Replay - How Much Should Electricians Pay Themselves?

0:03 starting with laughter here this fine thursday morning. Hello, hello, hello and welcome to electricpreneur secrets, another episode of the electrician's podcast. We're in episode 111. One, one, one, one, one. Or wait, is it one, one, one, one, two? I may have this backwards. We're on 112. Yesterday was 111, joe, wow, but guess what? Either way, we're here again to help you, the electrician master sales, simplify pricing and deliver premium level service. I keep saying this If you ever end up on a call with us because you're interested in getting help with that, I'm going to ask you what I say at the beginning and end of every show.

0:44 No one's nailed it just yet, but I'm hopeful. I'm hopeful we're going to get there. We'll get there. It's always funny because the deer in headlights look is like is he serious? Is this about him? Is this like an ego moment? That's what I feel when I ask that question, but it's really about the messaging guys. So take it easy on me Okay. Yeah, we're going to, we're going to grill you here. It's like, please tell me more about myself. It's like no, it's not what's happening. That's right. If you're with us in the Facebook group live and VIP on the entrepreneur secrets community page, then you've already seen Peter Rinsland call me clay Aitken today. So today I will be the pleasant peasant, your host clay. So today I will be the pleasant peasant, your host Clay Aitken of Electropreneur Secrets, here with my co-host, esteemed co-host, joseph I know I'm messing up your name too, joseph the sales bot, lou Canney.

1:33 Joe, how are you doing today, brother? Man, I'm sorry, you threw me hard with the Clay Aitken. You've been Chad. You've been Clay Aitken. I'm waiting for some guy to call you Bob. I'm waiting for like hey whatever works, Chameleonic believe it or not, chameleonic sales is a thing, so maybe that's your interior calling. You never know, right. Well, since you brought it up like what is that? What's chameleonic sales mean? Oh, okay, I love that. So chameleonic sales is a type of sales strategy to where what you do is you're mirroring the other person and mimicking their voice, inflection, tone and body language. What it does is it's hard to actuate skill, but if you can do it correctly, it subconsciously lowers someone's defenses and guard because what they see is themselves.

2:23 Defenses and guard because what they see is themselves. Now the problem is is that if they hate themselves, they'll also find a way to hate you. Wow, you took that to a different level. I've never heard the hate piece before. Well, think about it. Let's say, everyone wants to work with someone that's like them to an extent, except for those who dislike themselves. So usually where that comes into is, let's say, you're dealing with I hate to pull a stereotype. But let's say you got the sleazy car salesman right and this person you go to their home and they're used to screwing people over on a regular basis. Now, I don't have nothing against car salesmen, but I'm just using a stereotype. But let's say, let's make it even further.

3:04 Guy's flipping a nickel and he's got a toothpick Suspenders on his arm. He's really chewing an apple. You know what I'm talking about. Is he wearing a top hat too, a little bucket hat? Yeah, and a little mustache, the whole thing with a handlebar. New York accent. Maybe a cape and a goate. The point is, this person is less likely going to trust what they see in you if what they're doing to others is deceitful. But for most of us who operate with integrity, when you're mirroring the integrity of someone else, they say this is someone who gets me, this is someone I can relate with, this is someone I understand, and that concept is called chameleonic selling and it's based on the chameleon.

3:49 You put a chameleon in front of one thing, it's something. You put it in front of something else, it's something else. So it requires almost a mind like water mentality. You have to be able to ebb and flow throughout. Whatever you're going to find. It's very advanced level sales, but it's really impressive when you can pull it off. I appreciate that and it was unexpected. That's one of the beautiful things about throwing out all the fancy shit, joe, and just showing up. We just show up, have great conversations, and today we got to learn something from you there Chameleonic sales. I like that. Thanks for bringing that to our attention today. I also want to touch on something really important and it's our topic of the day, and it's well. The question was how much should you pay yourself as an electrician?

