manager. And again, without us pumping your own tyres, but this is what we train people to do to help with that identity shift because unless you do, you’ve either got to have an endless supply of cash while you make all the mistakes and go through it eight, nine times in a row and do all that sort of stuff, or you do start to learn what the real measures of that are. Like you said, it’s not about how much you can do. It’s not about how many problems. It’s not about how many jobs. It’s not about how many hours. It’s none of that. It’s about the decisions you start to make. It’s about how informed your decisions get because you know the numbers will tell you the story to an extent.
(09:07):
So there’s ways of operating the business. There’s that word comes up straight away, right? The ways of operating the business change from being all arms and legs and you being everywhere to making some decisions.
Speaker 1 (09:20):
It’s the little things like taking your high vis off. It’s getting the tools out of your truck. It’s the way you show up on a day-to-day basis to run your business. It’s the way that you conduct yourself, you carry yourself. It’s shifting from mate to manager. You can no longer being one of the boys. It genuinely takes time. And you can get strategy thrown at you all day long in terms of pricing, management, job costing, job management systems and everything. You can get all that strategy thrown at you, but fundamentally you don’t shift your identity to become a good manager of people. You’ll never get there because what takes you from a sweet spot of a tool belt business at a million dollars through the hamster wheel and into a $2 million plus owner-operator business is fundamentally led by being your identity has to become a good manager because you get there through people and systems and structure and strategy, not by you working harder.
Speaker 2 (10:20):
Yeah. And if you’re wondering why we talk about identity, it’s how you see yourself in the business. Unless you change how you see yourself and you show up differently as a different version of you, then you’re going to be stuck on that hamster wheel. And there’s no point, like you said, there’s no point going to the strategies, but there’s also no point even trying to do the structure. And let’s talk structure second. We talked about this in 111 episode, but structure does come second before strategy in this sense. So talk us through the structure of the owner-operator phase.
Speaker 1 (10:52):
If you’re listening to this, it’s going to be a little bit hard because I love drawing it out, but you’ve got to think in terms of the way a trades business is hung together from a structure point of view, it’s the same structure from when you’re running a million dollar business to the same way you’re running a $5 million business. It’s just that at a million dollars, you’re wearing all the hats. At $5 billion, you’ve hired people to wear all the hats. So the structure stays the same. Now in that structure, there’s you at the top of the tree. So think about a tree that’s you as the CEO or GM. Under that, there’s four main functions. There’s the bookkeeper, the operational admin, there’s the sales and estimation and then project management. So there’s four main functions. Underneath the PM is your ground crew. So at the owner operator level, the name of the game is to design and build a really good ground crew so you can get up off the tools and into managing the business.
(11:49):
And then eventually you want to be able to hire a good bookkeeper and an operational admin so you can delegate those low value tasks and get more into sales and operations. So a really good, well-structured owner operated business has a great ground crew and a really good office crew around you. And that’s your foundational levels of leverage to drive the business forward.
Speaker 2 (12:10):
And this is where management comes into it because you’ve got to learn a new skill. This is where recruitment comes into it. And not just recruiting a good tradesman is like, “Yeah, I see their work. It’s great. I want them or they can do that job.” When you go to do office crew, sometimes you’re hiring for a role you’ve never done. One that you suck at, but the recruitment process is part of your new management skills and your identity is what has to kick in. So this is a real life example of how that works through in terms of structure.
Speaker 1 (12:37):
It is. And the reason why it’s a handster wheel from a financial perspective is because when you make that decision to start building leverage, that comes at a cost to your overheads within your business. You get off the tools, you become an overhead, you put a bookkeeper on, they become an overhead. You put an admin person on, they become an overhead. If you want to rent a premises, that becomes an overhead. So all of a sudden you’re dropping 200 grand of overhead into your business, for example, and it’s not just going, “Well, I got to make 200 grand to pay for that 200 grand. That 200 grand’s coming out of margin.” So you might have to make five to 600 grand in pure revenue just to be able to pay for this overhead in your business. And that’s why during this phase, it’s not about making more profit, it’s about reinvesting it back into the business to buy back your time and make more leverage.
(13:33):
That’s what you’re doing in this dead spot in the hamster wheel.
Speaker 2 (13:37):
Yeah, such a good point. I think this also then feeds in. It’s like, well, Rob, hang on. I think I can see a better way of doing this. This sounds a bit fancy. This sort of sounds a bit like, “What if I save money? I just won’t get the structure. I don’t need to be corporate.” You’re sort of just making this harder than it needs to be. We’ve always made good. I’ll just get through it and we’ll keep moving forward.
