Growing into BANKRUPTCY... $3M Business can't get PAID!

No, we need to make more money.

It could have taken us out of business.

Today we're in Pennsylvania visiting Malan from Good Hands Roofing.

And if right now you're doing it hit and miss and it's creating 30% of your leads, we should probably focus on that.

A family owned business that did $1.6 million in revenue last year.

You guys are doing good. You literally are gonna double the business.

But there's a major problem.

They don't know their numbers. We're paying like 12 to 15 grand a month in online stuff.

Do I know the actual return on revenue? I don't.

That's $150 thousand dollars of revenue. So if it's not producing that, we're losing money on it.

In just the first four months of this year, their bank balance dropped by $120,000.

If this continues in this direction, then we're gonna be out of cash real quick.

Everyone's like, I will take checks.

And then they wonder why we have.

$200,000 in outstanding invoices.

According to their reports, more than $278,000 of completed work still hasn't been paid for.

They're robbing from you. It's unethical.

Suddenly people get dementia once they owe us money. This is the business.

Breakth money later is never ever a good idea. I always want the money sooner.

My name is Mike Andes. I'm the founder of Augusta Lawn Care. We have over 170 locations worldwide and I travel the country helping small businesses scale to the next level.

It opens up my mind to the pain points that I've been feeling and how to solve them. So I appreciate that.

Our goal is to give Malan a six week strategy to get the business to $3 million in revenue this year.

Hey, Mike, how are you doing?

Good to see you.

I'm Malin.

Malan.

Yes.

Awesome.

Good stuff.

And then your brother's Melvin, right?

So my name is Malin Fisher. I'm the owner of Good Hands Roofing. Co owners with my brother Melvin Fisher.

Just as we've been growing and God's blessed our business, it's been niching. It's systems and software is putting them in place.

This is a sick shop.

Thank you.

Do you guys own this?

My dad built it for us so.

We rent it from him. Sweet. That's awesome, dude. Do you wanna kinda do a little shop tour? Just show me around a little bit? Yeah.

Last year we really went all in on the business we built in the fall. But you already kind of outgrain It a little bit. Business has been the most harmony experience of my life. It's not easy, but it's tremendous amount of effort and responsibility. But it's, it's a good time at the end of the day. Like, I. I enjoy the responsibilities.

Where were you beforehand?

Just kind of like a little rundown. Probably like one fourth the size of this.

Really?

Wow.

Yeah. So, yeah, you've already outgrown this. Basically.

We got the important things.

Let's go.

Yeah, I got the pull up contest.

Yeah.

I mean, we try to stay organized in here as best we can. Obviously it's not the most cleaned up, but we're working with what we got at the moment.

They have no structure around follow up for invoices. That's like where I currently see the hole. Because on the P and L it has so much in overdues, like $280,000 in invoice work that hasn't been collected.

We do roofing, siding, gutters, softened fascia work on primarily the exterior of the home.

Putting a lot of time, a lot of money, a lot of effort into this now to set it up for my brother and family and like my ultimate go for our employees to be able to be part of the business and if they want to, if they want to buy and you know, pay them well, but also make a profitable business for the owners. Because a lot of businesses out there, you pay the guys well, and then the owner doesn't make anything. And it's just a vicious cycle. Madeline's done a good job with that. He's great with numbers and just the back end of things. Good at setting up Systems.

We have 11 employees and we're looking to go from 1.6 million to 3 million.

Last year was 1.6 million. What are you kind of targeting this year?

So I was thinking, thinking like lofty, gold wise, we could hit 5 million this year. Yes.

For myself, personally, I mean, I would love to. I would like to break a 3. I would like to sell $300,000 in a month. I think 280 is the best. Or 2 last August, but last month we did. Or this month we were at 250. So I'm trying to close some today. And you know, last week they're on.

Pace for 2 million.

They're here.

I want to say they're shooting for three.

Yeah.

But they're on pace for two.

I think we could have. But then during February, we were investing a lot into like a new website, a sales process. I just realized, like, there's just so many different processing systems that we don't have in the business yet to go to that level. If I don't build the foundation of the business, then I'm just going to build a house that's going to crumble down on itself. I'm always someone that if something's not working, then I'm always going to reach out and talk to people and figure out how to make it better.

I don't want to diminish the importance of systems. They're very important. But I think it's such a nebulous term and it's actually used against many home service business owners because it's so nebulous and it seems like so theoretical that you need to like hire a consultant or you need to go like get education or pay for a course to get systems. And you need to unlock these secrets. It's like, look, a system is simply simplification and standardization of a process and is the opposite of complex and custom.

So I think realistically, probably around 3 million this year, which is already, you know, 100% increase, which is good. Like that's phenomenal. But the biggest thing is build something that's sustainable, something that runs without Melvin. I always being hands on.

Earlier this year and even towards the end of last year, I was just running everywhere and meeting with old customers, you know, running some of the scheduling. But Malin coming off the field more has helped a ton.

So your role with Melvin, so is he mostly sales? Yes. Got it. So you think you're more ops?

Ops and then I work in the field. Right.

So you're very hands on operations. Like you're out with the crew.

Yeah.

