Raising Prices by $3 Made Me $180,000

We do not need more leads. All of your customers have a certain value they're placing on your product. If you only think in terms of one time jobs, you're gonna be stuck with this math forever. I do have stuff to go over. Just tell me, Eric, when I'm like five to 10 minutes out, because I can talk for years. Okay, you create time. Let's go. Alright, first off, so just for a little bit background on myself, I am, I was a franchisee at Anytime Fitness and I joined them. I bought out the previous owner and ran that location up in Blaine, Washington. Little tiny city, right up against Canada, Washington State. And so I was a franchisee. Is that where you're from? That's where I'm from, yep. So kind of raised in that area just outside Bellingham, which is kind of like the largest city next to us. And so this evening I will talk a little bit more about my story. But basically the essence of it is I started mowing grass when I was 11 years old, pushing a lawnmower around that same little town in our, in our neighborhood. And I started college when I was really young. So I was 13 years old when I started college. And so the reason I started mowing grass was basically to pay my way through college. So I was gonna go to medical school and I want to become a doctor. I knew in order to do that I would have to start do a lot of college. And I didn't want. I was not a huge fan of college. Most people like, oh, I must have loved it. I hated every minute of it. But I knew I had to get through it. Yeah, exactly, right. So at 13, I started college. At 18, I finished my degree and I was gonna between medical school and finish my undergrad, I was gonna go, went over to Africa, spent a bunch of time in orphanages, hospitals and clinics over there doing like the craziest stuff that is completely illegal for me to do over here. You know, everything from birthing, surgeries, injections. I worked a lot in the burn unit with the kids. So in the pediatric side of things. And so you just say medical student over there, like fantastic, you are now our doctor. Boom. And so it was great though. I spent a couple months over there just outside of Kenya, Nairobi, so Kalangari, Tagoni area, and came back to the us Decided, you know what, I loved it over there. But over here, I don't want to do the same four procedures for the rest of my career. I have to spend another 10 years doing residency and everything to become either a back surgeon Or a heart surgeon. So.

Decided, hey, only thing I knew how to do is mow grass. So that's when I started Augusta Lawn Care. So that was about 10, 11 years ago. And fast forward to today. We have 172 locations. U.S. canada and Australia just started over there. And so I kind of know both sides of the coin. Being a franchisee and a franchisor, I know the struggles of both. And so if and when we get some time for Q and A, I'm happy to answer any questions. I'm very, very pro franchisee. So we do things very differently at Augusta in terms of how we set up our fee structure, how we vote on things, etc. But even as you all get started with franchising, I'm happy to help however I can in terms of even just the mentality around how do I operate underneath the franchisor, how do I be most successful within a system like you've now created and super beneficial? In my opinion, the success rate of a franchisee is higher than independent dramatically. There's a lot of buying power, community coaching, the ability to be able to get leads, et cetera. One thing that I was. I have stuff to talk about. I do, but Eric just mentioned something to me, so it blew my mind so much that I need to go over it to hopefully convince you today that you need to spend more money on marketing. So I will talk about what I'm supposed to be talking about, which is like, simple systems and fantastic jazz. Like that. But he was just telling me that basically, you all, as franchisees get the leads for free from the corporate site, but you can still spend money if you want to go get more leads. Now, right now, based upon the blended average that Eric's getting, He's getting around $60 per lead when it comes to getting a new fence from paying for Google Ads, I'm assuming Facebook ads, et cetera. Fantastic. So if you can get one thing out of the day, I just beg you to keep pushing that button of $60. Now, let's assume that Eric has the secret sauce because he can create time. He can do everything. He's awesome. Let's assume that you get $100 cost per lead. All right, let's run the math on this real quick. So right now.

Okay, cool. Let's assume that our cost per lead equals 100 bucks. Okay. What's the average close ratio? So if you go out and give 10 estimates, how many of those are usually getting accepted?

Three.

Three. Is that about average? 30%, you think? Maybe. Do you Know the kind of blended average?

I would say ours is higher than that.

Okay, 40%, maybe, like physically going there.

To do an estimate.

Yeah, physically going there. Never not got a job that I physically.

