Q&A w/ $50M Landscaper (Live Call-In Show)

Ladies and gentlemen, boys and girls, welcome to another live stream. This is a call in show. We haven't done one of these for several months. Usually every Saturday I go live with members of Copilot CRM for office hours, but today I figured we'd go back to the original call in show. So if you have a question and you'd like to call in, call this number right here, 361733, 3332. While people are showing up, if you haven't got a copy of the book yet, highly recommend. You can get it for free on the podcast. If you like to listen to it, you can buy it on Audible. If you like Audible, you can get it for a dollar on Kindle if you want to read it. Or you can buy the hardcover. I think it's 23 or 22, something like that. So highly recommend. Check it on Amazon.

I think you'll like it. There's very tactical things inside of here it'll take you about five hours to listen to. If you're a fast reader, you'll probably go a lot faster through the book. Halfway through the book I do give away a course, so it's free if you just have to get to the middle of the book. So that is the book. All right. If you have questions, feel free to give me a call. 361-733-3333. Foreign we're going to prioritize people on the phone lines today. I think it's been at least five months since we did one of these. So thank you for everyone hopping on this wonderful Saturday. Also, if you haven't already, make sure you sign up for Blue collar summit. Blue collarsummit.com it's coming up in January. The site is brand new, brand spanking new. I'm going to be leading a whole day workshop. It's a three day event. Friday or sorry, Thursday, Friday and Saturday. Friday is going to be the entire day will be a workshop. It will not be a bunch of keynotes on Friday. It'll be an entire workshop. Let me actually share with you. Exactly. You can see this view to blue collarsummit.com it's going to be in January 16th, 17th and 18th coming up here in 2025.

So go check it out. Highly recommend. We will sell this one out because it's not as big as we had hoped but this kind of walks you through different keynotes, the breakout sessions, the workshop. So we're gonna have breakout sessions for like anyone over a million dollars in revenue. You have to show your P and L to get into that one. We're gonna have ones for younger guys like under 24, 25. Day one keynotes. You're gonna not want to miss this one. This is gonna be including the one and only from bar rescue, John Taffer. So he'll be our opening keynote for day one. Day two, I'll be doing the full day workshop on this one. No one will be able to bring in any sort of recording device or cameras or phones devices of any sort. Day three more keynotes. Some cool stuff we're going to be presenting there. So definitely we want to check it out. Here's some of the different keynote speakers that will be in attendance and you can go to the website. Check this out. Greg Crabtree, a lot of people know him in the home service industry for the numbers perspective and there's a whole host of others that are going to be joining as well. So go check it out. Blue collarsummit.com Lots of information and you can book your tickets. Tickets probably. I'm like to be perfectly honest, it's going to be towards the end of the year by the time the prices start going up. We're just simply going to do it based upon how many people have registered. So if you're, if you know you're going to come, I just recommend buying now because we're just going to ratchet up towards the end as we fill up the venue. All right, let's go ahead and get started. We got. First caller is coming in, looks like from Washington. Let's make sure that this phone thing is actually working correctly. Can you hear me? Three six zero.

Hey Mike, can you hear me? I can hear you.

Cool. What's up, brother? How can I help you?

Perfect. Yeah, I wanted to ask, do you know who Jeremy Miner is?

I've heard the name.

Okay, so he's like, he has like a style of selling. I'm not sure like you've heard of them. Watched him before.

Okay. I don't think so. To be perfectly. I've heard the name but I don't think I've ever actually watched this content. Sorry, Jeremy, what was his last name?

Okay, Jeremy Minor.

Minor, got it. All right, I'll check it up sometime later.

Okay. Okay. So my question was going to be like when you go out to do estimates like for project, like not like lawn mowing, like instant quotes, what is like that process? So they can actually.

So you can avoid any like objections and things like that that you used to use when you did go out to do like in person estimates like that.

Yeah. So there's several. Go ahead.

No, go ahead.

