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 from 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 projects 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 tactics y 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 to 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. We 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. Take, 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 uninspired leads for 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 edge streaming 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. 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. 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 we already offer like.

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, 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 an 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 pushbubble 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.

Yeah, 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 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 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 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 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 up 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 38 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 to the show. Thank you for coming on.

Hey, Mike. I really appreciate it. Been a longtime listener and 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 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, it's a good, 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 978. 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. The reason I'm not pushing a 90, 200 is everyone takes vacations right now, including myself and Scott. So we're more like 90 if you include all the vacations coming up. The issue we're having is our workloads have been cut in half. So Scott is Now picking up 15 budget hours a week of field work because he has time and we want More money. And I don't, I mean, I'm getting all my office work done, but I have nothing to do but like wait for calls most days. So our question is CAC obviously goes up in the summer since there's not as much demand. So really want to know like what do you recommend for the summer? Either one, just prep and save money for the fall demand bump and next year's spring rush. Or two, do we try to actually up the marketing spend and test out some new marketing methods or is there a third option?

I would say the third option is focusing on the customers that you got during the spring and upselling them into other services. Because now we're switching from focus on the recurring side to now one off projects. So all the customers you got for mowing, fertilization, so mowing in the spring, you know, now it's time to go double down on one click estimate emails, text messages, even in person estimates for projects. And so it's all the things that we didn't want to do in spring because we were super busy. Now it's time to swap over to those other services as demand for recurring services has basically fell off a cliff.

Right. So focus on marketing things that don't cost much extra money.

And if you look at your blended cost per lead with this sort of activity of focusing on upsells, then you actually have a decent cost per lead during even the summer because now that cost per lead is zero on an upsell. And so, you know, inside of copa, because I'm gonna use it, I would, I would incentivize your guys to the moon for upsells and I would really dial that in. I'd get your top four or five one off services that you can offer and I would give them a 20, 30, $40 if someone gets an upsell from their recommendation and whether or not you make it where you have to approve it. So you can make it where you have to approve it from the dispatch board before it gets sent to the customer. I would recommend that if you have more entry level guys out in the field or if it's, if you and your partner, you guys want to have the ability you can do it directly from one click, it immediately goes out without any sort of approval. I would incentivize that I would make a thermometer in the office of like or a leaderboard of who's getting the most upsells and either give them per upsell a significant amount, like 30 to 50 bucks, or I would.

Make a leaderboard with a Massive cash prize, and then do a leaderboard, like, each month, because ultimately, and this is how you pitch it to your crew, hey, I'd rather give you guys the money than Google and Facebook. So everyone knows work is kind of drying up. We have two options. One, we can go spend a lot more money on Google and Facebook and give Marky Zucky buck the a little more money. Or I'm willing to give you guys 30, 40, 50 bucks, whatever you feel comfortable with to be able to get an upsell. And all you have to do is click one button at a customer's property based on the services you think they need.

Take a picture, attach the job.

I love that.

Make the upsell, and then you would then look at the picture on the dispatch board, approve the upsell, and even send a customer. You could even, based upon the picture, based upon what service you're trying to pitch to, you could potentially send the quote as well.

Gotcha. Cool. Do you guys have an updated video on that in copilot University?

Yep, there's two. There's a business case, one that I made on, like, how to use and why. How to pitch it, like I just said to. To your team. And there's a second one, like, how to set it up with text or email, how to set up where you approve it from the dispatch board or if it just automatically goes out. So, like, I. For you guys, I would just make it where if, you know, you've seen upsell, especially that he's out now doing jobs, he could, like, literally on every property, be sending one of these bad boys out.

Yeah, yeah, he's actually been doing that.

Yep.

All right, cool. So. And they're both on copilot university. One's not, like, under YouTube channel, correct. On there?

Exactly. Just search upsells and.

Great. We'll get on that now. Thanks, Mike. Talk to him where services come around.

Good luck, brother. All right, next caller is coming in from 406. Welcome to the show. Thank you for coming on.

Hey, Mike. How you doing?

Good. How you doing?

Yeah, doing good. So I. I'm. I'm starting a lawn care business, and right now I'm doing auto detailing.

Okay.

I'm doing more auto detailing than anything. The plan is to eventually merge into something else. What are your recommendations for that? Because I know that can possibly get kind of scary. What do you do with those old customers from the previous service you had? So there's something else that I kind of want to do. Step it up, you know, step up my game. As far as what I do. And.

So I. I just don't know exactly how I'm gonna do that. Like, what about my. Okay. Kind of complicated here. But.

Yeah, just, I mean, it's a basic question. Just need some advice on merging into something different and what do I do with those old customers from the previous service? What can you recommend?

So, couple questions. First off, what was the revenue in 2023 for the auto detailing?

Okay, so I just got started and I'm not bringing in a lot. I just got started.

Okay, you're fine. You're fine. Okay, so just start with auto detailing. Now you're thinking of switching to lawn care. What's the reason for that?

Yeah.

Okay, so actually, I apologize. I'm. I'm actually doing. I kind of got out of lawn care and into detailing.

Okay.

And lawn care didn't quite work, so I kind of switched over to detailing. So I apologize for the confusion.

You're good.

But eventually I want to step it up to more of a.

More weed control, more home improvement service eventually in the future and. But I don't see that coming anytime too soon.

So I just kind of done the detailing and so.

So what makes you think that this eventually, this time around is going to be different than the last? Like what are you going to do differently now compared to last time? You did lawn care and it didn't work.

You mean with the detailing or.

So. So you did lawn care, you switched over to detailing, now you're going back to lawn care.

Yeah.

What are you going to do differently now with lawn care to make it work compared to last time when it, quote, didn't?

I kind of had a bad system as far as doing it. I'm just an independent contractor.

In my area. I'm not like, I don't have a business, it's just independent contracting.

Okay.

And.

I guess kind of like one of my more concern is my main concerns is what do I do with those previous customers, like if I get added detailing or vice versa, like a safe way to merge into a different business.

Yeah.

So I don't kind of where I'm at right now.

I don't think there's a ton of crossover in the way that like you're going to get a bunch of jobs. Here's the thing. How many people are in your database for auto detailing? Like how many contacts do you have again?

I'm sorry?

How many contacts do you have?

So this month I think has been around again, I just got started. So this month I think has been around 5, 6 or something like that, yeah.

