Level Up Your Contractor Business

Don: This is such a fun topic. We really enjoy it here at Fat Cat because it’s about helping you, the contractors, figure out where you are in your business, where you want to go, what your goals are, and how we can help you get there. Yes, we’re a marketing agency, but we love being involved in your business and helping you succeed at what you want to achieve. This is a fun mini-series that we’re doing together. Before we dive into our topic for today, I want to remind you that we’ve got a resource available for you to download to help improve your online presence as a business. If you go to fatcatstrategies.com/homeowners, you can download our resource called “Five Reasons Homeowners Don’t Choose You Online and What You Can Do About It.” It offers great tips and strategies that you can implement right now. So check that out at fatcatstrategies.com/homeowners.

Don: Okay, like I said, this is part two of our three-part mini-series where we talk about the levels of a contractor business. Janet, just for review, can you briefly go over the three levels we’ve been discussing?

Janet: Level one is what we loosely categorize as just trying to survive. You’ve decided to start your own business for whatever reason, and you’re out there doing it. You’re just trying to make it through. You’re making it work, one way or another, and paying your bills. That’s level one.

Don: Yeah.

Janet: Once you reach the end of Level One, you start to look around and think, “Hey, I think this is working. I can make it a little bit better.” That’s Level Two. In Level Two, you’re starting to put processes together, thinking about scaling, hiring staff, and developing standard operating procedures. Then there’s Level Three, where you’ve gone well beyond staffing. You have great people in place, you’re a great leader, and you’ve trained other leaders. In Level Three, you’re really in that rarefied air where you dominate your local market. You have name brand recognition, like a household name for the trades you represent.

Don: It’s kind of the dream for most of our contractors. It’s the dream.

Janet: That Level Three, I call it rarefied air because there can be a ton of really successful contractors making a lot of money who aren’t at that Level Three.

Don: Yeah, absolutely. Okay, so the title of this episode is “Level Up Your Contractor Business.” What we really want to talk about today is how to get from one level to the next. We’ll discuss what it looks like to go from Level One to Level Two and from Level Two to Level Three. As we mentioned in the first part of this mini-series, growth as a contractor business is never linear. It’s not just one thing to the next. Even as you describe the levels, one, two, and three, it hits me again that each of those levels almost looks like completely different businesses. The levels are so different from one to the next. It’s a stark reminder that what makes you successful in one level is not what will make you successful in the next. That’s a hard concept to wrap my mind around. As a contractor, it can be even harder to wrap day-to-day activities around. How do I actually move from what I’ve been used to doing all along to doing something completely different? That’s hard to do.

Janet: One of the things you’ve said many times, Don, is this idea that growth from one phase to the next in your business is not linear. It’s not a straight line on that classic time on one axis and money on the other axis. It doesn’t just go straight up and to the right. When you’re thinking about growing to the next level of your business, oftentimes it takes a lot of risk and courage. You have to get out ahead of things. You might need to make an investment that makes that line look more jagged. There are peaks and valleys along that upward trajectory.

Don: You have to be willing to maybe take a little dip in this season so that you can make a bigger climb in the next season.

Janet: Right. You might have a really great year and have your highest profit year ever, then take a step back and think, “Wait, maybe that’s a warning sign. Maybe I’m understaffed to take on the challenges of next year, or maybe I need to invest in new equipment, or maybe I need to invest in trucks or a different warehouse.”

Don: Yeah.

Janet: That’s what we’re talking about. It doesn’t look linear, and sometimes you have to rely on instinct and your experience to know when to take that next leap.

Don: Yeah. So, there are a number of things we can talk about in terms of progressing from one level to the next. I want to lay out what we’ll discuss today and what we’ll save for the next episode. Since we’re a digital marketing agency, marketing is our area of expertise. We want to devote an entire episode to marketing, so in the next episode, you’ll hear us talk about how to level up your marketing from one level to the next. Today, we won’t discuss marketing at all. Instead, we’ll cover everything else, like what the rest of the picture looks like for your business and how to move from one level to the next. Let me get us started here. You teased this in our last episode, and I think it’s a great way to kick us off. I’ll use that metaphor because it fits well. When talking about moving from one level to the next, particularly from Level One to Level Two, we like to use the idea that as the owner, your role has to start looking less like a quarterback and more like a coach. As you move from Level One to Level Two, you progress from being a quarterback to being a coach. This means you’re no longer just the star player. In Level One, you are the guy; all the weight of your company’s success rests on your shoulders.