4:32 But it's a little deeper than that, joe. We're really going to dial into some business problems, something that I hear on the calls sometimes, and I think it comes from just a lack of business training, and I think there's a lot of people who relate to this. Because when you start a business, let me ask you, how likely is it that a no one taught you business, that you never had a journeyman or a business owner going? Hey, joe, you know what would be really great if I taught you how to run my business so that you could one day be my comp, my competitor? Yeah, not going to happen, it doesn't. It's a shame though it is a shame, I agree. Please tell us why.

5:12 Why is it a shame? So the thing is is it's once again the race to the bottom mentality. People are so afraid that you're going to take what's theirs that they're not willing to help. And because they're not willing to help, the ships always stay low because we're always in low tide. But let's say sake of argument. You were to say like you, for an example, you're a qualified, competent, very, very intelligent person. I'm pretty sure I could take you into any position in any company and you'd somehow thrive. If I recognized you as an employee and said this person has the ability of thriving and growing, it would make my business better by putting you in a position of power, empowering me.

5:55 But some people don't, because they see you as a threat or the you that we're describing here as a threat. This person is too smart, this person's capable, this person could do better than me. Personally, I love being the least intelligent and least successful person in the room because that means the influence around me only will make me better If I'm the smartest guy in the room. I got to get out of that room. I love that. Yeah, totally true, man, and I follow the same philosophy, right? That's why I'm in the room with you. Good to learn. You get to learn about community sales and all the rest, no for sure. Someone standing on your shoulders and they want to empower you to do everything you can at that level, but absolutely hold you back, hold you down from rising up anywhere beyond that level, and that's not a great leadership quality to have.

6:45 Quite the opposite is what we encourage. Go ahead, show people the ladder and dare them to climb it. Help them climb it Because, just like we said the other day, you can make a situation so sweet and so easy for them that they don't want to leave anyway and they just appreciate you and your mentorship. Let's not forget, forget it's lonely at the top. Heavy is the head that wears the crown. It is not easy to run a business, it is not easy to be top dog, it's not easy to make executive decisions every day, and I fear that that's why so many of us are out there running fire to fire right now and basically, a time management dumpster fire.

7:28 That's not the topic of today, but it really fits there, joe. It does and, honestly, the thought of a dumpster fire is a great analogy for what it looks like when you're running a business without proper leadership. Because it's true, right, I know for personal experience I was a good installer, I had a sales understanding. It was like, okay, great, I can go do the job. What's stopping me? I'm already doing the job, as I'm already selling the jobs. Why can't I do this for myself? Until you realize that, oh, I'm not familiar with how the tech structures work or how write-offs work or how marketing works. It's the same problem. It ends up being a dumpster fire and you're the one holding the match.

8:10 Absolutely. I appreciate that Now today I want to get into a bit of some nerdy stuff, because we're talking about pay and we're talking about accounting a little bit. I know we've all got some stories, so earlier I was being featured on another podcast I'm going to do an interview on. It's called the Startup Shit Show. Got some experience there. If you've heard my interview, you know what I'm talking about. This isn't my first business. I did make a mess with my first one, though, and the first question that Travis Johnson had the podcast Titan had for me was do you pay yourself? And I was like, yeah, yeah, I do. But it made me realize the number of times I've been on calls where I've recognized situations where electricians aren't paying themselves, and what I mean by that.

8:58 Just so we're not puzzling, anyone is paying yourselves first. I think this fully comes around and becomes a big piece of that pricing problem, joe, and so it's so important that I think we covered this today, so tell us a bit of your early experience in business and how you evolved from not paying yourself to paying yourself. Sure. So when we started our startup, it was just me and my partner at the time. So when we started our startup, it was just me and my partner at the time. You know he was the manager, I was the installer. Like, we had it like well, you can manage this, I can install this. We're going to figure it out together Now. I had a wedding to plan that was in the near future and we still took the leap right, and the thing was we didn't know how to pay ourselves.

