Only $3,500 Left After $300k Revenue | Confession Booth

smarter to go ahead and just jack up our prices and lose those customers, like I know you talk about often, or if we should be focusing on path leads.

On a $300,000 annual revenue business, if you raise prices by 20%, that's $60,000. If demand is higher than supply and you cannot increase supply, price must go up. The alternative is you are saying no to customers that would otherwise be happy to pay you the higher price. Netflix is able to just increase prices by 50% on their subscription and No one bats an eye. So many people inside of home services are providing a very high value to customers and charging way too little. And we're so afraid that if we raise prices, we're gonna, they're gonna leave. You're not. As long as value is higher than price, they will stay. The vast majority of home service businesses, their problems would be solved if they just raised prices. That's the fix. What can I help with?

So I'm gonna be hiring an office manager and a virtual assistant, super qualified, starting June 1st. Right now I have 2 full-time guys and 2 part-time guys, and we're running 1 crew a day pretty much And then sometimes I say probably twice, 3 times a week we'll run 2 crews or myself or one of the business partners will get out and run a crew for projects or overflow mowing or whatever's left. We're doing between, I'd say, 14 to 20 properties a day, 4 times a week. Right now we're generating somewhere around $750 to $1,000 in revenue a day for mowing. We're usually doing one larger project coupled with a few smaller sort of like bed cleanouts that I contracted at the beginning of the season. A large part of my question has to actually do with these contracts because I feel like it's time to raise prices. We're kind of in this place where our asset capacity would allow us to run 2 crews pretty consistently. We don't have the manpower and I've held off on sales. I felt very comfortable selling jobs, not having any trouble finding leads, closing leads, and, and kind of getting the ball rolling on that side. But, um, my concern is Should I completely pack out asset capacity first, um, or should I raise prices? My concern with this is that our current books are showing that we were somewhere around 30 to 40% profitable last year with, uh, right at $300,000 in revenue in our first year. However, we don't have the money to show for that. We don't actually have that money sitting and available to use or utilize. We're, we're a cash flow business that's floating somewhere around, I would say, $2,000 a week from week to week after payroll and after, you know, salaries are paid and all that jazz. My hopes are that adding this VA is going to free up time for me to sort of get doubled down on focusing on systems and sales, etc. But no, with where we're at right now, it's smarter to go ahead and just jack up our prices and lose those customers like I know you talk about often, or should we— we should be focusing on on, you know, capacity.

So right now, how much cash do you have in the business?

Right now, after payroll this week, we'll have probably $3,500 sitting there that's free. Um, and we have roughly, uh, I, I know that, you know, on this call I should know this, but I say I think we have about roughly $1,000 to $1,500 in monthly expenses between CRM, uh, tax and, uh, tax accounting and bookkeeping, and, um —there's another fee there that just escaped me now, but it's roughly $1,500 in interest.

So this all comes down to your risk tolerance. If you're pro-growth, you could do it. Do I think on a $300,000 annual revenue business with $3,500 of cash in the bank, we should be spending that cash for growth? No, from my personal risk assessment. But if you're like, hey, I just want to grow this thing and I got tons of leads and I just need to go get another truck, you could probably spend a couple thousand dollars on a truck and a down payment, get some debt. That'd be very pro-growth and very pro-risk. And so it really comes down to when you go to sleep at night, do you worry about how much cash you have to make? I would, but you might not.

Yeah, I definitely am. I mean, I've got— it's myself and two other partners. One of the partners is taking a salary because of his investment, but isn't always available to actually generate revenue. I am the managing partner. I'm operating everything, hiring, firing, most of the systems are built on my back. So cash flow is super important to me to kind of get ahead of that. My concern with raising prices, and I think that raising them 20% to just try and be aggressive, you know, would definitely help us. But at the beginning of the season, I used, we used Jobber, and at the beginning of the season, I took the optional line item tool and basically created a menu. Of optional services for our customers with everything that we offer on it. And I've got, you know, probably 160 active customers. I would say 90 to 100 of those are recurring. And there's a lot of services on there such as winterization, startups, bed maintenance, um, some, you know, light tree trimming, just like maintenance services that are on that list that I'm feeling are, are probably underpriced. And some of our timing has been off, waiting a little too long to get started on some of those projects or is getting bogged down with, you know, people getting sick or whatever that might be because we're obviously a young business. What are your thoughts on raising prices on all those services? The contract doesn't say anything about a price lock, um, but it also doesn't say anything about our freedom and ability to raise prices if we want to. And I'm just not— I'm just curious your thoughts on whether that's a disingenuous thing to do, if it's a smart move if we wanted to go that route, and what you think.