Speaker 1 (13:58):
You will get to the point where you’ve got a client at the moment, he’s been on the journey in our launch programme. His name’s Chris. He runs a decking business and he was doing high ones. He was working 80 hour weeks. And that’s what happens when you don’t have structure because you’re on the tools during the day and you’re sitting in front of the laptop at night. And that’s because you are holding on tight because you think the longer and harder you work, the more money you make and no one can do it as good as you and it saves you money if you don’t hire them. It’s true. You might make a bit of money, but it comes at a cost and that cost is your time and the impact on your family. So when you realise that you have the ability to, yes, bring some overhead into the business, it’s about reinvesting back in and buying back that time, A, to give you a better quality of life, but B, that’s what propels you forward.
(14:50):
And that’s what Chris has done in the last six months, fixed his ground crew, get some office crew in. Bang, he has taken off like there’s no tomorrow at the moment.
Speaker 2 (14:57):
Yeah. So he’s worked on structure. Now, as we go through, it’s the big three. And remember we talked about this in 111, you can’t just do one and think that’s tick that box. Let’s keep moving. You’ve got to move all three together and in the right order and at the right time. So we’ve got one left, which is strategy. And we know that at this level, I think the primary lever you’d agree is that people are the primary lever, but there’s some things that go along with that.
Speaker 1 (15:20):
Definitely. At this point, there’s the soft skills around management. You’ve got to be able to manage because when you’re on the job, you can be the one driving productivity and driving the job forward, but now you’ve got to drive productivity in the job forward without you physically having to be there. So it’s unlocking productivity without being in person. So they’re all the soft skills you’ve got to do, but in the business, it’s now you’ve got to really wrap your head around your numbers. You got to get some good job management systems in. You got to get some fundamental operating systems. You got to really dial in your pricing because you got to price for your team to do it, not for you to do it. So if you try and grow through this phase without knowing your numbers, you will grow broke. It gets out of control very quickly.
(16:05):
So yeah, pricing, people, job management systems, structure, those types of systems, they’re the types of things you’ve got to really work on in this phase to build a very, very solid owner operator business.
Speaker 2 (16:17):
Yeah. And if you are entering into that phase, if you’re coming out of phase one into phase two, that’s your decision point. Are you willing to invest in all those things you just outlined? If you’re not willing to do it, you don’t want to do it, don’t do it because otherwise you’ll enter into the hamster wheel and you’ll never be able to get off. So don’t shy away from the conscious decision to do it. But now you know what that decision involves. Hopefully you can make that choice a lot easier. So that was the dead spot that we talked about, but let’s talk through now the sweet spot. So it’s not all hamster wheel and doom and gloom. There is a sweet spot that you can get to once you move through the dead spot in an owner-operator business.
Speaker 1 (16:53):
Yeah. Our definition of an owner-operator business is you’re around that two, $2 million plus revenue run rate. You’re predominantly off the tools. You’ve got a really good ground crew around you with onsite management through good leading hand or so. You’ve got good understandings of the fundamentals of your numbers. You’ve got good office crew around you in terms of admin and bookkeeper. You’ve got good awareness around the fundamentals of your numbers and your pricing and you’ve got the time and the resources and the head space to be able to focus on driving the business forward and filling your pipeline to keep cracking on if you choose to. But on the personal side, life becomes great at this point. Like you get to reclaim your nights. You get to reclaim your weekends. You get to take your kids to school in the morning because you don’t have to physically be on the tools if that’s what you choose.
(17:45):
You can go away on a week’s holiday or go camping on a long weekend because the boys are working on site and the office crew are doing what they need to in the office. So yeah, it’s hard to get through to that point. And it generally takes one to two years through coaching where you find. But once you get there, life is so much better on the other side, that’s for sure.
Speaker 2 (18:05):
It really is. And I think that’s the key. It’s no longer a survival sort of phase of the business. And at that $2 million mark, the owner, you’ve done the identity shift, you’ve done some structure work, you’ve done some straight, things start to feel different. And it’s not that it … You just rattled off a really good definition of it, but it sort of sneaks up on you a bit as you exit that mode. It’s sort of like, I got to have a weekend. I got to have time away for just one long weekend with my partner or whatever it is. It’s those sort of little things that you start to notice and the business doesn’t implode the second you walk away from it. So it doesn’t mean you step away, but you step up at that point. But it’s those little moments that sort of give you a sense of, “Hey, this is good. I like this. This is way better than being in the hamster wheel and I’ve got a chance of not having to be on the tools all the time.”
Speaker 1 (18:53):
It is. And in coaching in Pravar, we’ve got a whole programme designed to deliver on this promise of an owner-operator business. It takes one to two years to be able to get there. But how we do it at Pravar is this is where we’ve got to work on the soft side of things, which is more … I say this a little bit being wary, but some people may not like the term of life coaching, but this is where hard nosed business coaching has to blend in with the soft skills of some life coaching because when you are on the tools, you can have a few beers in the afternoon. You can eat shit food during the day because you’re physically doing what you need to get done. But in this phase now, you’ve got to change your relationship with alcohol. You got to start going to the gym because you don’t physically look after yourself on site.
