17 Brutal Truths I Learned Building a $50M Business

Here are 17 brutal truths that I learned building a $50 million business. My name is Mike Andes. I'm the founder of Augusta Lawn Care. We have over 200 locations around the world and I've been in business for 19 years mowing grass. And here's some of the things I've learned. Number one, most owners fail because they chase big jobs instead of fixing the broken business model underneath them. So there was actually a turnaround that I went on and I traveled the country fixing struggling businesses. And one of the businesses was a company called Universal Roofing. On their website, it showed these massive roofing projects on these huge commercial facilities and these big data centers. Why is it built as if you are a national company?

Because I want to get those big commercial jobs pretty much.

Now. Those projects that he was pitching and the solar jobs that he was pitching on, there were probably 5 to $15 million projects. However, 95% of his revenue came from residential installs. And, and most of that revenue came from actually just fixes like repairs on someone's roof.

From the website I had was residential and I was getting all the residential calls. And so since I really want to branch into commercial, I was like, let me revamp the website where it's just commercial. Like I wanted the best roofing website that there is in Arizona. Yeah. And so that's why it looks like, when you look at it, we look like a huge, like a huge, huge company, you know.

But this is the thing, like you literally told me, the reason people choose you right now is because you are a family owned business. That doesn't scream family owned. To me. It was very confusing to someone showing up his website thinking that they saw a flyer or a door hanger or an ad for a residential house and seeing these huge commercial facilities. A lot of times we fail because we're going after the home run instead of just going after the single or the double. And because we're constantly trying to get the massive contract and, and the massive project, we never actually pick up the pennies and the nickels and the dimes that are laying all around us. So oftentimes do we go after those big jobs and those huge contracts. Cause it is life changing money. If you just got started and your business is doing $100,000 in annual revenue and there's a project that's a $500,000 job, of course that's appealing. You would 5x the revenue of your business with just one project. That's awesome. Until you realize that the people you're competing against do million dollar projects, $5 million projects, and their margins are 1, 2, 3%. After years of being in business, having huge amounts of manpower, massive advantages when it comes to equipment and technology and insurance deals that they get all the time, you can't compete with them. And if you're going to be the lowest priced competitor and the lowest bid on those jobs, I can guarantee you you're not going to make money if you're out competing the big dogs that have been doing it for decades. Number two, cash problems are math problems, not market problems. Everyone thinks when I go on these turnaround shows and I travel the country trying to help these business owners, everyone thinks they need to switch industries. They think it's a problem with their market. They think they need to move to a bigger city. They think they need to serve a different part of town. They think that they need to offer a different service. And they complicate their business over and over and over again or come up with excuses as to why their business is struggling. When reality, the cash problem that they're facing, that is not enough money in the bank is a math problem. Because I get customers, customer acquisition cost, that's a dollar amount. And then I make some sort of amount of money from that customer, lifetime gross profit. And if those numbers don't make sense, I. E. I spend $10 to get a customer and I only make $8 from them in a lifetime, you will go out of business no matter what market you're in, no matter what service you offer. And so they're constantly thinking that another service, another industry, another town, another city, some other area is going to somehow fix your business. When reality, there's only one math problem that exists. What does it cost for you to get a customer and how much money do you make from that customer? That is the only equation that needs to be solved to build a massive business. Number three, your North Star might be 10 or 20 years away, but has very little to do with what you're doing now. I might have the goal in the future to build a $10 million business. At a $10 million sized business. You will likely be focusing on management, finding great talent, acquisitions, financing more equipment, buying out your competition, very different than what you need to do today with your $500,000 year business with two employees. And so a lot of times we get our heads stuck in the clouds of what our North Star, our vision, our mission, where we want to go. And in my opinion, the North Star is important. It keeps you in the game. When you want to quit to be Able to look at that and be inspired by what's to come in the future. But what's to come in the future has very little to do with whether or not you're going to overcome the current constraint of the business. And I would recommend, although you might have a North Star or a mission or or something you're striving towards way down the road, focus on the current constraint to the business. This is why I created the 4L framework where your business stops growing only because of four things. A lack of liquidity, cash, a lack of leads, a lack of labor, or a lack of leadership. I'm going to focus on whichever one I'm currently constrained by and only that. So maybe down the road leadership is going to be an important thing. You're hiring general managers, starting multiple locations, all looking for a sales manager yet down the road. Right now, as a business owner with three or four employees, I need to be focused on getting more leads and then getting more labors, not trying to figure out who's going to manage the business when it's $3 million in annual revenue. Focus on your current constraint. By solving that constraint, you will achieve your North Star. But if your head is always in the clouds of where your business is going to be, you'll never solve the constraint that's keeping it from from getting exactly that. Number four, a fast growing, profitable business can go bankrupt. An example of this was on the Turnaround show when I went out to Tennessee and met with Attaboy Lawn Care. The day that I showed up, if I remember correctly, it was early December. It was freezing cold. We showed up early in the morning outside of Johnson City. The day we showed up is when they crossed a million dollars in revenue for the calendar year. It feels like you have nothing to prove for it. Like show for it, but like it is not embarrassing the fact that you have built a million dollar business. Like the fact that we just passed that for the first time and that we have no celebration in terms of like you did something right and they had never done that before. The year before I think they had like 6 or 700,000. They were probably on pace to do almost $1.1 million in annual revenue. But a fast growing profitable business can still be go bankrupt because if you're doing a bunch of work but not collecting on it fast enough, you can run out of money. You can be profitable on that work as well. But if you don't actually see the money for 30, 60, 90 days, you can still grow yourself out of business. This is why? Having credit cards on file, having deposits that are paid prior to the job starting. Making sure that when people finish a job, they are due upon receipt. They're not doing 30 days, six days, 90 days from now. If you're going to allow someone to pay you in 90 days, they just got an interest free loan for 3 months. Good luck trying to go to the bank and get an interest free loan. Yet we as home service business owners serve as interest free debtors every single day when we have an outstanding invoice that doesn't get paid. And this is exactly what happened to Attaboy Longcare hit $1 million revenue growing very fast. 30, 40, 50% year over year. But there was no celebration the day I showed up. No one was happy. In fact, the owner was crying in front of me because there was no cash. He was tapped out in terms of tons of debt. And there had been damages to equipment, employees were leaving. Employees had tried to abuse him and the business and steal from him all his equipment, his customers, his cash. So would he sell the jobs too?

