140. How To Boost Profits And Shorten Your Backlog | Rick Grosso

Business is booming, so don't be afraid to raise your prices. Raise the prices, pass that extra money along, and pay your people top dollars to make them happy on the back end. And treat those installers, the most important people in the world, just like we treat our salespeople and everybody else in our lead people, because they are right now, they have been, and they always will be. We're only as good as our back end.

This is the Wealthy Contractor Podcast, brought to you by G4 Marketing. Interviews with today's top home improvement entrepreneurs about marketing, sales, money, mindset, and lifestyle. Now here's your host, Brian Kaskavalciyan. Hello everybody and welcome to another episode of the Wealthy Contractor Podcast. This is Brian Kaskavalciyan with G4 Marketing Group and I have got a very special guest with us today. If you sell home improvements and you don't know the name Rick Grosso, well, you are in for a treat tonight. Rick has been in the industry, like he says— what do you say, Rick? Longer than you care to acknowledge.

Well, when I first started, the earth was flat, and my first leaders were the Babylonians. A long time.

It's been a long time. Well, there aren't very many people that know this industry as well as Rick Grosso, and so I'm really happy to have him here today. I've known Rick for, for many, many years. We've sponsored many of his events, which, by the way, he's got one coming up. We'll talk a little bit more about it later, but he's got one coming up in December in Key West, of all places. So I'm kind of excited about that. But Rick, let's, you know, for those that don't know, and I can't imagine who wouldn't know who you are, but for those that don't know who you are, do you want to just give them a quick little background on you?

Sure. I got started in the home improvement business, oh, in my late 20s. And, uh, we started as a salesperson and then moved on from there and built in the early '80s the second largest replacement window company in America, then sold all that off and been working as a consultant ever since. And I'm pretty proud that we consult for many of the top players and some of the most successful stories in home improvement. I've been involved with this just about all my adult life.

Yeah, great. So we— so Rick and I were talking the other day and we talked about a whole bunch of things, particularly about what is going on in the market. So, you know, Rick has been in the industry a while. I've been around for a while. And this is interesting. We've seen booms and we've seen busts. But we've never seen anything quite like this. So what are your thoughts on what's going on today, Rick?

Well, yes, this is the golden age for home improvement. The business is so good now, it's incredible. Now, as you mentioned, we've seen booms and we've seen busts. And I think that's something, you know, maybe you and I ought to have a little conversation of because it'd be very easy during these boom times to get very sloppy about running your business and still make money. And I've seen that happen in the past and it can have devastating results.

Yeah. So, what are some of the things that people need to be on the lookout for during these boom times that can be very destructive later?

Well, as you know, I go back a long ways and I've been through other boom times. And what happens in some of these boom times is just about everyone's making money. I mean, you got to do something special not to make money today. Everyone's making money. So, a lot of people during the boom times are making money not because they're running a good business, but in spite of the fact that they're running a good business. And then all of a sudden, when things change out there, the next thing you know, they're gone because they really are not running a tight business. I've seen this happen time and time again. Perfect example, not going back too far, would be 2004, 2005, 2006, 2007, that was tremendous boom time, everyone was making money. And we all know what happened in 2008. And in a very short period of time, most of the home improvement people were out of business because a lot of them were not running their business as a business, i.e., they're doing crazy things like giving the phone numbers to the salespeople, letting them call and confirm the leads themselves. They didn't have a standardized presentation in the home. They didn't have standardized closing procedures. And yet, they were still making money. They thought they were doing great. And then, of course, when the hard times hit, unless you were very efficient, Those people were gone in a blink. They weren't on top of their business work. They weren't tracking their business. They weren't tracking their leads, their lead costs, and all the things you need to do to run a business. It's my warning to you right now. Things are great. Yes, let's whip the horse when it's running, which is something I think you and I ought to talk about. Absolutely. Let's take advantage of these golden years, but don't get away from the basic principles of running a good solid business. Hopefully you're making money because you're doing all the right things and not in spite of yourself. And I see too many people making money in spite of themselves only because it's so good out there right now.

Yeah, so there's a lot to unpack in what you— all of what you just said. So maybe let's start with what do you mean by whip the horse?

Okay, whip the horse when it's running is very simply, now that things are great, Put the pedal to the metal, but do it in such a way that you don't lose control. Right now, one of the biggest challenges we have, we all know, is the back end of the business. True? That's what I'm seeing, and I'm sure that's what you're seeing all over the industry.

