Profitability Through an ROI Lens

00:01 Hi everyone and welcome to another episode of the business growth factor. Today or this is where we have conversations about building better businesses and today the conversation is going to be through uh we're going to be discussing profitability through the through an ROI lens, return on investment lens. Uh my name is Lyndon Smith and um I'm joined by my co-host today Joshua Linhorst. A quick introduction. So uh Lynon Smith from Expansive EDGE and we work with companies. We're an operations agency that work with companies to uh build their business playbooks. Josh, how

00:33 about yourself? What do you guys do? Yeah, so Josh Linhorst, I'm the principal at Baspoint CPA. We're a cloud-based CPA firm uh focused primarily with uh contractors in the construction space, uh helping them make sense of their their numbers. So, lovely. Thank you. All right. Super. So, profitability through an ROI lens. What are we looking at today? Yeah. Well, I mean, I suppose we should probably define terms a little bit because people are like, "Ro, what?" So, ROI, for anyone who is unfamiliar with the the acronym, I suppose, or the abbreviation

01:06 is return on investment. It's not just a weird way of spelling the name Roy. Um, and so what it is is kind of you're looking at what comes as a result of investing in something. you know, simplest terms, you know, if I have a hundred bucks maybe and I put in some kind of investment and it makes me five bucks, my return on investment $5, right? That's kind of the idea in simplistic terms. Um, I think today what we want to talk about though is just more in terms of like getting to how do you optimize profitability in your business? And so, you know, optimizing

01:39 profitability in your business is increasing the net income, right? Is at the end of the day. Uh, and so there's different areas in your income statement you can do that. We've talked about that in some other episodes just as far as differentiation between gross margin and net profit margin. Um, but here we just want to think of think about every expense type or expense that we have or deployment of capital having the mindset of what's my return on this investment. Yeah. And not just sending your dollars out to die. That's right. Yeah. Exactly.

02:12 So great great reference and um so for anyone who's there's a book from Kevin Olri I forget what the title is but uh one of one of the key things I got out of there was a cool analogy that or idea that he has where he's like think of every dollar in your business as a little soldier and you don't want to send your soldiers out into the battlefield to go die unnecessarily right you want to send them out and have them bring back uh more territory and so that's kind of what we're trying to do uh in thinking about ROI on expenses is if you're going to deploy a dollar,

02:45 what's that dollar doing? What's the anticipated return going to be? Well, let let's uh run through a couple of examples here just to to bring some context to what we're, you know, like to the conversation. So, um I mean return investment and and the expense. Uh what what are some typical expenses that we um that we could discuss in in in a business? I mean got a couple of uh notes here. Um, anything that comes up for you immediately? I mean, just Yeah, I mean, classic ones that we monitor regularly for like our virtual CFO

03:18 clients, I mean, on a monthly basis, we'll always look at advertising, marketing expenses. We'll always look at wages expenses and then just general overhead expenses and then we'll dive into those uh, you know, at a more granular level if needed. But, uh, like the marketing side, you know, that's one of those ones you've probably heard of like rorowass, right? like return on ad spend as a metric. So the whole idea there being if you're going to deploy dollars into advertising, what kind of return would you anticipate on your advertising dollars? And so if you're

03:49 just doing Google ads and or Facebook ads, which they all can work quite well if you have a good strategy for them, uh but again, depending on your business, um don't just do the ads, like look at what's coming in as a result of those ads, right? and consider what the return on that investment is. Uh similarly, sorry, it looks like you're you want to say something? No, I mean it's just really uh making sure that you're actually looking at the metrics around it. So understanding what uh you know what data to look at um and make sure

04:23 that like whatever is going out you you understand what uh what value that's kind of bringing back into your business and in what shape or form. So, it doesn't always have to be monetary uh value necessarily. It could be different types of uh value and we can maybe lean into that conversation. Yeah, that's that's a great point and I think uh the advertising one is a classic example of where you can usually tie some monetary value to it. But sometimes um there's other value other return that you can get on different types of investment, right? Um some of it is indirectly tied