Janet: In the same way that the quarterback does everything, as a business owner, you’re measuring the job, ordering materials, managing the subs, creating estimates, collecting checks, and driving them to the bank.

Don: Yeah. At the end of the day, if it isn’t for you, it doesn’t get done. That’s the idea of the quarterback.

Janet: That’s Level One.

Don: Exactly. But that’s not sustainable. You can probably feel it as you inch towards the end of the Level One phase. You know you’re tapped out; you don’t have more hours to give, more energy, or more focus. There’s no more ability for you to do more. So if you’re going to scale up your business, you have to find a different way of doing things. That’s what the coach mentality is all about—saying, “Okay, it’s not just me being successful. I have to start leading others in being successful together.” That’s a whole different way of thinking.

Janet: It is a whole different way of thinking. You are starting to look around to add staff. That’s step one—you go from being the quarterback, doing everything, to filling in some of the lower administrative tasks. Who can answer my phone? Who can drive the check to the bank? Who can balance my checkbook? Who can maybe order supplies or help with preparing quotes, even if they’re not the one delivering them?

Don: Yeah. As you say that, I think about how adding staff is a way of building a team and moving into this coach mentality. How do we decide who to add first? More often than not, we see contractors start with something like an office manager, some equivalent of an office manager, because most of the contractors we’ve worked with say those are the things they enjoy the least, right?

Janet: Yes, absolutely. That kind of catch-all paperwork person. So, a really good office manager is a great position to hire. I’ve also seen contractors fall into two big categories. There are contractors who are born and bred tradesmen—they started as carpenters or in a similar trade. For example, I had a client who started doing fiberglass repairs on boats, which led him to acrylic bathroom installs as he was repairing bathtubs and grew from there. That’s category one: owners who started as tradespeople. The other category I’ve seen, and both categories can be very successful, is owners who are first and foremost sales and marketing guys. They understand they’re building a machine, a sales and marketing machine that generates leads to be fulfilled with a product or service. This type of contractor has told me it doesn’t even matter what they’re installing—it could be shutters, awnings, or siding—they’re focused on building a lead generation machine. So, it depends on which of those two categories you fall into. Are you the trades guy or the sales and marketing guy? Your first hire will likely be in the area where you’re weaker.

Don: Either the part you don’t enjoy as much or that you just don’t know as well, right?

Janet: Yeah. For example, the guy who built a very successful bathroom remodel business and sold it—one of his first hires was a fantastic project manager. He was passionate about marketing and knew he needed someone who could lead one crew in the beginning, then multiple crews, and build out a system of crews. That’s who he hired.

Don: That’s great. That’s exactly what we’re talking about in terms of being a coach. Recognize your strengths and weaknesses, and bring on team members who can augment your weaknesses, building a stronger team. So, that’s the idea—beginning to recognize when it’s time to start hiring and what roles to hire for. Another marker for leveling up from one to two is recognizing that in Level One, you’re just getting any work you can get. You’re not necessarily picky about the jobs that come your way. In Level Two, you start saying, “I need to get the right kind of work.” You start finding the right kinds of jobs that your business can be successful at. Maybe this is where your return will be the best, where you’ll make the most profit, and where you can systemize and scale.

Janet: The decisions I’ve seen some of our clients make when they hit that phase often include cutting out repairs.

Don: Right.

Janet: For example, a roofing contractor might have been doing small repairs, but not full roof replacements. Once they get enough leads and quotes to keep their crews busy with full roof replacements, they might decide they don’t need to do repair jobs anymore. On the flip side, I’ve seen contractors who get enough requests for repairs decide to staff an entire repair division. Rather than turning their nose up at repairs, they see the volume and potential. If they can do it well and staff it properly, it becomes its own business line. These are the kinds of decisions contractors make when they’re on the path to scaling. They start to look at things with a different perspective. They either say, “I don’t need to do repairs anymore,” or, “I’m going to turn repairs into its own division.” Both decisions are made intentionally rather than just taking any job to pay the bills.

Don: Yeah, exactly. And even as you’re describing that contractor who has a separate division built out for repairs, I heard you use words like “division,” “manager,” and “processes.” Scaling was another one you used. I think that’s a key marker as we look at moving up into Level Two—this focus on processes and scalable systems. I know this is like speaking your heart language right now.