So let's just say that you have 40 or 50 contacts from all of your mobile detailing business. I don't believe that's a make or break. However, you address moving into lawn care because first off, there's not gonna be a ton of crossover. I would say in general, if someone's having their, their car cleaned out by you, they're also going to have a lawn care guy though. So take the contacts, send them all an email back, hey, I'm switching to a lawn care business. If you like me clean your car, you're gonna love me taking care of your property. You might get a few customers from it, but I don't think it's a make or break. Like, I would make the decision to switch to lawn care based upon your passions, based upon you having more knowledge than last time. I would also really, really strongly recommend getting away from being an independent contractor and moving into your own business so that you can, you can get more of the margin. It's also going to be more reputable. You can start a website, you can get insurance, and then you can demand a much higher premium in terms of price. And so doing those things is probably where I'd start. And then in terms of like the crossover with past customers from the auto detailing, you know, flip a coin. I just don't think making that decision based upon how the previous customers are going to react. I don't think that's the decision maker. I think if you're going to switch to lawn care, there's probably some crossover though. And I would keep those contacts. I would move them into your new CRM, send them a blast email when you start with lawn care. I'm like, hey, no, I'm switching over to lawn care. I'm no longer doing detailing. Or maybe you're doing both for a while, that's fine. But like, I would just try. But don't get hung up on whether or not that's going to be the make or break. Next caller is from 46 9. Welcome to the show. Thanks for coming on.

Thank you. Hey, Mike, I've got two questions for you. So my first question was how do I figure out my marketing budget for the next spring rush?

Okay, and so this year, 2024, what do you expect in terms of revenue?

300,000.

Okay, and then what do we expect in terms of profit after you pay yourself a reasonable salary?

Right now we're at about like 37%.

Profit before paying myself.

So maybe 50, 60 grand, something like that?

Yeah, yeah, probably 60 grand.

Okay, cool. All right, so then what is the eventual goal for the business? Like, obviously everyone wants to make more money, but what do you think next year? Realistically, you want to grow to.

So revenue. I want to shoot for 500,000.

Okay.

That would be my goal.

Okay.

But I guess overall goal was to open up multiple locations for my business.

Okay. I would probably do the $500,000 year before starting a secondary location. And so let's shoot for that. So basically, you want to increase revenue by 200k, then it's a matter of. Okay, here's rough math. I know that most marketing dollars in this industry are gonna get a 10 to 20x multiple in the next 12 months. Which means if I spend $10 today, I'm usually going to see about 100 to $200 worth of revenue come back to the business over the next 12 months. Which means if you do really bad at marketing. All right, and you're doing a 1 in 10, that would mean you have to spend $20,000 on marketing in order to be able to make $200,000 of revenue, new revenue next year, I assume you keep the 300,000. You do a good job. You don't have a ton of churn. Now on the lower end, if you just crush at marketing and you great with Facebook targeting, and you do great with great job of doing door hangers, and you have your customer cost nailed down, then all of a sudden you can probably get that lower to 10,000. And that'd be like a rule of thumb 10 to 20k. And then it's just a matter of you can back this math out more. Right. So, okay, we need to increase revenue by 200,000. Fantastic. Okay, if we're doing recurring revenue and we're going to do $2,000 of annual value per customer, now all of a sudden, I need 100 recurring customers. Awesome. Well, what's your customer acquisition cost? Do you know that number or not?

Yeah, it's $48.

So if you can get a customer for $48 and you need 100 of them, everyone would usually do 100 times 48. Ding, ding, ding. If you kept every single person. However, that's not the case. If you're getting 100 new customers net, it's likely that you will have to get about 130 to 140 new customers. This is the part where people under budget for their marketing and they under budget what they're going to spend in order to get the the growth that they're wanting. Because what you're really going to have to spend. If assuming your CAC is 48, you're probably have to spend more like 7 or $8,000 in order to get the. A hundred customers.

Yeah, that was my thing was like factoring in like the attrition and losing customers with that because like yeah, you could, you could say okay, I need 10,000 for this, you know, amount of customers or revenue. But you're going to lose customers in that process. I wanted to figure out how to, how to factor that in with it.

If you don't know the attrition number, assume a 30 to 40% kind of as an industry average. It's gone up significantly in the past three or four years as a blended average. A lot of people moved in 2021, 2022 and so it's starting to come down as an average for the industry. But still 30 to 40% is safe. Keep in mind I assume a $2,000 annual value which is high for long care landscaping. So you have to upsell people, you have to have winter services. You'd have to do something more than just mowing typically to get that $2,000 value. You, what's your second question?

So, second question, when is the right time to switch to an S corp for tax purposes?

Yeah, so this is, this is simply a function of when Your savings on 15% self employment tax is greater than the cost to run a separate tax return as an S corp and you don't have to start a different corporation or entity. You can take the same LLC, same EIN number and file a form 1120s. Get a good accountant in December, have a meeting with them and ask them whether or not it's worth it based upon your P and L year to date. If they say it is, you can literally file 1w2 at the end of the year and file your form 1120s and you're good to go. So this is really a function of having a decent enough CPA. Usually when you cross 40, $50,000 of net profit after, after you've paid yourself, usually that's about when it makes sense. But talk to a CPA right before the end of the year and they'll make sure they take care of you. Next question is. Oh, by the way, Home Service CPA. Great. Brad will take care of you there. 51 7. Welcome to the show. Thank you for coming on.

Hey, can you hear me?

I can. What's up?

Hey Mike, this is, this is Cody from Michigan. We've had a couple of coaching calls. We had them last year and then our last coaching call. We try to bring up the speed here within like 20 seconds. Our last coaching call was I was heading into 2023.

Excuse me, it was at the end of 2023. I had a bunch of cash stacked up. I was ready to go into the winter, firing my employee to go solo for the winter. Because I was in Michigan the beginning of this year, I decided to switch or sorry I moved to Georgia. I was not, wasn't happy with the demand curve and how inconsistent the winter was in Michigan. And I just wanted to restart before I got five years in the business. I just cleared up for my first year or my first full time year. So I started again this year in March in Marietta, Georgia. It's a suburb of Atlanta.