04:57 to money, right? So if you think of perhaps um investment that you might make in your team. So maybe uh you have the choice you the decision of like okay so yes we pay competitively uh for our team but in addition to that maybe every quarter we do some kind of big event with them right there's going to be an expense to that. I've seen expenses in the tens of thousands of dollars or more uh as like for doing these types of investments in the team. And so then the question could be like okay well those are those are dollars that were deployed right were they deployed out to die

05:31 unnecessarily or was there value in doing that was there some kind of return right and so you think about okay by doing this you've developed a bit of a team culture so you have a more cohesive team that works well together that enjoy being together uh there's good internal communication is improved when you have these types of things happening and so as a result your efficiency we talked talk about this in a different episode, but like the efficiency within your company uh increases when all of a sudden you have better communication lines as well. And then I mean the direct tie to the monetary side too on

06:05 say investing in your team might be considering the the trade-off of having people leave your team. So if you don't have good retention in your team, now you have costs that are going to be associated with bringing in uh somebody new on your team, right? So, if you think of uh recruitment fees and training time and all that, uh you know, you're going to have very real costs tied to not making investments on the HR front. So, so what I'm hearing is it's not always the return on investment like the return in terms of like you're going

06:38 to get money back, but it's money that you don't have to actually spend. Yeah. By preventative maintenance almost. Yeah. By increasing that retention rate, uh you're you're you're um avoiding the cost of having to recruit uh on board, transfer that knowledge from the from the previous person that's left the company. Have those handover meetings, have the you know, like whatever it is to say, "All right, you're leaving the company. We need to, you know, extract whatever we can from you and then pass that on to the next person or to the

07:10 rest of the team." and then the you know the hiring process which is costly, onboarding process which is costly and then just getting that person up to speed and up to the level that that person uh that originally fulfilled that position you know was at before leaving. Yeah, I mean you could kind of think of it as like a maintenance expense on the HR front, right? Because you know another category if we want to like dive into some different ones would be your repairs and maintenance expense. And so, um, you know, if you're in a government agency, not to like knock all government

07:42 agencies, but oftent times their fleets are very well-maintained because you just have people like, "Sure, I'll go bring a vehicle to the shop for the day and mill around for the day." Uh, but usually in a, you know, small medium-sized businesses, there's not the luxury of like sending somebody out for a day to just sit at the shop and kind of wait for vehicles to be repaired. And so repair and maintenance might fall lower on the weight on on the priority list. But as a result, you know, if you're not having your regular oil changes, not having everything kind of like greased up the way it should, you might start having issues with some of

08:14 your vehicles. And you know, similarly with your with your team, right? If you're not maintaining your team properly and making sure you're investing in them and uh making sure you're connecting with them, you may start to have some breakdown in the team. And so same thing with maintaining your machinery and equipment and your fleet, right? So a lot of companies uh have have moved away from like the typical HR term and they they've started bringing in uh people in culture directors managers or um you know people they've kind of reermed the the HR to

08:47 people in culture and the whole idea behind it is you know like we're we're increasing you know enhancing the value of our culture so that we can retain employees and I think you know that's that preventative maintenance that you're talking about is uh you know empowering someone uh to empower the team and then that could be through training that could be through you know just getting feedback uh you know creating those feedback loops so that you understand what the team wants and um you know what can be reasonably accommodated to ensure that they're

09:18 satisfied and happy in their in their jobs and their roles. um that they don't that they don't consider leaving the company for something better because they you know there's a good old adage you know people don't leave uh you know um they don't leave their jobs they leave their managers or they leave their companies um because there probably isn't a good cultural fit there. So understanding that like you're you're adapting the culture of the company to you know who's in that business and you're you're kind of making everybody feel welcome and accommodated and they're part of something bigger. So you

09:51 know that that that oil or that grease that we're talking about that maintenance that we're doing is that uh that people and culture um totally role I guess we just the analogy only goes so far in that we don't want to talk about greasing people up I suppose in this situation but uh but even you know to your point as far as like leadership right so if you have uh so there's a really good book called uh the power of people skills from an author named Trevor Thronis and and he talks about how uh you have like competency and you have attitude and so those two things are equally important in in any kind of

