Office Manager 101 for Home Service Businesses

Hey everyone, it's Mike Andes, the home service millionaire. And today we're taking your questions via video. If you'd like to submit your question. Mikeandys.com? it's completely free. Within about 90 seconds, you can submit your question. We're gonna be taking four of those today answering your questions from your home service business. So let's jump right in.

Hey, Thomas. With Alvarez Brothers Landscaping, we are currently on track to hit 850, 900,000 if we do exceptionally well during the Christmas light season. And that is with, I'd say four full time right now, five, and then a part time or two. And my question would be, what kind of KPIs do you look for in for your office staff or command center? I suppose would be my question. Do you, do you do it by like speed of response, staying on top of things? And what kind of rewards do you have for, you know, completing everything or going above and beyond? Or do you have just like an average and everyone should meet that average or everyone should meet like these basic goals and then if they don't, they lose out on the bonus or worse, you know, they, they get marks or whatever. Just wondering that, I guess reward and punishments for KPIs and like, what are the KPIs for a full, a full command center or full office staff, whatever it may be. We're currently building that out and you know, use AI and everything, but just want to get your thoughts on it.

Yeah. So even with the advent of AI, we still see a huge return on investment when it comes to spending extra money to get great agents and training them. Mostly because to AI, if customers talking to AI, the likelihood of upsell is very low. As well as the ability to be able to get through objections with AI, it's just lower. People, once they know they're talking to an AI agent, they usually don't open up as much. And also if they are talking to an AI agent, they are more inclined to hang up, get unhappy and mad, and just the overall customer satisfaction is lower. So you're gonna have to have agents, in my opinion, if you're scaling a business of size. And I actually believe the value of a great trained agent will only increase as AI becomes more prevalent and customers continue to want to have that personal touch. And so this is something that we have tried to balance out and really invested very heavily in AI and very heavily in the command center and human agents and training them better and better and better. And so I think there's a balance now in terms of KPIs. I have found that when you are, when you have less than five or so people in the office, most of the time you need generalists, people that are going to be doing, answering the phone, emails, text messages, payroll. There's just a plethora of different tasks they need to be able to do. That generalist, as you pass 3 million, 4 million, 5 million in revenue, typically needs to start becoming specialists in things like accounts receivable, accounts payable, payroll, collections, like all of these things start becoming departments inside the command center once you pass about five to 10 employees. And so I still remember going through that transition. It was very difficult because you're going through. The reason you need generalists at 2, 3 people in the office is because if one person's gone, you can't have like all your payroll not being done or no collections being done for a few weeks. And. And so in order to kind of create redundancy, you actually just train everyone on everything. When you have 1, 2, 3 employees, that's normal. That's usually what you actually need for the business is generalists. The challenging part is when you go into specialists. The nice thing though, is when you go into specialists and you're much larger, you need to have at least five people in the office. I would say maybe more than like 10 or 15 before you want specialists and actually departments inside of your office. But once you do that, that's when usually you can create incentives around certain KPIs. Until then, if you have a generalist and you are giving APIs and metrics for earning more money incentives, just know the incentives will get hit. And so if you incentivize, answer the phone, the phone will get answered. But then payroll doesn't go through accounts receivable, doesn't get paid. Well, okay, then, great. If it's overdue payments, I'll give them a percentage of it. Great. But then all of a sudden that happens. But not the other thing. There's so many different things that need to get done from an admin person when they're a generalist. I find it very difficult to actually create a, a reward system that does not create perverse incentives. Perverse incentives being, well, I incentivize them for this one thing, but causes an actual problem in the business because they're not incentivized for this other thing they also need to do. And so I have found that for generalists, I'm not going to create incentives based upon KPIs, rather, and I'm going to focus on this one, because yes, if you create a payroll department, you could create certain KPIs and actually incentivize them. If you create apartments, they only answer the phone. You could do that if they only answer email. You could create KPIs with metrics and incentivize them. But if you're asking someone to do multiple things, I highly recommend making sure you have certain KPIs they have to be hitting just to keep their job. And then if they want to accelerate, get ahead, become a manager, become a trainer. You're going to take the best performers in those KPIs to be able to be the people that move up in the organization. And they are going to have tenured incentives. So after a year, after two years, after five years, after 10 years, create a ladder of compensation based upon how long they've been with you. Because the amount of time it takes to train new people. I know that keeping great people is extremely important. And so I have found that to be the most efficient. When you're talking about generalists inside of the office, once they become a specialist and they have one thing they do, then I'll create a metric and a KPI and incentive around it. But in my opinion, I would actually incentivize tenor, but only do that once you have certain KPIs in place that basically is like red, yellow and green. Like, hey, you're doing horrible, you're doing okay, and you're excelling and being able to very quickly identify the efficiency of someone you know. There's so many KPIs in terms of like time to answer the phone. How many times do we get to inbox? 0 in a day on email? What's the response time, how fast you get contact forms responded to? There's so many different KPIs know what those, you know what good looks like in each of those KPIs to be able to be the thing that when you do one on ones with your office staff, you can go through those and they know if they're winning, if they're losing, if they need improvement in certain areas, the KPIs should speak for themselves, but then have minimum KPIs. If they don't hit that, they know that they're going to be let go.