And is there two crews or one right now?

Technically two only we have like six guys out in the field. Seven with me.

When you see how much money they have in the bank and then realize that four times that is sitting there in accounts receivable. And you just gotta ask yourself, like, what would happen to this business if they could immediately just have all that money in their bank account? Like, oh, they'd be like less stressed out. They'd be able to grow, they'd be able to expand. And then they just go over to the office there?

Yeah, yeah, this is our little office.

We actually bought this and we had.

It at our other shop location and.

Then we moved it here.

Oh, cool.

Alvin, he's in here full time, takes phone calls, manages production, gets like work orders ready for the crew.

Good to meet you, man.

Nice to meet you.

Mike, you hustling over here?

So these Are each of our jobs. I kind of assign each crew. So it's basically Zeke that's doing them. These are our bigger jobs.

About a month booked out then.

Yeah, about like month and a half.

Yeah. Somewhere around there.

Honestly, one thing is to buy everything cash. So we have so far except one of the shingle buggies we bought way back. First one we bought, we bought it with a loan. So we're still paying it off on that. But everything else has been cash. And sometimes that's been stressful and hard. But it's. I think it's, you know, it's the way we want to set up our business is that we don't want to pay a bunch extra in interest. What's up, Mike?

What's up, brother?

I'm Melvin.

Melvin, good to see you.

I'm trying to get 300. These guys motivated me.

265.

We're close.

Not yet.

Okay.

I think she's gonna sign today.

The fact that you can do 280, 300,000amonth in revenue and two months ago do 80 to 90,000 is very scary. That's like a huge seasonal swing this year. The big change in February, like the website starting ads. Did you need that from last year? Do you think it's just gonna go to the next level or what was.

Yeah, I mean the whole thing with.

The website is we had an original one built. It didn't have like any SEO built into it. We have a marketing company that we spend 3,000amonth on. They content create for us and then they also handle our social media.

They also do a ton of marketing for what they're getting. It's not like a great return. Spend $40,000 in the quarter and make about 500,000. Like a 12x return on roofing. You should have higher. So it's 3,000 for that and the 3,000 for the website separate.

But that 3,000 will get up to 6,000 once we're done with the free performance. Because we didn't pay the 18,000 initially.

We did.

We break it out. 3,000amonth.

So basically nine grand. So three grand website stuff. The other six grand is managing the ads but then also creating content.

Yeah.

For every dollar I spend in marketing, I want to be able to make $20 of revenue within the next year. That's like a very general rule of thumb project based work. I'm looking for a 20x multiple on marketing in the first year. And the reason I need a higher return than recurring is with recurring, I can keep them longer from There it.

Was during February, whenever that cash got really low and it was looking like it would continue to go low just because sales were pretty low. Like our sales for February were our break even for as far as revenue produced wise. In February, things got pretty tough, right? Our bank account went from like 160k down to 40k. There was even a job that we had to go back on that we still have like, we'll probably have to pay out like, like 15k to fix it. We had to go back on and fix. Thankfully we were able to fix all the damage. But the amount of cost that it took to fix the job was if it would have gone worse than it did, it could have taken us out of business. All this stuff kind of piled up at one time. And so it's like, okay, if this continues in this direction, then we're gonna be out of cash real quick.

When you see how much money they have in the bank and then realize that four times that is sitting there in accounts receivable, like literally 20% of the revenue sitting in uncollected revenue. And that was what turned a profitable quarter, last quarter for them into a negative profit margin.

I was definitely.

Yeah, anxious about the whole situation.

And then in March, what it jumped to, so 91,000 in February did jump to like 150.

We hit 240 in March and now we hit 250 in April.

Have you heard the 4L framework? Kind of what it is?

The 4L framework is about solving the constraints in growing a business. Liquidity, leads, labor and leadership, in that order. Once you have liquidity or cash, I'm going to turn that into customers or leads using advertising. When I get a bunch of customers, I'm going to need more laborers. Employees actually go do the work in the home service industry. Once I get a bunch of employees or laborers on the field, I need to go get managers or leadership. And that costs more money, causing more pressure on liquidity.

And the business cycle continues from a liquidity perspective. Usually we want to have like a month's worth of revenue to be comfortable. In that case, like we've got like 200 grand in the bank right now. And so when you have 30 or 40, it's certainly difficult. So when I look at the books, there's two things I looked at. One is you got a cash accounting and you have accrual accounting. Cash being when money hits the bank, accrual being when the jobs are done. Big tip off with their financials is the fact that when you look at their cash Accounting, which is money. When does the money hit the bank account versus their accrual accounting? In other words, when the work was completed. It's way different. On one of them they had like a 10% profit margin and the other one they were losing like 10% profit, like negative profit, like $70,000. When you see that difference in a cash accounting versus accrual, you know they don't do a good job collecting the money because you shouldn't have that much of a difference. There shouldn't be the 20% swing when you switch from accounting, accrual and cash accounting unless you have a very, very long time to collect the money. Now on the books right now, like on your balance sheet, there is $278,000 of accounts receivable. But how much in like the real world do you actually have that's outstanding, actually produced? Like, does that sound like a decent number?

