OFFSEASON POWER MOVES: 5 Cures to End Seasonality for Good

Everyone's Mike Andes. And today on the Home Service Millionaire podcast, we're going to be talking about everything to do with the off season. We're coming into the fall and the winter season and for many home service business owners that's your slow time of year. Leads drop off a cliff, revenue drops off a cliff. So we're going to be talking about what you can do as a seven figure business owner in the home service industry to make sure this is the best off season you've ever had. Because the difference between a very profitable home service business and an average or below average or unprofitable home service business is whether or not you're able to get through the off season without losing money is something we've coined the term of seasonitis or Q4 collapse. When during Q4 your leads and revenue drop off and usually you actually hit you hard in Q1 when you actually have negative profits on your P and L and your income statement and cash flow goes negative, usually actually happens in the first quarter. But it's because of Q4 collapse and, and therefore we're sick. The business is sick with seasonitis. And to avoid that you've gotta be able to figure out one of the five tracks we talked about in the off season book that's gonna be either we're gonna shut down completely and then just offer people to come back in the spring and work for us and give them a come back to work bonus. Number two second option is to sell more and better by upselling customers. The third is to be able to make sure that we and the more and better is usually selling more of your existing service, just giving a better package deal, subscriptions, a lot more options on selling more and better. The third one though is an adjacent service, something that you can do that's aligned similarly with your current business, but you can do during the off season. It has an inverse demand curve, opposite demand curve of your current main service. The fourth track to be able to solve your off season problems is going to be recurring revenue. Usually think maintenance. So instead of installation, which many times happens during your spring, your summer, your busy season, think think more along the lines of maintenance and even not even repairs. Repairs are intermittent. They're not re occurring, they're reoccurring. They happen more than once, but they're not on a weekly, bi weekly or monthly schedule. We want that recurring revenue throughout the off season and that's when maintenance and inspections being able to maintain the property is very valuable. And then the fifth and final way to solve the off season is to create a brand new company, a brand new brand altogether. So if you do mowing, maybe you do Christmas lights. This is a completely different brand, has nothing to do with lawn care necessarily. But by doing that, we solve the off season. Now those are the five cures to seasonitis. But today I'm diving deep into what you can do. If you have a 1 million to $5 million lawn care business, landscaping business, plumbing business, painting business, any home service business, what can you do as you enter into the off season? So we have five different questions from the producer on the docket today about the off season. I have not seen them, so I will read each one, respond to them accordingly. So let's go ahead and jump in. First one, if your Q4 margins collapse, is it really seasonality or proof your business only works when the phone is ringing off the hook? Wow, we got a little edgy today. Okay, so the producer obviously is wanting to ruffle some feathers here. Okay. So I truly do believe that, yes, you could be very pointed and say, well, if you don't make enough money in eight months of the year to get through the four months of slow season, then shame on you. Okay, yes, you can have that, that ideology. And that would fit underneath cure one when you're solving seasonitis and that is shut down. Like, just don't worry about making any money during the off season when leads are hard to come by. That is one way to deal with the problem and just make the other eight months of the year really, really profitable. Do not have overhead, that is fixed expenses during the off season. That is certainly an option. And I think that the kind of what the producer is getting at here is that shouldn't you just make enough money in the eight months where times are good to not worry about the off season and some people that works well for them. However, it's very difficult to grow that size of business because many times you need fixed expenses to be able to build infrastructure, infrastructure for the business to grow. Good luck trying to get a solid manager that doesn't want to work for four or five months out of the year during the off season or not get a paycheck for four or five months out of the year. So you're going to have that fixed cost. And then if you get a shop space, it's not like your landlord is going to give you free rent for four or five months. Your insurance isn't going to stop, your subscriptions aren't going to stop. So as you grow a business and the infrastructure grows of more overhead, which is inherent in a large company. It's very difficult to just use this strategy of make more, make money while the, you know, make what's the hay while the sun shines. And then when it's not good weather and when it's not doing it, we're just, we won't do anything. It's very difficult to actually use that logic, especially if you're using debt. And if you have a seven figure business, there's a good chance you've used debt in the past, specifically with equipment, especially with trucks and vans and vehicles. I'm a fan of using debt to be able to accelerate the speed at which you're able to grow. I'm not opposed to it as long as it's done responsibly. And if you've done a million dollars in revenue and even four or five plus million dollars in revenue, you've likely used debt. But if you're going to completely shut down during the offseason, just try to make really good profits for eight months of the year. Very, very difficult to do if you have debt and you've built out infrastructure like an office. Any overhead. Employees that are on salary, managers, great employees, do not want to take four or five months off a year and they certainly don't want to live without a paycheck. And if you're telling them to go get another job for four or five months and they're really, really good, that really good company or that good company, another good company