We started with zero mowing customers and I had like, you know, a few grand in the bank. And by the end of, sorry, by the end of May, I mean we had 100 plus mowing customers. So like we went from zero mowing customers to 120 now and like 14 or $15,000 a month in recurring mowing. We raised prices. Once we raised, we raised prices on 105 mowing customers by $5.50 per service across the board, on everyone. And I think we lost four people. So there's another good example for you of why people need to raise prices. But anyway, I don't need any help with the business end. I'm doing good right now. I'm just burnt out. I now know this is something that's predictable. Like the months of June, July, ish, are usually like Phil burnout. But man, like I went from just grinding, like doing door hangers like you know, eight hours a day, 10 hours a day, mowing all day and I was sleeping three hours a night and you know, I was running off of fumes and that's all I needed. And now it's like, it feels like I can sleep 12 hours and then I still can't get myself out of bed. Like to be honest, man, like I'm kind of putting myself on a chopping block here. But like the last month or two, like I'll show up to the. It's just me and one guy, right? I got a full time guy. I'll show up to the shop 15, 20 minutes late. Like I'm not sleeping right, I'm not eating right. I haven't gone to the gym in a month or two. Like normally I'm eating two or three meals a day and it's like good prepped meals and it's solid, you know, whole foods. But now it's like I can't stay on a diet. I don't know, maybe it's systems that I need to kind of keep me burnt out or keep me from, from burning out. I know you talk about flattening the demand curve so it's not so much of an up and down and having higher lows and lower highs. But I love capitalizing on the spring rush and like how we were able to go from 0 to 15,000amonth in mowing revenue. I want to be able to do that again next year, but go from you know, 15 to 35 or whatever. But I don't want to run into the same issue. And I'm, I'm dying over here, man. I showing up to my own, my own company late and like I'm just burnt out and just so destroyed nicely right now. That's all I got. Okay.

If I asked you this question, if I was talking to you, like, why do you think you're burnt out?

I don't enjoy.

You and me have talked about this on C Suite recently. I don't enjoy the day to day. I hate mowing. Like I don't like mowing lawns. When I mowed my first lawn under streamline when I started the company, like that was my first time ever mowing a lawn. I did it because I wanted to find something to sell to build a business. And I dread the everyday thing and I know I can get out of the field next year. I can get there because I can keep my costs low enough where I can, I can stay out of the field with three or four full time guys in the field, me being an office person. But like, sorry, to answer your question, I would say that I'm burnt out because.

I, it feels like I didn't have systems maybe for the last couple months. I, I mean, you know what it takes to go from 0 to 120 million customers. I was on top. My close ratio is good, my response rate's good, Everything's good. But like I am falling apart. Like the thing that was make, you know, the sauce that was making that engine go so hard is like I can feel it falling apart and I'm trying to, I don't want to, I want to stay in this thing. I want to get out of the field. I want to grow a million dollar business and then start, you know, copy and pasting. But I would say I'm burnt out because I do not enjoy the day to day and I, that's been my life for the last few months. 12 hours a day.

Okay. So few things. I can take this from a few different angles. First off, I would say if you want to build this thing to a million dollar business, this is simply the journey on the way to doing that. If you feel like you're burning out, you're going too fast. And so you might just want to slow down and reduce the timeline to getting to the million dollar business. And so going from 0 to 130 customers, fantastic. Next year you could potentially probably double that or more if you can stay on the rails. Here's the thing, if there's a 50% chance you don't stay on the rails and you quit, all of this is for naught. I would rather you take three or four years to get to the same place, but do so in a controlled manner with 100% likelihood of success.

And so do you think your goals, do you think that the timeline that you're impressing on yourself is so great, you're putting way too much pressure on yourself or not.

To be honest with you. I think where. I don't think so. I think where the burnout started to happen, where the lack of like, me being there, being at our shop 15 minutes early and literally working till the summer goes down. And like, I will not go back to the shop until my employee is done. Like that type, like being a true leader, like, I just haven't been the leader that I have been the last month or two. And I believe it's just because I'm burnt out. I don't mean to throw an excuse on it, but.

Do you think that it's worth me trying to explore, like, systems to implement or maybe like reading books or trying to get knowledge in a different area of my life that may improve this so that I can keep the same timeline but like tweak the.

The thing that I dread every day is mowing lawns, man. I love selling. I love talking to customers on the phone. I love dealing with the employee. I love like, talking to him every day and like being his leader and seeing him trust the decisions I make. I love it. But like, it's literally just cutting grass. Like, I hate it, man. Like doing it 12 hours a day for the last two or three years after, like already not liking it. I just like, I'm making myself hate it almost.

So here's what this is my question.

Like, I feel like going slower is going to keep me in the field longer, which is going to make me hate it more, if that makes any sense.

Right? So here, this might come across as tough love, but just take it for, like, the love I have in my heart for you. Okay, so it is.

I got you, man.

This.

Is it. Is it simply the recipe required to get where you want to go? Like, I didn't enjoy doing lawns, and I did it for six years, and I did it despite having massive amounts of allergies and hating every single minute of it. But, like, you're going to either hate mowing lawns or you're going to hate not having the goals and the success that you want to have. So which one do you hate more is going to be the one that wins? Like, either you're going to stay in this because you hate where you're currently at in terms of money, in terms of finances, in terms of opportunities, in terms of success, or you're going to hate mowing grass so much that you quit.

And having a really honest conversation of which one you actually despise more will probably be the thing that gives you the hunger to keep in the game. Because I hated being poor. Hated being poor. And I hated it a lot more than mowing grass and not being able to breathe correctly because of my allergies. And I didn't take any medicine for it, and it was garbage, like rashes and eyes swelling and throat swelling, all of that. But I hated being poor more.

I appreciate you, Mike. Thank you, man.

Okay, love you, brother. Take care.

Love you, man.

Okay, Cody, I love you. Feel free to reach out to the community meeting on long care Millionaires. I'm sure a lot of people would love to help you out or give a word of encouragement. I went a little bit more the tough love part, But I think that's the majority of what a lot of us feel in home services. And when you're going from zero to a million, you're not working on the business, you're not thinking about strategy, you're not thinking about the architect side of the company and entrepreneurship and books and conferences. You're just doing the work.

And it stinks. All right, next caller is from 360. Welcome to the show. Thank you for coming on.

Hey, Mike, this is Hector with Wise Redwood Lawn Care Services.

Hector, how's it going?

Good. How are you, man?

Good, man. You're from local, right? You're in Washington here?

Yes, sir. I've brought into you a couple of times. It's been a pleasure meeting you in person, too.

Let's go. Cool. What can I help you with, man?

Hey, man, I've always followed your contact and the content and Everything. And I've learned quite a bit.

But I just, I'm still struggling if my business is profitable or. It's my second year in business right now.

Okay.

And last year we made.

220, I think. And this year I'm hoping to make around 350. I could be.

Shooting it low, but I think that's what I want to go for this year. But anyways, I do. I need to figure out if my business is profitable or not. And I just don't know how to figure that out. I was hoping you can help me with that.