Okay, I'm going to assume that we actually, it's any lead that comes in, for example, is it a little bit lower if you assume that? Okay, let's assume 40%. Is that fair enough? All right, so let's just do. Our close ratio is equal to 40%. All right, so what you can do here is you can then run your customer acquisition cost based upon these numbers. So based upon this, my customer acquisition cost is $250, which means if you spend $250 on marketing, you're going to need a new customer every single time. Assuming that we can get one lead for $100, and that 2.5 takes two and a half leads to get one customer. All right, so how we can kind of think about this from a funnel perspective is you have cost per click. CPC up top. This is what you're gonna pay on meta. On Google, you're gonna clicks. You could also think of this as like door hangers, a few other things like that. It sounds like most of it's online, so let's just stay with clicks. You can determine that pretty easily. Facebook's gonna tell you, hey, it's $2. Let's just assume that cost per click. Well, over here, there's a filter on this funnel because at the bottom, we want customers, we want money. But we put money at the top via advertising. And in this case, let's just call it $2 cost per click. Now, over here, we have a conversion rate. This is the amount of people that come and click on your website. What percentage of them convert into an actual lead? Because I don't need clicks. Who cares about clicks? I don't need traffic to my site. I need leads. So my conversion rate is what percentage of the people that come to the website actually convert into a paying customer. Now, as franchisees, you have very little power over this. This is Eric's job, all right? And that is to constantly be thinking about search and optimization. Looking at the design of a website to see how do we convert as many people that get to this page into an actual. They fill out an estimate form, they call you something. All right, let's just assume that's like 1 out of 20. So 1 out of 20 people that show up to your website actually do an estimate request form. They actually call you in some way. They give you their contact information, say Hey, I want to pull fence. Now we can come up with our cost per lead because if we spent $2 to get them there and 1 out of 20 of them converted into a lead, we now know that our cost per lead is $40. Okay. Significantly lower. Right. So let's just kind of match this up. We can actually do. So it's 200. So let's do one out of 20. That would be five. All right, let's just make this math workout. So let's assume now our cost per clay is five bucks. Okay, a little harder to get maybe on your keywords. Whatever. $5 cost per click. 1 out of 20 is our conversion ratio. What is our cost per lead going to be? $100. All right, so now it matches up with what we're talking about here. So using this math up here, we have to have another filter because guess what? Leads don't pay the bills. All right, people, you know, and even what we talked about earlier inside the room, I need more leads. We do not need more leads. We need more paying customers. And so just getting more leads is not gonna help you because right now we have another thing that is in the filter of this funnel and that is our close ratio. Alright, so another filter. Before they actually become a paying customer and come out the bottom of the funnel and I make money on them, I need to convert them from a lead into a paying customer. And that's where we are, customer acquisition cost. So again, back to our math. Up top, cost per lead was $100. Our clays ratio, let's assume that is 40%. Our customer acquisition cost is $250. This is how a sales process, a sales funnel looks. Okay, so we've now determined that if we click for $5, if we can get one out of 20 people that click to our site to convert and give their information, ask for an estimate. $100 cost per lead. And if we have a 40% of those people will actually accept the estimate. Based upon the pricing that I give them, I can assume that I can get a customer at the bottom of this funnel. If I spend $250 on my advertising, I will get a customer at the bottom. Alright, so now the question becomes, can I convince you to spend $250 on a customer? So on average, what is the cost or what is the price that you get from a new install? Just a blended average. 5 grand. 4 grand. What's the average? What's it, 2,420. 400. Is that about right? 60ft with a gate. 60ft with a gate, Eric, is that around $2,500, you think.

Total revenue, you're asking for 11 install.

We're about to buy 4,000 to 5,000.

4 to 5 grand. Okay. Is that.

1400? 14, 15. 3 grand. Okay. Is it safe to say 2,500 as a kind of a blended average across the board? Okay, so let's just say now that our.

Let's do a single. So let's just call it a ticket price.

Price equal to 2,500. Okay.

On that $2,500 job, how much of that is going towards material?

Half of it. Is that about right? 50%, 40%. Okay, so we're going to take out.

So cost, cost of goods sold. All right, that's what we're going to figure out. Now we have our total price, $2,500. Our cost of goods sold is going to include, number one, our materials. Let's just say that's $1,200 or $1,250. So half. How much in labor? How many hours is this going to take to install the job? This $2,500. How many hours?

Four hours to install the fence. Everyone kind of agreeance on that? All right, let's call it four hours. And.

So the size of his job, the cost of his job is that is because he's doing 120, 150ft.

Okay, right.

So that's why he said four or $5,000.

Larger fences.

Larger fences.

Right.

So it's. And then you have to factor in, yes, we're paying. Most people aren't paying for hours. Some are, some aren't. Some people are paying per week.

Yep. Right.

So the size of the fence is going to matter to the cost of labor.

Okay, so here's a better question then instead of talking about hours, because I thought that everyone would think about most of you. Since you don't have a ton of employees, you're not going to think in terms of hours. Employees will think in terms of hours. You all are thinking differently. So I'll ask you a different question. Is what percentage of a $2,500 job is going to go to labor if you hire this out? Is it 10%, 250 bucks? So whether you have an employee or you're paying someone, by the linear foot, we can assume that this is going to cost us in labor approximately $250. Fair enough. Cool. So if we take away. Take our ticket price, $2,500, and then we take away our cost of goods sold, which is going to be our materials, our labor, and any subcontractors involved. We can now assume that we're making $1,000 in gross profit on this job. Reason I say gross profit and not net profit. There's going to be overhead, there's going to be. You got to pay for your fuel, all this other stuff, all right? But ultimately, the machine that we have built and the reason pool fence exists and why you have a business is because you have built a system that you are going to get $1,000 in profit based on a $2,500 job. That is the entire model. Now, the question is, can I afford to pay.

