Ep. 154 - How to Create a Thriving Business in Today’s Market | Brian Kaskavalciyan

Not so much for us, actually. For us, it's riskier not to have the business because with the business, the security that we get from the business is that it's really kind of up to us. We get to drive leads, we get to drive sales, we get to drive how much we charge, we get to drive how much money we make in the business and what we do with it, how we spend our time, who we spend our time with. So to me, that's a high level of security. 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, welcome to another episode of the Wealthy Contractor Podcast. This is Brian Kaskavalciyan with G4 Marketing Group. So about a week ago, I think it was, is when we finished up with Accelerate Live 2022. And I gotta say, it was, it was an incredible event, got a lot of incredible feedback, and we covered a lot of material. And what I wanted to do was share just a few things with you that I think are really important that we discussed at Accelerate that I think will be good for you to know for your business moving forward this year. You know, we always start with talking about why you went into business for yourself in the first place and what do you really want from your business, and this was a recurring theme throughout the 2 days. If you don't know where you're going, then you just, you end up anywhere. And the idea is to not end up anywhere, but to end up where you want to end up. In order for that to happen, of course, you got to know what that looks like. So how much money do you want to make? How much time off do you want? What does freedom look like to you? And on and on. And so my contention is that we really all went into business for kind of the same reasons. One is we wanted to be able to make more and more money. We didn't want somebody telling us what we're worth. I would rather my customers tell me my value. Than my employer. My customers really are my employers. So that's reason one, you know, is to make money. Now the other part of that is we want to be able to take that money and turn it into real wealth, not just make money for money's sake, because there's a lot of people that make a lot of money but are practically broke because they might make, say, I don't know, $500,000 a year, $1 million a year, $2 million a year. But if they spend more than they make, they're, you know, for all intents and purposes, broke. So what we want to do is we want to be able to make enough money in our business to take money out of the business and go create real wealth. Now we can create wealth inside of our businesses too. But we want to really do both simultaneously. The other thing we want is we want independence, you know, so this is all about how we spend our time and who we spend our time with and what we get to do. We also want some level of security. And what's kind of funny is when you think about owning a business, the first word that comes up is not security. It's really more like risk. But to most people, starting a business or having a business is risky. Not so much for us. Actually, for us, it's riskier not to have the business because with the business, the security that we get from the business is that it's really kind of up to us. We get to drive leads, we get to drive sales, we get to drive how much we charge, we get to drive how much money we make in the business and what we do with it, how we spend our time, who we spend our time with. So to me, that's a high level of security. We talked about how to get rich from this business. There's really a couple of ways to do it. One is obviously you got to make enough money to cover all of your lifestyle expenses, your taxes, but you've also got to be able to build equity somewhere. Now, You want to build equity in your business, and we'll talk about a couple of the ways that you do that. But you also want to take money from your business and you want to invest that outside of the business. So you want to get into real estate or put money in the stock market, not risky stuff. You want to have a good wealth advisor that you can give a regular amount of money to that will build wealth for you and for your family while you sleep. At the end of the day, to me, really what I want is I want to be able to build enough wealth where I have a permanent income coming in, meaning my investments passively throw off more money than I can spend without affecting the principal. Now, the place to start with this is, first off, you have to identify what rich means to you, because for all of you that are listening to this, everybody's got a different number. Everybody's got a different definition of what rich means or what wealthy means. One of the big underlying principles that kept coming up over and over and over again was this statement. Actually, my buddy John Anglis says, he says, only what's tracked and measured gets accomplished. Only what's tracked and measured gets accomplished. So you can apply that to success in business, you apply that to success in making money, you can apply that to success in building wealth, you can apply that to success in gaining more and more independence and freedom. And so you have to define what all of that means for you. So that is kind of the first major piece of the puzzle. What I then talked about, what I really did was issue a warning. And I see two major Shifts or threats in the home improvement market that could potentially have a profound impact on