Yeah, well, I wouldn't say that much necessarily. I know there was a job that we did like a reframing over the wintertime reframed inside of this wedding venue that burnt down. The guy that was there, he struggled to like pay pay us up. It was a job that we break even on. But then he owed us like 40k.

I just want to see how they're collecting on the money. There's, there's. Because this is an easy fix. If this is simply a function of we don't collect the money fast enough, boys, this is going to be a fast turnaround. There's like four things they need to do. And then the other money, because there's another 100 grand of uncollected is probably just older stuff.

It'd probably be more jobs that paid their deposit. But that revenue is not produced yet.

Got it. Okay, cool. So we're like 150 to 200 maybe of like uncollected.

Yeah, I would say 150.

Usually when we do a turnaround or a business breakthrough, we're trying to talk about each of the four Ls in the framework. However, today we recognize the most important.

Bottleneck in the business and that is liquidity.

They're not collecting money fast enough after a job has been completed.

When I look at the constraint currently, I actually think liquidity is the main thing and that's just money in the bank. Because right now if you had $200,000 in the bank, you would feel a less stress, B, you could continue growing and it not be a huge risk to the business. And so liquidity, I think the biggest opportunity here is Actually, just your collections process. You guys start together, right?

Is it 50?

50, yeah. Good stuff.

Some days, one puts more work in than the other. It really cleans out in the wash. And we work well together. Like, we're best friends. We hang out a lot, play golf. But the biggest thing is you have to respect each other. You have to respect each other and love each other, and you each have a lane, and you each have gifts that the other person doesn't. And it's been a blessing. It's been super, super fun.

We're both gifted in different areas, but the biggest thing is we have a very strong relationship.

You can do more with two brothers than you could with just two friends. It's like two and a half people. So just have to have respect and love and. Nice. You each have gifts, but the other one doesn't. And communication.

It's rare that we come to a turnaround like any sort of. You know, when we come out for a breakthrough or a turnaround. And it's not related to leadership and labor, especially for breakthrough. Because usually the biggest constraint to growth in a business is really just the leader. But I actually don't believe that's the case here. They're capable of building a massive business together.

Evan's a big part too, man. He helps a ton. I felt like a chicken with my head collapsed before he came in. He's huge. I can vouch for him.

They're great owners. Honestly, they're great. Everybody loves working for these guys. And they're just so good together. Honestly, they work really good together.

I appreciate that.

It's better to serve than to create something that serves yourself. So for me, my goal is to hire young men, provide them with a job that provides good income so they can provide well for their families and their children, and build a business that supports not only the customer and the business, but a business that supports the employees.

They're capable of building massive business together. It's simply just coming down to, like. I think they underestimate how much they know, and therefore they pay people to learn stuff. Also, just basic systems, like, collect money. You're not robbing Peter. To pay Paul. Get the money beforehand. We need to get 120 grand in the bank. How far away from now you think?

We're probably like, 60k right now.

It's just like with this size of business, there are fluctuations. You basically have a week's worth of revenue in the bank right now. That's when I look at the business, I'm like, it's not A bad business, it's doing well. It's just simply all the money that they've earned is sitting there ready to be collected and just needs a system around. Like literally 20% of the revenue is sitting in uncollected revenue. Like jobs done have not been charged. That's all your profit. And some unless you're financing charges, you should never, the customer should never owe you money. Right. Like 60,000 on a 240,000amonth business. We're basically a week and the gyrations on a 240,000 month business, like 40 or 50 grand can go like that. I actually don't think that's a horrible thing. Cause you're growing so fast.

We try to move fast. Like we try to identify and react and just move fast. And biggest thing is have faith, not be afraid and just go for it.

You know, I wouldn't take it as like oh I'm doing bad job. It's just simply growth sucks cash. You're growing extremely fast. You're almost gonna double this year in revenue. Like that's awesome. At 23 years.

Accomplished a lot already. And you know, for all the chitter chatter in the comments saying that's a profitable business, it's not anything hard to grow. Okay, well were Yi23 running a 1.6 to 23 million dollar business? Probably not. He's done something right. When you have that much momentum and you have a solid team in place, focus on one thing. And right now that one thing is collections. If he fixes that one thing, he'll have more cash in his pocket. And if he has more cash in his pocket, I happen to believe he'll be able to do a better job running the business, marketing the business, selling, and then ultimately give back to the community, which he cares a lot about. From a quality of life perspective, getting a 120 would be like a big win. I think now the question is how do we do that? And I think there's, there's several things like so collections like people who don't.

Pay right away at the end.

We need to have a process in place.

Now we look at trying to improve.

How much money we collect on overdue invoices.

There's a lot of ways to attack.

It throughout the entire sales process. One is simply like changing the terms and conditions on our estimate. So for example, right now do you charge any fees after say 30 days?

We don't enforce it.

Okay.

The first place I'm going to attack in the sales process is when the customer gets the Estimate I'm gonna have clear terms as to when the payment.

Is due first off. So we kind of create a six week plan. Like how do we actually solve some of these constraints? So payment conditions and terms of payment terms, we're gonna actually enforce them right now. Does it say 30 days is your invoices?

Yeah, yeah, it'll stay on there.

