Breaking Down a $300K Tree Business

This is Zach. He runs a tree service business and made $306,000 in revenue last year. But the financials say he only profited $11,000 and he can't find any good workers. This is the Business Breakdown Show where we take real home service businesses and analyze exactly what's holding them back. Our goal is to give Zach a strategy to turn around the company in the next 6 weeks. The name of the business is Loyal Tree Care. They offer expert arbor services, including tree removal, pruning, and trimming. Let's take a look at their application video.

My constraints in growth are having another climber replacing me, having someone who can do high production tree climbing consistently, 5 days a week, produce $3,000 to $6,000 ticket jobs. Very difficult to find that employee. Most of them are self-employed, or I rely too much on subcontractors when I get tired. Lead generation and market visibility. Inbound work is too inconsistent. My Google reviews are slow because I'm— I don't do enough volume and my competitors have significantly more.

All right, so let's go ahead and jump into Zach's website. I first want to take a look at the site and see if there's any improvements, see Sounds like inconsistent leads is a big problem. He has a lot of large competitors in the tree industry in his area, and he can't find any full-time climbers that is needed for this very skilled arborist type of work so he can scale loyal tree care. So let's look at his website. This is actually a Home Service Web Design client. I can't really say too much bad about it because we built this. So it looks really solid. You can see at the top here, that it says expert tree care in Eugene, Oregon, and surrounding areas. So it says the service area and it says what we do. That's the first question that the customer wants to know is, do you solve problem that I have and do you solve it in my area? This is kind of a quintessential home service web design site. We have the estimate request form looking very solid, great pictures of the crew actually doing work. It's a solid site overall. If you want to see more of these, just go to home service web design. And click the Our Work tab. But you can see here like, oh, this is very cool. Oh, I love this warp speed thing. That's super cool. It's very clean too, 'cause see, there's not like a player on top of this. It's a really nice design. So I love that. Then you also do commercial tree care. Very good. Yeah, so then you have your really good integration of your Google reviews. Okay, great. I love the design. Obviously I'm extremely biased here 'cause this is a web design client. And so I'm going to give this bad boy an A. In terms of design. Now, keep this in mind, Zach, you just launched this during your offseason in September, like end of last year. And so traditionally it takes about 6 to 8 months to rank super well when it comes to the Google ranking side of things. When I looked up your website, you were ranking on the second page for residential and the first page for commercial tree care. And so I'm going to guess— I don't see this anywhere, but I'm going to guess that a lot of your current revenue is coming from residential. And so I would anticipate the leads to really start to pick up as we go into the next spring rush, now that your site is looking good, and it's almost always that second spring rush that people see a real huge uptake in the amount of leads, but that doesn't solve the problem of inconsistent leads. Because I do believe that you are going to double your lead count in the next 12 months, Zach, like in 2026, because your website got finished in September, and now as we go into the rush, people coming to your site, it's going to look better, they're going to convert more, they're going to fill out the ester request form. I'm not so concerned about that. A couple things I do think we could improve when it comes to this background video on the website, I would love to see a little bit more of you, your crew, your trucks, and your brand. I think these are great. I do believe these are your videos. I don't think you like got these off a random site. So it's better than 95% of people, but I would love it. And you can just send this to the team at what Home Service Web Design, we'll put this up for you. If you have videos that are a little closer showing your uniform, your truck, like your crew in action with your brand, that'd be excellent. I actually really like this sort of action right up against your crew shows like just the detail and the level. Like if you can get that with video, that'd be excellent. I highly recommend for anyone that's doing a background video like this, go to DJI and they have a little gimbal for your phone. It makes it really nice and smooth. It's like $100. You just pop your phone right onto it, usually magnetic, and you get really silky smooth video for these background videos and take it from like a 6 out of 10 to a 9 out of 10 without having to spend 10 grand for a film crew to come out for the day. So just a bit of a web design kind of side of things I do think you could improve at. But I do expect this to generate a lot of leads in spring and summer. I think you're gonna almost double your lead count, but