Contractor Cuts

Part 1 - Pay Yourself Right: From Chaos Draws to a Real Owner’s Salary

• ProStruct360

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We break down how contractors can stop mixing wages with profit, set a real project manager salary, and build cash reserves that make growth possible. A simple example shows how to allocate profit to taxes, owner distributions, and retained earnings without starving the business.

• separating labor pay from company profit for solo operators
• setting a fair PM salary while keeping profit in the business
• targeting gross margin ranges by job size and risk
• understanding revenue, gross profit, and overhead as controllables
• avoiding overhead creep as you scale teams and trucks
• simple monthly flow for taxes, distributions, and reserves
• why clean job costing beats generic CPA reports
• action steps to start now and get books ready by January

If you want coaching, go to contractorcuts.com or ProStruct360.com. We have max 30 people coming on this retreat… If you want in, reach out. Let’s have a conversation about it. 


Join us January 11–13 in Nashville for the Chart the Course 2026 Planning Retreat. Sign up now and get three free coaching sessions before the event to finish 2025 strong and hit 2026 with a clear game plan. At the retreat, you’ll tackle systems, hiring, marketing, and leadership alongside ambitious contractors, leaving with a blueprint for growth. Spots are limited—visit prostruct360.com to learn more!

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SPEAKER_01:

Welcome to Contractor Cuts, where we cover the good, the bad, and the ugly of growing a successful contracting company.

SPEAKER_02:

Welcome to Contractor Cuts. My name is Clark Turner. I'm James McConnell. Thank you for joining us again. You hate the intro part the most. I do. I know. Next time I'll say your name. I'm James Picado.

unknown:

Bang!

SPEAKER_00:

Back at it! Back at it again. Coming in hot, hot, hot. We got a Starbucks coffee, not a sponsor. Anyway, doing big stuff here in the Casa de Turner.

SPEAKER_02:

Well, thank you guys again for joining us this week. This is kind of a continuation from last week when we were talking about how much money you need to start your contracting company, what you need to be doing to get going. This is going to be a two-part series on how to pay yourself. We did a how to pay yourself as an owner two, two and a half years ago, probably. So we're retouching that, but we're good doing a deeper dive into it. So many moons ago. So many moons ago. And James wasn't a part of that one. So this will be we'll take your new turn. Brand new, fresh perspective. And it's going to be hot. Yes. James is like a financier. Like he is he when you think money is James. Money, tech. Money and tech is like if your Wi-Fi is broken, go to James. Talk to me. All right. So today the title of this is Pay Yourself Right from Chaos Draws to a Real Owner Salary. Right. And so we're this to this week is going to be talking about like the front end, how to get going on doing this. And then next week we're going to talk about the book that we love. That if you haven't read, read it this week. Start listening to it on audiobook, whatever it is. It's called Profit First, Mike McCowski or something like that. That's his name. You're crushing it. And it's Mike Michaels. Michael. It's something. But, anyways, it's it's a really good book. We uh next podcast is kind of a book book report on that. Um it's it's how we think money should be managed. Um we do a little bit differently. It's kind of the contractor's version of the profit first method. Um, but next week will be a really good one. So today is diving into understanding and kind of setting up how to get money in the background, how to start storing money and how to start getting to the spot that you can actually have different bank accounts and move stuff around the right way and have owner distributions. Um starting off with this, I think it's best to set it up as really the different sizes of companies, the different spots I see guys coming in to coaching. One being guys still swinging the hammer, out there doing the work, doing the labor. And James, why don't we, if you can for me, I I talk fast and I kind of go through the stuff quickly and numbers I get lost in. So treat yourself as the contractor. Treat yourself as uh if you would be kind of like the contractor learning this stuff in terms of pick me apart.

SPEAKER_01:

I'll act as if I don't understand what you're saying. Perfect. And I'll act as if that's the case. That would be great.

SPEAKER_02:

Thank you so much. But pick apart what I'm saying if if I if I get running too fast. Um so starting off, guys swinging the hammers. Guys out there, tool belts on, you know, they do two jobs at a time, three jobs. Um, they're doing most of the work themselves or subbing out the electrical and plumbing, but they're doing most of the most of the work themselves, but they're out in the field with their tools. Um, those guys, I think what I want to see from that style of a contractor as they're growing their company is we need to start separating out profit for the company versus pay for your job. Um, in those roles, though oftentimes those guys, and we said this on last week's podcast, they they look at a job and say, Hey, I charge$500 a day for my time for me to mobilize and get out there. That's a four-day job. I'm gonna charge you$2,000 for me to come out and do that job.