Yeah, man. Like we just can't do that. We are a bank right now. Sometimes what happens is people look at very successful companies and home services and they say, oh, they're doing X. I should do that as well. When reality, they did not grow the business to that size because of that, those tools. So it's like, oh, all these. All the companies around me have brand new trucks. I should get brand new trucks. No, the reason they got brand new trucks is because they are really good at selling and marketing, because they're really good at leading people. They're a great boss. Get good at those things. Like those are the actual skills that build the business business. And then all those other things we just attribute success to, like new trucks or they got the software, they got this tool, they do it this way. It's like that's not necessarily why there's a time value of money. Like, if I can just hold money away from you, I'm making money, you're losing money.

Right.

This is how the banking system is built, is you give me money today and then I will give it back to you in three years from now. But the holding cost is where I make my money. And so you are paying those fees right now. There's no actual fees going for your P and L, but that cash flow churn is what you're feeling right now. And that's why February is so brutal. Because revenue goes down for just a little bit and immediately you get hit. Business is very basic. You simply need leads. You need a team and you need to lead them. And if you do those things, you'll grow a big business. And then if you tack on all this other stuff, people will attribute the success of the business to those things. And that's like a very faulty thing.

We are collecting 30% of a job. We're paying out all the materials, all.

The wages, all this extra stuff, and then we're hoping they pay us.

Right? That's funny you say that because it's kind of how it's been feeling lately anyway.

Yeah, yeah. Cause that's what's been happening. Like your employees aren't gonna wait four weeks.

Your vendors aren't gonna wait four Weeks.

You pay for the materials before the job gets done.

Like, if we were gonna go the next level with him is I would have said we would have talked about how to delay payment to his vendors. Cause if he can figure out a way to pay his vendors every 90 days instead of every 30 days, that gives him more time to collect on the invoices without going negative cash flow. You always want to delay payment to vendors and you want to reduce the am. I should say that it takes for customers to pay you. That's why in COPA we track time to get paid. I never want to have negative cash flow being where I have only collected 30% and I'm paying out 67% of job in material costs, direct labor, etc.

So we're in the hole in every.

Job because different materials cost more than 30%. Like the payment terms on the estimate, I think we need to go seven days overdue. So like after seven days, we start to charge fees. But I do expect that when I do inspection and everything's good, that I collect the final bill.

Really what it is, is my time has been in the sales a lot.

So.

Because usually I would follow up with those customers and kind of keep it all in my head. But now we have to have delegate that, delegate that to office manager or mailing was on the project manager on the job site more just because like if I. If a job gets done on a Friday, my Monday, Tuesday, the following week is already booked out. And so I call. So I'm like, I can't call them and just say, hey, can I do a sales follow up Monday, collect the check? And so then it gets pushed back. So that's what we're working on. We really addressed that and started attacking that last week.

Basically put that out to the customer before the job is sold.

And I think I make it part of the sales process and I think it's a good thing because what you're showing there is like, we need this money to pay our team and we can't be footing the bill. I would change your sales process to actually bake it in. I actually think it's a huge value proposition.

My biggest goal for this year is, is to set up a sales process so that if I get hit by a bus like Mike says, that it would be able to be taken on. You know, what happens when I'm not here. He's gonna fill that role.

People hire you right now because of the higher value. You're not the low cost, like subcontractor out there. Like they want that. So you just like lean into it. Like Melvin is like, hey, like, we have local team. We pay our workers comp. We do our insurance. To do that, we need you to pay as soon as possible. So that's the first part. The next part is, I don't even want seven days.

I want that money as fast as possible now. I don't even want to have to charge any sort of late fees. My goal is to get the money right after the job is completed.

And so the question is, how do we do that? Is we're gonna have either a credit card on file or an ACH on file. So payment on file.

Do you charge credit card fees when customers use credit cards then?

So right now, how do people pay?

They can pay with credit cards. We don't have the fees set up yet. I usually tell them to pay with check.

You're either paying the fees or you're paying in holding costs. Holding costs. Everyone's like, I will take checks. And then they wonder why we have 100, 20, 30, 150, $200,000 in outstanding invoices. And so I would rather eat the fees and raise my prices by 3%. I'm always amazed at how business owners are afraid to A, pay 2 to 3% in process processing fees or B, give a 5 to 10% discount to get the money up front. And yet they're willing to pay the bank 10 to 20% in interest on credit cards and lines of credit that are required to bridge the gap because they don't collect money soon enough. Bonkers.

Right now you're worried about processing fees.

When literally 20% or more of our revenue is sitting wrapped up, just waiting to be collected.

That's true. Yeah, but then do you pass those fees onto the customer then?

I personally just want the money as fast as possible possible.

I don't want to create any friction.

For people giving me money. I guarantee if tomorrow you just went into QuickBooks and it's changed all of your pricing to 5% up, your close ratio would hardly change. It's a 40%. It's pretty good. But what I do know, if you were immediately able to offer credit card processing, your customers would pay faster. And furthermore, they be able to click a button and just pay instead of having to send you a check, which now comes down to, oh, I have my checkbook, I'm out of town, I'll.

Get it to you.

