Scale by Subtracting: Why Simplification Is the Fastest Path to Growth
Stop Adding. Start Eliminating.
Why Simplification Is the Real Key to Scaling Without Chaos
What if the fastest path to growth isn’t adding more systems, more people, or more hustle, but cutting the clutter that’s already slowing you down?
That question sits at the heart of a recent conversation I had with John St. Pierre and Rich Hoffmann. And it’s a question I ask contractors all the time, especially the ones who are “too busy” to think, too buried to step back, and too exhausted to scale.
Here’s what I know to be true:
Most contractors don’t have a motivation problem.
They don’t have a work ethic problem.
They have a clarity problem.
And clarity always comes from simplification.
From Construction to Craft Beer, and Getting Trapped
I grew up in a third-generation construction family. Job sites were normal. Hard work was normal. Long days were normal. What wasn’t normal was being taught how to actually run a business.
Later, my husband and I built a craft brewery. What started as a passion project turned into a fast-growing, award-winning business. From the outside, it looked successful. From the inside, it owned us. We were stuck in the day-to-day, wearing every hat, convinced that if we let go, everything would fall apart.
Sound familiar?
That experience taught me something contractors feel in their bones: growth without structure doesn’t create freedom, it creates chaos. And chaos always pulls the owner right back into the center of the business.
Your Business Is Like a House
This is where my “business is like a house” framework comes in.
You wouldn’t frame a roof before pouring a foundation. Yet that’s exactly how most businesses try to scale.
A strong business needs:
A solid foundation: standards, leadership, non-negotiables
Four structural pillars that support growth (not just revenue)
A roof that represents sustainable scale and profitability
When any part of that structure is weak, adding more only makes the cracks bigger.
The Five S Framework (And Why Order Matters)
Most owners want to jump straight to “scale.”
That’s the mistake.
Real growth follows this order:
Simplify – Eliminate what doesn’t matter. Cut the noise. Identify what’s actually moving the needle.
Strategize – Decide where you’re going and what you’re willing to say no to.
Systems – Build processes that support the strategy, not random SOPs for everything under the sun.
Sustaining – Create rhythms, accountability, and leadership habits so systems don’t die.
Scaling – Only now does growth become easier instead of heavier.
If you skip the first step, everything downstream breaks.
Why SOPs Fail (And It’s Not What You Think)
SOPs don’t fail because your team is lazy.
They fail because leadership is missing.
A process with no owner is just a suggestion.
A system with no measurable outcome is just paperwork.
Every SOP should answer three questions:
Who owns this?
What does success look like?
How is it measured?
When SOPs are tied to clear leadership and KPIs, they stay alive. When they aren’t, they collect dust, and the owner ends up doing the work anyway.
Simplification Is About What You Stop Doing
Here’s the hard truth most contractors don’t want to hear:
You don’t need more tools.
You don’t need more systems.
You don’t need to work harder.
You need to stop doing the things that don’t matter.
Simplification means:
Fewer priorities, not more
Clear roles instead of shared confusion
Systems built around outcomes, not activity
A business that doesn’t require you to be the bottleneck
When you eliminate the unnecessary, your team gets clearer. Your systems work better. And your business finally starts to support your life instead of consuming it.
From Owning a Job to Owning a Business
If you feel like you can’t step away without everything breaking…
If growth feels heavier instead of easier…
If your business only runs because you are holding it together…
That’s not a personal failure. It’s a structural one.
And structure starts with simplification.
Stop adding.
Start eliminating.
Build the house the right way.
That’s how you scale without chaos.
Watch me break it down on the Entrepreneurs United Podcast here.
Key takeaways from the episode
[5:53] Liz compares the business to a house: standards, non-negotiables, and leadership are the foundation before you stack more activity on top.
[20:44] Her coaching aim is not to make chaos a little more efficient. She says she removes chaos and simplifies down to the basics.
[29:48] She tells of a contractor who stopped doing pools, referred that work out, and saw profit margins move from about 10% to 42%.
[34:43] On estimates, she suggests criteria for which bids to take. Cutting low-fit estimates is part of simplifying sales.
[15:43] She ties SOPs to a measurable end: for estimating, track close rate (for example two out of every 10) so you know if the process works.
Questions answered in this episode
What does Liz mean by simplification?
She means removing chaos and cutting fluff so the business runs on basics that work, not adding more channels and tools on a weak foundation.
How can cutting work raise profit?
She describes a remodeler who stopped pools and focused on higher-margin work, with margins moving from about 10% to 42%.
How should contractors simplify estimating?
Use clear criteria for which estimates to run, cut the rest, and measure close rate so the process has a real end goal.
What comes before more marketing?
Foundation first: standards, non-negotiables, and leadership. Then cut marketing channels that are just spaghetti on the wall.
Full episode transcript
Transcript cleaned from YouTube captions. Speaker labels only where clear. Bracketed [unclear] marks uncertain words. Liz Chism's wording is kept as spoken.
