98. Don’t Be Afraid to Profit | John Chambers

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.

Hey everybody, Brian here. The episode of the Wealthy Contractor Podcast that you're about to listen to was actually recorded a few months ago. Right after Accelerate wrapped, our annual event. And when John and I spoke, we had no idea just how important the topic of profitability would be. The points John shares on pricing, value, and company culture are even more critical to you now than they were then. So get ready to take some notes. This episode is full of ideas you can take action on today. Let's get to it. All right everybody, welcome to another episode of the Wealthy Contractor Podcast. This is Brian Kaskavalciyan with G4 Marketing Group, and today I've got John Chambers with me from My Midwest Exteriors, and we are going to have a great conversation about some growth that they experienced in their business, and it's going to be interesting to unpack all of that and see because the growth was pretty, pretty significant growth last year. Before we get into that, I also, I want to mention to you all, if you have not done so already, to go and get a copy of my new book called The Seven Secrets to Becoming a Wealthy Contractor. You can get a copy of that for free, basically just pay shipping and handling. At thewealthycontractor.com. Thewealthycontractor.com. Go there, you know, sign up for the book, get on our list. There's a lot of stuff that we offer through The Wealthy Contractor, most of which has no charge to it. So a lot of good business building stuff there. So, John, welcome. Thanks for being here.

Thank you for the invitation, Brian.

So, John, take us back. Give us the, like, 2-minute version of your story, kind of, you know, where you kind of started, and kind of give us a little snapshot of what the business looks like today, and then we'll kind of unpack from there.

Yeah, so I started right out of college and was at a company for several years and moved up the chains there, and then on one cold January day in 2009, I was called into an office, and I don't have to tell you what happened next. So I was terminated from that job due to downsizing and thought my life was over, to be honest with you. If you've ever experienced a job loss like that, something you were passionate about and it wasn't there. So it took a day or two and then got back on the horse and had a headhunter reach out to me for a company called LeafGuard in Indianapolis that was looking for a selling sales manager. So took that opportunity and sold for like 2 weeks and did well. And then they kind of decided they just wanted to move me into the general manager. And that was in 2009. So since that time in 2012, we were a fine organization and pretty good company culture, but we just, in Indianapolis, we just didn't have it. We didn't have the right marketing and advertising plan. We didn't have the right leadership, you know, that we needed from a corporate level, if you will, to make that branch successful. So, this company was out of San Antonio, Texas, and they decided that with the lack of results and frankly with the cold temperatures, the winter market, if you will, in Indianapolis, they were going to close down. So, they kind of approached me as a mutual, I guess, coming together saying, "Hey, would you like to buy the business?" So, I put my numbers on paper and realized that I think I can make this work. So, in June of 2012, we closed the deal. And you know, they put a note out for 3 years for me. It doesn't have a whole lot of cash at the time. And that year in 2012, we did just over $1 million in gutter sales. So fast forward to 2017, we've got a great gutter business using, doing the LeafGuard brand gutter system and some other products as well. And we had grown up to $5 million. So we took on, really developed a new product called Gator Guard Concrete Coatings, and that started out well. We were selling, selling, selling, but we weren't profitable. So what we had done is we had basically sold way too much, way too fast, worried only about the front end on the sales and marketing aspects, and didn't concentrate on putting the product down properly. Long story short, at the end of 2017, I put pen to paper and realized something's got to change. We lost a quarter of a million dollars on our new product in 2017, and I didn't feel like we could do that again, certainly didn't want to. So we basically decreased the advertising by half and increased the price by double. So we thought, well, if we sell it, it's going to be profitable, and if we don't, we're not going to lose money. We switched the majority of our advertising to a pay-for-performance style advertising where the ads run and we pay if we make the sale. So we mitigated our loss on the advertising side, and if we made the sale, it was going to be profitable. Well, we did, and it was. So now today, last year we did just a tick under $12 million between the two branches— or pardon me, between the two products. And we're now in 4 locations for the Gator Guard, and we have our two original Indianapolis and Detroit our gutter division.

Wow. Well, that's quite a story.

