TOOLBOX
THE #1 COMMUNITY OF SUCCESSFUL CONTRACTORS
CCN
AUGUST/SEPTEMBER 2021
INSIDE THIS ISSUE
FROM THE PRESIDENT
Skill Building Never Stops Training creates a better, more enduring culture. People perform better and stay longer.
3 What’s your message to job-seekers Help Wanted
and is it somewhere they can find it?
News 4 Member Surging demand for contracting
services sends some members’ sales soaring.
6 How one member Game Changer
completely changed its approach to sales hiring, with excellent results.
In 8 Pivoting New Directions
Moving the company in new directions requires having everyone on board with fundamentals.
For Your Audit? 10 Ready How likely is it your business will be
audited soon and what to do about it.
11
Mile High Management
Why you should plan on being at CCN’s upcoming Conference In Denver.
F
acing a recruiting challenge? Most companies are. In many areas the surge of business following the pandemic created an applicant shortage. How do you get people to want to work for you? More money seems an easy answer. The problem is that if you raise the pay scale for entry level positions, you’ll need to raise it at all points up the line. You’ll then need to increase your price.
SCOTT SIEGAL
IF YOU RAISE THE PAY SCALE FOR ENTRY LEVEL POSITIONS, YOU’LL NEED TO RAISE IT AT ALL POINTS UP THE LINE. YOU’LL THEN NEED TO INCREASE YOUR PRICE
Benefits and Incentives Money’s usually the first attraction for job seekers. Of course, there’s more to a job than a paycheck. To that applicant, your company looks a lot more attractive with an organized, documented process that explains how they’ll do what they’re hired to do. Training is that process but it’s more. Good companies train all the time. They cross train and re-train. That siding crew, for instance, might do a great job installing because they’ve been trained by you or the manufacturer. What if they were also trained in customer service and dispute resolution? If they are it immediately pays off for you because issues come up all the time. For instance, a project manager untrained in dispute resolution would look to the salesperson or the production manager to talk with the customer and resolve the issue. The job would stop. Customer irritated, payment delayed.
Key To What We Sell Consider salespeople. There are plenty of businesses out there selling siding, windows or a new roof. Every company claims to do the best work, have the best materials, provide the best customer service. When everyone’s saying it, it becomes meaningless to homeowners. What we sell is the experience of working with Maggio Roofing. But it’s one thing to provide that, it’s another thing to explain it. We’ve spent time in the last year training salespeople in our Unique Value Proposition. That training becomes part of the inhome conversation. We talk about how well, and how often, we train. And not just train, but cross-train. People can jump in and fill a position when someone else isn’t there, so if you’re a homeowner buying a job, you know it will start on time and stay on track.
continued on page 2
CO N T R AC T O R S . N E T
continued from page 1
Soft Skill Training = Raving Fans
TOOLBOX THE #1 COMMUNIT Y OF SUCCESSFUL CONTRACTORS
MISSION STATEMENT To enhance the professionalism, performance and perception of the construction industry. We promote ethics, education, leadership and innovation, so that the construction industry and the community achieve mutual benefit. CORPORATE HEADQUARTERS 6476 Sligo Mill Road Takoma Park, MD 20912 301.891.0999 800.396.1510 866.250.3270 fax www.contractors.net
What does ‘training’ mean? To me it’s a step-by-step skill-building process that begins with hiring and proceeds through orientation. Part of orientation is getting the new person to understand that they’re part of a team and what the team is. It’s not a sales team or a production team. The company, made up of departments and people, is the team. That way when they train, it makes sense that they’re learning not just the specific skills to perform certain jobs, but how their job affects everyone here. For example, we train every employee in our customer service process. They see what it looks like to knock on the door, introduce themselves, and find out what the customer wants and how to take care of the property. When, for instance, the guy installing the roof learns that process, he knows how to interact with the customer, just like the admin person on the phone. Everyone’s working toward the goal of great reviews, tons of referrals, highly satisfied customers. Soft skill training is how you get raving fans.