He was an estimator. I found one job that he went out and bid for the company, came back underbid it personally, damaged their fence and ran off all the money.

And then you just use the labor from you.

Yeah, use our labor as well. So just, just what he took, I'm estimating 50 grand.

There was no celebration because just growing and growing fast doesn't actually lead to a sustainable business. And that leads me to number five. This is what Attaboy Lawn Care had to learn the hard way. One bad employee can burn your entire business to the ground and often already has. Before you notice, there was $80,000 worth of theft that happened to Attaboy Lawn Care from a previous manager that was managing the tree department. And the owner was always wondering why all of a sudden customers, they would say they're paid and say it was paid inside the system. But they just seemed like they never had any cash. What was happening was this manager was doing the work and then getting paid with cash from the customer and, and then just never telling the owner. And so randomly one day a customer called the owner and said, hey, they collect the payment but I'm not happy with my job. And wait a second, we never got payment. And he looked back, there's no record of payment. Why? The tree manager had taken the cash and deposited on their own while hiring the employees, while having the employees of the business work for them and using all of the equipment of the business. When did that all go down? Like, all end.

When did it all end?

October, right? How'd you find out that, like, how did it kind of come to light?

One of my old customers called me and asked for a receipt.

Cash. Cash.

They said, yeah, we paid the guy cash, and we never got a receipt. And I didn't think of anything of it at the time. It was actually a couple weeks later, I was on the phone with a new business coach, and he was like, something doesn't sound right. He's like, nobody's screwing you. Are they? And I was like, I don't think so. And then my mind went back to the incident two, three weeks before. Been so crazy, I haven't really looked into.

