Episode 444: Why 96% of Businesses Fail and How Franchises Beat the Odds with Steven Montgomery

Welcome to another episode of the Above the Business podcast. My name is Bradley Hemney, your host. On today's episode, we have Stephen Montgomery. He's the founder of Resi Brands. That stands for Residential Brands. On today's episode, we talk about all things franchising. Regardless if you own a franchise or not, there is absolutely something about the way franchises operate the things that they have that we can take away for our own business. Did you know that statistically franchises have such a lower, much, much lower failure rate than all of the other businesses? And we get into some of those reasons in this episode. I love talking about systems and processes and ultimately having an operating system to run the business so it's not dependent upon you. That business can run and grow without you. And I think this episode is ultimately going to help you to do just that. Without further ado, here's my conversation with Stephen Montgomery. Stephen, welcome to the Above the Business podcast.

Hey, what's up, man? How you doing?

I'm doing great. It's great to have you with us. So we'd love to start with background and origin story, kind of see how people got to where they are today. Why don't you, uh, take us back wherever you would like and bring us to present day?

Awesome. Yeah, so I, uh, I'm a college dropout. I, um, went to, uh, a Bible college actually for about a year and a half. Uh, met my wife there. That was, uh, about all I needed out of college. And, uh, dropped out, uh, started doing some subcontract work for a painting company as well as waiting tables and doing a mix of different things. And, uh, about 3 weeks after we got back from our honeymoon, I was pressure washing homes for this, this other company. Uh, they had sold all these group homes and they had me pressure washing 3 homes a day. And so I was soaking wet and smelt like bleach every day and making $150 a day. And I called my wife and I was like, hey, look, like, I can paint homes. I know real estate agents. I can make this work. I want to quit today. I figured out that with what you make at Starbucks, we can pay for rent. Tips are good, groceries, and I'll figure out the rest from there. And so she was like, let's do it. And so I called my boss, gave him a 1-day notice, and I thought I had this house booked for like $2,700 or so for a customer that I knew through a real estate agent. And that was going to kind of be my seed money because I only had $12 in the bank. But I was like, I'm going to get a deposit from this guy. That'll kind of be how I kickstart my business. And so I quit my job and then that guy cancels. Uh, the paint job, uh, the, the customer that I thought I had lined up canceled. And so I had no customers, no money, nothing. And I just started knocking on doors and I had a rule for myself that if I, um, if the sun was up, I was gonna be working on something. And so I would knock on doors every single day until a customer gave me a job for the same day or next day. I would call real estate agents, swing by real estate offices, and pretty quickly I had so much work from referrals that I didn't have to knock on doors anymore. I started hiring friends, teaching them how to paint. This is all in 2011. Grew, uh, over a decade to one of the biggest painting companies here in Texas. And then in, uh, 2021, started franchising my original business, That One Painter. Uh, that took off. We started selling a lot of franchise units. So a year later, we decided to, uh, start Resi Brands. Resi is short for residential. Uh, Resi Brands. And we started offering other home service concepts as well, a couple of them through acquisition and a couple of the businesses we started. So we're like 3 and a half years now into franchising with nearly 700 franchise units.

Man, that's great. I want to go back to some of those threads, uh, from the early days. What was it? Do you remember the moment that you found— you decided that you were going to step into— you probably didn't have this word, but entrepreneurship. Did you— do you remember the moment you were like, you know what, I think I'm going to own my own business?

I think that I was about 11 and I was doing a paper route and I saw— and I remember making money for myself at like 11 and 12 years old doing that paper route. and, um, I, I think ever since then had an itch for it. Uh, so I was always doing side jobs in high school and whatnot. Uh, even when I was in college, I was always thinking about different things that I could start or do. I thought I was going to get into marketing and videography. That's what I was passionate about. But, uh, my dad was a painter for a little while, so I kind of learned how to paint with him in high school. And, uh, I had always done side jobs and whatnot. And so I just had this itch for it from a super young age. I like, to me, like, I don't know, remember any one moment other than that day with, you know, when I called my wife and saying it has to be today. I remember that day, but I just feel like it was always there since I was a kid. Like, I just, I couldn't— I was not a great employee. Like, I, when I was waiting tables and stuff, like, I just wasn't a good employee. I just, I had this sense that I needed to do something for myself. I don't, I don't mind working hard. I actually love hard work. I think work is super important, but I really, like, needed to feel in control of what I was doing. And I feel like I've always had that ever since I was pretty young.