the inconsistent part is something we're gonna have to figure out because leads to a website only happen when demand goes up, 'cause people are already searching for your services. And now that you are ranking on the first page for commercial, second page for residential on Google, you are gonna get more leads, but they're gonna come during the spring rush. And so I do anticipate that to not be a problem, like the lead flow in the next several weeks. It's going to be the consistency of that lead flow in the off-season, which for trees is usually end of fall, into winter and then up until the beginning of part of spring. So we'll talk about that in a second. Now, when it comes to the Google side, I think you right now have 39 Google reviews. Let's check out your Google Business Profile. You got 39 Google reviews. I would love to see this get verified with an address. I can see you're currently using a service area, but watch what happens here. So if we look here, look up in your local area for tree service, you can see here The companies that are showing up on this map are the ones that have verified addresses on their Google Business Profile, not just service areas, but actual addresses. And if you look over on the left-hand side here, a lot of times the ones that are highlighted are the people that have verified addresses on Google. Now, when I look at your Google Business Profile listing, I see the 39 Google reviews and I notice that A lot of these actually come from the last few months, like almost all of them within the past 4, 5, 6 months. So I'm guessing since you got your website, you probably got most of these reviews. That's great. I would love this number to get over 100. I would also respond back to these reviews using ChatGPT or Gemini. Take a screenshot of this. For example, here, this from Janice. I highly recommend Loyal Tree Care. For any tree work you may need, Zach assessed the work needed and provided an estimate quickly. He scheduled the work and it was completed in short order. The trees look great. The yard was left neat and tidy. I can't wait to see the trees leaf out in the spring. I would take that from Janice. I'd screenshot it or copy it into Gemini or into ChatGPT and ask it to give you an SEO, search engine optimized, friendly response from you, the owner. Instead of just putting, thank you for hiring us, Janice, see you next time, put whatever the response is. It might be a paragraph, it might be 3 or 4 sentences, but it's gonna be really helpful for Google to know what services you offer, what service area you have. Super valuable. Also, I think you can get way more reviews if you just have automations and you can use HomeWorks for this. I'm not just going to ask for a review after a service. I can ask for it all throughout the customer lifecycle. We'll talk about that in a second. When it comes to your website and overall presence, I'm going to give you an A-. The website looks really good. I'd love to see some more closeups on the video side and I would love to see more Google reviews and a Google Business Profile listing that has a verified address, because I think it'll almost immediately take you from the second page of Google to the first page if you just got an address verification. Okay, let's go ahead and jump into the financial side of things for Loyalty Care. We got $305,000 in annual revenue. So top line revenues, $305,000. We got some contractor work in there. So you had said contractors were a big piece of things, kind of like a a bit of a struggle. So when I look at this, this is about 8% right now is going to contractors. Now the reason I say is because sometimes what seems like a bad thing, like subbing things out to contractors, might not be a horrible thing, especially when it comes to really specialized services that might make it harder to find a climber. So for example, you might say, hey, I'm going to use subcontractors for 20% of the work, or even 30% of the work, that is the most complicated, hardest work to do, that is going to be— make it harder for me to find someone who has those skills. So keep in mind, subbing in very expert industries is not a bad thing because it allows me to reduce the level of skill required for my full-time employees. So just keep that in mind. I don't see 8% as like a huge red flag. I know it's harder sometimes to manage, but sometimes the investment in trying to find these contractors allows you then to unlock a lower skilled employee and finding them becomes easier. Okay, let's keep looking here. So advertising, hardly anything on advertising. You're spending less than 1%, less than 1% on advertising. That's a huge opportunity. I do think now that you have a great looking website, I think what's gonna happen, Zach, is this spring and summer is gonna get really busy, especially if you get address verified on Google. And then after that, you're going to need the next level of growth. And I do think you can spend money on, on advertising to drive traffic to a website that will actually convert now into paying customers. Okay. So you do have depreciation of $47,000 wrapped up in this. So I'm interested. He's a bottom line. You say you have $11,000 based upon this math is like a 4% profit margin, but you do