Yeah, it absolutely is. And, you know, throughout the whole story, we've got additions of people that have helped us grow. You know, when we first started back in 2012, it was me and an office person, and now we've got layers of management to help us with the advertising, to help us with the installation, and a great group of people where the company culture is second to none. It really is.

Yeah, so what's interesting, so when you, you bought the business in 2012, 2017, that was the year that you did $5 million but lost money.

That's right, yeah, we lost a quarter million dollars on the flooring side, and that was our new product, the product we were so excited about introducing in 2017. See, from 2012 to 2017, we were riding high. The leaf Card was doing great, we were growing, so we thought it's really easy to add a product, right?

Right.

Wrong. Yeah, so that's, so that's when we decided to add that in 2017, and then by the end of that year we realized we needed to do something different.

Yeah, so I think that's interesting that you said you— well, you cut back on advertising, which is one thing I don't always agree with, but the other thing that you did And look, sometimes you got to do what you got to do sometimes. But the other thing, which is a lot more interesting, was you doubled your price.

We did. Yeah, we sold $900,000 in 2017, and in 2018 we sold $1.2 million. So we did less jobs, but we did more revenue with less advertising. So it really worked out in our profitability. And in 2018, we were very profitable on the leaf guard side, or pardon me, on the flooring side as well.

Yeah, so when you— so a lot of people will hear that and they'll, you know, there's probably a couple of reactions. Well, one is, well, yeah, that's a flooring product, that's not what I sell, which if your head went there, I'm gonna ask you to re-examine that thought. The other thought is, how in the hell do you double your price and not lose all of your salespeople and not have a mutiny on your hands. So talk to us a little bit about that. How did you present this to your people?

Yeah, so, and that goes back to the company culture, but at the end of the day, obviously our estimators have to be able to make a living and have to have leads to run, etc. So we did have the other product to fall back on, which was nice, and we went to them and said, here's what we've got. We believe in this product, we believe in our people, we believe in our company, We've got to make this work. And because we had the other products to fall back on to where they weren't, you know, starving, and because our estimating team in Indianapolis is where we started the flooring, the GatorGuard, you know, we only had 7 people, so it was a tight-knit group. So they worked with us, and we did additional training, and we did competitor surveys. We actually had companies out that did the same style of flooring and got pricing, and we found out that we were considerably more But they were losing jobs to us. So that really got everybody's attention that we just took a job from another company that is a lot less expensive than us. So then we started looking inside, well, why is that? Well, it's because of our product, it's because of our culture, and it's because we do educate and not just on the back of a business card give a quote.

So really you add value. You add more value than the next guy. And value comes from a lot of different places. Trust being one of them, right? Confidence. The homeowner having confidence in you that you're actually going to do the job, you're going to do it right, you're going to show up on time. There's value to that, right?

There absolutely is, yeah. That's one of the things that we found when we were doing our competitor quotes. You know, we were seeing that we understand what the product is and we understand the price, but we don't understand how you're going to get there. We don't understand how you're going to be there for us after the sale.

It's when, when value exceeds price, people buy. When the price exceeds the value, people don't buy.

That is correct. Absolutely. Yeah. So, so that, that really hit home with us, and that's what we, that's what we really started on our presentation. And we reevaluated our presentation and was all about value. So that's how we grew it.

So that's interesting. So you've, so you said presentation a couple times in that, in that statement. So how important is the sales presentation that you make to the homeowner?

Well, we believe it's critical because, you know, the home improvement industry and certainly some of the people even in the coatings industry are trunk slammers. You know, they're literally estimate on the back of a business card. If I could go back a bit, we, um, in, in 2017, at the beginning of 2017, I had an accident, so I was laid up at home for a while and had my garage done. And that's kind of what first started the thought of the additional product. But, you know, he came into the house and I understood what they did, I understood the price, and for me at that time that was okay. And they coated the floor and it was absolutely horrible. And that's when I really started going into what would it take and how could I charge more for the same product. Ultimately it was the value.