STAFF Scott Siegal, President scott@contractors.net John Martindale, Principal johnm@contractors.net Catherine Honigsberg, GM catherine@contractors.net Anthoy Brooks, Director of Sales anthony@contractors.net Sindy Wohl, Director of VIP sindy@contractors.net Denise Metheny, Accounting denise@contractors.net Troy Timmer, CCN Business Consultant troy@contractors.net Craig Leary, Director of Marketing & Sales craig@contractors.net
Not ‘One and Done’
editor: Jim Cory design: Stacy Claywell www.thatdesigngirl.net
We want people to know not only how to do their jobs, but the way that particular job effects everyone else. Ideally, that salesperson should see that new contract he brought in as not only adding to his prestige, and bank account, or even to the greater glory of the sales department, but as something that will keep production and admin working. Training isn’t one-and-done. It’s ongoing and endemic. For instance, your project leader may know your installation procedure, and your customer service protocols, but he or she communicates via technology and technology grows ever more sophisticated. In a year there will be updates to that new software you trained on yesterday. Fail to keep up with it and your initial investment comes to naught.
thank you to our: contributing writers
Job Dead Ends Here?
Toolbox is a publication of the Certified Contractors Network. Toolbox is a member benefit. Non-members may subscribe for $75 annually.
Training for our company is a budget item. Putting a number to it makes it far easier to plan for. You need to train one way or another, so if it isn’t budgeted, it’s going to feel like a hit coming right off the bottom line. To me training is a line item, like insurance or marketing costs. And as with marketing the dollars spent—measurable as leads generated—result in X percent return. Think of the time, cost and effort of bringing a new person into your organization vs. what it costs to train someone on your staff in some new system or technology. And training contributes in a big way to retention. When you have the right people, and you’re giving them good training programs, they stick around. Training attracts the best because it says to new hires that the company wants skills, and responsibilities, to increase. The employees with the greatest long-term potential are those who want to work their up. They can’t do that unless you train them. 2
I C O NTR A C T O R S . N E T
MANAGING
Help Wanted: Construction
If you’re looking to hire, what’s your message to job seekers and is that message somewhere they will find it? BY JIM CORY
H
aving trouble hiring? Or retaining? Don’t feel alone. With Covid infections way down and the economy rebounding, demand for new employees is huge. Industries such as restaurants and hospitality, crippled during the pandemic, often have all the business they can handle today but struggle to fill low-wage jobs such as cooks, waiters, and cleaning personnel. The job market is “churning,” according to a recent article in Bloomberg. And notes Fortune magazine, the power “is firmly back in the hands of job seekers again.”
Hard Hit Bars and restaurant owners have it good compared to contractors. Building and remodeling faced a labor shortage even before the pandemic. Lockdown, and rising demand as the pandemic eases, has made a difficult situation even tougher. According to Associated Builders and Contractors, cited in a recent story in CNN Business, construction “will need to hire 430,000 workers this year and 1 million over the next two years” to sustain current production. That’s in spite of the industry having recouped 80 percent of the workers who left. Those numbers come as no surprise if you’re one of the company owners looking for people. Small construction companies—say fewer than ten employees—are especially vulnerable if a key person leaves. Besides which, even if your workforce remains stable, how do you grow without additional people? And if you’re looking for someone longterm, that means a person you can train to sell, or install, to certain standards. Construction companies that once looked for workers with skills are now content to hire inexperienced workers and upskill those they hire.
Say you can’t afford to pay big bucks without raising your price substantially? What you can do, when you’re sitting down with an applicant is: n Focus on company culture. A certain number of jobseekers aren’t looking to work for a big firm. They’d prefer to work in a smaller company, where they can get to know co-workers and the atmosphere is more familial. n Offer room to grow. According to Fortune, one in four workers plan to switch jobs when the pandemic ends. Of those, 80 percent are concerned about career growth. If you’re looking to hire people who want to grow, they’ll want to see a clear path to advancement.
Referral Gold Mine Referrals have been, and remain, the top source of new job hires—accounting for 30 percent, before the pandemic. What’s not to like? You reduce your hiring costs and get a higher quality candidate who’ll stay longer.
Offering a reward for referrals keeps it top of mind.
Two Key Questions Two key questions: If someone’s looking for a job, how would they know you’re in hiring mode? Are Craig’s List or the online classifieds (Monster, GlassDoor, ZipRecruiter, etc.) sufficient? And assuming they know you’re looking, why would they want to work for your company? If you can’t give a convincing answer to that second question, you may have a problem.
Among jobseekers, or those who’re employed but looking, money is one of several factors in taking employment. CNN quotes one contractor as saying he raised entry level wages to $18-$20 and got no response. He went to a $23. Still no response. At $25 an hour he began to get a few applicants.
Construction Turnover Double Construction companies in recruiting mode face the problem that it’s a lot easier to operate a cash register than shingle a roof. The work can be difficult and dangerous, with high accident levels. In the last decade, employee turnover in construction—5.2 percent—is almost double that of all industries, at 3.2 percent.