Huge backlog.

Easy. Yep. It's easy to get the sales. We still want to do the right things in terms of controlling our salespeople. Good friend of mine, Bob Tariff, once said, the only thing worse than a no sale is an uninstalled sale. Yeah, you got to get it all installed. So yes, you want to go out there and really start pumping for sales, but you have to make sure you put the things in place to make sure you have the back end of business to get that business installed. I've seen companies in good times literally sell themselves out of business because next thing you know, they're 4 months, 5 months, 6 months out, and that becomes a disaster. So, we can't let anything like that happen. So, you have to make sure that you got the back end of the business covered. Now, easier said than done, right?

Especially today.

Especially today, yep. You can't just throw an ad in the newspaper and expect crews come running to your door. So, what you've got to do is you got to be more creative. It's booming out there. It's absolutely booming out there. So, number one, Since it's booming, my advice to everybody is: 1, raise your prices. You can't install what you have now, so why not raise your prices now? If you raise your prices, you have extra money. And what can you do with those extra monies? Well, you can use those extra monies to acquire the crews you need in order to make sure you have enough installers Even though you're whipping that horse and taking advantage of this great market you have out there that you can get everything, everything installed. So yes, my advice to many of my accounts right now is start offering substantial bonuses to bring crews to you. Now, that can be dangerous because when you do it, you have to do it in such a way because, you know, if you offer more money for someone to come to you, if they leave someone else to come to you for more money and they'll also leave you to go somewhere else for more money. True?

Absolutely. Yeah.

So, you know, what I like to see the guys do is offer a bonus system, offer a bonus, and, you know, they can all do it their own way, the way they want to do it. But I like to see a program where maybe they're going to offer a bonus of $2,000 to attract a good crew, but don't give them that money up front. What you do is space that money out. Maybe after 10 jobs they get half of it, after their next 10 jobs they get the other half, and then I renew that bonus so they get used to working for you. Again, business is booming, so don't be afraid to raise your prices. Raise the prices, pass that extra money along, and pay your people top dollars to make them happy on the back end. And treat those installers, the most important people in the world, just like we treat our salespeople and everybody else in our lead people, because they are right now, they have been, and they always will We're only as good as our backend. So that's really what I'm talking about when I whip the horse when it's running, but you have to take care of the backend at the same time.

Well, I just want to make sure everybody heard the great advice you just gave them. So I really like that idea of spreading the bonus out. So instead of giving them just more money on every single job, why not offer them a— basically you're offering them a carrot. So for every 10 jobs that you do for me, I'm gonna give you X dollar bonus. That keeps them going with you and then you just renew that. And of course the way you pay for it is by raising your price. So you raise your price, get, make sure that bonus money is in every single job and then you're giving it to them after that 10th job is successfully completed. And of course the customer is happy and the job is well done. That's really great advice.

Rick? Yeah, you can do it for 10 jobs, you can do it with 20 jobs, with a part of it after 10, you get the balance after 20, and then renew the program. Come up with some type of program to put golden handcuffs on these people that we need on the back end of the business. Yeah, absolutely. Okay, so as I said, it's fantastic out there, we can really goose sales, but we got to get them installed. And you got to put that whole program together, not just run around bringing sales in.

So one of the things I was just talking with somebody about this a little while ago is you're outselling what you can possibly produce. So every week, every month, you're adding to your backlog. That's potentially trouble for you later, and potentially, like you said, You're selling yourself out of business. So how do you maintain control in that situation where you know people are going to buy and you just—

you're—

you want to sell it to them, but you just know that it's going to create more backlog? What do you do in that situation?

Well, I think we have to go back to the discussion we just had. You've got to slow down right now and put an all-out effort— maybe hopefully you don't have to slow down, but put an all-out effort on making sure you have enough people on the back end to make sure that business gets installed.

What if you don't? You said, what if you don't?

Raise your prices.

Yeah, raise your prices to what? To slow sales down, right?

Yeah.

Yeah, that's not a bad thing, is it?

Number one. Number two, look at products that you can install quickly and easily over products that are going to take a long period of time, a lot of people and time to install. Okay, massage your lead flow to the products that you can get installed quickly so that you don't get that type of backlog. You might have Product A, that's your, your best product. You do a good job installing it and you do a good job with it, but this could be a product that might take, let's say, a week for one crew to install. And where Product B might not be your best product, but right now what you got to do is turn around and start focusing on Product B that you know you can get up and installed. So you've got to take a look at where your sales are if you're handling multiple products and maneuver your lead flow and where you're going for leads and what leads you're advertising for to the areas where you can get them installed.