10:23 uh uh role and what somebody's doing. And oftentimes what may happen is somebody will be very competent and have great attitude in the role. So they become promoted into a different role and now their competency level might be lower but they might have a good attitude. Uh but the competency is an important thing and so you need to make sure that even if you're raising people up in your team uh promoting them up to make sure you then invest in the training to make sure they're competent in that role so that the people that they oversee uh are still being led well. you know, because that's an

10:56 investment. And like you said to your point earlier, people don't leave a job, they leave the manager, right? And so if that new manager is just not trained sufficiently in their role, that can be a problem as well. Yeah, I think you know that's one of the one of the things so many companies uh one of the mistakes so many companies make is they take someone who's excellent at what they do and by default they promote them to to become managers or directors and they're actually great at the the technical side of the business but they suck at

11:28 managing and and and good with people. Um now you've created a problem because you know that competency of managing people is not there. their attitude might be great but the competency is um is lacking and I mean with that you know their their attitude will start diminishing as well because now they're in a position that they're actually not qualified to fulfill so how do you empower that person to be successful you send them for that leadership training you get them the coaching that they require um and and

12:01 create like a bit of a um what is the word I'm looking for like a a plan succession plan where you're building them up into that leadership role, that management or director or whatever level role they be fulfilling. Um, don't just put them in there and be like, "All right, now you're the director or now you're the manager. Um, you you've come from a very technical background and you're great at what you did there." No, you're gonna be respons. Yeah, 100%. Yeah. Um another category just to since we're kind of uh bouncing

12:36 them around here would be uh the quality of like your say technology and so uh think of like computer systems right if you have if you sort of cheap out. So again like just to kind of bring it back to what we're talking about return on investment right so if we're going to deploy dollars in our business what kind of return are we getting on it? So, you know, if we're looking at a whole bunch of computer equipment, maybe it's like, okay, let's go as cheap as possible because we don't want to spend a lot of money on on computer equipment, right? That's that's a reasonable concern. Uh, however, if you think about it, you're

13:07 like, okay, well, what's the return that you'll get on the alternatives, right? If you go with really cheap, slow computers, it's going to take your team longer to do things, right? They may have to step away from the computer while things are loading. So, now they're not being super productive with their time. Whereas if you invest a little bit more in the initial equipment, now you've got uh better utilization of your uh your people use using that machinery or equipment, whatever it is that you're using, right? And so uh sometimes, you know, there's the whole idea of like you have to spend

13:39 money to make money. Yes, but does that doesn't mean just go spend money hoping you'll make money. Be wise with the deployment of the dollars for sure, but recognize that if you do cheap out, you may be paying more or having less return in the long run simply by going with a cheaper option. So there's a a good old saying in Africa uh it's it goes and uh what it means is when you buy cheap, it actually ends up costing you more. Interesting. And I used to I used to run a design department and and um

14:13 you know it was a pretty easy for me to motivate you know um high-end computers versus you know the standard cheap run-of-the-mill um you know computers because when we when we had designers uh opening up 3D models uh like a um you'd have a guy sitting there waiting 20 minutes for this model to to uh to to upload and get get ready for him to start working on it. Um, in that 20 minutes, he's going to leave his computer because the

14:44 computer doesn't have the bandwidth or the capacity to open up or do anything else. So, he's gone, hopped off, got a cup of coffee, he's uh he's going to um, you know, his colleague and he's saying, "Hey, how's your day going?" sitting there having a conversation. Now, you're diminishing that person's time and um, you know, now the computer's upload, the model's uploaded, and they're in a conversation for the next 20 minutes. And, uh, that's right. Yeah. you start losing productivity on on on in different areas of your business. Um, and then also, you know, so he gets back to his computer, now he's working on it and and it's pretty slow because it's

15:16 uh, you know, it's not really efficient. Rather invest the money like you know, instead of $2,000, $4,000 in pretty solid system. How much time is that saving? You know, how much uh, you know, productivity are you um, you know, losing out on having this the slower computer in the bigger broader sense of things? If you're thinking it's like 20 minutes every model that they're opening up, how many times they're opening opening up a model every single day, times multiple multiple employees, right? Yeah. Multiple employees. Um you know what is that costing you in a week, in a month, and a year? Um it it becomes