It’s also wise to go where the eyeballs are. The average American spends 145 minutes per day looking at social media. That’s two hours and 25 minutes. In 2019, 70 percent of those in the 18-to-34-year-old demographic found their job via a social media site. It might be good idea to make a habit of posting about your company, your jobs, and your people and encouraging clients to do that as well. That way you’re no stranger to someone thinking about a job change or looking for work.
C C N T O O L B OX AU G U S T/ S E P T E M B E R 2 0 2 1
I 3
MEMBER NEWS
“Interesting Year” For Franzoso Construction CCN member Franzoso Contracting, in the Westchester County suburbs of New York, has always spent money getting its name and image out to the market. In the surge of demand for contracting services that followed the waning of the Covid-19 pandemic, that image-building paid off. This year sales are on track to exceed those of 2019 by 80 percent, according to GM Mark Sackerson. Sackerson attributes that to several things. While many other NY businesses were closed for 6 weeks in the spring of 2020, Franzoso generated leads and ran sales appointments. Another factor was the company’s new website, coupled with investments in PPP campaigns and an increase in its digital marketing budget. “Our web traffic and lead gen from websites is significantly better.” In addition, Sackerson points out, during the pandemic the company never relented in its substantial marketing effort. With more leads, Franzoso Construction hired several new salespeople. All that left Franzoso Construction well positioned to take advantage of the surge in demand for home improvement services experienced by contractors all over the U.S. as the pandemic began to wind down while affluent homeowners, unable to travel, hunkered down. “You don’t realize how much money people have to spend until they’re staying put and not spending it on vacation and instead buying $60,000 or $70,000 roofing/siding jobs.” Franzoso Construction offers many services, but roofing tops the list and in 2021, for the fourth year in a row, the company won Westchester Magazine’s reader poll as Best Roofer. When the publication did a 20th anniversary issue, readers named Franzoso Construction as Best of Twenty Years Roofer. Owner Mark Franzoso feels he has the best admin, sales and production team he’s had in 41 years in business. While some area companies are so swamped with work they’ve stopped making sales appointments, “we answer every call, we’re there and our admin people are top notch,” says Sackerson. That “sets us apart from the guy who says, hey, we’re busy, I can’t get there till next winter.” 4
I C O NTR A C T O R S . N E T
New Challenge: Fulfilling Demand Like any number of contractors, longtime CCN member Save Energy Company, a window and door firm located in Petaluma, CA, north of San Francisco, found itself deluged with work this year. President and co-owner John Gorman attributes his company’s surge in sales to the fact that with the Covid pandemic, many people found themselves working from home and unable to travel. “So, they’ve been putting money in the house, instead,” he says. In compliance with public health measures enacted in the state, Save Energy Company shut down for two months in March and April of 2020. But during that time “we never stopped advertising,” Gorman says. Because the company stepped up the quantity and quality of its advertising, “getting leads,” Gorman says, “has not been a problem.” Beyond SEO and Pay Per Click ads, Save Energy Co. bought billboard space, airtime on radio and TV, and wrapped its trucks in promotional messaging. The resulting additional business came at the same time that the ability of suppliers to fill orders on a timely basis began to diminish. “The most challenging thing now, Gorman says, “is fulfilling demand.” His major supplier of vinyl windows, for instance, used to turn around orders in a week. An order placed on Friday would be filled the following Friday. In 2021, a week became two weeks, then five weeks. “It’s been a little bit of a nightmare,” Gorman says. The company’s wood window supplier is now scheduling manufacturing lead times of six months. The windows purchased in July of 2021 won’t arrive until January of 2022. To preempt complaints, Gorman emailed a letter in July to approximately 100 clients who have jobs scheduled. “We explained that we’ve had some supply issues, that things weren’t coming together as readily as they had been.” He offered clients the opportunity to have their window and door job installed in stages. Of 100 letters sent out, Gorman says he got back five responses, and only one complaint. “Some people know there are things happening with the supply chain,” he says. “Some have some cursory knowledge about it. Some have no knowledge.” Most clients were happy just to have the job scheduled, and Gorman, recently a first-time grandfather, says he’s hoping to get as many of these projects completed as he can before the California rainy season starts in late fall.