Cool. Real quick, Hector, I missed your last year's revenue. Was it 28,000 revenue or 280,000 revenue?

220.

Got it. Okay, fantastic. So 220,000 revenue last year. This year you're on track for 350. You're probably undershooting. Great. So you're asking how do you know if you're profitable?

Yeah. Or. I don't even know if that's.

No, you're fine.

Yeah, that's what I want.

The bottom line is this. You are growing more than 50% over the year, over year. All right? Anything more than 10% growth typically means that you're going to have a cash constraint. Because in order to grow more than 10%, unless you're just raising prices, you're going to have to buy more trucks and more equipment. And so it's feeling. I would just guess I've been through this before. When you grow by 50%, you're feeling like I'm growing a bunch and I'm not seeing any money in the bank. Is that assessment correct?

It's. Well, right. Last year we ended with, I think it was a good amount in bank, which was 80 in the bank.

With everything, all of my, my expenses and everything where I have. I think the, the only thing that I'm a debt on right now is a truck, which is 20,000, which that's pretty much I have on debt right now. And we have.

Yeah, I don't know if that makes any sense.

And then in your cash reserves right now, 80,000 last year. This year. Has it gone up? Has it gone down? Where is it at now?

We're at 1.

Between 1121 40.

Cool. So I can tell you this. You are profitable. I know that for a fact. And if I take 80,000 and you're increasing just your actual cash reserves of $40,000, let's just say increase in cash reserves on last year's revenue of 220, if you take 40,000 out of that, you're running around an 18% profit margin. Now. That's a really imprecise way to run your profit margin though. And so this is when it's like, this is probably the time to really start thinking about like using something like QuickBooks to actually get a profit and loss statement every single month. Have you, do you use something like QuickBooks right now?

Hello, can you hear me?

Hello?

Yeah, I can hear you.

Cool. Are you using QuickBooks right now Hector, or not yet.

Not yet. I tried using it but I started using it right out of spring rush so I couldn't, I wasn't able to dive into it to figure things out. So I next year probably gonna look into it more like in the winter time and play with it. But right now I'm just using Yardbook right now and it's, it's working so far. You know, as you, as you pass.

That 200,000 and you move more into now the manager side of the business and you start scaling up and having employees, you really will want to use something like QuickBooks to be able to connect your credit cards, your loan, your debts, your bank accounts. So everything is flowing into one space. And then you just categorize expenses, revenue, et cetera and actually get an accurate P and L. Like every single month I have reconciled bank statements for every single one of my businesses and that's what I get. Like that's the one piece of data I need from every business is what's your profit and loss statement reconcile against the bank account. And the number one way to do that, just get QuickBooks account. It's expensive. Yes, I know you're gonna make a few hundred dollars, especially if you're running payroll through it. But that is the next step to actually really knowing what your profit percentages are. Next caller is coming in from 21 6. Welcome to the show. Thanks for coming on.

Hey Mike, how are you? I'm Ken from Cleveland, Ohio and I guess I have two questions. I'm 21 years old. This is about our fourth year in business. Roughly 250k annually. I do have one more year left of school. Six guys working. It's myself and a partner, two full time guys and then two other just summer worker guys when we're home from school as well. And my question is next year is going to be kind of the big year where I'm not going back to school. So I'm looking at buying out my partner. So I was wondering the buying out slash evaluating process and what would be the best kind of course of action regarding. To figure out a best. Yeah, Course of action. Price for that.

Cool. So what is. Okay, so are you trying to get rid of him or is he wanting to leave?

I would guess it's a mixture of both. He's going to. He's going to the Ohio State and he's going to be a dentist. So he's on his way out as well. And then for myself, yeah, I also am looking to kind of just do it my own way because I want to. I'm going to be out of school, so I'm going to be done. I'm going to be ready to go and I don't want to carry him around or when he's back at school.

Has he thrown a number at you?

He is not, no. And we're both very. I mean, we grew up best friends and we're both very, like, talking through this whole process with each other. And we're obviously going to try to talk to as many people as we possibly can to figure out the best and most fair way for the both of us.

Yeah, yeah. Like, I think first and foremost I just have an honest conversation and how I'd open it up is like, hey, if by the end of this meeting we don't agree on a price, we then will go to other measures of valuation. And here's the ways that we would value the business. And usually you can get three different ways. You can do it based upon profits, you can do it based upon number of customers and your cac. So you can be like, hey, we usually have to spend $150 per customer. We have 100. Okay, here's. You can break all that down. So three different valuation mechanisms, just look them up on Google. There's multiple ways to value a business. You can determine those before you start giving numbers, right. And then, then you can like, do you have a number in mind? And he knows, like kind of what the cash position, what business can afford, et cetera, you know, what you're kind of willing to pay. And so I just have the honest conversation first. And then just before that, though, determine if we don't make, you know, if we don't have a meeting in the minds, in this meeting, we're not going to be mean, we're not going to be. Nothing bad's going to happen. We're simply going to use this mechanism and we're have a third party come in and help us valuate the business. That third party could be another someone in the industry. I do this Quite often. But you could also just get a, like a consultant or someone to give you evaluation.

Yeah.

And then you guys just use that.

Right, we're right. I like that. No, that works well with like talking to him first and then going from there. If we can't fully agree on something.

Like, you honestly have a lot of the leverage here, him moving away. Also the fact that he's gonna become a dentist. He's not gonna be able to be doing this. So you have actually most the leverage here. The longer you wait, the closer it gets to school, you probably have more leverage. So because I'm speaking to you, I would probably say wait as long as possible. It gives you more leverage. No one else is gonna buy out the 50%. You are the one that, the only one that really can because he can't go sell his 50 else. So if I'm talking to you like let's be a shark here and you're trying to get rid of this person, which I know that's not the case, but let's assume it is for a moment. I would be waiting as long as possible and realizing you have all the cards on this deal. Next caller is coming in from 51 7. Welcome to the show. Thank you for coming on.

517.

Hi, Mike. My name is Reggie.

Hey, how's it going, Reggie?

Oh, hi. From Hudson, Michigan, and I'm 18 years old. I'm currently wondering just what the best plan for marketing would be this season. I didn't quite have the money for marketing at the beginning of the year and now I have, I'm getting more money, but I'm just wondering if I should wait until the end of the year or for next spring rush or what, expect what exactly steps I should take.