$250? So the real machine you have built is you have built a business. You have built a machine, a system that takes $250 and turns it into 1,000. All right? So the question is, why in the world would we not pump more money into this if we are confident that in this number, okay, you have built a business, the entire model, the entire reason there's a franchise here is because you have created a system by which you put a dollar in and you get $4 out on the other side. All right? That is the machine of marketing. And so when we look at the funnel, for every $4 at the top. Sorry, for every dollar I put at the top, I know how to get $4 out on the bottom. And so you're like, well, why? How is that actually possible from an economic perspective, what you're installing in terms of the fence, how we. How we actually derive this extra $3 in here, the 403. 300% increase in value is you have. You have the skill. You have the access to a pool fence that has a trademark, etc. On it. You have the. The ability to be able to source the material. That's how you actually derive value from economic perspective to the customer while they're willing to pay 4 when it cost you 1. Okay? All of this to say, if I could give you a machine today and say, hey, if you just put a dollar at the top, every single time you push that button, you'll get $4 at the bottom. And that's what you have in this. That's what this business is. There are very few, few vehicles to invest, whether it be real estate or the stock market, or I can put a dollar in the day and within, what, three, four weeks, by the time I get this job done and everything sits through and I get materials, et cetera, I get $4 every single time. I gotta buy. I gotta buy A truck? What about my equipment? Yes, there are overhead expenses. However, right now, when that truck is sitting at home doing absolutely nothing, it costs you the same amount per month on that payment, regardless of it sitting at home or out, actually out on the job doing work. Make sense? Cool. Before we take a turn, any questions on this stuff? Marketing, customer acquisition stuff.

So I mean, going from one to four, let's, I mean say that, you know, we do a lot of small jobs, you know, 30, 40ft.

Should we be coming up with a bottom dollar figure to say that I'm not leaving for more than or less than X amount of dollars based on that funnel?

Here's the thing.

You already spent this to get that lead. So yes, in the perfect world, I would say, hey, I'm not gonna take jobs that are less than 25 or 2000 or whatever because it doesn't make sense. The thing is, you've already paid this to get the customer to contact you, et cetera. You've at least, I should say, you at least paid the hundred. Right? They've already become a lead. I'm usually, this is the next part of what we're going to talk about and that is like, I actually don't like this equation. One to four is not great. I want it to be one to 10. And so the question becomes a, how can I upsell people into a better fence, more fencing embellishments, et cetera, or how can I sell them other services and products, cross sell them and other things that are adjacent to the pool fence that I could also make money on. Because right now, if the lifetime value of this customer is only $2,500, I don't like this math. But if I can figure out how to sell them on a recurring maintenance package, if I can sell them a warranty, if I can sell them some other service around the pool, whether it be the covers that were talked about today, whether it be the pool cleaning, whether it be chemicals, if I can get this to 5000, all of a sudden this math turns from 1 to 8. The math of the machine gets better, gets more efficient. And so when we think about lifetime value, the biggest flaw I see in this business model is most of you think in terms of one time jobs. We're talking a ton about this this evening because if you only think in terms of one time jobs, you're going to be stuck with this math forever. But if I can make this customer worth more to me every single year because I'm upselling them other services, I have them a Recurring plan. There's no reason why someone can't be buying an insurance policy on their fence, which is that if anything breaks, you're going to come back and fix it. Like that's customer service. No, no, you can sell that as a warranty, you can sell that as a maintenance plan. And there's other ways of recurring revenue as well as other one time jobs you could tack onto this. So for example, what are some other things that you could tack onto a regular pool install that you currently do? A pool. Pool fence. Install.

Lights on the poles. Okay.

Got it. Okay, so if we were able to sell on a $2,500 fence, for example, would that be an extra 500 bucks? Okay. Okay, cool. What else could we sell in addition to lights on top of the posts? Anything else?

Okay, so more of a temporary situation.

For people that can't. A lot of grandparents buy fences here, so they need to put up around Christmas and take it down.

Fantastic. What percentage of your customers you think need that? Maybe a quarter of them, maybe 5.

To 10% do that.

Okay. And.

That was my next question is like, do we actually even pitch that service?

No, we don't notice. I mean verbally, but it's not really written on my sheet.

Right.

I don't like really advertise it.

Right.

We absolutely should.

Here's the thing. I think every $2,500 fence becomes a $4,000 job. And how do we do that? He's like, well, you're a money hunger. No, we're gonna solve more problems for the customer. Every single time the customer is having a problem, they're gonna go find someone else to do it. If they're having you install a fence, they're not gonna go find. They're not gonna come randomly figure out how to like install Christmas lights or put the COVID on their pool. They're gonna have other people do these things. And I would bet to believe that the vast majority of your customers are hiring someone else to do services that you can perform. They don't even know about the lights because we don't offer it on the estimate as an upsell. And so instead of thinking, hey, that fence is gonna cost you 2,500, what you're gonna say is this premium ultra product is gonna cost you $4,000. Oh, my goodness. Okay, well, here's what that includes. We got lights. We're going to come back every quarter and we're going to make sure that everything is tightened. We're going to make sure the fence, the latch is working correctly. We're going to make sure everything is taunt. We're going to make sure the anchors are all correct, et cetera. Make sure everything's up to code, it's all safe. I'm going to tack that on. I'm also going to make sure that they have the option for the lights. I'm going to make sure there's an option for all these things that I can get the value up at four grand. And then if they are price sensitive, I'll come down.