have depreciation typically on a profit and loss statement or EBITDA. Okay. So if we look at what typically constitutes as EBITDA, which is earnings before interest, taxes, depreciation, and amortization. Meaning usually on a profit and loss statement, you don't put depreciation. And so even though this is a non-cash expense because eventually you have to buy more equipment, you don't put depreciation here. Again, this would be something you might give for your tax return, but not something you usually would see here. You got $11,000 for insurance. Very common in tree service. Okay, so you are paying yourself a salary. It looks like $62,000, and then you're paying other people $62,000. So probably like, I'm guessing a climber, or maybe actually it might be people helping you on the lower levels of the tree, and then you are the climber. That's probably what's happening right now. So you're paying yourself about $62,000, paying out in wages about $72,000 when it comes to including taxes. I don't see those as huge red flags. I really believe that right now this inconsistent lead problem is actually causing this climber problem. Like, how in the world is that the case? Because if you look at the 4L framework, which we're going to jump into right now, if I have inconsistent leads, I almost always will have problems with consistent labor. And so you're pointing to me the fact that like right now you're saying I cannot find— I cannot find another climber to replace me. When it comes to the arborist side. So arborist, climber, that is currently a constraint to finding this person. However, what I'm saying is because we have inconsistent leads, you don't have the confidence to go find the right climber because the climbers are out there. I can guarantee it. We're just not willing or able to pay enough because we have inconsistent leads. And so when I look at the 4L framework, I'm usually trying to solve it in that order simply due to the fact that if I solve the lead constraint, Usually it means I can go afford to pay someone more on the labor side and I'll solve that constraint. Okay, we've looked at the finances. In terms of overall, I would give you a solid A in terms of your financial organization. I'm not trying to grade your performance financially. I'm grading the fact that I see really good use of bookkeeping and categorization and very detailed but not over-detailed. You don't have like 500 categories. It all fits on 2 pages. You're looking at every single aspect of the business and keeping track of your expenses. And so that is better than most people. You also are paying yourself a salary and you're keeping track of it on the P&L. Huge plus as well. So if you want a solid profit and loss statement like this in your business, I'd highly recommend checking out Home Service CPA. We do bookkeeping, we do payroll, we do taxes. And if you want to have a monthly reconciled bank account, with your balance sheet and your profit and loss statement and have clear numbers like this to operate from, I highly recommend checking it out. We also have a free course on there so you can learn about taxes. Now let's jump into the 4L Framework. We already kind of started this, but right now we're looking from a liquidity perspective. We're having low profit. Technically speaking, after paying ourselves, we're making like 3 or 4% profit. Not great. Now, when it comes to leads, we have inconsistent leads, but we're also spending, as we found out, less than 1% on ads. I see that as an opportunity to be able to make our lead flow consistent by simply spending money at the right time of year. When it comes to labor, we've already found that only 8% of our revenue is going to contractors. And right now that is seen as a negative, like leaning on these contractors. I think it might actually be the thing that allows us to simplify the amount of skill required for our arborist climber. Right now, finding them has been a pain in the butt. So another constraint. Again, the 4L framework simply outlines the 4 different reasons why every home service business stops growing. Either a lack of liquidity, a lack of leads, a lack of labor, or a lack of leadership. And so when we look at these, they compound because if I don't have enough money, I won't spend money on ads. If I don't spend money on ads, I can't get enough labor. If I don't get enough labor, leadership becomes irrelevant because I don't need anyone to manage. When it comes to leadership, the constraint, though, this is actually a new one. I don't know if I've ever used this before. I want you, Zach, to fall back fall back in love with the business. Business is tough. Entrepreneurship is tough. But the minute that you fall out of love with your business and you don't enjoy the work and you don't love what you do every day, it becomes harder. Will there be times where you have to put your head down and grind through periods where you don't feel like doing the work and you don't love it? Absolutely. But the likelihood of quitting when you are low and when you don't love the business is higher. And so I want you to fall back in love with the business. And in my opinion, you are feeling very, a ton of frustration around the fact that you have low profit, you don't have