Step-by-Step Process to Build a $1M Home Service Business! [Mike Andes]

Hey, everyone, it's Mike Andes. I'm the founder of Augusta. Lawncat has over 150 locations around North America and Australia, as well as copilot CRM. Today I have a very special presentation I'm looking forward to sharing with you so you can grow your home service business over $350,000 per year. Let's go ahead and jump right into it. So first off, how this presentation is going to make you money. You're gonna get the cheat code of how to recapture 62% of your leads that you don't even currently know about. This is what usually boggles people brains is when they think, when they find this out, it's actually the leads you're not even thinking about right now are 62% of them. We're going to be able to recapture using these strategies. Also, we're going to. You're going to be able to offer your employees $4.81 per hour more when it comes to their wages, and that's going to be without reducing your profits. This is actually a picture of some of our team members. Make this a little bit bigger for you. Showing their big bonus paychecks on a paycheck where it's over $1,000 per pay period, they're making in bonuses because of this system. All right, now what I want to establish first is when we talk about growing your home service business, I want to first establish that everyone's business growth slows down at some point. I don't care if you're talking about Apple, Google and massive companies or you're talking about everyday stock small businesses. Every business will eventually at some point slow down in growth. And honestly, this is super frustrating. This is something I hate. It's frustrating when you want to grow your business and you don't know why it's not growing. And that's what I want to solve today in today's presentation is identify exactly why your business is not growing and what's the constraint causing it to not grow. So there's really, in my opinion, one of four constraints. And if you've seen the videos on my main channel, when I do turnarounds, really what I'm trying to diagnose when I first show up at a business that's struggling is which of these four constraints are happening in the business. These are the four constraints. Liquidity, leads, labor, and leadership. These are the four constraints that make up what I call the 4L framework. So in other words, a business is either going to, is going to slow down its growth. It's going to struggle with one of these four things. So how to continue growing your business is this. First, focus on the ugliest of these four constraints. Because most of us will struggle with all four of these throughout the year or even throughout your whole business career. Like, you're going to struggle with some of these, but focus on the ugliest one, the one that currently is causing you the most pain. Fix that and repeat that process. If you do that, you will grow the business. So this is in more of a diagram that I wrote out of liquidity, leads, labor, and leadership. And the reason I put it in this framework of a circle is when you have liquidity, you have money. What do you do? You go out and you buy leads. And when you buy leads, guess what? I get all these leads and I get all these customers. What do I need? I need to get laborers. And if I have a whole bunch of laborers, guess what? I need more leadership of those labors. So you're going to constantly go through this cycle and to grow the business, you'll constantly keep going through the 4L framework. So now let's really try to identify exactly which of these is your constraint based upon what I have put as the sort of standards, the benchmarks for each of the four Ls. The first, liquidity. If you have less than one month of revenue in the bank, I would consider this a constraint for your business. You would be cash constrained, in my opinion. If you have less than one month of revenue in the bank. I understand that sometimes when you're growing your business, it might go lower than that. It's if you're trying to grow really quickly. However, it's still a cash constraint if you have less than one month of revenue. If you have less than one week of work on the schedule, your backlog is less than one week. I'd also consider you having a constraint in the leads department. When. When you have more work hours than you have man hours, you have a labor constraint. You need more team members, you need more employees. And this is. You work on weekends and evenings and holidays just to get the work done. And then people, it leads to people quitting and they don't want to work for you anymore. And there's a big churn rate of your team members is when you have a labor constraint. And then as you begin to grow your business and you need leadership, if you're like, well, everything's a problem. I have a cash problem. I have horrible customers. My employees are brutal, then you start looking in the mirror right and saying like, hey, maybe I'm the problem. Maybe I need to have better leadership skills. And that's not necessarily a bad thing. Because if it is your fault, if everything's your fault, it means that you can control it and you can change it, but by improving your leadership skills. Now, the thing that is really frustrating can seem like an unending treadmill and be super exhausting when it comes to running a business is the fact that this is an unending circle and loop. Which means if I have a lot of money and all of a sudden I figure out liquidity, well, now I need more leads. So I go spend the money on the leads. Well, then I get these leads and I guess what, I gotta go get more labors and then I get a whole bunch of laborers. Man, I gotta manage these people, I gotta lead them. And so there's this constant, ever ending constraint that you're going to have in your business. There's never going to be a time where everything works out perfectly. There's always going to be a constraint if you're growing the business, if you're not growing the business. That's why usually I say growth sucks cash, because growth requires liquidity to keep this engine running. Now this is good news because it means that your business is growing. If you did not have these problems and if you didn't constantly fix one problem and