Larry Closs - Ep 62 - How to Create a Business, Not a Job

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.

All right everybody, welcome to this episode of the Wealthy Contractor Podcast. This is Brian Kaskavalciyan with G4 Marketing Group. And today I've got somebody on, on that I've actually been trying to get on for a long time. He's a, he's a longtime client, really one of the sharpest guys that I have met in this business. And I'm really excited to pick his brain today because he's got a lot of really great information to share. So Larry Kloss is the owner of MaxHome. And Larry, I'm going to let Larry actually tell you his story. He's based in New Orleans. But he's got an office in Houston, he's got an office in New Orleans, and I believe he's got an office somewhere else too. So Larry, welcome to the Wealthy Contractor Podcast. Excited to have you here.

Thank you, Brian. It's nice to be here. You have been asking me for years, so I'm sorry, sorry, sorry it took me so long.

No, you've been a little busy.

So the story, story's actually an interesting one. I used to own an ad agency and in the late 1990s, early 2000s, and I was specializing in car dealers and home improvement. I realized I didn't really want to continue with that. Like I enjoyed it, but I wanted to actually build a business that wasn't really built around me and ad agencies, you know, a lot of ad agencies have the founder's names on it and I wanted something not built around me. And you can't get a car dealership basically unless your dad owns one. So I started looking at home improvement. I saw the one-day bath stuff. I came home, I had a handyman working, doing some renovations on my house. I said, you think you can learn how to install this? And off we went. That was maybe 2004. And, you know, we built it up since. Yeah, multiple, multiple products. And now we're in, you know, we cover basically Biloxi, Mississippi to Corpus Christi, Texas. So basically the whole Gulf Coast. Wow.

And about how many jobs will you install or how about how many did you install last month?

Let's say 250, maybe.

Awesome. Cool.

Yeah, probably 250 jobs.

Yeah. So the product lines are One Day Bath and you also have a Renewal by Andersen.

We're a Renewal by Andersen dealer and we also sell Timo sunrooms out of Texas.

Cool.

And patio.

So, so your background's interesting. You started on the marketing side of the business, and, um, so you grabbed this guy and you said, hey, you're— hey, can you install bathtubs? Um, tell me about the first, you know, couple years, because you, you grew your business pretty fast, and I think It took me a while to figure out what you did in my businesses where it was like, hey, I don't want to be the guy that goes out and does the thing. I just want to be the guy that sells and markets the thing. And so tell me a little bit about the beginning of the business and how you go from, you know, basically creating a business from the first day rather than just a job.

Well, so, so Something that's interesting is that was my goal, right? My goal was to create a business and not just a job. I felt that in advertising I would have a job. Basically in advertising, what happens is you grow your agency and you turn your clients over to junior people and then you get bigger clients and eventually the clients are all kind of wrapped around you still. And I didn't want it wrapped around me. So I went into the home improvement business wanting to start a business and not a job. I do have to say, having done this for years and been around a lot of companies and also done some consulting, that one of the things that I was blessed with is that I ran that agency alongside the business for about 4 years. And look, at the end, you know, or after 2 or 3 years, the agency was giving me, you know, $15,000, $17,000 a month in money. So I could live, right? Yeah. I tell you, that's one of the things that I, that I have found as far as people growing their business initially is it takes cash flow and it takes more cash flow than you think it does.

Always.

And we're in a business with very low barriers to entry as far as capital expenditures. Our main capital expenditures, it's not even a capital expenditure. Our main expenditure is marketing, right? And then you got to go out and sell everything. And once you sell it, you get a deposit, you pay for your materials, and there you go. So it looks like it— well, it doesn't look like it is a business that requires very little money to get started, right? Get some leads, you go do it. Even if you got to knock doors, you go get leads. You get out and you get it started. What I found is, is that people underestimate the amount of money that they're going to need to grow the business. Because what happens is someone gets comfortable. Let's just say they're making $200,000 a year on a $1.5 million business or $2 million business or whatever it is. The trick is, is now you have to pay— let's just start with the sales manager. You have to pay a sales manager. And excuse the train, I'm right near a train track. You have to pay a sales manager. What, you have to guarantee him $100,000? So how do you do that? At least. Yeah. How do you bring in the professional management, let alone when without sacrificing your own money? And that's when I think you have to be prepared to find some more money.

So how do you do that?

How do you do that?