And when people hear this, that one bad employee can burn your business to the ground, a lot of people immediately think, well, I'll stay solo forever. Forget trying to hire people. Forget trying to provide jobs or help other people out. I'm just gonna stay solo and be on my own. And that works until one day, you can't do it anymore physically doing the actual work. And so you'll have to build a team if you're ever gonna build a business that. That could actually outlast you and outlast your work 40, 60, 80 hours a week. If you're ever wanting to build a business, you'll need team members, but realize that you'll need to have systems in place to ensure that one of them doesn't go rogue and burn the business down. And for Attaboy Lawn Care, it's not like they could go and try to sue their employee. It's very difficult to do legally, especially because he didn't have a paper record or a trail for him to follow. Yesterday, one of the members at Copilot CRM actually posted this photo of their last three years of revenue since joining the software. This is a screenshot from Stripe that shows that they've crossed a million dollars in revenue in this one year. So shout out to Simply Lawn Care. Brandon and Scott are a great example of what can happen when two great partners come together. And they're actually one of our very first turnaround episodes. So go check out copilotcm.com and see if you want to grow your business and. And take it to the next level. Number six, if you don't know your business's numbers, someone else is secretly controlling your company. Because Attaboy didn't actually know his numbers and tracked it and have inside of a CRM his efficiency score and actually be able to have a paper trail of what was being paid. He was allowing himself to be taken advantage of from this rogue employee. And so you've got to make sure you're measuring your labor efficiency, your budgeted hours, your close rate. These are sort of like the heart rate and the pulse of the business. And knowing these numbers will point you in the direction of sabotage or someone doing something crazy like stealing money from you or stealing customers. That will point you in the direction of those things much sooner if you have a pulse on the business. But the vast majority of home service business owners are flying blind. They don't know what their labor efficiency is. It kind of seems like if the one thing you're selling is time to the customer, and that's what we do in home services. We take time, we add materials, experience, and training. And on the other side, we charge more. There's a premium added per hour that we charge the customer. That's ultimately what we do. It seems like it'd be a good idea to know how efficient that labor is. This is where we come up with our efficiency score, and we track it all the time. That's the budget hours, how long we think the job should take, divided by the actual hours that the job took. So if the job was supposed to take eight budget hours, but they clocked 10 hours on the job, that would be eight divided by 10. That's an 80% efficiency score. I'm going to track that religiously for every crew member and for every crew. Why? So I can see who my lowest performers are and give them better training. I can see who my highest performers are and pay them more. Using P4P pay for performance, this is one metric. Being able to know what your close rate is is really important. If you're ever going to think that someone else is going to sell jobs for you as an estimator, as a salesperson, over the phone, estimates from your office, you'll need to track your close rate so that you don't all of a sudden wake up and realize that someone's been stealing from you, that there's no money in the bank account, that employees have actually been doing jobs on the side and stealing from your business. In order to make sure that doesn't happen, you've got to know your numbers. Number seven. A leaky sales process is more expensive than bad marketing, in my opinion. There's one thing that a lot of us will kind of track, and that is our close rate. That is the number of estimates that were sent versus the number of estimates were accepted. But in my opinion, there's A lot of other leaks in the sales process. A lot of business owners think when I say, hey, how are you going to grow your business? They think they need to get more leads. When in reality, there's a whole bunch of leaks in the sales process that they're not accounting for in their close rate. Because the close rate sent estimates to accepted estimates is just one step of a sales process. Someone first has to go to your website. There's leakage there because some of them, most of them don't actually convert into an estimate request form or calling you. So improving your website would be a good idea to improve the number of leads that you're getting. But we don't take that into account in close rate because. Because close rate only takes into account the number of accepted estimates divided by the total number of estimates sent. But them showing it to my website isn't accounted for. Also then they submit an estimate request form and it takes me three days to get back to them. There's leakage there. I haven't even sent them an estimate yet. But there's leakage in the sales process. Speed to lead is so important. Getting back to the customer immediately, instantly, within a matter of moments, seconds is important. Recently, Invoca and Angie ran a study and they realized that 70% of estimates were accepted were the first estimate received by the customer. In other words, 7 out of 10 estimates that were simply the first one that the customer received were accepted. So the number one thing you can do is send the estimate fast. And everyone's like, my close rate's really low. No, no, no. It took you three days to get back to the customer. Three more days to visit the customer and see the scope of work. Another week to then send them a proposal. All of a sudden, two weeks have gone by from the time they picked up the phone or filled out the estimate request form to. To you actually getting a quote in front of them. Speed to lead is extremely important. And yet we always think we need more marketing when in reality we need to fix our sales process. We think we need more leads at the top of the funnel when reality we need to fix all of the leaks in the funnel to make sure we get more customers at the bottom. Number eight, most businesses don't need more leads. They need more follow up. I went on a turnaround to Freedom Lawn Care out in Missouri and I looked at their CRM and I just said, hey, show me all of your estimates that were sent. And immediately I realized over 30% of their quotes weren't even viewed because you can see in most CRMs if they've opened up your estimate via the link or if they've opened up your email. More than 30% of the estimates they sent were not even opened because a lot of times it goes to spam. They did zero follow up. They sent one email, no text messages, no nothing, no automations, no follow up phone calls. And the vast majority of home service businesses would double the amount of customers and sold jobs if they simply made sure they emailed and texted the quote and then followed up with text, email and follow up phone calls until the customer said yes or no. How do I know this? We did a study a year ago at Augusta Lawn Care. We sampled over 10,000 different estimates and realized that if someone just followed up three, three times on a quote, the average close rate went from 34% to 67%. That's almost a doubling of the close rate if they just followed up a minimum of three times versus just sending the quote, crossing your fingers and hoping that they click accept. Luis with freedom Lawn care was letting 30% of his estimate just be sent. And what kills me is that those 30% he still have to go visit the customer. He would do designs for the projects, he would go to the warehouse and figure out what the pricing was at Home Depot and for the materials and for the plants. And yet all of that led to exactly no new jobs.