[0:01] That's when I learned how to be trapped in a business and not own a business, but own a job. So, we can get more into that later. But as I figured out that
[0:09] this was not the life I wanted and I knew it was possible with having a business that could run itself with the right team in place and with the right systems and processes in place, I went on this journey of figuring out, okay, how do I get my team to follow the systems and own the responsibilities and own the outcomes and how do I build a business that doesn't revolve around me and how do I do this? This is the Entrepreneurs United podcast with your hosts John St. Pierre and Rich Hoffman. >> Hey entrepreneurs, today we're sitting
[0:40] down with Liz Chism. And Liz has
[0:44] something very much in common with Rich and I. We love working with contractors. And Liz really focuses in on helping contractors scale without all the chaos that could potentially happen around their businesses and their lives sometimes when you try and scale and grow. Liz, welcome to the Entrepreneurs United podcast. >> Thanks for having me. Liz, I'm curious.
[1:02] I can share with you Rich and I's story as well, but how did you get started in coaching contractors? And were you a contractor yourself? >> So, funny story. I've never actually
[1:12] owned my own construction business, but I had the privilege of being homeschooled growing up. And at 9 years old, I was old enough to go work with my dad, who's a third generation contractor. And he had originally started as a floor carving contractor and then moved into building custom homes. And so as a homeschooler, I had a lot of flexibility. And the goal was if you got all your homework done by Sunday night and you had good grades for the week, then you could go work dad. My parents didn't believe in allowances, but when we worked with my dad, then we actually could earn money. So we loved working with my dad. We loved hands-on. We loved doing all of that type of stuff. Which kid doesn't like throwing hammers and demoing walls and destroying the place and being my dad's gopher? Hey, go to the track and grab this tool
[1:58] and whatever. >> Yeah.
[1:59] >> And so I started out in construction at
[2:01] a very young age. At about 14, I started taking over my dad's books on one of those old humongous commu computers and I would do the AP and AR and all that
[2:11] type of stuff on QuickBooks. And fast forward a few more years, my family moved to San Diego when there was cedar fires and they burned down my aunt's whole horse ranch. So we ended up building five custom homes all together. So, from the ground up, not just additions, which was a super fun experience to just be able to take something that was destroyed and remove all of it and then just build it from the ground up and beautiful custom work. And so, fast forward a little bit, I met my husband and for the very first Christmas, we I gave him a home brewing kit, a home brewing kit for Christmas. So, we started home brewing together and we caught the bug like most people do where they take something that they're really good at or they take a hobby and they turn it into a business. So, my husband and I actually opened up a craft
[2:58] brewery in San Diego. And I was the head
[3:01] brewer. I did all the brewing. I did all of the operations for it. I did all the recipe design for it. And that's when I learned how to be trapped in a business and not own a business, but own a job. So, we can get more into that later. But as I figured out that this was not the life I wanted and I knew it was possible with having a business that could run itself with the right team in place and with the right systems and processes in place, I went on this journey of figuring out, okay, how do I get my team to follow the systems and own the responsibilities and own the outcomes and how do I build a business that doesn't revolve around me and how do I do this? And at the same time, my husband and I started a family. So, I had the privilege to force myself out of
[3:48] some of the laborous tasks that are related to the brewing process because I
[3:54] was nine months pregnant and couldn't lift as much as I should have been lifting. So, then we were able to get
[4:01] our business to run pretty much without us. I was able to have some time off, enjoy our family. We started traveling a lot more. And that pivotal moment was when our distributors in China, so we tr distributed all over the world, but our distributors in China actually invited us to China for a trip. And so when my daughter was 14 months old, we left our brewery and we went to China. And I did nine events. I spoke at a couple of different conferences, did nine different tasting events all over China
[4:31] and left my brewery for two full weeks with zero communication because in China, Google doesn't work. So, your Gmail doesn't work, trying to text your 17 hours difference and all of that type of stuff. And I came back and our brewery ran better than when we left. And that's when people started coming to me. And with my background in construction, it ended up being a lot of contractors coming to me. I was like, "Okay, you understand OSHA, you understand workers comp, you understand trying to train employees on something that's an art and a science. You understand all of that. You have a construction background. can you help me take my business from me being trapped in it to actually me thriving? And so that's when the coaching kind of side of things took off. We decided to close our brewery down at one point in time and
[5:16] kind of shift gears a little bit more. And since then, we've had two more kids, but I've still continued to coach contractors. And I practice what I preach because I also homeschool my kids. I don't have a lot of time to just sit there and coach contractors all day long. So, I've had to put in systems and processes and help them leverage their time and put in systems and processes so that way the business can actually thrive and grow without you being in the center and your business revolving around you. >> Do you have a model or a framework that
[5:46] you use when you work with businesses to become self- sustaining? >> Yes, I actually do. And the easiest way
[5:53] to think of it, the way I teach it is your business is like your house. You want your foundation, which are your standards, your non-negotiables, your leadership. That's your foundation. If you don't have standards in your business, then as you scale your business, you're going to scale a reputation that's maybe not something you're proud of. So once you get your foundation in place, then there's four pillars. You've got your marketing, your sales and estimating, your fulfillment, so actually doing the job, and then your operations. Your operations also includes knowing your numbers, building your team and that type of thing. And each of these pillars follow the 5S framework. So we first, if we're focusing on marketing, we first have to focus on how to simplify it. How do we