That's a good point you brought up because you just— so one of the things that a lot of people do in this business is they take on that additional overhead, call it, you know, $8,000 a month or $10,000 a month or $5,000 a month, whatever it is, and they don't change anything else. They don't change their pricing, they don't change their lead gen, they don't change— so how do you— oh well, yeah, how do you make that happen?

You have to make sure your pricing But you know what? Here's how you make it happen. I think there's the main way you make it happen is you, for a period of whatever it be, 2 to 3 years, you have to sacrifice and take home as little as possible, take out as little as possible out of that business and put as much into that business as you can. And generally it's very risky because you're putting it into marketing, you're putting it into staff, and both of those are untested. And both of those are not just untested. But obviously they're variables and they change and things happen. But you have to be ready to not take every dime out of that business as it's growing. Leave it in and reinvest it. Yeah, that's difficult because here's what I found. Here's what I found. I have found that when people do take it out and their families get used to it, it's not going back in. Does that make sense? Oh, yeah. When the families get used to a $200,000, $250,000 income, It's hard to cut back to $125,000 income and really watch it. Where the truth is, is if you cut back to $125,000 in 2 or 3 years, you could be making $375,000 for your family and have management in place and have a completely different lifestyle and a business that's ready to grow. Yeah. And I found that to be true. The other thing that I found to be true, Brian, is, is something that I have that I still see struggles in my company and I probably have 130 employees. One of the things that I, that I really personally truly enjoy is developing people. Right. And one of the things that I have found is secondary to that cash where they can't hire people. The second thing is that managing managers is completely different than managing the actual work. Yeah, it is a very hard adjustment. It was brutally hard for me. It was a 2-year struggle for me. I got through it. I would not say it is not natural, especially if you're used to doing a lot of work. You do work, but you just do it differently when you start removing yourself and manage managers. And it's a combination of those two things because if you don't reach a point where you can just manage managers and you're always dropping, even if you have managers, but you're always dropping one level beneath them to get involved with the work, you're going to struggle.

Yeah, because you don't have— you don't have— you haven't completely given the manager the tools and the authority, I guess, to do what they need to do.

And then just from a straight time and energy stock, you're still in the same place, right? Look, just let's just call it for what it is. I mean, You know, everybody's working for the same thing. They want to make a lot of money and have a great lifestyle, right? And build something. But, you know, even the build something really comes down to like, you know, fulfill goals and have a great lifestyle. As soon as you're dropping beneath them and doing the work here, you're paying them, right? And you're still taking on some of that burden. I can't underestimate how hard this is. I see people in my organization struggle with it all the time. Um, some people can't get through it. It is very difficult. It is very easy for the right person to go from managing— from doing work to managing work. It's so— an installer with the right set of skills can go from installing to managing installers, right? They might not be great at it at first, but they can develop those skills. It's a whole different thing to go from managing installers to managing the manager who manages $1.6 million.

What would you say is— so you said that it was hard for you, took a couple of years. I mean, what would you say is the one big thing that you really learned that helped you get how to do it?

You know, one thing that I helped that I can recommend is there's a book called The Leadership Pipeline. It was given to me. God, I just forgot his name from I'll remember his name in a second. But anyway, it's a leadership pipeline and you really only have to read the first 3 or 4 chapters because it's really geared towards multinational corporations. But it goes through and you can read up until managing managers or managing units. And that's really helped me. That really kind of broke it open for me. You know, I think what actually pushed me over the edge was I had no option at some point. At some point, at some point, the growth forced me to say, like, I can't, like, I can't deal with that. Like, I don't, you know, whatever the salesmen are being trained, because I used to train salesmen, whatever salesmen are being trained, I, I can't get involved, right? I don't have the time. Like, there's so many other things I have to do. And it was hard, right? And it's hard. And I'm going to tell you what, I still struggle to this day helping people develop to do that. Because that's one of my main roles is helping people develop those skills. Because now, you know, whatever, I'm managing managers who manage managers who manage managers. And it's hard. It's even hard for me. And the one thing that I've found is constant talking about it, constant monitoring, and constant feedback both ways. Questions such as when someone comes into my office and I ask them, one of my direct reports, why is sales number X? And when they say, I don't know, let me go talk to the salesman, I say, whoa, whoa, whoa, is that what you should be doing or should you be getting with your sales manager and figuring it out? And look, it's hard and I've seen people not break through, but I think it is probably the most important thing that people have to do to really grow their business.