And then that through this cycle of invoices stacking up happens. This is like the ultimate treadmill of every seasonal Business, whether it be home services, whether it be retail, it's like, ah, the next season, we will make it back. Like, if I just make it through the next season, it's like, no, no, like just, just focus on the fact that if we don't collect the money, we will go out of business. It's always is a factor of like, if I just go a little longer, I will get the money. Like, eventually they will pay. And that's true. But by the time that they've paid, you have other invoices that are also overdue. And so you're on this treadmill and constantly like, oh, in a few more months, we'll be fine, we'll be fine. We'll get back to the busy season. And the busy season comes. And then guess what? End of the year you're feeling like.

You have a little bit cash going.

Into another off season where the same thing will happen. So what you could do, because processing fees, if that's a big deal, say, hey, if it's ach on file, no charge. If it's a credit card on file, then you can pay 2% and you.

Will do that beforehand.

We require this before they even start the job job, before they accept estimate. Like when they go to click accept estimate says, fantastic. You will pay deposit and put card on file. I can see the numbers. You guys give money away, like to charity and stuff like that.

10% of all of our profits goes back to local charities. One thing that we're adamant about is giving back to the community.

So, like, we can do more of that if we just do a better job of collecting the money. And the best time to collect money is when the customer is like, yes, I want you guys to do my job job.

It's not the end of the job.

We're like, thank you, that looks great. And now you have no leverage on them. So you're gonna bake in with Melvin on the sales process. He's gonna collect car information and or ach.

I think one of the advantages is I'm one of the owners, I care a lot. And that's one thing that we're trying to learn is how do we incentivize and build so that the next salesperson or the 10 that come after us, after me, what's gonna motivate them to care and go the extra mile?

Yeah, I just don't think it's the current constraint of the business because I believe that if they systematize the way they're doing their marketing, they'll get less Leads, higher quality leads increase their close ratio to 60%. I think they can easily do 3 to 4 million in revenue with just the one salesperson. So that's why I didn't spend any time like how to scale up the sales team and do commissions. You got something that's good, you can double the business without having to figure out that constraint. And so figuring that out at this size is a waste of time, in my opinion. Like, just focus on the current issue issue, which is we don't collect on invoices fast enough so he can have QuickBooks. Here roofer. Here Roofer is we sign everything and then we go over to QuickBooks and they put in their payment information that's stored on file. And the day they walk off that job, you're charging that card or you're charging their ACH.

And the 30% when the job gets.

Sold, we haven't got there yet. I still think it needs to be higher.

Now, right now, Good hands is charging 30% as a deposit or down payment on any invoice. That's more than $250. And I like the fact that they're at least collecting deposits.

We have a deposit threshold already of 250 bucks. I like that.

But we need to increase the percentage to 50%. The reason? Because otherwise we are losing money on every job before we get the money back.

We get 30%, but then we're paying 30 or 40% to materials, another 30 or 40% out to direct labor, and we're actually going in the hole until finally, and hopefully the customer pays us after the job.

On a $10,000 job, you're getting three grand, you're putting six to seven grand into it, and then you're hoping you get the other seven grand. Collecting money later is never, ever a good idea. I always want the money sooner because.

Then I'm going to use that money.

To pay my employees and buy the materials. The direct cost of the job by.

Not getting the money up front with a deposit or not collecting on the money right when the job is done. These are the hidden costs that don't show up on a P and L, but they're costing you money every single day. This leads to a treadmill of cash flow where you're constantly running, trying to get the next job, but you're still falling behind. And the faster you run, the more you fall behind because you're not collecting on the money that you've already earned.

And I can't afford to go 40,000 in the hole before I get the $50,000 at the end of the job. So 50% minimum. Why would we not do that?

I've just seen it being used as a selling point to not have to pay as much money up front versus paying more at the end of the job. That way you can be satisfied with the work. They have a right to be satisfied with what's been done on the project and then pay the rest of them.

But see, here's the thing. If you hadn't grown by 4x year over year and you're on pace to double, I would say that's a problem. Because we need more leads. Leads is not a problem. We're doubling, tripling and quadrupling the size of the business year over year year. I don't see it as a constraint. The constraint is the work that we're doing. We're not collecting the money. When I look at this, the reason this is helpful is because you notice we haven't filled in anything else. Because this is the only problem. The only problem is that we do good work. We have leads, we have good labor. It's really solid team and a really good leadership team.

We just don't collect the money once we've made it.

Right.

I thought that was our least problem.

No, no. Money is important. Money is important.

You know, when I took a look at our business, I thought this was our least pain point. But it turns out that in order for us to scale, it is our most pain point. I have no idea. But because Mike came out here and were so generous with your time, like I've been able to see that. So I'm very grateful to you guys for that.

I think you separate yourself from the competition though, when you have these sort of requirements. The reason we do all this is because the people showing up on your jobs and working your property are fully insured, they're fully licensed, everything's good to go.

And just include that in sales process.

It seems way more legit when I require this stuff. That's why big companies have big contracts. If someone else, let's just say a customer is like, well, so and so is like willing to do it. Just get the job started. Well, first off, I don't want a customer that is even comparing based on like potentially not having to pay. I want a customer that trusts us and if we haven't built that trust for them to pay me a deposit, I haven't done my job.

