How to Read Your Numbers Like a CEO!

Go ahead.

Okay, I got another.

So I like to over complicate things and I know we talked about KPIs a little bit earlier, like how many KPIs should I be monitoring? Like what are the most important?

Because there's a ton, the ones that you care most about and that's it. So, so which KPIs are you trying to like, are you, what are you trying to optimize? Are you trying to optimize for general manager right now? Are you trying to optimize for profitability? What, what's like the goal of the business?

Well, I'm trying to simplify, but I have the admin and the general manager as like new positions, so I want.

To like, okay, figure those out.

So your goal is to simplify the business for those roles, is that correct? Like by having these incentives, what are you hoping to accomplish or not incentives. By measuring these KPIs, what are you trying to accomplish?

Good question.

I mean this isn't a trick question. This is hard to actually answer. Most people don't.

I gotta think about it. Yeah, yeah, like, I know, like customer acquisition costs, I really want to track that because I don't, I don't know. But like how deep do I dive on that? Do I ask every customer how they heard of us and tie that to the dollar amount I spent on like Facebook ads or Google or, or do I just do like you were just talking about total marketing costs divided by new customers and just keep it like broad level.

Well, I went really generic there because like I, I knew the math was probably. We would get there with the math, but if you're really trying to track it, you're going to have a Facebook pixel. You're going leads, you're going to have your cost per lead. You would then, yes, track where they came from and then if whether or not you close them because not all leads are created equal. So I have a 10% close ratio from Facebook and an 80% close ratio from Google and then I'm going to treat them the same as marketing dollars. Wrong. However, if doing all of that metrics and tracking and math keeps you out of the business full time, when you could just be in the business doing sales, you might actually have a better return just not worrying about it.

That's what I.

Okay, yeah, that's where I'm stuck. It's like, so maybe I'll wait until I get like a salesperson and then really dive deep on.

Yeah, maybe.

I think it makes more sense for me at this stage to just like make more follow up calls.

And here's the thing, you could get an agency to do this for probably 500 or a thousand dollars a month that they do this all the time to manage this.

Right.

And then the question is, can you sell an extra one or two jobs a month instead of worrying about this and just make up the difference that you would otherwise pay? An agency that does this all the.

Time, is an agency you think worth it?

Well, I don't know which agency you're talking about. I don't have any that come to mind that I really enjoy or like that's what I have to figure out myself. However, if, if I was given the response, given the option of either a figuring it myself and spending the time or just paying someone else to do it that has a, does at least an 80% job, then I'd probably just go with 80% so I can focus on my core competency. Because I think you focusing on the business and focusing the general manager and the admin position leads the business doing far greater in profits than five that a hundred dollars, a thousand dollars in management fees, even if they do an 80 decent job.

I was gonna say it's like the 8020 year old. Okay, thank you. That makes a lot of sense. And I'll ask one more question because there's other people, but how much? Like if I'm, there's a guy that's selling his business and he had his accountant tell me that it's like four times EBITDA and I'm like I've bought other businesses and I'm like that just doesn't make sense. Like how do you go about buying other competitors and evaluating their know a price?

Okay, are we, are we talking about how to, how to value or we how, how like are you trying to sell, sell your business? What's, what's the goal in knowing this information?

To buy other businesses locally. Like smaller businesses?

Yeah. So smaller businesses are. The value of those are based upon what you're willing, what people are willing to pay for them because they're not worth anything. They're small businesses that the owner has to work in the business. It is worth exactly the book value, which is assets minus liabilities. Anything in excess of that is simply the goodwill. But they don't have any goodwill. And so the only thing you would otherwise buy from is contacts and contracts. And so you might determine like some, some sort of dollar amount per contact or contract, but outside of that they are worth zero.

Okay, I agree.

They don't have systems. If they don't have systems that can run without the business owner there. There is no enterprise value.

Yeah, that's what. Because that was it. I down the line, if I ever did think to sell, I always just figured it'd be from like some private equity firm and they'd want you to have like all the C suite executives, be like a founder. Like, that's the only time you'd really get a good multiple.

Right.

Just focus on growing to that point. Once you get to that size, that'll tell you exactly. I get too over.

You're good.

You're good, dude. All right. Yeah. You're good. Don, is it das?

Yeah.

