Behind this $200M Home Service Business

Hey, everyone, it's Mike Andes. I'm the founder of Augusta Lawn Care. We have over 150 locations around the world. But today we are out in Phoenix, Arizona, and we're gonna be meeting up with this guy, Tommy Mello from the Home Service Expert podcast.

I used to be Wayne Gretzky. I used to be Michael Jordan. Most of those guys don't know how to coach.

We showed up here as part of a turnaround show, but we did the podcast, and we want to show you behind the scenes. Here we go.

Good to see you, man. Not much good.

I'll be right back. Take your time.

Thank you. Guys.

Go ahead and get. Get set up. Over.

Cool. All righty.

Nice spot. How's it going?

Good. How are you, man?

Good. I'm Mike.

Mike.

Nice to meet you. You as well.

How's it going, man?

Dude, down. That's a teleprompter. Gentlemen. Thank you, sir.

You ready to rock?

Yes, sir.

How's business?

Good. And traveling? Arizona for the first time in a while.

Yeah.

Yeah. We were over in. Where were we yesterday? We were in Cottonwood. Cottonwood.

Cottonwood. Yeah.

Other side. Nebraska.

Nebraska. Sedona. Oh, cool. How's the CRM business?

Hard. It was going good, and then we scaled really fast, and it just broke everything. So that was earlier this year.

Here's what you're going to learn that I Learned is doing SaaS, Home Service, Home improvement. Everything's a little different. Yeah. And I thought I could do it all, and then I just learned to hire people way smarter than me.

Yeah.

So you know what the hardest part is?

Attracting the all Stars.

So that's. There's a good book. Have it up here, but it's who, not how, but.

Yeah.

It's not making any more decisions.

Right.

I say I want something done, they tell me how they're gonna do it.

Yeah. Yeah.

I'm not involved.

Yeah.

And I'm like, man, that's the hardest thing in the world. I'm like, wait a minute. I used to be. I used to be Wayne Gretzky. I used to be Michael Jordan.

Yeah.

Most of those guys don't know how to coach.

Yeah.

The reason that they don't coach is they're so used to playing in the game, so now I'm kind of. I'll call it evolving, but it's impossible. I'm like, dude, I want to be.

Back at the game.

And I'm like, I hired people. Better, stronger, faster.

Yeah.

I mean, a specific thing.

Yeah. Yeah. We were able to get some Guys from activecampaign to come over.

Yeah, Active campaign's amazing.

They've done. They've done good. Like, just saying same thing. It's like I don't have any idea what to do at that level. And so they can just take it.

Take it. So did you grab me a Celsius?

You have the gym Gym on site here?

Yeah, I do. Next door.

Nice.

Expanding it.

Cool.

I'm in a push up contest next. Next month is going to be a gambling push up contest with the whole team. Just a few guys that want to.

Okay.

It's going to be a fun bet. I think I'm going to win a few thousand bucks.

Thank you, sir.

I'm gonna try to get to 10,000 push ups in January. And I know form is so much better than everybody else.

Are you gonna do like 300 a day? Are you gonna go for like 500? Take a day off?

There will be no days out. But on my days off, I'll probably do like 200. On the busy days, I'll do like 600.

Okay. Okay.

And then I want to coast into, like the final days not having to do a ton. Yeah, I've been doing a lot. I did 440 yesterday and, like, I've been changing up my form a lot.

Yeah.

Different muscles.

Yeah. It's fun though. Are you trying to shed, like, are you trying to cut January? Let's go.

I made this morning 252. I'm trying to get, you know, 250, 260.

And dude, you got cut if you lost that.

Yeah, dude, push your chair up a little bit.

Oh, yeah.

I haven't heard that before.

Yeah. I started Carnivore like six weeks ago.

How do you like?

Was great. I already ate a lot of meat, so it wasn't like a huge.

Are you still doing it?

Yeah. Oh, yeah. Yeah, it's. Dude, you'll cut. Assuming, like, you don't have anything with your gut, you'll cut really fast.

I've done not straight. I like carbs.

Yeah.

My trainer's like, dude, your body don't do intermittent fasting. Like, just keep carbing up.

Yeah. Oh, yeah. No, 100%.

My breakfast had 100 grams of protein in it.

Yeah. Let's go.

What do you guys got? You ready?

Yeah, yeah, yeah. All right. Welcome back to the home service expert. I got a special one for you guys today. Mike Andes is here. I've known Mike for a long time now. Spoke at your event, I don't know, six years ago now.