Yeah, like To me, I say raise prices across the board by at least 20%. The reason for that is this. You are saying we are, we are, we do, we have plenty of demand. We have plenty of demand. So we have demand over here. We're getting leads like crazy. I'm going to go on a limb and say you're booked out. And if you wanted more work, you get more work tomorrow. Is that right? Yeah, absolutely.

I have a sales background.

It's very easy to do. Are you currently spending money on marketing?

Very, very, very little. I built our website. It functions. We get a couple of leads from there, Facebook, and then we pay for some tax. Mike Andes, but I have it on the lowest budget possible. So I'd say we spend maybe $300 a month on advertising. Okay. Okay.

So right now you are supply constrained, meaning you need more trucks and equipment and employees to be able to make up for the fact that you have so much demand. And so the only thing to do in this case, if you don't increase supply, is you must increase price. And so whether or not it's in— in disingenuous or all the rest of it, it's like these are the basic principles of economics. If demand is higher than supply and you cannot increase supply, price must go up. Because the alternative is you are saying no to customers, demand, leads, that would otherwise be happy to pay you the higher price, but you have to say no to them because you're stuck at the amount of supply you currently can afford and you can't serve more customers. And so you need to raise price to be able to get rid of some customers, reduce your close rate, and make room for better, higher-paying customers. And I understand the connection with customers, or they supported you in the past, they got you to where you're at, but the thing holding you back from where you wanna go is trying to serve the customer that's your lowest paying, that you are not making money on, and it's keeping you from growing the business. And if you have a $300,000 annual revenue business and $3,500 in the bank, from a 4L Framework perspective, your constraint is liquidity. And so you can solve that very quickly on a $300,000 annual revenue business. If you raise prices by 20%, that's $60,000. Of profit going to the bottom line. And we can only do that because we know that we have plenty of demand, that even when we raise prices, supply will be— that's fixed. Demand will be just fine. Like, assuming you raise prices and you still believe you get more customers, there's no reason not to raise prices. And so for some reason, this industry, it's just, it's just amazing how much we overthink price increases. And I'm guilty of the same thing. You get to know the original customers, you're thankful for them, you want to serve them. You got to know them, you don't want to lose them. But it is amazing to me that everyone that says that in home services also in the past year has almost for sure had a price increase from Microsoft, had a price increase from Google, had a price increase from Netflix, and we haven't batted an eye. And they're making 35 to 40% profit margins, and they're making billions of dollars of profit, and they are just fine raising prices. And yet we, working our butts off making $300,000 in revenue with $3,500 in the bank, and we are questioning whether or not we are gonna raise prices. And yet Netflix is able to just increase prices by 50% on their subscription and no one bats an eye. We have to get more confident in raising our prices. Like, it's such a vanilla thing to do. And a lot of times when I say on like the Turnaround Show, people, they say, "Oh, it's so simplistic. You make it, you're just dumbing it down. You're being so, you're saying the same thing all the time." Yeah, like because the vast majority of home service businesses, their problems would be solved if they just raised prices. That's the fix. If you serve the customer well and you have more demand than you have supply, you need to raise your prices. A lot. Not by 5%, not 3%, not a price increase for the adjustment of fuel. 15% minimum. And while at the same time we get worried and concerned, we wonder why all these big bad businesses, the reason they got big, the reason they make so much cash is 'cause they raised prices when they realized that people would stay if they just did a good job. The reason people don't cancel Netflix is 'cause they are okay with spending the extra $5 a month to get unlimited shows. 'Cause going to the movies is gonna cost 'em, let's just call it $20. So they're okay with paying $20 a month for unlimited movies. Value, price. And so many people inside of home services are providing a very high value to customers and charging way too little. And we're so afraid that if we raise prices, they're gonna leave. They're not. As long as value is higher than price, they will stay. And so, like, when I started HomeWorks and the software side of things, It's just amazing to me how much they think about price increases and optimization of price. And yet in home services, we freak out over raising prices. And then we wonder why they make money. And like, they're so bad. No, they figured out price optimization. And that when we have a bunch of demand and we do good service, we can raise prices and people will not leave. And if we take care of the customer, when we raise price, they'll understand the fact that fuel has gone up, insurance has doubled, cost of wages have gone through the roof in the past few years. And so why would you not raise prices? And they want you to raise prices. We recently, Brianna and I, we turned down a bid because it was like, they're so low, there's gotta be something wrong. Are they gonna steal it from our house? Recently I talked to Jonathan Patoschnick on the Home Service Millionaire podcast and he mentioned when they moved their house, the contractor they hired was doing 1099s and one of the movers stole $80,000 worth of their stuff. Our moving company stole like $80,000 from our house when we moved in. What? Yeah. Are you serious? Yeah, yeah, we know 100% it was the moving company, but we couldn't do anything about it. They're all contractors. Do you think in the future someone like Jonathan's gonna be price sensitive sensitive on who's going to be their mover? Let's get the cheapest person, honey. It's not happening. It's $80,000. So I'm going to pay a little more for the company that has W-2 employees and a professionally wrapped truck and hasn't changed their name 4 times in the past 10 years and make sure that their employees are trained and uniformed. I'm gonna pay more for that. And yet all of us are trying to provide that value and service the customer without charging the prices required to do all of those things. It costs money to have software. It costs money to answer the phone. It costs money to have uniforms and trained employees. It costs money to have insurance, and yet we're trying to compete with people who don't and think that somehow we're supposed to have the same prices as them. It's ludicrous. Alright, so there is a national travesty. The media team just let me know, and that is that over 60% of you watching the video have not subscribed. You're missing out on all sorts of good stuff. Usually the videos with the least amount of views have the most amount of value for you and for your business, and if you're not subscribed, you don't get notified because it's not going to show up on your feed. So I highly recommend, click the little bell, get notified, and subscribe today. Thanks. All right, next one coming in, coming in hot. Welcome to the show, thank you for coming on.