Yeah, yeah, really good advice. Earlier you mentioned standardized closing procedure. You mentioned standardized procedures. Can you talk a little bit more about that? Because A lot of people don't quite understand what that is, or even if they do understand it, then they don't quite have it installed in their business. So can you talk a little bit about, about what you mean by that?

Okay, well, every one of your product presentations should be standardized. So in your training, what you do is you're teaching that standard presentation for that product the same to everybody that you have working for you. Every single one of the products. We all know the 80/20 rule. 80% of your business comes from 20% of the salespeople and vice versa. And why? Because we don't have a lot of great natural salespeople out there. We can't assume they are. So in order to make salespeople highly productive, whether it be salespeople, lead procurers, any of these people, you have to standardize that presentation. You have to have a standardized presentation book. I use the word book. I know today we're using iPads. So, okay. All right. You have to have every one of those pages scripted. You have to train the people to be on that script. It eliminates error. It's that simple. In my owner's camp, I always use the example of McDonald's. I say, how many people here like McDonald's french fries? And everyone in the room raises their hand. I say, who makes the French fries? Chef Jean-Paul? Emeril? No. Some 18-year-old kid squeezing his whiteheads, for crying out loud. But they come out perfect. How? Every step in making those French fries has been systemized. They can't get off that system. The cooker, they use the same cooker in every McDonald's in America, it's spec'd. On that cooker, there's a line how much olive oil, Cooking oil goes in there. That cooker only cooks to one temperature. So we always have the right amount of oil, always cooks the right temperature. You put the fries in a basket, they're pre-cut so they're the right size. You press the button, they go down, they're cooked, they pop up automatically. You can't mess up the fries. You just follow the system and you can't mess up the fries. That's what we need for just every product that we offer to the customer, as well as our closing procedures to make and close the sale. Completely scripted, completely standardized, completely trained. That's what it's all about. You eliminate the chance of errors and you literally reverse the 80/20 rule where you're gonna have 80 of your salespeople succeeding on a continuous basis. That's what we mean by standardization. Love it.

And then in order to measure the effectiveness of everything you're doing, This goes into the next thing you were talking about, which is tracking. So can you talk more about tracking?

Yes, I can. Tracking is vital, obviously. And again, I go back to what I saw happen in the industry when a lot of companies went out of business and were too bored. They weren't even tracking their people. Uh, you have to track your people for efficiency and sales. You got to track your lead people. You have to attract Your advertising, give you a perfect example when it comes to advertising. Back in 2008, 2009, I went to companies and they had been using inserts and flyers and direct mail forever. Well, they stopped working. They literally stopped working, but the company didn't know they stopped working. They were running lead costs of 28%, 35% and didn't know it. Well, this is what I've always done and it's always worked before. Well, that's not good enough. So you have to be on top of those numbers continuously. With your salespeople, okay, you need to know every single day what their numbers are. Basically, you need to know what their demo rate is, what their closing rate is, what their average ticket is, and most important— I call it slugging rates, some other people use a different term— with their volume, net volume per issued lead. And that's the biggest number, net volume per issued lead. Okay, there's their batting average. And when that batting average is not where it should be, we got to bring them back in, retrain them. And if it still doesn't work, then you got to replace them. There's no question about it. You can't carry dead weight. As we always say, feed the lions, whip the horses, and shoot the dogs. Crazy to carry dogs. Never carry the dogs and keep feeding those lions.

Yeah. So let's make sure— so what he was just talking about, what he calls slugging rate, is called— also called NSL Net Sale to Lead Issued. Basically, you take, you could do it, you know, for every lead that you issue a salesperson, you take their total number of sales divided by the number of leads you handed them, not the number of presentations they actually did, but the number of leads that you gave to them to go and run. And then you come up with a number that's your NSLI or your slugging rate. And that number will tell you a lot about the effectiveness of that salesperson.

