Business Bootcamp: David Zoom Call #2

Welcome back to the Mike Andes Podcast where we discuss the ins and outs of owning a small business. If you're new here, the Mike Andes Podcast is all about taking your business to the next level. We're covering season one, Episode two of Business Bootcamp Zoom calls this week. You haven't heard? We've been watching four different home service business owners overcome their challenges and build their business into something great. Part of the whole thing is zoom call check ins that we do with Mike along the way. Mike has tons of great advice for anyone that runs a small business. Here's what we're getting into. We're talking to David from Headband Movers out of Denver, Colorado. David has been dealing with some serious, serious pushback from its employees. Not only that, but hiring new employees and keeping them around is a problem too. This sounds like a work culture problem and we just might be able to fix it. We're going to talk about what open book management and profit sharing can do to get your employees on the same page as you. As always, you can find all this and more over at the Mike Andy's YouTube channel. So let's get into it. This is the second call with David from Headband Movers.

Last week on Business Boot Camp, we talked to David Wagner from Headband Movers, a moving company out in Colorado, and one of the issues he was facing last week was just the overall morale, the employees not showing up, not caring, et cetera. And today on this episode, we're going to talk about Potentially him implementing P2P or pay for performance where he gives them a percentage of the labor revenue instead of an hourly wage. Now what's different is with this Headband moving company, they do charge the customer by the hour, so going faster on the job doesn't really make the company more money. However, we suspect about 30 to 40% of the day from the crew is still spent on non revenue producing tasks like driving to and from jobs, getting coffee in the morning and doing stuff that's not billable hours to the customer. That is where you're going to see a huge waste reduction and an increase in inefficiencies when it comes to implementing paper performance. We talked about the possibility of doing that as well as using P4P as a way the team leads to start recruiting the people who work under them in the field. So again, David, Headband Movers, if you'd like the whole episode of Business Bootcamp, the episode down in the description, the link to that from last week. How's it going?

Good man. How Are you?

Good, good, good. How was the week?

Really slow week really in terms of work coming in?

Yeah, just like was able to.

Middle of the month.

Yeah, just middle of the month, man. So just kept my crew busy with like a lot of promo. They hit probably a hundred different apartment buildings in the Denver area just to make sure they got some hours this week.

Have you started looking at the commercial side of things and seeing if that could potentially fill in this kind of middle of the month?

Yeah. So I'm going to start running some commercial pay per click ads in the Denver area. I'm going to be updating a page on my website that's specifically for commercial moves and then my Google, my business page is going to be offering that service as well.

Now the guys mentioned to me that you were looking at a WeWork. Is there a pretty good size one there? Because that. I thought that was pretty smart since obviously there's going to be a lot of in and out of office is from them.

Yeah, I mean I have, I have a membership, like a Global membership with WeWork. I've been going there for the last three months, ever since I joined the Bunker Labs boot camp. It's something that they did for me.

Do they have something though where you could potentially be someone that helps people move in and out of the offices though?

I don't know. That's, that's something that I could look into. I know that they, they post my services at the local WeWorks and they have my business cards, my flyers and stuff there, but I've never really, really thought about that before.

Yeah, like, I know, I know you talked about last time like trying to find the commercial work side of things which you know, I just kind of look at something like a we work where there's so much in and out because it's, it's short term rentals basically where that could potentially be useful outside of like moving like residential or even commercial. Is there other things that are like ancillary services in your industry that people will do just to keep their guys busy? Sometimes yeah.

Like furniture assembly gigs.

But they just don't like. I wouldn't make a, make much money off of those jobs.

Right.

It would keep busy and it would give them hours. But I wouldn't really make any money off of those jobs.

Packing jobs, which we already do. We started accepting more of those jobs, but that's about it.

The assembly, is that mostly contracted through furniture stores and hardware stores, etc.

Yeah, yeah. The majority of it's from like IKEA.

Or Different furniture stores.

Okay, okay. Yeah, I know. That's like a very cutthroat, low margin business. I've heard that before many times. Just because everyone's willing to do it for cheaper.

Yeah, yeah, it's. It's tough, man. Like, a guy will spend an hour and 45 minutes to assemble a dresser, and the customer, like, you'll be lucky to get $80 from them and then pay my guys 25 an hour a piece. So it's like I'm making 30 bucks off the job.

Right, Gotcha. Okay. And then. So is it pretty much common then? This is kind of what happens. The middle 10 days of the month is just very, very slow for a newer company. Yeah, got it. And then as the company ages, what's sort of the expectation? Is it just that you have more longer standing, you know, longer tenured customers that keep you busy throughout those times?

Yeah, yeah. As the company grows, we just, we get more and more referrals as time goes on. Most customers will stay at their apartment or, or rented a house for two years, maybe three years. So we get a lot of returning customers as time goes on.

Got it.