is going to offer that really good employee better salary to stay with them for the rest of the year. And so you will lose great people if you have to constantly let them go for four or five months every single off season. So although I agree with the sentiment, which is like we should just make a ton of money for 8 months, I agree we should always make more money. But by, by protecting the downside of the off season, I'm able to retain my employees. I'm able to not have negative cash flow at all and build the business much larger by without having the problems of infrastructure built, fixed expenses and no revenue coming in the door. So I think at first, many times people look at solving Q4 and seasonitis as defensive measure and that is like I just can't. I gotta make sure I at least pay the bills and break even. Great. Once you've done that and you've figured that out, then it's like how do I actually grow when everyone else is laying people off? How do I hire people when they're Being laid off from my competitors. How do I buy trucks and equipment when everyone else is getting rid of it? Because they have a, a cash crunch in the middle of the off season. So if you can go on the offense when everyone else is going on the defense, that's when you really take market share. All right, number two on the docket. Owners brag about paying off debt in winter, but are they starving spring growth by draining liquidity? Yeah. So that's very important in my opinion. And I think one of the major reasons why a lot of home service businesses go out of business is their first few years of the off season. They have not prepared from a cash position. If you're growing very quickly, especially with one time projects, it's more difficult to fill your off season and not lose money. And so many times the first two, three years of a new business owner and home services, they're just learning how much cash they need to have in the bank going into the off season. The first year they might lose 20 or 30 grand. Then they start getting in more infrastructure, getting a little debt, getting a little better shop space, more insurance, and all of a sudden that's 60 or $70,000. Now going into the third year, they're like, man, I got to put a hundred grand in the bank just to get through spring, get to spring. And so paying off debt is something that you really need to know what that demand curve looks like and make sure you have enough cash to get through the winter before you pay off debt. Also, paying off debt doesn't help you from a taxes perspective. And so if you've made a bunch of money, have a whole bunch of cash sitting there, just paying off the debt doesn't help your taxes. Like you're, you're depreciating the asset or you're getting interest, expense, those are things that do affect your taxes. But paying off the principal balance of the debt doesn't do anything. You just move from an asset like cash and move over to a liability of a loan and it doesn't do anything on your balance sheet. And so I'd be very careful with having a really, really profitable year taking all of your cash. I've seen this happen for. And then people pay off debt. Cool. Doesn't affect your tax bill. And all of a sudden you hit with a 50 to $100,000 tax bill in the spring of the next year right when you need the cash. And this is where a lot of times I see people have trouble with payroll taxes, income taxes, after their very first really Solid year of profits, taking all their profits. Like I'm going to go pay off things because I've listened to Dave Ramsey and Mike Andes and now we're going to go pay off debt. They do that in November, December. They have no tax write off for that because it has nothing to do with principal pay down. When you pay off debt, it's not an expense. Interest expense and depreciation is the only thing that's bringing down your adjusted gross income for your business. And so that has nothing to do with paying off debt. So be very careful because when you now go into next year and you file your taxes, you could very well be very cash poor. Oh, a ton of taxes going into your spring rush when you need capital if you're going to continue growing. So I'm always a big fan of actually paying off debt after spring rush. June, July, August in that area because you know you have another four or five months of great cash flow before you even hit an off season. So very good question. Third question on the docket. Off season training. Are you investing in sharpening leaders or does babysitting crews to justify payroll? Wow, we got a little edgy today on the podcast. So I believe that during the off season I am going to only keep around the team members that have exemplified throughout the entire year that they have hit certain standards. So if you have to pare down your team, I want to do it based upon certain metrics. For example, you could do it based on tenor. Hey, if you've been with us for two years, three years, four years, you get priority for the off season in terms of hours, you could do it that way. What I have found work really well is presenting to your team as, hey, during the off season we do not guarantee hours for these three or four months. If you would like to go get another job that is guaranteed 40 hours and indoors during a season at a time of the year when you don't really want to be outside anyways, great. You have a guaranteed position on this date when you return and all of a sudden you'll get enough people volunteer for that to everyone else that is in the business needs basically full time work. That has worked out for me year after year after year. Now if no one wants to leave, they've all basically opted into the fact that they're going to have less hours and then I'm going to prioritize the hours based on how long people have been with me. It's probably the only time tenor comes into play when with with my businesses is during the off season, if more people want to work then the hours that are available, the tenured employees are going to get the hours. If you just showed up two week, two months before during leaf season, now we're going to off season and skinny hours are getting a little skinny. The hours are going to go to the person's been with me for two, three, four years. I want to incentivize that tenor mostly with that. The same way they have been very loyal to the business, I'm going to be loyal to them. When hours get skinny, they get first dibs. But very rarely have I had to do this because I simply honest with the team. Say hey, if you don't want to work outside