Yes. There's several things you can do, like in project. The advantage you have with projects when you actually go meet the customer is you can use a lot of different tact other than simply speed around the technology side of delivering the quote. So a couple things is like the number one thing is assume the sale. So like when you're leaving the bid, meeting the customer, even if you gotta go prepare the quote, assume the sale. And that's like, okay, so when we come, this is what we're going to do. Here's how it's going to roll. A lot of times sales are not consummated because the customer's unsure of what the next step is. So instead of just being like, hey, yeah, thank you so much, I appreciate it, the office will contact you back and get a, get the quote to you and then we'll go from there. Instead of saying that, it's just like, okay, so thanks so much. I'm going to make a video for the crew so that when they're here, they know exactly what to do. I'll mention X, Y and Z that we talked about that you really were specific about. And then I'm going to get that over to the office. They're going to send a quote to you within 24 hours and then they'll get you on the schedule as soon as you get that deposit paid. So just assuming that that is all going to happen and then walking them through the next step of the process is the advantage you have of having that in person contact.

Okay. Okay. Yeah. And that's why I asked like, if you knew Jeremy Minor, because what he says is like assuming the sale is kind of like, it makes them feel like, oh, what the heck, they're just, it's like the, like you sound pushy and it makes them not want to go with you.

Only. Only if you haven't built up the rapport. Only if you haven't built up the rapport in the relationship, in the, in that process. And that's the advantage you have of being in person. If you tried to do this over the phone, it would come across wr. But if you've actually done a walkthrough with the customer, listened to their needs, gone over what things they didn't like about their lives, contractor, you really understand them and what they're looking for and not, not just like what they want done on their property. But why, like, what's the intrinsic motivation? And you're Able to connect with them. Making that assumption makes it really simple for them to make a buying decision because everyone hypes.

Okay, close.

When in reality, the closes isn't a problem. If you've just assumed they're going to be on the other side of the clothes, like, the decision shouldn't be a hard thing. It's like, hey, just click this button. Like, like, we've already gone through all the steps are going to happen after this. The only next step of the process is click this button.

Got it. So it would basically, basically be before you assume, you just kind of prepare by asking them questions, like actually knowing why they're looking for you to get this project done. Asking those questions before you assume the sale.

Yeah. Ensure that they, they know like and trust you. Right. And so in that process of 20, 30, 40 minutes, whatever you're doing that walkthrough, you are literally figuring out all their pain points, you're speaking to those, and you're not doing it in a salesy way at all. You want what's best for them. And if you actually believe, you know, if you actually care about the customer and you believe that you're the best option for them, then you're going to do whatever it takes to convince them, quote, unquote, to go with you as the vendor. And so a lot of times the reason people think that they feel salesy is because they don't actually believe that the best option for the customer. And so in reality, most contractors need to sell themselves on themselves first before they go to a customer and try to convince, quote, unquote, them of ever using them. Because if you don't believe you're the best option, if you don't believe you're the best value for the price you're charging, it will come across in the way you sell and you won't want to assume and it will feel salesy because you don't care about the customer.

Got it. Thanks, Mike.

You got it, brother. Best of luck to you. Take care of. All right. Next caller is coming in from 7:5:7. Welcome the show. Thank you so much for coming on.

Hey, Mike, what's up? How are you?

Good. How you doing, brother?

I'm doing good. So I just had a couple, like, two quick questions, or one of them might not be so quick, I'm not sure. So the first one is fairly simple, but do you recommend growing like really fast and then making it really profitable like a little bit later, or do you recommend growing like a lot slower and more profitably?

Yeah. So it comes down to your risk tolerance. I would say this. In general, the most profitable way to grow is determine what your capacity is in terms of if you used all your trucks and all your employees every single day, so max asset utilization, what would that revenue be? And when you hit that point, you're going to be at kind of the most profitable stage of your business because every, all your trucks are being used, all your employees are being fully used. At that point you have the decision, do I raise prices and slow down growth because my close ratio is going to go down but increase profit, or do I go out and buy more trucks, hire more people, increase the capacity so I can continue to grow? The part you're asking is really, what am I willing to give up efficiency of being close to max capacity. What I mean by that is if you right now have two trucks and you're at max capacity, buying one more truck and hiring one more person is going to be the most conservative thing to do. The more aggressive thing to do would go buy two trucks, hire two or three people, and now you've, you've jumped your capacity way higher and now you're only at maybe 50 or 60% of your capacity, which is going to lead to less growth. But it's right, it's going to lead to less efficiency and profit, but it's going to allow for a faster growth trajectory. And so really what I want to know is what is my max capacity using the current trucks and employees that I have? And if I'm going extremely aggressive, I'm going to get quite a bit ahead of that in order to be able to take on usually a spring rush of a ton of leads pouring in and be able to flex into my capacity that I've now expanded. Does that make sense? And is there any follow up on that?

