Leadership 101: Running a $54M Service Business

Everyone, it's Mike Andes from the home service Millionaire podcast. Today's a brand new format and I'm going to be just talking to the camera more podcast style. I'm going to be addressing those are doing over a million dollars in revenue. So if your business is doing between 1 and $5 million in annual revenue and you're in the home services, this show is for you. And if you like this sort of format where I go much deeper into some topics that are for much larger sized businesses, feel free to let me know in the comments. If you put Instagram like you tag me, it just lets me know that this is actually helpful. Put in your stories or something like that. Sometimes with the podcast it's difficult to actually get engagement. So it's hard to know what people are liking, what they're not liking, what they want to hear more of. And so what I'm going to do in this podcast is I'm going to be talking to the larger business owner and I'm going to be using prompts and questions from the producer about certain topics that might be relevant. Now I'll keep it subject based. So for today we're gonna talk about leadership and some of the things that as a larger size business, the things that I've learned, things that I've noticed and hopefully helpful for you. So I have a docket of several topics that we will go through. It will be, like I said, subject based. And if you have a question that you want to be on the next podcast, put in the comments like I said and we will go ahead and go through those. All right, the first one, next on the docket is why most GMs cap out at $1.5 million locations and how to break that ceiling. So this is for general managers and owners. I see this kind of as a natural inertia blocker for a lot of people. And it can be sometimes between a million and 1.5. And I've noticed on, on the turnaround show that a lot of people are in one around 1.2 million. And a lot of times the reason I actually think it's the kind of invisible barrier. I always talk about the profit wilderness. Between 200,000 and 500,000 in annual revenue. Kind of when you're getting your second third employee and how you start to make just as much profit as you did when you were solo. That's a very difficult time in the business because you, like, I just go back to being solo and I don't have to focus on hiring people and managing Other people, I'll do the work myself. And for a larger business, they have a similar sized cap in my opinion, kind of like a barrier between 1 million and 1.5. And I believe it's the case because of two things. One is because once you get above 8 people, it's more difficult to manage them. So they look at the military, a lot of organizations, they're not going to have someone have direct reports that are more than eight, 10 people. Like 10 is hot. Is hard to keep track of everyone. Usually it's six to eight people. And so I feel like once you cross that, a lot of owners are able to manage 10, maybe 12 people, but they're working crazy amounts of hours typically. And so what is required to keep growing the business is usually more management. Whether it be an operations manager, an office manager, a sales manager, they need somebody else. That add the extra cost of overhead is what keeps the business less profitable. Because at say 700,000 or 800,000, the one owner could run everything. And everyone just reports them. They have six to eight employees and we're rocking and rolling. We get 10, 12 employees. Now all of a sudden I need a sales manager. There's enough leads coming in, I need an office manager, there's enough phone calls coming in. I need an operations manager to make sure like throughout the day I'm not getting called all the time. And if something's bad on the trucks or the equipment, like it's being handled. And so now you start adding all these layers of management. And so in my opinion, this is why between a million and 1.5, the business can't really afford that. It can't afford to have two, three full time people, very experienced people, being straight overhead. It really can't. And it brings you back to where it's like, man, I should just stay at 6, 700,000, have six to eight employees and just ran this thing myself. And it's that same barrier. And so if you're going to go beyond, you know, just you managing and you get overhead, ops manager, office manager, sales manager, in my opinion, it is helpful to get past 1.5 years. The other barrier, right between 1 million, 1.5, I see it all the time. And people either go back to being a much more profitable smaller location and usually it's dictated actually by the leadership skills of the entrepreneur. And so if the entrepreneur has the ability to lead middle management, they can scale to 3 million and beyond. If they don't have that skill and they need to learn it, they'll turn a Little bit at that.1 million 1.5. Regardless of how they split the business up, different services, different departments like those keep spinning their wheels. Mostly it's a leadership thing. And I hit the same thing and had to learn a lot of aspects of like, okay, now I can manage, you know, 8, 10, 12 maybe people because I'm so good, I work crazy amounts of hours. Maybe I can work, manage 12 people, but I'm going to start going beyond that. I need to have middle management. And treating a manager and managing a manager is very different than managing someone that's out in the field. And it's a very different skill set now that someone has more autonomy, someone has the decision making power, et cetera. So is your leadership team really aligned or just good at nodding in meetings? Okay, so this is, this is interesting because now we're talking about a business that has multiple levels of