$80K IRS Fine DESTROYS Vacation Rental Cleaning Business

We were always like 5% away from just calling it quits. If something bad happens, it's game over.

Today we're in California visiting David with instant cleans.

All our funding is maxed out. For the past three, four years, we've always had debt. We can't put anything on the credit card. If we mess up, it's game over. It's done.

Last year he did $700,000 in annual revenue cleaning out short term rental properties.

It just wasn't profitable. We were just losing so much money. There's even more pressure on me now because my mom works for us full time.

If you don't hit these certain benchmarks, you don't get paid.

If we fail, my mom's gonna have to go get a regular job and then we're not gonna be str to pay rent.

They have no systems in place and employees keep making mistakes.

There's always a lot of callbacks because they don't really give it their all. And then if something you miss, it's like, oh, we'll get them next time. And it was just so bad.

If you're a home service business and your service doesn't do a great job.

You'Re eventually going to go bankrupt.

We're definitely overpaying cleaners. Every single week, we have to hire new cleaners.

This is the business turnaround show.

My name is Mike Candies.

I'm the founder of Augusta Lawn Care. We have over 180 locations around the world, and I travel the country fixing struggling businesses.

I think you can build a $2.5 million business in the next three years.

My whole family is kind of depending on me. There's a lot of pressure.

So this is literally a doubling or.

Potential tripling of the lead flow that's currently coming in.

Our goal is to give David a strategy to turn around the company in.

The next six weeks.

It just seems weird to me that you have a cleaning business, that the employees take their own personal vehicles to the property. So there's no trucks. I don't know if they supply the equipment. But even that, it's like, okay, you got some rags. Like, I used to have Augusta Cleaning Services back in the day. So I know a little bit about this and like short term rentals and where's the debt? So, like, I think the debt is all from mismanagement of taxes.

There's actually a lot of financial struggles.

Unfortunately, two years ago.

But we were growing the company like crazy. Everybody was inefficient, everybody was mocking the clock, and it was Just like a complete utter disaster. We couldn't make payroll. So many times we had to take our loans to be able to make payroll and pretty much had to set up another long term plan with the irs. And now we're pretty much back on the same boat trying to pay those off. I think it was like $7,000 at one point that we were just paying in pure debt payments.

So to be $100,000 in high interest debt, essentially, it's pretty scary. It's a $7,000 a month. Probably half of that is interest. Unfortunately that'll bleed any business. Again, they have a profitable business, but when you have that much debt, it's going to take them, like he says, at least a year or two just to pay it off.

We were this close to paying it off. We would have paid it off by next month. Then taxes did not have enough saved up. We're just so behind and the debts all snow piling up. We're kind of just again another standstill.

It's pretty demoralizing when they almost have paid off their last debt and they got hit with this massive tax bill.

I do follow pretty much all videos that Mike pushes out and he pushes out. I even have his book right here. So we have, we have learned a lot and we have implemented a lot of things. But I feel like if we just had somebody who can say, hey, this is what you need to do. These are the systems you need in place. Hey, this amount of strikes for a cleaner and they're gone would be very helpful.

This 10% equity thing with their friend might be the ace in the hole if they're in a rush.

Right?

Like, I don't think it's necessarily the right thing for the business, but if this person is willing to pay an exorbitant evaluation, the ability to be able to sell 10% of the business off and immediately pay off most of the debt, that'd be cool. So, dude, how's it going, man?

How's it going? Good brother. Nice to meet you. I appreciate it. My name is David Rodriguez. I own Instant Cleans. We're a vacation rental cleaning company and we've been around for four years.

This is the shop.

This is it. I know it's not, not as big, not what you guys are used, that's fine. But I like to keep things very minimal. Cool.

So no one shows up here though.

No one shows up. I give our cleaner supplies. They use their own vehicles. And then from the morning, like for example, say they have a cleaning at 10, they leave their house at 9:30, go directly to the job site. Rather than them coming 30 minutes here, picking up supplies and then driving 40 minutes out, they just go directly there.

It's a great model. It's just a function of how do you take a business like this and not make some profit because like there's not a lot of extra overhead.

I don't know if you're familiar with San Diego, but they're in like the Mission beach area right by the, by the beach. That's where it's all kind of centrally located. Just like on the street, Ingram Street. It's super close to the beach. So just on this street we do like 16 units pretty much. It's all centrally located here. Probably like 30, 40 units. Just like in this little, I guess like beach community right here.

In terms of like the overall structure that you want the business to be, I see you as kind of sales and in terms of operations. Right now you're kind of juggling that with your mom, is that right?

Exactly. Yeah. There's even more pressure on me now because like my mom works for us full time. If we fail, my mom's gonna have to go get a regular job and then like rent here, super expensive. So now we, we're not going to be struggling to pay rent. Since I was 12, we kind of just grew up as a single parent household. So my mom was actually working cleaning offices from 6pm to 3am and in the morning she would wake up and clean residential homes. When I graduated high school, my brother was like, okay, well, pretty much. We kind of just started marketing for her a little bit and then we got a good contract, right. Of like nine homes here in San Diego. Kind of just grew it that way. So my mom was cleaning, she was super tired. Every single day I would see her like always needing sleep. I used to see my mom so tired, like to the point that she like her head would hurt every single day. Never want to see her like that again.

When did you come on then full time into the business?