Yeah, absolutely, makes sense. Yeah.

And so it really comes down to your risk tolerance because if you're willing to have less profit and you have sufficient cash reserves, you're probably going to increase capacity, that is buy more trucks, buy more equipment, hire more people sooner than later, so that when you get a rush of leads, you're able to absorb all of it and maximize growth. And hence you are in growth mode. So does that make sense?

Okay. Yeah, makes sense.

Okay.

And then my second question. So this one requires a little bit more about my business. So this year I'm projected to hit like a hundred thousand in revenue or.

Just shy of it.

And I'm solo, like it's just me and I was at home and everything. So I was just wondering when should I start taking this salary? And like, how do I even do that? Like, I honestly have no clue like where to begin with that.

Yeah, like in reality you only take a salary in terms of an actual W2. Pay yourself through payroll. Once you are, you're going to be taxing yourself like an S corp. If you're an LLC right now, get a good, good account at the end of every single year. Be like, hey, like before the, before January 1st. Like, hey, do I need to file a form 1120s and be taxed like an S corp? And they'll base that answer on is the cost of running another tax return going to be less than the savings of being taxed as an S corp? In other words, getting around the 15% self employment tax if you're in the United States. And so that's going to be the calculus they're running. And then you just have to make the determination of make more money. Focus on that right now and just, just take distributions as needed because it sounds like you're in growth mode. Just focus on that and then get a good accountant that you talk to before January 1st to be able to file a form 1120s. Take your first W2 in that calendar year and you'll pay some taxes that way. Yes, you're going to pay more W2 taxes. However, you'll get around the 15% self employment tax. Does that make sense?

Okay. Yeah. Yep.

Awesome. All right, brother, you have a good one. Take care. All right, the queue is filling up, so if I drop your call, please don't be offended. It's not that I don't love you, it's just the fact that I try to make room for people inside of the queue. Next caller. Looks like they're coming from Germany. Four, nine, one. Welcome to the show. Thanks for coming on.

Hey, Mike, Patrick Becker here. Thanks for having me on the show. So I need advice when it comes to marketing. Right now we are drying up a little bit on lead. So we are doing right now 20k in revenue, 12k in profit. We have four people, so two people working full time, one distributing door hangers and me as a reserve. Right now our website is getting in leads. Right now we got unan5 leads or just about 12 bucks cpl.

Then google services kicked in quite nicely with about 18 bucks per lead. But everything else when it comes to active marketing like EDDM and all of that, it's just going down the toilet basically. So right now we are paying it about 90 bucks per lead and right now we are totally stuck because. Excuse me, because right now we are booked out for next three to four weeks. I don't know if like in Germany most of the people wanted to have it on a semi recurring services. So basically like bush and hedge trimming like once or twice a year. And about 10% of them want to have it in a recurring like monthly basis. Right now we got 35.86% of all the budgeted hours for two people. 320 they come from monthly services right now.

Got it.

So I need a little bit of advice. We did in the beginning of the year, we did a big mistake and tried to boil the ocean in Cologne and we went back and tried EDDM with door hangers, which is working quite finely again. Our third guy is distributing door hangers like all day long. It is working though. We have a CPO of about 70 parts with that, including as a wage. So right now we basically say we got a small area of about like 2 miles and our aim is to get a door hanger distributed on every house like at least once or twice a month.

Roger that. Let me confirm, Let me, let me confirm a few numbers. First off, you're making 20,000 per month in revenue for employees, $12,000 profit. Are those employees part time right now.

Al? Kinda, yeah.

Okay. Okay.

And then for Google, my best, my highest performer is on full time, including me and the other two on part time.

Roger that. All right, so for Google, you said right now you're paying. Was it 18 or $80 customer acquisition or cost per lead.