Like we have to focus on the sales process of selling good hands, roofing and the value compared to the other guy. If we do that correctly, this all makes a lot of sense.

And that was a big paradigm shift for me, was realizing that customers don't just buy based on price. I used to think that was the reason customers buy, but they don't and it's that. And also the lowest price person is generally going to get out of business or isn't going to make any money.

It's not gonna have a profitable business.

I would just change your deposit threshold to 50%. That would be 20% of your revenue in your bank account. So like 20%, that'd be an extra 30 to 40 grand right now in your bank if we would have just had that one thing different a few months ago.

Yeah, that makes sense. I see see where you're coming from now. And you need something to separate yourself from every other, whether it's a lawn care company, a roofing company, you need something to separate yourself. The pack. Especially in today's information age, we see everything a lot more deeper now. Like you see so many more roofing companies simply because of the social media age. And everyone's on social media that has a roofing company.

So we're going to change the payment terms, we're going to get payment on file and we're going to charge at least 50% down. I would also offer a paid in full discount.

In the perfect world, every single one time project would be paid in full, 100% because before the job even takes place. But a lot of times home service business owners, we're concerned by the fact that if we require that and we make it mandatory that we will lose out on jobs. And you could be right. But what if you could give them the option to pay in full when they had a $15,000 job, you required.

50% down, but you gave them the.

Option to pay in full. And you might even give them a discount if they were to pay 100% of the job before it even got on the books.

Now, you all don't have a ton of recurring customers kind of coming back to you, but there are people that know like and trust you. They've seen your stuff online, they've seen your website, they Trust you guys. 10% off if you pay us up front.

15% is a good profit margin for the roofing. And so I would prefer maybe to do 5% off if you paint full given a discount.

Like if you're able to say $1,000.

Off of your roof because you paid.

In full, that might be of importance to someone. This is also, I use it. Someone says, hey, we're really watching the budget. Like, we really like. Can you guys squeeze this down at all? Well, you know what, Mr. Jones, we do have another discount. If you pay the whole thing in front, then you do get 5% off, saves an extra thousand dollars. So I actually use as a sales tactic to bring the price down. We're launching this feature at Co Pilot called Paid in Full. Every single estimate, they just have the option of paying the whole thing up front instead of paying a deposit only. And you get like 25% of people to just pay the whole invoice up front without doing any payment terms.

Would you lead with this one then?

No, no, I would leave that in my back pocket for price sensitive.

Okay, I like that. That's. That's a good call.

I would also say I'd probably put.

Another one in my back pocket for.

Seasonality because you have such a massive ramp from February, March and April, like 90,000 to 200 something thousand. We have a seasonal problem. And so the other thing, if someone's like, I can't afford that, no worries, we can save more. If you're willing to wait eight months to the job in the middle of our offseason, I am willing to go and have the cost. If someone's willing to reduce the scope of work, pay me up front eight months in advance, and I do the job in eight months in the middle of my off season. Honestly, the vast majority of home service business owners, including myself, don't really like to ask for money. What we like to do is use the office of the admin person as a scapegoat and say, like, yes, the office will take care of the money. Like, I'm just here to do the work. The office will get the money from you. Versus just being, like, setting the expectation that it's part of the process. And that is like, we get the deposit, we lock you in, the office gets you on the schedule. When we do the walkthrough, we collect the rest of the payment. And I know that's not comfortable, but it's the difference between growing the business this year to 3 million for him versus having to keep it at 2 million simply because he cannot afford the massive cash flow gap that's being caused by not collecting money up front. And so I would really craft with Melvin. Like, when someone comes down to the end and I give them a price, if they're not happy with it, I can move. But there's three ways I get to move.

I like that. I like that a lot.

There is no word World in which you would rather have money later than sooner. None, zilch, nada. This is why in Copilot when we roll, when we make the feature, all new members to COPA will have it defaulted on to where every single customer just sees the option of paying in full. Like you would be shocked at how many people would rather pay the whole bill up front than wait after the job and you get like 25 of people to just pay the whole invoice up front without doing any payment terms. Last thing we do is automate collections.

Now let's assume for a moment that Good Hands doesn't collect a deposit. They don't collect the money right when the job is completed and they don't get a card on file or a bank account on file to charge the customer if things go awry. They've got to at least have an automated system for collecting on that invoice after the job is done. With texts, emails and phone calls going to the customer. Day one, day three, day five, I'm going to harass that customer until they pay me because until they have their robbing from me and it's costing me money every single day.

Now, because we have our payment terms ironed out because we have credit cards on file, this shouldn't really happen much and that is customers not paying. But we do need to create some of our automated follow up texts and emails going out to the customer. I'm doing one, day three, day five, day seven, day you can do it as much as you want. I will harass the person who pay me. They're robbing from you until they give you the money.

Now in any CRM or software system that you're using, you should be able to able to set this up. For example, inside Copilot, I'm going to create after one day a text message. Day three, I'm going to send them a phone call. After day five, I'm going to send them an email. I'm going to keep following up with the customer until they pay me. And in every one of those messages there's going to be a link to the invoice to get payment right away. But again, all of that shouldn't be happening because we should have collected a bigger deposit. We should have collected the invoice right when the job was done and we should have got a card on file or ach just in case that didn't happen.