I would say probably like a year in. I was working at Pizza Hut as a delivery driver. I would clean houses in the morning and then, you know, go deliver pizzas. And while delivering pizzas, I would answer phone calls, answer sales calls. I'd hide in the bathroom for like 30 minutes trying to like close the client, stuff like that. It was difficult, but I did have a good support with my mom and my brother. Like, my brother was like, dude, you need to quit your job to focus full time on the business. The business Wouldn't be here if it wasn't for them. My brother was working a full time job. He has a family to support so he can't just jump on the business full time. And so pretty much from four years ago to like last month it just been me kind of doing admin, operations, training, absolutely everything, kind of myself. My whole family is kind of depending on me and they're helping me as well. But there's, there's a lot of pressure. And then recently, last month he quit his job. So he's jumping on full time. He didn't take any cut for a while either. So with him doing that, we were able to grow the business. Now that my brother's on full time, it's like, okay, well now I need to make sure that the company succeeds no matter what because now my nephew, nieces need to, you know, have a roof over their head and they need to eat. He lives in Virginia, so it's like a three hour time difference. But he's moving to Colorado which is only a one hour time difference.

So he's mostly focused on admin. Managing the team.

Exactly, yeah.

Which is most of what you're doing because all of your crew is doing their own thing.

Like yeah. So like right now he's kind of doing like a big thing is like hiring. Like I didn't have enough time to hire. You know how you have your central command. That's what I want him and my sister in law to be.

They do scheduling, payroll, all that stuff.

Exactly. Pretty much Monday to Friday and me and them are going to alternate weekends. I'm glad that I jumped in and that we can grow the business and then hopefully we can all make an exit in a couple years is the game plan.

And so like the last few years, give me the revenue once you join came on full time. Like what was that looking like?

So I will say we got super lucky. And so right now like a big thing is client concentration. Like we have a big client that has like gives us over like 30, $40,000. Like $30,000 in revenue a month.

About 50. Almost 50%.

Yeah.

Like having almost half of your revenue coming from one customer is scary. Like what are you going to do? Cancel the contract? So it's like you, you're going to go get other contracts that are also that large or you're going to a whole bunch of little contracts that make that the size of that one big one less meaningful. But you can't have it where tomorrow 40 or 50% of your revenue could leave. Now you're just building the business on a weak foundation. And is that one property or is that one client that has multiple.

Multiple properties. Multiple. Got it. I will say we have niched ourselves pretty into that. Into that company that they were almost like really needed in there. That if they didn't have us, the company would kind of fall apart because we do all cleanings for them. And so we'll like let them know, like, hey, this is broken. Hey, this is. Or like scheduling wise. Right.

You're basically in property management.

Exactly. I think it's like 23 homes that we do for them. This one probably takes like two hours.

Yeah.

So for the most part, we always just look just to make sure that there's nothing left. Just because you never know what could fall out of people's pockets. You know, we found crazy things in here. The bathroom is super important. At least two extra rolls. This one, you have to make sure there's no hairs at all. It's the most important. We redo all the beds, change out all the linens, wash them, check every single cabinet under the bed as well. Make sure everything perfect. Really?

Do you have access to the app?

Yeah, yeah. So I can see exact. I can see like the whole year, like who's checking in and who's checking out and at what time.

Because, like, my thought down the road, not right now, is like, if you ever went from the cleaning commodity to like, you actually do the second part, which is the property management, full property management, you're in the app, etc. It's something you're kind of doing it with them already.

Yeah. And that's something we wanted to implement, but we were kind of like, okay, like, maybe once we get to like $150,000 in revenue, we can implement it.

To, you know, upsell people.

Upsell people on our property management services.

US short term rental, you get between 20 and 25% of revenue if you manage the whole thing, like from, you know, soup to nuts in terms of clean it, you make sure it's filled, you restock stuff. But it's a whole different business and it's way more admin heavy than what you're currently doing.

Exactly.

Like, yeah, this just quadruples with like toilet paper and paper towels the whole night.

Yeah.

And I'm sure we could, like, if you offer it, I'm sure we will get some, like some people who want it.

Right.

But for right now, it's kind of just like, hey, like, just focus on one service, optimize it and then grow your Revenue and that's it.

They don't have a shop space, they don't have offices. Fancy stuff like where's the debt? This might just be a time like a waiting game in terms of you have a profitable business and just a matter of time to pay off this massive debt. When you make the model more scalable, technically you don't need to be there. And I know that you got another, another service area quite a ways away.

We actually have two other locations. We have Malibu, which is like four hours away. We have Newport beach which is two hours away. And so my subcontractors in Malibu, we give them 75%.

So those ones we do subcontract. Just the Malibu, just the Malibu ones.

Because it's so far away and I don't want to, I don't have to drive up a.

That we could really scale this.

But he doesn't have any systems or on operations. That's why he's giving 75% of revenue away to the people that are far away.

That makes no sense. I went into the San Diego database and then I saw all the list of all short term rental owners, license, email, phone number. So I just pulled that list and it's like 9,000 contacts.

Got it.

And I've just been pretty much contacting them every month.

And then do you have their emails on a database as well?

Yeah. So I pretty much pulled all that list and then put through it in our CRM. And then we're just shooting like 20 to 30 texts out a day.

So we're not really mass messaging all of them at the same time.

No, no, no. Because yeah, I messed up in the past that I send like 50 or 60 and then I got, I got disabled. It was like from your CRM? From my CRM, yeah.

So current constraint is really labor. We're trying to get more people on, make sure they do a good job. And then if we have that we, we pretty confident we have a sales channel to be able to get more customers.

Exactly. Yeah. I think something we struggle with is just like developing Systems like this 1, 2, 3, 4. Like you do it this way. I feel like that's what we always struggled with. We don't really have like a full structure on like how to onboard training, deploying them on the short term rentals.

What he's finding now is you need more systems around operations and quality control because otherwise that really starts to slip. What was your process for bringing on in a cleaner training them and then making sure they actually do a good job?

If they call and you ask, hey, do you have cleaning experience? And they go, oh, well, I don't, but I clean my house. So it's kind of the same thing. Automatic red flag.