15:49 pretty easy to to uh consider that return on investment which is the a higherend computer with better computing power um to to run those models. I mean you could you could look at this in all aspects of your business is uh you know like you you mentioned equipment you know just when when is the right time to have um you know the cheap equipment and when is the right time to have the more expensive equipment you're investing um if you're in the construction industry you might be looking at like a trimble or um like a 3D scanning um you know system um you know when you're setting

16:24 out things all kind of aligned and tied in together versus actually sitting there and measuring measuring it. Um, you know, there's return on investment for time. You know, how much time? Um, what's the value of an hour of time and how much time is someone investing by actually measuring and setting it out? And then also like how accurate is that when someone's actually using a tape measure versus um setting it out with um you know like equipment. And then once you've done the project and you want to get some data like the asbuilt data um scanning the area getting like a point

16:56 cloud or something like that in into your model and then just tweaking your model versus sitting there measuring it and being like oh this doesn't you know it it's uh I can I can substantiate that from a tech um you know investment into technology um and I'm a massive advocate when it comes to these these types of things. Uh, of course this would expand or extend right across the business to other areas you like operations, finance. I mean what are some finance um you know investments or expenses rather

17:28 that you could consider? Um yeah I mean it's even the platforms that you use right I mean there's you can think of workflows that you might invest in. Maybe it's um you have like an an outdated software platform that you're using. So now there's going to be costs typically associated with like the the platform itself, but then also the the um the migration process and the learning that goes with it. But you know with with the advent of like OCR technology and like AI and computerized systems that you can use now like

18:00 there's so many processes now even in finance that can be streamlined significantly. Um, you know, we we as much as possible, for example, try to move and this this recommendation may become dated within a year just given how fast technology is moving, but we try as much as possible to have clients being on QuickBooks online because it's just so streamlined and it works really well as opposed to I don't want to say any names for fear of like slandering any other companies, but like you know other systems that don't have that kind of streamlined capability. Um, and so yeah, there's there's so many things that you can do

18:34 uh to to streamline things on the finance side too. And even, you know, as it translates into the experience of other things. So, for example, if you're a company that's still cutting checks uh for your subs, right? Like for your sub trades. I mean, maybe consider looking at EFT payments or like some kind of electronic payment system for your subs cuz a if you cut a check, it's going to take another 3 to 5 days to get to your sub trade for them to even be able to deposit the check. So, you've now pushed out their accounts receivable days, another 5 days, right? But then it's also a manual process that you now have

19:07 to stick handle instead of a digital process, which would actually be a lot quicker. Uh so there's a lot of uh merit in considering um investing in systems like this even in the finance operations space because there is return there and and we've talked about I think in another episode you know if you make your subtrades happy typically your pricing is going to be a little bit better with them as well whereas if they're not super excited about working with you you can imagine they might inflate some of their their numbers a bit when you ask for pricing on a project. Yeah. Um yeah, I think one of

19:41 the one of the finance like systems or um you know good return on investment is uh do you use dexed or I mean hub docs and dex and there's a whole lot of different Yeah, we use dex. Yeah. You effectively um streamlining that whole um for capturing expenses. I mean uh again I'm just going to use project management as a as a an example. you know project managers run loads of you know expenses on a project or against a project that they that they need to um get reimbursed for. So to

20:15 capture those expenses uh using like um Dexed for example makes it super easy instead of like scanning and then uh you know appending this you know document you know expense claim form and all it just make it so much quicker. um you know why why would you bog your project manager down with um you know half an hour is it's going to take them probably a good half an hour to get all of that you know captured every month you just make it quick and easy and it's part of their workflow as we get it you know you're using that capturing it go

20:46 straight into the thing um are um you know just handling all of that well here's so here's the way to think about the return on investment on that right is so Dex you're looking at like a $30 a month expense for a business to utilize Dexed and if it saves five people who are making 50 60 bucks an hour if you're looking at like say the PM level, it saves them, you know, half an hour a month, you've paid for that subscription multiple times over. Plus, you've just streamlined your processes, too, right? So, you know, having everybody on site