So first location got to $900K, and then we just built our second location, and within the first 4 months we hit, this month we'll do $130K in the second location within the first 4 months. The goal is to get to $11.2 million in revenue. I guess my question is like, With production at like around $1 million in revenue, um, do you think there's a way to do it without a production manager and just keep that profit? Like, I'm just right now kind of in between, like, either systematizing it to the point where it's like just super efficient without a production manager, or like I hire this overhead guy, which we have in the first location as a production manager. So I'm kind of stuck in between that right now. Um, and what's the most efficient way to do that, you know?

So if you don't have a production manager, who's going to like lead the crew? Who's that?

Yeah, I guess my thinking is like these guys should be able to lead themselves in a sense of like if they're getting 20% of the job, you know what I mean? Like most of them are making $45 to $50 an hour right now. Um, like, my thought was like, what is the production manager actually doing? You know, because in our first location we have one and he's great, but it's like, if the system was set up so proper, would they be actually able to do the same thing without that overhead guy?

Here's my question on that first location. I have two questions. First off, do you think the current production manager at the first location increases the efficiency of the crew by 10%. Yeah, of course. Yeah. Okay. So that was like an of course. So I was looking for how much you reacted to that. That's their wages. And so although you could create a system to probably get rid of the production manager, I have a feeling that removing that production manager from Location 1 would reduce efficiency by less than or more than 10%. And if you do that, that's $90,000. Yeah. And especially when it comes to technicians, regardless of how much they're being paid, like we have seen consistently a great manager can get 20 to 30% more discretionary effort from that team. And so it sounds like you have that person.

So the next question is— Go ahead. For that production manager, the— because I'm bringing— I'll bring a guy out from a lead tech to a production manager, but the issue is right now he's getting 20% of the job, right? And then the production manager, like, I just want to find a really good incentivization structure for when we go to like 10 locations. For the production manager itself. So one thing that was working well in the budget was 10% of overall revenue. Like, it does kind of work out. I know you probably hate that for a production manager, but like, how do you incentivize the production manager the same way that you incentivize the techs so that he's put— like, you know what I mean? So he's pushing it too.

Yeah, the challenge becomes if there is no one to do quality control, um, because if everyone's incentivized based on revenue, you will make more revenue but what can hurt is the long-term brand equity of the business. And so, um, it also can hurt the long-term profitability of the business. And so like right now on the $900,000 first location, what's the profit percentage per year average?

Yeah, the profit, like I would say like around like 22%.

Okay, so that's the number that you care about. When you leave there every day, the only number you care about is that profit And if the production manager is a huge piece in, in the puzzle as to whether or not that location is profitable, I want them to think about profit, and I want the techs to think about revenue. Because I want the technicians thinking constantly about being efficient, doing high-quality jobs, there's not callbacks. But I need someone thinking about profit in terms of equipment maintenance, in terms of shop and overhead expenses. Otherwise, those things will just go on a tear. Like right now, how is this production manager being incentivized? In terms of bonuses?