For EDDM, yes. And Google, sorry, Google Ad was by far the worst. We got CPL of 400, which is abnormally high. Facebook we did try last year, ended up at 90 CPL, so we dropped that one as well. We didn't even try that. And yeah, normally in the last year we got about 60 bucks CPL for EDDM, but it's just going down the wall right now.

Cool. So that's cost per lead. So right now we got door hangers at $70, including the person that's delivering them though. $70.

Correct. And we got a. Correct. And we got a 60% close ratio.

Got it. So your customer acquisition cost on door hangers is something like 120. $130.

Exactly. And if you include all those people that are still like asking us if we do like paper patio, which we don't offer, we just do super simple services, just mowing, cleanups, that's it. All services in total, we end up at a cat of 140.

Okay.

And then our minimum is 240.

What is your kind of. Just give me a ballpark of average annual value. Like if someone signs up for $200 per month, is that pretty normal? That would be a $2,400 annual value. What's kind of the average?

Just below 1,000. And we got a attrition rate of about 28%.

Got it. Okay, so.

And we already offer like. Yep. Excuse me.

Yeah, you're good. So so basically if we take your annual value of $1,000, we divide that by 0.28, we're going to get about, approximately, an annual or a lifetime value LTV of approximately 30 $200. All right, so right now the current math of buying a customer for $140 in order to make 30 $200 of revenue. And then right now you are running according to your numbers, a 60% profit margin because you had $12,000 profit on $20,000 in revenue. So if we can, if we can assume, let's. Even as we scale, let's just say 40% is going take home off of that. If we can run that, that's looking at around, I think it's like $1,200 of profit, which means right now you can put into the machine of your business $140 and over the course of the next few years make $1200 in profit.

So I don't think that's necessarily bad. And if you can pump money into that mechanism, it will still work.

Okay. Okay. So maybe I'm just like trying to get my overthink in that case.

Because I mean, like, I'm again from.

Germany and I'm trying to like replicate. Even though I know it's different from America to Germany, I probably dare to say that we are one of the most expensive Ghana right now with an effective hourly rate of 114 bucks per hour.

Like half your revenue is profit right now. So I think, I think you have the margin to keep spending at $140 customer acquisition cost. If you lowered your prices, I would probably have a lower customer acquisition cost because your close ratio will go up. However, I don't want you to do that because I want you to maintain that kind of margin so that we can make $1200 in profit after putting $140 into the machine. That, ladies and gentlemen, is why you start a business. And so I think that's actually a good return. A lot of us will get no tripped up over spending. 70, 80, $100 cost per lead. And if you actually run the math on a profitable business, it still makes sense. Next caller is from 609. Welcome to the show. Thank you for coming on.

Hey, what's up, Mike? My name's Dylan.

Dylan, welcome. Thanks for coming on, man.

Yeah, absolutely. Just got a question, so two quick ones I think. First one is when after your first location were you like, I want a franchise. And when did you know when to like, did you have a mentor? You just kind of jumped in and figured it out as you were really.

Whether it be starting a second location, whether it be franchising, whether it be starting anything new, usually you're not going to feel ready for it. And so I knew the goal, the goal for Augusta was the change level of professionalism in the industry. I knew that to do that we would have to franchise because we needed the location and we needed to compete with people locally. I thought I was going to do it in about a year, maybe two years after I did. But I realized if I didn't do something that would challenge my executive team, they would have moved on. And so I actually did it prematurely knowing that I was doing it, quote unquote, before I was ready. That being said, you'll never feel ready and you'll usually feel inadequate, especially if you have any sense of self reflection and can like analyze, you know, be critical of yourself. And so usually we have two extremes. We have people that have uninformed optimism and just jump into everything. And then the flip side, we have people that if you actually are self aware enough, usually will doubt yourself because you're always will feel inadequate and you'll always feel unprepared and you always feel not ready. So for you, are you considering a second location? Are you considering franchising? What's your thought?

Considering franchising? You know, I really like, I don't know, I kind of have the same passion as you. I just think a lot of landscaping industry is just a couple guys who just have a pushbubber and stuff and just want to make money. But the rest of, you know, other people who actually want the professionalism side of things and all of that, you know, it really shows and you know, I just want more guys in this industry to where we're not looked at as, you know, just like, you know, oh, you're a landscaper, like how I want to be looked at, like electricians, like.