SPEAKER_01:

That you're selling your time for money. And in this scenario, the contractor, all they're thinking about is how much does it cost? Like what is my time worth?

SPEAKER_02:

Yes, exactly. They're selling uh they're they're literally exchanging their hours for dollars.

SPEAKER_01:

They're working$400 a day, five-day job, two thousand dollars.

SPEAKER_02:

That's what we're talking about now. Like they're working at Home Depot or McDonald's, like you're just getting hourly pay, daily pay. And so those guys, what are other Chick-fil-A. Chick-fil-A. Yeah, there's people that work there. So when you're viewing that, and we talked, we touched on it last week about how on those jobs you need to be building in more than just your time because it's not four days. It's not five days on the job side, it's a day and a half before doing an estimate. You drove out there last week to get your eyes on the job and put things together the day before you went to Home Depot and bought some materials.

SPEAKER_01:

The same way that you describe, and I'm sure you've talked about this on other podcasts, but the same way that you sell the vendors and crews that you're working with on working with you is the stuff that you're saying guys aren't accounting for those things when they're doing that their own hammer swinging.

SPEAKER_02:

Absolutely. That nail in the head. So the the like we lay out on the on the onboarding subs, where it's like I'm doing all of this other work in blue, the little part in red that you're doing, the the labor itself, that's what you're getting paid for, and I'm getting paid for everything else. That's the everything else that you don't charge for when you're a one-man show, right? It's like I need this job, and I uh I if I got 500 bucks a day, I'm great. Well, you're not working five days a week, four weeks a month at$500 because you've got all this other work that you're doing. You're you're you're running around, you're picking stuff up, you're making returns, you're hunting money down, you're doing accounting, you're meeting with your CPA. Like, there's so much work that you're doing for free for your company because you're only charging for the actual middle labor part that you're doing. Yeah. So what we want you to start doing is find your price point. And we've talked profit percentages a ton. Uh, there's not a right one. It's it's individually, depending on the size of the job. If you're doing, if you're a one-man show and you're doing one job at a time and you're charging 500 bucks a day and that's it, you got to be 50% profit on that for your company to survive. If you're doing large-scale stuff, some commercial jobs are cost plus at 10% and they're killing it because it's a$20 million job. And that's okay to make$2 million on that in the next nine months as we do the project, right? So don't get stuck on profit percentage. We aim for 35-ish percent. It used to be 32, 30. We're trying to kind of creep that up a little bit and and and really find the right clientele at 35, sometimes 40. But I know we slide the scale, right? On a$20,000 job, we're making 50%. On a$120,000 job, we're making 40%. On a$300,000 job, we're making 35%. And it scales along with how much work we're doing. So don't get lost and stuck on the numbers of what your markup should be. If you want to talk through your job, your specific what you do, you want to know, you know, assessment of your percentage you should be at, call me. Hit me up on our website. I'd love to chat with you about that. Either way, we need that markup on top of how much it costs you for your day labor, how much you you need to make yourself. And finding that number is a whole different animal of, well, uh, you know, in my market, I need to be making 80,000 a year. I work at most four days a week for 50 weeks a year, and you can do the math on that. Some guys, you know, as they get better and get older and you have more of a clientele, they raise that up and I need to be at 150 a year, I need to be at 180 a year, whatever it is, I get paid for the work that you're doing separately than that profit markup. And don't pay yourself out of that profit markup. So when you're that one-man show, I want you to say, okay, I need 500 bucks a day. I'm gonna charge$2,000 for these four days. And then as a company, I want the company to make an extra thousand on top of that. So I'm charging this client$3,000 for the work. I'm going to pay myself$2,000 for the work I did this week. And that last thousand is gonna go into my bank. That last thousand is going into cash flow. That last thousand is not being Venmo to me personally, it's being deposited into my company account. And if you have a personal account and a business account separated, that's we put it all in the business account. And then I take my$2,000 for the labor I did into my personal and pay it out to myself.

SPEAKER_01:

This is not uh a joke, but in this scenario, the$2,000, does that include material or is that in the$1,000, or was the client supplying the material?