management. They have general managers and more hub and spoke model, multiple locations or they have a larger size business, a general manager, a office manager, operations manager, a sales manager. Maybe this business is two, two and a half, $3 million in revenue. So having a team meeting for your technicians is very different, very different than leading a meeting for your managers. A lot of times I have found that grade A, top class, top notch talent when it comes to management likes you being a little bit more raw and less put together than the front. The team that's doing the, doing the work, the technicians, the technicians, they don't understand elements of like the profit and loss statement, the finances, debt. And so we try to explain those things to them using meetings, et cetera. The management team is very acutely aware about profit sharing, how much money does the bank, the balance sheet and if they don't like, that's another problem. But they should have that information. And so a lot of times they don't want the fluff, they don't want to talk about how last year we were low on budget hours. So this year we're raising it and we're going to adjust P4P. Like the management team understands all that. Like the level of competence that they're at is higher. And not just competence because you expect that of a manager, but also the level of information they have is much higher. So you can skip a lot of steps that you would can't skip with your frontline team. And so trying to treat managers and frontline team members in meetings the same is you're gonna lead to the managers feel like you're talking down to them. What I would prefer is I want to get their ideas first. And so if you've had a team, eight, 10 people, you've managed them all. And now you're starting to get mid level managers. One of the most difficult things in meetings is to shut up. Because when you had eight to 10 team members and they're all working out in the field, you came up with all the solutions they brought the problems, you offer the solutions. That was the agreement. Because when you in their job, in their application and in job hiring process, you didn't expect them to solve problems, you expected them to execute on work. And that's not a bad thing. You need people to execute on the mission, but you also need strategy. And so when you start having mid level managers that are responsible for departments or aspects of the business, I do not want them just to execute. Because if they only execute, it requires me to come up with a plan for every single thing in the business. It requires me to still be the bottleneck for every solution, which is when I am hiring them as a manager to make decisions for the department. So I want to manage more from a KPI perspective and if I am curious as to why something is not working or I don't see good KPIs, I'm going to bring it forward in a meeting and then I'm going to look for them to identify the problem and I'm going to look for them to identify the solution. If you have a lawn care business and you've considered joining Augusta Lawn Care and converting it into one of the franchise locations, go check out augustalawncareservices.com franchise. We can see all the numbers and what the performance is of all of our locations. You're looking for strategy from a manager instead of execution that you would from a team member or technician. And so how you have that meeting is very different. I am going to usually if I see a problem in the business, not come up with a solution. And if I have one, I'm going to shut my mouth. I'm going to try to Again, this is difficult. Like I'm still learning this. I'm going to try to present the problem from a numbers perspective without giving my objective or subjective opinion. So hey, close ratios down, what do you think? You know, the call volumes is much higher. Why is the time to answer so much higher than usual? For example, I'm going to present the numbers, I'm going to have them see what you know, they identify the problem and then I need them to come up with a solution. And so if they bring a problem to me, instead of immediately becoming the solution, which then makes me the bottleneck for all solutions and strategy in the business, I'm going to first ask, well, what do you think? What do you think would be the best idea? What do you. Do you have any ideas? And again, this is what allow a player to feel like they can expand their wings in the organization. If you just, if they just simply deliver problems and then like the wise king on the hill says, gives them the solution, you're not going to keep great people. And if you do keep those people, like, oh no, my people stuck around for a long time. You are the bottleneck for all decision making. You are the bottleneck for all strategy. You are the bottleneck for all problem solving. And you will not grow past $3 million in revenue. You will just become the king of solutions where all the peasants come to you and they come to you and bow down. And this is why so many owners, that feeling of feeling important is so important to them. So they get way in the weeds on their managers and some people will stay. Cause they're just a glorified technician that have been around for a long time, is now responsible for more. But really they're just vicariously executing on all the things you're telling them to do. And so to get out of this and get past 3 million like that next jump it is going to come down to whether or not managers and mid level managers and people that are reporting to you can make decisions in the business without you. And so I would much rather grade people on their execution of their own plan than come up with the solutions myself. Also, if they make some mistakes, they will