From Stuck to Scaling: Which 10 Founder Habits Are Killing Your Profits?

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ℹ ABOUT THIS EPISODE

Feeling like your construction company is stuck in second gear? You might be the problem. 

Wade and Stephen reveal the top 10 ways construction founders accidentally strangle their own businesses. From decision hoarding to hero syndrome, discover which founder habits are killing your growth and profitability. 

This isn't about working harder—it's about working smarter and finally scaling your business beyond your personal capacity.

⌚️ Key moments in this episode:

• 00:00 Introduction to Financial Blind Spots
• 13:03 Common Misconceptions in Financial Management
• 13:08 Challenges in Tracking Work in Progress (WIP)
• 13:11 Distinguishing Job Expenses from Overhead Expenses
• 13:16 The Profit First Approach
• 13:18 Fear of Growth Due to Cash Risks
• 13:23 The Pitfalls of Cash Flow Management

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Join the conversation on our LinkedIn page: https://www.linkedin.com/company/CarpenterCPAs

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Wade Carpenter, CPA, CGMA | CarpenterCPAs.com
Stephen Brown, Bonding Expert | SuretyAnswers.com

Transcript

[00:00:00] 

Wade Carpenter: If you've ever wondered why your business feels stuck in second gear while the engine's redlining, it might be because the person behind the wheel won't stop riding the clutch. Today we're talking about the top 10 ways founders accidentally strangled their own business and no, working harder is not the cure.

If effort fixed problems like this, contractors would be billionaires. Let's talk about it. This is the Contractor Success Forum. I'm Wade Carpenter with Carpenter Company CPAs alongside Stephen Brown with McDaniel Whitley Bonding and Insurance. And this is a second part in a three part series on scaling up a construction company.

Stephen, can you give us a quick recap of the first episode before we dive into the episode?

Stephen Brown: The first episode we talked about, Wade, whether you as an owner might be a bottleneck. How are you hurting the growth and the effectiveness of your company, or helping it?

The second thing is there's certain points in a construction company lifespan where you just get to a level [00:01:00] where as a construction company owner, if you haven't been through it before, you've got a an intense learning curve. And at that point everything changes.

We were talking about those levels, and sometimes you get to a point where your level of work that you're doing involves so much more than you have in place.

So how do you figure out what it is you need? How do you figure out what's going on and how do you fix it? That's what the podcast is all about. 

Wade Carpenter: Absolutely. And I loved your analogy last time about the relative with the hearing aid. Intervention, I guess I would call it. Today might be an intervention. Some of these 10 constraints we're gonna talk about might hit home for you.

Let me jump into the first one and I'll get your thoughts on it. Number one is decision hoarding. We've already talked about it last time, every decision flows through the boss. The company moves at the owner's speed.

I've had actually a couple of situations this week where I had a couple of prospects and they were telling me one [00:02:00] part of their process gets held up like on the payables because they're the ones approving them.

If you're the construction owner, that's the only guy with the key to the tool shed, everybody's gonna be standing around waiting. If every decision goes through you, congratulations, you become the world's most overpaid traffic cone.

Stephen, ever seen a job site where maybe five guys are waiting around where the owner won't approve a $400 purchase order? It's stuff like that. 

Stephen Brown: I see that all the time, and I think to myself, at what threshold of pain? As a contractor, it's all about managing risk. And of course you've been through so much as owner of this construction company that your employees have never even thought of before. So you're gonna be the expert, right?

But here's the situation where you've got to say, here's some risk I'm willing to take in order to help my company grow. And that is the decision making process. For example, bonding companies require subcontractors to be bonded back to you if you're a General Contractor.

They said, well how [00:03:00] much? Any project over 25,000? Any project over a hundred thousand? It's different with different contractors. They're like, I can effectively manage any situation with a subcontractor to X amount of money. Well it's the same amount as an employee? You've gotta say, what decisions or am I going to realize that they have to make in order to move forward?

And what decisions do I have to make? You've got to trust. I think it all comes down to trust, doesn't it? 

Wade Carpenter: You know, trust, but controls. and, you know, I that's what all this is about, is how do we get around? We're gonna get to that next time, how do we get around this? But today is about recognizing it.

So if you're listening to this and it's hitting close to home, hit the like button. Misery loves company and YouTube loves engagement. So we would love it if you'd smash that subscribe button. Gently remember, this isn't demo day, we would appreciate it, always helps the channel out.

So anyway, let's move on to constraint number two. That is the hero syndrome. I personally do this. I know it's like, okay, it's just [00:04:00] faster if I do it myself. You ever see that? You always become the savior, but if you're always the savior and they're all lining up behind you, you become the problem. The owner is the one that's always the firefighter that refuses to install the sprinklers in the building. 

