Role of the 1099 in Storm Restoration Contractors

So you actually said this earlier. You said that. You started selling and that's how the business started growing. It was you selling. So I think that might have had something to do with it where you said the owner has. There's nobody that's more qualified to sell your business than the owner. You said something along those lines. And so I want to call attention to that for the listeners. Like that's reality. That's the perfect point really. Probably why you hired the production guy. Knowing that hiring sales guys, coin flip if it drives revenue or not. But if you're selling, you know, you have no doubt in your mind that you're going to be able to drive the revenue that you need. How did it feel to be responsible for these? Now you got three people, you got this kind of mercenary guy, you've got a production manager and then you have a salesperson. Now you got a little responsibility. How'd that feel?

Well, Cody, it was all a short term thing anyway. So that fall he went right back down to Florida and I took things back over. So it's just Derek and I. And then I had a salesperson and it's really nervous. I remember a good friend of mine who has a landscaping company, he told me, he's like, the first hire is the hardest. Everyone after that is easy from a cash flow on your mindset standpoint. Right. The responsibility definitely changes when you know, like especially Derek. Our wives went to college together, they ran cross country together. And like these are people that are really close to us that now they're taking a leap of faith. He actually lived in Wisconsin and would drive to Minneapolis and work Monday through Friday, stay at his sister in law's house on the couch, and then drive home three hours to Wisconsin on the weekends to see his wife.

So listeners are gonna hate this. Where in Wisconsin did he live?

I don't remember.

Okay.

No. Tomah, Tomah, Wisconsin.

Oh, wow, that is a long ways away because I. So funny story. I lived in Wisconsin, halfway between River Falls and Menominee, if you know where Spring Valley is, which is about 26 miles to make it to the border. And then I would drive to Eden Prairie. So that's a good ways on the. What is that? That's the southwest side of the cities. So it's about an hour and 15 minute drive one way. I would do that every day. In and then out.

Yeah, he ended up doing that. He moved to Menominee then like a year later and then ended up doing that drive every day to and fro.

That's that's pretty wild, pretty committed of him. But. So you. You now have these responsibilities. What did that do to your mentality as the owner?

I wanted to take care of them. And that's one thing that I, like, started understanding by a lot of, like, the industry is a lot of people are. 1090 were, at least at that time. There's a transition now, but a lot of people, 1099 independent. And they. There wasn't really a cultural kind of integration and, like, formed culture. So I kind of wanted to, like, have. I just wanted to care for them and try to get them benefits and, like, so I could actually care for these people. I really cared about, you know, in a way that, like, another company out there would do, like Medtronic or something like that. Like, I wanted to get them benefits. I wanted to get them, like, retirement options, all those things. I wanted to provide revenue so that I wouldn't have to tell them one day that it's over.

You know, that's pretty awesome. The idea that you care enough. The picture you have in your mind. A lot of guys don't know who Medtronic is, but it's one of the biggest medical device manufacturers in the world. And you're picturing yourself as that. Right. Like, I want to picture myself as a business like that so I can provide for the people that work for me. So has it always been employees from that perspective?

Yes. Yes. We've never. I've briefly had someone start as a 1099 for like, four weeks, and then they switched to W2. So everyone. And that's the thing is, like, I, like, I joined the UASRC at that time, which is now dissolved, but the United association of Storm Restoration Contractors, and there's a number of founding members in the Twin Cities of that. And I ended up meeting Jacob Sachs, and he introduced me to a number of people. And I was this close to going to the 1099. Whole model and profit split and all that jazz. And the number of people and mentors in that group were like, don't do it. You'll have to switch over later and start with the W2. So we've always been W2 employees on sales and everything.

Fun fact about UASRC.

Yeah.

Do you know who the founding members were?

I know who the founding members are.

Yeah. Okay. That all happened in a hotel room at an IRA in Orlando. We all started talking about that. There's five of us sitting there, and that's how it all started. It's kind of unfortunate that it's dissolved at this point, I think it had a really good idea. I hope at some point there is something like that again in the future where there's a resource place for storm restoration contractors to. To do it.