More and more options. Right. The fact that we are submitting an estimate for 2500, here's the thing in your mind, like, man, that's a lot. They might be coming to the. Because I came to this whole conference today not looking at anyone's pricing on purpose because I thought it was five grand. Because if I had a pool and I had kids and I was worried about their safety, I'm willing to pay five grand to fix that. So if I. If you're thinking 2500, all of a sudden they're like, oh, that's a great deal. Yes, go. When in reality, if you just offered more services, other upsells the lights. Oh, I didn't think about the fact that half of my pool parties are after dark. I didn't even think about the fact that I don't want this here during the winter. I want to actually be able to move this over and be able to have more room in the yard. So all of a sudden, our $2500 fence becomes 4000. And guess how much you spent on that extra $1500 in revenue? Nothing. Because you already paid for the lead.

Sense.

How many times have you raised prices?

I'm sorry, when you.

The price you started at 10 years ago and the price you offer it now was. Was the gap.

You mean like.

Every couple years?

I would say, yeah, but you started selling goods for like 14 a foot, $10 a foot.

We're at 25 now.

You're 25, right. Josh Parks of San Diego. I thought he was a creeper person because he sells it. His minimum is 30, and he goes up to 35, 40 bucks a foot, which no one else does, but he sells it all day long. And his logic was, well, if I double my price and get half the work, I'm still making the same money.

But I'm telling myself, yeah, and this is why close ratio is such an important number to track. Because if you go back to this funnel, the main number you can actually affect in this entire funnel is your close ratio. Now, here's what's crazy, all right? If we take this close ratio and we take it to 10%, we change nothing else. Same ads. It's the same cost per click, same website. Eric's taking care of that same conversion. Right. But we change one thing. Instead of a 40% close ratio, we have a 10% close ratio. Guess what your customer acquisition cost is going to be now? It's going to be $1,000. So all of a sudden, when people say marketing does not work, I usually look at this funnel. I start to realize that their close ratio doesn't work. Because if this is 40%, right now I'm making sense of a $250 customer acquisition cost that I can turn into $1,000 every day of the week without doing upsells, et cetera, I can turn into $1,000. But if I don't close a high enough percentage of those leads, all of a sudden, I'm at fault for the high customer acquisition cost. Same leads, same ads, everything. And so the reason close ratio is so important to track is because, number one, it's going to determine whether or not I can keep spe spending money on the. On the marketing. It's also going to determine. Back to what Eric's talking about here is price increases. Because if you don't know your close ratio, when you do raise prices, you won't be able to measure whether or not actually made an impact on the customer. Because here's what's crazy. When you raise your prices by $2, a linear foot, I happen to believe it'll hardly change your close ratio. But if you're not tracking it, you actually don't know if it did or not.

I agree with it because I. Yeah, just last year, I raised my prices about $3, you know, and.

Terrifying.

It was terrifying because we weren't very busy at the time, and I was kind of, you know, juggling with. With coach Joe here. No, Anyways. Yeah. Because you're like, holy. Like, we need more jobs here. We don't need less jobs. And so it is terrifying, but it doesn't take long. And then another thing that I've noticed for. Been doing this for almost 15 years, 13, 14 years. When I originally started, I'll never Forget, it was 13 bucks. We were gonna go for 13 bucks. And I didn't know any better because I was green, and Eric's dad was like, yeah, let's do 13 bucks. And Bill Mollarus in Miami and Nelson at the time, they were like, like, you'll never get It.

No way.

But I didn't know any better because I was just naive to it. And sure enough, we started getting it. But what happens and what's happened in the past is I'm notoriously the highest one in the whole game. The whole all out of all my competition. And when I raise my price, there is. We do lose a few. But then what happens? The competition's price comes up and I start hearing that they're charging 500 for a gate now.

Holy.

You know, I'm not charging enough. So now this happens every year at the conference. I'm gonna raise my prices again. But I. I don't know. Yeah, I don't know my close ratio.

Yeah. Which this is. This is a number that. This is why you don't have to. You have to use software.

I kept track.

Yeah.

Every single lead that I got.

Yeah.

Still too hard because probably about 20% of our business is referrals. So it's not in the system. You have to keep track of that separately.

But do you create an estimate for the customer? Yeah. Yeah. So how, how you're gonna track close ratio is just estimate sent. You can track that inside your software. How many estimates did I send?

We're paying for 30% more leads that we didn't even reach.

I don't consider them. I don't consider them though.

So 250 for it already.

No. So you paid the hundred. You paid the hundred. So in this case you have a lead. $100. Yep. And so what I consider a close ratio is once an estimate has been sent to the customer. Because if you're just saying, hey, I'm not going to send estimates to customers for whatever reason, that's kind of on you. So that's where I say, when it comes to your software, all you're going to do is filter down by estimate sent.