But sometimes I do worry that maybe he's trying to do too many things at once.

As we're sitting in the office talking to Micah and Luis multiple times, the crew from out in the field came back to the office because their credit cards kept getting declined. With non sufficient funds, there wasn't enough money on the card to go get the materials needed to do their job for the day. If a customer is going to take your time on the phone or in person going over the scope of work or you putting together a design or price proposal, they at least owe you a yes or no and make it very simple that hey, I'm balling up until you say yes or no. My opinion is right now you're probably closing only around 20% of your jobs. They literally might have one question about one type of bush on your design, but because we never followed up with them, they just never get around to it and they just take the next guy who comes along and follows up with him and says, hey, were those bushes the right ones?

Yeah, if it's like a small job. So like lawn care or anything like that. I have personally never done a follow up, but Say we hit like a thousand and higher. I always kind of try to do a follow up. And he's really good too, about making sure that people have gotten their estimates, especially when it is that much. But like I said, if it was just like $50 lawn maintenance.

If you want it, you'll want it.

But I, you know, you don't have.

To be pushy about it. Just be like, hey, look, Mr. Jones, if you don't want this service, just let me know. I can go ahead and take you off my list and you won't hear from me again. But I don't want to do you a disservice by giving you the quote and then not making sure all your questions are answered. Because I truly believe that our service is the best option for you. And if you have that conviction and you care about the customer, you'll ask the hard questions. You, you will keep following up because you actually believe that you're the best option for the customer. Number nine. Big equipment makes you feel successful, but simple recurring services make you rich. When I was at Freedom Lawn Care with Luis, he had this Kubota skid steer and it was like he'd pay like $80,000 because it was in the middle of COVID and he was using it. He admitted to me about once or twice every single month. You guys use it quite often, like a once a week kind of thing. It's like when we're using it, we're using it.

We're not, we're not.

What this really spoke to me is we can make sense of buying more equipment by the payments many times, because the payment was about $1,000. And he's like, Look, I'm already paying five or six hundred dollars per time. I use this as rental. As long as I use a couple times a month, it's kind of like break even. And I get to keep the equipment. It's way more efficient for me and for my business and way more convenient. There's one problem when we take into account payments on a loan to buy equipment versus renting the equipment, then there's one thing you don't have to do, or there's a few things you don't have to do. When you rent equipment, you don't have to store it, you don't have to insure it, and you don't have to maintain it. And many times what you consider as the monthly payment on the loan to buy the equipment yourself, you actually have to double that to know what the actual cost is to your business. By the Time. You maintain it, store it, and insure it. And so here we are, Luis from Freedom Lawn care having this $80,000 piece of equipment that he's using once or twice every single month. And this really screamed one thing to me. Focus on hitting singles and doubles and not home runs. I've already mentioned this before, but so many of us are trying to hit a grand slam and consistently keep striking out, and we just keep doing it over. And we'll switch industries, we'll switch markets, we'll switch services, we'll switch agencies that are doing our ads just constantly trying to hit a grand slam. The people with the highest batting averages usually don't hit home runs. They hit singles and doubles. They go after projects, they go after jobs, they go after contracts, they go after services they can do repeatedly, over and over and over again. The person that has the most home runs usually has the most strikeouts. And in an industry like home services, in my opinion, take the work that's recurring. Take the work that you know you can get done profitably every single time so you don't risk striking out. And in this case, striking out is losing tens of thousands on a massive project that you can't afford to lose. Number 10, debt doesn't solve your problems. It only delays the moment you're forced to tell the truth. I was with this turnaround, and they were refinancing a bunch of their debt. It was a roofing company, and they were taking a whole bunch of payments and loans from their payment processor. 14,000. Is that like a payday loan kind of thing? Like from Stripe or. Where does that come from?

So it's a mca.

Okay.

So it's a daily.

Daily. And so how much on that every day right now?

So it's a total of two different loans.

Okay.

And it's. It's about $600 a day, which is. That's what's killing me.