Right.

That's pretty cool. The Catalyst Group kind of feels a bit of that. So 2017 happens. We grow. We start to hire some people. Got a production manager, We've got a salesperson in 2018. What happened in 2018?

We went from 1.1 in 2017. We did 2.5 in 2018. So we doubled.

That's some pretty serious growth.

Yeah.

What. What were the. What were the big challenges there?

Oh, gosh, I don't know. It solved trauma. Trying to, like, resurrect trauma. No, it was. It was a wonderful time. The challenges there were, like, standardization of, like, results and, like, the approach. We were very, like, first salesperson. I didn't have a sales process. I didn't have anything. It was just us being endearing and being us. You know what I mean? There's no processes, really. And it's just like every little challenge you ran into, like, well, okay, we should do it this way and maybe make a checklist here or this or that next. You know, you have, like, these little tools and resources that you're using to kind of facilitate getting it to the next volume level.

Yeah, that's. That's a key point because somewhere around that million to 2 million mark, those decisions have to start being made. Like, up until then, we can kind of wing it a little bit, shoot from the. Shoot from the hip, and it's going to vary depending upon the type of trade that you do. So roofing might be around that million to 2 million, where something that's a smaller ticket item might be between 500,000 and a million. That we're starting to get people in place. We want those people to all do it the same way. We want to start making this thing repeatable. What were your first indications of that?

I just knew that at times things were like how I wanted things done, like how I did it. I wanted that done every time. I wanted the customer to have the exact same experience every single time, no matter who they dealt with in the company. So I just knew. I knew I wanted that, and I didn't really know how to do it. And that was kind of the tipping point on that.

I think that's a very good way of putting it. So 2018 goes well. Sounds like. So now we're rolling into 2019. Storm stuff still going strong. Like, you got more storms to Work and all that good stuff.

If I remember correctly, there's a few. There's leftover stuff a little bit. So 2018, yeah, we did. That was 2.5. And then 2019, we did 3. 3 million.

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3 million.

So what were you doing marketing wise? Like, were you knocking doors like everybody else or were you doing something different?

Less than probably 2% of our revenue in our whole lifetime has been knocking doors.

Ah. So what do we do? How do we do that? Because I think that's kind of the MO for storm restoration. Right? Like go knock a bunch of doors and get a bunch of business.

Yeah. And I was always too scared to do it, so I never did. So I had to figure out other ways to get leads. So kind of what happened is the referral base. So from then till now, we still, I can look in our database and 30% of our revenue in our whole lifetime has been from referrals. So doing that's well done. Yeah. And, but also, I just always had a knack for marketing and I had some friends. I had a friend, she was the social media manager at an agency downtown and she knew she had a guy. I needed a website and I was in college at this time and she, I knew I need a website. And I was like, Morgan, you're all, you know, all this stuff. Do you know anyone who can build me a website? And she's like, well, I do have a guy, he could do it on the side. His name is Tim. And I'm like, oh, okay. So I got to meet Tim Brown and he was working full time.

This was Tim Brown before. He's Tim Brown?

Yeah, yeah, Tim Brown. Yeah, yeah. So he. So I met Tim and he presented me with, you know, his website, which was like three, four times the price of someone else. And he sold me on the value of, like, what could happen. And we've been working together quite well ever since. So like, that really planted the seed because I always knew I wanted to have like a reoccurring, sustainable business on like my revenue. And I just kind of knew from SEO with some friends who had like SEO companies and stuff. Like that, that, that was a very important thing to be planting the seed now because everyone I talked to said the roofing industry, they're like, it's such a low hanging fruit. We don't know why all you roofers don't invest in this. It's so stupid. So I was like, all right, I'll do it. So I've been working with Tim, oh gosh, eight, nine years now with sto. So that planted the seed. So like we were just having organic and it just kept growing. And I was blogging too. In my free time I would write like terrible blogs and just to get.