I think so many of us that listen to the, to the podcast and myself, you know, some level of You know, I didn't use this language, but I mean, this becomes umbrellas.

Yeah.

Here's what resonates with you, like freedom and flexibility and financial success. Like, I'm in the driver's seat of it. And I agree with you that while I don't have a story of selling tomatoes, you know, from the family farm per se or whatever. There was then a sense of independence that I wanted, um, you know, myself. I was in the corporate world before I started my first business, around the same time as a matter of fact, so 2010. Um, yeah, I started mine. Um, what was it for you? What was it for you then? And then what is it about it? Because I, I personally believe once you go to become a business owner, you're like, you're unemployable at that point. Like, you know, once you've tasted it, Like going and actually working for someone else generally is just like, absolutely not. That's why a lot of companies that when they, they sell and they put earnouts in, those like year to 3 years for that entrepreneur are just torture because they, they, they're not accustomed to reporting to someone else, especially in the company that they just sold. What, what resonates with you?

Freedom for sure. I mean, even in those early years, I had a number of job opportunities, uh, through people that I knew that there, you know, there was job offers to make more money working for someone else than at those early years I was making on my own. And I just could not stomach the idea of not having the freedom to do what I wanted when I wanted. And, uh, that sense is something I still feel today. Like, I just, I need that autonomy. Um, and, uh, I think that there's a lot of people out there that that relate to that, and they might not have even taken the step yet, but they feel it. And I think that's that— the E-Myth calls it the entrepreneurial seizure. At some point you'll have that seizure where today's the day I'm doing it. It's enough is enough. I'm going for it. But I think a lot of people, some, you know, for me, it wasn't very long. I was 21 when I started my business. But for most people, they can sit there with that feeling for a decade and then one day it'll spark. Yeah, it'll spark, and today's the day they're gonna go for it. Um, and I think it's just different things will get people to that level towards like, nope, I gotta do it, I gotta go after it.

I know there had to be during those 10 years from '11 to 2021 that there were some tough times and, and challenges that you learned and developed skills along the way. Um, did you ever feel in that 10 years that there was, um, did you also— the other thing that I think all entrepreneurs have is, in addition to the entrepreneurial seizure that makes them jump into it, I feel like there was also the common thread is there's also a period of time— for me it was 5 years in, by the way, it was 2015. that they say, I call it the quitting fantasy, to where it's like, man, this crap is hard. Like, this is really hard. I think I would actually have more freedom if I actually went back and, you know, worked for someone. But it's just that it's a fantasy. It's, it's not something real. But there's these days you come back and you go, daggone, man, this, this, this is really, really hard. I don't know what I'm doing. Did you ever have that?

Of course, in home services, winters suck. Like revenue goes down, cash flows down. So I say that like most guys in home services probably have quitting fantasies every winter. And when you're new to business, I feel like there's some level of that around month 4 to 6. I see a lot of franchisees around month 4 to 6, just like, why did I do this? It was easier at my W-2. This is a lot of responsibility. This is hard. And then I tell, I tell everyone, because we have a lot of franchisees and many that have been very successful and, and some that are brand new and they're in the middle of it right now, is you're going to want to quit around month 6 and then you're going to want to quit once a year after that. Yeah, right. I think it's just how long do you let yourself sit in that moment? How long do you entertain those thoughts versus shake it off and get back to work and build. And, um, wanting to quit or having anxiety or being stressed is just part of the game. And when you realize that that's normal, uh, you can push through it and do what you need to do to actually get the job done and build something so big that you, uh, are not only proud of it but that it, it has the systems and the processes and the team in place that that maybe that weight isn't solely carried by you.

Yeah, that leads me into this idea of franchising. It's— before we hit record, I was telling you this, that it's one of the reasons I want to have you on is because, um, for a lot of people listening to this, they probably are not, you know, they don't own a franchise. Um, but there is such power. I think the statistics are You know, at the 5-year mark, 50% of businesses that started 5 years ago are out of business. 96% of businesses don't see their 10th birthday. I mean, those are sobering statistics, but there's this subsegment of companies that has like only a 15% failure rate. Again, depending on where you pull that data from, it could fluctuate a little bit. But the— but there is a statistically significantly less chance of failure from, from franchises. And for me, it was helpful. Maybe you can correct me if I'm wrong on this. I've read something to where, you know, licensing is like CrossFit. You're taking the name, but you're not necessarily taking a system, right? We're going to be the Bradley CrossFit name, and I get paid the license, licensing fee to be able to use CrossFit and advertise as CrossFit, but I'm not really buying any system. But if I'm franchising, okay, I'm buying the name, but then also the proven system that goes along with that, that helps me to successfully be able to kind of bend the odds in my favor, stay in business, and let alone even grow it to multimillion dollars in revenue and then in profit. Correct me on some of that. Is that, is that how you have seen it? What would have been your, your thoughts on what I just shared?