Right. Yeah. It's, I think a lot of people in this business don't understand that. Well, it's really in any business, presentation is key. You have to sell the job. Uh, you know, price becomes an issue when you are not building value, when you're just like you said, the, the, what'd you call it? Trunk slammer. Or Chuck in the Truck guy, you know, when you're just showing up, looking at whatever you're looking at, scribbling on a piece of paper, this is how much it's going to be. Well, that just leaves the customer with one, really one factor to look at in whether or not they should buy from you or somebody else, and that's price. But with somebody like you, and, you know, my, all of my top clients, value has to be built in. You have to make a case for why they need the product, right? Why they need to buy it from your company and why they need to do it now. And unless you've got all of those pieces in place, you are going to come up against price all day long and you're not going to be able to raise your prices like you guys did. The other, you know, the other interesting thing that, and I know this and you just verified it, was the reality of it is you went back and you looked at your numbers and you said, wait a minute, these numbers don't work. On $900,000, it actually cost me more to do the work than what I bid the work for. So if I want to stay in business, I'm going to have to change something. And in most cases, it's, it's the price. And what happens with a lot of people is they— it's so hard for people to change price because they think they're going to lose jobs. But then what you said, which is this is what almost always happens, is you actually did less jobs, but you sold more in terms of revenue, and you sold it at the right price, so you made a profit.

That's right, that's exactly what we did. So that was in 2017, and I'll tell you, Brian, we came to Accelerate Live this, this last, you know, February, and we came back and we raised our price again. Awesome. I guess February 1st is— we actually raised the price a little bit. We were before Accelerate and everything at the conference kind of rang true and we were really, really excited. We felt like we were ahead of the curve. Our February numbers, our average sales price jumped almost 15%. Wow. Our close rate, believe it or not, didn't go down. So the naysayers, you know, yeah, the naysayers, when you raise your price, the close rate's going to go down, and it didn't. And now we're to March 4th, and the close rate's actually up 3 percentage points from 32 to 35 as a gross close. So we feel real fortunate. We're really excited that we, you know, took that advice from your, you know, your conferences and books, etc., and did that.

Great. So, you know, what's interesting about that is the close rate going up. So a lot of people are scared that it's going to go the other way. And what's, what's interesting about that is if you look at price, see, people think that— I think what people think is, and even like your competition, they think, oh, he's gouging them. Oh, he's ripping customers off. No, he's not. What you're doing is you are Again, I'm going to keep going back to the word value, but you're building value. And as you look at that and as you raise price, you've got to look and say, okay, we are more valuable. We're raising prices because we are more valuable to the consumer. And value comes from reputation. It comes— again, we talked about this earlier, but just showing up, that's value. Doing what you say you're gonna do, that's value. Having a phone that your customer can actually call into and speak to a human being, that's value. And you, your people, just have to get better. It forces you— I don't put words in your mouth, but it seems to me like as a company, it forces you to be better.

It does, and that goes back to our company culture. So, you know, one of our motto is, we're family-owned and we act like it. And yeah, so we've got, we do a lot of team building. We also have apps that we use that, you know, everybody posts to. We post success stories. And I'm sure a lot of, a lot of people listening to this have things like that. But to us, it's really important because, you know, we celebrate birthdays on their work anniversaries, et cetera, big sales. We post on there all kinds of things and it really brings everybody together. And, you know, because I can't run every lead and I don't run leads. So with our salespeople now, you know, we've got 17 total salespeople throughout throughout our organization. We call them estimators. The 17 estimators, they're going out there and they're the company face. We want to make sure that they believe what they're telling people because if they don't, they'll see through it and the value won't be there. We're very careful about who we send out in the field to represent our company and make sure that they have our story and they believe our story and they're passionate about our story so that they can convey that to the customer. That is how backed with good service after the sale, that is how we get top dollar.

So let's talk a little bit more about that because you've brought up culture a couple of times. First off, what is that? Is it an app that you're using?