during the off season and you don't want to have less than 40 hours a week, you can go get something else and come right back here. And if I have a profitable enough business, I know that I can pay more than anyone else and they will come back and time and time again, assuming you're able to pay 5, 6, $7 more per hour than all of your competition, they will come back to you in the spring rush. I went to business school for two years to get my mba, my Master's in Business administration. I've compiled all that information into over 100 videos that that are useful for small business owners. You can find it mba for entrepreneurs.com it's completely free and it takes those two years of business school and smashes it down an online course completely free. And so I've seen this time and time again work out very well. Give the offer to your team a month before the off season and simply say if you want full time hours you can go get them someplace else indoors, a little easier working conditions and then come back here with a guaranteed start time. Those people opt out and everyone else is just enough to be able to keep all their hours fairly busy throughout the off season in terms of like justifying payroll and trying to sharpen leaders. Most of the time sharpening leaders is going to happen for me during the busy season when I have new people. Because a really easy way to be able to foster leadership inside the organization is have new people paired up with the people who have been around for a while and then I'm able to distinguish leaders in that process. So the training process is very much like hey, this is what you do on day one, day two, day three, day four. But I am looking for the trainer that really starts to thrive in that environment as potentially a leader down the road. But I'm not hiring New people in the off season, typically. And so during the off season, I am trying to optimize for all hands on deck, as much work as possible getting done to make sure we have profitable quarters. I am not interested in having more team meetings explaining the PNL like those things happen, but I'm not going to double down on it during the off season just to keep people busy. This is the mistake I made back in the day when I first started Augusta, and that's why I lost up to like $100,000 a year during the off season, is I'd be okay, we'll go over the piano a bunch, we'll clean the shop, we'll reorganize things, we'll sharpen a bunch of extra blades or reorganize and adjust things and opt. And like I spent so much money in labor that is not. Was not needed, but I just did it to keep people busy. And so a lot of times, leadership during the off season, many times, is simply you're trying to keep people busy and give them their hours. And in my opinion, that's not. That's a recipe for dis. Home services I would optimize for. How do we get as many work working hours done during the off season and then when there's new people around, there's spring rush, there's a lot of leads, and I need people to start stepping up to delegate things to them inside the organization. That's when I'll focus more on leadership, even if the team has been seasoned fourth on the docket we got most winter upsells are desperation plays, which services actually build recurring revenue and which are just fool's gold. So in my opinion, all you're trying to do when it comes to thinking about winter services is you're trying to do two things. You're trying to push demand and you're trying to pull demand. You're trying to push demand off of your fall season and you're trying to pull demand forward from your spring season. Now, if you're listening in Australia, flip this completely around. Think of it as, as I go into the off season, I'm trying to pull demand, push demand off because I'm super busy right before. And then when I'm going out of my off season and into my busy season, I'm trying to pull demand forward. That's all I'm trying to do with any offer, any recurring service, any winter service, whatever you want to call it. All I'm trying to do is push demand and pull demand. That's all I'm trying to do. And so when you're creating an offer going into an off season, what you're trying to do is actually get them on a recurring basis too so they don't have a bass a massive one time project that is going to keep you busy when you have tons of leads coming in. I want to push that demand off by convincing them that they will save money if they don't do it in one big shot. But we let it break it up over the course of 8, 10 visits throughout the off season via winter services. Now as I go into December and then January and then February and I'm coming into my spring rush now, the offer is much more hey, let's get this done before everyone else jumps in and you're waiting six weeks. Let's get done now. And you can have savings attached with it. So I'm a big fan of, you know, I do not think that upsells are desperation play. It is more a matter of I'm willing to discount in order for you to be able to adjust the timeline in which you are expecting services to be done. Everyone wants their leaf cleanup in November. Everyone wants their spring cleanup in April. But I can't get everyone in, especially let alone new customers when I'm trying to grow the business. And so what I'm going to try to do is get my existing customers try to push their demand off. So instead of November, it's like hey look, we will do a cleanup in October and then we will do recurring maintenance every two weeks throughout the off season, throughout the winter. And then your property will look good and you'll save 20%. And I'll do the math for them. I'll explain it to them and it'll take actual effort to explain to them that they're actually saving money if they push demand off. The same thing is true when it comes to spring spring time. I'm going to be trying to sell in January and February customers on the fact that hey, you usually have spent sixteen hundred dollars for your spring clean. We trim all your bushes and all that. We can do that in February. You're going to save money. I'm trying to pull demand forward to accommodate the fact that I have an off season. And so I do not think it's a desperation play. I think it's really a matter of building the recurring revenue allow you to pull and push demand. And if you're just doing one time project, it's very hard to convince someone to do a spring cleanup even two months before when they're not thinking about it. It's very difficult. So I've got to use discounts or the recurring nature of keeping