At the time, it, like, bailed us out, but now we're like, okay, we're paying out more. We're paying $14,000 in loans a month now. QuickBooks, Stripe, whatever your payment processor is, many times will offer you money. With a click of a button, you are eligible for $50,000 in your pocket today. And what they don't tell you is they're actually charging 30, 40% plus interest per year, which means if I take $100,000 out in the next year, I'm paying extra 30 or $40,000 in interest. Once you go the way of 20, 30, 40% interest on loans, it is Very difficult to get out of that hole. And a lot of times our first inclination is, well, I'll get more debt and I'll refinance this other debt. And this is the debt spiral that I see so many people going down. And no one talks about this because when you fail and you declare bankruptcy and you shut the doors of the business and you're completely insolvent and you have no more money when that happens, no one's posting about that on social media. What everyone sees is the person with the Lamborghini and the massive house and everything's going well and everyone's celebrating, but no one sees the person that failed. And so this person never shares the stories that actually caused them to be in that position, which many times is the way of debt. And it is taking massive risks when you don't have the skill to actually know where to deploy that money. I am a huge fan of taking debt and getting more capital to grow the business faster. Assuming I know the business model and I have experience in making sure I turn customers into profitable customers in the whole engine of customer acquisition and lifetime gross profit. If I know that number, yes, pouring more money on customer acquisition will get me more lifetime gross profit and more customers. But so many people will spend a whole bunch of money on trucks, equipment they don't need, they're using once or twice a month. That sits out there gaining rust and requires a bunch of maintenance. When they do use it and requires a new shop space and a whole bunch of more insurance, they'll do all of that with high interest debt and then never actually utilize the equipment, never actually grow the business, never actually turn their customer acquisition cost into more customers. If you're going to go into debt, if you're going to pour more fuel in the fire, inject more liquidity into the business, you will grow faster. But realize if your business is unprofitable, adding more debt will only make it unsuccessful and fail that much faster. Number 11, overhead always grows faster than revenue, unless you choke it. This happens so often times. Once a business passes 7, $800,000 in annual revenue, you have a few crews, you're starting to grow and scale, you might get a little shop space, little office, really starting to grow the business and starting to feel like a real business owner. But it's very easy to add admin, bloat, people in the office, and all of a sudden you have like three office staff and six people out in the field and a full time sales manager and someone doing social media full time. These are Fixed expenses that will crush you during the off season when your leads dip, when your revenue dips for any period of the year, if you have a whole bunch of office staff, expensive rent, a bunch of insurance on a bunch of equipment and furniture and computers at an office space, people on salary, that will sink your business. And one of the things I see sink so many businesses around $1 million in annual revenue is when they're at 6, 7, $800,000 in annual revenue. It was the owner doing sales, operations and admin at the management level. And then a whole bunch of technicians out in the field producing revenue, very profitable. And then all of a sudden they get past a million, like we're going big. So what do they do? They triple their rent, they double their insurance because they have all this assets and this extra shop space. They go hire a full time office person, a full time estimator, and all of a sudden all their profit is gone. Because on $800,000 annual revenue business, let's say you're running 20% margins, that's a pretty good 150, $200,000 in profit, that's fine. But $200,000 in profit goes very quickly. When you add the three to $4,000 a month rent or lease on an office space, a six or seven thousand dollars a month straight salary for your office person and a six or seven thousand dollars per month salary for your salesperson, all of a sudden all your profit is gone. I'm always tracking what ratio of people out in the field versus people in the admin in the office. I want to keep that ratio about constant. So as I grow the business in revenue, what is outpacing it is not my admin and extra overhead. Number 12. Most owners go broke hiring employees they're not skilled enough to manage. This reminds me of a turnaround that I did out in California where with Carter from Rough Cuts, he realized when we actually ran the math and I showed up at the turnaround, that his crew efficiency score was under 30%. In other words, if he had 10 budget hours worth of work on the schedule, it was taking 30 clocked hours to get the jobs done. And he'd send a crew of three or four people out to do work that should have been done by two people, but it would take three or four people an entire day. Super inefficient, but he was never tracking the numbers. All of these problems that we like, our trickle downs get fixed when prices get to the right. Cash solves it. Money solves everything. And so like it is Literally like gets good prices from 60 to 100 and like now all of a sudden our labors can be more efficient. The ultimate thing I told Carter to do is actually scale back to being solo. He had about 100 customers and we figured that about half of them were completely underpriced. I said, get rid of Those, keep your 50 mowing customers that you currently have and you go back into the field and, and make sure that these are priced correctly. You understand how to do the work and you tighten up the route, you tighten up the ship. If you just went down to like you're doing all the work and it is a matter of you are likely going to basically do all of the recurring work and then have like a day or two a week and on that day or two you'd be trying to get project done, that'd be all you'd be doing. And you'd have literally a cap of only being able to do three or four projects a month. But those three or four projects at two or three grand apiece now become you're making 20 grand a month by yourself. The skill he didn't have yet was being able to manage his crew. Being able to do the work and manage technicians is two very different skills. And as you grow, you'll realize that even managing technicians is a very different skill than managing managers. As you start growing past a million dollars in revenue and having operations, admin or sales managers or general managers that are managing your locations. And so Carter realized that he had a skill deficit. And it doesn't mean that you can't learn leadership. Leadership is a skill and therefore it can be learned. However, there's going to be times you realize this is my capacity, I do not yet have the skill and I'm going to not push beyond this. And so Carter, instead of making $250,000 the year after, hey, make 130, 140,000, but make most of it profit because you'll do all the work instead of having two, three, four employees and making $250,000 in annual revenue. One of