9:43 We assumed that the way it worked was well, jobs will come in. We just assumed work will just show up. We'll then close. Whatever it is that shows up, we'll make a fair enough profit that we can pay for everything. And then I could sit with a nice fat check at the end, and it never quite worked that way. That's kind of the what's left mentality. Right it was the worst. And when you work on the what's left mentality, I can tell you what you get. That first month's salary was $300 that month that was lower than I had ever. I was working as a cashier when I was super young and I was making more than $300 a month.

10:25 So to be a licensed professional leading a business and walking with pennies, it was probably the most demoralizing thing in the world. It really was, but there are ways out of it. The ways out of it was, believe it or not, when I was reading the book Mike Michalowicz wrote Profit First. I remember going through it and it started to make sense because it was like, okay, instead of just saying, well, I'm going to spend everything and then whatever's left over I'm going to keep Instead, I almost imagined it like a bunch of envelopes this envelope is marketing. This envelope is this. This envelope is marketing. This envelope is this? This envelope is that. And I put myself as an envelope and before I could pay the essentials, I was considered an essential, so we had to pay ourselves, even if it was pennies.

11:15 The money had to go into the account and as the business grew, we were able to get out of that mentality yeah, super important. So, bridging back to this problem I think this is where a lot of it stems from is most of us start a business with kind of one foot in dip the toe in the pool, don't just dive in right. And what I mean by that is the very same thing I did with my concrete company, my first business. That was also a startup shit show. Sole proprietorship, my account is the business account, right. All the transactions will happen. Like you said, joe, I'm going to earn money, I'm going to spend money. In fact, in many cases for a lot of these guys having to save a little or have some money to go buy materials on some of these first jobs and then float that for likely the 2, 3, 4, 5, 6 weeks, sometimes 30, 60, 90 days and hopefully get paid in time and try to figure out this whole timing mess.

12:12 And again you end up with this what's left problem because you're seeing your pay as whatever is left after the dust clears. But the reality is just to add that extra complexity, if you're out there doing projects which a lot of new electricians fall into, like some residential builds, additions, whatever, there always seems to be a lack of payment terms, a lack of communication on those payment terms and so a huge juggle and a massive risk that results in no pay. Would you believe it if I told you? I've been on the call with people who've been working in their business for a year and a half and haven't paid themselves.

12:53 Would I believe it? Yes, does it break my heart to hear? Also, yes, I cannot imagine the thought of it actually hurts even more. And can I explain why? Yeah. The reason being is that if you've been in business for a year and a half and you haven't paid yourself but you survived to this point, it's only one of two things that could have happened. Either A you had a phenomenal financial structure prior to making the leap, and it sucks, because I know what it's like to build that base up and then watch it dwindle, deplete it. I can only imagine how heartbreaking it is to see the mountain you've built be slowly chipped away. It's like or on the other side of the coin, they're literally just flying by the seat of their pants and just taking whatever crumbs can get, and neither situation is a situation I would wish on anyone.

13:45 Exactly, that's tough, right. And so how this plays into that pricing problem is exactly this Pricing forces us to make a projection upfront the expenses of this year, right? If I'm talking about having people in the field, well, I'm going to assume 2,000 hours just because it's full time, even if they're averaging 34, 35 hours a week. I don't want to deduct from that because in my pricing exercise, I want to be looking at it, not looking for it, just like I want that to arrive in my bank account and be looking at it, not looking for it. Otherwise, with this what's left problem, we end up with more month at the end of the money than money at the end of the month.

14:26 That's a problem, right. So in that pricing exercise, guys, I really want to encourage you to decide what it is you need to make, and full disclosure here. That's how we pay ourselves still to this day. Yes, things grow. Yes, lifestyle increases. Yes, you have a plan to increase that salary, that payment to yourself. But there's ways to do that like a commission structure to yourself, like performance pay to yourself, like dividends, checks to yourself for good performance, and so very much the same. We know what we need. Do you know what you need, joe, to pay your bills every month what we need.