So the first location, he's like, he's, he's at, um, he's at a salary plus, um, plus 10% of the profit of the business paid quarterly. So the only thing is, in the second location, I'm just thinking like, I'm going to take this tech from, you know, 20%, like, production pay, right? He's making like probably $8,000 to $9,000 a month right now. And then I'm gonna drop him into something where it's more of a quarterly thing. So what I was thinking is just tweaking that to monthly. But yeah, the first guy gets paid 10% of profit and then he owns like 5% Phantom stock and then he gets paid around like $75,000 a year.

Okay, so Phantom stock is sometimes tough with home services if you're not gonna exit. Are you planning to exit down the road?

To be honest, man, it was more of a thing where I just really wanted him to feel like he was part of it, you know what I mean? Okay, so it was, it was more of that kind of thing. I would say I'm not sure about the, the 5-year plan if we want to exit, but I do want to make it to— our goal is $11 million in 5 years.

So, so the 5% phantom, I think I would explain that better to a, a production manager because right now to them that doesn't mean anything. They don't even know what that means likely, and if they do, it doesn't actually move the needle for them because unless you're planning to exit, phantom equity does absolutely nothing because they have no ability to make decisions in the business in terms of from an equity perspective. I would say this. I think he knows that.

Cool.

So like, I think you have a great model and I think trying to tweak it would be crazy if you're doing 20 to 22% profit margin and in 4 months you were able to spin up the second location, which we consistently see. This is where you start having trouble because like now you leave the first location and you get a second manager. That's always the hardest hire. 'Cause now that person will be compared to your first production manager. And now you have to become a leader of leaders, which is now 2 people, not just like someone underneath you in production management. But the fact is you have built a model that gets you to $120K per month in 4 months. Is that mostly recurring revenue?

It's no recurring revenue, it's just soft washing roofs.

Like, okay, so I think you've built an excellent model, and if you're able to figure out making it more recurring revenue, it would be phenomenal. Like really, really good. Because right now, you've been able to figure out how to get to where they can make profit quickly. The biggest problem is if it took you 4 months and you did like $15,000 a month in revenue, there's no profit to give the person. And when it comes to like going from quarterly to monthly distributions, for example, or like profit sharing, that comes down to whether or not you're consistently profitable. And if you're consistently profitable every month, then I'm cool with monthly distributions or monthly profit sharing. If there's ups and downs or there's 3 or 4 months of the year where you're negative, that's where it gets really hard to give monthly distributions because they just all of a sudden don't see a bonus for 4 months and they're used to that monthly bonus and you don't plan on it, but they plan out from a budgeting perspective of what they think their bonus per month is going to be. And so I would only switch from quarterly to monthly profit sharing if you're consistently profitable every month. But at $120 per month, that's really good. It comes down to whether or not you're making, you know, $30,000 or $40,000 in the winter, and all of a sudden you have negative months.

Yeah, yeah, that makes sense. Yeah, so another question I've had for you is like, what's your thoughts on like the CAC being high and then raising like an average ticket, like adding like gutter guards or something just to raise, raise the average ticket so you can spend more for the customer?

Yeah, I'm a fan of that. Would you increase average?

Yeah, yeah, yeah, average.

Yeah, I, I love increasing average ticket on any project. What I would prefer is we increase the quality of the revenue. I would rather you do $70,000 a month in revenue, but it's mostly recurring or a big chunk of it is recurring compared to $120K per month of one-time projects because very difficult to give— like if you're going to start duplicating these and copying and pasting this model, like you prove that you can scale quickly, but can you figure out a model where after 4 months you have $120K of one-time projects but you also have $20,000 a month of recurring revenue that you've been upselling customers on where you come back annually and do cleaning or maintenance or something of the sort, because that business is much less likely to have downturns during the off-season and it's easier to find the operations manager that's not constantly on the hunt for new jobs. And so although increasing average ticket would be, would be awesome, the highest leverage thing to do is to create recurring revenue in this model.

Yeah, and then for, for Augusta, you guys are just— is it just like, uh, before sales process? Like, it's just you guys are hitting them with the recurring revenue ask, like, every part of the sales touchpoint, like the sales motion?

