I Stopped Doing and Started Leading (How I Left the Truck)

In this video, I'm going to walk you through the 3 stages that every home service business owner must go through as a leader to take their business from $0 to $3 million in annual revenue. And if you've hit an obstacle or a roadblock from $0 to $3 million in annual revenue, you're going to figure out exactly why and what you can do to overcome that hurdle. Now, to recap, when it comes to the 4L framework, we have 4 reasons why every home service business stops growing. It's either a lack of liquidity, a lack of leads, a lack of labor, or a lack of leadership. Now, I have found that most people think they have a problem with leads because they think if they got more customers, they got more leads, that everything would become better. Maybe I'll grow the business, maybe I'll have more money. The thing is, for the vast majority of home service businesses that I interact with, getting more leads actually just causes so much problems for them because they don't have good pricing. And so getting more leads, they just lose more money. They have worse off-season problems. They'd have less money during the winter. They'd have all sorts of cash flow problems because they have problems with liquidity. And if you get a bunch of leads and they don't know how to hire, retain, onboard, do one-on-ones, train their team, labor is a huge problem. It just compounds the issue. And if they get a whole bunch of leads, they just have a leadership problem because now they gotta go find general managers and operations manager an office manager, and they don't have the skills to find that leadership, or no one wants to work for them as a mid-level manager. And so many times getting more leads just compounds the problems in the business. And the real constraint to growth is always one of these, and that's leadership. When I do the Turnaround Show or when I talk about on this channel, when I talk about making more money, price increases, when I talk about advertising, getting more customers, getting more leads, when I talk about hiring, Everyone loves talking about these 3 things 'cause they think that's where the constraint of their business is. Newsflash, every business, in a small business where there's the leader or the owner of the business, is constrained by the leadership of the organization, and that is you. And so I have broken it down into 3 different stages of leadership that a business owner needs to go through because you might be saying, well, okay, great, the constraint is me. Okay, what do I do to fix it? I think there are 3 different stages in every home service business. First, I'm going to do the work. This is usually going to be used as a solo operator and you're doing the work. You're actually out there pushing a lawn mower, trimming bushes, installing mulch, pounding nails into a roof, whatever it might be. Then the next skill as a leader you have to figure out is teaching it. And this is where you're going to have technicians underneath you doing the work. So no longer are you doing the work, you're teaching other people how to do the work. And then continuing to the third level, we have lead. These are the three different stages of business for any business that's going from $0 to $3 million. And I kind of like to look at the role of the owner. If we took it into more common language, what's the role of the owner? Well, when you're doing the work, you're really a laborer. And I see this, I also call this in the book, a solo operator. All right, so solo operator. You are doing the work. You will be rewarded for doing more work. You will be rewarded for having more labor, doing more labor, getting more budget hours completed, more revenue for the business. You do the work and usually you're a solo operator. Now, as you begin to grow the business, and I'll just add this as a caveat, the stress that you're going to have at this size of business is going to be physical stress. That's the stress that you're going to feel because every single day you're doing so much work, you have tons of labor as a solo operator, and physically you're worn out and you're just thinking, man, if I could just get more leads, everything would be better. If I could just grow the business, I wouldn't have to be out on the truck. I wouldn't have to be having all this physical stress. And you're right. As you begin to grow the business, that stress does change, but it doesn't go away. Because as you begin to grow and you get employees, now your whole objective as the leader of the organization and the skill you have to figure out is teaching your skill. So if back here I mowed grass, doing the work, now I have to teach other people how to mow grass. And this is where solo operators usually fall apart. Because they're so good at doing the work, but when it comes to teaching other people, they get frustrated, they don't have the systems to train people to make sure that there's good quality work, they're not good at teaching. And so they, many times, you'll see them in the Facebook group or in the comments quite often, always just vouch for being a solo operator. Most of the time they do not have the skill to teach anyone how to do the work. So what are they doing? They're stuck in the do loop. They're stuck as a laborer and they're stuck as a solo operator and they're stuck with physical stress. Now, I'm not saying that's where you should always migrate out of that, but this is a feature and not a bug of this stage of business. Now, as we continue to grow, 'cause everyone wants to grow and it's gonna become better if I just get more leads, if I just grow the business, let's see what happens. Well, now as you're teaching, the role that you really play in the business is that of a manager. 