the ways to determine this is simply keeping track of how much top line revenue per technician you are making. If you're like, well, I don't know, budget hours, I can't do that in my industry. It's very difficult. Great. Take your total revenue, divide it by how many full time employees you have in the field and as you grow, make sure that number is going up. Make sure you're getting more efficient, you're making more revenue per team member because you add software because you have better systems in place. If that number is going down, it means that you're simply throwing bodies and you don't have the skill of managing them effectively. And so Carter for a year or two needed to be solo, pay off some of the debts they owed his family, he owed on trucks that he didn't really need. He sold off one truck as he laid off the employees he didn't need anymore and was able to get the business back on track and get pricing back to where it needed to be. And once pricing got back to where it needed to be, he was then able to go higher then able to be able to actually charge what he was worth in the market to be able to hire employees and scale again. And if you're not running a high enough margin at $60 an hour, you'll never be profitable. When you hit capacity to keep digging a bigger, bigger and bigger hole. Like the fact that you got 200 leads, dude, tells me that the business can absolutely be 6, 7, 800,000, absolutely can be. It just has to be done profitably. And you have to have a system in place to be able to absorb those leads during the spring and summer to, to build the backlog for winter. Sometimes taking a step back is important. Go back to being solo, have less employees, cut out a department that's sucking all of your time and energy and pouring all of your resources and cut back. It's okay to have a year where you don't make more revenue, but you gain your sanity back and gain profit margins back to be able to then regroup and go back on the offensive the next year. Number 13. If everything depends on you, you don't own a business. You own a fragile, high paying job. And I know this firsthand because my business was doing almost $1 million in annual revenue when I went on a job site and got caught in the PTO of the dump truck. I was underneath, yes, dumb, underneath the dump truck, turning on manually. The PTO is an old 1990 L7000 dump truck. And my hoodie got caught in the PTO. Why did that happen? Because I was in every aspect of the business. I was literally going back after that job, planning to do estimates all day long. But yeah, I was dumping material at the job site for the crew because I needed to show them the project in person. I was doing operations and then I was going to drive back to the office and talk to my office manager, admin. I was doing sales, operations and admin. I was doing everything in the business and I was working 70, 80, 90 hours a week, not making a lot of profit. And if the business requires you to run, it's very difficult to sell. It's very difficult to convince your kids to take it over. It's very difficult to have someone else manage it if it requires you to work 60, 70, 80 hours a week and be super skilled in every discipline of the business. And many times this happens, and it did for me because of a lack of systems. I should never have been on that project because I should have had a video that I took when I did the estimate that I sent to the crew. Furthermore, the project should never have even been done because what are we doing with this massive dump truck that's a manual transmission, so half my crew can't drive the thing. Have systems in place where we have standardized equipment. We have simple services. I'm not doing these services that are way out of left field, that require me to be on the job site having this business that sucked all my time and energy required me to be on the job site, which ended up me being underneath the dump truck, caught in the PTO and then being out for a couple of weeks on the hospital bed, literally videoing my crew so that they can do the next project. Cause I was so wrapped up in daily operations. I was doing sales, operations and admin. And if you're doing all three, you don't have a business. It's not to throw you under the bus. I've been there. It's to simply say, we need to build systems. We need to simplify. We need to standardize things so the business can run. When you go on vacation, when you leave for a day, if, God forbid, something bad happens to your family or something, an emergency happens, the whole business doesn't fall apart. But because you built systems number 14, confusion in your business is paid for in cash every time. Confusion can take the form of bad communication between you and your team, between your team and the customer, between your customer and you. But every time there's a scheduling snafu, there's issues with a rental piece of equipment. Material wasn't dropped off at the right time. The customer thought you were showing up, and you never told them that time. The wrong materials were delivered to a job site. No confirmations was given to the customer. So you show up and the gate is still locked. They're not home. They want you to reschedule. All of this is because of lack of communication. And this confusion is costing you a ton of money. It's very difficult to track what Confusion costs on your P and L. It's like in the expense line. Items like confusion this month costs you $6,422. No, but confusion around your onboarding process for your employees costing you massive because they're leaving after two or three months when they could have stayed one or two years and been much more beneficial and profitable to the business. But you didn't create systems to be able to communicate how they got onboard, what good looked like, what metrics of success would allow them to be successful in their role. That is the cost of confusion. The high churn you're experiencing with team members that leave every month or two and you can't keep anyone at your business, that's confusion. That's the untold line item on your P and L that's costing you so much money every single month and every single year is confusion. And so much of this can be fixed if you have good systems in place, the scheduling issues, bad material, drop off, not be able to know when a job is scheduled. I've had before where customers are calling in three, four times trying to figure out when am I on the schedule. When I'm on the schedule. A lot of this can be fixed with automations. And that's why at homeworks and what used to be copilot C CRM we have text messages, emails. We use these as a way to automate the communication process with the customer. They know when we're on our way. They know when we're about to show up. They give them notices beforehand. We can coordinate to DoS and meetings with our team and then give them reminders. We can send a text to our internal team reminding them of equipment maintenance. Just confusion around doing oil changes costed me over $50,000 one year because the stinking tractor and skid steer. I didn't plan correctly and have the correct oil filter on hand and we didn't do oil filters and change oil. It cost me a ton of money because I simply messed up and there was confusion with my techs about when to do the oil changes. These little things can be fixed with automations and that's one of the things that software fixes. You can check out homeworks and see exactly how you can build