absolutely. Because they take ownership of the solution. They are much more invested into it. They will push the extra mile. They will work longer hours if they came up with the idea. So if you're coming up with the idea and then you're like, why aren't people like working harder? Like where's the discretionary effort on the weekends? And can't they see that we're behind? Why aren't they coming in? Because they're just executing. They don't even have the ability to see a problem and make the solution themselves and try to give it a shot. And so when it comes to managers, and I've worked with people remotely, in person, hybrid, more JV style, where people are almost like partnerships almost with myself. And how you handle those people needs to be different. And it is. I am asking them for the strategy, I am asking them for what they think I should do. And that's what the meeting is gonna look very different for that manager compared to the technicians out in the field. And most technicians don't wanna think about strategy, they just want to execute. That is what they're good at. That's what they like. That's what the job description was for. But if you put someone in management, I am not wanting them to execute. I am wanting to come up with the solutions. It's better for them and their career. It's better for the business. I don't become the bottleneck. And if you have pride wrapped up in coming with solutions and being the genius in the business, that is a problem. It'll keep you from growing much larger. And what kept me from at 3 to 5 million is like, I need to let go of that notion that I need to come up with all the solutions to the business. I needed to hire great people that came up with the solutions to the business and identify the problems before I even knew about them. Very different. The hidden tax of keeping B players in leadership roles. Once you pass 30 employees, I would say the hidden tax is honestly churn of your technicians. And so anytime I see a lot of churn in a team, I'm going to look at the manager first. This is why on professional sports teams, if a team's not doing good, they just fire the coach. It's like, well, it's not really the coach's fault. Like can't you see that everyone's not trying hard? Like bad performance is on the field? Well, why do you fire the coach first is because that reset of culture trickles down across the entire organization. And so if I am having a B level performance from the team, the first thing I'm looking at is the coach, the general manager, the manager of the department manager, a certain service manager of a crew. I'm looking at that first because a lot of times churn people like people do leave because their manager, they do not usually leave because of compensation or other things. It's usually their manager. And so I am looking at that first. And I think that the hidden tax of keeping B players is that you can only attract B talent when it comes to people that they're managing. And so if, if you can only keep B players in the technicians because of a B player, manager or coach, I'm getting rid of that coach or manager as fast as possible. I need them to be exceptional. This, by the way, is why people will get mad forever about the pay gap between a CEO and a an average employee to go. It's 400 times greater for the CEO. The reason for that is because a, a B, B B level CEO has a trickle effect across thousands, tens of thousands of employees. And so if they're not the, the best of the best, anyone that gets better than usually leaves. And so if you have a B level CEO, you can attract and keep and retain A level talent at anywhere below that organization. And so especially if you're not growing really fast and there's an opportunity for an A player to rise up in the organization and eventually challenge the executive.

And so my first thought is if there's huge churn at the technician level, I'm looking at the GM for a location. If there's huge churn in the admin side in the office, like I can't keep anyone. Well, I'm looking at the office manager. If there's huge amount of churn from all my foremen and the crew technicians, I'm looking at my operations manager. I'm like, yo, what's up? And I would try my very best in that case to try to get feedback from their direct reports if needs be. Like, this is very forensic. This is like you're about to fire this person. I'm going to try to hear from their technicians now be very careful with this, very careful with this. As soon as you go around a mid level manager to their direct reports and ask for feedback, you are basically signaling mutiny. So I am not doing this in a direct manner. I'm not gonna go to my technician like, hey, what do you think about your boss? Like, what do you think about your, like what do you think about my employee that is managing you? I am never doing that. I've had it before where people will come forward from the technician level or from like two or three rungs down and they'll come to me. And that's fine. I am not taking action based upon someone's accusation because of simply the fact that if, if I take action on some random thought of someone else in the organization and I go straight to their direct report, who has way more information, is managing the department. I am throwing my manager under the bus so hard. And so I'm going to take indirect feedback, I'm going to look for other ways to be able to collect that feedback from my technicians. I am not doing like grade your manager like the most demoralizing thing you could do. Everyone's going to complain. And so I'm looking for first off, quantitative feedback. Quantitative meaning numbers. Is the performance of that general manager good. And then secondly, I am Looking for qualitative feedback things like