consistent leads, and then you're really, what it's all bubbling up into is you feel like you can't find a good arborist or a good climber. And I feel like these are actually, this is a downstream effect of having inconsistent lead flow. Inconsistent lead flow is a result of having low profit. So I feel like we can solve this. Let's jump into the 6-week plan to make sure that Zach and Loyal Tree Care can take their business to the next level. First thing I want you to do is set up Google Local Service Ads. This is going to be the very top above native search, above Google Ads is Local Service Ads. And you have to go background check, insurance check. There's a lot of things required to be able to get inside this program, but you're typically going to get leads for the cheapest cost. And so your first dollar spent on advertising going here, usually a good thing. The downside, usually you're not going to spend thousands of dollars a month on local service ads simply because there's not enough of them. But right now, less than 1% of our revenue is going to advertising. And I want the first dollars you spend to be good. So you have a good perception of advertising in general. So I want you to set up LSA and max out the budget. Now you're like, what in the world? That's a big budget. You will probably not spend more than $500 a month simply because the amount of leads there and available are limited. And even if you have a $500 per week budget, it won't spend it all. So max out the budget cuz I can guarantee you when leads show up, you're gonna be getting from a low enough cost. You can make sense of it almost every single time. The second thing I want you to do is set up an Indeed ad, but it's going to be across states. Right now you've probably been loo— looking in your local area for tree care around Eugene, Oregon. Eugene, Oregon's not tiny, but it's not big. Go out about 150 miles and include all of that area for Indeed. Whenever you have a higher paying or skilled position that you can afford to relocate someone, it is almost always better to draw the net wider, make the net wider for the amount of people that you are going after. So if you're going to your local market, yeah, there might only be 5, 10 climbers that are actually capable of doing the service that you need. But if you draw that a lot wider and include the entire state or or 150-mile radius around your city, you will get 100 or 200 capable people that could be employed by you. And you're gonna offer them a relocation bonus. So Indeed ads across state lines, and you're gonna offer a relocation bonus. It could be $2,000, $3,000, $4,000, whatever it is, but you're gonna cast this much wider net 'cause right now you have limited your supply of labor down to this very small area. You can't do this for entry-level technicians typically 'cause you can't spend thousands of dollars to relocate someone that's entry-level, but usually you don't need to because there's enough labor supply in a smaller area to be able to hire entry-level technicians. But when it comes to skilled employees or managers, I'm typically okay with relocation bonuses because I'm able to expand the amount of people, the net going to fish from, much larger. Recently at Augusta, we did a national hiring campaign offering a $3,000 relocation bonus, and we got thousands of people to register for it and apply and then go through a funnel of video applications and get the top 50 people out of thousands of applicants. And it was all done using Indeed, but then keeping the net wide. Highly recommend doing that. Offer the relocation bonus. You can do it because you're looking for skilled employees that are going to have a higher retention and a higher compensation package. The next thing I want you to do is create a recurring offer. This is the kind of arch nemesis of tree services is almost all your work is one time. The best tree companies and the ones that get the best multiples and end up selling usually create recurring offers and you do trimming services. And the reason I want you to focus on this over the course of the next few years, Zach, is because eventually you'll be— you won't need a climber to do your recurring work. This is going to be like an annual trimming. So someone might pay $5,000 for their hazardous tree to be trimmed or cut because it's like overhanging their house. But then you can just be like, hey, you paid $5,000, you're going to need this service every 3 or 4 years. Why don't we go and get you set up for $999 per year? We'll come out, we'll trim everything back. That way you don't have to wait for it to be a hazard again. And it's cheaper in the long run because we don't have to wait for it to be over your house. We can do this much faster. We have videos of your property. Take those videos, attach them to the Field Force mobile app inside of HomeWorks, have the video already inside the customer profile. So then you just give that to your crew. And it doesn't have to be a climber. It doesn't need to be someone highly skilled. It's someone going back and doing these recurring jobs. And at the same time, I don't have to go back to the property because they already have the video inside of HomeWorks and the work is recurring, meaning I have this much