their property looking good via winter services. So it's not fool's gold. It is simply a function of. I do not want to turn off my ads when customer action cost is at lowest during my my rush. And if I the reason I do that is because I'm busy servicing all my existing customers. And as you should, you should take care of the customers who are already paying money. Already existing customers should get priority. I agree, but can I pull their all of their jobs forward so they're already done so that I can keep advertising when my customer acquisition cost is 10 and 20% of what it is during the off season. So that's the objective. I would rather give up some margin, give some discounts during the off season to take my existing customers and move demand into the off season, whether it be from the fall into the winter or from the spring back into the winter. Either way, I'm trying to push or pull demand. I'm willing to give discounts so that I can continue to grow and expand and get customers for pennies on the dollar during my my busy season. And the vast majority of people turn off their ads when they get busy. Like when they're overwhelmed with work. They turn off ads literally when they're the cheapest. And yet they'll turn them on in the middle off season when it costs 150, $200 per customer, fifth on the docket, last and final on the off season. Power moves number five. The real reason culture erodes in the off season. Your managers only know how to react to chaos, not lead through calm. This is, this is actually a crazy one. So one of the stages of being a general manager at Augusta Lawn Care is to get through an off season and to be profitable. Like get four quarters straight of profitability. I actually find sometimes the hard part for a new general manager or a new owner, once they go through a spring rush and then a summer and they hit fall and it's like, whoa, there's no problems. Like I'm used to running from place to place and people having issues and constantly being busy and all of a sudden like my team has been with me for six or 12 months and things are going smooth and we're profitable and what am I supposed to do next? And so I think a lot of times if you have a very sales oriented general manager or you have a very growth mindset, a general manager with a very growth High growth mindset. Sometimes going into the off season, when things are going really well, you're really profitable and they they're not trying to grow, you're not trying to hire people late in the season, etc. It can actually lead to them feeling complacent and like they're not getting anywhere. And so this is really where having solid metrics of how much cash you need for the next spring rush is important. Because then they feel like they're working towards something to get the cash reserves to be able to grow next spring. Because many times the vast majority of our profits are made in the second half of the year in the last six months. But all your growth is made in the first six months of the year. But if you don't make enough profit and cash stacked up in the second half of the year, you don't have enough ammunition to keep marketing, hiring, buying more trucks and equipment in the first half of the year, that's after the off season. And so be very clear in terms of what you want for next year's growth and then how that ties to how much cash you need on hand. That way there's benchmarks that they're still striving for. They're still trying to be as profitable as possible in those last few months of the year. Because it can be weird when for four months you've been like working crazy hours, stressed out of your mind, hiring more people, doing door hangers, yard signs. We're doing ads, leads are pouring. All of a sudden the leads aren't pouring in. All of a sudden you aren't hiring anyone else because everyone's sticking around and they're on profit sharing, making great money on P4P. And it can actually be a weird thing for a manager or owner to go through. And that is. We're doing okay. Okay, well, what's yet next year's plan? Are you going to start a new location? Are you going to buy more trucks? Are you hire more people? Do you have revenue goals? Okay, those revenues goals are great. You're going to dou year. How many more trucks do you need? Oh, how many employees? Oh, you need new shop space. Okay, that's all going to require capital, so we better make sure we actually budget for that and then hit those benchmarks in the second half of the year. And that's the thing that usually will keep that person motivated is like, I need X amount of cash if I'm going to hit this goal next year. And then they can stay on that trajectory of optimization. Raising prices and really refining their customer acquisition throughout the second half of the year when all the profits are remade. And usually there's less chaos and happening in the business because when you start doubling and tripling the lead flow coming in, that's when chaos happens. And that's what the spring rush is. Whenever you double or triple lead flow, whenever you double or triple the amount of new customers coming in, you're going to create massive amounts of chaos because you also need new employees. You get new employees, which are the hardest to train, the least efficient, make the most mistakes, along with a whole bunch of new customers and a whole bunch of leads and phone calls pouring in. From the admin perspective, that's a recipe for chaos. And so when that slows down, that's also when your profits come up. Because now you have tenant employees, customers have been with you for a long time. So be very careful to not get complacent during that time because that's when you need to actually focus and lock in to make the profits necessary. So next spring rush is less chaotic. All right, those are some of the off season power moves, in my opinion. If you can do those things, that's going to be the thing that difference the differentiates the $5 million operator from the person that can never break $500,000 and in annual revenue. And it's certainly the distinguishing factor as whether or not your home service business will be profitable over the course of the off season. All right, if you enjoyed this one comment below, I'll keep doing these kind of higher level podcasts as long as you keep commenting and let me know what you enjoyed. So in the comments below, let me know what you're going to do this week to get ready for the off season or share a tip with what you've been doing for your Q4 collapse to prevent it in your business.