15:09 Do you know what you need, joe, to pay your bills every month, literally. If you ever wanted to, I could tell you to the cent everything that comes out in and every month. I am great with that number. I love that you said that because a mentor of mine many have said this. Actually, how you do one thing is how you do everything. Yes, but we know about businesses. If we're loose in our pockets at home, pull the mirror out and then look at your business and I would bet it's reflecting the exact same picture. Can I actually speak to that, please? Because you said perfectly, I remember, and I'm sure this is something that a lot of other businesses had gone through have you ever been in a situation to where you're looking at the money and you're like how are we going to get all this paid? How did the bills get so high?

15:51 How did these expenses get to where they were? And the problem was is because we weren't mindful of it. It was like oh, it's $50 a month. We make $100,000 a month. We can swing $50 a month, but then it adds, and it adds, and adds, and adds, and then a six-figure salary doesn't cover it anymore. So the thing was is I learned, and actually one of my financial mentors, josh Lupo, who runs the Fi Couple he told me to really get hyper-analytical on everything at home. So instead of running the business spreadsheets, I brought my personal spreadsheets to the business and then it became like, okay, run it like it's your money, like it's coming out of your bank account every time, and if you're not willing to make an expense, then strike it and make do with what you have.

16:39 I love that there's some big nuggets here Again. This is kind of reminding me of the cash management secret series that we did just about a month ago or so. But you just reminded me of something else, and there's this quote from einstein that I always loved. He he called it um, compound interest is the eighth wonder of the world, he says right, he who understands it earns it, he who doesn't pays it. But if that's true, then the ninth wonder of the world is something you just mentioned expense creep, lifestyle creep. Next thing, you know, we've got this quarter million dollar lifestyle and we can't afford it because there's been financial changes on the front end, because something changed right, or you've been spending it all over the years.

17:28 It amounts to nothing. Believe it or not, there's actually a term for that. Warren Buffett came up with it. It's a concept of gold. It's called golden handcuffs. So pretty much what golden handcuffs are is that they're too heavy to be felt or they're too light to be felt until they're too heavy to move. What that means is that expense creep grows with your lifestyle creep and as you make more, you start spending more. You make more, you spend more, you make more, you spend more until suddenly you are at max saturation and you're realizing you're like I make $200,000 a year, I make 300,000, $400,000 a year, make $200,000 a year, I make $400,000 a year and I'm still broke.

18:17 What's happening? And then at that point you realize you already have a house and a second house and the Ferrari, and now all these bills got to get paid and they got to get paid from someone and unfortunately that someone's you now. A hundred percent, a hundred, 100%. I love that. So taking this back to the relation to your personal finances Bridges back to what you said. I love how you said well, what I started doing is bringing my personal spreadsheets forth into business. So often in fact I would say 99.8% of the time when we are working through pricing with people and I ask them this simple question how much do you need to earn this year personally? They don't have the answer, joe. They don't know.

18:58 Now again, how you do. One thing is how you do everything, at least with a grain of salt, and so it's no surprise that we help with the bottom floor business. We help with pricing, marketing and sales. Once you check all three of those things off, you've mastered the exchange and your business can grow to the next levels. So we help at the bottom floor. That's what we do. So is it a surprise that people with pricing, marketing and sales problems have personal financing gaps? I would say as well. No, no, not really right. Not considering your business is a mirror of your person. But let me double underline the importance of this.

19:38 Just as Joe said, you need to know how much you need to earn in a month to cover your bills, because that assumes that you understand your bills. That understands that you understand. That assumes that you understand your responsibilities and your accountabilities. You got that one. And if you don't have that, then how could you possibly know what you need to earn? And if you don't know what you need to earn, how could you possibly know what the bills are for your business? You see how this is adding up, and if you don't know what you need to earn, how could you possibly know what the bills are for your business? You see how this is adding up, and if you don't know what the bills are for your business, how could you possibly know your fair service rate for billing for your services?