then have another problem, and then you fix that problem, you have another problem. And if you didn't have that means your business would be, you know, in stasis, it would be not growing, it'd be leveled off, and it would be plateaued. Now this is the blueprint. If you can really turn the constraints into infinite growth, you can do that by figuring out which of these constraints. And we're going to talk today about how you can solve each of these constraints in the business. Liquidity, leads, labor, leadership. What can you do to solve these constraints so you can keep growing the business, both in revenue and in profits? Now a caution when it comes to home services, liquidity, leads, labor and leadership are seasonal and inconsistent. This can cause stress, anxiety, and this will make you want to quit. This is why you'll need to recalibrate often and identify what the ugliest constraint is. Because in the spring rush, you might not have a leads problem. It might be just, I can't find any employees in the middle of winter. You might have the problem with. I don't have a problem with getting customers are getting any more employees. I have a problem with liquidity because I've run out of cash reserves and I don't have enough leads coming in. So your problem, your constraint is constantly going to be changing throughout the year because most of us have seasonal business. So you got to recalibrate and figure out, okay, what should I be focused on right now? What's the current constraint in the business? That if I can figure this thing out, it's going to allow me to move the business forward and that will change as you grow the business and as you go throughout the seasonality and the time of the year. Over here, I got the four different Ls, the four Ls, liquidity, at least labor and leadership. And I have over on the right hand side, the seasonality that's going to come along with that. With liquidity. You got seasonal revenue, right? Sometimes you have lots of work in the spring, sometimes you have lots of work in the winter when there's snow. And also, like you're going to have seasonality inconsistency with liquidity because it takes time to collect money. So people might not pay for 30 or 60 days, especially if big contracts deposits, people pay 50% down now, 50% at the end of the job. These are seasonality. This is spikes of, you know, high highs and low lows of liquidity. When it comes to leads, you have spring rush and you might have a slow season. You have a drought that really slows things down. You can also have the natural demand curve that people are always going to want your services for just a few months of the year. If you're doing Christmas lights, guess what? You only have two or three months where people are going to really want your services. And that's when leads will be pouring in. So there's seasonality to most home services. Okay, when it comes to labor, there's going to be times you have no applicants, no one's applying whatsoever. This is the other time you're so overstaffed you literally need to lay people off. You can't get people to even show up. Sometimes they're inexperienced. These are the type of constraints you're going to have. And the seasonality can change. I remember throughout 2020, 2021, 2022, it was so hard just to get people to show up to an interview. Now all of a sudden 2024 rolls around. We can get 20, 30 people applying for one position. This changes. This is the seasonality that comes with the economy and comes with just the natural demand curve of the year with our seasonal businesses. And it comes to leadership, it's tough to sometimes keep A general manager keep an estimate, or someone that is higher up in management because it's an industry that's easy to get started elsewhere. Like for most home services, if your manager has a decent head on their shoulders, they can go start the same business because there's not a lot of money that needs to be spent on tools, equipment. It's an easy, low barrier entry industry to get started with. So now let's create a strategy to overcome each of these four constraints. Now there's a slow way and a fast way to solve all of these. And honestly, more money, more liquidity is like gas in the fire. It's just going to make things go faster. So before we get into this, though faster is not necessarily better. Let me explain. So we have a problem with liquidity and you say, hey, I have less than one month of revenue. Great, here's how we solve it. You can do it the slow way or you can do it the fast way. The slow way is that you can raise prices and increase cash over time. You can get a line of credit again to make sure that you never go out of business because of a liquidity problem. You can get larger credit limits. You can also get insurance to make sure you never lose all of your money due to a lawsuit. These are things that take time. It takes time to raise your prices and it's increase profit margins and then pocket that money over time. Now the fast way to solve the liquidity problem is go get a loan, get debt, go get a partner that has more capital. If they have $50,000 and you have $50,000 and you're like, man, I have a cash problem. Well, if you have a partnership, all of a sudden you have $100,000. And so I'm not saying it's the right way to do it, but it is. A faster way to solve the liquidity problem is to get debt loans or partnerships. Now when it comes to leads, the slow ways you upsell and to existing customers, you sell them more services, you can do referrals, you can do one click estimate email. That's something where you send them an email, they click a button and it says, I want the estimate for this specific service. You can do all this doesn't cost a lot of money. You don't have a lot of money here. It's simply a way of getting more leads. And at Copilot you can literally design email pitching one service and then say click here to get an estimate. They click on that sends you off an email to you saying, hey, this person Wants an estimate for this service. These are things that are slower. It doesn't take money to do it though. Referral program, having review systems, you get lots of Google reviews and Facebook reviews. These are things to get more leads, but it's gonna