Yeah, it's called Workplace by Facebook, and it's basically just Facebook, but it's a closed organization, and you invite through, through the email, you invite your employees to that And then they can upload photos and videos and things of that nature. And it is work-based, but there are times where on the weekend, you know, we'll get on there and in the summer we'll take a picture of the barbecue and, you know, say post your weekend plans, et cetera. And again, it's a nice way to get to know everybody and to have the team atmosphere and everybody feel part of the team, even if you're in different locations. And it's very inexpensive. With that also comes a chat program. Where we use that to kind of like the old Nextels when you'd beep somebody, you know, but we use that as a way to talk with our installers and our estimators, but more so the install staff in the field where if they're running into issues with installation, they can simply post on there a photo and say, hey, what's my plan here? This is a bit outside the box, or here's my finished job. And then that takes us back into reviews. We take that data and those finished job photos that they send on the Workplace Chat app, and then we're uploading those to our Google, to our Facebook, to our social media so that we can take that real-time data and put it up there to leverage our social media and our webpage, etc. So it works both ways. But on that app, you can also, when you get that photo, you can say, wow, that looks great. You know, or inversely, if there's something we need to work on, we can find it there before we leave the job. That way we can give them that feedback or change that to decrease our service calls. So it really is multifaceted, but it works great for us. I think everybody should use something like it.

That is really cool. So this is something obviously that's been important to you for a long time because you, even before you made these changes, culture was important to you. What are some of the things that you did early before you had the teams that you have now? What were some of the things that you did early to start developing that culture?

Yeah, so as I said, when we started and took over in 2012, it was just me, an office person, and a couple estimators. So what we made sure is, is we made sure that everybody that came on board had the same value system that we have. And that's not easy to do, but I gained trust individually as we went along. And, you know, then I was working in the business more than on the business, so occasionally running leads, doing the ordering for the warehouse, for our inventory, things of that nature, doing the books. So one of the things that we did up front is we just made it a habit to have team building exercises, to get with people, to have our meetings, and just stay close with everybody. And even since we've grown now, we've got about 70 employees, we still have that. So I feel that's important for the home— you know, for the owner to be there. And, you know, I often I even talk to Mike, my second guy, my regional, and you know, I say, I know I need to work on the business, but sometimes it's fun to work in it. So a lot of times, not a lot of times, but maybe once a month, we'll go back in the warehouse and we'll put things away or we'll take an order in. And it's nice when people see the owner and the number 2 guy in charge out there sweating, putting away the order. It just, it helps camaraderie and it makes them believe that you believe the stuff you're saying, you know, teamwork. We're all one team. We have the same goal in mind. And when they actually see you helping and see you doing it from time to time, being part of the team, they really believe that. And that we've done that since the very beginning.

Yeah, I like that. How did you, how did you start to kind of stop working in the business? Because you couldn't have done all of this by working in the business. Let's I think that's all clear. But like, what were— what was kind of the first couple of things that you knew you had to get rid of?

Well, so about 2 years ago, um, I was working in the business a lot, and I had enough people, but unfortunately they weren't the right people, certainly in the right positions. So we did have a management restructure a couple years ago and bringing on some people to replace the folks that just weren't in the right seats. It was difficult to do that because those original people, they were good people. They just weren't the right people for that position at that time. So that was a big change. Finding the right people for the right position allowed me to begin working on the business and not in the business because I could trust those people. And that was a real big, you know, switch in my thinking when I brought my regional general manager Mike on and then a couple other people that have been instrumental in helping. But that allowed me to really focus on the business and not in the business. And as I said, you know, last year we did almost $12 million. The year before that, in 2018, we did $7 million. So we had extreme growth last year, and we attribute that to being able to, you know, do more of the 30,000-foot view thinking as opposed to the 30-foot view in the business. So we— Mike and I have been doing masterminds of our own. You know, we heard that at the Accelerate, and something we want to get more into. But we've been doing that individually and together as a two-man group for green light thinking, and it's been tremendous so far. And we've got some great ideas for 2020 that have come from those meetings.

You said, you said that you could trust the people that you hired. How do you— how did you know that you could trust them?