Wow, great advice. So I have to ask you, we have to talk about marketing, and that's like a, that's a big, uh, jump from, from where we were to now talk about marketing. But you're, you're a marketing guy, so we have to talk about it. So you basically do— before, before we turned on the recording, I, I asked you, you know, what are you guys doing? And I kind of knew the answer already. I just wanted to hear it from you. You're basically doing everything. Um, You're doing TV, you're doing internet, you're doing print, you're doing shows, you're, you're doing everything. What makes advertising effective in the home improvement business?

So when you ask that, you're talking about straight advertising, not marketing?

Let's, let's define— you define for me, what do you determine as advertising? And what is marketing to you?

Well, in my mind, advertising would be straight advertising that is paid for media in some sort and would not be face-to-face or some sort of partnership, right?

Okay.

Um, so we talk about that until you reach a certain point of size. I think you have to rely on direct response. The advertising, the advertising all has to be geared towards getting a lead, and some people do that forever. All their advertising is always direct response. There are many successful people in our business who've reached certain points where they can rely on just branding, right, and getting a bunch of ads out there. And you don't worry about if this TV ad gets a lead. It's your 100 TV ads, your radio ads, your billboards, and people are just calling all the time. Yeah, that's a tricky point to get to, and not many people get to that point.

Yeah. Larry.

Yes.

Larry, hold on, just let's back up for one second. I want you to, because you know I'm a big direct response guy, but some people may not know that term. So can you talk about direct response versus brand type advertising or marketing?

Direct response is going to be you run an ad, whether it is print, TV, anything, and you want a direct response from it and you want it a measurable direct response from it. You run a TV ad and you want to say my 12 o'clock TV ad produced X in calls and X in business. Right. And there's specific techniques you have to use to do that. Whereas branding would be you run an ad and you run a bunch of ads and you're not looking for a direct response from that ad. But the, the cumulative whole of your advertising drives you leads. And when you start thinking about this and I can put it into context. Direct response is call now in the next 5 minutes, receive 50% off installation and a free $250 gift card. Branding would be a testimonial with your phone number at the end. And granted, those are, those are spectrum examples and it is a spectrum, right? And I want to remind people it is a spectrum because look, when you are running that ad and it's direct response, you're still getting your brand out there. Right. But you're still getting your brand out there and you're achieving some branding. You're just doing it differently. So what changes in all that is both your creative changes and your buying changes on it, right? How you purchase the media, how you do your creative changes on it. I would venture to say that almost everyone in like there are very few people who have reached the point of being able to just run branding ads. Now, there are many people who do a lot of direct response and then a little bit of branding. But there are very few people that just do branding. Yeah.

So let's, let's be, I don't want to interrupt you, but let's be very clear at this point for everybody that's listening that if you are small, even if you are bigger, if you're running brand type ads or image type ads, you better stop and go figure out direct response because you don't have the money, you don't have the time. And when you put an advertisement out there, it's like sending a little soldier out. That little soldier's got to go and bring back, you know, leads. That's a mistake a lot of people make in this business, Larry, is that they let— you know, that, you know, this is good as anybody knows. This is that they let the advertising rep, you know, create an ad for them, or, you know, they, they just whatever they put, they put a big logo and a phone number and a big image on the thing with no offer, with no call to action, with no urgency, no reason to call today. And that's really dangerous. That's— and then they'll say, well, the ad didn't work. I tried marketing and marketing didn't work. So I just wanted to make sure that we were— I was clear about that, that you're listening to a guy that built his company based on these principles of direct response marketing.

Look, I back up everything you said. The only, the amount of money it takes to do, the only way you can win with brand advertising is if you completely dominate a market and you can do so much of it that you can dominate a market. I don't know anyone under $35 million, and that's only one person. Most of the people who are doing just straight branding are $100 million plus companies. And even they probably have so much direct response put in there to drive leads. But look, it's so important. You have to do all direct response. All we do is direct response. Look, now the only thing that changes with that a little is, hey, when you get into social media, Facebook and Instagram and things like that, guess what? You can afford branding. YouTube. YouTube is a great place to do branding. And a lot of people watch it. But the reason that you can afford to do it is because it's virtually free, right? You just have to direct people there, or people will find it regardless. But direct response advertising with an— with a reason to call right now and with an offer, and just as important, is trackable. Has to be trackable. If it's not trackable, it's truly not direct response.