20:19 it becomes impossible. And you know the biggest problem that comes from that, and I'm pretty sure we've seen it as well. Yeah, and we say, well, well, what do you think you need to charge? Oh, about $200. The about is the dangerous part. If you just said I need to charge $200, I'd believe you. But if you said I have to charge about $200, it's like there's first off, no one should be charging $200. We need more than that. But second, it's when you say I only need about, you clearly don't know. And if you don't know, how can you ensure it? When a customer looks at you in the face and says, why are you so much? You better have a damn good answer. Yeah, and that confidence that I know what it is will often sell the job for you.

21:01 Exactly, and if that wasn't a mic drop moment, I'm going to try to create another one right here. Go for it. When contractors say to us, well, that pricing won't work here not on the east side of Mississippi, not down here in Texas, not up here in Canada, not out here in the plains, wherever they are and we always say, yes, it will, because it's based on your expenses. When they say that what they really are saying is where I live, I can't bill based on the expenses that I've accrued to run this business, plus a markup that would sustain my growth to build this business.

21:41 In which case, if someone was really asking you that, wouldn't you then ask them what the fuck are you doing then? No, it makes complete sense why? do this. Do you like punishment Some? people do. Hey, I'm not going to knock it. But at the same time, think about it. When these people are asking and saying, what am I doing? Sometimes it's because we don't know any better. Like I knew that working for myself was probably the best move I could make, just because of how I am as a person. And if you don't know that, how could you possibly say you know what? Yeah, I work best like this. I'm going to go work for someone else. But you have to know yourself first.

22:24 Some people are in a situation to where they know they can't work with other people, but they can't figure it out on their own anyway. So it's a rock and a hard place between I know I can't go left and I know that my business isn't letting me go right, and all I see is the walls coming in, and that's where desperation and panic kicks in. Definitely huge. So here's the good news, guys we're going to turn this around. That's that's really examining the problem here. We have to stop looking at this as a sole proprietorship. You need to account for a salary for yourself, because, whether you work or not, you need to get paid. If you can't pay yourself, then you can't be in business. End of story.

23:06 It's not even a business, it's a promotion. At that point, you're just working for free, right? That's a promotion, isn't it? it's a great promotion. If you don't mind, I wouldn't mind something like please, by all means line up. I will gladly take the order for free so here's the exciting thing sometimes, on these calls too, just the same, we'll ask this hard question when do you see yourself in a thousand days? What's your business look like in three years, five years, 10 years? Quite often it draws a blank. Well, really, I haven't thought past. This month I got payroll to meet. Not even for themselves, for their team, right. What about for your person?

23:46 What about the character that you're cultivating? As our late great mentor, jim rohn would say, you've got to have a plan right. Design a life of your own or you'll fall into someone else's plan, and you know they have planned for you not much, not much. So this is what we're sure about. Your pricing can be anything but someone else's. It's got to be yours because it's built off the money you need to float your bank in your home, your personal needs. It's built off the vision that you have for your business. No matter what template you follow. You don't have to do it like anyone else. You don't.

24:27 You could do it any way you want and the proof's in the pudding, like with our client Edwin. 11 months in, right from two weeks into business, he began working with us, got his pricing right. First, it was built off the full, comprehensive plan between personal and a congruent plan between personal and business life and at this point, 11 months in full van wrap, full website, right, second van, second wrap journey person and a helper. Now some people grow faster than that and some people never get to that level and that's who we're really speaking to here is look, if you want to get there, all you have to do is put a plan in place to do it, take the steps and, most importantly, pay yourself to do that.

25:17 Because even in your personal plan, you can say, well, look, I need sixty thousand this year, and my next step would be to say, well, okay, great, I'm glad you have a number. Is that an optimized number or is that just looking at your bills and recognizing what we need to make? That's my next logical step, because where I'm taking it next is to just a moment of tax planning. We can look up the tax tables, federally and in your state or province, and you can actually do a projection on how much tax you pay. So for me, I like to max my tax bracket. So I know I said 60 earlier, but in reality it's closer to 82. That's my salary.