'Cause you're managing all of the employees that you're teaching. You're managing all the people that are doing the work because you've moved into being a manager. A lot of times when we look at the revenue ranges, this is usually going to be between, let's just call it $0 to $250,000 in annual revenue. That's as a laborer. As a manager, this is usually $250K all the way up to about $1.5 million in annual revenue. So until you get to $1.5 million, Usually the skill you're trying to figure out is management. You're trying to figure out how to teach other people how to do the work. And this is where delegation is a big deal because you're constantly trying to take what you're doing and teach it to someone else so they can do it. You are therefore a manager of those people and usually you're between $250,000 in annual revenue when you start getting your first couple employees and $1.5 million in annual revenue. At this stage, I like to think of you as what I call inside the book, a working GM all the way to a full-time GM. 'Cause at $1.5 million in annual revenue, you're out off the truck, right? You're not actually doing any of the work, but this working GM could be at like $300,000, $400,000, $500,000 in annual revenue. You're still teaching, but you're also still doing some of the work. And so this is a continuum as you grow the business substantially from $250,000 to $1.5, that you're gonna move from a working GM to a full-time GM, where once you get to this 1.5, you are off the truck. You're not doing any work. You're completely out of the stage and you've moved on. 100% of your time is on this side of the equation. You're either teaching or you're leading. Now, everyone always wants to grow their business, but the physical stress that you had as a solo operator now just moves into financial stress at this stage of business. So you're teaching people, you're managing them, you're between $250,000 in annual revenue, $1.5 million in revenue. As you grow through that continuum, you're moving from a working GM, which is out in the field with your team, leading by example, producing labor revenue. As time goes on and you merge this $1.5 million, you're now full-time off the truck, but you have financial stress. Why? Because as you go through this stage, you are producing less revenue. You are doing less work. You're spending more of your time teaching and you're starting to migrate towards leading the team. And when you do that, you're not producing labor revenue and therefore, the most skilled, most experienced, most efficient team member, you, is no longer actually making money for the business, but rather you are an overhead expense. You turn from a revenue generator for the business to a cost center because you're overhead. You don't produce revenue. You're no longer doing the work, and you'll probably have to get an office manager, maybe even at 1.5, an operations manager. These are all overhead positions that reduce your profit margins. Because over here, although you had physical stress, you were making 70%, 80% profit margins. Every dollar you made, 70% of it went in your pocket. 'Cause you didn't have a lot of expenses. You didn't have employees and insurance and a shop space and an office person, none of that. As you grow the business though, your margins go from 70% all the way down to 10%, 15%, 20% profit margins, and you have financial stress. This is where a lot of times people stall out simply because they don't raise their prices, they don't make enough money, they run out of cash, they go bankrupt because the financial stress that this incurs. All right, so I'm actually out on a turnaround show watching the video and I wanna just make this point here. This is why I talk so much about budget hours versus actual hours, even measuring that when you are a solo operator. Because when you hire your first few employees, if you know if you're actually making money on every job, it's so much easier to be able to scale when you have this drop in profit margin but your revenue's going through the roof. And so a lot of times people don't track budget hours, they don't track actual hours, and they don't know if they make money on all their jobs. And so what happens is they hire employees, and so now that 70% drops way down and they get— they freak out because they don't know if they're making money on every single project or if they're losing money. As they hire more people, it feels like they're actually losing money on their business. And so this is why inside of HomeWorks, on every single page, every single visit, the calendar, the dispatch board, we're always tracking budget hours and we're tracking the capacity of budget hours for our crew to make sure we don't overbook them. So go check out HomeWorks, use the functionality around budget hours in the calendar. In the week view, you can see the recurring budget hours versus the one-time project hours. It's super useful. Go