Yeah, so if someone's asking for a one-time project, you could in the estimate give them the option for the maintenance of that, or annual inspection, or tie the warranty to them getting on the, the annual inspection. It's like, hey, we come out annually, we do this office cleaning, and if you do that, you also get a warranty, no money asked, no, no cost to you. We will replace whatever on the work we did originally. And so you sell as a warranty, you say, as a— sell it as a guarantee, you sell it as maintenance that they're going to need so they don't have to do it again in X amount of years. And you can grease that at the very beginning of the process when you are making the original sale, when you are giving them the price for the one-time job. But most of the time that's gonna happen after they've paid, they're happy, you've proved that you do a good job, and then you show them the math of, hey, doing this every 5 years, here's what it's gonna cost you. Doing it every year is gonna cost you the exact same, but now you're gonna have a warranty, we're gonna have a guarantee, it's gonna look good, you don't have to wait for it to look bad again, and now you have some resemblance of a recurring revenue model. And so if you have a $5,000 job, I'm just making stuff up, If you've got a $5,000 job the customer just paid for, my whole objective— this business gets 3 to 4 times more valuable and much more scalable, and you'll have way more confidence in copying and pasting this if you can turn this $5,000 job into a $499 annual inspection when you come back. Like, that's crazy. Well, if the gutters are going to last 20 years and I can make $500 per year on that, I made $10,000 extra. And so although I could, you know, try to upsell this $5,000 person to gutter guards, get them to $7,000, the real moneymaker in the long term is tripling the amount they give me from $5,000 to $15,000 because I get them into this annual package. Now I would love to get them to quarterly, I'd love to get them into monthly, I'd love to increase their occurrence as much as possible. I'm just giving the example of the quality of the revenue is far more important to me than the average ticket. And this whole model that he's built is phenomenal. The fact that in 4 months you get to over 6 figures per month is— just keep doing what you're doing. Like, don't figure out how to try to cut out your production manager. Just keep doing what you're doing with the 22% margin business. Copy and paste this. However, there's this big asterisk when I see one-time work, because that can dry up very quickly. Can be a recession, this production manager going down, them losing the ability to sell, them getting distracted with something in life, and all of a sudden, if my revenue drops in 3 weeks, it's hard. I can, my revenue can drop on a recurring location, recurring revenue model. It can drop over the course of a few months if my general manager starts to check out. It can. However, it doesn't, it can't happen like a week of them being bad, which is the case when I have to kill to eat every single job. If I have to keep killing and eating $5,000 jobs, I'm just on this constant treadmill of customer acquisition cost, sell them a $5,000 thing. Customer acquisition cost, sell them a $5,000 thing. If I can instead get the customer, sell them something that they constantly are coming back for, I can get the next customer and build on top of that revenue. And yes, it'll take, it'll be slower. You're not gonna build $120,000 per month of recurring revenue business in 4 months. But if you can build this as one-time jobs, but then sell them into something else, you can, sell them into recurring maintenance, you can sell them into a warranty or a guarantee and get this to $20,000, $30,000 a month in recurring revenue, the quality of that $20,000 or $30,000 a month revenue is far higher than $100,000 of one-time projects. All right, next caller. Welcome to the show. Thank you for coming on the confession booth.

I gotta confess, I bought land, put $40,000 down. It was supposed to be where I could get my money back out of it, like my initial investment and pay myself back. That didn't work out at all. Change. I got started and I got into this because the small city I'm in, just outside the big city I service, at the time the administration wanted to say that the owner didn't have it zoned right. And now I've got this place built and it's like right at final inspection. But the owner, he's been trying to sell it, but he wants way too much for the land that I'm on. It's actually— we're so close to $800,000, it's like I want to just keep this place. I like— but that payment would be probably— I think it was $3,500 last time I looked, and that would be even more down, uh, 20% down. But it's just like, if I go where I should go and be close to my service area, everything's at least 3 to $5,000 and it's not as big. It's— I just, I'm scared like I can't operate it, operate out of there. Um, this guy says that he'll give me 1 year on a lease and raise my rent from $1,200 to $1,600, which I'm okay with that because of the security. I think it's still not that long, but it's a problem I need to solve. But at my size, I'm trying to you know, the office person, be in sales of, you know, my guys, 10 years. And, you know, I've got a virtual assistant. Last year we did P4P service autopilot and I built this place. The good side, it's got a hundred— I should have about $100,000 in equity, but it's just, I kind of created a mess and it's like, yeah, I'm trying to find the best path out.

Okay. You're talking about equity, but then also the owner. Do you own the shop space right now?

Uh, so there's two separate shop locations, the one I built and the one we've been in for 3 years.

Right now, why would you not just— if the landlord pulled out from underneath you and said after a year, hey, no, we're out, why could you not just go to the second shop space?