SPEAKER_02:

Total uh in that example, I wasn't buying materials. Okay. So on my example on that would be hey, I've got a thousand dollars or you know, five hundred dollars of material. So I'm charging them$35. And so it's like$2,000 for labor,$500 for materials, and a thousand for profit. Trying to be simplistic and not marking up materials is easier when you're getting going, um, especially when you're dealing one-on-one with the homeowner who's like, well, I'll just go out there and buy it. No, I'm uh let me just handle it. Uh, you're gonna buy the wrong thing. It's gonna make make me take be here for an extra two days. Yeah. All that being said, what what we want is we want you to pay yourself twice. We want you to get paid for that$2,000 for the work. And I want a thousand dollars in the bank. We're gonna talk next week about how to spend that thousand dollars in the bank and what accounts and how to pay tax and all that stuff. But mostly we wanna start building up to usually what I like to see is one month of revenue in the bank. So if you're a company doing$100,000 a month, let's have a$100,000 nest egg. That money's gonna go up and down depending on cash flow. And hey, we're on three big jobs, and so we're two of the jobs we don't get paid till the end. So that$100,000 is down to$40,000, but I get that money back and it goes up to$120, right? That that sort of cash flow to where my standard, if I had my accounts receivable counted along with my bank account, is around is as averaging$100,000. If I'm doing$100,000 a month, right? That that being said, we're gonna get into that later. Let's let's stay stay ground floor here. I want to live off that labor. I want to live off that$2,000 a month. If I need all three or$2,000 for those, for those four days, if I need all$3,000 to live as a and I'm staying busy, right? Not if you're working one week a month, but if you're staying consistently busy and you can't live off of the labor price, you gotta raise your labor prices, not steal your profit. Right? We gotta get, okay,$500 is a lot. If if you're charging$300 a day and then all of a sudden it's like, I feel like I'm working a lot and I'm just breaking even, you gotta be go up to$400 a day. We got to bump that up and we still gotta make profit on top of that. So no matter what you're charging, whether it's$200 a day,$500 a day,$800 a day, I don't care what your level of expertise that you're charging, I gotta see profit above and beyond that number built in for the company to survive. Because if you're spending all of your profits, then one month you have a bad week. Uh-oh. Yeah. Two weeks, three weeks, now where I'm getting money. All right. That's kind of the the uh the self-operators, the in-the-field, the hammer swingers going into the project manager operators, right? Those guys that are actually running as a true GC that isn't doing work, isn't swinging hammers, but is general contracting all of the work on their job sites. I want to do it the same exact way, except that we're gonna have an extra layer in the middle. So as a GC, James, you are out there, you're not swinging a hammer, you've got five jobs going on right now, you got two about to start, you're managing all your crews, your labor and materials, let's say, are$10,000 for number's sake. We need to do a big enough markup that we can pay a project manager salary to you out of that markup and still have the money left over in the account for the company to be growing and making money. And we'll, again, we're diving deep into what those numbers should look like in a second. But just to understand that conceptually, I want your the the profit, the 30% can't be 100% of European payroll. Uh so if I'm$10,000 of labor this month and I marked it up and I'm making$33,000 of profit this month, A, you're not gonna survive on that. But B, I need you to take$2,000 home with you, and$1,000 is gonna stay in the bank account. Uh and we'll talk about that again in a second. We need to figure out what your minimum pay needs to be as a PM. But our goal is to grow this company to where that PM role has a set pay, a fair market value pay for that PM role that you're paying yourself. And then we're putting money away above and beyond that as company profit. Because as you grow and duplicate and grow and grow, and now I'm gonna hire a PM to come in with me, your PM pay is gonna go away partially, and you're gonna start living off your distributions from the company as an owner. Right. This is how you duplicate and grow yourself out of the company is as big as we can make the company pay, the profits coming in and the owner distributions, as soon as I can live off that, I don't need that PM pay. And I can hire guys in, and it's not costing me anything because I can live off my owner distributions. So that's kind of the bigger picture of what we're talking about. But mainly pay yourself as a project manager, even if you we're growing it and getting to a spot. I want a, all right, what is gonna be my pay? I need eight grand a month to survive in this market, where we live, my bills. Great. So let's figure out how we get eight grand a month to you and another four to eight grand a month into the company. Let's work these numbers backwards and be like, hey, you're doing eighty thousand dollars of revenue a month. Looking at the numbers, you gotta be at 180 to make all your numbers work, right? There's it's all math in the back end to understand where we have to be. You just gotta do the work and understand like I need eight grand a month, I need six grand a month, I need twelve grand, whatever, whatever market you're in, then we got to figure out what the profit is and how much we need to be charging and how much revenue you need to be doing to survive as a company. Make sense? Totally. Did I miss anything there?