It's like when people say they like pulling weeds in their garden.

Exactly. It's like it's not the same thing at all.

So if someone does a callback, a customer calls back, they complain, it's not looking any good. Is there any downside for the employee right now?

For the employee?

Yeah.

No, they don't really give it their all. And then if something you miss, it's like, oh, we'll get them next time. You know, I'll do better next time. There's always a lot of callbacks because our employees even feel rushed because we give them so much work. So that's something we want to implement with performance pay. If you do a bad job, you only get paid, you know, your minimum hourly rate. That's it for the time you were there.

I have some ideas in terms of how can we tie their compensation and their commission percentage to their performance. Because like doing P4P pay for performance, like if you just give someone a percentage of their labor revenue.

Yeah.

They're going to go fast, but they're not going to do it. Good job. I think we can create more accountability there. But like from a legal perspective, is there a reason we can't do 1099?

We can do 1099. I think it's just the fact that we, we do want to sell the business in the future. And I don't know if it will be as valuable if you only have 1099. Should we do 1099 just to make more money and just to grow the business? Like, it's always in the back of my head, should we switch or should we not?

I look at the scalability. If you have a $2 million business that you want to sell and you have a bunch of W2 poise, great, you'll get some multiple on it. If you have a $20 million business, because now you can attack the entire state or the entire country with subcontractors, then it becomes you are a sales machine. The thing that you've actually tapped into is get the certificate licenses for short term rentals and then you create a sales process and a sales system to just get tons of customers. And then you create on the operations side and admin side systems in place to manage all of them, make sure people are doing a good job. That's the business model. Like if the business model is we Hire people to clean other houses, that's a commodity. But if you can create a system that every day there's hundreds, thousands of leads coming in and then you have a process for hiring them, training them and keeping them accountable, that's a very, very profitable and scalable business model. I think like from a 1099 perspective or W2, we can build the compensation model in a way. It's like if you don't hit these certain benchmarks, you don't get paid.

And if it's 1099, it's easier because.

I don't have to worry about overtime and base pay and all this stuff. It's like, hey, this is a straight amount. And what I would probably do is do some sort of tiered system of your commission based upon callbacks. I like the commission model, but you've got to have a countermeasure to quantity and like how fast you go. And that is what they're facing right now, which is they having callbacks and the quality of services slipping, et cetera. Being able to have it where their commission is hinging on great quality.

I feel like it to me more.

Like a tiered system and like how long since their last callback, for example, could be a measure of how much commission they're making. There's so much overhead right now, you're eating but like managing extra stuff, doing extra training, going back to customers, properties, doing quality control if you can just all that out. We always want to focus on how do we onboard and train people and how do you sell customers. Gotcha. And then we just pair the two together. Yeah, this middle part right now is where we're getting really messy because it's hard to keep them accountable, hard to keep them doing a good job. The highest quality standard, like we just need to like make that part of the system.

Really what I'm asking Dave to do is for instant cleans to get out of the cleaning business, the doing of the work. I want them to become a recruiting agency to go out and get 1089 and then match them up with a great lead funnel that is bringing in people that have short term rentals. I want to get out of the doing of the work and focus on.

Sales and making sure I connect these 1099 contractors. And here's the thing, ultimately what you're selling is an output to the customer of a clean house.

Yeah, that's it.

And as long as they're doing that.

And the customer's happy, you don't care.

And so you just create a system in place where they're incentivized to figure it out.

If you're trying to sell the business, this is not something no one wants to get into. Managing materials and we'll drop it off here. They don't want that.

They want.

Can you automate how we find people.

Train them up and then make sure.

They do a good job. If you can automate that loop and then automate your sales process where there's people calling these 9,000 people and setting appointments for you to go sell them and then there's text message and emails going out.

You go to a new market, you.

Know, okay, we spent X amount on marketing. We spent X amount on a closer and a setter and we have immediately 100 customers. Like that's a scalable model that's really interesting to a buyer.

How long do you want to before.

You want to sell it? Do you have like I've already in mind.

I would love to do like two to three years from now.

Oh, you're going out.

I think it would be best.

Okay.

Cleaning isn't really my passion. We definitely do want to sell the business to invest in other businesses or to start a business that we're more passionate about. Yeah, that's what I want. Me and my brother wanted to like, you know, sell the business, make some money and then go do whatever else we want.

So that, that refines things. So I was thinking 10 years. So two to three years now even more conviction that like we do not want employees.

It's important to know what the goal.

Of the business owner is.

If David would have told me that he wants to run this business next 10 or 20 years, I would have approached this in a very different way. But given the fact that he has a two to three year window where.

He wants sell the business.

I'm just going to optimize how do we improve the enterprise value and how.

Much you can get during that sale. That's all we're going to focus on. We want to measure the output of happy, satisfied customers.

And that's it.

And that's it. Let's just focus on. We do 1099 and then we just show compensation charts for incoming employees. If we keep doing what we're doing now with employees, I think you can build a real quick.

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Amount of lead they get from their website. I think you can build a $2.5 million business in the next three years. What's the ownership breakdown? Is it your mom? Is it you who owns it?

So pretty much it was me and my brother. 50. 50. We got an investor who bought 10% last month.

Oh, so that did happen.

That did happen. Okay.

This is huge. He actually got the partner was able to sell off 10% of business, which kind of stinks, but give us the liquidity available to be able to pay off the credit card debt. Big win. Now we can think about the future.

And actually grow in the business.

We did want you to review it, but it was just not enough time.

Got it.

Like, it had to be done. And so pretty much now he owns 10%. And then me and my brother both do. I think 45. 45.

And so what valuation? Like, did he put cash in? What was his.

Yeah, so he bought it for 80 grand.