Because it's not zoned correctly. And I guess I forgot to mention that. It's ag. Okay. And so that's the one you bought? I don't think that—

That's the one that you bought? Yep. Okay, and so can you get rid of that one? Is it useful? Like, can you use that one or not really?

Okay, so that payment will be $3,200. It's— and it gets my guy of 10 years that he says he can't afford himself to move 45 minutes closer. He moved away like 4 years ago. I tried telling him, please don't do that. But he might have been spending in excess, and I have no idea. But now he's paying for it like crazy. We could keep it, he would pay $1,000 a month rent. That was like the original plan. And then my rent's only $2,200. And then it's like, if I run fully out of there, I'm just waiting. I'm a target for somebody to complain.

So why did we buy that land? Was it just a function of we didn't know that we couldn't operate from there?

I just, I made a bad decision at the time and rushed it. And it was either go pay $5,000, $6,000 in a whole new area and then have to drive further, like from my house, like to a shop that I'm not set up with. Or it was like 3 minutes from my house, buy some land. I know that I could have this issue and now I'm paying for it.

Like, it was just honestly a dumb decision.

Okay. Uh, I was rushing it and it's like, $3,000 versus $6,000. Right.

Well, here's the thing. Right now, your rent is actually $4,400 a month, because the utility that you're actually getting—

Yes, that's what hits the books.

Right. And so, in my opinion, I would cut loose of number 2, the ag land, as fast as possible, because you know you can't use it. And even if you did rent it out to this employee, it's like one-third of the cost that you're paying on the mortgage. So, like, you're already upside down on it. And then it's a function of like, well, worst case scenario is we lose the shop space that we currently are at for $1,200 a month. And what's going to happen? I'm going to have to go spend $3,000 to $4,000 a month on a lease in another part of town that's probably close to my service area. But guess what? You're already paying $4,400 per month. Yeah. So like the worst case scenario is that we—

go ahead. It wasn't— oh, oh, I'm sorry. I was going to tell you originally the plan was I thought I was going to be kicked out of this one and I was going to plan to move everything there, fly under the radar as long as I can. And I knew that from the deal I've done, I should for sure get my money back. I probably won't see $100 grand, you know, profit. But it's like, I don't even care about that. I just want out of the situation pretty much.

Yeah, I was still going to take some time, but I'm I would sell it as fast as possible. You can't use it. You're never going to rent it out and make a cash flow. So it's not like it's an investment and you're never doing agriculture. That'd be another distraction. So like, I'd get rid of that as fast as possible. I would also just double down on growing the business because this is right now sapping your mind space. And it's like, what happens if in a year my rent— I can't get the $1,200 a month rent? The worst case scenario, if the, if the landlord doesn't renew your lease, is that you go get another shop space for $3,000 to $4,000 a month, which is already what we're paying right now. But it would be in a better part of town and probably closer to our market and our customers, which by the way, even going from $1,200 to $4,400 a month, you can run the math very quickly. It's okay, that's, well, that's what, $3,000 more? $3,200 more. Well, if you have, let's just call it 6 employees, we could very well have a, make a lot of sense of actually spending $3,000 more if we're 15 or 20 minutes closer to all of our customers. Just in terms of drive time. And so I think the worst case scenario is not that bad. But the thing is, right now you are fighting a dragon that doesn't exist. And doing that in the past and crossing a bridge before you got there is what caused you to buy this land. And so instead of fighting the dragon in front of us, we fight the boogeyman that we can't see. And to fight the ghost that we just think inevitably is gonna happen down the road, and what we do is we make dumb decisions because of it. So you went out and bought this ag land because you were afraid this rent was gonna go away, this shop space. It didn't. And so let's not double down on that by getting concerned about keeping this land when we know we can't even use it. Cut your losses by the fact that we fought a boogeyman that didn't exist, 'cause we still have this shop space. And I happen to believe, it's been a year, it comes this time, and the landlord's like, hey, I wanna get rid of you. And you say, hey, can I give you $1,500 per month, i.e., a 25% increase in rent? They'd be like, you know what, let's go ahead and renew that lease. And now all of a sudden, this does not become a problem. And so many times, if we even break this down to— let's look at this. So if we have $3,200 per month right now is the— like our whole problem, the worst-case scenario is this landlord kicks us out and we have to go to another shop space. And that is $3,200 per month, alright? So we run $3,200, we times that by 12, that equals something like 30— something like this. This is the worst-case scenario. Of you getting kicked out of your current spot in a year, you have an $800,000 annual revenue business, alright? $800,000. Meaning this constitutes about 5% of revenue. Meaning I would be building the business in a way which I just need to raise prices by 5% and this, this whole problem goes away if I can raise prices by 5%. And so the vast majority of us are facing issues inside of our business that if we just built a better business and were able to raise prices 'cause we had better service, We have better quality, we have a better website, better systems, better procedures, better software, answering the phone, better communication. If we just did those things, this would not be a problem. And this is the worst case scenario. And by the way, I also think you'd probably end up saving about $20K just in the fact that this new shop space, in the worst case scenario, would be closer to your customers. And you'd save in payroll and extra time driving back and forth from the shop space that is currently far away from all your customers. And so many times when you play out the worst case scenario, it's a small fraction of the percentage of your business. And so that's why I just focus on growing the business, making it more profitable, having a better team, the simple stuff. Because the actual boogeyman that you're facing is 5% of revenue, 5% of revenue. I have seen people add whole lines of service and build out new brands and build out websites and whole new ways of doing their business, and it adds like 3, 4, 5% of their revenue. Versus just focusing on the majority, where all the good stuff is happening, and just making it better so they can raise prices. Making it better so it's more efficient. Making it better so they retain their team more.