[6:40] make marketing as easy as possible? How do we cut the fluff and focus on what actually works? A lot of times people do Yelp and they do Google and they do PPC and they do local ads and they do magazines and they do mailers and it's okay what is effective and actually working and what is just wasting money and so going through that and doing an audit. So simplifying what you're actually doing and this is across the board on any of the pillars. Then the next one is to strategize. What will it take to get from where you are to where you want to go? So I worked with one client and we've already worked through all the pillars. The last pillar was the marketing pillar and it was like okay if
[7:24] you want to go from 6 million to 10 million and your current cost to acquire a client is X amount then that means you need to be willing to spend this amount of money and we did all the calculations in order to actually grow your business. Because if you're not going to spend the money to acquire more clients, then you
[7:44] obviously there's always going to be holes you can fill. But you've got to be willing to actually do the work and spend the money or be strategic in taking those next step forwards. And so that next step is the strategy. The next after that is the systems. So how do we make things predictable, easy, everybody can follow them. Things can go off your plate. You're not the one handling everything. Sometimes that includes a software program. Sometimes that includes just SOPs. Sometimes that includes really mapping out and doing a flowchart of how the process happens. So that way there's no holes and deadends where you're going to be losing profit. And then after that is the sustainability step. Now most people actually miss the sustainability step or they miss the strategy step and they go straight to the system step. But the sustainability step is where you want to
[8:30] create these systems and processes and actually integrate them into your business so they become a part of how you do work and how you do it versus it
[8:40] being a struggle every time. And so the easiest way to describe this or explain this is I call it the toothbrush analogy. I can almost guarantee you that you do not have an SOP in your bathroom on how to brush your teeth. You just do it every single night. You brush your teeth and you brush for two minutes and you've been taught how to brush them and your dentist has helped you learn how to brush them and you may change your toothbrush here and there and you may get different toothpaste, but for the most part, every night you brush your teeth and you don't have to have a reminder in your phone. You don't have to have an SOP on your mirror. You don't have to have somebody nagging you and telling you to do it. It's just something that you do because it's a habit. And so that sustainability piece is where the habits come into play where you do it because that is what you do every single time. And so everybody
[9:25] actually can depend on that. And there's where you can create predictability in your business. And then the last step in the 5s is scaling. And so these kind of go around in a circle because as you scale your business, you're going to find new things that work and new things that don't work. You're going to have to lean into some things that work and you're going to have to cut and simplify the things that don't work. Then strategy, systemizing, sustaining, and then scaling. and it goes up and that's how you build your house which then you have your roof which is the goals that you want to reach as your business. >> Help me around SOPs. You had said when
[9:59] you talked about systems maybe there's an SOP needed. Then when you talked about sustainability you were saying you don't have an SOP for some things that you have habits for. I see here on your website you've actually you're holding a book that you're the author of SOPs suck. So, where is it that SOPs are
[10:21] needed and how do you know? >> So, there's a couple of different things
[10:25] at play with SOPs. First of all, I don't
[10:30] believe in SOPs being the key to growing
[10:34] your business if you don't approach it correctly. So, the way most people do
[10:40] SOPs, and I've talked to hundreds of contractors who do this, especially with Chad GPT, they go to Chad GPT and they go, "Hey, I need an SOP for fill in the
[10:50] blank, whatever it is, and they say estimating." And Chad GPD comes up with this beautiful thing on this SOP and they copy and paste it and they put it into a document and they may either share this document digitally or they print it out and they hand it to their guys and they go, "Oh, here's our new SOP for how to do this." And they expect
[11:09] that piece of paper is going to change their business. And I'm going to tell you that it won't because that SOP does
[11:18] not have the foundation. It doesn't have the loyalty and trust. and you are just trying to herd cats. You're not trying to build leaders inside your business. And so when you approach SOPs as the
[11:30] golden ticket for your business or the key that's going to unlock success, you're missing out on the leadership transformation that actually needs to happen inside your business. So most of the time SOPs are used as transactional. You do this and I do that. There's three different types of leaders. There's your title leader, which is where most contractors start out with, and they are the ones who have the LLC. They have the escorp. Their p their name is on the paperwork. So, they are the owner. They are the leader of their business, but they really just own a job. And then next, you have the win-win, which is where it's like you you follow this SOP and I'm going to pay you. If you finish this job, then I'll pay you a little bit more. If you don't do this, then I'm not going to pay you a bonus. And so, there's very transactional. And when you have transactional, anytime you have
[12:16] employees, they're going to jump to another company if that transactional
[12:21] relationship ends up being better. And then you have the transformational leadership, which is the servant leadership. And that's where you've created a big enough vision for your business that all of your systems and processes actually fit inside of it. And this is where systems and processes actually become magic inside your business. When you can sell the vision of this is what's going to actually turn make our business turn, you know, become an X percentage or whatever that goal is that you want in your business. This SOP is going to help us and you use collaboration to create that SOP. Then that is when that SOP can become powerful. And you always want to create SOPs or standard operating procedures. That's what SOP stands for the things that are repeatable in your business. So you can say every time we do this, every
[13:08] time we do this, every time we do this. Now, going back to the toothpaste analogy, there are obviously a little kid as they're learning to brush their teeth can't read or write, but there are instructions you can find on how to brush their teeth, but because there's been enough training involved, you're not reading the SOP every time you're brushing your teeth, but you're building in, hey, this vision of wanting clean teeth and no cavities is what we're all