SPEAKER_01:

Was anything confusing? No, I mean, I I think we're uh I think everything's still up in the air for me right now. Perfect. I'm waiting for for the landing to stick. Great.

SPEAKER_02:

All right, so with everything that I just said, we've got we've got three different numbers that you are gonna control. You're running this company, there's three numbers that you control. Number one, revenue. How much money can I do? And by controlling that, it's marketing, going out, finding people, uh calling on old clients, asking your aunts and uncles and parents and friends and old teachers, do they know anyone that needs renovation? It's doing the gorilla marketing to get out there and find it. Maybe you're starting to run some ads, maybe, but that number is fluctuating. It's up and down in terms of the revenue number. The second number, your gross profit percentage on cost of goods, your labor materials. How much profit am I going to mark that number up? So if I'm doing a hundred grand a month in revenue, how much of that is gonna be my cost of goods? Normally we're we're aiming to land at 32% profit and what 68% cost of goods. Um I I think the number that that we came up with, I think it's like 40. I think it was 46% of our every dollar we invoices labor, and then it was like 21 and a half percent of every dollar we invoices for materials, and then there's 32% profit. That's where we want to end on a bad day. Um and so those numbers, understanding that again, that's that's I ran numbers over 10 years of our company running, and that's that hit on the healthy times for I think it was 41, 45, 46, somewhere in there, and then 21, 22% for materials. And some of that is relative. You know, I pay my some guys pay, I'm gonna pay one number to my flooring guys, and they do the labor part of it. I cabinets, they do the labor part of it. So that's gonna fluctuate the difference. At the end of the day, I want 68%, 67% of my cost being cost of goods. And I want 32% to be my profit. So that's the number second numbers that we have to know and that we can control. The third number is overhead percentage of my revenue. How much are you spending on your truck? How much is insurance? How much are you spending on? Are you renting an office? Do you have employees? Do you have a CPA? Are you uh am I a coach for you and I'm on your team with you? Are you, you know, software, all of those expenses, what percentage of that of your overhead? Now, I'm not going to give you a percentage right now because that number is all over the place depending on the size of your company. And the smaller you are, the lower that percentage is, right? On a on a startup company, when you're really thin, you don't have employees, you're probably gonna be around eight to nine percent on that number. Once you get up to uh a large-scale company, you're around 21% on that number. And this this is a deeper dive that we're not doing today, but that number is what kills people as they grow. That's the crunch the numbers again because the bigger you grow, crunch, it doesn't work, right? And so guys get set up and say, well, you know, my overhead's about 8%. Um, and I'm I I only got to charge 15% and I'm making good money. Well, as you now you gotta make a hire. Now you your insurance goes from$300 a month to$1,500 a month because you're doing more revenue. And as you grow, your expenses grow not the same percentage-wise. It's not the same incremental growth as when you're growing the company. Because when it's just me, I'm super efficient. When I have two, three, four project managers, I now have a head of construction, a separate role that is nothing but sucking overhead to manage those guys, to make sure they're doing the paperwork, to make sure they're doing it's gonna be me, but eventually it's it's gonna be somebody else. But when I was previously taking the pay of a project manager, I now have to pay that to a project manager, and I've got to take an additional pay for me to manage that guy, right? And so as we grow the companies, that overhead, the the percentage of your profit, which is your of overhead, usually grows to about 20, 21%. If I can get it down to 17, 18, we're doing awesome. I remember when we uh back when we closed down the service division of our company, and this was the reason. We couldn't make enough money on it. We we said on the service service side, we had seven trucks, six trucks on the road, I think, doing service calls and punch out work and that sort of thing. We had to, we looked at it and we're like, either we get up to 20 trucks or we get rid of it. But we can't, this in between is killing us. We we got to get to the tipping point, and we're like, it's just all of our efforts, overhead, and expenses. We it was 50% of our our overhead was on that division, and it was like 8% of our revenue. I remember the exact moment in the hotel room.

SPEAKER_01:

Yeah, and it was like okay.