custom automations to remind your team, your customers and everyone inside the company. So. So we're all speaking the same language and on the same page and get rid of the confusion. Expense line item once and for all. Number 15. The customer who complains the most usually profits you the least. This is why I love price Increases so much because price increases don't just make you more money, they purge you of your worst customers. The customers have low margin work, they never accept your upsells. They're always complaining. They have long drive times. They they're the wrong demographic, they're way outside your service area. They complain after every service. Raise prices on them. And if they leave, you've gotten rid of someone that is sucking the energy and life out of you. And if you resent your business and your team resents the business and their job because of 20% of your customers, just get rid of them. If all of your weekends energy and time is spent focusing on 20% of your services, 20% of your customers, get rid of them. So you can focus on the 80% of your customers that love you. Take every upsell. They respond back to your marketing messages, they leave online reviews, they give referrals. Focus on those people. The same is true for your internal team. Get rid of the lowest performers so you can actually compensate, reward and cultivate the talent of your highest performing team members. Number 16. Growth without capacity is worse than staying solo. So many people think I just gotta keep growing the business. And there's always the grass of being greener on the other side of growth. More crews, more employees, more trucks, more customers, more revenue. But if you grow without capacity, I would rather you just stay solo. Because if you grow without having the capacity in the short term, you will make more profit. In the long term, you will burn out. There are three capacities. I think about their labor capacity. In other words, how much work can you get done with your current crew and then not have to work overtime? There's asset capacity. In other words, how much work get done, how much revenue you could perform, how many customers could you serve without overworking your equipment? Or without having to buy more trucks and buy a bunch more equipment. That's your asset capacity. Then there's personal capacity. It's like how much revenue could you perform, how many customers could you serve without losing your marbles? If any of those three capacities, labor, asset or personal capacities are exceeded, in the short term, you make more money. If this weekend you told all of your crew, we're working extra hours on Saturday, 12 hours on Sunday, 10 more hours in the short term you would make more money. But you're over capacity. They're working overtime and in the long run they will burn out. The same thing is true with your equipment. If you grind the thing in the dirt, you don't take care of it, you don't have maintenance eventually it's gonna break down. And the same thing is true with you personally. This what leads to a lot of mental health and a lot of burnout in the home service industry is people going way above their personal capacity. You have the capacity to manage 3, 4, 5 employees and yet this year, because you're supposed to, and cause it's a cool thing to do on Instagram, we're gonna go to 10 or 15 employees, we're gonna buy more trucks, we're gonna get more equipment. Do we really need that? Do we need the extra stress that comes with all of those extra employees? And, and all these more customers? And now I gotta hire managers. I can't afford that overhead. That extra stress pushes me way beyond my personal capacity. The vast majority of home service business owners would reach their goals eventually if they slowed down. And instead of trying to build a million dollar business in three years, they would actually get their goal of building a million dollar business if they just thought about it more in terms of six, seven or eight years. You will achieve your goals, but you can't exceed your capacities without burning out in the long term. Number 17, a million dollar business that can run without you is 10 times more valuable than a $3 million business that requires you to work 60 hour work weeks. So often the times we go after vanity metrics like number of trucks, number of trailers, how many employees we have. And trust me, I've been guilty of this. When I started Augusta Lawn Care, I remember liking to have, liking all my trucks lined up against the main drive. There was a highway and we park all our trucks out front. And I got a lot of satisfaction and pride from people saying, man, we've seen all the trucks lined up and the trailers, they're looking so good. And then I got a lot of pride in having a team photo and there being 15, 20 people inside the photo, that made me feel good. But those were vanity metrics because it didn't make my business more valuable. It didn't put more cash in my bank account, it didn't make the business any more profitable at all. And if your business can't run without you, it's very difficult to sell that. It's very difficult to hand it off. It's very difficult to have someone else run it for you as a manager. This is why I prefer that someone run a smaller, profitable business by cutting out services that are sucking their energy, cutting out services that they can't replicate inside of a manager, trimming their overhead, reducing their office expenses, getting off of this grow at all cost treadmill. This ideology we bought into simply because of Instagram and social media, where the thing that people get the most likes on is trucks. It is equipment is hiring more people. It is not their bank balance. No one's sharing that number. And so if every time you saw a big fancy truck or piece of equipment, we just assume they're doing good. If we see a bunch of employees, we just assume they're doing good. And the turnaround show has opened my eyes to the fact that there are massive businesses that are losing hundreds of thousands of dollars and millions of dollars every year, but yet the vanity metric being shown on social media make them look very successful. And I say that because I want you to build a business that makes profit that actually serves the reason. You built the business. You built the business for freedom. You built the business so you could spend time with your family. You built the business so you could actually go on a vacation for a few days and not worry about putting food on the table. But yet you're spending 60, 70, 80 hours a week working on a business that can't run without you. And recently I went to a landscaping business called J and l. They're doing $1.7 million in annual revenue now. He had nine children with a tenth on the way. When I showed up and it was difficult, I was talking with his wife and she's like, he doesn't show up. It's 8, 9 o' clock at night. He's worked 12, 13, 14 hour days and we don't even see him. And it had been years. I think it was like 15 or 20 years he'd been in the business and still working these crazy hours. And it couldn't run without him. He, he couldn't retain his management team. He couldn't maintain quality and efficiency on the field. And it was heartbreaking to realize that someone had worked 15 to 20 years to build a bigger business. The reason this business isn't doing good financially, here's the numbers. And people aren't staying. This is my fault, is my fault.