So was that able to pay a big chunk of the debt off then?

We still owe IRS $3,000. We just haven't paid it off. We're on a payment plan.

We'll pay off all the credit card debt.

All credit cards, all gone.

Oh, good.

We have no credit card. Let's go, dude. Yeah, dude, I'm excited.

Yeah. On our way here, I was like, that's like our ace in the hole is like, can we sell a piece of the business and then pay it all off?

Going into the day, I thought there was $70,000 of more credit card debt and they were paying $7,000 per month.

On chipping away at that. Just a whole bunch of interest.

I already knew about the $30,000 of IRS debt from mistakes made in the past around taxes. But the fact that $70,000 is behind us is.

Because now he can spend $7,000 a month on growing the business.

For the past three, four years, you've always had debt, and it's like, finally, we have no debt. We're able to pay off all the debt, wipe this thing completely clean, and now we can just focus on scaling the business. This is the office.

That's super cool, man. This is perfect. So basically, we've paid off all the credit card debt. We have $30,000 left that we owe the IRS.

Yeah.

Does he have any say in the business?

No.

So he's in it for a three to five year exit, essentially.

Exactly. Yeah. More than a year. Ago, we actually took a loan from him and we paid it back super quick. So he already kind of had that trust in us.

And what's his expectation of the exit? Like, it's like in terms of time and then think in terms of valuation.

So for him it was more. He's a good friend of ours and he really told us like, hey, I'm not really investing in the business, but I'm investing in you guys because I believe in you guys. One of my brothers, like mentors, he recently sold his Sonic company for like $4 million. And he's pretty much like, hey, like, I'm not really investing in the business, but I'm investing in you guys. So it was more of like he believed in us and he wants us to succeed. So that's why he invested. We have no debt, we have $80,000 in revenue and my brother's been on for like two, two weeks and we just stayed at 80. Like it's like 75 get paid and then go back to 80. I get paid my salary, he does. My sister in law, my mom, all the cleaners get paid. The business really isn't growing.

Got it.

Okay, cool.

That's awesome. And in terms of the 30,000 for IRS, that what's the fees or interest on that? Relatively low.

It's relatively, yeah, super.

It's pretty low.

I think like, yeah, I think like 6, like 6, 7%.

Are you going to chip away at it? Kind of thing.

So we did want to pay it, but it's super hard to get in touch with the irs. So like we were on the phone like every single day for the eight hours and we're like, we can't get a hold of anybody. So we just haven't paid it off.

Yeah, and that, that was just from a like the past mistake of taking distributions and paying people essentially.

Exactly.

And then they're like, yeah, by the way, you get taxed on all that stuff.

Yeah, right.

So you probably seen the 4L framework. So we'll just work our way through. Essentially, a business will stop growing because of a lack in one of these things.

There are four reasons why your business stops growing. Either you don't have enough liquidity or.

Cash in the bank.

You don't have enough leads, you don't have enough labor, or you don't have enough leadership. This is what I call the 4L framework. And it's a cycle you keep going through as you grow a business. All right, so from a liquidity perspective.

We have the 30,000 doll of taxes.

So we'll just kind of define the problems and opportunities and then we'll think of planning later on.

The first step of the 4L framework is liquidity.

Money in the bank. Now that we've knocked the debt off, we should be fairly profitable. Like 24 to 27%, I would imagine.

Yeah. So I think last month we still had some debt that we finished paying off. I think right now we're doing like 20% profit margin.

We're doing your estimates. Are you usually my square footage, number of bathrooms.

So that's the thing. We don't really have it in exact and that's something we really need to work on. Just have an exact pricing structure in place. It's been something that we've had to do for like the past year and we just haven't done it. I've always just been winging it. Hey, I'll charge you this much. You know, we kind of just wing it. Like, hey, I think this will take this long. So let's charge them this much so we can pay the employees 50%. They'll make good money. We'll be able to pay them above their hourly wage and we'll still be profitable.

When it comes to systematizing sales for David and his department, we've got to first come up with pricing and actually have a strategy instead of just guesstimating on every job.

For example, example, we have like 16 units that we charge like 105, 110 because they're super small and the cleaners not come out in like an hour, 15 minutes. They make 55 to $52 for that cleaning and then that's it.

So I think within an hour you create a matrix on this, like bedrooms, bathrooms, square footage, and there's your pricing. And maybe your first initial visit because you don't go in person is we charge X amount per hour.

Gotcha.

Right.

Just say on your first visit to get it up to the instant clean standards, you're going to charge X amount per minute. And then after that, here's your price.

Yeah, pretty much like a little like a deep clean at first and then just like a regular standard turn every time.

Yeah, like there's no reason to go visit a person.

You could even do it.

One thing with short term rentals is do it based upon their occupancy or not their occupancy, but their occupation limit.

Yeah, like send people.

Yeah, exactly. So it's like, hey, you have, you have like four different variables, you know, bedrooms, bathrooms, square footage and what their occupancy rate is gotcha. Because like that, that's a huge determining factor.

The use.

Use of the property.

Right.

So I think you could literally figure this out in a day.

I think so. Right.

And then the reason is because I want that system to be used over the phone.

These are things that we already know. But if we just sat down for half a day, we'd be able to create a matrix by which based upon certain variables, we know the pricing with certainty. And if you have that pricing matrix, if you have a system for pricing, that's a system that can be passed.

Off to someone else down the road. So where your admin folks, they can sell these jobs over the phone. Again we're thinking about how do we create some. And that can really scale here and that becomes valuable. Someone you going to properties to get the pricing is just not going to. It's not going to be good.

But I think it's something that we need to have down just so I don't have to sell myself personally. It's like, hey, any admin person can just like plug in the numbers and it's good to go. This is your rate. And if the client says oh, can you do this? No, you can't.