How you doing? So basically, I kind want a little bit of guidance. I'm going on year three. We got right up. We did 150, 50k this year. I had a part time and I had a full time during the spring rush, but I let him go after the spring rush just to help us catch up. And then I had two trucks. So basically I got a second truck last year. I owe 11, 000. And the only reason I got a second truck is because the first one was like a 93 and it was a guy very low. You know, I just kind of helped me get by. So I use as a backup truck and then I have about 20k in personal debt and then about 6000 in the bank. And then I did all this with like no website. We have about 70 lawns and then about 50 snow clients. And so I just kind of want to know, like, what kind of the next step, like if you're kind of in my shoes, where as far as like a website, should I get like a va? I know you say I'll talk a lot about like 200000 is like just late or focus on labor. And so that's kind of was like my goal. And I did follow you along with some of your content, so I'm a little bit aware.

Well, good for you. What was last year's like, not 2024, but 2023's revenue?

That was, I want to say. So we did 60. 65, 65,000.

Cool. All right.

Awesome.

Good for you, man.

Good stuff. So are you going full time this coming year? Yes or no? You're full time? You have a full time. I got it.

Okay.

I can be. Okay, Got it.

What is more painful to you, the debt or the fact that you want to grow the business?

Probably the. The debt because it's kind of hinders like growing the business.

Yeah. What's. What's your monthly monthly payments on all the debt like combined is it a thousand bucks a month? Fifteen hundred dollars a month. What's that dollar amount?

Yeah, it's about 12. About 12, 13.

Okay, cool.

Are you married right now?

No, but I am in a relationship.

I'm just joking. Just joking.

Just joking.

Okay, cool. Good to know that that's important. That is actually important because I think that you're wise to think more about the debt than the growth right now. That is a significant amount of debt with a low amount of cash given the fact that you're going to have someone like that in your life. So I would have that conversation with honestly her and make sure she's comfortable because when she signs you are are going to she inherits some of this risk. And so you're running it relatively risky having essentially your debts higher than your, your amount of cash on hand. So there's a level of risk there. And so I would definitely, I would probably default to whatever she feels comfortable with. Honestly.

You've been defaulting risk which is fine. You grew a business, got the truck now let's go. But I think if you spend one year, you get this employee maybe to get to full time status and you can do 200 to 250,000 in annual revenue and make significantly more profits. That's probably the move. Now in terms of website, I would probably not yet get longer web design or a more expensive subscription that even though it's going to look really good, et cetera. We're not trying to optimize for growth. So what I would be saying is we are trying to take our existing customers and we're trying to focus a ton on referrals. We're trying to focus a ton on door knocking, yard signs and door hangers, posting in Facebook groups that are local, whether it be you or your girlfriend or whatever is you can just make a commitment to like we're going to post on Facebook groups every week. We're going to knock on X amount of doors. If you do that, you'll get from 1150 to 250,000 this next year without having to spend a bunch of money on marketing. I don't want to spend any money on marketing because you have more time than you have money right now. And so I assuming that you're okay with a little bit of grind mode. I would take this year and try to cut that debt out as much as possible. Especially the stuff that is personal debt. I just get rid of that as fast as possible and I would do that by putting in the time to get the customers and fill the capacity so you and that, that other employee can go full like full time together. And I think you can do 250 with the current. Just the two of you.

Okay. Okay. Sweet. I appreciate it.

You got it man. Good luck for ya. Jamie, go ahead.

Hi. Yeah, so I've got my own business. It's year five now. I'm 17. I've got about £40,000 in debt so far.

We're just about to get the traders all sort of brought in. We've got all the money to cover everything till March and then we can start obviously earning money again. But we've naturally got nothing left after that. So obviously we're depending makes it quite tight. But we've got 125000 leaflets that I'm putting out in January and February. So it basically costs pennies to get a customer. So we haven't got a massive sort of cost to get those customers. But we're hoping this year I've done 60000 just myself since March but I'm hoping to do quarter of a million next year with myself and four other employees.