The Market is Begging Longtime CCN member Mr. Roofing, based in San Francisco, is featured in Roofing Contractor’s Top 100 list, published this month. The leading publication of the roofing industry, Roofing Contractor compiles an annual list of both companies based on volume. The designation took into account Mr. Roofing’s 2020 sales revenues. Big growth plans have been laid, and are well on their way to being fulfilled, at Mr. Roofing. CEO Carlos Rodriguez says “we are on pace” for the company’s sales to expand by 50 percent this year, from $4 million to $6 million. Mr. Roofing, Rodriguez says hired a new Sales Manager, Mark Wendel, a new Production Manager, David Sanz and four new project managers. The company also promoted Eloisa Gallardo to Customer Fulfillment Manager and Maria De Leon to Office Manager. In addition, Mr. Roofing added another roofing crew. Rodriguez says he plans to add a crew next year and again the year after that. The result is that lead times on roofing jobs have shrunk from six months out to anywhere from 6 to 8 weeks. “We’ve been able to sell faster and produce jobs faster,” he says. Rodriquez notes that “there’s a good pool of talent out there” when it comes to sales and admin positions. “Someone who has no roofing background could become an awesome salesperson,” he says. “The tough part is finding people to do the installation work.” The company has a reputation for quality and this year, for the 14th year in a row, was listed as Diamond Certified, a coveted local designation ranking companies by performance, safety and customer service. The new foreman and project managers at Mr. Roofing have all been internal promotions, but “finding new people with good heart and a strong work ethic” is an ongoing challenge. What made the difference, Rodriguez says, is turning his time and attention to the challenge of hiring and training. “In the past,” he says, “I would bellyache about it but I wasn’t spending enough time trying to find them. So, I decided instead to spend focused time finding and training people. It’s kind of scary,” he says. “Because I didn’t want to lose quality, or customer service. But the market is begging for us.” With many new people on board, Rodriguez says he is “excited to get back to live CCN conferences to immerse our team into the best practices we have learned from CCN.”
Road Testing Membership
C
ontractors who may have heard about CCN or know members of the organization and maybe considered joining will shortly have an opportunity to test the waters via a new opportunity called the Premium Trial Program. The program enables new companies to become Diamond level members for 30 days, with “access to all the Diamond features except for financing,” says CCN Director of Growth Craig Leary. Diamond level membership enables an unlimited number of attendees for CCN live-stream training sessions, two free seats and discounted registration at CCN conferences, a business health check and DISC behavioral profile analysis as well as on demand coaching/consulting via phone, and online business planning software. Leary says the program is part of a broader recruiting effort to connect not only with former members but “those who don’t know CCN.” He notes that in addition to sales, production, admin and financial training, CCN will add training in the fields of sales management and marketing.
“MY NEW FOCUS,” HE SAYS, “IS TO BUILD OUT THE TRAININGS, IMPROVE THE TRAINERS, MAKE SURE WE HAVE THE RIGHT CONTENT AND RIGHT MATERIALS, AND FOCUS ON A DIGITAL LEARNING SYSTEM.”
C C N T O O L B OX AU G U S T/ S E P T E M B E R 2 0 2 1
I 5
Game Changer Finding people to sell home improvement jobs is tough, so we reworked our hiring process. BY CHARLES GINDELE
The pandemic changed a lot of things about our business. One is the way we hire and train salespeople. In years past we’d BY BRYAN hire oneMILLER salesperson at a time, maybe two. Now we hire six, seven or eight at a time and train them as a group. I also used to look for candidates who’d sold home improvement jobs. I assumed all I’d need to do was teach them our products and our prices and let them figure it out. Time To Reconsider In the last year-and-a-half we’ve changed our hiring approach. We had to. In March of 2020, with the onset of Covid, our lead flow slowed, and we were forced to lay off a third of our salespeople. Then we figured out new ways to generate social media leads. The lead flow picked right back up and has continued to increase. We brought some salespeople back. Three months into the pandemic, we were in recruitment mode. Having more leads than salespeople to run them is a good problem to have, but still a problem. We put out ads for sales candidates. We couldn’t get as many as we needed and as a result made some bad hires. Bad hires cost time and effort. We started 2020 with 20 salespeople. I was hoping to start 2021 at 24 and have 40 by year’s end. In home improvement, you set sales targets based on the leads you can generate, the close rate on those leads and your ability to produce the work. But if you can’t generate leads and sell them, production doesn’t matter. We had marketing dialed in and we continued to ramp up our installation capacity. Having sufficient sales capacity was another matter. The sheer level of demand forced us to rethink our procedure for hiring and training salespeople. We needed effective, efficient salespeople and not just one or two but a half dozen or more.