Yeah, like if I was you, I'd be testing right now different kind of marketing methods. Try to figure out some Google stuff, figure out some Facebook stuff, run some every door direct mail, do some door hangers, try to get some sort of pulse on what's working. And then I would try to keep as much powder dry for next spring rush because that's when your customer acquisition cost is going to be the lowest. And so right now it's tempting when you have more money to spend said money on growth. The problem is it will cost you twice as much to grow now compared to next spring. So right now I'd prefer you get the skills, the education and the data required to succeed next spring rush and then spend your marketing dollars next spring. Does that make sense?

Yeah. Yeah. Then right now, like Facebook ads are doing pretty good and then I, I do door hangers and yard signs and those all do pretty well. I've been putting a little money towards that. But yeah, that definitely makes sense of waiting to. Yep, all the money towards spring lunch.

Also next month I will be doing like an hour long video on 20 different ways to market. I'll break down the pros and cons of each. That might be helpful as well. Next caller is coming in from nine seven one. Welcome to the show. Thank you for coming on.

Hey Mike, my name is Jesus. I'm 25, I own a business with my partner. We're doing about 1.4 this year.

Good for you.

Can you hear me?

I can, yep, absolutely.

Oh.

So you've talked about building the foundation, which it feels like that's what we kind of have. But everything within that foundation feels like it's not complete and disorganized.

Okay.

Like there's loose ends in every single aspect of it and when I try to close one loop, I have to go to another and then that loop opens up again and it just feels like it's a never ending cycle.

What evidence do you have that things are falling apart internally?

Equipment, employees not doing their job.

Poor return customer rates. We sent out a review request from customers. We got like eight messages come back saying that they were unhappy, they felt the value wasn't there. Our manager, I'll tell him, hey, this needs to get fixed because we're going to run into this problem. He'll say okay. And then he doesn't do it because he's end up, ends up problem solving something else.

It just seems like it's all kind of like thinking.

From my point of view, but it's still going very self aware.

So question, what was revenue in 2023?

1,050,000.

Okay. What was it in 2022?

I think we were like 7, 800.

Yeah. So you've doubled the business in 24 months. So keep in mind first off we'll get to like how to fix but like keep in mind it's going to seem like twice as many problems, twice as many issues, twice as many complaints because you simply grew revenue by double.

And so I would, I would frame that first because as people grow and especially if you're a people pleaser and it hurts to have bad feedback, like it kills me, I can't sleep. Usually when that happens, I have to realize that the business is simply bigger. And I could do two things. I could a try to fix the problems, which is what we'll talk about second and put my head down and just fix stuff. Or B, I can just retract the business back to being a smaller size. And guess what will happen? I will have less complaints, I will have less problems, I will have less equipment breakdowns. And so I'm going to assume that you're not going to shrink the business. You continue, want to grow, make more money, et cetera.

Yeah.

So then, now that we've crossed that bridge, it's a matter of how do we fix these things? And the question I have is, do you know how to fix these and you're just observing, or do you actually have an education? Like an ignorance side of things? You don't know how to fix these problems because it sounds to me like you know what to do. Like the equipment.

I could fix every single problem myself if I had a limited time.

So here. This is good. Great. So this is what I would recommend. I would recommend not growing next year. I would take one year and try to do 1.5. Have the same number of customers, same number of trucks, same number of employees. Raise prices by 20 to 30%.

Okay, word. We're only booked out about a week right now, so raising prices.

Right.

Feels like.

So not the answer. How much of. How much of your of your revenue is recurring versus projects?

We have.

Around 300,000 recurring. Rest yard cleanups, almost no landscaping.

Okay, wait, sorry. 300,000 in property cleanups, mostly. Everything else will be mowing and then very little landscaping.

No, no, no, no. Maintenance would be around 300,000. Okay, everything else, variable landscaping.

Got it. So like, property maintenance type of situation for the other million.

Yeah, cleanups, like overgrown properties and bar sales and that kind of stuff. One time project.

Got it.

So this is the thing. I know you're only booked out two weeks, but the reason you're only booked out two weeks is because you've been increasing capacity by buying more trucks and hiring more people. Like, I would put, like, a moratorium on buying stuff. No buying stuff, no more hiring. As soon as you do need those things, you simply would raise prices. And that might be next spring, to answer your question more directly. Like, do you need to raise prices now? Maybe not. You only have two weeks worth of work. But the next time you think I need to buy a truck, or the next time that you think you need to get more equipment, or the next time you think you need to hire someone, you stop and you just raise prices. Prices.

Okay.

Because what's happened over the past three years is you have doubled the business, which Means you're in massive growth mode. And in growth mode you have massive amounts of pain. You have to, there's so many things that break simply due to the pace at which you are growing. Growth sucks cash and growth creates chaos. And so if you, if you have too much chaos or you don't have enough cash, simply slow down growth and we can do it in a much more profitable fashion. I happen to believe that if you're making an extra hundred thousand dollars in profit in the bottom line, these problems wouldn't seem so bad. And so we can do that literally within 12 months by just not growing by 3 to 400k next year.

Okay, so you just can't take, stop, take a breather.

I highly recommend, I think that, I think that most people over a million, if they just took one year, didn't grow any sort of customers, bought no trucks, no equipment, didn't hire any more people, and just raised prices whenever they had the Internet inclination that they were overbooked. They would be way more profitable, the business be much more sustainable, and the following year they'd have the capital to actually grow a lot more in the long term because the business would be healthier financially.

Okay, that makes sense because that's the other issue. Money in the bank.

Hey, if you don't have, if you're not making money, a decent situation will sound horrible. I happen to believe if you're making $200,000 in profit on the 1.4, you'd be fine with what's going on. You're like, okay, yeah, I get a couple complaints. Who cares? I'm growing the business here so we can fix both of these things. Because by you taking one year to get your feet underneath you, and what you'll now focus on is systems, not growth and expansion and painting trucks and hiring more people, you're going to focus on creating all the systems and you know what they are. You just need the time to do it. And we're going to enforce that by raising prices and reducing the demand for your services by the price increase.

Okay, so would, if we're taking that breather, would you say we? Because right now there's two owners, one doing sales.

I'm kind of managing the crews and trying to train our, our operations manager to manage the crews. And we have a secretary. So for not growing next year, would you say we have too much non revenue generating employees?

I would cross that bridge when I get there. And if needs be, the person that is doing sales, the person that's doing ops goes in the field because they don't have as many leads coming in. Because when you're in profit mode, you're not going to spend as much on marketing. Like you've been stuck in the past. And I mean stuck in a bad way. You've been crushing it, let's just be honest. But like you've been stuck in growth mode, which is market, market, market. Spend money and then keep prices low to get more customers. And I know that simply by the fact that you said the two week thing like you're trying to fill the schedule all the time. And so I would just take you gonna take a complete reframe on what you're thinking about the business. As we're not here to increase revenue, we are making profit. Like everything changes. Which means if there is not a lot of leads coming in, we're not going to spend more money in marketing to fill the salesperson's schedule. What we are going to do is put them in the field for a couple hours a day so they go make, make money.