Estimates accepted. Boom.

That's it.

That's it. So if you sent. 140 were accepted. 40% close ratio.

Okay. Yeah. Yep. So if you use Housecall Pro Go estimates, filter that by cent. Boom. Filter by one or accepted, whatever the nomenclature is. And there's your close ratio. Track that thing religiously. If you're getting above 70% accepted. So sent. And then 70% are accepted, there's a very good chance you could raise your price and not see a single change. Right. So real quick, let me run some math because what he did. What was your name again?

Casey.

Casey, I apologize.

What he did by raising prices by $3 a foot. Right.

Last year he did 75,000 linear feet, give or take.

I was just kind of working.

But let's call it 60 because we're conservative over here. That decision made him net profit $180,000. By just making a decision.

That'S why you create a product that's actually good. Because when you raise prices and it's not a good product, everyone leaves. So the reason you scale a business and the reason you want to grow a business is that when you raise prices by $3 a foot, it means something. Because if you're only doing 5,000 square foot a year, or linear foot, sorry, a year, and you raise price, that's 50 grand, no one's going to complain. But it's not no 180 grand. So if I can build this funnel and I can make it bigger to where I can pump more into it and make sense of it when I raise prices. Now, the reason that this happened and the reason that when you raise prices, no one leaves, I'll explain. Every single time you make a buying decision as to whether or not you buy something, you are running this equation, and that is value and price, for example, going to steal someone's water. If right now, to me, I'm in the middle of Sahara desert and I'm just absolutely parched, this glass of water to me, value wise, could be $100 right.

Now. I'm not super thirsty right now. I might pay a dollar for this right now. So if it's, if it's priced at $3, so price is here, I value it $1. Guess what, what's not going to happen? I'm not going to buy this. But now if all of a sudden the value of how much I have valued this water goes to 100 because I'm now thirsty and parched on my mind, two or three dollars is an absolute steal of a deal. And someone could raise their prices to 80 or $90 and I'd still buy it. And so what that means is every single time value is higher than price, the transaction goes through every single time. If value is higher than price, you will buy the product. And so what that means is right now, when you're going out and you're sending out estimates, everyone, all of your customers have a certain value they're placing on your product. And then you come randomly and throw a price in here, okay? Now sometimes the price is going to be here and they value here. And guess what happens? They do not accept the estimate, okay? Now for the vast majority of your customers, your price is here and their values appear Somewhere. And so if you raise prices by $3 a linear foot, guess what they're still going to buy. If you did another $2, guess what, they still buy. And so that margin that you're increasing is all currently there. They already value your product a certain amount. And guess what, sometimes raising your prices increases the perceived value of the customer of the product. Because they're thinking, dude, $2,500, could it really even save my kid? Like, I value my kid a lot more than $2,500. I was coming to this with five grand and you come in at 2,500 and they actually now think of your product as less valuable.

So that's what happens when we raise prices. This is the power of creating a valuable product and create a valuable service. Back to your question. Sorry.

So she's great. KPIs and all the like, she's on.

Yep.

For me it is. How do we identify if the marketing is reaching our icp?

Okay, first off, why does that matter?

Because if we're getting leads in that aren't our ideal client.

Yep.

Then.

Exactly. That's why in tracking the close ratio is so important. Because not all leads are created equal. Because now I'm gonna actually try to determine which leads come from Google. What close ratio do I have on my Google leads versus my Facebook leads? Alright. And so this is where I start playing the game. And it's like I was gonna go off in this direction this morning, but we'll get there. Like, hey, are we tracking where the leads are coming from? Cause maybe marketing doesn't work. What if your Google close ratio is 90% but your Facebook is 5%? We don't know. And so that's why asking every single customer, hey, where'd you hear about us? Is very important. So I know where my marketing dollar is coming from. And then tracking the close ratio for every single marketing channel.

And Housegirl Pro tags them.

Utm. Probably. Yeah. Yep.

So Housegirl Pro identifies whether it's a meta ad.

Yeah, we know she tracks that.

Yeah, yeah.

And there's ways we can help you automate that too.

Yeah. With UTM tracking, you can say, if it comes from a certain place, I want it to be able to track or tagged, etc. Cool.

And to jump on your pricing thing. You know, we go massively out of our way to emphasize how much better our product is. Right. We're the top end, we're the premium product. And I think it hurts people when they, you know, come at the same price as everybody else. Because I Think it does. The, the messaging doesn't align with the reality.

Right.

And I know what the thought process is. Well, it's an even better product for the same money. Why wouldn't you get it? Now? It's a no brainer. Right? But people like you said have a perceived value as price, right? If someone offered me a Rolex for $500, I would be concerned, right. That I would want that more. Right now it's something weird. It's fishy. If you tell me you're selling me the best refrigerator in the market, but it's cheaper than the other guys, I don't believe you.

Right.

And I've done this. I've been a victim of this. I went to go buy a phone case. There were two side by side. I didn't know anything about either one of them. I bought the one that was twice as much as the other one always because I figured it had to be better. It costs more, right? So I've heard of people raising their price and they're saying, like you said, their close rate goes up. Because now I trust you more because the price matches your effort. I think the price is part of the market.