Training Pay When I realized we weren’t getting enough quality candidates, I began to budget a lot more—high six figures—to turn around sales and step up recruiting. We filled one class with potential 6
I C O NTR A C T O R S . N E T
recruits. Two weeks later, a second. Eleven reps completed those classes. The new goal was 40 reps by Labor Day. We attracted candidates by redesigning our system. What made a big difference was a new compensation plan. We came up with the idea of paying sales trainees $2000 a week for 18 weeks. The first four would be in-house training, then new reps would begin to run leads. In the past we paid sales trainees an hourly wage, then handed them leads for a commission-only sales position. They’d get half the commission when they sold the job, and the other half on installation. We realized we weren’t paying enough to attract qualified candidates and keep them. If they didn’t have success early on, they’d get discouraged and leave. This new program allows quality candidates to focus on learning a new job, new products and our sales methodology without having to worry about their personal cash flow. In the course of 18 weeks, they begin to fill their sales pipeline with jobs so that when training ends, they have consistent cash flow from commissions on new sales plus back half commissions on older sales. They don’t feel the immediate pressure to sell but rather to learn and improve. Plus, we invest in supporting them along the way with workshops and individual coaching.
Working With Reps Another change was hiring an additional sales manager. We now have three. This allows us to work intensively with new reps. We ride along on their first two calls, and on four of their first ten calls. When they’re not running appointments, we bring them in for follow-up training. This is where $2,000 makes a difference. We want to hire mature folks who have families and are looking for a career. Two thousand dollars a week allows us to attract a higher caliber person. They get it provided they’re hitting the benchmarks we lay out for them during training as they transition to running appointments. When you’re paying that much, trainees feel responsible. And, by the way, if commissions exceed $2,000, we pay them the greater amount.
Training Vs. Learning We’re not only attracting more, but higher quality candidates. Some are referrals. Many are from the mortgage and financial industry. We’ve also added a full-time talent acquisition person. Our recruits are not the kind who would’ve been willing to come to work for $20 an hour, while training, then be suddenly out there on their own with leads.
“MORE THAN AN ENGAGING PERSONALITY, WE LOOK FOR SOMEONE WILLING TO LEARN THE METHODOLOGY WE TEACH.” We have a mantra: learning begins when training is over. Selling a home improvement project isn’t easy and you become ever more adept as you do it.
No Assumptions I mentioned we no longer look for industry experience. I’ve found that type of candidate sometimes brings little or no sales process or methodology experience but lots of preconceived ideas about the product and the prospect. CCN founder Richard Kaller used to say that someone with 20 years’ experience selling home improvement may actually be
he or she is interviewed by all three sales managers. Based on their recommendations, I do a final interview. More than an engaging personality, we look for someone willing to learn the methodology we teach. One hiring mistake I made over the years was seeing someone sitting across the desk from me and projecting my thought process onto them. What I learned in CCN was to evaluate candidates from a behavioral standpoint by asking behavior-based questions. How would they handle such-and-such a situation? I use both real and hypothetical examples. Do they listen? When they answer a question, do they really answer the question, or do they go off on tangents? Are they verbose? That would disqualify a candidate.
Not An Easy Job When I sit down with candidates, I’m trying to drill down into the process with them. I want them to understand how hard this is. Do they know what they’re getting into? It’s not an easy job. They’re working evenings and on weekends. There’s a lot of driving. I ask the old HOW questions: Are you honest with yourself, open to ideas, and willing to try new things? Can you look me in the eye and tell me you trust us, that you understand we have a vested interest in your success? Will you listen to what we tell you, because we know what it takes to be successful in this business? There are people selling for us who never sold anything before and have a solid success rate.
Methodology Key To Success
someone with one year’s experience repeated twenty times! Did they grow? Have they improved? Now we base sales hiring on data. When someone applies, we make an initial assessment of that person’s potential. Then
The sales methodology we use is not optional. It’s the key to our success. We hire at all ages—20s, 30s, 40s, 50s—and we’ve hired many who lost jobs during the Covid pandemic. A lot were business-to-business salespeople, with good instincts and people skills. They just needed to learn, and believe in, our process. They’re also coming from companies which offered real benefits. So, they’re not going to take seriously a potential employer that doesn’t offer similar benefits. The big thing I’ve learned is that you must roll up your sleeves and help these people be successful. We pay 8 percent up to $1.6 million, after which they get 10 percent up to $2.6 million, and 12 percent commission after that. We want them to work even harder when they get to that 12 percent pay scale. We pay a car allowance and a $92.50 monthly technology allowance. But the game changer was the $2000 salary for their first 18 weeks. It may sound extravagant, but it’s what we needed to spend to meet the challenge of selling home improvement these days. We make a big investment in salespeople and the only way to ensure their success is to impose our will and help them develop the habits they need to be successful. And support them while we’re doing it.