[13:35] looking after. And so, therefore, the process to reach this vision is brushing our teeth every night. And so that's the same idea with systems and processes is to put them in place with the bigger vision in place. So a lot of times when
[13:50] we are creating the SOPs and the systems and processes, I actually like to ask a lot of questions because the more questions that I can answer and the more questions that I can ask inside an SOP creates clarity in that process. And
[14:05] when people have clarity, they actually follow the process versus people just going, "Okay, I got this piece of paper and I'm supposed to follow it, but I've been doing it this way and it's not really the way I used to do things and there's really no harm in doing it the way my way." And so they there ends up being all this variable success within
[14:23] the business without everybody being on the same page. And so that's what I mean by having SOPs in your business, but also having the leadership so that those SOPs work inside your business. Liz, I have a situation that happened to me recently where I was visiting one of the clients that I'm coaching and they had a bookshelf and in the bookshelf was a binder that said 2011 SOPs and I grabbed
[14:45] the binder and I started looking at it and sure enough I had to dust it off to begin with and I'm starting to look through it and I asked the entrepreneur I was like, "Hey, do you remember these? Do you guys still use these?" And they're like, "Yeah, you know what? I think somebody created those one day, put them in a binder and no one looked at them since." And so I've found that a
[15:04] lot of times something happens in a business and everybody else, oh we need SOPs and SOPs get created, they get put
[15:11] in a binder, put on the bookshelf and dusted off. And yes, I understand we need systems, we need processes, but how can entrepreneurs and businesses really implement SOPs in their business and not just have them be something on a bookshelf that sits there for years and needs to be dusted off 10 years later? >> So again, it all comes down to
[15:27] leadership. What you measure is going to what you focus on expands. What you measure matters. So there's a couple of different ways that I do this tactically. First of all, every SOP should have a
[15:43] end goal of knowing whether or not that SOP works. So, if you have an SOP on how to estimate and let's say your current estimating process is you're closing two out of every 10 estimates and you put in
[15:57] this SOP and you work through this process and okay, you're very dependable and you've got the proven system in place and the you everything's working and everything's aligned and you get that those estimates to go from two out
[16:11] of every 10 to let's say three out of every 10, then you've actually just grown your business by 50%. Without even trying anything and then you can start looking at it and going, okay, what else needs to happen in order for us to maybe close four? And so this is where the questions get an get asked. And so instead of the leader saying, okay, we're going to do this and this is how we're going to do it. You ask the estimator or you ask the salesperson or if you're it yourself, then you ask yourself, okay, what do I need to do to let's say get to four? and you document everything you do and you document the lessons that you learned along the way. And maybe one day you go, "Okay, I'm going to try this new process and see if I can actually close four out of three instead of three." And then you try that and it's, "Oh, that didn't work. I only
[16:57] closed two this this week." So then you go back to the proven thing and you document every single thing that you do. And I do this through honestly through Google documents and I just do the comment on the side. So that way as I hire somebody, they can see the comments and see the conversation actually happening in real time. And then you go,
[17:20] okay, could I make this better? And so you start tweaking and changing. And so if you are constantly looking at your processes from a key performance indicator, a KPI method, then you actually can constant consistently improve your SOPs. Now, what happens is
[17:38] people don't have anything that they're measuring based off of that SOP. And so, it ends up just becoming a training manual, which is not a bad thing to have, but you're going to use that training manual. As soon as that person's trained and up to speed, they're never going to look at that manual again, which is fine, but then when you hire somebody else for that same position, their first job is actually making sure that manual is up to speed. So every time you train somebody new, then that manual gets up to speed. But as far as SOPs go,
[18:10] they've got to have a KPI or something that you're measuring because if you're not looking at that and you're not measuring it, then that SOP really has
[18:18] no grounds to even be held within your >> Okay, I love the 5S framework. Let me
[18:24] repeat it again. Simplify,
[18:27] strategize, systems, sustaining, and
[18:31] scaling. And I'm curious as I read through those, I think entrepreneurs struggle in a lot of these. I know I do sometimes as well. I'm curious as to which one you guys think entrepreneurs struggle with the most out of simplify, strategize, systems, sustaining, and scaling. What are the 5S framework, Rich, as an example, do you feel, and I'll give you my opinion as well, and then we'll see what Liz says. Which one of those do you think entrepreneurs struggle with the most? >> I think it's simplify to start with. I
[19:01] think over the course of business, people add on and they layer and they layer and they have, to your point, John, an SOP from 2011 that they have
[19:11] not gone through and discarded. It's just a thing that's on the bookshelf. If you just look at the bookshelf and how it's cluttered with different things like a 2011 SOP, what would simplifying
[19:23] be in their case? It would be removing the 2011 SOP. But that as an example, a
[19:30] very visual example of what I'm talking about. I think the opportunity to distill our thoughts, our processes, our
[19:39] words. I think we spend too little time doing it. >> Okay. I think you've convinced me. I was
[19:45] going to say something different, but based on your response, I do agree. I think simplicity might be the one that may win out here, but just for sake of debate, I'm going to say scaling. I
[19:56] think we create SOPs to fix a problem initially and again we put in the binder and we put it away and the business fixes that one particular problem but we don't know how to scale it forward. We don't know how to get through the strategizing systems of sustaining phase but if we don't know how to scale it to the next level so I would say scaling on the complete opposite side of you but something tells me that I might be wrong. Liz please inform us where do you think entrepreneurs struggle the most here? So most of them struggle with the
[20:26] simplifying part. Rich said they >> I'm pretty sure I just won that John.