Absolutely. You give a perfect example. Let's say you give a salesman 10 leads and, and we don't care if they're not home, one leg, makes no difference because the end of the day, guess what? We're all going to get the same amount of no homes and one legs. Don't just judge a salesperson by their closing average to demo because then you're giving a reward not to demo. Worst thing you can do. So if you give a guy 10 leads and he sells $50,000, that's 10 goes into 50,000. That's always net volume, incidentally, never gross. That's $5,000 a lead. That's a slugging average. Well, somebody was doing $5,000 a lead, he's a home run hitter, he's a superstar. Now you have to have a number below which they cannot drop. You don't want to carry people whose number is not high enough Okay, because then that means every time you give that person a lead, they're losing you money, and that's crazy. That's insanity.

Yeah.

So you got to track that number meticulously and post it constantly, post it every single day. Never met a great salesperson who wasn't an egomaniac. True or false? Ego is the name of the game. Money is only the scorecard, right? So their ego, they want to see those numbers up there, know they're number They'll fight harder for that than they will for the paycheck. So post those numbers every single day. No secret.

Yeah. So you talked also about basic principles, and we've just covered 3 big ones here. Have, you know, business is good, but you got to be in control of the business. So that's number 1. If you can't get the work installed, raise your price, slow your sales down. But do what you can to get that work installed. Number 2 was standardization. We talk a lot about that as it relates to sales presentations, but also in the customer experience journey and lead intake. I mean, there's so many places in this production, getting things installed. All of these things need to be standardized. And then we talked about tracking right now. What are some of the other basic principles as the owner of the business? What are some of the other basic principles that need to be in place in order to run a successful and profitable home improvement business?

More and more, I think people are starting to become aware of corporate culture. Most important asset we have are our people, and we should never forget that. And this is a tough life. It's a great life. Where else can you make this kind of money, truthfully, in the kind of numbers that we have making this kind of money? So, it's a phenomenal opportunity. But you've got to make that workplace something that people like being part of. You've got to give tremendous recognition across the board. We were talking about how important the backend is. Most people don't have recognition programs for crews. That's crazy. They're the same as everybody else. If they're good, they take a lot of ego satisfaction in what they do. They want to be proud of it. If they're working in the dark, their quality is going to start slipping. Okay, so to create a corporate culture of recognition, approval, and the fact that they're the most important people in the world. You know, little things like know when someone's birthday is, know when someone's anniversary is, and tell them you don't want them working on their anniversary, okay? And maybe treat them to dinner at a favorite restaurant or something to let them know you appreciate what they're doing. All the little things that make people say, I'm a human being, I'm important, I'm not just a number, I'm not just a salesman, I'm not just, or a crew or a lead person. They feel appreciated and become part of that company to create that type of corporate culture. Matter of fact, we're even gonna be talking about that a little bit, which is really kind of a new topic for a lot of people in the home improvement business at our owner camp coming up in Key West. So, I think that's part of the key. Why do people stay with you and why do they not stay with other people? And the key is getting them to become part of that team, a real team spirit with an improving corporate culture. These people are important to us. And make the workplace fun. Make it fun. Make those sales meetings fun where people love to come in and where you're, you know, Putting the heroes up there and giving them all the appreciation, ego satisfaction. Remember, the number one motivator in the world is not money, it's recognition, it's approval, it's these things we're talking about. So I think that's the key. A lot of us kind of forget, and I've seen that especially true in the home improvement business. So I think that's the key we really need to talk about and focus on.

Yeah, love it. Really good. So I'm looking at the clock here as we're wrapping up. What other advice do you have to owners to deal with some of the challenges of what's, what's going on today? Any other words of wisdom for us?

Yes. Tom Hopkins has a wonderful line: never forget the girl that you took to the dance. And I've seen that happen too often. Right now, we have a lot of people making a lot of money. And the next thing you know, they stop paying attention to their business. They get involved in other businesses, other ventures, other things all over the place. Don't forget the girl you took to the dance. This is the money pump. This is what got us there. This is what you got to constantly keep focusing on. That doesn't mean you have to work 80-hour weeks. Absolutely not. In our owner's camp, we talk about that, you know, working— working on your business, not in your business. And we give you a lot of examples how to do that. All right, but you've got to remember, as owners, don't become fat cats that you forget that this is the business that gets us there.

Yeah. Yeah, love it. And don't forget your customer either, right? Like, they're, they're absolutely an important part of your business.

That's part of the corporate culture. That's what you do just such a fantastic job with G4. If you build the right corporate culture where that customer becomes vitally important, okay, those customers are going to follow you and people are going to be proud of what they're doing. Yeah, that's all part of that corporate culture we're talking about.