(19:41):
So in this phase here, this is why coaching for us is so big around identity and beliefs and habits and everything, because we’ve got to work on you as the individual to grow into the person who is feeling worthy of building that $2 million business. And it’s not just the business side, it’s the personal side where you have to physically become a different person and it’s all the other health and wellbeing things that you’ve got to address. Otherwise, the things that used to work for you when you’re on the tours will now work against you if you hold onto those bad habits. So it’s a real power play in coaching at Pravar, isn’t it?
Speaker 2 (20:18):
It is. And it’s not about adding. And I think that’s the thing as we go through these phases. You think, “Well, I did phase one. I’m going to add more to get to phase two. I’m going to add more to get to phase three.” But what you’re outlining there is you have to, and I know you’ve said this before, but you’ve got to almost shed versions and layers. It’s what you get rid of just as much as what you add in as you go through these phases. It shouldn’t feel heavier. It should feel different. It’s a different mode of operating as opposed to just more shit that I’ve got to get through.
Speaker 1 (20:46):
Yeah. And I use that example of Chris before. He’s just taken his wife and his kid’s caravaning for a long weekend. This is the first time he’s at his caravan sitting there for a long time that he’s barely even touched. He’s out of his home office, into an office. He’s built his ground crew. He’s got his office crew underway. He’s dialling in his pricing, and now he’s got time at nights and weekends to spend with his family. It’s like, that’s six months.That’s a huge transformation in six months. And he’s feeling more positive about his business and life than ever, even to the point where he’s turning work away at the moment because he’s had that time to focus on sales and he just can’t get to it because he’s in that growth phase. So yeah, it’s a really exciting phase in business, I believe, in this owner-operator phase.
(21:36):
It makes it worthwhile, doesn’t it?
Speaker 2 (21:38):
It really does. And it almost breeds itself into the next problem you get, right? Because if you’re successful, like we said in toolbelt business, you will end up at this decision point to get into this next phase of owner-operator. Your success will drag you there. The question is, did you decide to get there? Same thing with this phase, right? Owner-operator business does really well. You’re going to be inundated with work because you’re really good at what you do. Your team’s great. Everything’s humming. It’s perfect, but there is a tipping point, and that’s where you need to make your next decision point. I’m not going to jump into it, but that’s probably where you get to as you move through these phases. You’ll get sucked up into the next level, but whether or not you get sucked into it or you choose it is the real kicker to this whole thing.
Speaker 1 (22:22):
It is. It’s another decision point. And we’re going to address that on our third and final part of this series, but you have to make a decision at this point because it is, again, you step out of a sweet spot into a dead spot and you’ve got to make a decision if you’re going to push through the nightmare zone or not. And so it’s a conscious choice you’ve got to make and you’ve got to be willing to go on that journey. And so now the question might be, when do we ever stop? Dan and Rob, like can I stop here? Absolutely you can. And we’ve seen it in our journey where clients have gone, “You know what? I’m happy with an owner-operated business. Do I have to go ahead?” No, you don’t mate. You do you. And I think that’s an important thing where sometimes it’s okay to give yourself permission to tap out at this point, isn’t it?
Speaker 2 (23:10):
Yeah, you could run this business really, really well. You can have a good going and set. Like you said, you can have long weekends. You’ve got a team that you love and some guys love the team element. I’ve got my crew. This is us. This is where the business starts to feel like family. You get those sort of comments from clients. And it’s an exciting time, especially when you think, like we said at the beginning, you’ve got to a million bucks that was worth celebrating, getting into this phase and being an owner operator. Again, well and truly worth celebrating. It’s the choice you make around it that’s important, but you can celebrate and live in this world for sure.
Speaker 1 (23:45):
Let’s leave it there because we don’t want to give away what we’re going to talk about next on the next one. I know we want to keep talking, but let’s leave it there. Now, if you’ve loved part one and part two, especially part two here, and hopefully you’ve heard it in our voices, we could talk about this all day long because this is our GM here at Pravar Group. This is what we do best when clients come to us at a million dollars plus in turnover and we’ve built our whole business around intersecting the market here to help those businessmen in the trade space build owner operated businesses. And so if you’re in that space, in that journey, you’re doing a million dollars plus and you are feeling like you’re in a dead spot where you just are stuck, you’re trapped, you’re confused and you don’t know what to do next, then jump across to strategysession.com.au, fill in your details, book in a time that suits, and let’s have a conversation to lay out your roadmap in terms of where you’re trying to go. Let’s work you through the dead spots into the sweet spot and design your own or operator business, then let’s get to work in building it together and help you achieve some amazing things in business and life. Hopefully you’ve enjoyed today’s episode. Looking forward to coming back to you with part three. Until then, take care.
Speaker 2 (24:59):
See you soon.