your business this year, next year, next, you know, foreseeable future. I will say this, and I had a funny slide for this, but I do not have a crystal ball. But I've been at this 30 years. I'm 53 years old now as I'm recording this, and I've been in home improvement for 30-plus years. So I've seen ups and I've seen downs, and a lot of you listening to this have seen ups and downs and changes in the marketplace. So I see two big things. So I issued these warnings. One is winter is coming. I will say we have no idea when. We have no idea what it's going to look like. Personally, I don't think it's going to be a fall-off-the-cliff event. Like '08, '09. But what do I know? I do know I want to be prepared for it, and I want to make sure that all of my clients and all of you listening are going to be prepared for it. So right now we've got crazy inflation. Interest rates are going to go up. They've gone up a little bit. They're going to go up more. The stimulus has stopped. And the real question is, like, how much longer can this last? Yes, demand will remain high. But how much longer can this last where everybody is outselling their capacity? Again, we have no idea. Even I, I had this slide where I went on to the internet, of course, and I did a little bit of research and to see, well, what are people saying? What are the quote-unquote experts saying? Well, You got some of them that are saying, well, this is it, it's going to peak in 2022. And then you got some that are saying, well, this is going to continue on for the next few years. So basically nobody knows. My point here, this is not doom and gloom. My point is, let's be prepared. We know it's coming. We don't know when. And while it's good, let's be prepared. That was Warning number 1. Warning number 2, private equity has found the home improvement industry. So what does this mean? There are a bunch of private equity-backed companies out there that are buying up home improvement companies. Now, you may have seen some of this, you may have heard of it, you may be one that's a target, you may have sold your company already. There are some pros and cons to this. I'm going to go over the cons first, and then we'll talk about the pros, and then we'll talk about some steps that you can take to protect yourself. Now, what's interesting here is that, and you got to be aware of this, is that they are buying the best-run companies first, the most profitable, the ones with the best management teams in place, the best systems in place, the best sales processes in place. Those are the companies they are buying first. And again, if you read trade magazines, you will see this happening. There's a new announcement, seems every week or two. This is going to continue for the foreseeable future. Now, as a home improvement company, local home improvement company that has to go up against these people, here are some cons. These companies, these private equity companies, have oceans of money, like oceans of money. In order for them to— they got to go back basically to their investors and show ever-increasing top-line growth. So they're just going to keep pushing for more and more growth. They're going to acquire more and more companies, and they're going to open more and more stores, locations. What this is gonna do as things start to contract a little bit and you've got more and more people, so you've got the external economic forces that are gonna start to shrink the market a little bit, but also if you've got 3 or 4 of these companies in your marketplace, that's gonna shrink the marketplace as well because what's gonna happen is these machines need to be fed. And so market forces will drive marketing costs way up. Now, the inconvenient truth here is whoever can spend the most money to acquire a customer generally wins. And right now, what's happening over the last couple of years is that people haven't had to spend as much money on marketing as they have had to historically. Now, these companies will spend upwards of 15%, 18%, even in some cases 20% of revenue to drive leads. My question is, can you spend $400, $500, $600 a lead and still make money in your business? Because if you can't, if you can't, you will likely get outspent. You may get some crumbs, but you're likely going to be outspent. So you've got to be able to, even though you don't need to do it now, this is something I tell my clients all the time. When I look at that line item and they say, well, Brian, look, I only spent 3% on marketing this year. I say, great, great. Did you add an additional 7 points to your bottom line because of the money you saved? And in almost every case, it's like, well, what do you mean another 7 points? Historically, we got to spend 10% or so on marketing of revenue. So if we're a $3 million company, we're going to spend about $300,000 a year on marketing. Well, if you happen to have an incredible year where the fish are jumping in the boats, as the last couple of years has been, and instead of spending $300,000, you spent $90,000. Well, What happened to the difference between the two? The point here is you gotta have— you gotta be prepared to spend 10% or more, even if you're not. This is the advice that I'm giving to every one of my clients. The other thing that is going to happen, another con, is there's going to be even more intense competition for people, for marketing. So think about Is it hard for you now to find salespeople? Is it hard for you to find installers? Well, guess