check it out. All right. Back to the video. What's the next level? The next level is that you lead. This is where you have to go find people that will teach the people that do the work. So the laborers, the technicians out in the field are taught by your managers and you are now the leader of the organization. And I consider this role The architect role. Now, an architect steps outside of the building. They're not doing the work. They're not even managing the people that are doing the work. The architect steps away from the building and looks for stresses, areas of weakness in the building. They look at the blueprints, they look at the systems, they look at the projections. They're looking to the future of where the building is going. They're making sure the foundation is laid right. They're checking in on the metrics and the numbers, but they're not doing the work. They're not managing the people that are doing the work. They're simply standing outside of the building and making sure that everyone has what they need. They're ordering the materials to get on jobs on the construction site. They're making sure that the other vendors, the permits are in place. They're making sure everything is being done right, orchestrating it, but they're not doing the work or managing it. They have hired managers to be able to run the business. This is usually when you are above $1.5 million. So I'm just gonna say $1.5 million plus. 'Cause this is really an ongoing thing where you lead. And it is a very different skill to do the work than to teach the work. And that's why many people stay solo. It's very different, this is the part I really want to focus on today. It is a very different skill to lead your team than it is to teach your technicians. And so this skill of leading leaders is what keeps a lot of people from growing beyond 1.5. Or if they grow past 1.5, they're juggling everything. It's very stressful. There's low margins. There's lots of churn at the mid-level position. If you have a lot of churn at your mid-level management position, you have to look inward and realize you have not yet gained the skill of leadership. And that's not an easy or fun proposition. And I'm not pointing down at you. I have to come to grips with the fact that every single day, the constraint to my business is me. Every single day I have to realize that the constraint to my business is leadership. And if you're talking about a business where you are the leader, you are the constraint. Your skills, your ability to learn, your ability to humble yourself, to be able to gain skills is the thing holding the business back at this size. This is what I call inside the book the GM+ model. All right? This is where You are architecting the business. You have general managers, operations managers, office managers underneath you that are teaching the technicians on how to do the work. Now, at this stage, everyone's like, oh, this would be a hunky dory. This sounds like a great place to be. No, you still have stress. And for everyone that has a $2, $3, $4, $5 million business, they're all nodding their head. And the reason for that is because the stress you have at this point is psychologic. Look at that, even fits. Every single day at this size of business, You wake up to problems, fires, bad reviews, broken equipment, people calling out, people calling you names, unhappy customers, unhappy employees, people threatening to sue you. All of these problems happen every single day. Every single day I wake up, there are text messages of something bad happening. Something bad. That is psychologically stressful. This is why you have people that have $5 million businesses and you talk to them sometimes, even if the business is profitable, like they got past the financial stress, they figured something out. But psychologically, it's very taxing. And what they'll do is they'll be like, "Man, I just long for the day I can go back, just put my headphones back in and just mow grass or just do the work." Do the work. And so be very careful from a stress perspective, if you're physically drained, to think that growth is somehow going to solve all your problems. It's just going to move the stress to being financial. And once you're at the stage, it's a grind because you're trying to find people to be able to teach and be managers so you can move on. And once you do that, it's psychological because they start falling out. There's issues between things. There's drama, there's bad reviews, stuff is breaking all the time. So what do we do about this? When it comes to a professional sports team, the first thing that a team does when the team is failing is fire the general manager and the coach. You know what's funny? The general manager and the coach never touch the ball in most sports. What they do is lead. What they have identified is that any constraint to the business, in their case, the organization, the team doing well, all comes down to leadership. And like, oh, the players aren't good. Look at any sports team. The first thing they do when the team is doing bad and it's like, we went from a 16-0 season, next season it was all of a sudden 5-11. What do they do? They fire the coach. And they fire the general manager because they realize that leadership has a downstream effect on every other area of the organization. The laborers get better, the leads