Yeah, I think that franchising is a way for you to get proven systems and processes and a trademark proven to work. And what that does is it doesn't guarantee success, but it reduces your risk of failure significantly. And there are a lot of stats out there, and I think they're a little bit all over the place as far as exactly how much, but it is pretty clear that franchising reduces your risk significantly. And so it does not guarantee success, but you are much more likely to be successful in a franchise than on your own. And, and it's because there's somebody that's already paved the way. They have systems, processes, SOPs, vendor relationships, discounts on products. So many things that give you a step forward that would— could be something that you might never be able to achieve on your own, or certainly things that would take a long time. Like day one, our franchisees get better prices on paint than local contractors are going to get. That gives you a market advantage. When you're selling. And so it also gives you a community of franchisees who are not just entrepreneurs, like, because you can, you know, build community with entrepreneurs through networking events. But in a franchise, you have a network of franchisees who are not just building a business, they're building exactly the same business that you are. And that's a unique advantage as well, because like, it's not like, hey, what, what worked for you in that other industry that maybe I could learn from in mine? No, it's like literally they're building the exact same business using the same process and the same trademark right next to you. And you— that community is so powerful. And so you have the franchisor and the systems and processes. Then you have all the other franchisees with that sort of like groupthink. Where it just keeps getting better and better until, you know, as that tide comes in, all ships are rising, right? So there's so many advantages to franchising. Franchising is not for everyone, though. I think some people, it might be hard to follow somebody else's processes. It might be difficult to not have any control over the brand. And they would want to build their own brand. And for those people, I would say it's not— don't consider franchising. It's not— it's really not for you. Some people are kind of lone wolves. They don't really want to be a part of a community. Definitely not good for franchising, but the people out there who want a business, they want proven systems and they want a community to do it with. Franchising is a really good option. And, uh, yeah.

How did you, in your own journey, before you got to this point, those 10 years, I want to take you back. Um, well, I'll ask this question. Who's the first person you hired, even if it was like on the side? After you, you got your first couple jobs, you were doing the job, you, you, you, you marketed, you sold, you delivered, right? You, you did all the things, and then you hired somebody. I don't care if it was like, here, here's 10 bucks to help me with that. Um, well, ultimately you walk through that, and then you started actually building people. When did, when did it shift from the genius with a thousand hands to, oh no, no, no, we actually have a system. You were not doing all the marketing. You were not doing all of the sales. You were not doing all the delivery and fulfillment.

So within that first year, I started hiring friends. So I just pay them up back then. It was like $12 to $15 an hour to help me like tape off a house and like, so I could spray it. Um, I had a buddy who was like, Couch surfing basically between my house and some other people's houses. And I was like, dude, stop with this, all this bullcrap. Like, like, just work for me full-time for a while. Let's, let's get you up on your feet. He was one of probably my first full-time hire. I hired my brother for quite a while, a couple other buddies, taught them all how to paint. They worked with me for a long time. Eventually most of them moved on to different things, but I ended up building up a pretty good team of painters and Then I moved on to more of a subcontracting route as we got bigger and started hiring managers and whatnot. But when it turned into something with processes in place, I would say it was around 2017. So probably 6 years in to where I really started thinking through how do I scale this to something really big? And like at that time I was living pretty comfortably, like I had like 3 really great crews. I did sales half the day. My crews did all the jobs. I barely had to check on them. I was working like 30 hours a week, making good money, super comfortable lifestyle, and was really content from like 2014 to maybe 2017. And then in 2017, towards the end of the year, I was like, I think I can do more. Like, I'm comfortable, but I'm not pushing myself anymore.

Hmm.

And so that year I started really thinking through— I started— got us on a new CRM. I started organizing. I got my administrative tasks a lot more cleaned up, processes. I started writing SOPs for my painters. And it was around that same year I was reading like books like The E-Myth. I was listening to more business podcasts and it was just starting to click for me that there's another level here where it's not Steven and a bunch of painters, it's Steven and managers and a whole team. And we start to go to multi-city. And pretty quickly I had doubled my revenue just by getting everything more organized. And then I got really overwhelmed and started hiring managers and an admin and, and, and all of that. And so, yeah, but it took me 6 years, 6 years of just kind of me managing painters before I really got my processes in place.