what? It ain't gonna get any easier. So are you gonna be able to compete in terms of compensation, benefits? Can you pay installers more than the next guy can? Can you make your place the place that they want to come and work? If not, it's gonna be very tough for you to hire the talent that you're going to need in order to grow. Because again, these companies are very aggressive and they're very sophisticated. The next thing was that there's a lot of efficiency in these companies. They're machines because of their process and because of their people. Now, by the way, this opens up an opportunity for you because a lot of people don't want to work for machines. They want to know who their owner is. They want to work side by side with a team of people that they like and that they respect. So that may open up an opportunity, but you got to be able to compete. Technology. So I'm hearing some of the technology that is coming to the home improvement industry and it's pretty incredible. So one of the things, there's a company out there right now, that is using AI. And what it does, think about this. So a lead comes into your CRM. So somebody calls or you get a home show lead or you get a lead off the internet. You put that lead into your CRM. Instantly, this software picks up that lead, runs it through, I forgot how many data points, hundreds of data points, and within seconds Delivers back to you information on who these people are, their creditworthiness, their psychographic profile, and get this, and which one of your salespeople will be the best person to give this lead to. Which salesperson on your team has the best chance of closing these people? This is some pretty sophisticated and incredible stuff that's coming down the pike. Now they can also do market testing unlike anything, and there's shared experiences between all of the offices. So a lot of these companies, you know, the private equity companies, they're not— they don't have just one company they're buying. They're buying 3, 4, 10 companies, and they're putting all of that data together and all that information together. And once they start to share that information, it's not really happening right now, which is a little odd. But it's really not happening yet, but it's going to. When they start to share all of that information across all of these companies, they're going to become very dangerous. Okay, they're dangerous now, but they're going to become even more. Let's talk a little bit about good news, some pros. This is the best time ever to sell your company if you're in a position to sell. Now, what does it mean to be in a position to sell? Well, you got to make a lot of money. These companies are generally looking for EBITDA, which is the main driver, earnings before interest, taxes, depreciation, and appreciation or amortization. I'm sorry. They're looking for $1 million or more in net profit. Now you can, you can sell a company with less net profit, but it's got to be a nice share of the company. For example, if you have a top line revenue of say $16 million and you make $1 million on that, which is what, like 5%-ish? That company is going to be less valuable than a company with $5 million in top-line revenue and $1 million in profit, a 20% bottom line. So if you're a $3 million company and you've got a 20% bottom line, you could be attractive. You could be attractive. Another thing that's incredible is the multiples that they're paying. So generally, the way that the value of your company comes in is they take your EBITDA number, let's say it's $1 million, and they attach a multiplier to it. Right now, the multiples are between 4 and 7. So again, on the low end, if you've got $1 million in EBITDA, you've got a low end of $4 million in value, a high end of $7 million in value. I've never seen these kinds of multiples before. I mean, it used to be— I mean, just even a few years ago, even if you could sell, if you could sell one of these companies, you might get 3 times earnings. Now you're looking at 4 to 7 times earnings. Pretty incredible. It's a great time to sell. Now there's a number of different variables in that that's going to make the difference between 4 and 7. I can't go into all of that here Here now, we don't have the time, but it's something to think about. Now, you may not be wanting to sell your company today. You may want to sell it 2 years from now, 5 years from now, 10 years from now. But here's what I'll say to you, whether you're selling or not, make no mistake, you're buying. So every morning you're buying your own business every morning. So if you're not selling to somebody else, you're buying. And is the business you're buying worthy of you? Is your business a business that a multimillionaire investor, like you should be thinking about your business, wants? That's how you got to be looking at your business. And you've got to set it up in a way that whether you're going to sell it or not sell it— and I'm not telling you one or the other. All I'm saying to you is this is what's going on right now. And what you want to do is you want to think about how do I create a business that has value? Remember what we said about getting rich? How do you get rich? Well, you build equity in your business and outside of your business in both. Now there is another pro, which is interesting here, and that is that generally when these companies start coming to town, in multiples. This is going to raise consumer awareness because what