Yes, it is.

And empty your chambers. If you allow them to do that on you, you now have down the road after time has gone on the ability to hold them accountable to the standards that you anticipate for them to have. Like, the reason there's no extreme ownership of your team is cause you're not taking extreme ownership of the business. Like that's just facts. Like extreme ownership of the leadership position is why did I have an admin person that allowed, I allowed them to be a cancer. Why didn't I fire them sooner?

I should have.

It is simply a function of they do not want to work for Luke. Yeah. And by all optics, looked very successful. Big F550 trucks, F350s new equipment, super nice shop space with fueling spots and like an office. Very awesome. Fantastic. All metrics of success looked good from the outside. But the whole reason he started the business when I asked him was to spend time with his family, to provide for his family, and he wasn't achieving those things.

My wife and my kids are my number one, and if the business is taking from that, then something's got to give.

Honestly, he wants to give up, and his wife is kind of losing faith in him. This is hard to watch. Luke, can you do something like, is.

This even worth it?

In my opinion, the ability to scale that business back to 1 million, 1.1 million. Focus on the most profitable customers, stop marketing, stop getting more trucks and equipment we didn't need. Focus on the core five, six, seven employees that were super efficient, had been around for a long time. Serve the customers the highest value, raise prices to what we actually needed to be able to have a profitable business that seems like it would serve the business owner better. And so realize that the ability to be able to have a business that serves you instead of you serving the business is the goal.