BRUTALLY HONEST Advice for EVERY Home Service Business Owner

My name is Mike Andes, and over the past 10 years, I've grown my lawn care business from one location to over 150 around the world with over $50 million in annual revenue. Today, I'm going to be sharing with you the brutally honest advice I would give any home service business owner that's starting their business today.

All right, so the number one thing is to make the business sellable. Now you might actually want to sell your business one day. And, and this is a website called bizbuysell.com and you can see in here there's siding businesses, there's window cleaning businesses, there's electrical businesses, and they're selling anywhere from 400,000, 65,000, $10 million that these home service businesses are actually for sale. However, you might be like, well, I don't ever want to sell my business, but that's not the point. I just want to build the business where it is sellable because you want options. And whatever is going to be higher value when you sell is also going to mean the business is easier to operate and makes more money. So, so how do we do that? First thing is reduce key man risk. So if there's one employee or if you're the only person that knows how to do a specific task in the business, a specific service, or if they got hit by a bus, the business will be completely down the drain. That's a problem. That's a lot of risk associated with specific employees. Or you as the owner, reduce that by creating redundancy, having other people know how to do everyone else's job, or if you're the only one that knows how to do a specific service, train other people up, or create systems and operation guides and standard operating procedures for other people to follow and do that same task. So what you can do is create systems. Now, what is a system? A system is simply creating a repeatable outcome. And so if I want to create a repeatable outcome of getting contracts signed, getting estimates accepted, making customers happy, I need to create a system to make it repeatable every time. There's two ways in my mind that you can make systems. One is simplification and one is standardization. Simplification is just how do I reduce this to the least amount of steps possible and take out complexity? Standardization is how do I do it the same way every single time so I prevent any sort of mistakes from happening. And if I create systems, I create a repeatable outcome. Guess what? It's a more of a sellable asset. I could sell it to an investor. I could sell it to a competitor, or I could keep the business myself and go have a general manager or someone else run the business for me while I'm out in the beach or I retire. Another way I do this is creating more locations where I distribute the management between multiple people. I have general managers and I have a hierarchy of regional managers. This is all done so that I can make the business more sellable. Now keep in mind, if I'm making a business sellable to actually improve the valuation of my business, I'm going to be focused on customers and contracts, buying more trucks and equipment. If I turn $40,000 of cash and turn into $40,000 truck, I haven't improved the value of the business at all. I just took cash and I turned it into metal. If you actually improve the valuation of your business, you're going to focus on generating more revenue, creating a website that generates a ton of leads. You're going to have customers that are constantly coming back to you and buying from you over and over again. And you're going to have a massive recurring database of customers that buy from you every single week, every single month, and over and over and over again. That's where the real value of a business comes when you're trying to sell it. And it makes it where it's more profitable, even if you continue to own it yourself.

Q4 collapse will kill your business. Now, I call it Q4 collapse because typically in home services, the last quarter of the year is the one that you wipe out all of your profit. And for two, three quarters out of the year, spring, summer, fall, everyone's super profitable. Then you hit Q4 and all of a sudden leads dry up, people stop calling you, revenue drops precipitously, and during that time you lose all your profit and you have negative cash flow. Bottom line, having negative cash flow where you actually lose money to stay in business for any month of the year is completely unacceptable. I've seen over the course of hundreds of locations at Augusta and thousands of different businesses and home services that if you take 1/4 of their and loss statement out of their financials, they're usually running a really good profitable business like 20 to 30%. But then you add in one quarter where they're losing 10 or 15 or 20% of profit and they're actually paying money to stay alive and in business. Now all of a sudden they don't have a very profitable business. And that's when you get to single digit profit margins typically in a lot of home service businesses. And so the whole Objective is, how do I fix Q4 collapse when the grass stops growing and the bushes stop growing for me and lawn care and landscaping, I've got to figure out a way to make money for those extra three or four months. Now, at Augusta Lanka, we have five different winter tracks and one of them is Christmas lights. And we've gone ham on Christmas lights. We've invested a lot in actually creating augustalights.com just so that our owners are able to solve the problem of Q4 collapse. And it's a basic service. Look, I already got the truck. I'm showing up in the same truck. We got lights. I'm just plugging them in to the bed here along the driveway. I'm going to do the similar thing on the gutters to be able to get ridge lights for Christmas lights. Now what this does is allows the owners inside of Augusta Nation to be able to sell during October, November and December. December and then take down the lights during January when otherwise those are typically our slowest months of the year. Now, if you don't have Christmas lights, that's fine, but you've got to figure out a season specific service and create season specific offers for your customers. So what we do is we have our mowing customers that we're going to service throughout the entire year, but they don't need mowing and they don't need bush trimming and they don't need mulch during the middle of winter. So we create a season specific service, Christmas lights, and then we create season specific offers for our customers. And so what we're going to do is we're going to create an offer for existing mowing customers and say, hey, look, we can go ahead and install your Christmas lights. Click this one button and we will set up a quote for you. And here's what includes. We can immediately upsell massive amounts of our mowing customers into another season specific service just by making the right offer. I remember when I would save up between 70 and $100,000 of cash when I first started Augusta Lawn Care. And that was basically all my profit for the first half of the year. I would save all of that just to burn through it during winter. And I would keep my guys busy because like, I was like, I can't. There's no way I'm going to be able to go into spring with no experienced crew members. So what did I do? We literally would pressure wash people's houses for free. We'd pressure wash their driveways free. We would give. We literally made cookies and then gave it to our customers and had the crew, like go distribute them. We gave customers free estimates. We went and talked to property managers. A lot of wasted time. And during those winter months, I had a negative profit margin of like negative 10 to negative 20%. I was losing money to stay in business. Off seasons will keep you poor. In home services, you've got to figure out a way how to never have an off season where you're simply switching from the lawn care season to the Christmas light season, or from the lawn care season to snow plowing service season. You've got to have a different service and a different offering to make sure you never have an off season and you never have a single month where you have negative cash flow.