Janet: Oh yeah. It’s the difference between being proactive and being reactive. If you decide deliberately to build a division to go after repairs, that is a proactive decision. The flip side is someone called needing a repair, and you really wanted the whole roofing job but needed the money—that’s reactive.

Don: Yeah. And the ability to look at that and say, “If I’m going to turn this into something profitable in the long run, I need a system—a whole different division within my company that has its own manager, its own cadence, all of those kinds of things.” Those are what we’re talking about in terms of scalable systems and processes. In the last episode, we talked about how the spectrum of businesses that operate within Level Two is broad. The ones that are really maxing out and getting to the top of Level Two are the ones doing the best at processes. They’re figuring out how to scale, systematize, and hand off tasks to people so they can do them well without constant supervision.

Janet: And, you know, Don, we’ve talked a lot about building systems and processes. Something just occurred to me—listeners might be thinking, “That all sounds great, but I don’t even know where to get started.” I think the way to get started is to ask different questions. You’re trying to uncover places in your business you may have been blind to. Asking different questions helps you drill deeper, and that’s where you put your focus to develop some processes. We were talking about something between recording these episodes that I think is a great example of a Level One contractor struggling and looking for where to focus their energy to improve their business. It’s classic—we’ve got a contractor with a successful business, but leads have slowed down in the winter. They think it’s a marketing issue. We have software installed with the client’s permission to listen to phone calls, and what we’ve found is the person answering the phone just hasn’t been trained properly. Don, what were you telling me about some of the calls you listened to?

Don: Oh yeah. They’ll get phone calls from people looking for other remodelers who do the same service, but they’ve dialed the wrong number or heard an ad on the radio and didn’t remember the exact name. They stumbled upon our contractor and called them, and the person answering the phone says, “Oh no, that’s not us. I think you’ve got the wrong number.”

Janet: Oh my gosh, what a missed opportunity. Here you have an inbound call from someone looking for the exact service this company provides, and the person answering the phone hasn’t been trained on how to respond.

Don: Yeah, just to be able to say, “Well, we’re this other company and we do similar services. Is there something we can help you with?”

Janet: “Tell me what you don’t like about your bathroom. We’re not that other company, but we’d be happy to answer any questions.” That’s a scripting exercise, a role-play exercise, and a training exercise. We see Level One contractors do this over and over again. They hire a company like ours or buy leads from Angie or Modernize, then say the lead quality is bad. Sometimes that’s true, but it might be the wrong place to look. Are you maximizing every opportunity when your phone rings? If you’re a Level One contractor, you probably don’t have defined scripts for answering your phone or responding to common questions.

Don: Fantastic. This is really good. To recap, moving from Level One to Level Two involves a few things: shifting from being a quarterback to a coach, moving from getting any work to getting the right work, and improving your processes. Now, let’s shift gears and talk about moving from Level Two to Level Three. This is a significant transition. Your business is at a substantial place if you’re trying to move into Level Three. This can be difficult for the owner in terms of figuring out how to make those transitions. I’m okay with transitions; I just don’t know what transitions need to happen to move into that place. I’ll throw one to you because I know you love this analogy and talk about it well. Going back to our quarterback-to-coach analogy, in the Level Two to Level Three transition, it looks like moving from being a coach to more of a general manager. Would you agree with that, and what would you say about it?

Janet: Absolutely, Don. Moving from Level Two to Level Three is about shifting your role from a coach to a general manager. As a coach, you’re still very hands-on, involved in day-to-day operations, and directly managing your team. But as a general manager, you’re more focused on the overall strategy and growth of the business. You’re overseeing multiple departments, ensuring they’re working together efficiently, and driving the company towards its long-term goals. This transition requires a higher level of delegation and trust in your team leaders. You’re not just coaching them on how to perform tasks; you’re empowering them to make decisions and lead their own teams. This shift can be challenging, especially for owners who are used to being deeply involved in every aspect of the business. It requires letting go of some control and trusting that you’ve hired the right people to carry out your vision. The focus is on building a leadership team that can operate independently, allowing you to concentrate on strategic planning, business development, and scaling the company to new heights.

Janet: Oh, I totally agree with that. It’s such a different mentality and mindset to have. Just to recap for our listeners, when we say Level Two contractor, this covers a huge spectrum of businesses. Let’s benchmark it from $3 million to $20 million. A $20 million business is a healthy business, and we’re not throwing shade at that at all—you have a lot to be proud of. But you know if you’re listening to this podcast that there are a small number of players in the home improvement industry who have made it well above that and are household names. How did they make that transition? From the owner’s perspective, when you were in Level One, you considered yourself a quarterback and had to make that mental shift to becoming a coach. Now you’re making a mental shift where you are not the coach—you are coaching other coaches. You’re turning into a general manager where you are working with division heads, department heads, and managers of teams that might also have project managers under them. You’re setting big-picture strategy at a high level and not necessarily involved day-to-day. That is a very different place to be than where you were five years ago.