—Longtime CCN member Charles Gindele is president of Renewal by Andersen of Orange County, in California. C C N T O O L B OX AU G U S T/ S E P T E M B E R 2 0 2 1
I 7
Who Built That?
Want to have a successful customer experience? Communicate often. BY BRYAN MILLER
Everyone knows what a wild and unpredictable year 2020 became. When the pandemic hit, we had a month’s worth of appointments lined up. Like other contracting companies, we had to face many issues. We figured out how to create electronic proposals, sales appointments and presentations on Zoom, all in the first few weeks. We also figured out a method for safely building decks and outdoor spaces in the middle of a viral epidemic seven times more contagious than the flu. We had to make these and other adjustments quickly and typically at the same time. Our sales for the year were static, yet we were able to increase net profitability. Pivot and Adapt What we did was pivot and adapt. Pivoting involves creating an immediate, practical response to a sudden problem. Adapting is changing or altering behavior to get better results, a change that’s strategic or long-term and becomes part of how you do business. What we soon came to understand was that while the pandemic threw off our top line sales goal, it was also an opportunity to run the company more efficiently and more profitably on a consistent basis. Circumstances force efficiencies. The key is to understand which of those efficiencies should be integrated into the company’s processes to scale the business more effectively and more profitably. The key idea is to do more with less and do it better (fewer/better). Don’t get me wrong. We want the growth in top line sales every company aspires to. And this year we plan to get back on track with sales of $8 million. But we knew, from ten years’ experience, that we didn’t necessarily have to increase sales to generate additional points to the bottom line.
All About People A company’s ability to pivot and adapt depends on three things: the quality of its leaders, the ingrained nature of the culture and the ability of its systems and processes to drive forward momentum. But getting to the top and bottom line that we’re aiming to achieve always comes down to one key factor: our team (people). The people, and the belief in the company’s core 8
I C O NTR A C T O R S . N E T
values, are what makes the flywheel move. (See Jim Collins, Good to Great.) As we considered growth scenarios, we did so with the understanding that whatever plan we put in place had to be something everyone at this company could live and breathe. Systems are great, but people must own them, implement them and believe in them. In addition, we must remember we serve people (customers). It’s also about understanding the way consumers think when making large purchases, especially in the face of a pandemic. What level of communication do they expect from their contractor in each phase of the project?
Communicate Often When clients rave, it’s never just the work. The work may be fantastic—we build award-winning decks and outdoor living spaces—but the reason they rave about the experience has to do with the level and quality of the communication they receive, which is helpful, professional, and consistent (i.e., often). People today are impatient. They want a quote before you come to the house and if they sign a contract, they expect their project to be built within a week or two. Reasonable or not, consumer expectations can be very high, especially if you aren’t the cheapest contractor. From that initial phone call, we keep the communication flowing at every stage, from lead, to sale, to finished product, and thereafter. Before a salesperson shows up, we find out how best to communicate with each consumer (phone, text, etc.). We explain our procedure, sales, planning, production, and warranty. It’s a specific process to get the specific result of 100 percent satisfaction and a raving fan. For instance, the
customer might say: “Oh, just call me.” But people are often too busy to pick up the phone or don’t have time to talk. They can read a text or an email, so we find out what they prefer. We communicate every development at every stage of the project. Our project coordinator sends messages alerting clients to the site plan, the HOA letters of approval, the completed drawings, and the permit we obtained for the job. Many times, contractor communication fades when the project starts. With Outback Deck, the communication doesn’t diminish, it increases. We explain the steps involved in producing their project and that it could be several weeks before it’s completed. Consumers need to know not only how the building is going to progress but that we, as the contractor, can only control a certain percentage of the process. Sharing the inspection procedures, the potential issues that might arise during construction, and our process for helping to manage these issues, serves us well in the difficult times that can arise in any construction project.
Measuring Performance Just how well we do perform in each of these areas is measurable by key performance indicators and a scorecard. As an example, some employees are scored on how many times they touch consumers, on overall satisfaction, and on whether customers reviewed the project. Others are scored on the quality of their installation, or the specificity of their sales proposal. Each employee knows the KPIs he or she is responsible for and how that corresponds to their job on a daily, weekly, quarterly and annual basis. We use this information to measure effective performance.