Yeah.

Has it been that long?

I think it's been three or four.

Three or four time flies. The funny thing is, is Mike's a badass when it comes to landscaping. And I had a landscaping company in Michigan and Arizona, and I love landscaping because there's a lot of money to be made in landscaping. It's kind of hard if you're just mowing lawns with a 22 inch Honda, but once you really master it, it's something a lot of people could get into. And you had a lot of successful people at the event. But you, you're a busy man. You've got your own CRM, you've got Augusta Lawn Care, you've got Anytime Fitness, and you're the host of your own podcast called the Home Service Millionaire Podcast. How old are you these days?

29.

29?

Yeah.

Well, that's awesome to get started and be as passionate as you were. When did you get into the business?

So I was 11 years old when I first started pushing a lawnmower.

Around 11 when you started pushing it. And then you started.

Augusta in 2014, is that right?

Yep. So I was 18 when I started. I dropped out of medical school because I went to college when I was 13. That's when I started. So I dropped out of medical school at 18 and started Augusta Long Hair then. And five years later is when we.

Franchise 100%, you're no longer in the landscaping business. You're in the turnkey business. And by the way, what I've noticed and I spoke into probably 20 different keynotes for franchises. And when I talk to the franchise or they're like those four companies, there are bread and butter.

Yeah.

The other 60 or whatever it is, they're barely getting by.

Yeah.

Because they're not bought in. Blah, blah, blah, blah, blah. But here's the thing. It would be very hard to get into my franchise. I would not sell you a franchise. You know what McDonald's does? They make sure you're a millionaire.

Yeah. Answering your phone is important. Well, we're going to answer your phones for you. We're gonna run your payroll for you. We're gonna run pay for performance for you. And then a matter of most recently we've really been going after is like we know from Getting just from 0 to 500,000 is the biggest hurdle. If we do that, we have exactly zero people have ever quit the franchise. So getting them to that level is like the activation point that we have to focus on. And so the number one thing from 0 to 500,000 is like sell, sell, baby, sell.

Landscaping's a tough industry. What do you think was the key? And landscaping is really open. If you're talking about just cutting lawns versus I know guys that charge $90,000 for landscaping. They deck it out. They do like, they're arborist, they set up the trees, and they do the bushes and the rocks, and sometimes they even interact with the pool and whatnot. It's the curb appeal of the home. But what was that stepping point that you were like, this is more than just a career. This is actually gonna be a massive, massive company?

Yeah. So it was about three years in to starting Augusta Lawn Care. I was the classic working 80, 90 hours a week situation. Didn't have systems and procedures. I got underneath the dump truck and was turning on the PTO of an old dump truck. His manual line had broken from inside the cab. PTO is a power takeoff. Makes the thing spin, dumps the bed. My hoodie got caught in that. And so basically I was in the hospital for two weeks recovering from that and realized my business had no systems. And fortunate enough, I didn't have a family, I didn't have kids, I didn't have dependents, but if I would have, I would have gone bankrupt. And so I realized that the business was personality dependent and not system centric. I was on the hospital bed with my phone facetiming my crew to walk through the next project. And so from that time, two weeks later, I started landscape business course and just started making videos online about like, hey, here's what I'm doing. This is what worked, and this is what didn't work. And so that's really why to me, even when it comes to franchising, yes, the money is not the fastest way when it comes to franchising, but being able to see these owners that don't have systems in their business get the systems and then turn things around. That's all I care about. And so to your point, there's landscapers that do $90,000 projects. But sometimes I'm labeled as the guy who just tells you to do the simple services when reality it's just, I want you to be able to build a business that has systems and procedures. And for the vast majority of people, it's easier to create systems for simple and standard services instead of complex and and custom services. And so I'm just being more to the masses when I speak about systematization and build a business. Build to Sell is a great book. I think about Build to Leave, John Warlow, Build to Leave. That thing and let it run without you. And many times the systems built to do that is through simplification and standardization. I truly believe the past. If you look at the 2010s a great home service business, many times the distinguishing factor is do you have a great looking website and do you answer your phone? If you did that, you are ahead of like 95%, 98% of home service business owners. And so I believe like in the 2020s it'll be the determining factor will be technology and software. And I think in 2000-30s is when robotics and AI will actually impact our industry the most because so much of our work is manual. And I believe that the software and parts of AI on the admin side will be really important in the next five years as we head to 2030. But as we go into 2000 and 30s like it will be the robotics companies that will start to take over this very fragmented market.