Most people aren't going to enjoy this fact, but the bottom line is usually it takes about three years for you to replace the income that you would otherwise be if you are an employee as a W2. So those three years of pain is why most people will never get through it, because it's very, very difficult. You usually make less money on your business than if you were just getting your old job from the past. So when we look at a calendar, it's probably going to take you three of these bad boys to actually get to the point where you make more money in your business than if you were just at a regular 9 to 5 job. All right, so three of these where you're working and grinding and hustling every single one of these days three times over before you finally actually like, oh, I made more in the business than if I would have just gone and worked my regular 9 to 5. Now let's go to the whiteboard. Now the reason this is super demoralizing is because you're going to look at your profit and loss statement or your P and L and it's going to be like you made $80,000 on the bottom line. And you're like, that's fantastic. But why in the world on my balance sheet do I show from a cash perspective, I only have $20,000? That's horrible. Here's the thing. Your profit and loss statement does not take into account depreciable assets like trucks and equipment. So for example, if in your first year or two, because you're growing really quickly and you're buying a bunch of trucks, and yes, you, these are going to be the best trucks you have ever seen on a whiteboard. Now, if you're buying this truck and this truck is $40,000, you're like, well then doesn't that mean that I'M going to have an expense of $40,000 on your P and L. No, no, no, you aren't, because $40,000 for said truck is a balance sheet item. It is not an expense item. And so what's going to happen is from a cash perspective, you got $40,000 poorer if you paid cash for this truck. However, it is not an expense on the P and L. And that is why so often the times you'll be very, very like, business owners will get disillusioned by the fact they see $80,000 or they see some big number of profit on their P and L, and they're like, why in the world they don't actually see that in the bank account? Like, where is the money going? And it's usually just a matter of you're putting your cash into assets and those assets don't show up as expenses on the P and L. And that's why usually by year three or four, you're not buying trucks and equipment and growing so much. Therefore, you start to actually see this profit and loss. This money starts to actually show up inside your bank account.

When it comes to marketing, we want to make sure we boil the puddle. Instead of trying to boil the ocean and try to market to everybody, I want you to focus on direct response marketing to a very small segment of your target market. So instead of trying to market 50,000 homes, I'm going to select several neighborhoods where I can boil the puddle. In other words, I'm going to get in front of them in every single way possible. I'm going to put door hangers on their door. I'm going to send them every door, direct mail campaigns in the form of postcards. I'm even going to show up at all the intersections that are close to their neighborhood and put yard signs right next to these intersections. So underneath that red sign, the stop sign also, I might even put it across the road there. So when they're parked at the stop sign and they're looking into oncoming traffic, they can actually see my yard sign. I'm going to do that all around my target market. But again, my target market is not my entire city. It's not my entire county. It's not the three counties surrounding me. I'm going to start very, very small. Now, the whole goal in doing this is that we start with direct response marketing. Now, direct response marketing is not the end all, be all. What we really want to achieve is brand awareness. Because when you have a good brand, it reduces your customer acquisition cost because you don't have to spend money in order to get actual new leads. If you have great branding, people just see your trucks and they go to your website and they submit an SM request form. Direct response marketing, though, is different. Direct response marketing is I'm asking the customer to do something. They need to respond. So on my Facebook ad, I'm saying fill out the form. I'm saying click here on my yard sign or door hanger or my every door direct mail campaign with postcards, I'm going to be telling them to go to my website or give me a call. That's what we call direct response marketing. This is how I think about when you start a home service business and scale it up is I'm going to start with direct response marketing to boil the puddle. So I'm going to do the door hangers, I'm going to do the flyers, I'm going to do the postcards and the yard signs. I'm going to do Facebook ads in this area and try to boil this puddle of several neighborhoods, maybe a thousand houses over the course of time. If I get all my customers inside those neighborhoods, this is what's going to happen. My trucks are going to be driving through that property, through that neighborhood every single day. And this actually happened in this market. Where we're standing right now is Blaine Washington. You can look it up. It has like less than 6,000 people that live here. And I started all my marketing. All of Augusta Longer started right here where there's like 6,000 people. And I was able to hit everybody multiple times with every door, direct mail, door hangers, Facebook, Google, really, really easily. Because it's such a small puddle, I was able to boil it. But then what happened is even though I had two or three trucks, we were driving around here all day long in this little one mile radius. And because that people thought we had like tons of trucks because they were. They saw us every single day in their neighborhood, in their community, driving down their streets. And so we eventually achieved brand awareness because people thought we were bigger than we were. They saw our trucks everywhere. And I started to get lead.