Many of our KPIs are tied to bonuses within each department. These may be personal or team-oriented and everyone knows that he or she is going to get written and verbal feedback based on KPI scoring. It is important to recognize that KPIs aren’t the only way we measure employee or organizational success. They are just one part of the overall system. Because our organization is built around constant quality communication, everyone knows how he or she is measured on their performance. If you have
a scorecard system in place, you can quickly see whether the behavior of employees aligns with your KPIs and your core values (for us: trust, confidence, care and grit) and whether people are doing their jobs according to the metrics for which they are responsible. If they are, it’s relatively simple to acknowledge and reward for their behaviors.
Brand Equity At a certain point, you know how to obtain the right lead, in the right location, and to service that lead by creating a solution for the homeowner. If your lead generation and sales process are executed in a way that brings high value to the consumer, he or she will be willing to pay your price. If your administrative and production departments follow your processes and deliver on the promises you make in your marketing and sales, homeowners will rave and demand for your services will build. Fifteen years ago, our typical project was a pressure-treated wood deck with wood rails. Average ticket: $6,000. Today, most of our projects are built using high-end synthetic materials with aluminum or custom rails. These are long-lasting, low maintenance outdoor living projects (our Core Focus) with a far higher average ticket. There are not a lot of people sitting on a large pile of cash to spend on an outdoor living space. Many of our larger projects come from other big projects in the same neighborhood. The neighbors ask: who built that? Or our consumer provides a referral. That conversation—between a thrilled customer and someone he or she knows—naturally leads to another one, about what the process and experience was like. As a brand we must deliver on our promises and raise the bar for our consumers. Their experience with Outback must continue to add exceptional value in order for the brand to continue to grow. We’re reaching a point where there are people who save specifically so they can afford a deck from Outback. This consumer confidence results from our outstanding team, their consistent focus on using our systems and our process and their belief in who we are and the values by which we choose to live on a daily basis.
–Bryan Miller is president of Outback Deck, a CCN member company in Atlanta. C C N T O O L B OX AU G U S T/ S E P T E M B E R 2 0 2 1
I 9
An Audit May Be Coming Your Way Small businesses are coming under greater IRS scrutiny. BY KEVIN BASSETT, CPA
A recent proposal by the Biden administration would boost IRS funding by $80 billion over the next decade. The idea is to bring in an additional $700 billion in federal tax revenues. The proposal makes it likely that you, as a small business owner, will be hit by an audit at some point. The IRS, in fact, is already ramping up audits, including audits of small businesses. Both businesses and the public have been spoiled by really low audit rates in the last decade. According to CNBC, tax audits dropped by 72 percent in that decade, from 40, 965 in 2012 to 11,331 in 2020. In 2019 the IRS audited 0.4 percent of all individual tax returns. Seeking to reverse the trend, the Tax Reform Act passed at the end of 2017 authorized the IRS to hire an additional 10,000 agents to replace the thousands of employees who left after 2010. By the time those agents were hired and trained the IRS was forced to put enforcement activity on hold, or slow it, because of the Covid pandemic.
Hot and Heavy The change is well underway. It started last year and right now it’s getting hot and heavy. Based on IRS bulletins posted to the Treasury Department website, audits of small businesses will increase by 50 percent this year.
The IRS selects companies for audit in two ways. A certain percentage of audits are generated at random. That’s part of the increase here. The rest are triggered for specific reasons. The IRS uses what’s called a DIF (Discriminate Function System) score, based on an algorithm that compares your return to other businesses in your industry. A leading reason for audits is that a DIF score is too high because ratios are out of whack. For instance, compensation that’s too low along with excessive deductions. Other red flags would include: n Excessive expenses and/or deductions disproportionate to your revenue. n Low or no salary for S-Corp. shareholder employees. n Margins and ratios inconsistent with your business activity code. n Businesses reported on a Schedule C.
are. For instance, you can deduct the expense of attending a CCN conference, including airfare and meals, as long as a majority of the trip’s days have a business purpose.