25:58 Then, based on performance of the business. We take bonuses beyond that. It's an incredible way to still be fruitful and recognize the efforts that you put forth and the performance that you're experiencing. Does that make sense, joe? It really does. And really it comes down to maximizing everything that we know about how to leverage this effort. If you're going to put in that much effort, it almost seems like a shame to not pay yourself. And I like the fact that you said maximizing your tax bracket, because taxes are also things that people don't really understand. I mean, for all of us in the States it's usually the IRS comes at you with this big, giant dude with a club just thumping it against his hand like, hey, you're going to pay me this month, right.

26:45 But the thing is is that you can also learn about how that game is played and play it smart. And when you know the rules of it just like running the rules of business you can make educated and accurate, well thought out decisions. So knowledge becomes power. Absolutely. Yeah. Here's one of the telltales I always know when someone says to me, we get on a call and they're telling me about the performance of their business and it's like first year we did 180K with about a 48% net profit. That to me, is always the moment where I go okay, how much did you pay yourself?

27:25 And I know immediately that they're a sole proprietor, because that's the telltale sign that they didn't pay themselves first and that they're just considering what's left to be theirs. Well, I guess about 40 grand, because that's what was left, that what's left problem guys, don't fall victim to that. Okay, we're running out of time here. Joe, you want to crank out a couple of action items? Do you have anything in mind? I can go with action or all-star I got no preference either way, we'll roll with it, so I'll take action for start. Are you you going? personal. Are you going personal? Yeah, I'll be happy to go personal, all right.

28:06 So when you need to start with a plan, right, like, no matter, what you do at the very most rock bottom level really comes down to understanding your personal finances. Now, we touched on it earlier, and the reason why was you cannot figure out what you need to charge if you have no idea what you need to make. So the most bare, bare minimum is literally sit down with your spouse and say let's come up with a list of all the bills that we have. Now, some people might say that's overwhelming. So I have an easier way. The bare minimum like I'm talking, the easiest thing you can do is just get one family credit card. What you do is you get one family credit card with a cashback bonus.

28:48 What you'll do is then all your expenses get transferred to one card. Then at that point, the following month, you'll be able to see every bill that you have. And the fun part is the bills that you didn't remember, the sneaky ones, that kind of creep in. You're going to get a letter from them and they're going to say, hey, you haven't paid us. You'll be like I didn't even know I was paying you. So by consolidating your card, you can at least understand what your bills are going to be, so that you have a position of saying it's all here. Here are the numbers. What can we cut? Absolutely, I, absolutely, I love it. Okay, I'll throw in the uh, the all-star today. I'm not an accountant.

29:29 Joe's not an accountant. We are not accountants. Big flashy flashing sign. Flashy flashing sign. Yeah, I said that. Right, we don't carry those credentials, guys. Everything we talk about is based on business, math and business experience and the growth that we've seen and the potential that contractors electrical contractors tend to have to design a business that they envision. Okay, and you can do the same, but you should have a tax accountant. I love tax accountants. Why? Because they do all the complicated shit. They help us with tax shit, they help us with tax position, they help us reduce and plan, and that's really important.

30:10 It's important to me and it's important to you. So if you're someone that doesn't have a great relationship with an accountant, I'm going to really push this here. If you don't have those good feels from your accountant because this is someone you want to spend half a life with I want you to meet with them quarterly or at least have a check-in to make sure. Oh, yeah, no, we don't need anything this quarter, but I want that appointment set up for you. I want you to have such a great relationship that that accountant can look you in the face and say, joe, you're being stupid right now. That'd be nice, that's the kind of person you want. That'd be nice to have an account with that level of honesty. Absolutely so. If you don't have that relationship yet, guys seek it out, Find that person we did.

30:53 I'm quite happy with our selection. It did take going through some difficult people, some less than adequate premium service providers let's put it that way. I remember that. Okay, guys, this has been another episode of Electricpreneur Secrets, the Electrician's Podcast number 112, not 111. I'm Clay Aiken, this is Joseph Lucani, and we're here with you, guys five days a week to help you master sales, simplify pricing, pay yourself first and deliver premium level electrical service. We'll see you again tomorrow for the end of the week show. Cheers to your success.