And if he doesn't create a pricing system, he'll never be able to sell.

His business and pass this on to another buyer.

In terms of the lead flow, right.

Now we're scraping these lists, we're sending out emails, but we don't have any way to mask message them now because the current platform on Go High level is limited like 30 to 40 a day. The second step of the 4L framework.

Is leads getting more customers.

I'm not sure what the upload rate has to be. We get like disabled for a certain amount of like it's suspended for like a week or so. Oh really? Yeah.

Down to zero.

Down to zero. Then we have to do the A2P authentication again and it's.

Yeah, it's just a matter of getting a platform that actually allows and built for mass messaging.

Gotcha.

So mass message, that would be an opportunity. The other thing is right now you are really doing all of the same sales, correct?

Pretty much, yes.

Like you cold call people.

Yep.

Message. Cold call. If somebody calls us.

Cold call strategy. When you have that few quote unquote of targets when it comes to leads, doing something like a cold outbound is certainly in the cards. I also think that if that's been proven as a good lead source, he can scale that up. Right now we can't be doing 20, 30 messages a day.

You think it's too little?

Oh yeah. Way too little.

Really?

We want to be hitting at least 100. That would be 9,000 you have locally. That's once every three months.

Gotcha.

Right.

You have your target like you know who to be contacting. I would be hitting with text and email every three months and then I'd also be calling them. The calling part takes a lot more effort and a human being.

Yeah.

But I think we passively. If we can go from like right now you're doing 20, 30 a day. Like how do we, how do we 5x leads? We just go to 100. Literally this is, this doubles the business. Because right now your leads depend on 20 to 30 outbound messages a day.

Yeah.

Like how often are you doing cold calling?

Nothing.

Very, very infrequently. Because you're busy in operations.

Exactly.

Yeah.

So my, my hope is like how can we just Automate going from 20 messages a day to 100?

Yeah.

Just we double the business.

Gotcha.

Right.

So this is literally a doubling or potential tripling of the lead flow that's currently coming in. And now when that lead flow comes in, we have systems in place to actually close them with over the phone pricing.

Let's say you spend 4, 3, 3.

To $400 a month will get you text and emails to all that at mass.

Yeah.

If you spend that kind of money, it's hurtful but it's cheaper than right now you even spending a day a month doing cold calls.

Gotcha. Yeah.

So I think you're smart enough in terms like what the drip campaign should look like, what we're trying to offer them, et cetera, et cetera.

Exactly.

Yeah.

Because you're going after people already have a short term rental. There's only two customers. One is the customer that is currently doing themselves and the other is the customer that is unhappy with their current provide.

Exactly.

And so the first group is what everyone tried to go after. But it's a very small group. Most people that have a short term rental, they aren't going to clean themselves and already got a vendor. So you just want to attack all the pain points they're currently facing.

Are you tired of having empty people.

Complain about empty toilet things like whatever.

That you know the three or four.

Things people mess up on and it's harp on them. And then I was also whatever those three or four things are, that is the most common issues that you're targeting for your marketing. Make sure that your compensation ties back back to it. Okay. You don't mess up on those things.

Gotcha.

I trust you enough to be able like create mass messages that aren't spammy, that just look natural.

Yeah.

That sort of thing. I think you already know.

Yeah. 100%.

Doing something like a cold outbound is certainly in the cards. He can scale that up. Like he doesn't have to be the one doing the cold calling. He could have a setter that basically sets the calls for him and then he's not doing that all the time. We're in Malibu and we're in Long beach. Is.

It was Newport Beach.

Newport beach. But like Newport is really where we're at. Malibu is. You like got a couple random contracts coming.

Yeah. So Malibu used to give us so much revenue, like 20 grand revenue. Then this past year the Malibu fire happened. We had like nine homes that were with this, with this certain contract that we had four of them completely burned down. One is still in remediation. So we're only left with four right now. Wow. We would have been like 80, 85 grand revenue if that would have not happened.

But. And that with that big one contract.

Yeah, exactly.

We do have some right now like revenue concentration because of that one big contract. I'm not worried about though, because they have a whole bunch of properties. It's not like it's one property that's generating all of that. And it sounds like you're pretty anchored inside of that.

Yeah.

I think also that when you come to sell it like in a year and a half to two years from now, I would really experiment with offering a upgraded level of service that does the full property management.

An area of opportunity, but also a potential distraction for instant cleans is the ability to actually add more value to the customer and be able to charge them more. So instead of just cleaning their house. Also managing the guest experience, the booking process and the communication with the person.

That'S coming to the short term rental, communicate with the guest, everything on the messaging apps, et cetera. You could probably get twice as much revenue.

Gotcha.

And so I think it's like, hey, if we can build a business that has two and a half, $3 million at the cleaning, I think you can almost immediately tack on another million million and a half with the property. With the property management. And then if you go to a buyer that looks more appealing.

Yeah.

Because your customer acquisition costs can be higher. And because your. Your lifetime value customer is so much higher.

Yeah. Exact.

I say this could be a distraction.

Is because they have a good thing.

Going And I don't want them to focus on that.

Now.

That's a whole nother level of complexity, but certainly an opportunity if they want to double the lifetime value of a customer simply by adding a service that is exactly adjacent to what they're currently offering.

All right, labor, I think we can do 1099, but it's going to come down to creating systems for quality control.

The current constraint in the business for growth is labor. They've got to figure out how to get more people to do the actual work.

So I would just straight up call the labor for her. I know, like, with. Especially with, like, the whole tax thing in the past, it's scary.

Yeah.