Don: Yeah. It’s less about operating and leading your business and more about leading the people who lead your business.

Janet: In the last episode, we said that when you’re square in the middle of Level Two, every day you’re just challenging yourself to be a better leader. When you move into that next realm, you’re trying to build leaders.

Don: Yeah.

Janet: You’re trying to build other leaders.

Don: That’s right. What that means is that you’re honing in on a very small few key responsibilities that you are overseeing. For the most part, everything in your business is being overseen by someone else, and you’re developing them so that they can oversee their areas really well.

Janet: One thing I’ve seen contractors do, which I initially chuckled at and maybe did a little eye-roll, but the more I see it, the more wisdom I find in it. Let me tell you what it is. An up-and-running company, let’s say $8 million or $10 million—a healthy company. The owner will deliberately take themselves out of the traffic flow at least one day a week. They don’t go to the office, they are unavailable by phone, and they are just unavailable. They take themselves out of the traffic flow so their people have the opportunity to make their own decisions and mistakes. When I first heard this, I thought, “Oh my God, wouldn’t that be nice?” But I see the wisdom in it. I’ve seen this playbook in multiple businesses where the owner, who was first the quarterback and then the coach, is moving into that GM role. They are trying to develop other leaders and give people the space to find their own way and make their own mistakes.

Don: Yeah. And just to step out of the picture and see if the business can run without them. What happens if I’m not here?

Janet: Exactly. Understanding that shift from being a coach to a general manager is crucial. Another shift that has to happen moving from Level Two to Level Three is, in Level Two, it’s about establishing your place in the market. But in Level Three, you’re aiming to dominate the market. You’re leading your local market. Like you said, you’re becoming a household name. When anyone in your service area thinks about the service your business provides, your name comes to mind. By this point, your service area might be very broad, encompassing multiple areas. To achieve this, you need to be known as a reputable and trustworthy business, familiar enough that people have your name on the tip of their tongue when they need your service.

Don: We’ll take a deep dive into that transition in the next episode, discussing the marketing changes necessary to go from being a strong player to the dominant provider of your service.

Janet: Yes. But it’s important to acknowledge that the goal shifts. It’s not just about making more money and getting more jobs. It’s about becoming the dominant player in your market. That’s a different kind of goal.

Don: I’ll throw a monkey wrench into this episode. I don’t think this is said enough: not everyone has to make it to Level Three. Most entrepreneurs started their own business for various reasons, often because they don’t work well for others. So, you don’t have to push to Level Three. Decide why you’re in this game. What do you want for your family, yourself, and your employees? Work towards that exit strategy. It might be to sell to a Level Three dominating player in your market before you get to the next level because you have different goals.

Janet: Absolutely. It’s important to acknowledge that if you’re at the top end of Level Two, you have a healthy, successful business. You might not need or want to push into Level Three, and that’s totally okay. Depending on your personal and business goals, you might not need to make that transition. We’re here to help you if you do want to get there, but understand it’s not necessary for everyone.

Don: Exactly. Moving to Level Three requires a different set of tactics, strategies, and mindsets. I believe in beginning with the end in mind. When I talk to potential clients and they say, “I started this business three years ago with a goal to reach $8 million in five years,” it tells me they set out a path from day one and have been measuring themselves against benchmarks. It gives clarity in what to pursue and what not to. On the other end of the spectrum, we have clients like a father-son business where the father didn’t have big aspirations, but the son did, and we’ve seen different dynamics in play.

Janet: All of those things are good. It’s really up to you in terms of what your goals are. We want to provide you with a roadmap and be a partner to help you get from one level to the next. If you want to check out our free resource we mentioned earlier, “Five Reasons Homeowners Don’t Choose You Online and What You Can Do About It,” go to fatcatstrategies.com/homeowners and download it. That’s it for today’s Digital Marketing for Contractors. We’ll wrap up this three-part mini-series next time. We look forward to talking to you then. See you!

Don: Digital Marketing for Contractors is created by Fat Cat Strategies. For more information, visit fatcatstrategies.com.