take you more time. Over the course of time you'll get reviews. Over the course of time you'll be able to get referrals, etc. Now the fast way is you could literally go out and buy other companies out, acquisitions. You can do paid ads in Facebook ads, Google Ads, door hangers, you can rebuild your website. And we do that. Lawn care web design we do at home service web design. I'm not against those things, but, but this is going to require capital. Again, liquidity being poured on is like fire, is like gas on the fire. You will go faster if you have more money when it comes to solving the leads problem and the leads constraint. But you can also do it the slow way. Right now if you have a labor problem, the slow way of fixing the problem is having a flex schedule, giving them more flexibility, creating a bench of employees that you've hired, but they're actually not working. And you say, hey, look, you're on the bench. You, you might be able to get a full time position in two, three, four weeks. And you create a bench, a backup plan for your labor. You can have employee referrals where they refer their friends to come work for you. Focusing on your leadership skills is going to also help bring in better candidates and have a better labor strategy. Having a great culture and having one on one meetings, I can't overemphasize how important is to have one on one meetings with your team members to be able to solve the constraint of labor and keep them around longer. Now the fast way to to solve the labor problem is just increase pay. Guess what? If you increase pay, you will get better people, you will get better applicants, you will get more applicants and they will stay longer. You can just increase everyone's benefits. We don't all have just money though, just to throw at the problem. And so sometimes you'll have to use the slower strategy. But again, money in this case makes all four of the four Ls. Liquidity, leads, labor and leadership. It greases the engine of the growth. That's why you have more capital. You can grow faster because each one of these constraints, adding capital, adding more liquidity allows you to grow faster and get through these constraints. Same thing with leadership. Look, you can do it fast by just paying people a bunch of money or hiring really experienced managers to come run your business. The slow way is you cultivate that talent from within. You learn by trial and error. And so, again, this is the whole premise behind, like courses and going to masterminds and conferences is, yes, it costs money, but the whole point is that you can learn faster. You can learn and improve your leadership better and faster by spending money. But if you don't have money, you can do it the slow way as well. You don't necessarily have to go to a conference and spend $2,000. You could just buy a bunch of Audible books and listen to a bunch of audio programs. These are the type of things you can do to solve the leadership problem. A leadership constraint. Now, you might be asking me thinking right now, well, those are all fine and good, but it doesn't solve my problem because I can't find anyone to work for me. There's no labor whatsoever. And it's like a brick wall in front of me. I cannot get through it. It's insurmountable for me to be able to solve the bottleneck or this constraint. So if that's what you're thinking, then go back to liquidity and charge what you're worth. All right? So if you're. If any of these stages, leads, liquidity, labor, or leadership, you're like, I cannot find a general manager leadership. I cannot find any employees labor. I can't get any leads. If that's where you're at and you're like, I can't grow my business because of this constraint. And you actually believe that that is a huge problem for your business. Charge your worth, raise your prices, and increase your liquidity. Why? Because money solves everything. Because, remember, if we get more liquidity, we get more cash. We. We're able to solve the problem with leads. You go buy more leads. If you have more capital, if you have more liquidity, guess what? You can go increase your wages, you increase base pay, you can increase benefits and solve the labor problem. You can go out and hire better managers and people with lots of experience and estimators, et cetera, if you have more money. So if you're running up against something, you're like, I just can't figure out how to do this. Raise your prices. Maybe you don't grow so fast. You lower how much you're growing. But by lowering your growth, you increase your cash, because again, growth sucks cash. So reduce your growth, but by doing so, increase your margins, your profit margins. Increase how much cash you have, and you'll be able to solve the problem. In time. Well, say, well, I need more leads. Great. Increase your marketing spend, build a new website, hire an agency. Oh, I need more labor. Great. Raise your prices. And by doing so you will be able to have higher wages, increased benefits, increase need. You'll buy more equipment, buy more trucks, get a new shop space. These are things that will solve the labor problem. Same thing with leadership. You have profit sharing, employee training, development programs for your team. All of those things require money though. So if you're running up against a constraint in the business of the four Ls, simply go back to raising prices, slow down growth and increase the amount of cash you have so you can solve the problem in time. Here are some of the cheat codes at Augusta. That's my business is currently using in 2024 to solve each of these four constraints. When it comes to liquidity, again, this is money capital, cash in the bank. Fico we're using is we're using Copilot CRM to make sure that we refine our pricing, we track our budget hours versus our actual hours to make sure that we're able to make sure we are charging the correct pricing and optimizing our profit margins. And later this year, we're actually going to be having AI prompt certain decision making, using the software to tell you exactly when you should be hiring, exactly what prices you should be charging, which services are your least profitable. That solves a liquidity problem when it comes to leads, increasing the speed and lead efficiency. How fast can I get the estimate to the customer? I will increase the number of customers that accept my estimate. If I increase the speed that I get to them, getting the estimate to them, and the time it takes for me to be able to, once they accept, get them on the schedule. So what we're doing is we're reducing the friction of the sale and we're having live pricing 24.7on the website so someone can sign up and get mowing service 24. 