21:18 be able to just take a picture of the receipts and then uh put it through the system. And there's other platforms too like Expensify and and uh systems like that too where you can basically capture receipts and have them uploaded instead of having to have people bring paper into an office and sort through it which all takes time. I mean these are relatively inexpensive platforms that uh yeah another good financial system to streamline that for sure. Yeah. So Josh I'm put you on the spot here. um you know we we we're talking about uh return on investment or expenses and and and

21:52 measuring return on investment. Um h how do you make that decision? You know, it's uh sometimes like if it's working the way that it's working, but um I how do I qualify or or make that decision? What's the best like is there like a short uh you know like a couple of questions to ask myself you know when when I'm considering something because it can it can stack up pretty quickly you know it's just another software yeah it saves a bunch of time um but it's you know it's just adding and adding and

22:26 adding to the stack of um costs that we have right uh how do you how do you you know how do you make that decision to to say all right um this is a good return on investment. We're going to add this to our tech stack or we're going to add this to, you know, cuz because there needs to be a bit of a balance between, you know, like what we're spending and and uh the income coming in as well. It might make us more efficient, but you know, it's another expense that we've got to consider. Do you have any comments around that specifically? I'm going to give the classic accountant

22:58 it depends response. Um, but it it would depend. I mean a good question to ask yourself is why are we currently using the platform that we are using right because maybe it's not the best platform maybe it is and so if you can kind of get to you know kind of ask the five W's on that a little bit get to some underlying rationale as to why you're using existing platforms are doing things a certain way uh because what that does is it helps kind of set the fence post for decision- making. It's like, oh, we're using this because we uh

23:30 care about the good internal controls of the system, and we're using this platform because uh it really helps us stay organized with our projects, and we're using this platform because it gives us really good transparency into the financials on each job. It's like, okay, we care about those three things. So now, if we're looking at potential alternatives, what are the things that we care about? We care about those those three things, right? So sometimes it it helps just filter out the yes or no to alternatives. uh question. Um but then you want to just think about like the overall cost of utilizing say one

24:02 platform over the other. And those costs can be direct as far as how much time does it take somebody to use this system or this method or whatever it is that you're looking at a potential investment alternative for and how much would it cost to use the alternative? But then also what are some of the other indirect costs as we talked about earlier, right? So, for example, if you're going to implement something that allows you to pay your trades a lot quicker, there's going to be some other returns on that investment that aren't simply just a a direct cost to cost analysis on the

24:34 platform. Um, that was a long-winded way of kind of explaining it, but it really depends on what it is that you're you're considering. Um, you know, if it's a piece of software, it it should just you should always ask why it is that you're implementing it. Especially entrepreneurs have a tendency to have uh flashy or shiny object syndrome, right? Where it's like that looks cool. I want to use that platform, but in espec I mean we're kind of focusing in on platforms here, but as far as like uh systems and platforms, you know, there's implementation that's required. There's a bit of a process. You want to think

25:05 through it before just pulling the trigger on something like that. Um build out a plan in it. Uh yeah, before proceeding. 100% agree with you. And I think uh it's just understanding what problem that solves for your business. Um and then and then and and and then also just taking a view on the the existing you know um like what do you have already like what is what is the the current structure or software solution technology whatever it is that you're considering what does the existing look like and um and then what what problem

25:38 does this solve for us? Um, give you a pretty rudimentary example. I mean, we were talking about Loom on the previous episode and I think we mentioned it here. Um, I had a a client ask me like, why would I use Loom if I could just use Google um, you know, Google record with a Google Meeting? I was like absolutely, you know, it all depends on um, like what is it? you know, why would you pay for those extra subscriptions if if you know the outcome that you're looking for is just a screen recording and um you know, so that's what they're using. So especially when

26:11 you think of subscriptions, I mean every subscription is $20 or less typically, right? And so you know there's death by a,000 paper cuts. There's also death by a,000 $20 subscriptions because those do add up uh over time. I had another client that said to me uh I said to me it's about it's about 20 bucks for this uh for this software. I can't remember what I was um sharing with him. He's like, "Oh man, it feels like I'm getting $20 to death." Yeah. Right. It's because it falls under the radar of like having to think about it too much. You're like, "That's only 20 bucks a month. That's