Of anything to do with that. So, like, just call them. Like, I have a cleaning business. This is what I do. What do I need to do? Maker, I'm compliant to be 1099. We want to cut out any sort of payroll. We want to. Having them have to clock in and out. We want to cut out inventory management. We just want to make sure that all we're trying to do is get the output the customer wants, which is having a clean house. You even ask them, like, hey, if I provide uniforms but don't require them, is that okay?

Like, these are the type of things.

You could ask them is like, get really, really clear. Can you be a tenant?

Gotcha.

They love very definitive answers for you. You record that call just in case.

Okay.

Don't tell them, but. But it's a matter of. I recorded every call I have with the Department of Revenue and Department of Labor, because if they tell me to do something and then three years later, like, oh, yeah, we're dinging you. I have a recorded call of you telling me I can do this.

Okay, yeah, that's super smart.

I would just. Just for peace of mind.

Okay.

But the only reason that's the only way it's going to work is we have the next part, which is systems and training for quality control.

Now, I know in the past, David.

Has had a run in with the irs, taxes and getting audited.

By that happening, you get very defensive.

And be like, I don't. Again, it's caused a lot of pain.

Therefore, I'm not going to try to.

Explore this 1099 option.

But honestly, when it comes to things.

Like audits and regulatory things and taxes.

Go out and reach out to those departments and ask them what they need from you to be compliant, and then just do exactly what they say so.

You have confidence to grow your business.

I'm gonna take Mike's Advice. I'm gonna record it on our phone system that we use for the company phone. Everything's recorded. So I'm gonna just call it through there and see what. What's needed. Whatever is needed is implemented as fast as possible. And then you start working on the systems because that's what's going to take the longest.

Once they figure that out, we can go get more leads, get more customers.

And grow the business again. So we need systems for training and quality control.

I understand, Dave, is desire to want to hire skilled and experienced cleaners. Sometimes though, when I see someone always needing to have someone with years of experience, what it actually is telling me is that there's a lack of systems to take someone who doesn't have the skills and experience and give them the training necessary to do the job efficiently.

Efficiently and to a high quality standard.

Without those systems, we're always relying on people already having a ton of experience, which makes it harder to find people because less people actually have that level of experience.

If you think about selling a business, what is the buyer buying is something of value. What they're looking for is an acquisition channel that you figured out and then a way to be able to service that demand.

Gotcha.

And so if you can just create systems for those two things and don't worry about the commodity as much.

Yeah, right.

Because if we're trying to maximize two to three years, it'd be a very different. I'm talking to you.

Very different.

Differently. If you're like, hey, I'm going to do this for 10, 20 years, build multiple locations. Very different way we're talking. So if you're trying to get out of this in three years, you've got to nail sales. Sales acquisition, and then training new people. These are your two bottlenecks. And then you just pair them together and then you make sure that you have systems in place to make sure they don't do a bad job. We got to get to 1099 in my opinion though, because right now you're doing all these quality control stuff you're doing, you're delivering materials to people, all of which has no valuation whatsoever. And if we're trying to maximize for that, we just cut it.

Gotcha.

So I understand it makes you more vulnerable. Like Sometimes going to W2 is like a forcing function for control.

Yeah. Like we can have all control. Like they have to do what we say.

It's also a band aid sometimes for bad systems. Gotcha. Because we don't have systems in place right now to know what a Good cleaning is like we don't have training systems in place to make sure they're actually doing it the way that Instant clean does it.

In any business. Even if you're not trying to sell the business next two or three years like David is, it's a really good idea to build the business as if you're gonna sell, say this built to leave, build the business in a way that it could actually handle you leaving the business for two or three weeks. Right now if David was gone for two or three weeks, if his mom was gone for two or three weeks,. The business would fall apart because there are no systems, there is no training, there is no procedures, there's no standard operating procedures for people to follow if they're not there. And if you build a business as if you're going to sell it, if you build it as if you're going.

To leave, it becomes much more valuable. I would really try to nail this part.

I think it's a matter of sitting.

Down with your brother and, and your sister in law and your mom and be like, okay, what does a good cleaning look like? We have the checklist, but how do we get someone to there, right? Do we do a video? Like if you sat down in a facility with your mom for two days and made video training and said, hey, before you get started, here's two hours worth of training. Here's how you clean the toilet, here's how you clean the sink. When you leave, do this. And now you have video training so.

She doesn't have to be there for everyone.

That starts to look more scalable.

If you nail that, if you take.

A week and just really focus on, on that, that video training can be used by thousands of people. If someone was to scale this across the country, that's more valuable.

Yeah, right.

Something that can scale to that extent. So if your mom and you have this great way of packaging up this great service, let's just capture that on video and make a training system.

She definitely knows how to clean a home. She knows a good expectation, she knows how to train cleaners. And I think if I just help her out developing the systems on training videos and then what's expected, if I can communicate that with her, it's she helps me and she communicates that with me. We just work together on building those systems, I think we'll be good to go.

And that leads us in our compensation model. So right now we have a broken compensation model because we have no balance to quantity with quality. So like of course everyone's going to go fast.

Yeah.

We're gonna have problems. And again, we've slapped another band aid on there, which is. We will go back and check every house.

Yeah.

We're just not gonna be able. That's just not gonna. We're not gonna be able to scale that. And there's no value to a buyer.

Yeah.

So compensation is essentially broken. We have a broken compensation model.

So creating that standard for service is going to include video training.

Once someone's onboarded as a contractor, like having a very clear system for them.

Right now you're very much leaning on.

You get hired. We then do on the job training to make sure you do a good job.

Yeah.

It needs to be.

We onboard you.

We teach you what an instant clean is. And then here's the video train to make sure you're up to that standard.

Gotcha.

Then we, we. We hold everyone to this standard. And so if you want to get more money, you do this.

My feet. Right. Yeah.