Like, you know, plumbers, like those guys, like legit, a legit company, a legit industry. I mean, and so I'm really passionate about the same thing as you. I think it's just more like, you know, I get stuck in the how to go about it, but it's kind of dumb because, you know, I got to the point where I'm at right now just by learning, just jumping in like the majority of us. But I think it's more just like the question of like, you know, because when I'm, when I listen to your, all your podcasts and everything, you know, you have so much knowledge on like what you're talking about with like taxes and everything like that. And I'm like, where does this guy go to learn all this stuff? Like, did you have a mentor? Did you just jump right in? You just learned it? Because I know I can take MBA courses, I listen to as many books as I possibly can, but I just, I always feel like it's just I'm lacking the knowledge, if that makes sense. So I don't know. Did you have a mentor? Like when you, when you start like the second location or you, you just did it yourself? Either way is impressive. Just curious.

Yes. Like, I didn't have any sort of mentor coach until last year. And in part because anyone that is going to be so far above you that you want to actually pay to be around usually will not talk to you unless they can get value from you. And that value is going to come in the form of either A, lots of money, B, some sort of equity, or C, they just want to see you succeed and then be able to co sign on your success and be like, hey, it's part of why they are successful is because of me. And so most of us need to just focus on creating evidence of success in order to attract a great mentor. Like a great mentor if they're good, if they're great, they don't even. They have tons of people wanting to be mentored like that want them to mentor them. And so it is never a matter. Like, my coach, for example, hasn't taken clients for ages and like to become a client is basically impossible. So why would he take me? First off, not really sure. Secondly, there needs to be evidence of success that when they look at the track record of what you're doing and executing on, they're like, okay, if I pour my fuel on that, they'll become way better. And so, but back then I was still creating the resume required in order to be able to attract a mentor into my life. And so I think most of us just need to focus on that and is like, create a resume that is undeniably better than anyone else in the industry. And to do that, you're on the right path. Books, podcasts, et cetera. And if you can make your passion this thing called business, and you love reading annual reports and you love documentaries about entrepreneurs and you love these books, it becomes your passion and your hobby instead of any other hobby that fills people's time. And so I just simply have done more reps, not because I am more gung ho about making more money, but simply because I love this stuff. It's like if I go on a vacation, I would just read annual reports. I would just look at numbers and data. I would just run experiments using software. That's what I would do for fun. And so it's not that I am better, it's simply a matter of I've been gifted this weird DNA that loves this stuff. All right, next caller is from 2 to 5. Welcome to the show. Thanks for coming on.

Hey, Mike, my name is Robert Lowry Dufour. I'm actually from Baton Rouge, Louisiana. I just recently found out about you.

Right.

You, Alex Ramosi, Tommy Mello, probably like the three people I'm consuming content from right now. Just all the, the breakdown, the turnaround.

On the pool business.

So I appreciate you doing that. Really love your insights on the industry. So first question, really quick. Average recurring service, gross profit margin, what do you typically like to aim for there?

It really depends because some recurring businesses, if they have supplementary services, the recurring side of their business is actually just the gateway. Right. So are you exclusively recurring or are you using recurring as a way to get people in and then you're upselling them?

So we're pool service.

So my primary bread and butter, weekly pool maintenance. And we should be doing more repairs. I am honestly, I'm more of a business person than a pool person. So repairs have not been as natural to me. I find myself gravitating to the chemistry side. I used to be in a partnership. It ended this year. And so I actually, I'm in a bit of a transition period with my business. I launched this new one with the existing customer, half of the existing customers that we had with the old business. And I'm actually right now, I haven't put together any website branding anything for the new business because I've been exploring the possibility of linking up with a pool builder who we can work on with leads and also have a better foothold in the repair, renovation side of.

The business, which kind of more like you talk about.

But I primarily as an entrepreneur, I like cash flow. So that's that's what I like to optimize for. I right now, just for reference, I run it anywhere between 23 and 85, but a blended average gross profit margin of about 50 to 55%.