Deductions You Can Use
Manage An Audit
A home office expense is a valid deduction. Here is the rule under the “Safe Harbor” method. If you’re a shareholder in your business, you can deduct up to $1,500 for a home office (based on square footage) and as many as two shareholders can claim a home office deduction. Your cell phone and home internet are also deductible. Your vehicle is also a deduction if you can demonstrate that less than 50 percent of use is personal. Entertainment is not deductible but corporate meetings or employee events
Business Expenses If you take the team somewhere, say for a corporate meeting or employee retreat, that’s deductible. In fact, you could rent a property you own to your company without reporting the rental income, according to the Augusta Rule— Section 280 A—for up to 14 days per year. Remember that when it comes to business expenses, the IRS requires actual receipts, not a line on a credit card bill. Put someone at your company in charge of those receipts. Use a mobile expense app, that takes a picture of the receipt before it’s forgotten about and forward it to a central database. If your company was selected for audit, you’ll receive a letter by mail notifying you, requesting preliminary information and giving you a deadline for submission. Typically, we have our client sign a form that allows us to represent them under audit, so they never have to meet the IRS. We will arrange to meet with the agent in our offices. You don’t want the IRS coming to your business or your home and meeting with you or your team. That simply provides you with limitless opportunities to say the wrong thing.
—Kevin Bassett, a frequent speaker at CCN conferences, is the founding partner of Bassett & Associates, a full-service public accounting firm providing innovative financial and tax strategies for entrepreneurs. 10
I C O NT R A C T O R S . N E T
Jeff Evans, Keynote Speaker
Mile High Management CCN’s fall conference in Denver is all about how to be a high-performance organization.
R
eady to climb Mount Everest? For most people, a mountain is not a hike they’re planning but a metaphor for their next challenge. But getting to the top of the world’s highest mountain, while accompanied by a person without sight, is what author and adventurer Jeff Evans is famous for. Evans, keynote speaker at CCN’s forthcoming conference in Denver, September 24-25 at that city’s fabled Brown Palace Hotel, will address issues having to do with organizational leadership.
Climb Every Mountain The keynote speaker has ascended some of the highest peaks on the planet. In the course of planning and executing those grueling forays, he has made himself an expert on leadership and the handling of adversity. In his opening presentation on September 24th, “Developing the Expeditionary Mindset,” Evans will offer his observations and ideas about what it takes to lead. These involve how to make and implement a plan that accommodates not only the organization’s goals but the various contingencies for what to do if things go wrong. The morning keynote program will be followed by an afternoon of various Mastermind trade sessions, including one on Interior remodeling, one on Exterior remodeling, and one on roofing.
Key Performance Indicators Friday, Day Two of the conference, will feature a morning-long Take Flight interactive presentation in two one-hour sessions. The focus, says Craig Leary, CCN Director of Growth, will be to introduce the use of behavioral profiling for better hiring, management, and coaching, through accountability. Sales management then becomes the focus in the afternoon. The second session will address “what it takes to be a good sales manager,” Leary says.
Defining Metrics Of course, to manage salespeople you need sales metrics, so the session on managing ties directly into the final session of the conference, on Key Performance Indicators (KPIs). CCN president Scott Siegal says the final session will feature eight-to-ten of CCN’s most successful companies reporting on their KPIs. “We’re going to define what the KPI dashboard looks like for a contractor,” Siegal says. “What numbers should you be looking at in order to run your business? How you define, for instance, gross profit, or marketing costs?” Siegal says the session will “put the actual definitions” to the most commonly used KPIs and participating companies will discuss how they benchmark those metrics for employees and managers “so they can create this dashboard from accounting numbers.”
Welcome to the Palace Opened in 1892 after four years construction and built of red granite and limestone in the Italian Renaissance Revival style, the storied Brown Palace Hotel is today listed on the National Register of Historic Places and part of the Marriott’s Autograph Collection Hotels. A landmark building in Denver’s downtown, the Brown Palace was one of the first atrium hotels, featuring an enlarged open interior covered with a stained-glass roof. The hotel’s interior balconies offer a view of the lobby. The facility may be historic but includes all the amenities of contemporary hotels. C C N T O O L B OX AU G U S T/ S E P T E M B E R 2 0 2 1
I 11
CCN LIVE EVENT CCN LIVE EVENT CCN LIVE EVENT CCN LIVE EVENT
Running a high
performance organiZAtion
FALL Conference September 23-25, 2021 Brown Palace Hotel Denver
What’s the difference between an old clunker and that sleek machine whipping around curves at the Indianapolis 500? No comparison, right? Well, they’re both cars. But one is old and probably not too well maintained while the other is a high-performance vehicle built to compete, with teams of mechanics keeping it in stellar condition. Contracting companies are similar. Some sputter along awaiting their final breakdown while others move with grace at dazzling speeds. At CCN’s September conference in Denver we’ll show you how to run your contracting company as a high performance organization, one so well-designed and maintained it outmaneuvers and moves past all competitors.
For a full schedule of 2021 events & more details visit contractors.net