Again, we are trying to to avoid this by all this other stuff, card on file, payment terms, the fee stacking up after seven days Painful discounts. Deposit threshold being higher, like, all of this should prevent this from happening. But this is your last line of defense, and that is like, we need to collect the money.

That's funny, because.

You'Re not gonna like this one. But last week we just, like, finished up with, like, 70k job, and you paid 30% down. So it was, I think it was like, around 40k, 42k. So I said, hey, I'm gonna call you up. Can I do the job inspection now? He's like, yeah, go ahead. And so I did the final walk through, and he's like, oh, are you guys gonna come back up for the check, or do you want us to? How do you want to do it? And I was like, oh, don't worry about it.

No, the office will send that dealer.

Stop.

No, we need to make more money. We need to collect every dollar possible. Okay.

Final inspection equals money in pocket.

So we're going to completely avoid overdue invoices by attacking three distinct areas. First, during the estimate process, I'm collecting a larger deposit. Then at the job being done, the inspection, the walkthrough with the customer, I'm collecting all of the invoice. And if all else fails, I'm going to have a card on file. The third part, a card on file or an ach bank account on file to be able to charge the customer. I should never have an invoice overdue by more than seven days. I would really look at your sales.

Process and your inspection process as that is when we collect money, no job walkthrough or inspection happens without money going into your pocket.

And also would be probably good for us to schedule those job walkthroughs as soon as possible.

Yes.

Oh, it's like, within 24 hours. Because the longer that sits, the more they're going to come up with all these random little things. Once you've solved the problem, all the materials that all the direct costs have been spent. That is not when I want to be collecting money. Like, anytime after that. All bad news. They're like, oh, that one shingle looks off. Oh. And then all of a sudden, it's.

Like, oh, no, you did a horrible job.

And then you have all the leverage.

Inch because 70% of the job sitting there and $42,000 against you, they're robbing from you.

It's unethical. And we will sit on that property, and we'll just sit there and be.

Like, yo, you got to pay us.

And if you're not, I have a credit card. I'M gonna go ding it right now.

Right.

And that's also gonna look a lot cleaner than. Than on our cash basis accounting.

It'll line up perfectly.

Right.

It'll be beautiful.

Cash accounting will be ahead because we collect money faster.

Right?

Right. But then our accrual. The moment we finish the job, we're getting paid.

I mean, this is really cool.

Like.

Opens up my mind to a lot of the pain points that I've been feeling and how to solve them. So I appreciate that. I think one question would be, how do you, like, build systems and processes and SOPs inside of a business?

So this is another thing that I words that people use to sell fancy things. Unfortunately, we have a whole bunch of people wanting to sell system and process and checklists and procedures and SOPs as if it's a magic sauce, when all that is is, hmm, does this simplify this process?

Does this standardize this process? Ah, let's create a script.

All that script is is a standardized way of doing X. Right. Systems and Process SOPs. I agree. It should be done. I like to think of it like this. I think like this. Like, look, how do we create a place in which systems occur? Right? So there is two ways of doing something. Either the simple way, or we can do things the complex way. Okay, there's two ways to do a job. One is a standard way.

The other way is custom.

Boom. We want to live right here. Simple, standardized services. Now, what you talked about is very true. Like, you're pruning things that you, hey, we're growing the business. Why? Because as you scale, simple will work better. Standardized work better. When you start doing every job is custom and every job is. Is complex. You live in the land of treadmill operator. You have to be on every single job site. Every single job site goes wrong. There's mistakes made on all the time. You do not want to be living over here. So instead of like, like getting all focused on paying a bunch of money and, like, feeling inadequate, that's what I hate the most. Like, I hate the fact that, like, we just talk to someone that runs a $2 million business and feels inadequate to, like, run their business, do marketing and hiring when they are fully capable of learning this eight hours on YouTube. I just don't like the nebulous terms of systems and SOPs. It makes everyone feel inadequate to be able to run their business when reality, all it is, is simplification and standardization, and it is avoiding complex and custom, period. So in my opinion, instead of saying, how do I systemize the business. I say, how do I create simple everything and standardize everything? And by doing that, I create a system. Because if you standardize the way you answer the phone, you create a system. If you standardize the way you do invoicing, the way you do your sales process at the Melvin, that's a system. We just call these SOPs. It's like you just standardized it. We do it the same way every single time. That's what standardized means. Simple standardized.

If you just live in this world.

You will create systems by osmosis.

So anything that's complex, anything that only you can do. Bad news. Anything custom. Where every single job is different. Every single. We need different types of equipment. Equipment.

Every single.

Just get rid of it. That's what you're already doing as you begin to grow. The first thing we get to a customer's job. Brand new customer interested in a new roof. What's the first thing you're doing?

Do a full roof inspection.

Great. Number two, what's the next thing we're doing?

We have like an inspection checklist on company cam. And then from there we go and create the estimate in roofer.

Okay. And is that in like the truck? And then you go back in the house.