26:42 not that big of a deal." you just add it there. And then you look again, you're probably spending like 700 bucks a month, you know, on one person or uh yeah on on uh so actually just kind of a quick uh quick tip on that, you know, is uh we have a process that we call traffic light budgeting where and this works really well on your dues and subscriptions account in your income statement or your chart of accounts is go into that like once a quarter and then just look at each transaction in that uh that account and then anything that you're like, "Yes, we need this. we

27:13 want this highlight in green. Anything that you're like, we actually don't need this. Why are we paying for this? Highlighted in in red. And anything where you're like, I think we still use this but not totally sure, highlighted in yellow. And once you're done that exercise, go and cancel everything that you've highlighted in red. And then anything in yellow, flag to look at it in a month from now. And so in doing that, you kind of address that risk of set and forget. And then, you know, for for companies, which I highly do not recommend this, but a lot of companies that do this where they don't really look at their financials till the end of

27:44 the year, uh you should be looking at them at least quarterly, if not monthly, but for the companies that do leave things till say like the end of the year, they're not looking at this and they're like, "Wow, we spent like an extra $8,000 on these subscriptions that we didn't need." Right. And so, it's these like set and forget things that can add up significantly. Yeah. So a quick question on that because um you know what what we do with our clients is we we we document every tech you know like every solution that they have and then we we kind of categorize them for which departments use it who's

28:15 responsible for it. So um who's responsible in ensuring that the subscriptions are up to date maintained that we've got the right number of users on it that we're not paying for 100 users and we are only 80 people right actually using it you know so um you just having a good spreadsheet or a bit of a dashboard around uh you know like everything there. Um, how do you prevent let's say um um you you've got a operations manager or a project manager or someone that's uh that's used their company credit card to sign up for some

28:48 software and that's just kind of like a recurring recurring expense that goes off. they leave the company um they've used a a company credit card not necessarily their own but it's a company credit card and that software is just running for the next three years because I've seen that I've seen that with you know they're paying for softwares that I asked them what is this I don't know and then you start digging around oh that's something that Joe from like two years ago subscribed you've been paying for this for the last two years um you know it's pretty substantial in in some cases

29:22 and it's you know, we can terminate that right now. So, what is what what is your um what is your your your take on how to deal with that? How do you how do you actually find that information or those expenses and you deal with that? Yeah, that's a good question. I mean, uh this is getting into tactics a little bit, but uh having rhythms in place to review. So, so whether it came through Joe's credit card or through comp like you know main invoices or whatever it is through the company, theoretically it would still end up flowing into specific accounts in your chart of accounts. And

29:55 so doing a quarterly review on some of those accounts where you can have some of those set and forget type expenses that could just sit there and erode the bottom line uh is a good idea. Um, you know, just kind of a top off top of my head, maybe if you encounter things like that, just making sure whoever is doing the the record of the bookkeeping ensures that the description on that transaction line has the person's name beside it. So then, you know, so you're like, okay, these are like people specific transactions that we would not carry if this person leaves. Um, and so

30:28 then, you know, once they do leave, then maybe as part of your offboarding process or workflow, um, you have a let's go through the GL and just a general ledger and just make sure we review any transactions that have this person's name attached to them and cancel those or just keep a list somewhere, right? It's like here's like a our subscriptions list. Uh, you know, these are specific to this person. These are what what are part of that process. I mean, if you use a like a a good uh people and culture, not uh HR platform, uh that you know is a good place to like

31:02 keep track of all your your team members. Um oftent times you'll have like a notes section, you can even have the notes in there. So at least it's somewhere recorded so that as part of your offboarding process, it would be uh something that you resolve because that is a good question. Those are things that, you know, business owners look at like five years down the road and they're like, "Oh man, like for this long we've been paying for that thing, right? You may have lost out a couple of thousand bucks there and um just it's flowing to a service provider that you're not leveraging." Yeah. It's a flight down to Mexico. Um and so again,

31:35 like the what we're trying to get to here is like having that mindset of return on investment for each dollar that's deployed out in your business, right? And sometimes again it's not going to be money coming back to you right away uh as like in your sort of traditional investment sense. It will be cost savings down the road too. Uh and so we have to think about this even on a monthly basis with clients you know because obviously as with our virtual CFO services it's not like it's a couple hundred bucks. And so we have this have to have this mindset too when we're