Welcome to my world.

Yeah, well, like, yeah. And then it just kind of, that was kind of the baseline and we didn't actually start spending money on Google until 2020. So.

Wow. So from 2013 till 2020, so seven years, eight years, you didn't spend any money.

Local services we did in 2019. The GLS, we were like one of the first people on that in the Twin Cities. But yeah, I didn't do any google adwords until 2000.

I heard this thing that SEO is dead. I actually saw an ad, an ad on Facebook said SEO is dead. I went, okay, it's on Facebook. So that's thing number one is like, okay, they're about Facebook. But do you still see results from SEO? Is it getting better? Is it getting worse? Staying the same?

Continually getting better? Because we've, we're so far invested into this for years and years and years. Not financially. I'm just like time and effort put behind it. The financials is a huge roi because once it's there, it's there. It's just compounding. And as long as you're adjusting it to Google's algorithm and you're continually feeding, making yourself valuable, it's gonna, you're gonna do well. And we get tons of website submissions like daily. So it's not, I mean there's different like feeding methods there now with other diversified marketing efforts, but the website really is the hub of things online that you need. It's almost like a pay to play. I could see why someone would say that line, the SEO is dead. Just because it is, it's a necessity. You need to have that, you need to have a good website, otherwise you're not even in the game.

Yeah. And if somebody was starting today, would you give them that advice like, hey, get the website going and do that now?

Yes and no. I think that it's diversified effort. I think that depending on the person, there's way you can make your money work for you real quick if you put it in other methods. So I think it diversified well. It's just like Google Ads, if you have that figured out. Or like even just free stuff, Facebook, social media. You don't need to run ads to make money on social media. It's a low hanging fruit. You're free. Your network just even like networking is the way to do it. Like I joined a network, I joined a networking group last year actually. So I'm like out there networking and doing that and that's a huge ROI as well.

Yeah, I couldn't agree more. I just read a book here recently. I'll give it to you if you haven't read it before. It's called the Power of who. Have you ever read that?

No, I haven't.

So many of us I think are about building this really wide network. Like I want to know everybody and anybody and that way they all know me type of thing. This book's concept isn't about that. It's about having a tight network and deep relationship with each one. And do you find that like as you're now building out your network and stuff like that, you've built relationships with certain ones and they seem to be more valuable than just the everybody that we know?

Oh yeah, yeah, absolutely. There are people that know your customer before you. So who are those people? And aligning yourself and building deep relationships. So like the whole creed of like BNI Business Networking International, I avoided it like the plague forever. I thought it was like whatever. But like the creed is like your visibility equals credibility, which equals revenue, and like your referral is your reputation. So you gotta think about that as well as who are the people that know your customer before you and what really matters to them? Well, they want their, their reputation valued by whoever they refer it to. So like if I refer someone to Jim Johnson, it's a reflection on me, your performance. Right. So if you keep that in mind, if you keep that in mind on your customers, like who are those people that really are and who increases your closing rate? So like there are certain individuals in the market that if you line yourself and get deep relationships where you are really like making them look like rock stars, you're making them look like the champion you're going to keep getting fed.

That's really good. Like you said something there that I don't want the listeners or viewers to, to miss. This idea that your network knows your customer before you do. And so they're your little broadcast voices out there. They're the ones that, like when somebody says the word roof and they go, oh, Josh, that's the first thing that comes to mind. Or North Face, first thing that comes to mind.

Yep.

And I think we. We don't put enough effort into that sometimes, especially in the storm world. I'm going to come back to that a little bit. So 2017, a big storm, but there hasn't really been another big storm until 2022. Right. Like, there's been little storms here and.

There, little pocket storms like we've had. We had a good one in 2019 in Elk river, our hometown, which that kind of launched us to the next phase. And.