What can I help with? Under $100,000. My dad's been running this for a few years now, but come to the realization that he doesn't know how to scale it, and me as his son, like, I'm coming into this, I'm like, what can I do to help him scale? Recently, I partnered up with a few agencies to like, obviously like Sales Cheers Off to like bring in more leads, help with the sales process, all that kind of stuff. And I started working, working with them last month, back in April 5th. This, wow, few days ago, I was doing my calculations. I realized that I spent a total of $3,000 to work with that agency. And in return, I've only, I've generated close to $5,000 to maybe pushing $6,000.

I'm breaking into ads.

I guess I want to hear your expertise because I'm doing this all alone. Like, what can I do to help me scale to the point where consistently I'm bringing in 5 figures a month with obviously monthly recurring revenue with monthly maintenance, plus like those big extra jobs that obviously help bring in more revenue?

Okay, so just to be clear, so you spent $3,000 on the ad spend, or is that on the management fees of the agency?

Yeah, so, so the way it kind of works, I guess you could kind of call it digital knocking, right? They send out blast SMS messages to like homeowners in the area, and then any, any responder that does reply back, they charge me $65, right? So you could just imagine that fee of $3,000 has gotten me about close to 38 to 40 clients, right? But out of those 38, um, not a lot of them respond, right?

Because it's cold outbound, right?

Like I'm reaching out to these people Some of them do respond, some of them do respond, do, do, do respond. And the guys that do respond, like, we go out, make the job. But again, when you're spending $65 per lead, it's like your minimum has to be $300. And sometimes these homeowners are just looking for like leaf removal, right? We're like, it's like, dude, we can't do that. Like, I'm gonna lose money if I do something like that. So I want to hear like your expertise on what I could do differently. Um, I started working with an ad agency as well, like around the same time. I am more so leaning on ads and wanting to replace that digital door knocking because the return on investment just isn't there. And I want to hear like your expertise on what I could do differently to like obviously scale consistently and like for sure hit that $100,000 mark this year.

Okay, so you spent $3,000 on, let's call it ads, but really this is like SMS tokens. What was the management fee on that? Or is that the management fee, the $3,000?

Yeah, that's kind of like the management. So there really isn't no management fee. So the upfront base was $500 for 8 leads confirmed, and then like any lead that they give me was $65 on top of that. Okay, so $500.

All right, and then right now, do you have a website that you're sending people to, or are you just doing it all on like— I don't.

I think I have a pretty good sales process, to be honest with you. I've been in sales all my life since I was a little 17 years old, so I don't have no website. I call as soon as possible. Any estimates I do, I have a 50% close rate, so out of 10 people that I see, 5 of them are for sure gonna own their business and we're gonna run their stuff for them. So I don't have no website.

Got it. So the thing that I would say is when we look at kind of the sales process, I'm gonna go ahead and agree with you that you're really good at sales, but here's the thing. Right now we have prospects and then right now we're paying a bunch of money for them to become leads. You're really good at turning them into, like through sales, turning them into customers, but the problem is we don't have any engine right now besides paying for $65 per lead to turn prospects into leads. And I think that's the part that's broken because you paying $65 per lead is actually not like incredibly bad. What's bad is the fact that you are if you turn that lead stream off tomorrow, you'd be at zero. And I want you to be able to build more of an organic path through your website. And so, if you're spending $3,000 on ads, I would spend some portion of that and just go build a great website because if you do that and you get 100+ reviews, you're gonna start ranking and getting leads for free. And that's ultimately the long-term game. The short-term game, yes, like, we can make this math work. And if you're closing, let's just call it 1 out of 2, Well, now your customer acquisition cost is, let's just call it $130, and then I'd be saying, okay, great, now that they're a customer, how do we do an upsell process so that we can get customers to pay us more than $130 in the first week or two? That would be the first thing to do, but I also think about long-term. I don't wanna keep being on this IV drip of $65 per lead to this other agency.

