Building Needs to Be MORE Expensive to be LESS Expensive

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The construction industry is broken and most builders have no idea they're part of the problem.

In this solo episode, Duane breaks down his most controversial take: for the cost of building to get cheaper, it first has to get more expensive. It sounds counterintuitive, but once you understand the numbers, it makes complete sense.

Transcript

Safety And Tools That Save Time

SPEAKER_00 0:00

My mission is to create a new building industry, not just where clients get the houses that they deserve, one where every single business owner in the building industry is profitable because that is one way that we are going to make the cost of housing in Australia more affordable by everybody understanding what their business is, stop pretending that we're just tradies and builders and actually becoming business owners. As a builder, one of my number one priorities is making sure that my entire team, including my contractors, go home safely every day to their families. I understand that workplace health and safety can sometimes feel like it's just an overwhelming thing that you just don't have the time, you don't have the money, you don't have the resources to put in place. That's why I recommend AZCo. Azic Co. is a digital platform that allows you to run more profitable projects and stay on top of your workplace health and safety requirements. You see, safety isn't a cost. Chaos will always send you an invoice. An unsafe job site is an unprofitable job site. Using digital platforms to drive safer, more profitable jobs is the way of the future. So get on board with Hazico. Go to www.hazico.com and help create a safer job site for your team. From timber frames and trusses to fasteners and stealers, Rhett Online has got the lot. Real trade gear, no weekend warrior stuff. Your own profile page gives everything neat and tidy. Account details, safe job lists, invoices, and all your top ordered products. No more digging through old paperwork or chasing around old invoices to try and see what you've ordered. It's all there, ready to go. As a builder that's run my own construction business for over 20 years, 17 of those years I've been using Brett because Brett's are always putting their customers first to help us deliver more successful and profitable projects. By using their online portal, it means that myself or my supervisor can order gear at the drop of a hat. No more driving across town to place orders or have to pick up the phone and try and get through to the right rep. It's just done and dusted. On top of this, their next day delivery service is an absolute lifesaver. When you under order on framing or one of your team forgets to add a zero, Brett's proudly serviced all of Southeast Queensland and the Wide Bay region right now and are gearing up to roll out across all capital cities very soon. The Brett's way is simple. Less admin, more building, more profitable projects. Brett's online, built for builders who don't have time to muck around. Building better and living

A Claim That Upsets Builders

SPEAKER_00 2:40

better. G'day guys, welcome back to another cracking episode of Level Up. We are back in the studio this afternoon for another solo podcast. And I'm about to stir things up because every time I talk about this subject, I tend to get lots of messages with people completely disagreeing with me. So um look, that's what it's all about, isn't it? We've got to put these conversations out there. We've got to, well, we've got to start the conversations to um to get people thinking. And so the the topic I want to talk about today on the podcast is I firmly 100% believe for the cost of building to get less expensive, it has to get more expensive. So I'm gonna break that down and talk to you about what I am, my theory on this. But I've seen how this works. Um, like my building business uh these days is charging, well, it's charging what it needs to actually make money. I know my numbers, I know my costs, um, I know my role in my business, well, I know everybody's role in my business. We all get paid a salary for the roles we play. My business makes profit