But moving company, if you're doing everything right, you're like, you're doubling your business every year. Almost.

Got it. Okay. Okay. And so when you're doing the promos, it mostly just really trying to sell the same service, trying to get more of those initial customers in the door then.

Yeah.

Have you thought about doing a flex hours with your guys? Like where. So that way you hire less guys, but then they work say 50 hours for two weeks out of the month and then only say 25 or 30 the other two weeks? Have you thought about doing that very much? I know obviously overtime comes into play, but have you thought about doing that? Just because the alternative is basically paying them to do promotional stuff, which is extremely expensive when you start throwing in wages into that.

Yeah, I haven't considered the flex option, but everybody on the team or in the moving industry understands, like, the middle of the month gets kind of slow. So they, you know, guys really, really work hard the end of the month, the beginning of the month. Um, and all my guys hit overtime in that time, and they kind of look forward to things slowing down in the middle of the month. It's, it's, it's time. So.

Kind of like a flex thing already going on.

Got it. Okay, now it makes sense. All right. And then were we able to talk to them about open book management and kind of show some of the numbers this past week?

Uh, I was able to sit down with my dispatch manager and then put together a game plan for the meeting. Waiting on my cpa, my bookkeeper, to get back to me. They're filing like corporate taxes right now, so they're going to put the books together and have everything ready for me in the next week, week and a half.

And is that. Do you like. So this past week, how was it with the team? I know there was the two of them that were not super bought in. The other four were pretty gung ho. How did that play out this week?

Yeah, so I ended up letting one of the guys go.

And then he's friends with the other guy that I've been having issues with. He actually just sat down in my office the next day and then put in his two weeks. Not got it.

Do you think four guys is going to be sufficient to for now or is it really those end of month of which can be a little bit tight now?

Yeah, it's going to be really tight at the end of the month.

I just hired another guy yesterday, brought him on. He's an experienced mover, but I need to have at least six guys to be able to operate at a profitable level.

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What would you say is like your average turn right like now? Like, how long does someone last? Like two, three weeks? Is it on average or like, you know, two months? Like where are we at? Because I'm kind of trying to think like, is finding employees the best option or do you go more of a 1099 route and try to get guys for like one or two weeks stints?

Usually.

Usually guys stick around for like three months. I mean the sub. The summer was hard, man. I was just hiring all the wrong people and then they, they were just not a fit. They were just not solid employees. They just weren't good people. And those guys maybe lasted two, three weeks.

I would love to go the. The 1099 route. But there's, like, some legal implications if I do that with a moving company here in Colorado, I can't have.

1099 team.

Eventually that's going to catch up to me with the. With the state of Colorado and, you know, potentially jeopardize my moving license.

Okay, that makes sense. Yeah. Okay.

Yeah. Because it's just so difficult. Like, we have. We have this, you know, obviously, spring rush, and then, like, you know, the demand curve goes down in the winter. You almost are having that every single month. Right. And so when you have that seasonality on a monthly basis, it creates even further challenges when it comes to hiring.

And so it's a matter of either, A, you fill in the gaps so they have a little more continuous work, or B, you've got to figure a way to make it profitable for two weeks out of the month and then just limit cost as much as possible for the other two weeks.

And I'm just trying to think of, like, potentially, you try hiring people with the expectation they only work with you for two weeks. How long does it take you to train someone up?

Like, do they just need one day, two days on the job and they're kind of ready to roll, or is this a matter, like, they kind of need two weeks?

Yeah. Like, right away I do, you know, three or four jobs with the guys, and. And then my leads will take over from there. So they don't need a whole lot of training because when they first start, we just have pushing boxes. Right. Or wrapping. Sure. They're not handling the, you know, the very fragile items. You know, they really just got to earn their rank as time goes on. But I train guys pretty quickly.

What if you. Have you thought about trying to do something where you have, like, a team lead for the truck that's the driver and kind of the one that is more experienced that you're going to keep on longer term. They're at a higher percentage. And you actually give a percentage of the revenue from the job to the lead and then a lower percentage to the crew members. My thought on this is if you did that, you could potentially turn your team leads into kind of where they're recruiting because they kind of have their crew underneath them that they have to go find, and they know if they can generate more revenue in a day, they get more revenue themselves because they're getting a percentage of the revenue. Obviously, the challenges with moving, like, with most services, you can't go so fast that you're damaging things. Right. And so you don't want them going Fast. But you're getting paid by the hour anyways. Am I correct on that? Like in terms of your final invoice?

Yeah.

So it's just a matter of like, hey guys, you know, have you ever thought about giving them a percentage of revenue or doing more of a performance based pay instead of just hourly?

Yeah, yeah, I was, I just had that conversation with one of my mentors a couple days back. Eventually just making the entire company in the next four years employee owned. But leading up to that, you know, giving them or giving them more opportunity to make money in the company.