And then you just walk through your compensation model. You walk through, like how things should be done, what timing. All of the things that you already know. The things. She's training them vicariously.

Yeah.

You just need to systematize it. The only way it's going to work is we have the next part, which is systems and training for quality control. Your compensation model needs to incentivize quality. Right now we just are incentivizing quantity.

I would say there should be some.

Sort of 40 to 60% sliding scale we can afford. You might even go higher. You might go 65% if you're doing 1099.

Yeah.

I will leave that part up to you.

But we need some sort of sliding scale. Does it reset after every week?

Do we allow them to have what is permissible in terms of callbacks? Do we allow people to really climb the ranks if they like? No callbacks for months after months after months. Because those are the people you're actually concerned about. Potentially with 1099 clients is. I'm taking away your customer.

Yeah.

But you can incentivize them so strongly because they're so good at their job.

Yeah.

That you're not hardly doing anything. If they're not making mistakes, you're making good money.

Yeah. Because you're not doing anything.

Just.

You're just managing.

You could very well probably get this to 65%.

Yeah. Right.

Do I like giving away 65% of revenue anytime? No, but if they're managing all their own stuff, they're managing their. Their. Their timing. Like the only thing you're really doing is getting the customer connecting with the labor and then managing billing so they don't have to think about, about that.

Gotcha.

Right.

And communication with the customer directly.

And so if we can, if we, if our top cleaners can be more.

Like 30 plus because we're.

They're at 60, I would even say.

Potentially 65% and there's on a sliding scale then great. But if they're at 40% because they keep making mistakes every week, they will probably self select out.

Yeah, yeah. Because they're not making enough.

They're making 20 bucks an hour, 18 bucks an hour. They should just go get a job someplace else.

Gotcha.

So they will self select themselves out and. Or you eventually fire them because they just are doing such a poor job.

I do think a pay structure has to be that like there has to be some incentive if they do a good job or if they do a bad job. There has to be like a slider. Right. That either goes up or goes down with the job that they perform. I think it's a great idea.

I will also say this likely will.

Become where now your outbound strategy that you're using for leads ends up where you're having to. You're going to go contact solo operators that are doing current in their cleaning business.

Gotcha.

That are looking for leads.

Yeah.

The same thing that you just did.

With your short term rentals, you're to do with, with cleaning companies for everyone who's licensed because you need them to be licensed and insured. So like pull out that list and basically put into the same system and tag them differently. Because now you need to, you have a marketplace. You're trying to connect labor and you're trying to connect leads. And so right now we've been going after leads occasionally in kind of a sporadic way and then using W2s to get labor, we're going to switch it to where like this. We're going to systematize and get leads and now we're going to systematize getting of the actual, actual labor themselves.

Okay.

And that's going to be the same thing we're doing here which is we're going to have their text message, we're going to email them. Same exact thing. Whether regardless of what software you use, I would just tag, okay, these, this is our contractors and these are our customers.

Right.

So customers being everyone's short term rental contractors being everyone that has a small business that does cleaning in our market.

Gotcha. And then just connect them to connect the two.

Gotcha.

Right.

So I would do a 40 to 65% sliding scale for comp. When you go reach out to, to those contractors, you can say, hey, you.

Can make up to 65% of revenue.

And the only thing you do is claim and let them manage.

If they want to scale it up.

They can get employees.

Yeah, let them, paid them 25 bucks.

An hour and make 32. And they create all sorts of systems for quality if they want. But like you have the systems in place for them.

I see what you mean. Instead of having to go out to every single, every single worker, every new worker, like having to work four days in a row hands on with them, rather than just having straight videos, watch the video videos. And then for 1099, we're only going to get experienced people.

Right.

Or companies that are already established or smaller companies or family companies that are already clean for a living. Just pretty much bring them on board and have them clean for us.

Yep.

I definitely think we should switch. I can see it definitely just like increasing profit by a lot because we're not dealing with all this like little stuff that we deal with every day.

The key to making all of this work is having great processes for onboarding new 1099s and then training them so their quality standards are very high. Because if they have high quality standards, I can pay them really well. But if that's broken, the doing of the work, the operations is not of a high quality service, eventually you're going to go out of business. If you're a home service business and your service doesn't do a great job.

You'Re eventually going to go bankrupt.

From a leadership perspective, thrilled that you're.

Able to get 80 grand for 10%, $800,000 valuation is really solid for what you're at. The fact that we can kind of clean the balance sheet off, that's all in the past. Super awesome. I do think that if we're going to scale and we're going to sell it, we need clear definition of roles.

When I look at any business, I.

Look at we get the work sales.

We do the work operations and then we grease the gears. The working it done admin Right now.

All the owners, all of the leadership.

Is kind of doing a little bit of everything.

They're doing a little bit of operations.

A little bit of training. When there's a customer complaint, we all jump in on it and that's fine. But if the business is going to get to the next level, it's going to get to 1.5 million. We've got to have a clear rules of who is sales, who is operations, who handles admin, and then each individually trying to systematize their role.

And I see it as we have sales, we have operations, we have admin. Now as I currently see it, you are a salesperson. It sounds like your brother and your sister in law are admin center command right now.

Operations. Could I say that your mom or.

Does she not really want to be a manager type situation?

I would say she, she is, she does. She has like kind of like stepped up to the plate and has been helping us out a lot, lot with training and day to day cleaning and stuff.

And when I say sales, you will still be the one that makes ads, goes out and scrapes. Scrapes the certification. Exactly. You are I'm going to guess is like the one that's good software, you know, making lead funnels, things like that.

Yeah.

So I've kind of skipped over a lot of those other little things and I know you'll figure that out.

Gotcha.

But making sure your sales. Your mom is operating out right now.