churn of their direct reports. If that's huge, that signals potentially a problem. Whether it be quantitative numbers or qualitative things like no one wants to work for them. And I keep churning people out below them, okay, signal of a problem. I am not jumping in and asking all of the people who they hired how they're doing. So be very, very cautious of this. I'm not going to interview them, I'm not going to like tell me all the dirt about your boss. That is signals that there is no unity at the leadership level and that will cause a lot of unrest. So what I might do, I might show up for team meeting, I might see how things are being conducted, I might see why is this so much churn in at the lower level of this organization. Is it because of this manager? And so be very, very careful of accusing or jumping after your managers based upon the feedback from their direct reports that you never see. So once you have 50, 100 plus employees, like you are going to get random people in the organization come to you with a complaint about their manager. And personally I have found it very demoralizing if I immediately assume that they're correct and I immediately run to their manager and start accusing them of things. What's the thought of a manager that immediately all the trust and the goodwill that I with my direct rapport have built, I'm immediately throwing that under the bus for the accusation of some person that's below them in the organization. And so I'm very, very careful about how I bring up feedb to mid level when it comes from someone below them because that manager I am entrusting them take care of the technician or the person below them. And so I have such limited data. As you begin to grow the organization past 20, 30, 40 people, you have to realize that you have limited data on everything that's happening. So any report that comes to you, you have limited data. And if you have a manager responsible for that data and changing the data, I'm I absolutely need to synthesize their feedback first before I jump to conclusions. Jumping to conclusions based upon limited feedback or limited data is a number one way to make sure a great team member does not want to work for you. That's mid level manager, so hopefully that's helpful. This is mostly applicable when you get like 30, 40 employees, 50 employees, or you have multiple locations where you have people working with each other that you don't see very often. It has served me well and I have learned unfortunately the hard way that jumping to conclusions about a general manager or a manager or anyone that is my direct report jumping to conclusions about them without first talking to them is really, really bad for culture. It hurts the technicians when I start going back and forth with them about their manager. Like mutiny, bad stuff. Don't be very, very careful. I would much rather fire a mid level manager based on the numbers and bad performance. And if I'm going to do it based upon churn, I'm going to do it based upon churn. Not because so and so told me that you don't show up to work on time. Not because so and so told me that, you know, you've been doing X, Y and Z in the trucks during the day. I, I'm not not going to make that sort of critique based upon they said, he, she said. I'm going to use the numbers if I'm going to bring any sort of correction to my mid level managers. And some people might have a different thought on that. It's like, well, if someone from the frontline team member comes up to you and gives you feed, you should act on it immediately. What does that say to the general manager? What does that say to the person that is actively responsible for managing that person and is every single day prime pour into them, train them, educate them, and block for you as the owner to be able to operate the business. From an architect's perspective, this is the equivalent. If we think about a labor, a manager and an architect on a construction, massive, huge, high rise building. This is the equivalent of a labor going out to the architect and complaining about their manager. What's the architect supposed to do? Are they supposed to immediately like stop the work site? We're immediately shutting this thing down? No, they should go to the manager and talk to them and they should not do it in an accusatory way. Instead, and most ideally you tell the labor, go talk to your manager. Like you guys, go figure it out. And so again, a lot of times I see the architect stepping into the business to be the arbiter between a laborer and a manager and it's like, look, the architect's job is to stay outside of the building. Don't come in here. And almost every time I've ever stepped into the building being the savior between a manager and a labor, I get in trouble and business, something gets hurt. Because as architect I need to stay away from the building and I'm going to push people in the right direction when they have some dispute or something they need to resolve to talk to Each other. I have found that helpful, and I've found it that many times. I'm not getting complete data from the technician or the person that I'm not responsible for. And if I start jumping to conclusions and convicting people that I am responsible for, it hurts our relationship. And that's the most important thing to me. Next on the docket, when to promote from within versus when to go outside your culture for fresh leadership. Okay, so I'm going to step away from the moment. Like, my immediate thought goes to. If I'm starting multiple locations, usually outside salespeople, those people, I'm usually outside the organization. My technicians are not going to become salespeople, typically. So if I'm starting a location from zero, rarely is the person that's been with