Yeah, well, like, you know, an employee owned business honestly is actually a liability to the employees unless there's consistent profit. Right. So like usually profit sharing programs is a nice intermediate between before doing an employee owned program because an employee owned program, if the company loses money, theoretically if they have equity in it, they're, they're like it's a liability. Right. And so they can be scared by that and rightfully so. But like my thought is, okay, why don't we look at the books when we get them back and see, okay, what percentage of our revenue went towards wages? Let's just say it's 40%. Okay.

Yeah, it's right around 40%.

So let's say, okay, it's 40%. We need, we need to have a healthier margin. Let's give 35% of all revenue to our crew. And how do we break that down? Well, okay, we're going to give 38% of that to the team leads and we're going to have 30% of that to the revenue split to the crew, the guys, the front line guys. Right. So that way it's like, okay, if I have a truck, I'm going to have one or two guys underneath the team lead and they're going to be at a lower percentage of the job. So if the job is, you know, 500 bucks, I'm giving 35% of that away. That is 350. No, that's 200. Like 200 bucks. Something around that that you is set amount is going to go to the employees. And because you're doing by the hour, theoretically they could go slower and make more money. Right. The thing is they have that boss there all the time, which is the customer, to keep them honest. And they're going to want to make sure they do a good job because they are on hourly. It's not like they're going to try to skimp. Right.

I think that'd be really interesting. Not so much from a making more Money perspective, we could take it from 40% to 35. There's obviously margin there for you. And so if they kill it and make more money, that's fine. Like you're, you're okay with it because you know you locked in this 35% and then furthermore, it's a matter of you don't have to be as micromanaging.

Right.

Because you know that team lead is, is busting their butt to make sure their crew stays on task, gets the job done because they're making a really good amount of money if that customer is happy and there isn't issues and they potentially again, like they would try to find employees to work underneath them, potentially inside their friend group.

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Yeah, yeah.

I mean I give, I give my, like I give my leads a lot of autonomy out in the field to, to run things and that's something that I've been doing over the last three months just because I just have too much on my plate in the first place. But if I can incentivize my leads to, to, to be in more control of the job, then I mean I'm all for it.

The thing is like what's kind of unique is that when you're charging your final invoice by the hour, you kind of already have a system like this and that is they're getting an hourly wage. You're charging the customer an hourly wage. Right. I think it just, it shifts in their mind though when they know they're getting a percentage of that. And what that does is cuts out all the, the lollygagging that's not actually producing revenue. So getting to jobs happens way faster. Fueling up breaks, all of that is where you're going to see the increase in profitability because now they are not getting paid for that. They're getting paid for to be on the job site. Yeah, it's not really on the job site where you're going to see the benefit because they already are getting paid by the hour. They're already getting kind of like a quote unquote percentage of what you're charging the customer. It's just the fact that now you're probably going to see your percentage of the day that they're actually working, producing revenue go from I'd imagine around 70% to probably 85 or 90%.

And then how well legit, like logistically, how would that work as far as like reporting earnings or, you know, I use gusto right now to keep track of all that. How would, how would I structure that legally?

Yeah, so basically you're going to have a still a base pay that they are going to sign for and then you basically give them a bonus for anything above that base pay. Okay, so like I can give you all. I'll set you up on P4P software. And what's nice about your model is you can use the simple version of P4P which is you simply are getting a percentage of the labor revenue. It's just straight across the board. It's really, really easy to keep track of. You don't you have to keep track of like budget hours or anything like that? So literally what you would do is they clock into the app every day, then you have a time card and then all you have to do each day is put in how much labor revenue they earned and then it's going to do the math on the back end of splitting that up and you can literally go into each user and if you wanted to give different, like I said, split commissions. So like, okay, a lead gets 38 and someone else gets 30. You could do that all in the user and it would split the money appropriately each day and then they would get a report. So they get emailed report to them saying, hey, great job yesterday. You're 10% more efficient. Here's what you made yesterday, here's what you made on base pay. So again, that's going to be their base pay that they can't make less than. Here's what you made on P4P and that's 30, $40. That starts to become pretty motivating them to stop the waste of like getting there late. All of this other stuff that is slowing down the crew. Like right now, the only thing that keeps them from being late is you getting mad at them. When the crew is getting a percentage of the labor revenue, they will absolutely demolish other employees that make them late to the job because they're sitting in the truck not making any P4P. Right, right. So, again, when what's unique about your model is it not about them doing the job faster? It's the fact that it's all this other garbage that happens around the job that will immediately disappear when they get a percentage of the revenue from the job. And that's why you'll be able to afford to pay more. It's like, man, I'm paying now. All of a sudden, you know, $4 more per hour. It's like, no, the reason you can do that is because they're producing $8 more per hour for the day simply because they're cutting out all this, like, late to the job in the morning, which you can't charge for now, spending 20 minutes at gas stations, which you can't charge for right now. All of that stuff is what would get cut out.