SPEAKER_02:

I I remember you and Jared sitting on the couch, and I was pacing, I was like, I think we just fire everybody and close it down. And it was like, well, yeah, I don't know any other way to do it. And and we didn't, it wasn't clearing house, but we did lose lose a handful of guys, and some uh we moved a couple over to project manager, right? We we kind of shifted things around, but we were looking at our numbers, and the only reason we made that decision, which was the smartest decision we we made in an in like a five-year period, that was the smartest decision we made at that time, was because we knew our numbers and could look at it and say, My heart says I want to keep this division. My my pride wants to keep three divisions in this company and all these guys, and I see my trucks on the road, and people text me that they saw my truck. Like, my pride wants to keep all this, but when I'm looking at it, why are we doing this? Like, what's the point? I remember being like, This this amount of it's 50%. I was like, we're making hundreds of dollars a month on this on this arm, right? Like it was like, this is not what are we doing here? Yeah. One one screw up, one Bobby Boucher drinking driving down the road. Driving down the road, drinking a Bud Light, and someone calls in and says, Hey, your driver is driving. Literally drinking and driving. And an accident there shuts the whole company down. Yeah. Right. And so it's risk versus reward on that as well as looking and knowing our numbers and saying, this is all of our overhead. Like if we cut this, let's run the numbers, we'll be at 15% of our over our overhead is 15% of our revenue, which was a great number to get to. But you have to document everything, you have to do a year's worth of QuickBooks perfectly to understand and see those numbers. It's small steps getting there. So I digress. Those numbers you got to know. And so when I when I'm starting with guys, and really it's this time of year that we're gonna start doubling down and in in all the coaching sessions. That my my really it's November. I started in October, but November, December, guys start slowing down, right? The the March through August, September, guys are just slammed. And so I'm trying to hold on for dear life, trying to get them to move a couple inches down the football field every single month. October, November, December is like we're going to understand your numbers. And when we turn the corner into January, you're gonna be, everything's gonna be doing doing it the right way. I want to reset, I want January 1st, your QuickBooks to be perfect. I want your processes in place, and this is where we can pick up some extra yardage going down the field because you've got an extra five sports. Sports. Uh, how do I say it for you to understand it?

SPEAKER_01:

Uh you uh say you're catching a bunch of Pokemon. You have as many Pokemon as you can find. There's the Pikachu's, there's the Charmander's. You you know these ones.

SPEAKER_02:

So again, it's if you're listening to this and you're listening to it live as it released and you're not listening to it six months later, this is a great time of year. October, November, December is the time of year to start doubling down and say, okay, I've slowed down a little bit, take a breath, but let's spend an hour a week organizing your QuickBooks. And if you don't know what you should be doing, let's get on a call. I hate how much I know QuickBooks because I help you out a lot with it. But um this is the time to where when we to set up those processes, you're not gonna fix it overnight. You're not gonna get everything organized. But if we start by November 1st, everything trying to run the right way, we work out the kinks. And by January, we turn the corner and every job is being tracked. We can see the numbers, I can see my revenue, I can see all of that stuff, and it's really clean. And and you're launching into 2026. This is also something that uh we're we're gonna work on. If you're not in coaching, I'm and but you want to come on the retreat in January. This is one of I give three free sessions between now and well, depending on when you're listening to this, it's about one a month from now until the retreat. So if you sign up in December, you're getting one free session. But if you're signing up now in October, you're gonna get three free sessions that I'm gonna do some coaching going into the retreat. Because I want you to understand these numbers and I want to get to a spot where we understand what you're doing. So when you hit the ground running on the retreat, we're not trying to sort through all your QuickBooks and figure out your numbers, but you're showing up with, okay, this is where I'm starting. What do we need a game plan for next year?

SPEAKER_01:

Yeah, if you go into the retreat with without that information, you're gonna do yourself a pretty big disservice.

SPEAKER_02:

You're you're spending the whole time figuring that out where everyone else is solving the problem of it.

SPEAKER_01:

Yeah.