And I would go to believe that if Casey, if you looked at his year prior, let's just say he profited 200 grand. Just gonna make up a number. By making a split moment decision to raise his prices. He immediately doubled his prices, doubled his profits. So the lever on increasing prices is ginormous. Like we all are gonna, like, we're gonna focus on marketing and we're gonna do like operation. We're gonna get the new latch and we're gonna do great. Fantastic. Love it all. You can double your profits if you just make a decision to raise our prices. And so the biggest lever in your business is price because tomorrow, without any friction to the business operations or a better product, you can simply make more money. Okay, so you're like, I'm not 100% convinced. Fantastic. So what you can do for the next 20 estimates is have your regular prices for 10 and your other prices, new prices for the other 10. What I would venture to believe is that you will probably get the about approximately the same close ratio and then you'll be convinced of yourself that hey, charging an extra 20% on this and doubling my profits is a good idea. I just want you to make believe it.

And you're scared.

Yeah.

You have to believe that it's worth what you're offering.

Or if you hate money and you can send me the rest of it. Via chat. That'd be fantastic. That's right. Cool. Any other questions on that? All right, so that leads us into what we talked about a little bit today, this morning.

This is called the 4L framework, okay? So there are four Ls, and every single business, regardless if you're a Fortune 500 company or you're just getting started and you're by yourself, is going through the 4L framework, okay? The first L, if we're just going to go through a small business, is liquidity. Okay? Now, I used to say cash, but didn't start with an L, so that's boring. So liquidity, typically, you're like, oh, it takes money to make money. That's what everyone says. Because what you do need is liquidity. You need money, you'll go get leads. You gotta go advertise, get your name out there, you gotta make a website, you gotta build a product, you gotta do something. So you do need liquidity to start a business. Now, typically, the first thing you need to do is go get leads. It doesn't matter if you're building software, if you're installing fences, if you're mowing grass, you need leads to build a business. Okay? And for the vast majority of people, they will always think they need more leads. To the vast majority of business owners, they think this is the constraint of basically everything. I just need more money, I need more leads. Most of those people have never hired a lot of people because they start to realize there's actually other things in a business beyond just getting a bunch of leads. But for smaller businesses, we always, almost always look at leads as the constraint to the business. Just realize that is not where the destination is. If you got enough leads, if tomorrow I gave you 100 leads, you'd have a problem because you would not be able to fulfill on all of them. So if I get enough leads and all of a sudden I'm super busy, what's gonna happen? I'm going to need labor.

The next constraint of the business. I know I get so many leads. I'm so far behind. I'm booked out so far. I have so many fences on the schedule. I cannot go out and do the estimates. Leads are coming in, I'm not even getting back to them. Your constraint now is labor. You need to find employees. And that's what we talked about this morning. And that's why, like, for example, one of the attendees this morning, he was only wrapped up in this, and he couldn't think that this was important. Why? Because he hasn't got Enough leads to make this a problem yet. But if he got enough leads, if he did UTM marketing, if he able to figure out and track and do his close ratio and all of a sudden get more leads and drive traffic through Facebook ads and do email remarketing and send everyone text blasts, et cetera, if he did that and got more leads, if he doubled or tripled his leads, he would have a problem of finding employees and getting the work done. So I need money to make leads through advertising. Once I get enough leads, I need people to go actually do the work. So I need laborers. And then you get enough laborers. This is where some of you will be hitting over the next few years.

And this is why you join a franchise. You need leadership because now you get so many labors, you're like sick. I need to go focus on sales, but they got to figure out how to use the stinking drill bit. And I need someone to go do a shop, do a walkthrough with the customer, final walkthrough, make sure everything's done well and upsell them. And do it. Oh, by the way, on a walkthrough, really good idea to upsell them then because they're happy. That looks really good. That was great. That was simpler. You guys did a great job. Oh man, that's so sturdy. I love this latch. Mr. Jones, I have something for you. We also have options for lights. We have options for cleaning this thing. We have options for making sure there's a warranty so you never have to fix this again. We also take it down for you in the winter. Here are the five other options that our customers love after servicing the initial service. Say, well, I don't want to pitch them the $4,000. Great. You're going to install it for 2,500 and then you're going to offer them five options to get them to $4,000 after the job is already completed. If you're not upselling during a walkthrough, what's the point of the walkthrough? Like, oh, I gotta make sure the job is done correctly. Yes, great. We want the customer happy. We want a Google review. Yes. But get to the next job for them like they have other problems to solve. Don't be so narrow into like ah, pool fences. No, there's so much that goes around that. Do you really think they're buying a fence from you? No, they're buying peace of mind. They're buying security, they're buying insurance. And if you think about those, you will actually think about the cost per linear foot, it's getting completely unhinged and completely removed from their. What they're actually paying for. You all think. I think in terms of mowing grass. You all think in terms of I make tall grass short. You all install mesh and metal. Okay? That's what we all think. They could care less about that. If they wanted to buy that, they could go buy a cheaper product. They could do it themselves. They could do it in a temporary manner. They're buying a product because they want other things. They want insurance, so no one's going to go sue them because they have a pool party with their kids. They want have peace of mind so that they can let their kids go outside and they don't have to go watch them. They have the security of knowing that. Honestly, for half of these parents, they want to, when someone else comes to their house, for them to say they're good parents because they have that pool fence up, they want status or they.