Yeah, 100%, 100%, yeah. And that's also a thing, so, In your personal opinion, it's like, don't spend so much on that agency and cut half the price, spend it on the website, improve it, get those Google reviews and all that kind of stuff?

Well, I don't think it's necessarily an or game as much as an and game. Like, you can keep doing this, assuming you have sufficient capital. This math is okay if you convert half of these leads into paying customers and then you get like, let's just call it $500 in the first 30 days. And so I would do two things. First, I would focus on the upsell process of new customers, because right now they are gonna be low-quality leads, but if you're saying you're closing 50% of them, I still have a cost per customer of $130. I just gotta figure out a way to upsell them and create an offer where I'm getting $500 in the first 30 days. Otherwise, I'm gonna have a bad cash flow problem if I'm paying $130 for a customer that has a $200 service and I'm 20% profitable on it. That's a losing formula. And so, the first thing I'd be doing is focusing on my upsell process. The second more long-term thing I'd be doing is trying to solve this lead flow issue of you having to pay for every single one at $65 to where you are addicted to this lead source. Because what happens is if you scale this, if someone gave you, you know, $50,000 tomorrow, and you went and got a bunch of leads, you'd build this infrastructure, and then build this business, and then all of a sudden, you would find yourself having to pay more and more and more in the top of the funnel to get these leads simply due to the fact that if you turn it off, your leads go to zero and I don't want you to help be held captive to them.

Yeah, I'm also, I'm gonna be honest, like, I personally feel like spending $3,000 to only make close to $5,000 to $6,000. I feel like that ROI just isn't there personally when I have been looking at ads and I'm like, ad a lead cost me $10 and let's say I get like a super basic job for like $150 weed removal, like the return on investment isn't going to be a lot better than a $65 just to even consider them. And then, then just tell me they're just looking for a weed quote, right? So I do, I do want to like completely cut off that agency, just not work with them at all no more because I personally don't see that return on investment. Just double down on ads and then eventually, not eventually, but As I'm running up on ads, as I'm fixing my ad creative, as I'm growing my social profiles, break into like SEO, get the website, rank on Google, all that kind of stuff. Like, what are your thoughts on that as well?

Yeah, like ultimately when we started Augusta Leads, for example, this is why we did not charge a per lead basis is because now I'm just arguing about the quality of leads all day long. And so you are always at odds with this agency over the quality of leads because you're paying per lead. I would rather, before you go turn them off or reduce their budget, go figure out, like, right now, spending $3,000 and making $5,000, yes, you're never gonna make money doing that. However, if you're able to spend the same amount of money, $130 to get a customer, and instead of making $5,000 on those customers, you made $25,000 'cause you 5x'd the amount of the lifetime value of that customer, now all of a sudden the exact same lead source makes sense. Before we just discount the lead source and turn it off, 'cause you're very new, like cutting off your lead source right now is like saying, you know, take off the wheels off your car, it's not going anywhere. And so before you start thinking about that, and if you're like, hey, I can go get leads for $10, then yes, by all means do it, but prove that before you go cut out your agency, because I think most of us, there is no agency I've ever talked to, there's no business owner I've ever talked to that hires an agency that loves them forever. Because eventually you just expect the cost per lead to go down when it's actually the opposite when it comes to marketing. And so when you're chained to this cost per lead, I wanna first figure out the downstream funnel of making sure that the customers were so much that I make sense of spending $130 per customer. I was looking at someone's numbers the other day, they're spending far more than that, but because they sell 3 or 4 services in the first month and make $500 plus, they can recoup the customer acquisition cost within the matter of first 3 to 4 weeks. And so I would rather you fix your downstream and then go fix the upstream, because the upstream is always the thing that looks easy to fix, and then you're gonna get into it and realize, okay, like, those $10 leads are also not that great, and I've gotta have a better website to drive them to, and I've gotta be better tracking, and make sure that I'm, have the analytics to track all this in Google Analytics, and now you're spending all of your time doing that instead of just focusing on creating an upsell process that makes a $200 customer a $500, a $1,000 customer.