are they going to do? They're going to spend a lot more money on marketing in your market than is currently spent. That's a good thing. So it's going to raise awareness. And what do they say? A rising tide lifts all boats. The other good thing here is it's going to raise prices to the consumer because make no mistakes, these companies are not coming in as the low-priced leader. There's no Walmart coming to town. These are all premium-priced companies, which is one of the reasons why they were acquired. So if you're charging, you know, $300 or $400 a square for roofing, let's say, first off, you're barely making any money, if any. These guys are going to come in and charge $1,000 a square. Why? Well, because they have to. They got to pay for the marketing. They got to pay for the people. They gotta pay for the systems, they gotta pay for overhead, and guess what? Consumers are gonna pay it because they got systems. Let's pause here for a quick break. In today's world, getting a 5-star review on Google from every single one of your customers is critical. This is something that G4 Marketing Group helps hundreds of home improvement and home services companies with every day. So we put together a free 5-star customer experience checklist to help you ensure every one of your customers are getting an experience that will turn them into raving fans. You can get your copy of the customer experience checklist today. Just go to g4marketing.com/CEX. The checklist will walk you through 30 points in your customer journey that you you can improve today. That way you'll be able to turn today's customers into tomorrow's leads, sales, and profits. Just go to gfourmarketing.com/CEX. That's gfourmarketing.com/CEX to get your copy of the checklist today. Then when you're ready to automate your relationship marketing so that your customers grow your business for you, Just give G4 Marketing a call at 305-856-8788 and we'll give you a free demo to show you how your future business profits are hiding in today's customers. Now let's get back to the episode. So the question is, how are you going to compete? And really, how are you going to win? Now the good news here is that the strategies for getting rich, beating quote unquote, them, and making your business recession resistant really are the same. It's all the same. It comes down to your people. It comes back down to the processes and systems you've created in your business for your people to run. It comes down to your profit model, your reputation, your customer relationships, and how you set yourself apart from the competition. So one of the things I talk about here a lot is what I call the Wealthy Contractor Success, Wealth, and Freedom Framework. And basically this framework identifies 3 key areas of your company that you have got to essentially master. And that is people, having the right people in the right seats working towards the same vision. Your people have to be aligned with your company's vision. They have to be accountable for results. If we say that we need to sell $50,000 this week, who's accountable for that? Who's accountable for bringing in the leads that's going to make that happen? Who's accountable for getting the work installed and bringing the cash in to the company? There has to be accountability. The second piece is process. You've gotta have reliable, consistent, and predictable results from your processes. So if I issue 10 leads to a salesperson, I know that that is gonna return to me, I'm making up a number, $3,000 in NSLI. Net sale to lead issue. For every single appointment I issue, I'm going to get $3,000 back. Well, if I know that and I know the next piece, which is profit, if I've got the right pricing model, premium, value-based, if I've got the right scorecard and data and metrics in place, if I've got the right margins in place, that, and I know that that $3,000 is profitable, then I've got this thing, then it's right. Okay. Then that process, that system is good. Now, does that mean that we can't still improve on that system? Absolutely. We can continue to improve on that system. And by the way, as the owner of the company, what is your job? Your job is to make sure you have the right people in the right seats, to make sure you've got the systems and processes for those people to run. And that it's all being done at an ideal level of profit, which to me is 15 to 20%. Now here's the thing that all of you have to— and you've heard me say this 100 times, you will hear me continue to say this hundreds more— you've got to be thinking about profitability, not just top-line sales. Profit is not something that can magically be added on at the end. You've got to plan for it from the beginning. You've got to plan for it from the beginning. One of our speakers, Charlie Guindel, is a master, an absolute master at helping companies plan. So you put out a spreadsheet and you say, okay, my goal this year is coming up with a number, $4 million. What does that look like month by month? What do we need in sales? What do we need in sales capacity? What do we need in, in production and production capacity? How many leads do we need? How many salespeople do we need? And on and on and on. It must be planned from the beginning. I'm recording this at the end of February. If you don't have this plan in place right now, then whatever quote unquote goal you have for the year is probably just a dream. It's a hope. It's a fantasy. Now, I'm not saying that to beat up on