This is Cooper from Wake Landscapes.

I'm a solo owner operator doing just under 200,000 a year.

And I want to know if it's.

Necessary for someone like me to have.

An LLC or if it's okay just to have general liability insurance as Far as from a tax standpoint and of course liability standpoint, thanks.

From a tax perspective, having an LLC really doesn't do anything. It's still going to be taxed very similar to if you just did a sole proprietorship. Now, the LLC as is stated in its name, limited liability means I'm going to limit my liability. And what that means is if I get in an accident and I get in a lawsuit, assuming I have not pierced the corporate veil and I've kept all my bank accounts separate, everything has been separate. I've not been co mingling funds and doing cash for my personal expenses and having my credit cards all mixed up. Assuming, assuming you have kept everything separate, there is a level of liability that is reduced in the event of a lawsuit or damage case, an insurance claim that now they're going to come after you personally. Having the LLC is helpful. That's why having the trucks in the LLC's name useful. Running payroll from the LLC, useful. It says, hey, this is llc. This limited liability company is totally separate from my personal expenses. Now if you co mingle and you pierce the corporate veil, that lawsuit will get through to your personal side because you are not honoring the llc. You're not honoring that this entity is separate from you personally. So I do believe that it is worth setting up an LLC. It's going to cost you maybe an extra 200, $300 depending on your state, depending on your province to get things set up around an LLC. If you're in Canada, for example, there's not LLCs, they just have corporations. The benefit of an LLC, it's very, very easy to get one set up. And you don't have to file a separate tax return. You just have a schedule C on your personal tax return. So it's very, very simple. Highly recommend getting an llc, even if it's from day one. Just get it set up so you have an EIN number. You can hire employees very quickly. It's easier to open up a bank account that is a business account. You can start building business credit if you ever go down that road. Ultimately though, it's mostly a liability protection. Yes, you can get started as a sole proprietor. Yes, you can just use your Social Security number and go get started. But from a legal liability perspective, that's why you get an llc. And then down the road from a tax perspective, that's when you would want to be taxed as an S corporation. You're going to file 1120s form. That makes you, hey, I'm still an LLC, but I want to be Taxed like an S corp. And you do that usually once you're making above $40,000 in annual profits, bottom of the line that you're taking out of the business. That's usually when you want to take your LLC and tax it like an S corp. You don't need to create S corp from day one. You don't need to go create a whole bunch of fancy documents and spend thousands of dollars. You just need to take your LLC and say hey, I want this tax as an S corp which means I don't have to pay self employment tax. Now that's about 15% of extra tax on everything you earn through this pass through entity which is an S corp. And so you can say 15% but you're going to have to file a separate tax return. And so the separate tax return might cost you a couple thousand dollars in extra fees and extra accountant fees and getting a CPA and the whole nine yards. And so the extra couple thousand dollars is offset by the fact that hey, that's when I'm usually 30, $40,000 in profits, bottom line, I'm taking out of the business. That's usually when I'm starting to think about being taxed like an S Corp. So sole proprietorship, not a fan. Get an LLC for liability protection as the business grows and it becomes more profitable, 30, $40,000 in annual profits minimum. Then I would go file with your accountant form 1120s and be able to then be taxed like an S Corp.

Hey Mike, Sam with troops mowing, we are going to end this year around 1.5 million in annual revenue. We have three locations, one is in profit mode, two are in growth and each location is ran by a general manager. My brother in law Dylan acts as a regional manager over all three GMs and we've also centralized admin so we have an office manager covering down to help out all three locations. My question to you is should we centralize sales and what would that look like? Would you even suggest it in a business model like mine? The reason why I would like to centralize sales is because It'll allow our GMs to focus specifically on ops and we can have a person in house dedicated specifically to go in hunting and closing. And what got us to 1.5 million is not what's going to get us to 10 million. And I believe in having a centralized salesperson would probably be an integral part of that. Please go into the to the intricacies of how we would handle this in if we had all profit mode locations. Since we shouldn't be dumping money on marketing and what that would look like who also if you could please cover what the GM's responsibilities and how they would be compensated because now their direct actions are no longer focused on sales and increasing revenue. So would love to know your feedback on this and all the intricacies of what this would look like on the front and back end.