But what's costing the most is the insurance for the vehicles because of my age. To get the vans insured that we're using for free vans, it's costing about £10,000 a year for them. Plus my vehicle that I use for quoting is 25,000 a year to ensure that as well. Even though the cost of the vehicle is only 4,000, they're charging 25,000 to ensure that vehicle. So it's costing a lot just to keep sort of everything going. On the insurance side we haven't got a website yet because we've been quoted 2000 for a website. That's for just a basic website but we've got all the equipment, all the mowers, all the trailers, all the vans. Everything is ready. We just need to now get working in March. So we just need to try and get the employees in. And that's another difficult thing to try and find out. Am I ready to use P4P or to keep them on hourly? Do I do sort of zero hour contracts or do I do a salary contract? Just need a bit of guidance of it. Really.

Cool.

So there's, there's one of two problems that's happening right now. One is you have too low of prices. I could be wrong on that. Or it's one of these two things. Or two, we have extreme amounts of inefficiency. Because we have four team members and yourself producing $200,000 in annual revenue. Well, it was 60 this year, but like we're shooting for two hundred and forty, two hundred and fifty.

What's your hourly rate right now?

So we charge 25 pound per hour for myself, so it's just myself at the moment, but next year it'll be 25 pound per employee. We can't charge any more than that because of where we are. Prices are very different to the US to where we are in the UK. It's really difficult to charge any more than 25 pound per hour because people just will not pay.

How much do you have to pay per hour for the labor?

So wages is 15 per hour, minimum is 13 pounds something. So we're paying above minimum to try and get people in. But we struggled last year to try and get people, but that was when I couldn't drive because I was only 16. So now this year I'm driving. Obviously it's so much more expensive to keep all the insurance going.

But yeah, our business Insurance is only £700, which isn't bad, but it's just the vehicles to ensure them that's really costing the most.

Okay, so two things. First off, if what you said is true, I would get out of the business.

Right.

Because if you, if you cannot pay, if you cannot get more than $25 or £25 and you have to pay 15, then your, your cost of goods sold is over 60%.

Just for direct labor, let alone for taxes and everything. You will never make money. Ever, ever make money.

Yeah.

If that's true now, I don't believe that's true because I do know the pricing enough in the UK to know that they, there are customers that will pay more than $25 per pound. And so 25 pounds per hour.

There we go.

Wow.

Okay.

So I do think that something like a rebrand like this is the thing. It's kind of chicken egg, right? I need enough revenue to be able to afford the website, but having the website allows me to charge enough because I have enough brand exposure and the value that customers place on my service is higher. I know that there are people in the UK charging 80 to 90 pounds per hour. Now, that's not the average. It's more like 60, 50 to 60. But there are more than 25. Now, the customers you're talking to that are attracted to your business now are not those people because you don't have the website now, whether or not you page 2000 or whatever, that's inconsequential it's just a matter of having the website. Like, are your trucks painted or do you have the uniforms? Is your, is your logo? When you do your print marketing, when you put out the leaflets, what does the leaf look like? Because if it's cheap, you might get a bunch of leads. This is what was the problem with like a lot of the old material on YouTube when it comes to lawn care is they say, hey, just like it can just be yellow paper with black ink. They're right. You'll get a lot of leads. But is it the type of customer that I want? Because the type of person that will call for that is probably the person that's price sensitive and only willing to pay 25 or 25 pounds an hour. We just will never make money. Never, never, never, never. Like, I need that dollar amount to be under 25% of what I'm paying my employee to what the customer is charging. So if you have to pay 15, I've got to get that above $60. 60 pounds. Yeah. Like, if you're gonna go for this, Jamie, I would say reset your brand. Like, you gotta go into a different echelon of customers. And if you don't have your paint trucks painted, if you don't have uniforms, if you don't have a great logo and great marketing material, if you don't have a great website, you're getting like lower tier customers right now that are just price shopping. Like, it's gonna be very difficult to build this, this business because you are literally like at best have a 5% margin business. So I would just really encourage, like, go ahead.

So the vans are all wrapped, the trailers are wrapped, the everyone's wearing uniform. We've got Facebook, so it's all linked through that. But where we are, it's quite a sort of. There's a lot of money, but not a lot of people pay a lot of money. Like, people won't pay. Really. The price is what we.

What's your close ratio?

We get every job that I put out. I pretty much get every single one.

Okay.

Yes.

Okay. Yeah, yeah. So you can raise your prices dramatically. Dramatically. Oh, yeah, yeah. So, okay. Yeah, yeah. So this is, this is the assignment, Jamie.

All right.