When Being “Too Expensive” Lost Money

SPEAKER_00 3:40

on top of uh paying everybody our salaries, and we understand all of our overheads very, very clearly. So, but the thing is, if I go back 10, 12, 14 years ago, when I was like most builders out there and and and most traders, just tendering on every job, every phone call I got, every set of plans that come across my desk, um, I was just tendering, tendering, tendering all the time. And yet ever almost every single job I was being told I was too expensive on. And back then, my business hasn't really changed too much uh when it comes to structure, but I know what I'm charging now, and I know what I was charging then, and back then, even though I was getting told I was too expensive, I was actually losing money on every single project that I did. Um, and that might sound like I'm full of shit and it's all bullshit, but I can tell you now that one of the reasons that I was so stressed out, I had so much anxiety, I ended up with a lot of depression because I had no idea on my numbers. Um, I was a great builder, but did definitely did not know how to run a business and didn't know my numbers. Honestly, like I was not making money on any job that I did for a long period of time. Uh I was literally just covering all the bills, I was covering the overheads, uh, and occasionally I'd I'd earn a basic wage. But I was in that position where every year the the accountant was telling me, hey, um, you've made a certain amount of money, but your company's made a loss. And I didn't understand that the money that I was being told that I'd earned, I'd actually stolen from my business, and my business was trading in solvent. So yeah, there's a lot to unpack there. But I firmly believe, knowing what I know now, um, again, I'll put my hand up. I I personally believe that when it comes to the building industry, I am the best when it comes to understanding the costs of running a building business, how to work it out, uh, and what builders need to be charging. I am the best in Australia at that, and I've proven that um over a thousand times by working through the numbers with builders and uh getting them to have those light bulb moments where they're like, holy shit, like that that's why I'm not making any money, that's why there's no cash in the bank. The thing with this is if you're running a shit show, which over I personally believe over 80% of the building industry is, you're basically chasing your tail every single job you do. You're you think because you don't understand your numbers, you you think you're making money. And I was having

Knowing Numbers Means Walking Away

SPEAKER_00 6:05

this exact conversation actually with a with another builder that called me up earlier today off Instagram, and he was saying to me, mate, like your your podcast has changed my life. Like, I I've I heard you talk about numbers for like the last three years, but it's only clicked in the last six months. And I was like, What do you what do you mean, mate? He's like, Well, I just I didn't get it, I didn't understand it, but I I'm slowly gotten better, I know my numbers down. Now I get called, like I go to price a job up, and the clients are calling me back and saying they've got a builder that's gonna they've told me they can do it for 10% cheaper. And I just flat out say, Oh, yeah, no worries, I can't do the job. And they're surprised that I knocked them back. And he said, There is no way in the world that I'm going to get caught up in that tendering scenario and being told what I can charge because I know my I'm starting to know my numbers, I know what I need to do to actually make money. Um, and I'm quite happy to walk away from jobs. And he actually said to me, He goes, Your podcast is the best thing that's happened to me. Like, you you don't realize how much you've changed my life. And I'm actually going to get him on the podcast in a couple of months' time. We've got him booked in, so stay tuned for that one. It's going to be an absolute cracker. But um the thing is, he actually said to me, now that I'm charging more, I've actually got more work. All those clients that I'm pushing off, and I'm I'm not paying, like they're not wasting my time because I know my numbers and I can confidently say, hey, not interested, go and get the guy to do it cheaper, is opening up the door for all this other work that's now piling in. So it's completely changed his life. But this is what will happen to the entire building industry when business owners understand how to run a profitable business, understand their numbers, and make money on every single project that you do. So I'm uh I'm like I do, I'm probably going off on tangents here, but uh let's talk about um I'm not sure on the exact, but I think it was like the 24-25

Insolvency Ripples Through The Industry

SPEAKER_00 7:50

financial year. It was the highest amount of insolvencies in the construction industry ever. Um, it was near I think it was um close to 4,000 builders uh shut down when insolvent went bankrupt. On top of that, you then have all the trade suppliers, contractors that were caught up in that that possibly didn't survive and fell over as well. Um, and we never actually know the true numbers of that, we never know the full flow and effect because when a building business goes under, it doesn't matter if it's a if it owes a million dollars, ten million dollars, a hundred million dollars, even the small ones that owe a million or a couple of million dollars take lots of little tradies down with them, lots of little suppliers. And it breaks my heart because it shouldn't be like that. And so all those costs get sucked up by by all of us. So the cost of building, like the cost of materials, the cost of labor, the cost of our vehicles, the cost of every single item that we put into a building, all has that lost money built into it. Because if you don't look at the bigger picture and you you don't understand what's going on here, you you're never going to be able to get your head around this. And so just let's just talk about my building business for a moment. Like my building business pays uh insane amount of insurances, um public liability, builders insurance, indemnity insurance, and then this podcast pays a lot of insurance for me to sit here and be able to express my opinions. My my training business pays a lot of insurance. Like all those insurances are to cover people that aren't doing the right thing. And so, as builders, when we pay our insurances, um there is a fee built into those insurances