And that's also another mistake that a lot of people make, is that they'll use the same phone number on every single ad, right? Or they won't track the result and, and put it into their CRM so that they can get a marketing report.

Look, look, I can tell you right now, on, on, on all advertising except possibly billboards, which I would highly— which are not direct response advertising. So let's just talk about all direct response advertising. All direct response advertising should have a trackable number in it. 100%. Every study shows that all the large manufacturers that I work with, and I work with many large manufacturers that are all having very, very successful marketing departments. We're talking billion-dollar companies. Don't use vanity numbers. They use direct response trackable numbers. It is very cheap. There's so many companies out there that can do it. You're crazy not to do it. And here's another thing that, that happens with almost all of them, and it's free. You get what's called a whisper on the line. So when you pick up the phone, it will say, "New News TV," "New News," before you start talking to the person. So whoever's answering the phone knows exactly where the call came from.

Right.

Incredibly important.

And by the way, the other thing now with tracking numbers also is that every call is recorded. So now you can also go back and listen to the calls to measure whether or not your people are effectively setting the appointment when those phone calls come in.

That's paramount. I mean, we reached the point, sadly, we just brought it back earlier this year of having quality control people that listen to our calls. But many of the phone companies now, including If By Phone, and I think If by Phone is now DialogTech and 1-800-RESPONSE actually have, God, I don't know if it's artificial intelligence or what it is, but you just type in a search word like estimate and it will pull up the conversations that have estimate in it. Or you could pull up something that say TV and it would pull up just the calls that have TV in it. Um, it actually, it's incredible technology.

Yeah, it really is amazing what is available now. And, and by the way, all of this stuff Larry did when he was first starting out too, right? This is not stuff that you just started doing now at your size at 250, 300 jobs a month. This is all stuff that got you to 200. You can't get to Larry's size. You can't get to your size of business. Well, forget your size of business. Shit, you can't get to $4 or $5 million without doing this stuff, right?

Direct response is the key to getting it going only at a certain level. So let me just tell you exactly what we think now. So we spend 90% of our ads on direct response and we'll do 10% branding and 10% branding might be a sponsorship of the local minor league baseball team or something. Right. But guess what? We still want to get with that. Even when we're spending that, we still want to get some promoters. Field marketers out in front of people at that baseball game to get leads. But when I started, it was 100% direct response. Now here's the thing, just because it's direct response doesn't mean you're not getting your brand out there. Your logo's in the ad, your phone number's in the ad, you're in the ad maybe, the same voice is in the ad, the same look is in the ad, the same colors are in the ad. You're getting your brand out there, but you have to go for the immediate business, for the immediate call. You have to make it tracking. Don't let any media tell you anything different, and hold media accountable for it, right? And you have to start that way. You, you have to. There's no other way. There's no other way to start. Like, you have—

yeah, you can't just— yeah, you just won't.

You won't make it, and it'll be incredibly frustrating. And you, you— and, and, and here's something else that I caught that, that I— that people who might listen to this might need to know. If you have been doing it that way and you have made decisions on media sources as far as not working, working, if some have not worked and you haven't done, applied the correct direct response principles to it, you might want to go back and try it and try the direct response principles because it could very well work.

Right, right. Great advice.

Um, you know, look, an ad, so any print ad basically that you don't put a coupon or an offer in to call right now Okay, if you've been running print and you have not been doing that, go back, try that print with that. I would venture to say always put a combo offer. Look, call now for the Ginsu knives and receive $50 off. Oh, and get a free chopper and get a free, uh, dicer. Look, those work for a reason.

But Larry, okay, but Larry, come on. Isn't that stuff corny? Isn't that stuff cheesy?

I would always put a dual offer in. I would go so far as to also offer, if you can, and sometimes do it, change your offers to make sure that you have offers that appeal to different people. For instance, a person who's interested in saving money off a job is different than the person who might want no finance for a year, no payments for a year. And mix those things up. Whenever you do both of those, throw something else in with it. No payments for a year and a gift card, no payments for a year and a free safety shower package with your shower. I don't think they're right.

No, you know what, and it might be, maybe it is to some people, but you know what, it works. It works.

It works.

It works, right? And so what you want to do is if you're going to put an ad out there and you're going to spend your money on an ad, you want to do everything that you possibly can do to get a return on that investment. Otherwise, why in the hell would you spend the money to do it? Anyway, we— you and I are both in the same, same camp on that. Might be cheesy, but hey, we're in business to make money.