Is that gross profit?

It looks like that's gross profit.

Cool.

That's after chemicals and just direct labor, which right now the software I use to measure my labor cost, it has to estimate a flat, a flat rate. So I overestimate the amount of labor to account for just like a few other variable costs. Fuel, equipment, depreciation, such.

Yeah, like in general, if you can get your gross profit in home services almost across the board to 50%, you're good. And the reason I like that is like a really basic metric is because if you're in, if you're in something that does more material base, so, so in this order construction, your labor percentage is gonna be significantly lower. Direct labor. But COGS includes your materials and supplies. And so generally for something like pool cleaning or lawn care, more recurring. A far greater portion of our revenue goes to cogs in the form of direct labor. Whereas in construction it's usually more like a 2030 split on a 50% margin. 50% margin. And so anything under 50, you start getting extremely profitable. Like if you look at the valuations and enterprise value of home service businesses, as you get below 50% gross of your revenue going to COGS, I just see the enterprise value and the saleability of that business increasing. So just recently, like my location on pay for performance, we this is the first time we've ever done this. And as we reduced our percentage from 33% going to the team down to 25 after we raised prices significantly. And I know the impact will almost more than double our profits over the next 12 to 24 months. And it's simply a function of when I go from 33% of my gross revenue on mowing, I put down to 25%. That's a 25% decrease in labor cost. And so that goes straight to the bottom line. And so I would, I think where you're at right now is probably good. And I just say like, if you can get down to like 45%, you're going to see incrementally better opportunities down the road at your next stage. Because if you're not passionate about the business like the industry, it's going to be probably some sort of an exit, multiple locations, general manager, some sort of passive down the road. And if you can get that down to 45 or 40, you just almost can't lose, honestly. So that would be my recommendation.

One follow up.

Yep.

Can I one follow up on that? So a lot of these customers we had since we picked them up, like 20, 18, 20, 2020, they've been, they've been around for several years and haven' seen a price increase. So several of these people could probably to make it to the current market rate could probably be seeing anywhere between 25 to 30%.

Increases on their service side. So.

What'S your methodology for evaluating when to raise prices on existing customers? And yeah, I mean, there's plenty of things about it, but I just, I'm.

Curious to hear your thought.

Yeah. So have you read the book yet.

The turnaround book? No, actually, I got the audiobook going through it now.

Chapter, let me see.

Chapter four is your chapter. Basically what it is a way to make sure you actually have a way of knowing exactly when to raise prices. There's one way to raise prices and it's based upon capacity. Right. So basically when you have got enough jobs in your pool route where you either a need to hire someone or get another truck in order to increase capacity, you have the opportunity to raise prices. And the reason you have this opportunity because if you raise prices and some people leave, you don't care because you need to make room for them. And so that chapter will kind of walk through how to determine what your capacity is and then when you hit that is your. The more so I would love to track this one day. The more time someone hits capacity, I can guarantee you their profits and their growth percentages are way higher because it gives you the opportunity to actually move those levers by either raising price, increasing profits or B growing the business. And so it's a, it's a more calculated way of actually raising the prices. But if you know you're 23% under market rate, if you just were able to accomplish over the next six months that price increase, you'd get your average recurring profit. Blended profit margin on gross profit probably down to 38 to 40% which you would crush on. So best of luck to you. I know you know what to do there. Great work. Next caller is coming in from 205. Sorry for the long hold time. It is like 20 minutes being in the queue. So thanks so much for waiting.

205. Hey, what's up? How's it going?

Hey, good. Okay, so yeah, you are on my call. Let me put you.

Okay, can you hear me?

Good, now I can hear you. You're good.

Okay, so right now my question is I have A labor rate of. That's like 38% to 41%.

Okay.

That I'm paying my. My employees for labor.

And is that.

And I just got P4P and I'm going to implement P4P.

Okay.

And so I was wondering, like, our route density is not that good. And then we're thinking about getting a two zero turn spot push mowing. Just don't push mo anymore. Because in my area, the properties are big. I was wondering if I should kind of set the P for P percentage at like 35 and give them, like, tell them like, hey, we're gonna get a another zero turn soon. This is like, I guess what y' all gotta strive for or should I put out 40% to make them get the P4P bonus? And I guess that motivates them.