Well, I, to be honest with you, the, my, my main guy, Mike Evans, he's our, he's our regional general manager. He and I had a relationship before, so we knew each other back at that company that I said fired me in 2009, well, they didn't fire him. But in retrospect, looking back, that was the best thing that could have happened. We did have a relationship, but you're not always going to be able to have somebody like that, that you know, and you know their heart, and you trust them already. But bringing someone in and just working with them, training them, that might be a different story, I guess. But I looked at my spheres of influence of who I've known in the past that I could bring on, because recruiting is difficult, and it's expensive, and it's So I looked at my spheres of influence as who do I know in the past, from my past, that I would want to be on my team. And that's what I did. And I looked and I found, I found those people. And I offered them the opportunity to come someplace where they can feel good about what they do, someone that they know my ethics, and they know that they're not going to be selling their soul for a buck. And they wanted to join a team that had a positive culture and not just a job. And so that's what we did 2 years ago, like I said, and that's what really changed it. But I suppose if you're just placing an ad, doing that might be a bit harder. But look within yourself to see who you know, who would you want on your team, and find the right people for the right places on the bus.

Yeah, that's really interesting. You're very intentional about it. And, you know, one of the things that, you know, I talk about a lot when we talk about profitability, and we covered this all you know, at Accelerate this year, we covered it last year, is that as, as tough as it is to, to bring people in today, one of the things that you've, you've got to be profitable enough, not only obviously for yourself and for your family, but you've got to be profitable enough to be able to bring in great people. And great people, you got to pay them more. It's just the bottom line. You've got to pay them more. And then you've got to put them into an environment where they can really excel. And I don't know if— I don't know if you want to repeat what Mike said earlier before I started the recording, but he had said something about if he helps you do a certain thing, then he knows that he's not going to be that far behind. And I don't know if you want to share what that was. Yeah, you don't have to, but we—

yeah, of course. Yeah, I mean, and, you know, we had, after Accelerate, uh, we had found some motivation and we were talking in one of our mastermind sessions and he said, you know, I said, what are your goals this year? And, and he surprised me and he said, well, one of my goals is for you to pay off your house. And he and I are in similar positions and we share, you know, that those things and stuff. And I said, it kind of took me aback, and I said, why do you say that? And he said, well, I believe that, you know, with your success I'll find success. And, you know, that's what we want everybody in our organization. If you're successful, I'm successful. And that's really where the root starts. But yeah, Mike wants me to pay my house off this year because he knows if I do that, it's probably not far far behind because success breeds success.

Absolutely. And you know what? And that's why you got great people because they know, hey, if we do right by the company, it's not only just doing right by John, it's if we do right by the company and the culture in that company is one of growth and respect and increase, then that only means that it's going to be good for us as well, whatever, you know, whatever those goals are. Were you inspired at all by one of the guys that was on the $100 Million Roundtable with that?

Yes, that's— yeah, that's where that word came from. They were actually— yeah, we were actually sitting next to him also, but that is where that came from. And that's been a goal of mine for, for a while now, and I've got my house about half paid off, but I figured it would take a few more more years, and then we were putting some numbers, pencil to paper, and we found out that, you know what, if we make this the goal, we can achieve that goal. And, you know, it takes maybe a 5-year plan, and with the right planning and the right data and the right tools and effort, you know, you can make that 5-year plan a reality a lot sooner than that.

Right. Yeah, and it's a good, you know, and whatever the goal is, that's a fantastic goal, you know, to be debt-free free is a pretty fantastic goal. And what we're referring to is at this year's Accelerate Live event, good friend of mine and a longtime client basically got up and during, we have a session called the $100 Million Roundtable and he was one of our guest panelists. And he basically told everybody that he paid off all of his, he has, he had 2 mortgages, I believe. And paid them both off last year. So he was 100% debt-free. And, and it's, it's inspiring and it's, it's, it's great to see other people doing it. And that, and that's what I hope to do with this podcast is inspire people and, you know, set big goals and, and build the team around you that can help you get that done. I think that was, that was really cool. So I'm going to— I want to— I'm looking at the clock here and I know we can keep going, but I want to— I want to close off with, with 2 questions. And one of those is— let me— which one do I want to ask you first? Okay, let's do this. I want to ask you, what is your job now as the, as the owner of the business, as the leader of the business? What is your job now? What does that look like?