SPEAKER_02:

Right. And so I think that's that's something. If you're thinking on coming on the treat, or if you're not and you just want to help some help, reach out. Let me let me know. I'd love to meet with you on that. All right. So let's this might be where we simplify some of this. Or it might be more complicated. Okay. Let's go through an example. I'll let you know. Uh let's go through an example. I'm gonna use some real world numbers that I wrote out. I tried to be as simplistic as possible, so I've got them written down. Um, so here's the example of what I'm talking about. Let's say your revenue is a hundred thousand dollars a month. You might be half that, you might be triple that. It doesn't matter. Let's just use these as numbers.$100,000 a month of revenue. Let's say, for number's sake, your gross profit is$30,000 on that. Which means it's a markup of a about 37% to have a 30 30% profit. I'm not gonna go into that.

SPEAKER_01:

I'm so sorry. Why would you even say that? Because that math doesn't math for 95% of people. I know, I know. It's we'll just go back. And now, if you really want to get nutty, if you graph this out, the hypotenuse is unreal.

SPEAKER_02:

Uh it's it's the difference of markup and gross profit and and gross margin. I'm not I'm not gonna get into it. Are you? I really want to Okay. So let's say you made$30,000 on$100,000. Your gross profit To me, that's 30%. Your your margin, your gross profit is thirty percent. Okay. But if you only did$70,000 of work, I'm going into it, and you mark it up 30%, 30% of$70,000 is$21,000. So you actually made$91,000 total revenue. Okay. Because you made$21 instead of 30. Anyways, let's back it up. Let's go. Let's back it up. Revenue is$100,000.

SPEAKER_01:

Revenue's$100,000. Gross profits$30.$30,000. 30% margin.

SPEAKER_02:

Margin. No more. Yes. Uh of that, let's say on a thirty thousand, your overhead is very conservative. You've done well, you don't have a twelve hundred dollar a month truck payment, your overhead is seven thousand dollars a month. So you're spending seven thousand a month, you're a one-man show, that's insurance, that's gas, that's where we don't have an office in there, um, that is just overhead, not including what you're paying yourself. That's just the overhead of the company. Maybe you spent 800 bucks on some ads, you did you you placed something in a pay, whatever it is,$7,000 of overhead.

SPEAKER_01:

Then Now let me stop you here. Yeah, please. The You're doing this as an example of an owner, and that's why you're not including what you're paying yourself inside of the overhead.

SPEAKER_02:

This is the this is the project manager style. I'm I'm a general contractor, one man show, and I'm running a bunch of jobs. And I own my own this is my company. I'm the owner. I'm the owner of the company, I'm a one-man show. This is not in the field. It's hard to do a hundred grand a month swinging a hammer by yourself on one job at a time. This is I'm project management, I got three to four jobs running at a time, maybe a bump up to five to six on the busy seasons.

SPEAKER_01:

But I have no employees. No employees, you're the owner of the company. That's why you're not including uh your money, your paycheck into the overhead.

SPEAKER_02:

Well, yes, but what overhead, well, yes, let me let me say the next sentence because it is$7,000 of overhead outside of the salary and then a$5,000 project manager salary for yourself. So our total overhead's$12,000. But I wanted to be distinct that five of that is going to me, and seven of it's covering all of our overhead expenses. Now I count that all as overhead. On my line, it says overhead seven K plus PM salary five K. Total overhead is twelve K. Does that make sense? Yep. So it's a$12,000 overhead, it's 12% overhead right now. Net profit is$18. Net profit, operating profit is$18,000. You're following the math. Thank you. So we got$18,000 after I pay myself five. Most guys spend seven grand and they've they've got twenty-three there, and they're like, cool, I'm gonna take 15 of that. 21. 21 there. Thank you. So and they say, I'm just gonna take half that, I'm gonna take whatever it is. I we're we're throw that thinking out the window. 7,000 is my overhead, 5,000. I'm paying a project manager. Luckily, I've hired myself. I'm a really good PM and I've hired myself to be the PM at my company, right? We want the two different hats. I got my owner hat, I got my project manager hat. And my hard ass hat. So overhead's$12,000, and my profit is$18,000. Now, next thing we want to do, and we'll talk about how to do this in the next podcast, is of the$18,000 sitting there, I want to take 25% and put it into a tax savings account. Some guys pay taxes weekly, some are I'm sorry, monthly, some are quarterly, some are annually. I don't care how you do it, it's easier to do it annually because you have like I don't have want to have three really good months and pay high taxes, and then three really bad months and have nothing. I'd rather do it annually, but it's so hard because you gotta save. You might have a forty thousand dollar tax bill, and if you're not good at saving, you're gonna screw yourself.