She's not really serves operations, she's actually.

In the field a lot. But she's the one that unlocked unlocks the. She knows what a good cleaning looks like.

Exactly. Yeah.

You're gonna have to help her get that into video format systems. Create systems for getting videos from people instead of going out and visiting. Like visiting someone is simply a band aid for the fact that we do not have a system around using technology.

Yeah, it's a short term fix.

And then the thing you can sell.

It to your.

Customer, your lead that actually has the short term rental in a very positive light. It's like, hey, just so you know, know, we don't just have employees. We have vetted companies that are insured and we train them up to our instant clean system. And here's our system for training. Yeah, here's everything that we're doing.

Here's how we train them.

We do video checks, we do like oh this, this, they have systems down. Like as someone who owns a short term rental, I want someone who has systems because I don't want to rely on a really good cleaner because that cleaner gets whacked. What happens in my house.

And so rarely if you market that.

Way, that customer that comes to you for that is rarely gonna go be like work with your one off cleaner.

David needs to be the salesperson. Operations is gonna be his mom. Nailing down the training and making sure we have high quality. And the admin side, the greasing of those gears is gonna be handled by his brother and his sister in law.

So there's really six things. We're gonna need a system for pricing so we can do over the phone. Then we're gonna use software that allows mass texting and mass emailing. So this is huge leverage. And I think it is a matter of you spending half an hour day what software you use to plug it into. Go high level and just do that. Making sure. Viable option for 1099. This is a phone call away. Viable 1099. I'm not even asking you to switch everything over. I'm just like let's figure out what we need to do to make 1099 work. Then we're going to do 40 to 65% sliding scale for compensation. And that's all going to be based upon quality.

Yeah. Right.

And this is how you pitch this to your team when you have to switch them over.

Like hey guys, we hate the fact.

That some people are capped here at 50% and you deserve more.

Yeah.

We also hate the fact that there.

Are people that make the exact same amount, 50% percent and they don't do a good job.

Yeah.

So what we're going to do is now make a sliding scale where you can make more if you do a great job and you make less if you do a poor job. Of course then we're going to create a standard of service. These are the three or four things that must be done in order to have an instant clean.

Really getting granular about that.

Talking about with your, your, your leadership team.

Yeah.

Of like what does, what are the three main things?

Gotcha.

And if we have the 30, 40% checklist and we have video, great. But if we could really market this to our customer, what would be say and then sales operation admin, defining what that is.

This is a matter of probably spending.

Half a day with all of them. Like hey, who's responsible for what? That's how this business literally can do 3 million, I think with this setup.

Gotcha. Yeah. Just like sales, operations and admins. Everybody doing their, their tasks. I really look up to Mike a lot and definitely in the future I want to help Hispanics or Mexicans like that are maybe in the best part like kind of like how we were struggling in the past. I would love to use make as an example and kind of follow what he does.

But for cleaning companies and in three years, if you're in 3 million, you have three markets, you have this structure set up. You're running a 30%, 25 to 30% margin business. And you tell someone there's five other markets that we think are viable. Do you want to buy the business? That looks really interesting.

Gotcha.

I wish we. I know it was like a six week plan, but we have not been. It was like way too much to do in six weeks. More than anything we've been thinking for a long time is the employee part making sure, you know, everything's actually, actually fully in compliance with, you know, California, California law. Actually today, funny enough, today we have a meeting I have at 2pm with a local employment law lawyer attorney. So we're gonna. We already have the game plan set. We have the pricing structure, we have the sliding scale. We have everything. Pretty much all we really need is just. We're just gonna, you know, go over the plan with him and see if he has any advice on, you know, what we can do, you know, just to be fully compl.

Finally.

So for them sliding scare we are, we're doing, we're doing 45 to 55.

And then you know, we're just starting.

Off at 45 and then see. But every, every employee that we talk to about it is like 100 on board.

Yeah.

So actually in the contractor agreement we're doing this, this like online checklist that's mandatory after every single cleaning. And in that mandatory checklist is there will be like they have to upload the four page pictures, the after pictures with pretty much the very detailed checklist after every single cleaning in order for them to get paid. We're hoping that as long as they do that every single time and it's in the contract that you know, we won't really have to. We. And using the sliding skill as well, they won't have to. You won't have to go out there as much. And that's honestly it took forever to do that, to really get roles. So that that's actually what's kind of taking the longest rather than everybody. I've been doing a little bit of everything with me and my brother. Really been like we, we really just wanted to create more of a routine for everybody. That's kind of like the issue that we were like, you know, there wasn't no routine in our day. It was kind of just like everybody does like whatever's needed, you know. So me and my brother have been working on like a daily to do list for the admin. Yeah, I think, I think we got it down. I think pretty much the whole plan is like ready to go. I think we just honestly, I'm just waiting on that attorney to give us the every night. That definitely took a long time. Also talking to, like, the labor department in California. They were terrible. Like, I couldn't get it. Like, I called multiple times, and I couldn't get a clear answer. So I was like, you know what? Let's just pay for an attorney. I mean, we can afford it, so let's just pay for one.

Yeah, you know what?

We haven't changed the messaging software yet. Totally forgot about the mass messaging. I'm gonna. I'm still gonna look into that. Yeah, we've been to. We've always been back and forth between W2.99. It's been, like, three years now. Like, you know, we'll go a couple months and be like, you know, what should we do? 1099, and then we'll scrap the idea. So, you know, when me and my brother said, like, you know, if we're gonna do it, like, we're gonna stick to the plan and just go through with it, we'll save so much more money, and we'll be able to pay the cleaners more, which is ultimately what I want. That was amazing. I was stoked on meeting Mike. You know, I look up to him a lot, and so it was. It was like, the best birthday present ever.