anybody. I'm saying it out of tough love, because if you don't have a plan, I'm not going to say you're going to get crushed, but it's going to be a lot harder for you than it needs to be. Got to get your profitability right. The other thing too is, look, when winter comes and it's coming, just don't know when. Do you want to be in a position where you have to sell another job in order to make payroll, or do you want to have a pile of cash in the bank so that you can pivot, so you can adjust your business to where it needs to be in order for you to maintain your profits? I don't know about you, but I want to be in the second camp, not in the first. So now profitability is not only about what you can take out, but it's also about what you can leave in, what you have available so that when it happens and if your business is impacted by it— now, I don't even know if your business will be impacted for it, but better to be planning for it and thinking about it and be prepared than be surprised. Another big piece here is you've really got to be able to set yourself apart from the competition. We call this differentiation. One of the biggest problems with home improvement companies is everybody looks the same. I have this, this thing where I say, if it looks like a duck, it quacks like a duck, and it swims like a duck, it's a duck. If you are viewed as a commodity, and you can't clearly distinguish yourself from the quote unquote next guy, then you leave your prospects with only one way to decide which option to choose, and that is price. And I'm sorry, but that is a game you cannot win. So the question I'll pose to you, and I say write this one down, not if you're driving, but write this down when you can. Why should I choose to do— this is the question that you've got to be able to answer, and you've got to be able to answer it really well. Why should I choose to do business with you given every other option I have? Why should I choose to do business with you given every other option I have? And you can add to the end of that, including doing nothing, including saying no and not buying. You gotta have a really good answer to that question. Because if you, again, if you look like everybody else and you sound like everybody else, why should anybody want to do business with you? And that is the, I'm sorry, but that is like the biggest problem we have in the home improvement industry. It's that everybody looks and sounds the same for the most part. They really got to think about what gives you value. Why should your customer do business with you? Now, the last piece here is you gotta really be thinking about customer relationships. This is gonna make another huge difference in your ability to not just survive, but to thrive over the next few years. So customer relationship is really all about committing yourself to saying, look, when we get a customer, we're going to do everything we can to keep that customer for life. Because when you think about the ways that we can maximize the value of every single customer that comes in, there's a lot. We can get 5-star reviews, post them on Google. Google right now is really the only place that matters. Those people could give you positive word of mouth. They can talk about you to their neighbors and their friends and their coworkers. They can come back and buy from you again. They can provide referrals, and if you've got a system set up for it, you can do radius marketing around that house and get more customers. So there's a lot of ways that it used to be the whole one-and-done thing. Well, I do, you know, roofers are notorious for this. I work with a lot of roofers, as most of you know, but roofers are notorious for this. Not my clients, but we did a roof for them. They're never going to need us again. So why should we ever talk to them again? Well, that's silly. Absolutely silly. Because I could think of, yeah, they may not come back and do business with you again, although it has happened when they move to other parts of town. But even if you took that one out, you've still got 5-star reviews. You've still got positive word of mouth. You've still got referrals and you've still got radius. So while times are good, while times are good, like right now, you want to build up as many of these customer relationships as you can. Because the reality of it is you're probably doing more business than ever. And a lot of your competition thinks that this is going to continue indefinitely. They don't have history or they're just not thinking it through. And they think that, man, look how good I am now. And this is just going to go on and on and on, and we're going to sell boatloads of customers and everyone's going to buy, and we hardly spend any money on marketing and blah, blah, blah. Well, if you're thinking like that, that is potentially devastating. It's a huge mistake. You got to be a little paranoid. Sorry, but good entrepreneurs, they got a little paranoia in them, and hopefully I'm giving you a little. So while times are good, if we set our customers up the right way, today's customers can be tomorrow's leads, sales, and profits. My mentor Dan Kennedy taught me a long time ago, and I've lived by this for as long as I can remember: the only asset that can be kept safe from every threat and made to appreciate in value year after year is the relationship you have with your customers. And so you want to be thinking about how do I develop my customers for life. Now I'll tell you