Yeah, well, you know what, here's something else though. You're, you're in business to make money and you're in business to help customers, right? In your business, you know, a lot of us still really enjoy changing customers' lives. And here's the thing, I know a lot of people are in remodeling because a lot of the satisfaction that they get out of it is seeing the customers' faces when they're done and knowing that you're going to change a customer's face, like, not the customer's life, right? So why not do marketing that you can do more of that? You know, like, great point. Uh, don't be afraid of that. Get more customers so you can change more people's lives. And you can make more people. Look, our mission statement is everybody happy. I actually do a new employee meeting every month, and I was in my Houston office doing one yesterday, and I had an employee who missed the first meeting. So she was 2 months in with us, and she started the meeting off because I have everyone introduce themselves and said she's blown away, having come from the medical field, on how happy she makes customers and how she changes people's lives. She's like, I would've never thought I would've had that in remodeling. And then I expounded on it and how that's really changed kind of my thinking too, because it's not something that you would think, but it is something that you get out of this job. You really make people happy. I have a friend in the roofing business. He might've been on your show before. He's actually a doctor. He was an MD for about 10 years, became very frustrated with the healthcare system. He found himself found himself being forced to spend less time with patients because he was dictated that by the insurance company. He basically found himself, his, his income being limited by the insurance company, by the number of people he could see. And then he could see less people. So he was like, wait a minute, I don't like— I'm not even helping these people as much and I can't make money. He became a roofer, very successful. And he said, you know what, Larry, putting a roof over people's heads and protecting their family, I get just as much satisfaction as I was being a doctor. And I don't have a system fighting against it. It really is.

That's amazing. I don't know who that is, but I'd love to get him on the show.

I'll tell you afterwards. I don't want to say his name here. I can get him on the show. Yeah, he's a, he's a great guy. Awesome. Um, but look, the only reason I bring that up is, you know, like, grow your business, grow your business for a lot of things. So you can make more money, you can have the lifestyle, but grow so you can affect more people's lives, both internally and externally. You can affect your customers and you can change people's lives who work for your organization by providing them a great life.

That's awesome. So, let me ask you this. So, let me ask you this. You've been doing the home improvement piece now for 14 years. You've had your ups and your downs. You've built a great company. What's one thing that you kind of learned that you kind of wish you knew earlier, way back at the beginning, that you might have done differently?

After a certain point, when you are dealing with staff, when you have staff, right? It's not you and 2 people. I wish I would have learned earlier on that the game I'm really playing is a people game, not a lead game. The game that I have to win at is talent. My main job is I have to grow talent or get talent. I have to either grow people so they can do their jobs better. I have to find people who can do it better. I wish I would have learned that in an earlier game and not worried so much thinking it was a lead game because guess what? When you get the talent, they get the leads, they get the sales, they get the installs, they get it all done and they make you a lot happier and they make the customers a lot happier. For years I thought I was just playing, you know, let me get more leads, let me sell more stuff, let me make more people happy. Now I realize that my main job is let me get some great talent and then it'll all take care of itself.

That's, um, that's incredible advice. I have recently, you know, after all of these years, um, discovered the same thing. And I think that that's, that would be very high up on my list as well. Wow. So Larry, this has been awesome. I'm watching the clock. I, I appreciate you, uh, taking the time. You've really— this is another one for all the listeners. I tell them this a lot because I have really great guests, but this is another one you want to go back and listen to, um, again, uh, because there was a lot of really good advice and really good information in there from a guy that's you know, he's been doing it for a long time, and it's, you know, you've had your ups and you've had your downs too, and, and there's a lot to learn, learn from that. So Larry, thank you. Any parting words here? Any like last, like, little piece of advice you can give to the listener?

Oh yeah, I'll tell them what I tell my kids every day since I drop them off from school since they're in preschool: go get them.

Awesome. I love it. I love it. Well, look, everybody that's listening, go to thewealthycontractor.com if you haven't done so already. Get on the list. There's a bunch of stuff, bunch of resources there. Most of it you don't have to pay a penny for, but go to thewealthycontractor.com, get information. Larry, thank you so much. Really appreciate it. And until next time, everybody, this is Brian Kaskavalciyan with G4 Marketing Group and The Wealthy Contractor. All right.

So that's it for today's episode of The Wealthy Contractor 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.