Want to be able to have grandma come over and watch the kids and not worry.

100 peace of mind. So we aren't selling a fence. We're selling insurance. Like, every single month you pay on your house insurance, and you will probably never get a claim. You will never have a house burned down. You'll probably never have it completely flood. But. But every single month, you're gonna pay, on average in the United States, $5,000 per year for home insurance.

So people are willing to pay for insurance and peace of mind and security and all these things, but we all wrapped up in, like, mesh and metal. And so if you're selling insurance, you know what you're selling? Thin air. You're selling a promise of future service that some of us will never use, but yet we all still will pay it every single month. Cause that's, that's the value we place on security and insurance and peace of mind, not mesh and metal. And so when you're selling something for $2,500, we're not selling a metal fence. We are selling the fact that they are going to look good in front of other parents. They're going to allow to be able to go on date night and let grandma watch the kids. They're going to make sure their kid doesn't drown, because God forbid that happens. They look like a bad parent.

Yeah, that's right. That's right. Yeah, that's right. We'll give you a discount. Not 4,000, 3,600. All right.

So this is the 4L framework. And you're like, ah, great, Then I've built a business and everything will be perfect. No, because when you hire leaders, guess what? Leaders also don't show up to work. Sometimes leaders also have family drama. Leaders also do stupid stuff. Sometimes they can do all sorts of weird things or just cost you money because they're overhead to the business. They don't actually produce the labor. They just simply are the general manager, the operation manager, the estimator, the admin person, whatever. They cost you money. And because they cost you money, you now have less margin, less profit to work with, and you now have a liquidity problem. And there are businesses that I just literally left this week that do million plus in revenue and make no money. Why? Because they have a whole bunch of leaders running around not making them any money. Three people in the office. Four. What's that? Well, Elon's trying to fix it. Give him some time. Give him some time. But ultimately, this is the framework of growing a business. Because as soon as you get more leaders, you will then have a drop in your profit margins. As soon as you do that, you'll need to probably raise prices to be able to afford it. And then go get more leads so you can get more laborers. And when you get more laborers, you'll need more leaders. This is the growth engine of a business.

So the reason I say this is because most of you are in this stage right now is that I need more leads. And what I said this morning goes true. And that is only thing we should be focused on is getting more leads. It is the constraint of the business. The reason the vast majority of home service businesses do not grow is we a don't know which constraint we have. And two is we focus on all the wrong stuff. Besides, the one thing that matters, and that is the constraint of the business. If you fix this, guess what? You're like, I'll be good forever if I just got leads. No, you will eventually need a higher laborers. But in order for the business to grow, you do need to figure this out. So it's not the end all be all. Because If I dropped 300 leads on the individual this morning that was talking to us, he would immediately have another problem. And that would be finding employees, interviewing, making sure they show up, training them, all the rest of it. Cool. Any questions on the 4L framework?

What if you have two problems?

So then it's about which one's most ugly. Because a lot of times if you fix one constraint, it'll fix the other. So walk me through what you're thinking.

I'm Just thinking, okay, you know, and I'm not saying I have the problem, but like, liquidity, like, keep pouring money out of my pocket into trying to generate leads.

You know, where's the. You know, eventually I'm gonna run out of money if I don't get enough leads.

Great point. So leads, it would still in this case be your constraint because you're trying to get leads, and now you've ran out of money because you don't have any good way of getting leads for cheap. And so I would also say all elements of the 400 framework get easier with more money. Duh. Right? If someone gave you $500,000 tomorrow, all of a sudden I'd be able to find a great leader. All of a sudden I could hire people all. All of a sudden I could get more leads. Cause I just go spend more money. So having more liquidity always greases this engine faster. And that's why people go out and raise money from venture capital, private equity, go on the stock market to go get a. But raise a bunch of money so they can make this thing go faster. And so money always makes the problem easier in terms of speed making it go faster, I should say. But in that, in that example, leads is still your constraint. We just have not tackled the problem of how do we take a $500 customer acquisition and make it 100. Because we figured that problem out. Now all of a sudden, liquidity is not as much of a problem. Right.

So still.