how we do it at G4 for our clients. I'll share some best practices with you. We do this for over 200 clients around the country. Is first you got to say thank you and you got to make a big deal out of it. Obviously, well, let me back up here for a second. All of this, all of this is dependent upon an amazing customer experience. I learned a new word for this. I got it from my friend Tim Mush at MarketSharp. He said the customer experience today needs to be remarkable. It's a great word, remarkable. You want people to remark on it, right? So that is your starting point because if you don't get that right, none of the rest of the stuff is going to matter. You've got to design and execute on a remarkable customer experience, one worthy of a 5-star review. When you're done, you want to say thank you, send them something. So for our clients, we send out a box and inside that box is a thank you card. There's cookies, there's a nice note from the owner, there's gift cards that they can use. They're like, um, like credit cards, but they're gift cards back to the company. So you can use this for yourself. You can pass it on to your friend. You want to make review collection easy and effortless. People left on their own are not just going to go and leave you reviews. You'll get a few, but you need a system for getting a review from almost every single client. We teach our clients the 90-second review. We call it the 90-second. Here's how to get a 5-star Google review in 90 seconds or less. You want something like that in place. You want to talk about referrals all the time with them. You want to stay engaged. The last piece of this is you've got to stay engaged with your customers. What does that mean? Well, how do we do it here? We do it through your company newsletter. We do a digital version every month. We do a print version every quarter. We talk about the referral program in every communication that goes out on behalf of our clients. See, it's not your customer's job to remember you. It's your job to make sure they never forget. And so you want to show up on a regular basis. With friendly, engaging, and entertaining content. You don't want to show up— if you do windows, you don't want to show up talking about, you know, how this window is better than that window and how double pane is better than single pane and triple pane is even better and the blah blah blah. They don't care about that stuff. You want to entertain them a little bit. You want to put your face and your name in front of them as often as possible. Again, today's customers are tomorrow's leads, sales, and profits. So anyway, this was just a small section of what we covered, and I think over the next few months you're going to hear more and more from some of the speakers that we had at Accelerate. And our theme this year was success leaves clues and those clues lead to shortcuts. And I said this, you've heard me say this over and over again here. Success leaves clues and you want to look for those clues in everything that we say here, that you see the most successful companies doing. You want to look for those clues and you want to use them as shortcuts in your business. There's absolutely no reason why you have to take months and years to figure out a sales process. When boom, instantly you can have one. That's just an example. One example, right? You want to look for these clues. You want to look for the shortcuts and you want to implement them into your business as quickly as possible. The longer you wait, the harder it's going to get. Again, you don't want to be in a position where things slowly start to turn. You start to get a little bit squeezed and then all of a sudden you find yourself in trouble. It can happen faster than you know. So I hope this has been helpful for you. Again, I'll have a lot more in the coming months, and we've got some great episodes coming up. I'm going to talk more about customer relationships as my, my new book, my updated book, The Definitive Guide to Relationship Marketing, is going to be coming out soon. And so we'll be talking a lot more about that stuff over the next few months. But again, I hope this was of value to you. And hope you're having a great first quarter. Again, really think about what it is that you want from your business, create a plan around that, and go execute. Until next time, this is Brian Kaskavalciyan with G4 Marketing Group, and this is the Wealthy Contractor Podcast. 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 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 Wealthy Contractor. Just pay shipping and handling and I'll take care of the cost of the book. And finally, a big thanks to G4 Marketing for sponsoring The Wealthy Contractor Podcast. For over 12 years now, G4 Marketing has been the secret back office relationship marketing team for hundreds of home improvement and home service businesses just like yours. You get the customer and our proven system turns that customer into 5-star reviews and profitable repeat and referral business. If your home improvement or home services company completes at least 10 jobs per month, they have a solution that will work for you. To find out more, sign up for your free, no-obligation, 10-minute discovery call at www.gfourmarketing.com/strategy. That's gfourmarketing.com/strategy. Set your discovery call up today and they'll help you set your business up for long-term profits and success. So until next time, this is Brian Kaskavalciyan.