[20:33] >> They they don't want to go backwards to
[20:35] go forward. They just want to keep barreling forward. And so what ends up happening is they're just getting more and more exhausted. And when I coach
[20:44] contractors, I'm not trying to make their chaos a little bit better or a little bit more efficient or a little bit more fill-in- thelank of whatever they want. I'm actually removing all of that and like simplifying it down to the bare bones. I'm actually reading a book called Anti- Time Management. And I just posted about it on my Instagram page, but there was a quote in there that says, "It's 100% easier to increase your time and freedom by eliminating the dumb things you do every day than to try to be 100% more productive doing more dumb things." I was like, "That's perfect."
[21:16] So, I actually I posted it today just because it was so in line with the simplifying thing. But I would also say that the sustainability side of things is where you actually keep those SOPs from collecting dust. You keep the momentum and the energy going in your business and you're constantly trying to make every day 1% better than the day before. And so that is where that sustainability comes into play. And so that's where you can have a business that's not just spending six months full force trying to systemize and scale their business and then all of a sudden they go, "Okay, the six months is over with." And then they revert back to their old ways. And so as far as the initial side of things, you've got to simplify. And then for that sustainability towards the end of
[22:02] coaching, that's where you start getting that rhythm into place where it just becomes this natural thing to do. I know like about six years ago, I started working out and I started working out every single day and minus being pregnant and having maternity leave or being on a vacation where I am able to
[22:21] go out and work in a gym. I've worked out every single day, Monday through Friday. I don't have to think about it. I don't have to put it in my calendar. It's just what I do and how I do it because it's sustainable and it's just I know my workouts. This is what I do. This is how I do it. And so when you can get to that point in business where you can look and this is just what I do every single day, it actually creates that snowball compounding effect. I recently talked to a guy who owns a tree trimming business and he's the dad of
[22:49] somebody I know and he happened to be around and he scaled his business from buying the business 50s something years ago for $5,000. He bought it from the his employer because his employer wanted to retire and he's built it from a business that he bought for $5,000 and he scaled it to now over 250 million a year. And he's Oh yeah, I every night
[23:12] every team has to send me their numbers and their numbers have to average out to $950 per person for that entire team. So, if there's four people on a team, then their total income, billable hours that they can bill against the contract needs to total to 950. He goes, "That's all I do every night. I look at the one number and I do it every single night." And then whoever was the team that made the most money, they get a text message, me telling them, "Good job. You were the top team." And everybody else sees that they were the top team. And that's their performance review. And he does this every single day. and he's been doing it for 200 for 50 something years and he's at 250 some odd million. That's where the simplification and the sustainability actually go hand in hand
[23:58] to make a business where you can fall in love with your business again and it doesn't feel like a chore every single day. >> Yeah, I love that. Like we had an
[24:06] episode Liz this year with Lee Benson. What's your what is your most important number? And everybody in the org chart should have their most important number and measure that number. And I thought that to be very informative. A lot of entrepreneurs that I work with today are focused on KPIs and numbers and what number you trying to manage, what number you trying to improve. So I really love that example. And if I think about the
[24:29] three of us right now and what entrepreneurs are trying to simplify in their business, I'm curious as to with the entrepreneurs that I'm seeing, there's things that I'm looking at their business go, man, you just got to get simplify this. If you simplify this, everything else would get easier. Rich, I'm curious about you. When you're working with your entrepreneurs, what's the one thing you think they need to simplify? And then I'll give mine. And again, love to hear yours, Liz. >> I'll start just with simplification of
[24:53] communication. We should have about seven times more
[24:59] information than what we're sharing with our employees. Not because we're holding anything back, but because we're not giving them an excess of information that they don't need and they were never going to ask questions about. An example of this came up just this morning on a coaching call where somebody did a dry run of a conversation that they were going to have with their employees. And in that dry run, the person went through every single contingency that could possibly be asked because that was part of their prep. It was very thorough, very good prep. And I had this exact conversation with the person was you've got to have seven times more behind you than what you're presenting to them to simplify.
[25:44] Nobody confused ever left excited.