Yeah, yeah, yeah. I think that's— I mean, I think it's— that's roughly it. I mean, in my own, um, story, the 10-second version is I completely burned out in 2015, um, because I was just doing all the things and I ran out of time. And it wasn't until I met an entrepreneur doing $40 million, yeah, kind of in an adjacent industry, and, and he had made $5 million personally, and I was like Wait, what? How much did you make? And he, he said, oh man, look, I just— systems and processes, you got to have a good team. And, and I smarted off to him basically, and I said, I'm so tired of hearing that crap. Everybody talks about that. No, not a dang person shows me how to do it, you know? It was about that time I was reading books too, because I'd, I'd burn out. And I was trying to— I was working hard. It wasn't the hard work. It was just like, I'm spinning my wheels. And it took a while. It took a while to, you know, um, but, but that, that planted the seed of like, okay, I actually— I'm doing this wrong. Like, I'm doing this whole thing, uh, like all wrong. Given now, sometimes it's the curse of knowledge. Sometimes, I mean, given the fact that you, that you, um, help people with franchises, you think about this a lot, but What do you believe really is the right way to create a system where it really truly does delegate it well to other people? So what I mean by that is, what are some of the specifics that you all do for your franchisees that say that they're able to retain the information? They get the concepts. They, you know, are you doing a combination of physical materials, reading, online, uh, videos, tutorials, trainings. What are— what's the— all of the different learning modalities to be able to really transfer this information and, and skills to other people?

Yeah, so there's two pieces here. So we do all of that. So we do, like, when you join our franchise, each one of our franchises, you're going to get over 70 hours of online training A lot of those segments are also available to your employees as a franchisee. You then get like a week-long in-person training here with, with our team and other franchisees. And then we also have the ability for you to ride-alongs and whatnot with franchisees as well. And so you get a mix of training styles and that's how we deliver the information. And I think that something that's really important to understand and was important for me to understand is like SOPs, processes and systems. Those are information, but they're only as good as they become behaviors. And so that's the real trick is, is not whether or not you taught it and whether or not the information was received, it's whether or not it becomes an actionable thing they do every day. And, and so that means you have to take all of that information and then summarize it simply into something that they can remember every single day on how to be successful. And so we'll take everything that we have and then teach them all of it. And then at the end we say, hey, here's your one sheet on how to be successful. And literally hand them like, this is, this is what a successful day looks like for a Pink's franchisee or for a technician cleaning windows. Here's your one sheet. Do this. Never stray from this. And it's like, yes, there was hundreds of hours of other stuff that you went through. But just don't ever leave this. Like, stay here. Like, like, all of that led to you to this simple truth here. And it'll be a couple KPIs, best practices on customer service. It's the things that we know, no matter what's going on, no matter what your experience level, do these things and you'll be successful. And so we, we make it as simple as possible in our processes and, and hopefully as memorable as as possible. And if we notice people aren't embracing it as a behavior, then we question how good the training was in simplifying it. It's not how good was it in like the information. The information might have been amazing, but did it become a simple practical step for them at the end of it?

Hmm. Um, I, I, every time I'm that guy that, uh, I guess just I obsess over business and entrepreneurship, that and, and, uh, basketball. But, um, every time I see— I go somewhere and I'll see something that talks about franchisees available, I call it. I call, I submit my information, really, because I don't, I don't know if I'm actually interested in the thing, but I'm actually interested in how they present it, what they talk about, all of these kind of things. And so I'm going to ask this question and you may say, absolutely not, we don't do that. But some places do. There are people that, like myself, build or building a portfolio or a holding company. Right. And so where I don't want to be the owner-operator, I want to— I want to own it and then put an operator into it to be able to run. What are your general thoughts on that? Both for your franchisee franchise opportunities and then also maybe just in general?

Yeah, I think people should build empires, and empires are built by building a big team. And so I, I'm very pro people putting in operators in their business if they have experience and capital to do so. If this is your first time jumping into business, like it's best for you to get in it and grind and learn the ins and outs of the business. And so that's, that's— but and then sometimes people have a really high paying W-2 that they're just not quite ready to leave. So it's like, all right, work every night and weekend. But like, but it's really the— it's really the owners. I believe it's the owner's decision on what they want to do as the strategy. I just don't love the words like semi-absentee or passive. Because it, it makes it sound easy. But, and like, I have businesses that I probably spend 1 hour a week on. It's 1 meeting reviewing the key important things, but I never feel passive or semi-absent. Like, right, right, right. And so, and then the other piece to that, I would say, is like, a franchise is supposed to be a scalable system, not just for the franchisor, but for the franchisee. And so I believe that a franchisee should be able to own many, many, many things and be successful with operators in place. It just depends on their experience and capital. And because when you put an operator in place, it could take a little longer because sometimes there's that owner hustle that gets things going a little faster and it's naturally more expensive because you have that salary to pay for. And so if somebody has the experience and capital, like we have an entire system and process in place for them, to hire operators and do that. If it's your first rodeo, I would say start, start a little smaller and a little and get into it as much as you possibly can yourself.