Hidden Margins In Materials And Insurance

SPEAKER_00 9:40

to cover the builders that aren't paying their bills and that are going bankrupt. The companies that we purchase materials off they build in excess percentages to cover the money that they lose from builders and tradies not paying their bills. And I can give you multiple examples of that, but just a couple that hopefully will hit home is there's a large hardware store chain um here in Southeast Queensland that on average writes off four to six million dollars in unpaid invoices every financial year. So that four to six million dollars that's just that's just not pushed under the cupboard and under the carpet and and nobody knows about. That money is is built into everything else. Every other product that they sell has a bit of a margin built in to cover those losses. On top of that, that company has to pay insurance. So that there's insurances out there that will pay bills that if if someone goes broke or insulin or whatever, it will it'll it will pay a certain percentage of that lost money. Every all of that costs money, and so for us to buy materials from that particular hardware, they're building in all these excess fees to cover all this lost money, which we all pay extra for, which our clients pay extra for. Um and I can I can tell hundreds of stories from suppliers like that, uh, roofing companies, plumbing companies, um, you name it, there is so many businesses that write off lost money because the builders that they were working for, or the tradies even that they were working for, didn't understand their numbers, weren't charging enough, ended up going bankrupt, and so the rest of us all have to pick that up. And so,

Charge Right To Lower Costs Long-Term

SPEAKER_00 11:25

this is where I want to really get across to everybody for the cost of building to get cheaper, business owners need to learn how to run their businesses better, we need to charge what we need to charge, we need to cover all of our costs. Because if we're covering all of our costs, and this is exactly how it works, if I'm covering all my costs, I'm paying all my contractors on time, I'm paying all my suppliers on time, I'm paying all my taxes on time, and so nobody is having to add on additional costs because I can't run my business. But the reality is the whole industry is built on the back of businesses that fail. And every single one of us is paying an additional margin or additional percentage to cover all the lost money from the builders and the tradies and the suppliers that go broke every single year. This is it's time for change, but this industry needs to improve, and it's time for this industry to stop burying its head in the sand and stop making excuses that we're we're not business owners, we're tradies, we're builders, we're suppliers, we we don't understand this stuff. There is so much information out there now. There is absolutely no excuses for businesses not to understand how to run a better business. And look, I hear it all the time with LiveLife Bill, my training business that helps, well, we've helped over a thousand builders in the last five years understand this stuff, understand their numbers, run better businesses. So it's all doable. And the thing is, so many people out there, and I get this story almost on a daily basis that I can't afford help, I can't afford training, I can't afford mentoring. The reality is you can't afford not to get training, you not to get mentoring, because every day that you pass, that you're not reaching out for help to know what you don't know, is another day that your business is just dragging its tail, putting its head in the sand, having poor cash flow, not making profit. And that is bad for every single one of us. So my mission is to create a new building industry, not just where clients get the houses that they deserve, one where every single business owner in the building industry is profitable, because that is one way that we are going to make the cost of housing in Australia more affordable by everybody understanding what their business is, but stop pretending that we're just tradies and builders and actually becoming business owners. When we become business owners, we get more serious about things, we we have systems, we have processes, we we understand our numbers, we track our data, we pay our bills on time, we pay our taxes on time, it benefits the entire country. And more importantly, it benefits the entire construction industry.

Open Invite To Talk And Final CTA

SPEAKER_00 14:07

So, guys, look, reach out, comment, ask me advice, reach out to me on Instagram, reach out to me on YouTube, wherever it is. But uh if look, if you've got a if you've got something on this topic about um the cost of building or understanding your numbers, let's get you in this desk over here. Let's sit down, let's have an open conversation, let's talk about what your opinions are and what your experience is because the more that we put this stuff out there, the more that we open up these cans of worms, the more this industry is going to improve. And at the end of the day, that's what leveling up means. We're gonna change the building industry in Australia, we're gonna create a new one, and everybody's gonna thrive. I look forward to seeing you on the next podcast. Make sure you go to the DwaynePears.com website, get your level up merch so that you can help me continue to create a new building industry and for this podcast to be the number one podcast in Australia. Cheers, guys, see you on the next one.