[25:49] And if you give them too much information, answering questions they never asked, they're going to leave confused and not excited. And I'm pretty sure you want them to leave excited. >> I'll piggyback on that. Yeah, I'll
[26:02] piggyback on that and say if you are the leader and you're talking 75% of the time, you're talking too much. You should be talking 25% of the time. And that talking should actually be asking questions and pulling the knowledge out of your employees because if they can come up with a question and answer it themselves, you've now freed yourself from being the bottleneck of your business. >> Yeah, I love that guys. Communication.
[26:26] Completely agree. Simplify. I'll throw a different one, a different angle, which is financials. I really believe we just overcomplicate our financials. And again, from different episodes we had this year, Mike Mallo, it's profit first. Revenue minus gross margin equals
[26:43] profit and then whatever we have left is expenses. Yeah, I love that guys. Communication is absolutely key. And how to simplify that. A lot of entrepreneurs need to to work on that. The one that I'm seeing a lot is financials. How do we simplify and clean out our financials
[27:00] and use zerobased budgeting methods or any other method possible to just simplify where we are? And if you take the learnings we got from Mike Mallowitz and profit first revenue minus gross margin, then take out your profit, whatever you're supposed to make, whatever is left over is your expenses. How do you simplify that method? Just flip the profit and loss statement around. Take your profit out and then see what you have to budget for your expense management. Just keep it simple. Keep your expense budget within that frame and everything starts getting a lot easier and simpler. So, I'd say simplify your budgeting process. Simplify your financial process and clean out the garbage you've maybe had in your business for quite a while would be the one I would throw out. Liz, I'm sure you got a few more. What other things you think entrepreneurs need to simplify in their business?
[27:45] >> So, I'd say there's two. One of my
[27:47] favorite ones is doing a project audit. Most of the time contractors are doing too many types of jobs and not honing in on the ones that are most profitable. So for a kitchen and bath remodeler, they may be doing kitchens and baths and additions, but which of those three are
[28:04] the highest profit margins? And sometimes it's kitchens and sometimes it's bath. Like I have two different clients that are a kitchen and bath remodeler except one their profit margins are skyrocketed in kitchens and they barely break even in baths. And so just literally going I'm not going to do any more baths. I'm only going to do kitchens. And saying that you're not going to do any more baths is the hardest thing for contractors to do. But overnight you can increase your profit margins like this because you're not taking you're not focusing on the things that are actually just breaking even and keeping you busy. One of the other contractors I work with, they love additions. They love complicated additions where there's a lot of techniques and challenges that come along the way and they're very custom. And she actually turned down 13 bath
[28:51] remodels because they were like, "We're done doing baths." And it was a lot of coaching to just have them be okay with the uneasiness of saying no to business
[29:01] through the the slow times of the winter because they're like they're in Connecticut and it's cold and snowy so bathroom remodels could get us through winter but they were like no we're we want our business to be different. We want the vision of our business to be something where people go oh yeah they can do it. They do the complicated work. They do the things that everybody else thinks are impossible. And so as soon as they said no, within a week they had a million-dollar remodel job that came up and they're totally fine through winter and they're happy as can be, but they're not doing the bathrooms. And so just doing a project audit and saying, "Where is your money coming from and where is it not coming from?" Another guy, he did pools and outdoor living and beautiful landscapes and he realized that all of his pool jobs were 10% gross profit margins. So, he literally just stopped
[29:48] doing pools, referred him out to a friend, and his profit margins overnight went from 10% on average to 42%.
[29:56] And it's, whoa, I've got all this cash. I can actually grow my business. I actually have breathing room. I'm not going paycheck to paycheck and barely making things happen. So, that's one side of things to do. The other side, going on the communication side of things, I would guarantee you that most of your employees don't actually know when the job is supposed to finish. They don't know the end date. It's just you just work and every day you just work and every day you just work and you just keep going and working. And the owner knows the date or the salesperson knows when the client wants the job finished, but typically it doesn't get communicated throughhand. And so when you just say, "Okay, we're going to finish by, you know, March 1st. This job
[30:38] needs to be finished by March 1st." So this is the leader communicating that. It's a very simple thing to communicate. Then you ask, "What do we need to do to get it done by March 1st?" And then you let them figure out the strategy and the plan and the tactics to actually get it done. And that's where you step back and instead of forcing all of your systems and processes on them, they actually come up with all of it and go, "Wow, we need to get this done by this date." and we need to have this done and this happens and this so on and so forth and so therefore they build the schedule that actually gets the job done on time and when you do that it applies to the Parkinson's principle where things swell to the amount of time that you give it. So if you don't give that end date at the like we've got to be done by March 1, then the whole job just swells and all of a sudden you're way over March
[31:24] 1st and your profit is just diminishing by the day because things don't happen. My husband actually built highrises in downtown San Diego. He was a contractor for many years. And in construction, in commercial construction, you have an end date. And most of the time you have liquidated damages. And so every single day was how many days do we have left? How many days do we have until the end project date? Because they had to pay $1,000 a day for every day it went over. But typically in remodeling and home improvement type contractoring, residential contraction, there's really no urgency to get things done. And so it just can swell to whatever happens. So if you just simplify and say, "Okay, when does this job need to get done? And what do we need to do to get it done?" That's going
[32:11] to solve half your problems to getting jobs done on time and on budget. If simplifying is one of the most important S's that people start with, I'd love to go through your pillars and grab one or two things that every entrepreneur could use to help them simplify. Can we start with marketing? What would be the one or two things that every entrepreneur in the next 48 hours?