This is the assignment. You're going to raise your prices by at least 50%.

Right.

Okay.

And I need your close ratio to go under 50%.

Right. Okay.

Because then you'll actually make money and then we'll actually know what the, what the market can afford. Because you told me that no one's willing to pay more than 25% but every single estimate you sent is getting accepted. You know why? Because you are extremely cheap. And I know you might say, well what about my competition? It doesn't matter. The customer tells you whether or not your high prices are not and they're screaming to you that you're extremely cheap. Extreme.

Yeah, I mean we don't where we are, we don't really have any competition either. There's the odd one good problem here.

You need to double your prices. You just need to charge way more money. Okay. So I generally mean this like you need to have your close ratio under 50% if you're going to be profit, you're going to try to get the debt down. Like you need to raise your prices. Whatever thought is in your head that is limiting that, which is potentially the fact that you're not the target market and you think it's expensive. The customers are screaming at you that this is. Your prices are too low. So just, just raise your prices. Like it'll solve all of these problems.

Right? Okay, cool.

Last one, Shane. Go ahead.

I appreciate it, Mike. So you, you'll probably know when I go to reference this. I'm in Callahan's group on the, the coaching side there. And so he, they teach the elite methodology or similar to eos, but a little some differences in there. For field admin and GM, what would your big three be for each of those positions?

APIs.

It really depends on what you're trying to optimize for. Like if you're trying to be an absentee owner, the only thing you actually care about is distributable cash. Net free cash flow. And so anyone that is in a management position, I need them thinking about that. And so it, it changes. If you're like doing sales and then you have an operations person and you have an admin person.

Right.

So what Jacob's talking about is a little bit different. How I structure my incentives because he's not an absentee owner. For myself, when I am an absentee owner and have a general manager place, like I'm never there. Therefore I need them to only think about the one thing I care about, which is give me a distribution at the end of the quarter. And so I'm going to massively incentivize that. So it just comes down to like, okay, if your admin person, are you going to give them profit sharing? Do you want to incentivize them based upon their close ratio? Do you incentivize them how many jobs they close over the phone. There's so many different KPIs. So a lot of times if you're going to put people in place of leadership without any restraint, I am simply looking at the end result which is how much profit is in the business. And that's usually going to be a profit sharing position. And so at your size, like if you're going to do say 600,650 and kind of get to like 800, 850 and not optimize for profit, I, you're going to have a general manager going have an admin person. I would probably lean on profit sharing, especially if you're not going to be now if you're going to come in and make decisions in the business, you've got to do different KPIs because now they, you're taking the reins out of their hands in terms of what the profit is. So I know that doesn't give you like an exact core three, but there's like 20. It's just a matter of like what are we trying to optimize for if you're going to be there? I'd probably lean on things like efficiency of the crew for the gm. I'd probably lean on things like their, their amount of budget hours to complete every single week, the amount that they're booked out and their close ratio. And then if I'm looking at internally like in the admin side of things, I'm probably looking at like I'm tracking their efficiency somehow. So like usually as a function of revenue per month, like I'm tracking like how much of my admin, how much, how much is the admin costing me. And I'm trying to give them incentive to essentially work less.

Right.

Because I don't want them just dragging the hours out. And then I'm probably doing something based upon time to lead time, like answer rate, like what percentage of them get picked up during hours and like the time to pick up the phone. Like you could just go down the list of different KPIs, but I'd be doing much more. I'd much rather do profit sharing because it is the output of all of those inputs being done correctly and then it's my job to train them how those inputs impact the bottom.

Yeah, yeah. So I've been using a VA for just answering inbound calls. I do sales admin and then I have one guy who basically, you know, oversees all the guys if they're late, if they're. All the communications go to him and then he filters it to me. So I'll then this year be introducing an admin position and then again just giving him a little more control over the guys and you know, having him giving him some measurables because right now I run most everything remotely. Only just now signed a lease on an office so I can stop going to coffee shops like this and not have all this noise in the background. So, so these are things that will I plan on implementing this year and kind of starting to to work through and continuing to remove myself from the business. Right now I live about 60 miles away from my shop so I'm only in the area a couple days a week or if I'm doing site visits for one time quotes. Otherwise everything else I sell over the phone, I get the inbound call, the EVA takes it, they send me the message, I follow up with them. They get a quote within 30 minutes unless it's a project. Then they get 24 hours before they get that put in hand. So I'll have to be distributing. You know how the sales process between the GM and admin person. I was assuming that GM would do any one time project based. We only do sod mulch and cleanups. So relatively simple. But we're pretty heavy maintenance. You know roughly 90% of our revenue is all maintenance which can be sold over on the admin side. So I was trying to get some ideas of, you know, how to track both of them so they can have clear definitive data if they're doing their job correctly.