Yeah.

Yes. Got it. So then I'm gonna say we're gonna do price. And then I'm going to assume we present that price to the customer. Yes.

Right.

So then we're gonna do presentation inspection. They're going in their truck for 20 minutes and they're coughing back in.

Yes.

Great. Okay. So he's printing out some pictures. He's showing that he's, I'm assuming, showing pricing information. Okay.

Showing different products that we have and then trying to. The goal is to get a close on the spot.

Go close.

And payment.

Yeah.

Let's go.

Five things.

There's your simple standardized process for every single sales. Sales call. Right now the presentation part sounds like it's going to be improve a software.

Yes.

Great. But now there's five things that he's going to work through every single time. And then what I would do is I would do a. A recon on every single estimate, especially big ones or however you want to figure this out. Where do we lose this job? Do we lose it in the inspection? Do we lose it in the price? Do we lose in the presentation? Do we lose in the close or do you lose it in payment? Then you're going to find out. Because right now this is what you're thinking. You're thinking close ratio, 40%. I look at it as I lost 5% here, I lost 10% here, I lost 4% there. I lost 8% there, I lost 6% there. I want to know that because right now you are assuming that if we change payment terms we're gonna lose more customers. I don't believe that's gonna happen. I think you have less than 1%. That would be a problem. You're losing it up here. And honestly like what I did with.

Him with like the sales process, he made the sales process. I asked so what's the next step? And what's the next step?

And what's the next step?

That's all I did.

And so some people just need to.

Sit down with ChatGPT and YouTube for about eight hours and they'd figure out.

Out most of these problems. And they're capable. Like yeah, they're fully capable.

They're more capable than a lot of.

The people that tell them about the systems and processes. Like just because you can use ChatGPT better than someone else doesn't mean anything. Liquidity all is the only thing I care about. We need 100,000, $120,000 in the bank. We need to work on the collections process. That collections process is all the six week plan. The rest of it I'm talking about not even putting the six week plan.

Because I don't think it's actually the.

Bottlenecks of the business. I think it's, you fix this, the business can, can grow and it won't be as stressful.

I have the little chart here with me.

A couple days after you guys left, I would say maybe a week or two after you left, I was going over the bank account and on paper we were of course like pretty profitable. But then I looked at the bank account and our checking account went from like 100k all the way down to like 11,000. And in like the matter of like.

Three days, it was just like a.

That light bulb moment of okay, now I know this is what Mike is talking about. It just opened my eyes to see it a little bit more from Premier's perspective.

So we, we updated our payment terms.

50 deposit down, rest of the job due upon job completion. Deposit threshold of 50 paid in full discount. We didn't do that one much yet. That hasn't been, we haven't seen too many objections as of now as far as price automating, collections business has been going very good.

Like we had our record month in.

Sales in April and we're hoping for another record here in May. I think our goal was to do.

Like over 200k in, in April.

And then we ended up doing like 340k as far as getting money in the bank, like getting the money off of what people owe us, Even cleaning up the accrual based accounting as well. Yeah, we've definitely been able to do a better job of it. So as of now, I end up checking and saving. If we combine the two we are currently at. Wow, what a blessing. I didn't even know we were at this much, but we're at 130 plus. Dang, that's crazy, man. Like 180,000 right now.

Yeah, so that was like. Yeah, that's a good feeling, man.

That's a really good feeling because recently.

After you guys left, one of our.

Trucks broke down or a tree fell on one of our vans during a storm. One of our trucks blew a transmission line. We had like some extra money in the bank that helped us go out and buy a new van and really not see it a big stress on the bank account because we were able to collect on money ahead of time and also collect all money that was actually owed to us. The thing about Mike and your guys teaching really that I really appreciate is Mike is such a down to earth guy and the way that he cared about us, about our business, mentored us and the way your whole team, dude, really yourself, that meant so much to me. It finally settled in my spirit that like, okay, wow, I'm running an actual business. And the way Mike was so encouraging to me and then it also showed the guys on my team that we care about improving the business and this isn't just something I'm experimenting with. Like I'm serious about this and yeah, like really lit a fire underneath our whole team. So man, I'm just super thankful for that.

Thank you so much, man.

What's like one piece of advice that you'd give me to.

Have ton of respect for what you've done and accomplished? Yeah, so inspiring to me.

But if you were to talk to somebody in my shoes or look at your own self, like that's one piece of advice that you give to just.

Focus on one thing at a time. Like I know like right now like you come to this, just it's all beating the dead horse of collections. But like that is the current constraint. It's easy to get like, oh, I got to do like the leads thing and a website thing. I got to do like all this. Just focus on one thing. And if you do that, like and fix one thing every two, three months in the business, you'll crush it. And then, like, time will go on. Like, you'll focus on other aspects of life, too. Right? So, like, family and stuff, like, yeah, I focus on this for a bit. That's fine. So no question.

I think taking it a day at a time. And one. One piece of advice that I got from you guys was just to take it one thing at a time and one step at a time. And really, like, steering well what we've been given. And how can I max out every area of my business before I try anything else new? Like, I would say that's the biggest focus. And then whatever comes next is just a result of the input that we've put into the business.