I was talking to my C suite today and I go, I'm kind of worried about AI. Not, not in a bad dark way. But I'm like, I think it's going to be like whoever wins. And I got, there's a strong, strong possibility A1 will be continue to be the largest. Because people come to me because of what we've done online and our Facebook groups and the way we've spoken at events. They come to me when they've got something.

Yeah.

And I'm the first one to research and implement.

Yeah.

And I do think there's not going to be a whole lot of winners. There's going to be a couple winners and a whole hell of a lot of losers. And you better join the winners quick. I think they need us more than we need them because there's a lot of PE out there. There's a lot of money. But there's not a whole lot of people that know how to treat people that didn't have a mom. You know, like some of our, my co workers, you know, some of them didn't have the greatest upbringing. And I don't think white collar people are going to get into home service anytime soon. Like to go do the work.

Yeah. No.

And that's why, you know, a lot of my guys make six figures and I think that's okay because no one else wants the jobs. Before they were a dime a dozen. Now very few people are getting into the industry. So now you got to pay them more because there's not a lot of them out there.

Right.

I mean don't get me wrong, I was a Landscaper. I know it's hard to make pay some landscapers six figures, but why put a cap on what they could make if they could outproduce anybody? You know, the paper performance side of it is don't limit it.

When I first started, I did it as a necessity. We were basically break even at best, you know, seven figure company, but nonetheless break even at best. And it came as a result of one of my employees coming, asking for a raise because of course I did not have a system around how do you actually give raises to somebody? It was just simply a matter of like when I needed more people to stick around, I'd probably give out raises to keep people around. He asked for a raise, he probably deserved it. He was making less than other people inside the business. And I just walked away from that conversation knowing I did not have the money, could not give him the raise and said, we're doing this because it's something that I think everyone wants to do. It makes total sense logically. But then you have 10 different reasons why it won't work for you. Everyone has that. And so in landscape it's like, well, if you go too fast, if they go too fast and they start making mistakes, then now you're incentivizing them to start making mistakes. And it's like, okay, well then let's fix that. It's a yellow slip system. If they make the mistake, they have to go back and fix it. Also, it can come out of their bonus if they do damage cases. If they lose the customer, it can also come out of their bonus. Okay, well what happens if they got to sharpen the blades or they got to change the oil? Okay, well then we're going to have non billable time. Okay, let's bake that in. Okay, what happens if there's one person that's really, really skilled on the crew and the other people are less skilled? How are we going to handle that? So there's all these little variable people have as to why they can't switch to P4P and many times that's what keeps them from going that direction and they just switch back to hourly because it's honestly lazy.

So what would you say about that? Instead of divesting out of the business and picking up that nice house and having the nice vacation house and having two Mercedes and having a Harley and going to Sturges and everything else. What if you just said, I'm gonna build this business as fast as possible for five years, sell 70% of it, roll the 30, work there for another three or four years, I'm gonna walk away with millions and millions and millions and millions and millions of dollars. And then I learned so much during the process, I could go start buying these businesses because now I got money to work with.

Yeah.

Everybody that I know says, oh no, I'm gonna do this for at least 10 more years. I'm like, okay, so you're gonna miss your kids growing up. Cool.

Yeah, yeah. It's the instant gratification part. As soon as the first level of that success happens is usually when people take chips off the table. And so people aren't willing to hold their breath for the five or 10 years. And so I really encourage, like, think of your career in 10 year swings. And if you think of that way in your, in your 20s, you have five, six solid swings left in you.

Yeah.

And if you actually committed yourself for 10 years and let's just say it didn't work out, I happen to believe you would have learned so much more and gone so much deeper in that industry. Your second swing would be that much more precise. If you look at Elon, for example, he owns 20% of Tesla. And you look at Bezos, he owns 9% of Amazon.

Yeah. 8.6. And then even Mark Zuckerberg owns like 13% of Facebook.

Yeah. Jensen Yang of Nvidia owns 4%, I think it is. Of Nvidia. And so it's like, do we think so small that we don't get the big person that's done it before? We don't give away stock options, we don't give away equity, we don't give these other people the opportunity. Because if you don't give them that opportunity, that 301 level, you will lose them. And that was the thing I had to learn. I made so many mistakes around this time and time again.

Equity, it's called an EIP equity incentive program. It could be called phantom shares, it could be called profit units. There's lot of names. It could be called stock options if you go public. But every smart company on the planet knows this. But in home service and home improvement, in the blue collar industries, we're like, no, it's all mine and we'd rather have the whole pie, but it's tiny. I'd rather take a small sliver.