So my job now would be thinking about future expansion. I pay close attention to the data of the business in terms of the profit and loss, where we can adjust. I also use the time that I've got on the business to look at the 30,000-foot view to make sure that, you know, we're doing the right thing all the time, to make sure that we keep a good company presence online. You know, we want to make sure that the overall health of the company is where it needs to be. And frankly, that could be getting involved with a large— with an estimator on a large sale. It could be talking to the CPA and the accountants It could be a myriad of different things. But now, with the culture shift, the change that we've had, me working more on the business as opposed to in the business, it allows me to concentrate on the entire health of the business and not just the day-to-day or getting into the weeds of a specific customer issue that's come up. Because I do trust the people around me to take care of those things. You know, and that ultimately takes care of the overall picture with the reviews and the overall health of the company.

So what's it— so there's a couple of really interesting things in there. So one of the things that I talk about in all of my extended workshops, and we talk about it here, and I talk about it in the 7 Secrets book, is you have to work less So you can make more. And what I find really interesting is I asked you, what do you do now? And you basically said you do two things. Okay. You said you think, all right, you think about the business, you think about doing the right thing. You are looking at the business from the 30,000-foot view. Okay. And then you also mentioned data. So you're, you're looking at the numbers. And what's really interesting about that is that when you get into that position, you don't have to be there running leads every day. You have people for that. You don't have to be there to deal with production. Unless, of course, unless you want to, but you're not dealing day to day with production. You're not dealing with the minutia of the business. You are looking at where are we going? And it's interesting because the whole impetus, by the way, to the listener and just a little bit of inside baseball, how do I come up with guests for the podcast is I was on a call, I was on a call with Mike and Mike was telling me about some of the things that you guys were doing over there. And I said to Mike, I said, oh my God, I want to interview John. And that's how these things come about, because I hear that, hey, they're doing these great things and I want to bring it, you know, bring it to you guys. But I think that's really interesting that how, you know, now that you've, you've basically freed up your time so you can focus on the business. And there's no way that if you were in the weeds— and this is kind of my point— there's no way that if you were in the weeds every day, there's no way you could have gone from $7 million to $12 million. You couldn't have gone from $7 million to $8 million because you're just so, you know, focused and spending your time on all the wrong things. So I think that's, that's, that's really cool. The last thing I want to ask you, you've been, you've been at this now on your own and doing well for, for quite some time. And that's awesome. Congratulations. What, looking back, what would you have done different?

Well, that's easy. So if I could know then what I know now about our pricing, for one, I would go back and I would add more value and increase our price. And nothing has really changed our business since we did originally increase the price of the Gator Guard. And then, like I said, even the last 6 weeks that we've increased the price and our close rate has increased. And if I knew then what I know now, I would go and I would do that right away. Build value, increase the price, keep your quality high, keep your company culture high so that people want to work for you and they do a great job in the field when you can't be there. And I would have, I would have learned that a lot sooner.

Nice.

Would have implemented those things for sure.

Nice. Well, John, thank you so much. I really appreciate you taking the time and sharing your experience. Experiences with us. I wish you nothing but continued success. And for everybody listening, thank you for being here. And again, if you haven't done so already, go and get a copy of my book, The 7 Secrets to Becoming a Wealthy Contractor. We talk a lot about success leaves clues. This episode, like many, most every other one, John shared a lot of information that you have heard before. And so, you know, get the book, listen to the podcast, look for those clues and do your best to put them into your business. So this is Brian Kaskavalciyan with G4 Marketing Group. This is the Wealthy Contractor Podcast. And until next time. All right. So that's it for today's episode of the Wealthy Contractor Podcast. Podcast. Let me ask you, did it help you look at your business in a new way? Did it spark an idea or ideas 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. Now, 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. And a favor, I'd really appreciate it if you'd go to iTunes and post a review of this podcast. Let us know how we're doing. And finally, we started The Wealthy Contractor as a resource to help you, the home improvement entrepreneur, regardless of where you are on the wealthy scale, get where you want to go. We want to provide you with the motivation, the confidence, the resources, and the tools so you too can live the life of the wealthy contractor. Now, the wealthy contractor is a place where it's okay for you to want it all. In fact, it's not only okay, it's encouraged. So until next time, this is Brian Kaskavalciyan with G4 Marketing Group.