Okay, I agree that that's a valid point.

Awesome. Hey, best of luck. You're crushing it. Let me just preface all of that stuff by saying you're killing and I.

Think that you got it, brother.

You have a great day. Take care. Next caller is coming in from 2:1 8. Welcome the show. Thank you for coming on.

Mike. This is Ben from Offshore.

Ben, how's it going?

Good, how are you?

Good, good. What can I help with?

Well I'd just like to say thank you for everything you do for us and going in the home service industry. But my question is, comes to winter services.

What point do you start like a new business or do it under a new name if you're doing something that might be like for insurance or.

Give me, give me an example. What services are you thinking of offering during the winter that could potentially require a separate entity?

So I'm thinking about having us in the winter get into like ice, dam, steaming.

I missed that. Sorry. Say that again.

Damn.

Steaming.

I'm sorry. I am not sorry. I'm just missing it. I apologize.

No, no worries. Ice, ice, dam, steaming. So like up on the roof by where the gutters are.

Oh, okay, I got you. Okay. So basically gutters getting frozen, you steam to kind of like get rid of all that.

Like a pressure washer almost, but it's actual steam gun.

Interesting. Okay, cool. I'm tracking now.

All right.

So my question is if we were gonna get into that and it doesn't really go hand in hand with you, do now during the summer months, what point would you start? Like a whole different. Under a different name and have different insurance for it. What would you not do that?

Refresh my memory, Ben. What's the main focus during the summer?

We do beach cleaning and cleaning out swimming areas. We're pretty much service business. And then installing docks.

Yeah, I think, I don't think you need a new entity. You're working on the property, doing cleanup services. The dock versus their gutters. It's on their property. I'm guessing you're probably not getting on massive ladders. That would be the one thing you'd want to keep an eye out for. I'd probably take a look at your insurance policy, tell them what you're doing. But I wouldn't purchase a different service. You're just simply adding like you probably do 10 or 15 things for customers on their docks, their beaches, et cetera. You just happen to be doing it now a little close to their house. So I wouldn't do it. Separate one Also because the amount of cross pollination between your current database and what you can get from that database by simply offering that other service, I think there's a lot of potential there.

Yeah. Pick.

Did you want to split them up? Is that what your thought was before?

I was just kind of wondering if you go like that far out with it, you're better off naming it something else. And I didn't know if people did that because of insurance reasons or if it was more of just for advertising and getting clients.

Great point, great point. This is a fantastic point. So this is what you could do. This is what I would probably do in your case is what we're doing with Augusta. Right. So we have augustalights.com. no one's starting new entities, but we're running it from a customer facing perspective as a different business because no one's looking up Augusta Lawn Care when they want their lights in. They're going to be searching for Christmas light installers. And so we started a new website but everyone's entity is the same and then you just add a DBA for the other, other service. And so we would add a DBA of Augusta, Augusta Christmas Lights. So I would probably go that direction and if it blows up, maybe consider doing it separately but just make a new front end website. I'd call it Allshore Gutter something, Winter gutters or whatever, however people refer it to it. I'd be looking at your Google Analytics and like the search side of things to see what people are actually searching and then potentially make a new division but I'd revolve it around the branding of allshore so you can cross polynomial. Make sense.

Yep, gotcha.

Alright brother, you have a good one. Take care. Next caller is coming in from. Oh this is a caller from today already so maybe I messed up on them. 216 did you have another question? I apologize, did I cut you off?

I did yeah. No, that's all good. I guess before that I meant to say it before first and foremost it is absolutely incredible of all the content you put out there between everything on YouTube and your book. When I'm working, reading both your books just from start to finish the business side of everything that you get into is incredible especially how you're just giving it out on YouTube regardless. So my next kind of follow up question was so next year if I do buy out my partner or which is the plan to do, he's one dentist and I'm evaluating etc.

Yep.

Is something I'm heavily considering is and it's a little ironic asking you but I'd love to know like what my thought process should be and the pros and cons cons of considering joining a franchise and I know it is ironic again asking yourself but I love to hear your thoughts because I'm thinking like it's something definitely that's been on my mind and I'd love to hear your thoughts and the questions I should be asking myself is it something I should do or not?

So, so I'm super biased. Let me just say that you should talk to franchisees of whatever, of whatever franchise you're considering. I would say first off what skill deficiency or what are you going to gain from joining a franchise.

And I think it's, it's kind of interesting as well. I guess a lot of my thought process that comes through it all is that every single night, every single chance I get I'm watching your content and I even realized like since I'm so young in a business as well I'm almost trying to copy and paste what you've done and implement it into my business each day and the thought is like it would make more sense just to kind of, you know, don't beat them but join them and but I think like with the franchise it's a whole systems aspect of everything and how it can take so much. I mean I, I mean it's a lot of stuff that you say but the whole you know, command center as well to take care of all the admin work just allowed me to focus on selling and doing the actual work, just instead of having to split, you know, put two to three hours a day just in the admin work. After each day of working in the field, I think is incredibly valuable. And I guess my long term goal is to hopefully eventually get out of the field. And I think with the ability to join a franchise, that pretty much gives me a playbook to expedite that process, then kind of, you know, going through the mud and trying to learn it on my own is incredibly valuable.

Yeah, well, like, yeah. So, like, from my perspective, I think the advantage for you joining a franchise like Augusta, for example, getting to 500,000, you'll probably save yourself a year by using command center. Once you pass 500,000, you get yourself an office assistant. You can take a little bit more on internally, get a little more diversified. Great. But like, it'll probably save you a year there. I'll be honest, the best part about Augusta Nation is the community, right? Like the twelve hundred dollars that we charge per month, we'll cover like you got, you got augustolights.com, you got the main website, all the marketing and the templates, and then coaching. That's all great. And I could sell you on that. I'll be honest. The best part is the community. Because you have 150 other people, a lot of them, which are very close to your age and where you're at in the business, that are all doing the exact same systems. And so you see a bunch of people iterating on the exact same system and then telling everyone what's working because we're not competing with each other. And so that's probably, I would say, you know, and then just talk to other owners. So there's pros and there's cons. There's cons because when I make a bad decision, it's gonna affect you, right? If I make a good decision, it'll affect you too. So like, you've got it. You've got to kind of weigh these things out and realize that when you join a franchise, you are, you are hooking yourself up to other people. What that means is in any community that if someone takes a bullet, it does impact you, you indirectly, right? So if something bad happens to some other owner, it impacts you. It also means there's power numbers. And that's why, like a Buffalo group, when people are attacking, they all get together. That's what the community's born for. You get great ideas getting put forward, you get people iterating on, say something like door hangers. It's like what's working? Oh, this is working. Okay, great. Let's tweak this and then we bring it to the media team. Let's tweak this. And so you get a bunch of people doing stuff. And that's the advantage. It is the community. And I would say to anyone thinking about joining a franchise, look at the community as the number one asset that you're tapping into to be able to accelerate your education and the growth of the business by not learning, having to learn the mistakes of others. Does that make sense?