And give these slivers away and give away 30, 40% of the business.

So basically the turnaround show we do on YouTube and then the problem with the YouTube channel is in order for me to go out, fly out and do a turnaround show they have to get a bunch of cameras in their face. And no one wants that when you're in your lowest moment. So we just left the company here did 1.2 million in revenue or is doing 1.2 million in revenue. We've been in business for 40 years. They have 22 employees. They're charging $40 to $45 per hour. And so the fact of the matter is, it's extremely embarrassing to have cameras show up in your face and talk through the fact that you have a 3% margin business and you have $170,000 in receivables from projects.

3% of 1.2 is like 30 some odd million. 30 some thousand a year.

Yeah, exactly. And that's on the bottom line. And they're not taking much out as owner distributions. And there's $170,000 in overdue invoices you haven't collected on. And so that's not fun to have me come out and have the world see what's going on in your business. And so what we did with the turnaround book is like, hey, here's the manual, if you don't want to be embarrassed, because it is embarrassing. And so the number one most important chapter in that book is the first one, and it's just about cash, because ultimately, if you run out of cash, the business will die. So many bad business models are hidden by an entrepreneur that's working 80 hours a week.

I. I worked at a couple of my buddies. I helped them start a Christmas light business after the first year. I said, guys, I'm looking at this. We got to double prices. You're kidding. I go, no. They're like, we can't do that. Did I tell you the story?

No.

We doubled the prices.

Yeah.

These assholes, good buddies of mine, finally listen to me. Double the prices.

Yeah.

Guess how many people canceled?

Less than 10%.

It was 40%.

Oh, really? But hey, you double prices, you double you 120% collected.

So if you were collecting a million dollars, now you're collecting 1.2 million.

Yeah.

And you were only doing a little more than half the work.

Yeah. Yeah.

So I said, guys, this is amazing.

Yeah.

I said, you got rid of the worst 40%.

Yeah. Yeah.

And most of the people I tell the raise their price. I don't tell them to double it. I say, just add 20%.

Yeah.

Doubling is pretty sharp. If you're paying $1500 for less, now you're paying 3000.

Right.

Clients are like, but 60% said, you guys did A great job. It's Christmas. Yeah, we'll do that. I thought you guys were giving a smoke a deal anyway. And that's the deal. So what do you do with somebody? How do you fix their. You said they've been doing this 40 years. They're charging 40, $45 an hour.

How do you. That's a mindset. They're broken.

It's tough because I don't like to go in there like the Gordon Ramsay and yell at people. Although it's like. So how I approach it, honestly. Yeah. Well, Jon Taffer's coming to our event here in a couple weeks. I'm looking forward to that. That's not my usual genre of dealing with it. But my thought is I get mad at the problem for them. Cause I know what it's like to be in that situation. And I remember the pain that I went through. And I hate to see someone in their 60s going through that pain because they have not dealt with the problems of the business. And they still are clouded with the mindset that I can't charge more and everyone else is more expensive. And I'm like, wait, wait, wait. What's your close ratio? Almost 100% of my jobs get accepted. I said, I don't care about the cost of what you charge versus your competitor or any. Or if a customer says it's too expensive. If you're closing 100% of your jobs, you are too cheap. The market is yelling at you to raise your prices.

Well, the deal is I tell people, if you're into growth, don't ever fall below 10% profit. Don't ever fall. If you fall below 10%. And by the way, I bet at 10%, I've been at 20%. I've been at 30%. I think there's a happy medium when you're trying to take market share. Yeah, it's kind of like I tell the. Like I tell the best story is when you're trying to gain muscle, it's very hard to get cut. You know, Arnold will tell you, listen, during the off season, I used to gain a lot of weight. And right before three months out, I cut.

Yeah.

And I think cutting means becoming extremely profitable. So planning on selling means I'm cutting 18 months in advance going into that 12 month spurt because that's what I get valued on as a multiple of ebitda. What has been the largest challenge you faced as being a young entrepreneur in business?