get better, the liquidity gets better when you improve leadership. It takes a lot of humility to realize that the only reason your business stops growing, the only reason it isn't as profitable as you want, is because of you as a leader and as the coach, the general manager of the organization. It is your fault. And that can be a lot of stress for some people, but I'll say this. It is extremely liberating to know that you are the problem, because if you are the problem, it means you can solve it. If it's all out of your hands, it's all the politicians, it's all the economy, it's all the labor market, and you're at the mercy of everyone else and you're just going to be a victim, then you have no power to make any change. You have no power to be able to move up inside this continuum. You have no power to be able to gain new skills. If it's everyone else's fault but your own as the leader, We are now out of control. And so I would much rather just say the business will stop growing when I, as the leader, stop growing. The business will stop growing when I, as a leader, fail to have the humility to realize I lack a skill. I might like the skill when I'm first getting started of just knowing how to do the work. And if I have a couple employees and I keep— they keep churning out, I have 3, 4 employees, but I can never keep a good team. Everyone leaves after a month or two. I can't get them to do good quality work. You might just lack the skill of teaching other people. How to do the work. The skill of being able to know when to give someone instruction on how to make a straight edge, how to do a straight line when it comes to mower. Have a checklist and a process. Have one-on-one meetings, a 30, 60, 90-day progress report that you have a one-on-one with them and go over their progress as they've gotten onboarded. And then as you begin to get past the stage, starting at $1.5, $2 million, you become the architect. The GM+ model starts to be— You have the psychological stress and you start running up against this problem that Your mid-level managers are leaving you. You feel like there's chaos whenever you move outside the organization. Bombs dropping all the time from managers disagreeing with other managers, technicians. There's all sorts of drama happening. You get pulled into every aspect of the business. All of a sudden, you're out doing the work. You're out here trying to help someone get trained up. You have not yet gained the skill of leadership. And it's a different skill to lead leaders than it is to lead technicians. At every one of these chasms, these two chasms, so many people drop off. Many solo operators cannot teach other people how to do the work. Many other people who know how to manage and teach technicians do not know how to lead other managers. And the good news is, if you take accountability for that and are humble enough, you realize you can solve that because the only thing standing between you and where you want to go is skill acquisition. Gaining more skills. And the only thing between you and the skills you want to have is reps. Humility to know that I'm doing something wrong and reps. If I want to gain more muscles, I need to do two things. One, I need to have the education, the skill, the ability to know what I'm doing wrong or how I adjust my form. And I simply just need to do the reps and then increase the weight. More reps, increase the weight, more reps. You will gain muscle. But most people are having the wrong form. They're using the wrong weights. And so they are therefore not humble enough to be able to know that they do not have a certain one of these skills. And because they never have the humility to understand they do not have the skill, their form is always off. And they will continue to say, I've been doing this for 5 years, I've been doing this for 10 years, I've been doing this for 15 years, and they can't ever move up this side. They keep hitting a plateau. It's because they are not humble enough to realize that they are the problem. And I understand that the form you're currently doing with your bicep curl feels comfortable because you've done it 1,000 times that way. But something will have to change and then you will have to do an inordinate amount of reps doing it the right way in order to move up this chain. Every single time I've looked at the businesses that I have and they have plateaued or there has been a mistake, many times public mistakes, whether it be the franchise and the software out in the field, regardless of what business I've ever ran, it has always been because I lack skill and I've either got to humble myself and gain reps to be able to get that skill, or I've got to go out and hire people, usually a lot of money, to acquire the skill of someone else that is able to fill the gap of my skill. And so for the vast majority of us that don't have access to capital and hundreds of thousands of dollars to pay someone that has already done these things and already built a business and already has a skill that you don't have, most of us will have to humble ourselves, realize that leadership is the constraint, You are the leader. And then humble ourselves to realize that the way you've been doing is wrong. And then once you change the form, you have to do so many repetitions to finally gain the skills required to get to the next level of business.