But even then. So that's 2019. So 2020, 2021. So that's two years of not a whole lot going on. Probably picking up some work that hadn't been completed, which is what a lot of folks aren't able to do. They're not able to pick up those ones that kind of slip through the cracks. I would think that the reason that you're doing that is because of the heavy investment you made on the digital side. Would you agree with that?

Yeah, I would agree with that for sure. Like, we're getting things that not everyone else is looking at and we're not afraid of holding on to the customer's hands for a year, year and a half that it takes to get something pushed through. You know, the integration of the marketing. Definitely you're in a place where you're visible to people who are seeking a solution actively. And if you're the one that's right there to be found, your credibility and your closing rate and your ability to close that is just going to go up higher. It's like I said earlier, like, my whole model has always been like, I want a sustainable revenue stream. We've never really targeted Storm, which is interesting. We've always targeted. Our inbound has always been 60 to 70% retail. And then our revenue has always been 60 to 70% insurance. So it flips. And we never really have chased the storms either.

Explain that. So our lead intake is 60 to 70% retail, but our work is 60 to 70% Stormworth. What's that flip? How's that happening?

Well, it happens because of where you're getting that retail work in places that have damage or they don't know they have damage. So, like, we'll go out to. I don't care the size of the job you call us for one little leak. Like, our job is to give the customer an amazing experience. We have something at the company called the customer for life mentality. And that means like, even if I can't provide a solution to your problem, maybe it's a plumbing leak. I'm going to make you feel so special and happy with the experience that you had meeting me that then you're going to be a customer for life and evangelist of the North Face brand for me. But then also like going out into a gutter lead, you know, you might go to gutterlead and it's a 50. There's literally a job in Elk river, our hometown. We went out to a gutter lead and it was like 50ft of seamless gutters. How many roofers are going to come and bid that? Well, we did and it turned in $80,000 claim.

Wow. You know, and so where did you get this concept that these, these folks that might just be a gutter job or a repair job or something like that could be an evangelist for you?

I think everyone, everyone can if you give, make them feel good about the experience, you make them feel special and cared about.

I think so many people don't approach it that way. They go, crap, man, I got a repair lead.

We love it.

Yeah.

I have a text thread that all my salespeople are on right now and they're like, today there was a text, text, like someone went out and sold a $2,000 window leak repair.

And.

And they're sharing the contract and all. Like, it's not about the size you guys, about serving them. Like, and that's the culture they have. You know, we are here to really take care of the customer and make them like happy. Because social proof, it comes around. Like if what you do to others will come around, you need to make sure that you're doing the right thing.

100% agree with that. So we'll go back to 2018 again. We had two people working for us. It's now 2020.

It was more than two at that time. So I had, I had actually one, two. I had three salespeople at the time and then production manager and then I had a supplementor. That was short, that was short. That was like a short lived time. Then I outsourced that. Yeah. So 2018 we had I think about six, seven team members, something like that.

So where are we at today? It's 2023.

In regards to team members or revenue?

Yeah. How many team members?

I think right now we're at about 28 full time people.

20. Wow. Did you say 20 or 28?

28.

28. Okay. Wow. And what kind of revenue are we looking at?

Well, last year we did 10.5. This year we're going to do 12 million residential, and we're on track for it.

Like, if you're looking at your numbers and everything, you're on track.

On track. If you take in the fact about an extra four weeks of winter, that pushed us out a little bit.

So that's what I was.

You take a little bit of a mulligan there. A little bit of a mulligan on that one. But no, that's where we're at.

It's pretty funny, though. Like, in those northern climates, that'll happen, right? Like, you know, you have winter that goes longer and you're like, oh, crap, that's going to throw up all my numbers. Well, the work still needs to get done. It's just going to all happen very fast. It's going to be like big flow if I weather correct. I was just up in Minnesota not too long ago. It seems to have broken and. So are we hard at work now?

Oh, yeah. It's like you said, like, you got to go, you got to be ready. That's the thing. Like, especially in these markets, there's been a lesson I really learned in the last year or so is the speed. Like, you need to be agile and be able to produce and move fast.