SPEAKER_01:

Well, let me let me add one thing to this. You just this is what I I've done for mine. Please, please. Just high yield savings account. Yep. You don't don't put it into like money market or or whatever. Yep. High yield savings account and just let that grow. You'll make a couple hundred bucks. Yes. And then that money is not yours, though. You're gonna plan on spending that with Uncle Sam.

SPEAKER_02:

Yes. And what one thing that I did wrong exactly what What you just said was I this was a number of years ago, not too far. I mean, probably five or six years ago, I had that account, right? It was just wasn't touched. My buddy was over here talking about Robin Hood and how he was doing investing. I was like, Well, I got 40 grand over in this account, waiting that Uncle Sam's let me borrow till the end of the year. And so I started investing it and it went down like I like I lost like five grand. It was like right before COVID. And I was like, so I had to come out of pocket at the end of the year to cover my and and it was like I gotta find 10 grand out of my pocket just to cover my taxes that I owe because I was trying to be cute with my savings. So again, it's I got burned by designer pogs. I remember that you lost your house on that.

SPEAKER_01:

I lost my entire house. That is sad. I have the sick pog collection.

SPEAKER_02:

It is, I mean, that that one slammer that you have that's like gold and crust. It was amazing. It was amazing. Anyways, put that away. It's not your money. Don't touch it. Sit it there. If you are not good, know yourself. If you're not good with money management, try to pay monthly taxes, try to pay quarterly taxes. Get that out of your hands, get it to Uncle Sam. But we're pulling that out. That means we have leftover. After we had 18,000, we pulled 45 out of it. 13,505 times three.$13,500 is left in the company account. Right. And so what I want to do, my rule of thumb on this is at the end of the month, you can go 50-50. I'm doing a 50% owner distribution and a 50% retained earnings in that account. That means six hundred six thousand seven hundred and fifty dollars to me, six thousand seven hundred and fifty dollars stays in the account. If you are fine with that five thousand dollar a month salary and want to leave more in the account, I love you for it. If you are, if that if you need more than that$11,700. It's in and buy some pogs. It's in and buy some pugs. If you get, if you borrow money, if you owe people, if that that throws a wrench in all of this. And so I like I most more guys than not that I coach have some debt servicing. And I this was one of my biggest mistakes in doing in growing. Like, like learn from this as a contractor that did it wrong. I remember 2014, I took out like a$400,000 loan, just like, oh, if we had it, like we're growing, we're doing this, we're buying trucks. And it's and it's the the noose around the growth's neck having that payment, having a eight thousand. I mean, we were at one point, I think we had about$14,000 a month servicing debts alone, which is like, could you imagine if we grew a little slower, didn't have those debts, and had$14,000 a month to put into growth.

SPEAKER_01:

Yeah. Right.

SPEAKER_02:

And so it's just, I mean, it's it's drugs. It's just a little bit. Well, I can do, I mean, and I'll pay that back with this, and that job's about to hit. And I got that huge half a million dollar one that is starting in January. Yeah. Don't spend next month's money profits this month. Wait. Be patient for a freaking month. And when that money comes in, then you get to spend it. So that's my warning on this. But what we want to do is we want to separate out$5,000 a month for the project manager pay. Again, what's a good project manager pay in your neck of the woods?$5,000 a month is terrible in Los Angeles.$5,000 a month is great in Macon, Georgia, right? Like it it depends on where you live as to what that number should be. And all of these numbers should scale with that as well. And the level of renovations or work that's taking place.

SPEAKER_01:

Like, yeah.

SPEAKER_02:

If uh I mean, I'm not going to get a project manager that's doing new builds for me at$5,000 a month. No. But if you're working with a bunch of REITs, doing investment turns, quick flips. I I don't need you as educated. I need you to be a grinder and you can get in there, do the work, get out of there. So again, you know, the main thing that we're trying to drive in here is what we need to know where those dollars are going. And it's not this clean. It's never this clean because it's not like I do work, I get all my money in, I can figure out which accounts I go, and then I can do the next job. That's not how it works. So understanding this is level one. Level two is how do we make this the hit when the rubber hits the road? When I'm actually sitting down on a Friday looking at this stuff. So we're not going to talk about that this week. That's next week. We're going to get into that. Ending this podcast right now. We've said a lot of stuff. I hope it's been not that complicated. There's three things I have for you to do starting today. Do it this week. Try to start doing these things and come back next week and listen to the podcast. Number one, if you are doing your own labor, price your labor as if you're hiring someone else to do it and then hire yourself. Right? This is, I'm going to charge three grand for this job. I'd pay my labor two on this. I'm going to be that labor though. I'm going to take that money. And I made the two and I got an extra thousand that the company's making. Number two, identify your margin profits and your margin percentage and overhead percentage. So I have this much I spend on overhead. It's 8% of what I normally do on average month over month of revenue. Um, I have this much, I spend, I'm my margin is normally about 25% profit. Now that I'm marking my jobs up 25%, when at the end of the month, I've made about 25% profit on the jobs I've I've invoiced. And of that, I'm spending 10% of overhead on it, which at that point I want you to include your PM salary, because that's that's part of that over that overhead number. Um, so knowing those numbers, you're not going to be able to figure out until your books are clean. But let's start moving that way. So we're or the goal is to know those numbers by January. So, what do we do? How do we do that? Job costing. I'm tying every material purchase to the job. I'm paying every crew, even if I've got an hourly guy, there's a way to do that to where he might go to three different jobs. I will show you. We I did it literally on Tuesday with one of our coaching clients in Chicago. This is how we do. We pay for this job, this job, and this job in the software. We make it, we pay him the check. However, you do it, let me like you need to track where your money's going so we can see profitability per job as well as the company. What I really, really hate is guys say, Yeah, my CPA just handles that for me. All your CPA is doing is saying materials. You spent$70,000, you invoiced$90,000, you made$20,000. And that's not the case because you might have spent$70,000 and invoiced$90,000, but of that$90,000, you have a$30,000 invoice that you haven't spent on yet because it was a deposit for the next job. So in reality, you can't count that, right? In reality, I invoice 60 and on 70 spend, right? And so that's what the problem is. The way CPAs do it is to keep you upright with the government, which is a very important thing. That doesn't work in construction. It doesn't work, and it works for a lot of companies. It doesn't work here because our month over month invoicing doesn't equal our month over month spending. I we invoice sporadically, I get deposits on the last day of this month and spend all the money of the first week of next month, or vice versa. So you can't trust your numbers if your CPA is doing. You can trust it that you're paying your the your taxes. You can't trust that the job costs and understand your numbers by just looking at what your CPA is doing in the background. You have to control your numbers. So we want to start this week. How do we start doing that? How do we start tying our numbers and identifying what our labor is, what our materials are, and what our overhead is? How do we categorize that in QuickBooks or whatever uh software you're using? And then the last thing, I want you to start breaking down well, honestly, don't even do that. Let's start with these two things. Let's go do your make sure you're paying yourself and money on uh as profit for the company. And let's identify your margin and your three different areas: your revenue, profit, expenses, as well as how much your overhead is of your uh cost of goods. Doing those things before next week's podcast will be helpful because next week we're gonna break down once you're making money, once you're starting to do this stuff, how do we manage it? How do and James and I are gonna talk about how in our companies how we actually pay ourselves, how that works, and what what you should be doing. So hope you enjoyed part one. Anything that we need clarity on before we go, James. No Mike Mikelowski. I have it in my notes. Profit first all the time. Mike McClowski. Mikelowski. Mike Mikelowski? That's made up. Mikelowski. M-I-C-H-A-L-O-W-I-C-Z. But like Mike Mikelowski. Oh Mike McLowicz. What do you say? Mikalowitz. Mikelowitz? I don't know. It's a good book. That's all I know. All right. If you want, if you want coaching, if you want to meet, if you want to meet this week with me, go to the website, go to go to contractorcuts.com. You can sign up for this uh for a meeting with me. If you want to come on the retreat, we don't have a retreat sign up online yet. Ever. You have to have a 30-minute meeting with me to make sure you're fit for this retreat. I want to make sure your mind's right. I want to prep. I want to understand you. We have max 30 people coming on this. Uh, and so if you want to come, we only have a few slots left at this point, which is great. Last year we filled up December 15th. Right now we're getting close to full, which is fantastic. But if you want in, reach out. Let's have a conversation about it. We can start coaching this week or next week and start with some of this basic stuff to get you rolling. So when you hit the retreat in January, you're killing it. So that's the goal. If you want to talk, contractorcuts.com or ProStruck360.com. Both of them go to the same spot. Love to love to talk to you, and we'll see you all next week. Bye. Bye.

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Clark Turner

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