[32:37] Go do what Liz is going to say next and it is going to help because it's going to simplify what is that in marketing. And then I'm going to prompt you on the next three. >> Perfect. So in marketing it would be
[32:47] knowing your ideal client.
[32:51] Knowing who you serve, who they are,
[32:54] where they live, what they want, what their goals are, what their expectations are. Who are the clients that you're not going to serve. Why do you serve those clients over everybody else? And really honing in on that person is going to
[33:07] pretty much solve half your marketing. Because most of the time marketing is people throwing spaghetti on a wall. And if you can eliminate half the wall and half the spaghetti because you're not marketing to people in certain areas of the county or people in houses that are
[33:24] twotory and you only want to deal with one story or people that have a super small backyard. And so the price per job
[33:31] is going to be super low. You want to make sure that you actually know who your clients are and what they want. What drives them? What are the things that are going to motivate them to actually hire you over everybody else? >> All right. Sales and estimating. One or
[33:49] two things that somebody can simplify, think about in the next 48 hours to be better at sales and marketing. >> So sales and marketing goes back to
[33:58] >> Sorry, sales and estimating.
[33:59] >> Sales and estimating goes back to a
[34:01] project audit. like what jobs are you going to estimate and what jobs are you not going to estimate? The easiest thing to do is eliminate how many times you go to somebody's house and simplify that process. A lot of times contractors answer the phone, they're like, "Oh, you want a bathroom? Cool. I've got time tomorrow. I'll swing by." Instead of asking strategic questions on that phone call to see if they're even the right ideal client to even go waste your time to go do that. So, a lot of times people are doing too many estimates and not closing enough. And if you just eliminate half your estimates because you know that you're not going to get the job or they're not the jobs that you can actually have a big profit chunk on them, then you can reduce how many times
[34:43] you actually do estimates. So, if you had 10 estimates a week and you were able to simply go through that and have a criteria of which estimates you were actually going to do and which estimates you weren't going to do and you cut that that down to five, typically, at least the contractors I talked to, it's about six hours per estimate. By the time you go to their house and do the measurements and talk to the clients and figure out the pro the calculations and look at the materials and things like that, on average, it's six hours. If you're doing you're cutting five estimates a week and that's six hours per estimate, that's 30 hours you're saving just like that before you even done anything else in your business. And so really understanding what am I going to say yes to and what am I going to say no to and having that criteria or those bumpers in place for those projects is
[35:29] where you simplify this sales and estimating side of things. >> Okay, tell me about fulfillment and
[35:35] simplifying that. >> So this is where team comes into play. A
[35:39] lot of times there's people on your team that shouldn't be there. And usually
[35:46] this is where people don't want to rise to your standards. So having your team really understand what are the three things that they each are responsible for, which most people can't tell you that. And anybody who's dragging your team down or not revenue generators, then need to be cut. Most of the time when people work with me, I don't even try to tell them to do this, but it by just raising their standards and setting that new standard, they end up losing about half their team and their profit still goes up and their jobs finish on time. And so really looking at what does our team look like that's actually fulfilling this job? Sometimes it's even the subs that you're working with and you realize those subs are not doing the jobs and they're not actually having or meeting or exceeding your expectations. And then on the other side of things in
[36:32] fulfillment is to not make your schedule
[36:36] so crazy. Every time I talk to a client and they're like, "It depends." It depends. It depends. So wearing diapers here. We're trying to make a business that actually makes profit. And so with that being said, how do you simplify each phase? Most people don't think of their projects as phases. So like phase one is demo, phase two is permitting and roughing, phase three is finishing, phase four is closing out the project or whatever your job is like actually breaking it down to that. And if you can simplify that and say okay this is what we do and have one sentence per phase then it makes it very easy to communicate the whole schedule of the entire job within a sentence instead of spending hours and hours trying to schedule your job. So those are the two things that I would talk about.
[37:22] >> Operations simplify.
[37:25] >> So that would be where your numbers come
[37:28] into play and that would also be where you're going to be hiring new team members. So most people don't have a system or process for hiring new team members. So they end up just trying to hire anybody or they get applications on Indeeds in the hundreds and then they spend hours going through them. So simplifying your process where you can weed people out and not spend time actually interviewing the people that are not going to be serving your business is one. And then on the number side of things, knowing the critical numbers that are going to move the needle in your business. You don't need to every single week spend hours and hours looking over your P&L and going, "Okay, I have money in the bank account or I don't have money in the bank account, but what are the levers inside your business that you can look at?" And
[38:13] typically there's about five or six levers that you've got to look at every single week. But most people try to look at 20 and they don't look at the trends. And so they can't actually make decisions by looking at those numbers. And so they spend time stressing themselves out with just looking at their numbers and not actually going anywhere. And so you can just go, I'm going to just track these six numbers and I'm just going to look at them and I'm going to see what they are and then I'm going to ask questions based off of what these trends are telling me and make decisions based off of that. It it cuts the clutter of being in this I know I'm supposed to look at my numbers and I know I'm supposed to know my numbers, but I don't know what my numbers are and so therefore I'm not going to sure what's going on and that type of thing. If you minimum did a job costing and looked at the few key levers in your
[39:00] business every single week, you would not have cash flow issues in your business. >> Liz, if people want to learn more about
[39:06] you, the foundation, the four pillars,
[39:10] the five S's, where can they get more information and how can they connect with you? >> So, for more information, it's on my
[39:17] website, listchism.com. But I love having conversations in DMs via Facebook and Instagram. I'm constantly messaging myself. I love having conversations with contractors. So, if you want me and,
[39:32] you know, me responding and me having a conversation with you over the interwebs, then social media is where it's at. >> Thank you for joining us today.