I think if you're really young, sometimes it's easy to default to like the Age thing I think being young is. It's like, so when I went to college when I was 13, and everyone always asked, like, was that weird? Was that strange, et cetera, ultimately, because, like, the way my parents raised me and the way we never mentioned it was never a thing. We never talked about me being young. In hindsight, a kid going through puberty in college and university seems really strange. And so I do think it's like, who do you surround yourself with and what are they telling you? Because if they tell you it's weird that you're young and that it's strange that you're hiring people that are older than you, then you will believe that. But, like, I was very privileged to have parents that, like, we never talked about it. Yeah, it was like, I'm just going to school. I took the bus and I went to school. I couldn't drive, so I took the bus. And I think the same thing is true if you're in a circle of friends or even in your family, you might have to break away from them. And like I've said, sometimes, sometimes your goals will outgrow your friends. And in the event that you're a young entrepreneur needing to hire and interact with people that are older than you, you might have to break away from your friend group and your age group in order to chase the goals you have.

Good stuff.

Thanks, brother.

Absolutely. Let's do it. Tommy, let's do that quick video that you did.

Okay? Okay.

Okay.

All right. All right. I got Mike Andes here. He's probably one of the world's best landscapers. He's got a franchise, 160 locations. You're going to want to look out for this podcast. Mike, what are we going to talk about in this podcast?

We talk about franchising, but that was the much smaller part about really focusing on goals. What do you do as a young entrepreneur? I started college when I was 13. Tommy's built his business doing garage doors. Whether you're doing landscaping or installing doors, you make millions of dollars in home services. He's a testament to that. I follow his stuff from a young age to copy and follow in his footsteps.

He wrote a book. And you're going to want to learn about Cash is king cash flow. And you're going to want to learn about if you can make money in landscaping. Really? I was a landscaper. I started when I was a kid. You can make money in anything. Mike understands the systems. Even a landscaper needs to just be able to kill it. And guess what? Charging $40 an hour is not the solution. We're going to talk about how to come up with an hourly rate that actually you're allowed to make money more than 3%. You should be making 15, 20%. So you're not going to want to miss this podcast with Mike.

Let's go.

Thank you. Awesome. Thanks.

Thank you. I just want to show you our training center. So we bought this building probably six years ago.

Okay.

And I just kind of built the. My dream training center here. So.

Got the barbecues over here, plus one over there. Try to cook for the guys as much as possible.

How many guys come out of this shop each day?

So training, there's anywhere from 20 to 50 guys a month.

Okay.

Dog, that's tar. This all opens up. The reason I like a kitchen and a bathroom is maybe not for landscaping, but when you're talking to a. A client. And the garage is 20 degrees or 120 degrees.

Yeah.

You want to say is there somewhere. I'm going to go over the process with you about how we do things. Is there somewhere we can sit down and discuss some options? Yeah, we give options. We always give options. We don't give ultimatums.

Yeah.

And yeah. This is the training center. I mean, there's different scenarios. Lots of things to talk about with the clients. Gamification, having fun.

Yeah.

Talk about the Harley, talk about the motorbike, talk about the kids.

Yeah. How long does that training process use you for a new tech?

30 and 30. And then they get what we call polished.

Okay. Hey, guys. Good?

Great.

And this is Pinnacle Club. If you make Pinnacles. Pretty awesome.

Very cool.

And then this is the training center. We have in each market.

Tool kits. These are five grand a piece.

Every guy gets a brand new set of tools after three years, they own them.

Cool.

Figure out a way. My CFO is a genius because he's able to add a couple million dollars of ebitda.

Yeah.

From giving it after three months to three years. I don't care what I give them away. But by changing that policy, we will add a lot of money in them. Here's the right words to use. Instead of contract, we see agreements that assign. Here we see, okay. The paperwork. Instead of cancellation.

Right.

Of rescission. Instead of cost, we say investment. There's a lot of good stuff there. This is in a book called.

Oh, it's a blue book called.

Something. Influence. Not. Not Robert Shahri's influence. Maximum influence.

Okay. Okay. Yeah.

It's one of the best sales.

Okay.

And then read. What should we do?

Yep. Yes. I have. Yeah.

So those two books combined.

Have you met him? The author of what should we do?

Yeah. Okay.

Cool.

Made him a lot of money.

Yeah.

He's the man. So as she said, she hasn't seen me all day.

She's mad.

I got two eas. She's freaking phenomenal.

That's good.

Next level.

That's awesome.

I paid her 180 grand a year.

Let's go.

But I needed to get somebody.

Yeah, that was Dan's issue too. He kind of burned through three or four of them and then he finally.

Who's that?

Dan Martel. Same thing. Yeah.

Hey, I appreciate you very much.

Thank you. Thanks for having me out. Appreciate it.

Appreciate you guys.

Absolutely.

Doing great work. And let's keep in touch, man.

We'll do. Thanks, brother. Have a good dinner. Appreciate you.