Yeah, yeah, yeah. I agree with that. Well, that's why I kind of tiptoed my question because I was like, I don't know how he's going to answer this, you know, because, well, there's a lot of—

yeah, there's a lot of franchise brands that don't allow it. So, yeah, no, that's what I'm saying.

Like, I've called a few of them and they were like, They were like, no, absolutely no. You've— you—

we—

we want you working as the owner-operator. And I was like, okay, cool, well then I'm out, you know. It's not— that's not my— yeah, it's not my fault. But I do totally agree with you that especially if it's the first business, no, like, you— you know, you have to almost have gone through the fire.

Yes.

To then be able to—

you either gotta quit or you got to quiet quit. Like, yeah, right? Like, you have to quit and actually just go all in, or you got to quiet quit and every extra hour you have, put it into the business.

Yeah, yeah, totally. Stephen, it's been great. I've learned a lot today. Um, people want to connect with you and, and learn more about your opportunities and, and, uh, brands, where would you point them to?

Yeah, resibrands.com. You'll see all all about our different brands, the opportunities. You'll also see my socials if you want to connect there. Uh, it's all on resibrands.com.

Awesome, Stephen. Appreciate you coming on, man.

Appreciate you.

Thank you. Well, I really enjoyed that episode. I hope you all did. I, I try to, uh, bring on people that come at business from different angles and different, um, perspectives, and Stephen's is one I think that we can all really relate to. I do love the idea of franchising your business, even if it doesn't mean you actually franchise your, your business. I think having the name and the system of how you do things, and that's what I really love. Those are all just fantastic reminders, not only my own journey, but I'm sure I know has related to a lot of you. So make sure you go and check out their website. They have a great website, resibrands.com. All right, big shout out to our podcast partners, Club Capital. If you want to be able to get on top of your financials, make better decisions, so you know when to hire, when to take money out, when to reinvest that in marketing, etc. Club Capital can help you to get on top of your financials, whether it's coming up on the tax season or just in general, to be able to forecast more revenue growth, more profit, and more personal income for you in the business. Go to club.capital. You know, there's not many coaching programs that both help the business owner as well as the key employees in the business. But Coach P does that. So if you go to coachpconsulting.com, let him know you've heard about him on the Above the Business podcast. He's going to be helping you to be able to do just that. Coach P himself has been able to scale his business to remarkable heights across 3 different locations and has a massive team, and they're going to be able to share with you what's working today. Coach P Consulting. Autopilotrecruiting.com. If you heard what Stephen was saying about having the empire for the business and having a big team, that immediately brings up an opportunity that you got to be able to recruit. And team members— or excuse me, business owners— all the time talk about saying that they need to always be recruiting. But that gets difficult because we're in a lot of different hats in the business. Well, if you work with Autopilot Recruiting, They're going to help take that off of your plate. Go to autopilotrecruiting.com. Autopilotrecruiting.com. Stephen talked also about the CRM that they've used. So the tech stack that you have in your business at this point is massive. It's so important, the technology you use. My dad and his business, Clemmons and Hamner Seed, they have been, you know, working off archaic systems. We're now putting in new systems for them to be able to actually really be able to grow that business, even in agriculture. And so the tech that they use and how they integrate with CRMs and being able to help the business to be more efficient, it matters. If you work with Today@Pro, they're going to be able to have a corporate-approved CRM, or it's going to sync with your corporate-approved CRM system seamlessly. Your team is going to love it, all at a very low cost. TodayAppPro.com. Well, it's a good segue. If you like what I talk about here on the podcast, you want to get out of the day-to-day working in the business, and you want to be able to not just even work on it but even get above the business and really make the transition from being the operator in the day-to-day to become the true owner CEO of your business, I'd love to help you. Come join me at my very next live web class. Go to BlueprintOS.com blueprintos.com, and you can register for my upcoming web class on the homepage. All right everyone, that was a great episode. Till next time, lead well and go be great.