Thanks Mike. So great question. When you have more than one location in growth mode, in other words, they're both trying to grow, just know you're going to be sucking profits like it's going to suck cash. Because as soon as you as the founder can't be in a location that is in growth mode, it's very expensive and that's fine. Obviously Sam is an overall kind of just trying to grow the business as big as possible. 10 million. So just as a frame, if you ever have two locations and more than one of them is in growth mode, just know it's going to take a lot more capital to keep that machine going, which is if you have enough capital, it's fine, you'll grow fast. So the short answer is if you have more than two locations and in growth mode, I do recommend trying to take away sales from your general managers. Why? Because a general manager that also knows how to do sales, very hard to find if I've got to find three of them for Sam, very difficult. If I can find one person that's good at sales but hates being out in the field, could work very well. They do sales for the entire three locations and then my working GMs just focus on operations. I want to get as close to my general managers only focus on operations in general. I want sales. The long term goal is to get sales to be mostly instant quotes on your website, instant quote forms and over the phone estimates. That's the goal. So that way my general managers don't need to do sales because everything is online or it's over the phone. Now the thing is when you're in growth mode, you're usually taking other projects on, you're doing in person estimates, etc. That's when I would give the nod of approval to say yes. One estimator, one salesperson can kind of do all across the board in terms of sales. And so it is certainly a very growth centered strategy. It's better because the salesperson really can focus on selling and only selling don't have to worry about people in the field. You can really dial in, follow up phone calls and hold them accountable to that. So I Am a big fan of multiple locations that are in growth mode at the same time. Having one salesperson, I would say in the long run I don't want to have a salesperson though. I want my general manager to only maybe have to do in drive by estimates. But like anything in person require a bunch of talking and designs. I don't want that back and forth. I want instant quotes and I want over the phone estimates. And so I'm always pushing towards that. But if you're in growth mode, I understand you're trying to take on projects or try to upsells and other things that might require an in person estimator. And in the event of having two locations in growth mode, it's easier to find two working GMs to focus on operations and then get one estimator to do both of their sales. I'm okay with that. It's harder to find a GM that can do both and and be in growth mode because there's already so much chaos and operations that I don't want to also have the new skill of sales that you've got to learn. That being said, when you, when it comes to compensation, I do believe you can still comp your general managers based upon growth and based upon profitability and then hold your salesperson accountable to certain ranges of close ratio because as long as the salesperson is trying to close as many as possible, but then making sure that it's at a certain like hourly rate is certain hitting certain metrics in terms of quality, then they'll be fine. And then you know that there's at least some consistency of lead flow and new jobs being passed to the general manager. When, when a general manager in general is in growth mode, they're not going to be as incentivized on profit, they're going to be more incentivized on revenue. So they're going to want more jobs anyways. And so what you want to be careful of here is having a system where the estimator or the salesperson is incentivized on close ratio. And then your GM doing operations is only incentivized on revenue. Also be very careful of that. You will grow very fast. You will also lose a lot of cash. And so just be careful. You need to have the balance there. And so I would still have my general manager having a ramp to a much more lucrative position once they're in profit mode and once they are doing profit sharing. So they want to get there as fast as possible to get to kind of the promised land. Of profit sharing. And in profit mode, my salesperson needs to have very clear metrics in terms of how much revenue they need to produce. And I do want them incentivized to grow fast. I also need to have a countermeasure though to make sure that these jobs are being done with enough budgeted hours, they're actually profitable and the crew can actually get the job done in the amount of time that's being allotted to them. And so I don't want a 90% close ratio, I don't even want 75%. I'd be like, hey, these are the bounds that I want you to be falling into. Here's the price range you're willing to be able to do and discounting that you're allowed to be able to do based upon the book, how far you're booked out or your close ratio is, here's a discounting that you can use. Be very, very clear with that. But again, you want to make sure that being in profit mode is in the best interest of the general manager. And in my opinion, profit mode means we're not marketing like you said, and we're definitely not going to be doing a lot of in person estimates. My one location, the general manager is able to do over a million in revenue because almost all the quotes are instant quotes on the website over the phone. And then if they're drive by estimates, he just has the crew like send him a video. And so it allows there not to even need to be that estimated position because we've simplified and standardized things as much as possible. So I'd push you in that direction long term, profit mode, instant quotes, and over the phone in the long run. In the short term, if you have two locations in growth mode, it is easier to get one estimator and then have multiple working GMs so that they can just focus on operations. By putting both a growing location, operations that change because you're adding new trucks, more employees as well as new customers can be a lot for a new gm, especially when you have two of them at the same time in growth mode. So great question. Hey, thanks so much for watching the video real quick. I wanted to invite you to a private event that I'm hosting online@mikeandys.com Black Friday. That's right, it's on Black Friday. It's going to be a live stream that includes a whole bunch of training that I've been working on for over a year. It's gonna be completely free for the first 500 people that sign up. So go to mikeandy.com black Friday sign up for the registration and there's also three massive announcements that I haven't even shared with my team that I'm gonna be sharing at the end of that live stream. So you'll definitely wanna be there. Mikeandys.com Black Friday we'll see you there. All right, last question for today's episode.