me for five years mowing grass gonna be great at starting a new location. So I've talked about that before. I'll put that on the side. I'm gonna address the other aspect of this is, which is when I'm looking for fresh leadership, I would be careful with this because a lot of times the notion is if I, you know, bring in someone from the outside, they'll bring this, like, new breath inside the organization. I'd be very careful with that. Unless you are resetting the culture, like, you're clearing the deck. If you're clearing the deck, that has the opportunity to work. If you do not clear the deck of your technicians or the people that are going to be reporting to this new manager, be very careful. So a lot of times, like when you see a shakeup at the a GM or own coach level inside of professional athletes, they're also changing different coaches out. They're changing like the personal trainer, the pitching coach, the hitting coach. Like, they're also changing some of their key team members of the team. And the reason I feel like, is if I just get some random person that's never been in the organization, pop them at the top, and think that everyone reporting to them is going to just like, somehow embrace that. Not going to be a great move. It's very rare when it comes to home services that I see hiring from the outside of, like a bigger company, Plopping them into your org as a manager is somehow going to be helpful. A lot of technicians look at it negatively. And so what is theoretically correct versus what actually works? I've seen different. What theoretically works is like, okay, bad manager. I go find great manager from my competitor, I pay them more and I bring them in and they're a rock star and they change the company, that can happen. But it likely means that a lot of the people that report to them, the technicians a lot of times or their drug reports for management, if it's a larger company, eventually leave. Because unless the team hates their manager, you removing the manager almost always leads to an exodus of people that liked the manager. So this happened before where we had to fire a manager and everyone that liked that manager ended up leaving within like two to three months. So we didn't even clear the deck of the team. There's a few people I think they fired because they were kind of toxic along with that general manager. But there were some people that like, just like the general manager, they were good team members, but they ended up leaving next two to three months because they like that manager. And so when, when we changed out management because that manager was not great, those people ended up not staying at the org. So I would say that if, if your technicians like the manager and you fire that manager, replace them from someone from the outside, most those technicians will leave. I've just seen it a lot and I think that what can can work bringing an outside leader in is if everyone hates the manager and they're relieved that you brought someone in and now they rally around this new person. They want to show them where stuff is at the shop. They want to fill in all their gaps and who, what customers need certain things and they don't feel like they're dealing with an incompetent general manager like my manager. He doesn't know anything. He doesn't know where everything's in the shop. He doesn't know anything about these customers. I know more about the gen, more about this business than the general manager. If that notion pops up, exodus will happen at the technician level. No one wants to work in that environment. And so that's why many times when I have fired a general manager, if the team does not like them, they stick around. If they do like them at all and they've been cozied up with them as buddies. And I know the business is not doing well, if I fire that general manager and get someone new in, they, the technicians will usually leave. One way to kind of mitigate this is to hire from within. But when it comes to like quote, fresh leadership and hiring from outside your business, just expect that if anyone likes the manager you fired, they will probably leave. And so that's a very delicate situation and there's a lot of moving parts. Like do the technicians want this manager removed? If yes, you might be able to hire from the outside. And it'd be okay if there's like 50, 50, and you're looking at the numbers and there's a lot of things that tell you that you got this person go. That's when I would be trying to encourage you to promote from within. And so that you can explain the technicians why the past manager left, but then you're hiring from within and there gives them the ability to see that there's upward mobility in the business and that maybe they did like that previous gm, but they also like the technician that you're hiring, promoting, and they can see them being successful. And they also come with so much inherent knowledge because they've been working in the business already that they don't have all these knowledge gaps that need to be filled. So they don't look come across as incompetent to their team. And that's why a lot of times, especially technicians will reject a new general manager as they feel like they're incompetent because they just don't know anything. And so hiring from within, allowing that knowledge already to be with the general manager, sets them up for success to not look like that in front of their team. All right, that is one of the first episodes we've ever done. These are much deeper topics. If you like this sort of thing, let me know in the comments. Put it on your stories and tag me on Instagram because I need to know and I can add to the docket in the future. Thank you all, and welcome to the Home Service Millionaire podcast.