more stable base of revenue. Now, this is not going to happen overnight. You're going to need a couple hundred of these people on this recurring service to even make sense of it feeling like it's, it's meaningful. Because right now, so much of your revenue, $300,000 a year, is coming from probably mostly one-time projects. I would love if we get to $100,000 in annual revenue coming from recurring work. That means probably 100 customers that you're going to have to get on some sort of annual package for recurring work. And I'm going to have to figure out when do I sell that upsell to my customers? Do I sell it when they have a $5,000 job? I say, hey, by the way, we have $1,000 annual. Yes, right from the upfront on the estimate, I'm going to try to sell the recurring service. But the best time many times for this type of upsell is to— once the job is complete and they just gave you $5,000 is when you say, oh, by the way, this is a continuity offer. Hey, for $1,000 a year, we can go and do this service. We'll come back every 12 months. And by the way, it's going to save you from paying about $5,000 like you just paid me every 3 to 4 years. It's really a slam dunk offer for the customer, and it allows you to be able to create this annual recurring revenue without needing this really highly skilled person. And so I would love if in a year or 2 years you go out and hire someone that is far cheaper and easier to find with lower skill that can do this recurring work and you'll be really profitable on it. All right. So I want a recurring offer. I want you to figure out when you're going to sell it in the process of the estimate, when it is after the job is completed. Make sure you have videos that you take inside of HomeWorks, attach it to the customer's property. That way in the future, in a year later, I'm not going back to the property. I'm putting that video Inside the Field Force mobile app, my crew is going, seeing the video, knows exactly what to do. That's how you make, make sense of a recurring offer and you create this stability of revenue that even during your offseason you have this money coming in. And what's great about this 12-month offer is you can move the jobs to be in your slower season. I'm not going to do my annual trimming for my recurring customers in the middle of spring rush when the phone's ringing off the hook and jobs are pouring in, or right after a windstorm when I can't get to all of the work that's coming in. I'm going to do it when I need the work and I can put that in my off season. The next thing I want you to do is set up automations to collect Google reviews. Automations, Google reviews. You have some now. I want you to get over 100 and you can set up inside of HomeWorks where every single time that you complete an in-person estimate, ask the customer for a review. Like, why would a customer leave me a review after I just had a meeting with them. I'm going to go out on a limb and say people enjoy talking to you. They enjoy doing the customer walkthrough. They think you're really intelligent and you know your stuff and you're a professional. And if that's the case, send them an automated response, automated review right from HomeWorks. You can set this all up. You'll never think about it again. That after in-person meetings, they get a text message with a link to your Google and just says, hey, could you please review the estimator? And your positive response allows them to be able to get X amount dollar bonus. Right now, you could be the estimator. Down the road, that's gonna be someone else doing your sales and you would give them the bonus. To me, $50, I'm very happy to pay $50 for a 5-star Google review. If you're gonna get 50 of those, that's gonna cost you $2,500. It'll be the best marketing dollars you've ever spent. So I wanna automate this at every point in the sales process. I wanna do it after the estimate is completed, when I met the customer in person. I'm gonna do it after the job is completed. And the customer satisfied, and I'm gonna do it after the recurring visit that I'm gonna hopefully get with an annual basis, I'm gonna also be asking for reviews then. And give your crew the bonus. And if you tell the customer, hey, after the first year's recurring service, hey, if you give us a 5-star review, you give us your review on Google, we give $50 to the crew that was on site. They will do it on behalf, 'cause they love the crew, they love the workers that were there. And if you don't tell them that you're the owner and you're also the estimator, Zach, and you're out meeting customers and right after you leave, they're getting automated text messages asking for a review of the estimator. You will get so many of these Google reviews. So I highly recommend automating this. You can do this all inside HomeWorks in 10 minutes, set these up and never have to think about it again. But every single week be getting these reviews and I want you to respond to them using something like a Gemini or ChatGPT with an SEO-friendly response. 