Yeah, it's like admin. I'm probably going to be doing it based upon their calls and then something around like time to lead because I just know that's the main thing I basically want to think about is if they're not doing their job, what does that look like? Well they're probably not answering the phone. They're probably waiting a long time to get to the emails and the inbox. Right. For the GM it means they're probably showing up late and they're not like getting their crew out efficiently. And it will just trickle down to the efficiency score. It's like GM's operationally efficiency score is like my number one go to metric. It's my close ratio on the sales side and then it is how far they're booked out in terms of my price flexibility. Cause if I know they're booked out super far and their close ratio is high enough, I know I can now raise prices. And so I'm just trying to triangulate usually between those three of any of those KPIs will do a decent job if you're going to give them more power. The ultimate is profit sharing because it gives big checks and it directly aligns with your incentives instead of them trying to game the system because like your admin specifically, it's very easy to game those three metrics that you start tracking and then other things start falling through the cracks that affect the thing you actually care about, which is profit. And so just be careful with creating perverse incentives because there are so many things that end up trickling down to profitability.

Yeah, yeah, I understand. Yeah, we do use P4P and have all that implemented in there. We'll be switching over to co pilot, which is I'm doing this. We've been with sa, so now we're making this transition over the winter. So like all the efficiency scores have, have been in there. The guys have been pretty, do have been doing pretty decent. We usually don't dip lower than 70% at any point in the year. Winter's really high because we're in Florida. So everything's usually 90 to 100% during this time of the year. So we're gonna be introducing this metric into our team meetings. But I am gonna have to start opening up for our GM or who's going to be the GM for him to start leading these meetings and the data that he'll need for that. And then I have to go and set up this back end admin position because again, I've been doing it remotely just with a VA service. So this isn't, you know, something we'll be, I'll have to implement this year. So I'm just trying to get a base. I'm like, hey, this is your job. This is what I'm doing. Going to tell you if you're in red, green, yellow, how you're standing so it's clear, you know, across the board.

Yeah, yeah, like, you know, hey, look, a great efficiency score covers a multitude of sins for a general manager because it means their crew is happy, they're making good money, it means that we're profitable. And so like I'm, I'm literally looking at like the efficiency. So getting the work done. That's the efficiency score, the getting of the work, how far am I booked out and my close ratio. And then the only other thing I usually am thinking about is like from an admin perspective, am I collecting the money right? So it's like inputs doing the work and then output collecting the money. So if you can guard those three, that's like a good starting point.

Okay.

All Right, Yeah, makes sense.

I.

And as far as like the profit sharing for those positions, it pro. I don't know that it would make sense this year for us, but maybe a year or two for them to really be more heavily incentivized on that since this is more introducing, you know, these positions.

Give them.

Yep.

Give them a scale. So it's like, hey, this year this is what we're doing. As I move out and you take these things off my plate, it's going to move more towards profit sharing. You get a piece of the total piece. But I would make sure that they get as much of the power or control as possible for they get a piece of the pie of the profit. Because otherwise if you're controlling sales, for example, which it doesn't sound like you are because you're just doing recurring. It's a. Based upon a matrix anyways. But if you're controlling sales, they're handicapped in terms of what they can do in terms of pricing, what they can do in terms of close ratio, et cetera. So I'm just usually careful if I'm guarding any part of the business to give them a piece of the props because they are handicapped.

Okay. Yeah, makes sense. I appreciate it.

All right, everyone, I have to go. Thank you for being here. I appreciate it tremendously. Hopefully the goal session was helpful. Again, please share that with other people in your local area. Other members of Copilot not only get them encouraged to join, but also just keeps yourself accountable. And if you get someone local in your market, it is primo. So I love you all. Hope you have a fantastic rest of your weekend. Happy holidays and we'll see you soon. Take care.