Stephen Brown: You're exactly right. That's just like you take all these new action hero movies that are out right now. Notice they're teams. Each one of them have specialty. It's not just Superman doing everything. That's why comic books have so many different characters.

Wade Carpenter: Being the hero is fun until you realize heroes don't scale up. Have you watched owners refuse to let go of things like that? I know I do it. They say, nobody can do it like I can. 

Stephen Brown: Yeah. It's so true in every organization. I would not name the relative that would not recognize the hearing aids because I didn't wanna get in trouble, and I won't say in every organization but to some extent they mean well, but they're just causing frustration down the line.

Because their inability to say well, you know, actually you may have a point [00:05:00] here. What do you suggest? And then I'll think about it and get back to you. That's a healthy response, isn't it? 

Wade Carpenter: Yeah, absolutely.

Stephen Brown: But anyway, the hero syndrome, you were talking about it, and then you also mention in your outline, a technician mindset. What do you mean by that?

Wade Carpenter: If you ever read the book, the E-Myth Revisited, that takes me back to when I first started. The E-Myth basically talks about what they call the entrepreneurial seizure. You may be really good at what you do, like me. I got really good at doing the accounting and all this stuff and I know a lot about business, but running a firm is a lot different. There's Still a lot of things had to learn.

But that's exactly what happens to contractors. You may be great at putting a building up, but you've never maybe done the estimating side over the purchasing side because you've all had that around it. Just because you're a great carpenter doesn't mean you should run lumber yard, I guess I would say. 

Stephen Brown: That's a great point. I think too about hierarchy of titles within an organization. Now as A [00:06:00] LLC, things have changed. Back in the old days when there were C corporations, there was Presidents, Vice Presidents, Associate Vice Presidents, on down the line. And that was most importantly in banks because at each level of promotion you were given a little bit more authority to lend money.

My current partner and I were made Associate Vice Presidents of an LLC that we used to work for. As soon as the meeting was over he pointed out to me of the significance of that and what it meant: nothing. I was like, well, I was excited there for a minute now you bummed me out.

That is such a good point. You have absolutely got to give someone that title, that authority, and let them work within those parameters, or don't give it to them.

I see so many companies give someone a promotion or a title, but not the extra authority to make decisions that go along with that.

And it's designed just to say, okay, I'm just gonna make you happy and keep you here so you don't leave. Hey, I see promoting you, I see great things for you, and they're not doing anything about [00:07:00] it.

Wade Carpenter: Again, the point here being the technician versus actually being a CEO. That thing that made you great, maybe you can build it like nobody's business, but that might be the thing that's holding your business hostage.

So basically, you sort of led into the next thought I was gonna go into. You don't have this second layer leadership. if you're the only person doing estimating, you're you know. estimating bottlenecks. Do you have project managers that need babysitters? Do you have administrators that can't protect the owner's time because the owner's like, okay, they won't let them do something?

I've done that. I was like, I want to approve all this stuff. But if you're trying to frame a roof with no trusses, everything's gonna sit on your shoulders. So do you see, you know, owners finally hired their first real operations manager or something like that, have you ever seen some kind of relief like that?

Stephen Brown: It is stressful because a lot of contractors, what they do is they hire that person based on the experience they think they have. It's like, I need someone to do this. You know more about it than I do. I'm gonna hire [00:08:00] you. But you can't pretend that because you don't wanna be dependent on them. It's like a Catch 22 situation.

I had a customer, Wade, who's one of their senior estimators cost him $400,000 on a project. It was purely due to their mistakes. And I won't get into the details of it, that estimator's still with him. That estimator was going through a lot of trauma that wasn't recognized by the two owners of the construction company. And they came forward and they said, Hey, it's okay. It's on us. We should have provided you more oversight help and support. That person's still there at that company and now doing more than ever. And now doing better than ever. 

Wade Carpenter: That's great.

Stephen Brown: That second level leadership is huge. Does it exist in your organization or not? Is there a second level of leadership? 

Wade Carpenter: Right. The next one I wanted to talk about is what I refer to as chaos tolerance. And I see it at different levels. There was one I was actually dealing with yesterday. The guy's got a, I don't know, a [00:09:00] 15 person organization, but he's actually in this five, six, $7 million range, but he is the epitome of this.

But some founders just love chaos. It makes them feel needed. This firefighting becomes permanent, but when things happen, I can actually point to that's how we actually got hired, was the fact that he waits till the last minute and then everything becomes a crisis. For some people, that, that's just a lot to work with.