Hey Mike, My name's Phelps. I'm the owner of Momin and I am on track to hit 200k in revenue this year. We got a little bit more to go on that, but we luckily got a lot of money in the coming seasons, hopefully. And My company has zero employees. Those are my questions. How to hire and P4P. I don't know how to hire. I've never hired anyone. Where do I go to find people? Great talent is what I'm looking for. Someone I can train. Are there certain websites I can use to, you know, have those people come in? And then implementing P4P, I know that's what I want to do from the get go. How do I implement that? Should I wait until I have multiple people or just like, hey, this is how we hire from day one and like roll it in with the first guy. That's kind of like my thought process. But I do have P4P university I can look at. Just want to see your thoughts on it. Just want to see your thoughts on hiring and how to do P4P from the get go.

Thanks, Mike. Okay, so if you're hiring a first employee, Indeed is still really the main place we get a lot of our applications. If you're getting overwhelmed with applications, having another additional step with the automations inside of Indeed to ask them for a filling out a form or a video track. A video system, like a video interview system. That's what we do. Video screening system. Okay, so if you're just getting started, you're getting your first employee. A lot of times Indeed is going to be where you get your most applications. Some people will post on Facebook. There's now Facebook jobs that has recently come back. There's Craigslist, there's other areas. But like Indeed is still kind of like the number one. If you're going to do that and you're getting bombarded with tons of applications and a whole bunch of people don't show up to interviews, then I'm going to make sure I have a automation set up in Indeed to send a link and do some sort of video screening with them. So we use software to be able to Ask them questions, get the video submission. So before we even set up an interview, we know if the candidates relatively good and going to pass a lot of the questions. Very helpful to screen down the amount of people that you have to set up interviews. And a lot of them just don't show up. So indeed would be my first answer. And then in terms of P4P, if you're not going to install P4P from day one, I just recommend making sure that what you pay people per hour is at or below what you're going to be paying on P4P as your base pay. And again, I'm always trying to hit the 25% rule. So if I'm charging $80 per hour, I don't want to be paying Anyone more than $20 per hour as an employee. And so I would set that as my base pay. So when I switch into P4P and I offer 33% of labor revenue to my team, there's enough difference between 25% and 33% for them to actually make above base pay. And as long as their base pay isn't any lower than what they're making on hourly, there's no downside for them. So it'd be an easy transition. So if you're not going to do PPP from the get, just make sure your hourly rate that you're paying the employee is at or below what you're going to pay them as base pay on P4P. And then I would say if you're gonna do P4P from the get, do this in the numbers in the background. That's why we have a month free@p4psoftware.com because you can run all the numbers and a lot of times it's very eye opening and you need to make sure that they'll actually make above base pay. Cause if they don't make above base pay, they're gonna think it's all smoke and mirrors and you're trying to pull their leg and lie to them and be deceitful. And you don't want that. You want them to be able to make above base pay on P4P. And a lot of times when you're solo, the reason that your first employee won't make a lot of money on P4P is because you have an inefficient route. You have a lot of drive time. You have people driving 15 minutes and then 20 minutes and 8 minutes and 12 minutes between jobs. Instead of like 30 seconds, a minute, 40 seconds. That's what it should be for a really efficient route. And so I would highly encourage someone that is just getting started to track the numbers before you roll P for P out. Because if you don't have an efficient route, if you don't have jobs that are close to each other and you're doing mowing for example, gonna be problems if you're doing big projects and you're not efficient and accurate on your estimates, you're also they're not gonna hit above base pay. So you've gotta have accurate estimates for projects and you've got have a tight dense route when it comes to route based jobs and maintenance before someone actually is efficient enough to make above base pay. And again do not roll P4P out if they're not going to be able to make above base pay on a consistent basis because otherwise they will think you're a liar. Great question. Today, if you have a question and you'd like to get it submitted for the next episode, go to mikeandys.comquestion, submit your video and we'll see you on the next show.