7 from the website. And it's not some long complicated form, by the way. Our conversion went up 17% on our sites when we shorten the form and stop asking for a bazillion different things on the form, like shorten it down, reduce the friction and you'll get more leads. And what we're doing is I'll show you in just a moment showing customers a picture of the house and saying like, hey, is this about the site? The property size that you have? If so, I'll give you your mowing price just like here, $49 weekly, $75 biweekly. And then you can just accept the quote right from the website. When it comes to labor, again, this is the four L's. We talked about liquidity, we talked about leads, and now labor. What are we doing here? We're trying to reduce the cost of our admin. All of the phone calls coming in by using AI. Check this stat right here. 79% of callers chose to continue with an AI assistant when given the opportunity to switch over to a regular human. And by doing so, we were able to reduce the amount of time spent on the phone by half, which saves so much time and money when it comes to admin. Another fun fact is that did you know that over only 37.8% of missed calls leave voicemails? This is insane. Why? Because the vast majority of the time throughout the week your office is closed, they're not answering the phone. And if they're not answering the phone, only 37% of people are leaving a voicemail, which means you are losing out on leads. But Furthermore, by having AI answer the phone 24, 7, it means that I don't have to pay someone to sit next to the the phone all day long twiddling their thumbs waiting for phone for the phone to ring. Now, when it comes to leadership, efficiency and trust is gained through real time tracking and pay for performance. So P4P software, I also have built that tool and what it does, it creates a meritocracy by which the harder you work, the more money you make. It just makes a lot of sense and it gets everyone pulling in the same direction because think about it, if you're paying someone by the hour, the, the longer the job takes, the more money they make. Whereas for us as business owners, the shorter the job takes, the more money we make. Well, with pay for performance, we get everyone pointing the same direction and that is the faster the job gets done, the business makes more money and the employee makes more money. And this is what's so cool is Last year on P4PSoftware.com, the users using P4P were on average able to give their team members $4.81 more per hour as a bonus on top of their base pay because of this system. Now in conclusion, when we're trying to grow a business and we're trying to increase our profits, we're trying to grow our company. Number one thing we have to do is identify the critical constraint. The most critical constraint, identify that. Number two is create a strategy to solve that constraint. And we talked about how to do that with or without money. But really, the cheat code is charge your worth, raise your prices, and increase liquidity. Because ultimately, again, money solves all your problems. And so if you're able to increase your prices and make more profit and make more cash, you'll be able to solve any constraint inside of the business. And if you do this, you'll be able to infinitely grow your business. So whether you're trying to go from 300,000 to 600,000 or a million dollars to $2 million, or you're just getting started and you're trying to go from $2,000 to $20,000. 1. Regardless, you'll be able to grow your business if you can identify what constraint. Where am I at in the 4L framework? And just then being able to, like, stay focused on that one thing. It's so easy to be like, all these things you're learning and you're watching YouTube videos and you might have gotten five ideas in this video. What is the one constraint, the one thing in your business that you need to focus on? Because sometimes just all these are good ideas. You might see the best trucks to buy and equipment and how you should do marketing, all these different things. What's the one thing out of the 4L framework you need to focus on? Do you have capital? Well, if you have capital, do you have leads? No, I don't. Well, then, great. You should probably focus mostly on trying to get more leads, figuring out your marketing practices, et cetera. So I got lots of leads. I got tons of work. I just can't get anyone to work with me. Great. Let's solve the labor problem. How are we going to do that? What can you do to make sure that your hiring ads stick out from the rest on? Indeed. On. On Craigslist, on Facebook. How can you stand out? And how can you make sure you're able to pay your employees based upon performance so they're able to make far more money than your competition? These are the things that you must do in your business, and that is focus on the one constraint, the thing that's going to give you the most return on investment, the most return on your time. Because, yes, you could spend all day long talking about a truck or a piece of equipment or some tactic in your business, but is that the thing that's going to get you the most return of the next hour? Think about return on the next hour. If you're going to spend the next hour working on your business, where's the greatest return going to come from? And that's what the 4L framework is for, to identify exactly what you should be working on. Your business. The last thing I want you to do is be frustrated. Why can't my business grow? Why can I make more profit? Why can I increase my revenue? It's going to be one of those four constraints. Identify it, fix it, and then you'll grow your business to the next constraint and. And it becomes this ever ending treadmill of growth. And that's awesome. It means you're growing your business.