Absolutely, it does. Yeah. And then I guess another question I have is, would you guys, you know, I do hope to buy out my partner. Is it even an option to join Augusta or other franchises as a partnership? And then along with that, would I be able to, like, if I really was sold on joining Augusta or a different franchise, would you guys be able to help with the buying out process or be involved in that at all? Or would that be on my plate in order to kind of become a solo operator, you know, get him out of the business and then approach you guys?

I would definitely do it beforehand. Like, if you talk to Lee, for example, on the calls, he's done so many of the acquisitions that he could help with some of this stuff with the partner. But I would recommend doing that before because really for this reason, you're gonna get a franchise license that will increase the valuation of the business. Then you got to bring that into the valuation with your partner. I think if I was you, I'd be waiting as long as possible before he leaves, knowing you have all the cards, because he's not going to be able to sell his 50% to anyone else. So I would use that. I would get him out of the deal and then just join. We allow partnerships, by the way. We do, yes. But in this case, I. I would recommend for you to get rid of him, quote, unquote, not in a bad way. Just get him off the cap table and then join by yourself.

Yep, yep, yep, yep. Cool. All right, cool. No, yeah, that sounds good and I appreciate it. And again, thank you for everything. The stuff you put online is incredible, and it's. It's insane compared to the. The knowledge and the content you throw out there.

My pleasure, brother. All right, you have a great day. Next caller is coming in from nine eight, four, welcome to the show. Thank you for coming on.

Hi, Mike, how are you doing?

Fantastic. What can I help you with?

Hey, so I'm calling in because I find myself really easily able to save money through the spring and Summer. But as you start getting into the phone, I find that it's kind of hard to estimate on doing like leaf work and.

Through the winter time.

Yeah. Revenue quickly jumped up a cliff. So basically only have like. Sorry, I'm sounding out of breath. I'm actually doing some mulch right now while I'm listening.

You're good.

So from my understanding, I'm hearing that you're getting into Christmas lights and I don't have any like professional experience experience in that.

Would you recommend like trying to.

Find a job with another large company to kind of like learn the rope and try and float my business like through that and my regular like expenses through that other job? Or would you like recommend doing like a hybrid.

Or would you recommend just like any kind of resources to like learn that side of things and try and jump from there?

Yeah, like I think that, you know, in chapter nine of the book talks all about this. It gives you a few different options in terms of getting another job. Like the nice thing about home services is there's a lot of other industries that are completely opposite in terms of us in terms of their demand curve. Like retail, Q4 is their biggest time of the year for us. Most home services, Q4 is our worst. It's Q4 collapse when everything drops off. And then Q1 and 2 is literally just trying to get back to zero in terms of profitability. And so, you know, getting another job option. Second option, which I'm a big bigger fan of, that I talk about in the book is creating season specific offers for season specific services and figuring out a way to be able to get customers to buy more services from you in the wintertime. And so if you're doing landscaping, can you do Christmas lights? If you're doing landscaping, can you do snow removal? If you're painting houses outside and then all of a sudden it's winter, can you do interior remodels inside of the house? This sort of creativity is what allows you to get rid of off seasons because off seasons will keep you poor. Next call is from 850-Welcome to the show.

Yeah, thank you, Mike. I actually have a heating and air business and I was just curious if. And we're very small and I don't have any big aspirations to grow it. Huge. But I was working on getting a Google guaranteed deal.

And would you say it'd be smarter for me if I'm at max capacity during the summer months like we are now? Do I only pay for the Google Ads populated like higher up in the list? So to Speak, would that be better spent when the season is slow and I need the work or do you think those that it really matters?

What's your cost per lead from Google local services right now?

I don't think they really tell you that. I haven't seen it. It just asks you to set your budget. How much do you want to spend? Okay, so, so I'm not sure exactly.

You're fine, so log in. And when you log in there, your budget will almost never be used entirely. So like we put an infinite budget because if I could get leads for 15 to 20 bucks, I'd just keep doing it forever. I'd take loans out to get those infinitely they usually not going to spend your whole budget. What you want to go though is when you go in there, you're going to see the actual leads which are recorded phone calls coming to your office. And so listen to those obviously and make sure you can dispute them if they're not in your service area, if they're not for your services, etc. But also I would be saying it will tell you on your billing statement what you're charged, getting charged for those leads. Because this is the thing, let's just say you're paying 40 or $50 for a lead on AC or heating. You might be at capacity now, but what I would push you to do is have seasonal pricing. So if you know, especially because you're smaller, you don't have, you're not going to go increase capacity by hiring people if you know during a certain period of the year you're going to get, you're going to hit capacity. I'd keep the lead machine rolling, but then your prices absorb not only the increased cost of that lead, but also the fact that you can get more margin off the top knowing you're going to fill your schedule regardless.

The only thing for me that's a little different is I want to make sure that I serve my existing client. I'm not really trying to serve. Even if it was a really high.

Got it. What percentage of revenue during the summer when it's crazy busy? What percentage of that is from customers that are existing and you want to take care of. If like, if there was no new customer, again.

I'd probably say like 75.

Got it. I would raise prices to all those customers.

Yeah, right.

Because, because if when people turn off leads or they say I'm not going to accept new customers, what they're really saying is I'm willing to take lower priced customers that I'm currently serving because If I can alternatively get new customers that are willing to pay a higher price, why wouldn't I do that? And so I would. Unless you are like, hey, I don't care about money. I just want to serve these customers. I have a good relationship with them. Awesome. But if you're trying to maximize profit, I would say raise prices to all your existing customers. You're gonna make more money. Cool. You're probably gonna go from 75% down to like 60 or 65%. Giving you now the capacity. Go get more customers at a higher price that you get to, that you give to those new customers. Does that make sense?