'Cause now with AI, it is looking at Google reviews and the responses to those reviews as very high credibility. All right, the next thing I want you to do is email and text monthly offers to your database. So if you use a CRM like HomeWorks, I want you to send a mass email and a mass text message to all of your customers, especially during your slow season. This is going to solve the biggest problem of all, and that is inconsistent leads. We can get a great website and we will get more leads, but we will get more leads when there's a whole bunch of demand and tons of customers that are needing the service. To be able to get consistent leads, I need to be able to— one that turns on the faucet, and it's going to come in the form of two things: either advertising, spending money on ads, or it's going to come in the form of a quick text or email that you can send to all your customers and fill your schedule. Just last week at my Bellingham shop, we're slow ramping up for spring rush, but it's early February. We sent out a text message for spring cleanups and got 60 accepted jobs. In a matter of 1 week from a text message. And that text message cost us $0 from HomeWorks. And so if you can send a mass text and a mass email monthly to your database, I want you to do that before you spend a dollar on any other advertising. And so I've already told you to go spend money on LSA, but any other advertising doesn't happen until you send a text and an email to all your customers. And all the texts are free inside HomeWorks until July. So you click of a button, you probably have hundreds, if not 1,000 contacts in your database, Zach, over the course of years of doing this, you can immediately have 10, 15 estimates, 5, 10 accepted jobs from people who already have a credit card on file, people who already know, like, and trust you. Why in the world would you go spend money on ads to people who don't know you when there's people who do know you and have given you money in the past? Just market to them and sell more to them. Before you go spend more money on ads, I want you to send an email and text monthly, meaning I want you to go through January, February, March, every single month of the year and ask yourself, What's the offer I could give at this time of the year that people need? What's the service that's seasonal to this month that customers need from me at this time? You're like, I don't know what to sell. Go through your last year and look through all your invoices and see what service was selling the most. There's a good chance that service is in high demand at that time of year. That should be the promotional offer on the text and email that you use on a monthly basis. If you are invoicing at the end of every month, for your recurring services, send that monthly text or email in the middle of the month to be able to make sure you get people to click and respond and get more leads for free. Okay, so number 6 is a bit of a continuum. I'm kinda gonna piece all this stuff together. 'Cause the first thing I need you to do is get leads. We've talked about the website, getting the reviews, a lot of these things go into getting the leads. Then I've talked about hiring one skilled person. So one climber is gonna be the goal and we're gonna cast the net wider using Indeed ads, give them a relocation bonus so they can move over to Eugene. And then I'm going to fill to capacity, meaning you and the other climber, you're gonna get as much work as possible to fill both of your schedules. And once you hit that point, I don't want you to go get another climber. What I want you to do is raise prices because what I want you to do is focus on you and this other climber, probably being able to do $500,000 to $600,000 in annual revenue, but then raise your prices when you hit capacity and both of you are completely booked. Completely filled. And then I want you to stack cash. Again, you're gonna be around $500,000, $600,000 in revenue. You're going to raise prices because now you're going to— all these leads coming in, you now have an ad budget in place. You have leads from local service ads coming in. Your website's firing on all cylinders. You have a whole bunch of Google reviews. You have leads coming from your existing database from HomeWorks that you're sending out these monthly offers to. You're going to fill up. I want you to raise your prices and then you'll be able to stack cash so that you can feel more confident in your growth. And I think that is what unlocks falling back in love with the business and not being stressed out of your mind financially because you have money in the bank. And so get that one climber, use everything we've talked about to fill the leads. And then I don't care if you got to use these subcontractors times a year when it peaks and gets super busy. Don't go get another third person. Don't get another fourth person. Just go use the subcontractors at the time of year when it gets crazy busy because our goal is to sell this recurring service to fill in our off-season and make sure that our cash flow is much more stable. If you want me to come out to your business and fill out this exact same document and turn around your company and get it to the next level, you can do it for free. I'll actually fly out to your location. Just go to MikeAndes.com/Turnaround. The links are in the description. Go check them out and submit like a 5-minute video and apply. And I'd love to see you. I'll come out in person, completely free.