Do you remember that show, Ice Road Truckers?

Stephen Brown: Yeah.

Wade Carpenter: You know, some owners run their business like in an episode of Ice Road Truckers. Just barely holding everything together. They secretly love it. Chaos is great for adrenaline, but horrible for scaling.

Stephen Brown: Yeah, that show's almost too stressful for me to watch because first of all, they can break to the ice and then everything breaks down and it's like 80 below zero. You just get out to fix something and you're dead. And then there's the music that scares the crap out of you in the background. And then they break for commercials, designed to scare you.

When you were talking about chaos operating, I was thinking [00:10:00] about what you were talking about, superheroes. Superhero with an ego, he can't show what he can do unless there's some chaos going on. Right. That's the mentality, right?

It's like, I'm Superman, and I'm working here at this newspaper doing my job as Clark Kent, and I can't be Superman unless there's a problem. 

Wade Carpenter: Right. Sometimes they're creating their own problems and that's sort of the point. But I love that.

The next one we've talked about is no systems or inconsistent. We have this tribal knowledge I talked about. Everything lives in the owner's head. Our procedures and those kind of things, having those written down, that gap really kills delegation. Because a lot of people don't know what the procedures really are. So if you don't have SOPs that you know is living in Randy's head, you don't have a system, you've got a hostage situation.

What's the most ridiculous thing you've seen, like we've always done it this way. Have you ever encountered stuff like that? 

Stephen Brown: Oh yeah. All the time. And here's the thing the systems, when we talk about [00:11:00] this podcast going out in December 2025, and you making New Year's resolutions already, my goodness. It's not even mid-December and everybody's already got that mindset.

But you're right. Things slow down in the construction industry generally during the winter, more than they do during the spring and summer. That's a fact.

But all of a sudden you realize, yeah, I'm the one that has those standard operating procedures in my head. I better either get that down in writing or figure out a way to communicate that to my team.

And it is hilarious. You asked me, I guess, for a case study of a contractor that has that all in their head and it's just I can't, because there's too many of them. You just see it out there, you see it out there visiting a job. You see it hanging out in a job trailer, and it just, it's really not your job and place to say anything about it. It isn't. But you see it's going on.

And I tell you, when I take my underwriters out there and they see that's going on, they pick it up immediately. Right? Because they [00:12:00] worry. So what happens if I'm writing this bond and something happens to you? Yeah, that's a great point, Wade.

Wade Carpenter: I just still remember the story. It was actually about a year ago. Had picked up a contractor and they were wanting to fax something to me. And in today's day and age, it's like that was their exact line. That's the way we've always done it.

And, that's sort of like ridiculous thing of not letting go because they didn't want to turn loose of their fax.

Anyway.

Stephen Brown: My 99-year-old stepfather he died a week shy of his 99th birthday. He refused to embrace any form of technology, anything. It was based over his fear and headache of not being able to control it and understand it. So he just said, I'm not gonna do it.

And I think back about what he missed out on, Wade. Being able to communicate with his loved ones, being able to communicate his needs and wants effectively. And the chaos that caused. 

Wade Carpenter: Yep. I think we could probably go on with several examples like that.

[00:13:00] But let's move on to Financial Blind Spots. One of the things we talk about all the time on this you know, thinking cash equals profit. We don't know where our WIP is or how we're really doing. We're not using job expenses versus overhead op expenses. I mean, goes into my Profit First teaching.

I've seen them where they fear growth because they don't have the cash, the cash risk. If you're running your cash flow by looking at the checking account, you're basically driving a dump truck by looking out the back window.

Growing without financial controls is pouring concrete without forms. It just goes everywhere. So what are your thoughts on that one?

Stephen Brown: Financial blind spots, definitely cash flow. And as you grow you need more cash. You just do. You are like no, the project I'm doing finances itself. That's just not true, because you're gonna have extra expenses at each level of growth stage. And those extra expenses come in the form of necessary overhead to manage the projects.

[00:14:00] And you didn't know what that was going into the job before you bid it, because it didn't exist. I put a big contingency in there for that sort of thing coming up. Did you really? What if you didn't? That's what contractors do all the time. But you are right. If there's a financial blind spot with contractors in this growth stage, it's the cash they have that they need for growth. That's a great point, Wade.

Wade Carpenter: I think that one's one we talk about all the time on here. But let's move on what I call control identity. This is sort of like an emotional part that nobody talks about. Just like your 99-year-old stepfather. It's like you got a crane operator who refused to let anybody touch the controls, even where they're completely exhausted.