Yeah. So how does this lead thing work? They're going to charge me for every time a customer even calls me to want a quote for a new, for a new AC or something.

Exactly, exactly. So I would just check on it once a week. I'd go like log in and you'll be able to see, I think it's called leads, I might be wrong there, leads on the left hand side. And then you'll be able to see the recorded phone call. And then you can dispute it if it's not in your service area or if it's service that you don't offer. But more importantly, you want to go to your billing and see the actual cost of those leads. But I would assume on a 30, $40 lead, if you're able to make 500 or $1,000 in profit, like we should really be doing that as much as possible. So I want to raise prices to my existing customers to make room for those high margin services that I know I can get during the summer, which for you is kind of your spring rush. Like people, everyone's lining up. You want to take advantage of that by giving yourself enough room of capacity to serve the new customer because they're willing to pay more. And if you're like, well, you know, yeah, like I just think you could probably raise prices significantly, make more profit and then be able to keep the leads flowing in.

Yeah, there's just no guarantee that this person, maybe they think my price would be astronomical if they just got their lead off Google, you know? True, true.

And this is the thing. When those leads are pouring in, there's also pouring in for all your competition. It's go time. No one can get in. Everyone is thinking what you've thought in the past, which is like, I'm not taking new customers. And so they are now less price sensitive. They also have the biggest pain. It's crazy hot in their house. And so Like, I think you want to take advantage of the person when they're in the most pain. Your customer acquisition costs will be the lowest. It's easiest to get the customer because everyone else is closing down their doors and they're at capacity. And that's the time to be like, it's go time. Right. So to be stopping leads during that time, you're leaving a lot of money on the table.

You think the leads are going to be helpful when. It's when I do want the work though, in the off season, or is it going to kind of be different?

Well, I don't know. Google local services specifically. I don't know how many leads you will get because that's like they do it differently because they have to distribute between multiple contractors on the platform. But I would. Doing the right thing. You're in the system now. Now, over the next few weeks, you'll see one, do you get two, do you get three? But I can promise you you're not going to get like 50 years. Not I just. You won't.

Okay.

So I just monitor it, see whether or not you can take more on and then adjust the budget if needs be. Next caller is coming in. 4, 1, 2. Welcome to the show. Thank you for coming on.

Hi, Mike, how are you?

Fantastic. What can I help with?

Hi. So I just graduated high school this past year and I've been running a landscape side gig. I'm currently doing about 40 yards right now every about two weeks just because it's so dry during the summer. But I want to know the steps I should take to go legit because it's just been a side gig for mostly cash all the time.

Okay, cool. What do you think legit looks like? What would the steps be for you? Licensed, insured, etc.

Yes, sir. And then, yeah, growing employees, trucks, the whole nine yards.

Cool. So what can I help with? Because it sounds like you kind of know what needs to be done.

Well, I'm looking for really suggestions like when should I be start hiring employees? When should I start getting my licenses, insurance, when all should I start beginning that?

Yes. Like your first employee is gonna come when you have so many so much work you can't get done by yourself. Right. The things that you want to get set up right now are the basics to be able to set the foundation for growth. Licensing, insurance, it's gonna cost you all of a couple hundred bucks. I'd then be figuring out how do I get more leads. Because if you. If you look at the 4L framework, which we Talked about before, you have liquidity. So like, do you have enough capital? Great. Let's assume we have a little bit of money set aside. The next thing we need is leads. Right. And so I'd be going out and figure out how do you get more leads? Well, how do you get more leads if you have enough money? Get a website. Next. Next. It's like, okay, door hangers, Facebook ads, Google. It's like, figure out which one's working so that when we get more capital down the road, when we get more liquidity, we can pump it into the correct lead channel. And so I'd be focusing, if I was you, on figuring out your customer acquisition cost. So in the future, you know exactly how much you have to spend in order to get one new customer. And I'd be testing on Google Ads, testing on Facebook. I'd be testing on yard signs, I'd be testing on door hangers, every door, direct mail. I'd be posting on Facebook groups, locally. I'd be doing everything and anything to simply test every single marketing channel. So you know what your customer acquisition cost is per channel.

I gotcha. So all of my, I've done almost no advertising. All my clients have gone are from word of mouth and then knocking on my two next door neighbors. That's about it. So I think I'm doing something right. I got the phone ringing off the hook for people calling, hearing good things about me.

Absolutely. And the bottom line is what got you here will not get you to the where you want to go. And so what got you from 0 to 40 might have been like just word of mouth, people talking about you, et cetera. And yes, you could stay on that path and probably grow a big business over the course of 20 years. If you want to to do it in five or six, you're going to have to likely use a different way of growth. And it's going to be usually in the form of marketing and advertising. And so I'd be putting as much money as possible into that because that's what's going to unlock. When do I get the next truck? When do I get the next employee? That's all going to come from simply having so many leads. You can't do the work yourself. Next callers from 760-Welcome the Show. Thank you for coming on.

Thank you very much for what you do. We really appreciate it.

My pleasure.

I'm in the junk hauling, okay, junk hauling business. And I'm in a. I'm in north San Diego county, heavily saturated. In fact, I have Three junk haulers on my street.

Wow.

So I'm wondering, how do you, how do you compete in a heavily saturated market? A and because like what I found is no matter what I do, I just changed my name of the company, the Cheap Junk Remover to compete with say Junk King or Got Junk. So it sounds more appealing. And I'm working with yard signs. What else can I do to compete in such a saturated market?

Great, cool. Real quick, just for me to confirm, did you say what's the new name of this? Is it Cheap Junk Removal?

Yes. In fact my website I just built two days ago is Junk Remove Cheap.

Okay.

So I gotta get some Google rank Google hits on that and I did it through Godaddy, so I don't know how to get Google to rate it.

Yeah. Okay, so here's, here's what, let's step back for a second. So when you look at the three guys on your street that are hauling junk, what, what makes you different than them? If I asked you like why should I hire you instead of them, what would you say?

Primarily what I've been focusing on is Price. I'm 54, so retired from my primary job.

Okay.

So I can work at a che rate. That's not my goal, but that's how I was gaining customers.

I got you. Okay, so what I would recommend is over the course of time, this is a non instant thing, is to try to remove yourself from being the low cost provider. That is a volume game which will require. It's possible, but it will require massive amounts of labor. It'll also require massive. You'll have to win the game of efficiency and logistics if you're going to win in junk removal on price. And so if your goal is not to have a ton of employees and a massive amount of software for logistics and competing on price, I would strongly recommend to create a brand.