32:07 making recommendations for considering ROI on the deployment of dollars, right? It's like you're deploying dollars on the the heightened level of analytical services and recommendations and financial guidance that we're providing. Is this worth it? Right? And at some point even as advisers cuz you know even yourself being in an advisory space for for clients there comes a point where it's like okay your business has now reached a point where we are no longer the best ROI on the deployment of of dollars. Maybe you need to in our case it ends up being they need to have somebody they hire in house as a

32:40 financial lead because they actually just need a little bit uh more steady uh uh oversight that way. But um always just maintaining that mindset of return on investment for deployed dollars is kind of what what it comes down to at the end of the day here. Yeah. I think in in in in more simpler terms is uh what is the value that we're creating by investing in in whatever you could be training right. So, you're not going to see that value immediately, but you're going to see that value in in enhanced productivity, in improved leadership

33:12 skills, um, you know, improved culture, uh, you know, so there's there's employee engagement, you know, there's a lot there to consider is what is the value that you're actually investing in and what would a return on investment look like in the future. I think he's always just trying to because you want to put some metrics behind it. If you want to look at how you how to measure, we've invested $20,000 into uh training. How do we measure the results from that? I think is um you know what what you want to try and consider and then um you

33:45 know like it it's not going to get you results immediately. It's going to be something further down the line. That result that return on investment or that metric could be hey this person started off as a technician. We've promoted them to manager. um you know they weren't really much of a people's person but this training that we've sent them on has empowered them to be more um engaging you know more people oriented more um you know understanding they can get into the world of the you know their their subordinates and and really um you know they've got a lot of value to add

34:18 to them. So now become like an asset to your company rather than people coming to complain about you know hey that guy doesn't know how to speak to people or Yeah. Well, the other thing to think about too, I mean, when you're talking about building value, it just kind of made me think as well, is when when you think of like, you know, selling your business in the future, right? The the value of your business is going to be based on profitability, a profitability metric, typically EBIDA, earnings before, interest, taxes, depreciation, advertisation, and then a valuation multiple of some kind. So, in the

34:50 construction space, usually like 2 to 5x, you know, 2 to four is probably a safe range. So, if you think about it, if you have a $500,000 net income kind of business, like business, and you're looking at two to four time multiples on a potential valuation on a sale, you're looking at like, you know, a million to 2 million roughly in a valuation for your business, right? And so, what is it that will impact where along that scale your business falls is the investment in some of these things as well. And so again, yeah, you invest in training, you

35:23 invest in building your team, you may not see money coming in the door, uh, you know, as a result of that um, in the same way you would with say like traditional investments. Um, but you are retaining your team, you're making your team be more efficient, but also in having your team operate better um, and having your business be a little bit more turnkey when you do exit your business, which everybody does exit it at some point. If you want to harvest as much value out of your business when you exit it, you want to slide up that multiple scale. And what is it that moves you up that multiple scale? It is

35:56 things like having a very well functioning business in addition to the profitability metrics. Of course, you want to have the profitability there. Often to the oftent times the two impact each other. Uh when you are focusing on things that optimize revenue or profit, you are focusing on systems that slide you up the multiple scale. And similarly, when you focus on things that slide you up the multiple scale, you're also driving your profitability. And so all of these are investment type activities that do have ROI, but you do want to just think about that each time,

36:27 right? We're investing in this initiative, in this system, in these people, whatever it is. What is the anticipated return, whether it's monetary immediately or uh value in the business in the long run? I love that. I think that's a really great way to to wrap up this this episode is um you know um exactly what we were saying there is you like that that value that you're driving for the business and um when you're investing what is the val what what value are you creating and how do you measure that so it might be like you said um you know sliding that multiple

37:00 up um you know to a 3x instead of a 2x. Yeah. Yeah. Awesome. Josh, thanks again for for the for the conversation. We need a button up here today. Um, and we're looking forward to some more episodes, uh, sharing some more with you on the next, uh, next episode of the business growth factor where we have conversations about building better businesses. Thank you. Thank you. Take care and see you soon.