The Confession Booth with Mike Andes!

Ladies and gentlemen, welcome back to the Confession Booth. So this show basically operates like most call-in shows, except the fact that you are going to be anonymous. So you don't have to say your name. You don't say the name of your business. Your voice will be garbled. We use AI to garble your voice. So this allows you to talk about the things that are hard, whether it be an employee leaving, issues you might be having in the business, financial problems, struggles you're going through. And I do this because anyone and everyone has questions in their business. Many times when you go on a public livestream like this, it's very difficult to share The things that are actually happening, because you're always aware that someone could listen to it, could be shared with your employees, could be shared with your family member, your spouse. And so we try to make this a safe place for you to be able to ask the questions that are actually affecting your business. And hopefully I can help in some small way. So without any further delay, we already have people in the call queue. Thank you so much for your attention. Down here is the phone number: 361-733-3332. We are live. And taking callers. So go ahead and call in. Let's go ahead and welcome the first caller into the confession booth. Welcome to the show. Thank you for coming on. I cannot hear them. Can you hear me?

Check.

1, 2. Jace, is this my problem?

Hello?

Oh, there we go. I can hear you.

Hello? Am I on?

You're on. Welcome to the show. How can I help?

Hi, I can't really hear you because it sounds like a robot talking at me.

Oh, okay. You're supposed to sound like a robot. I'm not supposed to sound like a robot. They'll fix that right now, but feel free to go ahead and ask your question.

Do I try to call back?

Jace, can you see what's going on with his— he's hearing me like a robot. Interesting. Well, can you hear me? Like, can you hear the words I'm saying?

I can barely hear what you're saying.

Oh man, it might be a connection issue on your end. Feel free to call back in. Maybe on a different, you know, line.

Yeah, I'll try to call him back.

Okay, sounds good. All right, so if you have a question or if you would like some help with something in your business, again, 361-733-3332. We have the next caller coming in live. Welcome to the Confession Booth. Thank you for coming on. Hello?

Hey, if you guys can hear me, I think your Wi-Fi is screwed up. I can hear the callers fine that are on with you, but you guys are coming in all like a robot, like the Wi-Fi is bad.

Weird. Okay, you're supposed to sound like a robot. I'm not supposed to sound like a robot. But can you hear at least what I'm saying right now?

Yeah, I don't know if you're talking to me or not, but yeah, it just sounds like a robot. So I think you guys need to check your connection. I can hear the callers okay, but not you guys.

Okay. Very strange. Well, if you can hear me, feel free to go ahead and ask your question, but it is me talking to you. I promise it's not a robot.

Oh. See if you can reset your connection, 'cause nobody can like hear ya.

Okay. All right, very strange. Don't know what's going on. Jace, do you see any sort of pattern with what's happening right now?

Okay.

