Mike Andes, founder of Augusta Lawn Care, breaks down four money leaks in small businesses: not knowing your customer acquisition cost, losing customers to churn, failing to collect payments, and missing upsells. He uses real numbers like $100 CAC per visit and shows how one third of revenue can get stuck in unpaid invoices.
Questions this episode answers
Over $50 million a year.
May 29, 2024.
One third of revenue.
CAC $100; revenue per visit $50.
$10 profit per visit (20% of $50).
Chapters
Hey, everyone, My name is Mike Annes. I'm the founder of Augusta Lawn Care, where we do over $50 million a year mowing grass. Today we're going to be talking about the four different things in your business that are keeping you poor. And if you stick around to the end, I'll give you a fifth one for free. Now, the first four, let's knock them out. We're going to go over the customer life cycle, and every single stage of the customer life cycle, we're going to look at what is keeping you poor. The very first thing that, that we need to do in order to start a business is get a customer. What in the world? This is basic. Yeah, you better believe it is. Because what's keeping you poor is you're not getting customers. But why don't we get customers? Well, we don't understand our customer acquisition cost. So no comprehende. Cause I don't know how to spell comprehende. No comprehende. Customer acquisition cost. And so what is customer acquisition cost? It's simply the amount of money that I need to spend on advertising in order to get one new customer. If I understand what my customer acquisition cost is, I'll be able to know how much revenue I need to earn before I even recoup the cost of acquisition. If I have a customer acquisition cost of $100, and every single time I come to the customer's Property, I make $50, well, I'm gonna break even on this customer after two visits, when in reality, you might be 20% profitable on that $50 visit, which means you're actually making just $10 in profit on each visit. And realize that it's going to be different every single marketing channel you have. Knowing what your customer acquisition cost is very important in order to get customers, because not getting customers gonna keep you poor. Now, the next stage of, of the customer life cycle is keeping a customer. We got all these customers. We nailed number one. We understand our customer acquisition cost. Now, the thing that keeps you poor in this stage is churn. Churn is simply the amount of customers are leaving the back door. And you get all of these customers coming in the front door. But if every single day a bunch of them are leaking out the back door, we got a problem. I like to think of it as a bucket. Inside this bucket is all of your customers. And you're paying for customers to come in the top of the funnel. Top of the bucket. You're paying on Google Ads, Facebook, et cetera. And we fix the problem of.
Customer acquisition. But you can get Customers all day long. Even if you were paying only $10 per customer. Fantastic. All we're doing is we're adding the top of the bucket. But what happens if we have holes in the bottom of the bucket? All our customers are going to flow at the bottom of them and we're going to lose them. And, and all of a sudden you start having an unprofitable business because you just keep pumping money into getting new customers, and then they leave very soon thereafter because of these holes. Now what are these holes? Bad customer service. You don't answer your phone. It takes you forever to get back to customers. When it comes to them wanting an estimate, you have really bad customer service on the property. All of these are the things that are causing customers to leave every single day. A lot of times a business will grow very quickly and, and then all of a sudden it'll start to plateau. The reason it's doing that and you're not really growing anymore is simply the fact that the number of new customers that are coming into the business are equaling the amount of customers leaving. And that's what leads to a plateauing of growth. What's really cool, if you can just half the amount of customers leaving because of all the holes in their bucket, you'll double your business. And so the next stage is we gotta get paid by the customer. Pretty fancy magic on this whiteboard. Hey, the power of editing. In order to get paid for a customer, you need to ask for money. It's amazing to me how many home service business owners will do the work, get everything installed, all the labor, all the materials, and all the rest of it, and never ask for the money enough to actually collect. And they have all these overdue invoices. The more you ask for money, the more money you will get. Do you have an automation sequence for text, email, phone calls, even going in person to actually ask for the money that's due you. I saw a business the other day that over one third, one third of the revenue they had already worked for was sitting in receivables. So they'd done all the work. They'd put all the labor and materials and cost of goods sold into the work to get it done. But they hadn't collected it on one third of their revenue. That one third was their profit. If you don't collect the money that's due you, you will never be able to pay your bills. Because guess what? IOUs and accounts receivable isn't going to work for your employees, isn't going to work for Home Depot or Lowe's where you're picking up the materials. And so in order to be able to grow your business and not stay poor, you'll actually have to collect money. And if you want to collect money, you need to ask for money. Now the fourth way that you must make more money and not stay poor is, whoa, get another customer. I want to grow a business, baby. We got to get another customer. And you say, well, how does that keep you poor? Well, if you have to run ads and you have to pay Mark Zuckerberg to get more customers, we got ourselves a problem. How do I get another customer without running ads? Very simple, two different ways. First off, we're gonna do upsell selling more to the customers you currently have. They get mowing. Well, I'm gonna sell them weeding, I'm gonna sell them bush trimming, I'm gonna sell them mulch installs. The other way to do this is referrals. Hey, Mr. Jones across the street is my neighbor. He needs service as well. It could also be an online referral, a Google review or some other form of service that's gonna allow them to leave positive feedback about your company and then referring other people. Get upsells. Sell more to our existing customers and we're gonna ask them for reviews, we're gonna ask them for referrals to get more customers without paying. Mark Zuckerberg on copilot. There's literally a button that you push when you're on the visit and from there you can create templates for upsells of different services to your existing customers. So when you're on the property, you're like, I see weeds in bed. Ah, upsell button. Oh, very good weeding. A one click estimate email or a text message saying, Mr. Jones, would you like us to do weeding services on your beds? That's an upsell. All right. If you're not doing this, you will be poor and you will constantly run more and more ads trying to grow your business. Now we have a little surprise because we said four, but we made it five and it's going to be free. Number five, it's focus. And that is in order to go through this process and actually get more customers, make them pay, you've got to focus on just two things, sales and hiring. If you hire great people and you train them and they actually have great quality, you won't have churn problems. And so it becomes a self fulfilling prophecy. If you just focus on sales and hiring and there's people that are like, well I can't grow my business. I'm only at 200,000. I can't get to a million. And yet they spend the vast majority of the day focused on things other than then sales and hiring. This video right here is going to walk you through the five different ways to be able to outrank all of your competition on Google. So when people in your market are searching for your services, they find you click it right here.