That's one of the big things I noticed after the Great Recession was a lot of the companies that made it through, they had relationships with their customers. It's not— they weren't transactional. The ones that were transactional that had no relationship, those were like the first ones to fall, right?

You know, I've seen a change in the home improvement industry that's for the good. Way back in the early days, a lot of home improvement owners could care less about quality or the customer. Yeah, it was quick bang. A lot of people didn't even want to do business in the town they lived in. I've seen a tremendous change now that more and more of the home improvement owners are true business people and run a business like a business. And never forget, never forget, the most important people out there, your own employees and the customers, both of those. Okay, we talk about the 80/20 rule, the same thing is even true. The same people buy home improvements over and over and over and over. So once you have a satisfied customer, okay, man, mine that gold, mine that gold. You've already done all the heavy lifting. Do not go back and keep mining that coal because make sure you have a happy customer and now you can sell them a second time, a third time, a fourth time, and each one of those sales becomes a lot easier because you have the trust factor when you treat them right. And that makes for a gold mine. And you're so good at that. That's what you guys do so beautifully at G4.

Well, thank you. Well, cool. So I've been going— so I've been going to your owner's camp for I don't know how many years, Rick. 7, 8, 9 years. Rick is fantastic. He's funny. He really breaks the business down for you. And can you give everybody details on when is the owner's camp, where is it? And I know we have tickets? I mean, you can go— just come to G4 and we'll get you tickets, but where can they learn more?

December 9th and 10th, Key West. It's going to be at the Marriott Key West Beachside. It's a condo hotel right there in Key West. We have a website that gives you all the information you need on, on the camp. But again, anyone who's interested, they, they're listening to this, they're obviously customers of yours or people you have a relationship with. I know you have tickets that you've have available that you can give them and save them money because the tickets run about $995 per person.

Yeah.

That's just something that you are offering. It's going to be a day and a half. We start 9:00 AM the 9th and we go to 1:00 on the 10th. So people can get out early or stay and enjoy beautiful Key West and all the fun that goes with it.

Yeah. Key West will be fun that time of year. A lot of fun.

Yeah.

And you'll be around some really good owners. You'll be around some really good owners too.

Well, yeah, you know, that's the nice thing about this business. You don't have to live on an island. In fact, it's the worst thing you can do. The industry is so huge, there really is no competition. You're so better off networking and sharing with people. It puts you so far ahead of the crowd.

Yeah. And this is, that's what this is all about. And that's what we promote here. And our annual event is the same thing. It's a great opportunity to be around other like-minded business owners. Learn from them. You don't have to do it alone anymore. So cool.

Absolutely not. 100%. You know, if you take a look what it takes to run a successful home improvement business, you have to know sales, you have to know marketing, you have to know accounting, you have to know construction. Nobody has all 4 of those. I don't know if anyone wants 3 of them. So associate yourself with the right people. Absolutely.

Yeah. Love it. Well, Rick, I appreciate you and everything that you do. And thank you for coming and talking with us today. Really great advice. This is, you know, every once in a while I say to people, this is one that you probably want to go back and listen to again because, you know, there's a lot of real good meat in here. Rick's got so much experience. People pay him a lot of money now and over the years. To come in and help them with their businesses and help them grow, and especially on the sales side too. So good stuff, Rick. Thank you so much. I appreciate it.

Thank you. I love talking about this business. I love being part of it. Thanks a lot, Brian.

All right, cool. All right, everybody, until next time, this is Brian Kaskavalciyan with G4 Marketing Group, and this is the Wealthy Contractor Podcast. Thanks for listening Thanks for listening to today's episode of the Wealthy Contractor Podcast. Let me ask you, did it help you look at your business in a different way? Did it spark an idea or ideas that you hadn't thought of before? Do you have a list of action items that you can take and implement into your business or your life today? I really hope so. If it did, I'd like to ask you a favor. Would you leave a 5-star review of the podcast? By doing so, you'll help other contractors find the podcast more more easily so that we can help them achieve more success, wealth, and freedom. And before you go, make sure you subscribe to the Wealthy Contractor Podcast so you get access to the latest episodes as soon as they're available. We're always striving to provide you with great content, so you don't want to miss what's coming up. In fact, if you haven't already, make sure you go to thewealthycontractor.com and get your free copy of my latest book, The 7 Secrets to Becoming a Healthy Contractor. Just pay shipping and handling and I'll take care of the cost of the book. So until next time, this is Brian Kaskavalciyan.