Great question. Great question.

Yeah. So basically it comes down to this. Right now, when you say you're paying 38 to 40%, are you considering that 30 to 40% of labor revenue or all of your revenue right now?

Labor revenue only.

Okay, great. Fantastic. So this makes it really easy. And then the next question is this. And I know this is like a weird question to ask. Is the business making a lot of profit and you want to give back to your team, or is the business struggling from a profit percentage? And the team is decently making money.

Struggling from a profit percentage and the team. We're paying one hour, one dollar more than the average pay right here for Alabama.

Okay. Okay, fantastic. What area of Alabama? Because I know the area pretty well.

Down south of Birmingham. Hoover, Alabama. Pelham, Alabama.

Cool. Cool. All right, so this is what I would recommend doing. Have you used the soft P4P software at all or not?

I have kind of played with it, tweaked it. I found out my numbers. I had a call with Lee. I kind of asked him a little bit some questions about it to implement it, but. But not. I haven't really.

Really.

I just figured out my numbers, and that's how I figured out that it was from 38 to 41%.

Cool. So this is what. Basically what's happening right now is you can go lower than 38% because we know when we actually institute P4P. And if that. If you're going to actually institute pay for performance, you could probably give your crew 30 or 33% and they would, because they now have incentive to work faster and do a better job. They will be able to make more money and you will be able to recoup that extra 8 to 10%. Of right now, it's going to them in wages, to the bottom line. And so I would recommend doing this. Use P4P software, don't tell your crew anything. Just simply run their time cards every day and you know where they punched in, punched out, what their labor revenue was for the day and see what it would look like if you did 30%. See what would be if you did 35%. And then you will know that when you actually flip the switch and tell them they're getting paid based upon performance, usually we see a 20 to 30% increase in efficiency, so they'll produce 20 to 30% more revenue. Which means when you're running that kind of trial period without telling them, what you're looking for is not for them making way more than what they're currently making per hour. What you're looking for is making around the same that they're making now. Because you know that when you turn to people to P4P actually being their pay, the way they're getting paid, they'll become more efficient. And so the reason I say that is because if you were like, man, I'm making really good money. I would like to raise wages for my crew so I can attract better people. If that would have been what you said, I would say give them 40%, because you know you're profitable at 40% and you're happy and you just want to give it back to your team so that you can attract better talent. In this case, where the business needs more profit, it is a matter of we need to move that labor rate down. And so I would be really, really pushing for 33 or 30%. But before you do that, run the math without them knowing, knowing that they will probably increase by 20 to 30% in efficiency once you tell them they're getting paid like that. Does that make sense?

I already ran the math. So last week on average for the landscape crew was 38%. The mowing was 40%.

Right. What I'm saying is I would like to know what their hourly pay would be if you move that down to, say, 30 or 33%. Right. And so, yeah, so I would, I would assume right now, if I just have to, like, based on what you've told me so far, I would assume that if you did 33% on P4P. The reason I like 33%, by the way, is simply because the crew can look at all their jobs for the day, divide it by three, and know how much money they're making. So I really like 33% simply for that matter. And the reason, like we just moved from 33% to 25% is because now it's easy. They divide it by four. So, like, I really like that easy math for them. I would really push you to go to 33%. By doing that, I know you'll get an extra 5 to 7% of profit margin going straight to the bottom line. And I believe that they'll be able to not only compensate for the, the decreasing quote, unquote percentage of pay, they'll actually end up making a few dollars more per hour. And so I would probably, if I was you, do like I talk about in pay for performance on the training, and that is tell your team, like, hey, this is what I would like to do. I would like to be able to pay the people who work the hardest. I'd like to pay them more. So what we're going to do is we're going to have 33% or a third of all the labor revenue you make every single day you're going to get as a paycheck. Now what we're going to do to test this over the next two pay periods, I'm going to give you the higher of either your current hourly rate or I'm going to give you P4P, which is a third of all the revenue you make for the business. And then you let them go and I guarantee you they start to get more efficient and they'll start to work harder. And then you just can show them each day at the end of each pay period. Oh yeah, you made an extra 2, $300 on the last paycheck because of P4P. And so if you do that for two pay periods where they can't lose, then it puts your mind at ease. Like there's not this massive switch. Does that make sense?