I know there's things like that I've done. Turning loose of payroll was one of the biggest wins for me. For the longest time I was like, I refuse to do that. I'm the one that's gotta do this. They say they want freedom, but you can't do it if you can't let go. That's what my point is here.

Stephen Brown: Yeah, no, that's a great point. And you mentioned Ice Road truckers and how stressful that is [00:15:00] to you. There's another show called The Last Woodsman, and again, there's tension in built because it's a risky business. But I love the way the owner lets people do what they do. And they make mistakes and it costs them money.

And he's just like, yeah, that's part of it. But it's like everything from even changing a tire in the middle of nowhere in a rainstorm, he's got his person whose job is to do that, and he knows how to do it, but that person does it better, and he just helps. He's there for moral support and it's in everything that happens it's a great analogy, Wade. I see him as a great role model for someone running a business that wants to scale it up.

Wade Carpenter: Yeah. Let's keep going on some of these. The ninth one I think I would say is hiring too late. You know, buying capacity after you're drowning and just maybe talking about waiting to hire your project manager after you're drowning 

Stephen Brown: Yeah, why would you wanna do that? And you can say I have to now, but nobody wants to step into a new [00:16:00] position that's really good at what they're doing when they feel like the ship is starting to sink. But hiring too late is a great indication that maybe you have had some problems in the past and you need to get on top of that going forward.

Wade Carpenter: It's a Catch 22. And I think I told this story recently. I had one contractor, a bridge contractor, that called me up and was wanting help with the Profit First stuff. He told me he had never taken a paycheck. And, he was like, I need to hire a-- we were also talking about doing his accounting and CFO and he's like, I just can't afford that right now.

I can't afford not to do that kind of stuff. If you don't find the ability to do it, you're gonna be stuck. And so that's why, again, I keep going back to Profit First, but putting money aside so that you can fill that position so that you can grow.

I've gotten some owners where they get it. Hey, let me take this part of off the plate, the project management part, or whatever they're doing so that can go sell more. And they wait until it becomes a [00:17:00] crisis. So just, I don't know. I see it all the time hiring.

Stephen Brown: Yeah. And when you're hiring, you're being strategic. It kinda leads into the last point you had. When you're hiring the right people ahead of time before you need them, that's a strategic move. Have a customer that during COVID, during a time where a lot of their work was being temporarily shut down, that materials and supplies weren't coming through, and that the workers were just flat out getting sick, took that opportunity to make great hires. At a time everybody was panicking, they were expanding like crazy. And in retrospect, it was the perfect decision. It was a strategic decision.

If you're not taking the time right now, especially at the end of the year, to make some strategic decisions, maybe that's a bottleneck. Maybe that's a problem you're gonna have as you move into the next stage of your company's growth. 

Wade Carpenter: Yeah, and all these interrelate so much, it's just amazing.

The last one I had on the list was no time to think. [00:18:00] Whether you're hiring somebody to take something off, I mean, the owner is too busy to fix the problems they're complaining about.

And, trying to scale without thinking time, you may discount it, you may think, Hey, AI can be out there and do all this stuff for me or whatever.

one thing actually, I was leading a group yesterday of CPAs. And this came up, it's like not having time to think. AI is great for ideas. A lot of business owners are out there, this bright, shiny object. AI can give you tons of ideas, if that makes you ineffective, it's I'm trying to do this and this and it just puts even more on your plate. I know. I'm guilty of that. 

Stephen Brown: Yeah. just recently, the Builders Exchange. I had AI give me a lot of good ideas, and I had to take it and compress it into one idea. And then I had to sleep on it, run it by some other people, and then I realized it was close but not close enough. And then I woke up one morning and I got it. And then I ran it by others and they say, yeah, you got it.

So you're right. That's what AI [00:19:00] does. And I also think about you, all this information's coming in, technology ideas, things you need to do. Listen to this podcast. Not being able to take the time to do what you need to do. And I just think of that analogy of wailing away at a tree with a dull ax.

You gotta take some time to sharpen that ax, right? Anybody that's tried to cut a tree down with a dull ax knows exactly what I'm talking about.

Wade Carpenter: Yeah. Again I get it. And really to wrap this up, you really, can't architect your future while you're fighting today's fires.

So anyway, for the final episode, we got one more of these we're gonna be talking about. And if you're feeling personally attacked after this one, that's actually good.

It basically means you were listening. If you would hit that like button, subscribe and share this with another contractor who's also out there running a circus instead of a company. And in the next episode we're gonna show you exactly how to break these constraints and finally scale. And we'll see you next week.

[00:20:00]