Okay.

Does that kind of make sense?

Yeah. No, yeah, it makes sense. It does.

What I'd recommend doing, David, is just sign up for the trial version of P4P, and without even telling your guys, just run their. Run their time cards each day. It'll take you, like, five minutes, and you'll literally just put in the time that they punch in, the time they punch out, and how much revenue they earn for the day. Run that on the back end, and you're going to very quickly see, because it'll show you the efficiency of each person as well as the whole crew. And I guarantee you, I would imagine your efficiency is around 65% right now, just by changing that to where they're getting a percentage of the revenue when they're on the job, that will go to 85 or 90%, almost guarantee it.

And in terms of reporting in gusto, like I said, when you run the report inside P4P, it'll tell you what they made on their base pay, which is just hourly times, you know, how many hours they clocked, and then what their performance dollars were, which would be the bonus on their paycheck.

Okay.

And what's nice for you is, like, the thing I'd imagine is the pain in the butt for you from a customer service standpoint is damages. Damages are on the table for them. Like their performance dollars are on the table when it comes to damage cases. Right. So that's what makes them slow down and really take their time and do a good job is the fact that they know if they damage someone's, you know, wall and to cost $50 to repair it, that their performance dollars, anything above base pay is on the table for damages.

Okay, I like that.

So like it's very unique to me actually honestly like that I would even think it PvP would be beneficial in your market because you're charging by the hour. And typically most the efficiency gained is the fact that they do the job itself faster. That is not where you're going to see the benefit because you're already charging by the hour. What you're going to see the benefit on is the massive amount of waste that's right now. Not being charged with the customer in the form of guys being late showing up the job late, gas stations, breaks like it goes on and on and you're not, that's not non billable time.

Yeah, yeah.

And then if they, if they're able to make, you know, $4 more per hour, I think your retention will go up too. Uh, so that help is helpful, but it's not about that. Cause what you'll eventually do, once you run the numbers in the back end, you'll see what the efficiency numbers are. And if you do that even for three days, you'll immediately see your highest and lowest performers and you'll see what that percentage efficiency is.

I truly believe like that can go up 20, 30% just by giving them a percentage of the job.

Yeah, yeah. I mean, and if they're more efficient, we could book more jobs.

Right.

Like on the weekend, you know, when we're the busiest there there's teams that I just know that they're not going to be efficient. So they can only do.

And if you don't have enough, you know, too much work, what's going to happen? Instead of needing six guys, you only need four or five. This is what happened when we implemented P4P. We lost some of our crew cause they didn't like the system. We lost two people and the other 12 or 13 wanted it, they embraced it. And we did not have to hire any more people simply because they got more efficient and were able to absorb that extra workload.

Okay. And that's how you're able to afford to pay them more. Right. And that helps retention.

Okay.

So let's try that for this week. Let's give that a shot. Even if you just run the numbers in the back end, don't necessarily pay them. That, that's a, that's a whole conversation you gotta convince them on and all the rest of it. But for now just start the trial and start tracking it. It'll take you like five minutes a day to just see, okay, how much Revenue, they earn time in, time out. That's all you'll have to do for each employee. And then you'll just start to see over time who's the most efficient, who's the least efficient. What is that number? I'm going to guess it's around 60 to 65% and I would almost guarantee it'll jump to 80 plus percent efficiency. And that, that is how many of my minutes in a day that is clocked in are billable to time to the customer. I think that'll go up 30%. I really do.

Okay. Okay. Yeah, I'll run it and you'll just, you'll have the team shoot me over the P4P software?

Yeah, I'll have them create a log. You know what, you can create your logging yourself and just do the one month trial and then we'll extend it.

Okay.

Yep. All right, let's try that out. I want, let's see how that works this week. Just running it on the back end and obviously a little bit slower now, so you should have some time. But then I want to see what those numbers are because I think you'll be kind of shocked at what, how low that number is right now and then what that potentially could be. And you probably already kind of have an idea, honestly, of like how many clocked hours per day versus how many billable hours. Is it around 60, 70%, do you think?

Yeah.

Okay.

Yeah.

So, so, so let's track it for a week and then let's just see if we, you know, what does the number look like for their pay? If we would move that to a percentage based and you can run those all in the software to change the variables and see what they would be paid for otherwise and see if that could potentially help some things.

Okay, cool. Yeah, I think that'll put some things into perspective for me too.

Cool. All right, David, I appreciate it, brother. We'll talk. Yep.

Take care.

Take care.

This has been the Mike Andes podcast. Now you have some ideas on how to take your business to the next level. And if you liked what you heard, we have tons of lectures, interviews, and more over at the Mike Andy's YouTube channel that'll be right up your alley. That's all we have have for you today. We'll see you next time.