[39:41] >> Thanks for having me.
[39:43] >> Stay tuned as John and Rich unpack
[39:45] today's conversation. Stay tuned as John and Rich unpack today's conversation. John, I noticed a pattern in where we
[39:53] just ended on the four pillars in
[39:56] simplifying. I'm going to look at my notes here and I'm going to describe the pattern to you. So, marketing was about
[40:03] knowing your ideal client. What that means is cutting out communicating with
[40:09] people who are not your ideal client. Sales and estimating. Basically, she said what jobs to not estimate. Cutting something out. fulfillment. The team
[40:21] understand the three things that each person's responsible for, i.e. cut out
[40:27] doing things you're not responsible for. Operations, hiring new team members, and
[40:33] actually having a process for it. Cutting out doing all the other things that aren't part of an effective process. The pattern I found in simplifying is it's not what to start doing, it's what to stop doing. And
[40:48] that's how we get the simplification I just learned from Liz. >> Yeah, it's great. She even gave an
[40:53] example of what she was posting on social media today on the anti-time management. Here's some good tip for anti-time management. Stop doing stupid stuff.
[41:04] Just stop doing the stuff you shouldn't be doing. And she mentioned a lot in this conversation, too. What's your most important number? What are you tracking? And I thought that example of the tree owner, the company, the gentleman who owned this tree company that grew it to 250 million and what he tracks on a nightly basis is one number from each pod. How simple can you make your business? And I really think, Rich, when it boils down to it, we do struggle with simplicity because there's this belief that you can grow your business only when you have all these systems and all these different people in all these different pods. And in reality, what it takes to grow is having things like a little cleaner. And I'll relate relate to this. We
[41:50] talked about Mary Condo before, right? Cleaning out your house and the Mary Condo method. how much more efficient you feel when you clean out your office or how you clean out something. You just you have clarity. You have a sense of just this direct movement. And what bogs us down a lot as entrepreneurs is we have three people that are aren't performing in our business. We carry them on for another year. We have this situation is not working. We don't clean it out. We just try and fix it. We try and put like more scotch tape on it left and right as opposed to just blow the thing out and clean it out and know exactly what you're doing. So, it's a great trend that you found in those last pieces, which is what should you stop doing? And maybe we should all make a list of five things you should stop doing in your business that will help just simplify your life. I love
[42:37] this idea of every SOP should end with
[42:42] measuring the effectiveness of the SOP and evolving the SOP itself.
[42:49] like your question around how do we keep these things alive? We don't want it to be buried in a drawer. We don't want it to be buried on a online files. How do we keep it alive? Oh my gosh. How do you
[43:01] keep it alive? Is at the end of the SOP itself, revise the SOP to be better. I have
[43:08] never heard that before. I've never seen an SOP written before that at the end of the SOP, there are things in it to
[43:17] measure the effectiveness of the very SOP that was written and somebody followed and to evolve it to be even better, which by default we would always have a saying. I think Liz mentioned as well, what gets measured gets improved. So if you're trying to improve something, an SOP, you should probably measure it. >> Pretty a no-brainer,
[43:36] >> but I've never seen one with it. I've
[43:38] never thought of it. Like >> the simplicity that Liz was even able to
[43:42] communicate in just exemplifies that first S of her five S's. That is such a simple concept. And it would be actually simple to actually do in an SOP, I believe, but
[43:55] most people just don't think of it, me included. >> Yeah. I think it plays down to once you
[44:00] have the simplicity and you simplify things, then you need a strategy. And a lot of having a good strategy is simplifying where you're going and what you're doing and your marketing strategy, who you're going after. And a lot of that comes into the strategy component. We talked a lot about systems. I wish we would have talked a little bit more about sustainability too, sustaining. How do you get there? But I think I got from it that you need to make sure that once you get to that phase, it's about servant leadership. It's about really getting your people up to speed and being able to run the business without you. And I would have liked to dive a little bit deeper into Rich with Liz how she sees entrepreneurs
[44:38] getting out of owning a job at when they can get to that level. What that what does that dream look like for entrepreneurs? Because I do think part of the story here is to own a business. And I think way too often we get caught into owning a job when we don't have that sustainability how this business could run without us. And I think that's a challenge we all have and all have to continue to face as well. >> Thank you entrepreneurs for joining us
[45:00] today. We look forward to bringing you more content like this next week.