Yes.

Okay.

Cool. Well, hey, best of luck. I know, I know the switches is daunting. It can be a little bit scary. But I just genuinely believe going to 33% is going to be sufficient because once they actually have the incentive to make more money, they'll push themselves enough to not only recoup their current wage, but then make a little extra on top of that. Next caller is coming in from 31 6. Welcome the show. Thank you for coming on.

Hey, Mike, I really appreciate it. Been a longtime listener fan. I got a question. As far as market size goes, I've been on the edge of starting my own company for quite a while. I've landed in the home service or home improvement. And I'm Kind of really leaning towards potentially exterior cleaning as far as, you know, power washing, soft washing, things of that nature. Now there's a couple other companies in my market who already have like a good bit of the market share. And I was just curious and wanted to know, say your opinion as far as the size of city that I'm in, whether you know, this is even anything that's viable or doable. The city I'm in about 400,000, in the metropolitan area is about 650,000.

I'm just kind of, I'm going back and forth, well, I want to do this or a different idea and I'm just, I'm just trying to land on top of something.

Yeah, like in general, I believe that you can build a million dollar business as long as you have more than 10,000 people. So from a market cap size, I'm not concerned about it. And when I'm evaluating markets, the one thing that I actually do pay attention to is not so much how much competition there is, but are there any players that own a large percentage of the market? Because then I'm facing brand. And brand is something that's extremely hard to compete with. And so if you look at the market and say, okay, there's 20 different competitors but two of them own 60% of the market, I would be less inclined to want to go there compared to another market that might have 60 competitors but no one owns more than 1 or 2% of the market. I like fragmented and I don't mind more competition. When someone though has a brand, they have a massive moat that you're not going to be able to scale to that to beat their customer acquisition cost because they can simply get customers for cheaper than you because of their brand awareness. And that's just a hard wall to scale.

That's kind of where I'm at. There's, there's probably two or three maybe top and four people who, one of them has, I mean they got like four 400 five star reviews on Google. Another one has probably like 80 to 100 or topping over 100. And then everybody else around there is, you know, 20 to 30. I mean some guys only have a couple, so they have a great brand. I'd love to replicate it. And I mean essentially that's what I'm looking to kind of built and start and potentially franchise in the future, you know, something I can be proud of. But that's just when I see that it's definitely a little daunting, I'm like, I don't, I don't know if it's compatible or compatible, I guess.

Yeah. The hard part is honestly assessing correctly what the market size is. That's the hardest part. Because if for example, both those two big players only own 5% of the market each and then there's 60 other players that are breaking up the other 90%, I think that's a great market because what that means is you'll probably get to that 5% of market share pretty quickly. But when I'm, when I'm talking about a smaller market, if someone owns more than 30 or 40% of the market, it means that they have so much brand awareness, when people think of that service, they think of their, that company. And it's just going to take you way more money to break into that market. So I would really just try to correctly assess what percentage do these two, two, three, four big players have? Because if they did it, there's a good chance you can. If you just simply follow the correct recipe, which you pro. As you probably know, it's like they have their trucks wrapped, they're insured, they have a great website, they have people to answer the phone, Boom, you probably have yourself a million dollar business. It just is correctly assessing what the market size is actually the most challenging part. And so I would look through all the competition and I just ask, can I become one of the four really fast? Because 90% of the market is split up and fragmented over course of a ton of different competition. Next caller is coming from 97 8. Welcome to the show, brother.

Hey Mike, can you hear me?

All right, I can, Mr. Brandon. How you doing, brother?

Phenomenal, Mike. Good to hear from you again. So it's Brandon over at simply Longcloud, Massachusetts, your favorite turnaround. Quick question for you, quick synopsis. So as you know, we did 700 last year, we're doing 800 this year. We took your advice, we focused on profit. We had three overhead people. Now it is just me in the office, Admiral and Scott in the sales and opera where we're at right now. The issue we're having, it's summer teams, all trained, everyone's making P for P. And we're at about 75 to 80% equipment utilization.