Yeah. And that's where it's like, well, you know, what, What. What should I focus on? It's everyone like, what should I be doing now? It's like, if leads is your problem and that's your constraint in this cycle, the only thing we should be focused on is how do I run Facebook ads, how do I get better pictures, how do I track it? How do I close my track my close ratio? How do I make sure How? Like, do we send emails to all of our customers? If you've been servicing, let's just call it 100 customers per year. And then we assume about 300 leads. So this is customers. We actually got customers. Let's say 300 were leads that came in per year. Let's just assume that. And now we do this for five years. We now have 1,500 contacts inside of our system. If we are not emailing and texting those people at least once a month, we are losing out massively. And guess what? You don't need to be able to send them emails and text messages. You can Directly, get them back into the leap, get another customer, resell them something else. Like, man, Mike, you're right. I could have sold them lights. I could have sold them the down. I could have got the packing up in the winter. I could have sold them this and I could have gotten the COVID Why not look at the year 12 months and say, okay, in January, this is the upsell. I'll send all 3,000 of these people. In February, this is the upsell. I'm going to sell every single one of these people. In March, April, May, every single month of the year, I'm going to try to keep the 1500 or 3000 people warm in my database. Because eventually, as the business grows and you get enough people in your database, you should not have to spend money to get more leads. Because right now, almost every lead you get is someone's paying for it, whether it be a corporate level, are you going out and generating ads, etc, you get some word of mouth, etc, but you can't actually go make word of mouth happen. Right? The reason, oh, it's all word of mouth. I don't do any advertising. I hate that. You know why? Because I can't control your word of mouth. I can control how much money I spend on Facebook. And so ultimately, if you want to make a lot of profit, the goal is, how do I get a customer with zero customer acquisition cost? We all like that. Referrals, upsells, right? If I can get this customer that's paid the $2,500 to come back next year and buy something else, install another fence to be able to do. Hey, we're doing a pickleball court now. Great, we got pickleball fences now. Oh, we now offer a new service during the winter. Every single person. In November, I'm going to be sending them. And what am I trying to do? Remove them all? Hey, we do temporary storage. We take them away and we store it for you. So you have to keep it on your property.

Christmas lights, the list could go on. Trust me. This afternoon when we go, I will give you 100 different ways that you can upsell and cross sell people into. But the bottom line is everyone thinks they have a lead problem. Every single person. When reality. If I told you today that that $2,500 customer, over the next five years, you're going to make $8,000 from them. You're like, oh, I'll spend more on advertising. All of a sudden we can make sense of a higher customer acquisition cost and spending more money if we can increase the Lifetime value of the customer. But we can't improve the lifetime value customer if we do a one time job and they never hear from us again. And so the number one step, if you're like, yes, leads are my constraint, go to the people who have already given you money and ask for more of it. We're out here like, I'm gonna do ads. I'm gonna go like paint my trucks, I'm gonna wrap my trucks. New billboards. Great. I agree. That is all to cold traffic. People have never done service for you, half of which don't have a pool. The other half of you don't have kids. And we're going to go spend money advertising to them. When there's people in your database, you have their credit card information. They did work for you and you're still not advertising to them. Kind of crazy if you ask me. Okay, so we ignore the obvious customer in front of us, which is the one that has already done work for, we've done work for in the past. They're happy with us and they have given us money and instead we go after the cold traffic that has never done service for us. And we don't even know if they are an ICP that we could actually serve.

The 20 grand that we did this year in six weeks on open kind of was generated from three text messages to Casey's customers. Casey's recent customers. Customers you had in the last year and a half or whatever.

That's it.

Three and.

Yeah. And I can vouch that the amount of planning ahead we did for this was infinitesimally small down the middle. We didn't know that Chris couldn't climb ladders when we started sending them out. He had some serious anxiety about climbing ladders.

Customers were calling us to make sure it was legitimate. I got 30 phone calls. Hey, I got a text from your. An email or do you do Christmas lights? I didn't even know about it. I called Casey. I said, do we do Christmas lights? He said, call Eric.

Here's another thing. Landscape lighting. Okay? If you think about what are they trying to solve, this is what I like to think about. What's the pain point I'm solving with a pool fence and what's adjacent to that? I am solving security. I am solving peace of mind. I am solving insurance. When it comes to a pool fence. Guess what else? When it's dark for the majority of the day, the 24 hours that are in a day, the majority of them are dark, they also want security, peace of mind, etc. Whether it be thieving robbers and you're doing motion detection or, or whether you're doing the kid walking from the pool around the house to the front front yard. Also need landscape lighting along there. Now all of a sudden that $2,500 fence can become a $10,000 job.

Right?

Lightsaber.

Yeah.

Well, how you package this is important, right? So for example, like the $2,500 job, I'm now going to poo poo on that. On my estimates, that is like the first time parent. I would call that package the first time parent. Alright? And then up the very top, I have the perfect parent, for example. And now you have packages, the good, better, best model that you're gonna sell every single customer. Because right now you all selling the good model. There needs to be a better and there needs to be a best. And guess what happens? Everyone buys the better. And instead of a bullet, I have an $8,000 package for full out lighting, the whole nine yards, for the landscape, lighting their Christmas lights, the whole nine yards. Great. I have $2,500 just for their pool fence. And somewhere in between, they're probably going to buy the fence with maintenance and the lighting on the fence and that's gonna be $4,000. Right? So if you're not sending every single estimate with a good, better, best model, we're losing out on massive amounts of money. Say, well, what if only 20 or 30% of them do it? That means that 20 or 30% of your customers are going to die.