All right, well, while they are figuring out that, feel free if you wanna call in. I'm gonna quickly chat about compensation. I think when it comes to technicians and for those that are potentially a little more entry-level, so your techs, I think that's when I wanna think about getting my compensation as close to performance as possible. This is why P4P or pay for performance is so important in my opinion. Now, P4P is not something you just implement overnight. It's not something you hear me talk about like, oh, tomorrow I'm gonna go start giving 30% of my revenue to my employees out in the field. It's different than that. The reason is because if you don't have accurate estimates, if you don't have accurate budget hours on every job, it's very difficult for your crew to actually have a standard for how long a job should take. But what I have found when it comes to technicians or any entry-level position, they're not willing to hold their breath for weeks, months, or years before seeing compensation. Now, if you look at it as a continuum, you would have very risk-averse people over here, and on the other side, you have very risk-prone people. Very risk-prone people are entrepreneurs because they're willing to risk years of time, years of effort, tens of thousands or hundreds of thousands of dollars in exchange for the potential upside of the business doing well down the road. But they are very well aware, entrepreneurs, that for a year, 2 years, 3 years, they might not make a single penny from the business. They might actually pour money into the business. It's going to take weeks, months of time working 60, 70-hour weeks every single week, on weekends, on evenings. And that is highly risky. The fact that you're going to do all that effort, invest all of that money and potentially not see a return. In fact, over 50% of businesses don't even last 5 years. And so that's a very high-risk move. And if that's something that's appealing to you, you're probably listening to the show, you're an entrepreneur. You're way over here being very risk-prone. Over on the other far extreme is an entry-level team member that needs to pay their bills this week. And the reason I say this is because many times we sell out of our own pocket. Meaning, when it comes to customers, we are thinking about how we would think about the invoice or the estimate or our sales process. And because we came from limited resources, we think they come from limited resources. When in reality, the customers we're serving do not have the same problems that we have. The other side of the coin is that when it comes to our technicians, our team, our managers, we also sell from our own pocket, which is we as entrepreneurs are very risk-prone. We like upside. We like risk. But if you sell in that manner to your technicians, to your managers, to your team, you fail to realize that they are not entrepreneurs. And so what to you seems like okay in terms of risk, seems okay in terms of risk-adjusted returns, is not okay for them. Meaning, some people would rather have a job that makes $20 per hour every single hour than a possibility of making $100,000 a year in 5 years from now. And you could say, well, mathematically, it's just, you should take the risk. You are an entrepreneur. You likely are okay with high levels of risk for high levels of return. But if you approach your compensation at that same level to your technicians and expect them to think about year-end bonuses and it change today's behavior, you're going to be sadly mistaken. Even when it comes to general managers, if you make 60%, 70%, 80% of their comp based upon bonuses around profitability, around year-end bonuses, quarterly bonuses, keep in mind that if they were okay with an annual bonus being 50, 60, 70% of their paycheck, they would just go start their own business. And so there's this continuum of risk from low risk to high risk. And what I see is the through line is how long are you willing to invest time, energy, and money into something without any— without seeing any return? And the lower level on the, on on the company totem pole or like the org chart or even the amount of pay that someone gets or the way that they're paid, whether it be hourly, salary, etc., usually corresponds with this continuum. And just because you enjoy having huge upside does not mean that someone as an employee is going to have that same appetite for risk. When you say, hey, 50% of your, of your, of your, uh, of your compensation is gonna come from commissions or it's gonna come from bonuses, be very careful. You very well might attract an entrepreneurial person that is not going to stick around very long. And so, I've seen some people be very generous when it comes to profit sharing or the incentives or the commissions that they're willing to give someone. However, they fail to realize that that person that likes that commission plan or likes that bonus structure, is probably entrepreneurial and has a high tendency for risk. So what does this mean? I need to have a high enough base pay to be able to make sure that I'm attracting people to my organization that are not risk-prone. They are seeking some level of knowing that they're gonna be able to pay their bills today. But then I also want to make sure they have enough incentive to keep them motivated for the upside. When it comes to managers, I'm going to tailor this individually to the person. If they really value having a higher base pay, I'm going to tie their incentives to a higher base pay. If they're like, "Hey, I just wanna swing for the fences. Give me a commission. Give me a percentage. Give me profit sharing." Great, I will adjust in that direction. Just know if they're doing that, they're usually entrepreneurial and they're probably eventually gonna wanna start their own business 'cause they tend to be over here when it comes to risk. On the very far extreme is usually our technicians and home services. If someone's making $20, $30, $35 an hour, they usually aren't going to be able to take the next 6 months in between jobs without any pay. They usually don't have a lot of money saved up. They're usually living from paycheck to paycheck or even just within the next few weeks of their paycheck. And because of that, if you think that you're going to do profit sharing or you're going to have some sort of program, end-of-year bonus that's going to incentivize them, usually that's when you'll be disappointed. Like, "Man, I'm throwing money at them. I'm doing profit sharing." It's too far away. The horizon that they're able to think of is shorter simply due to the fact that they don't have enough resources to get through next week's paycheck and to be able to provide for themselves and their family. And so what do you do to solve this problem? When it comes to technicians, that's why I like pay for performance because every single hour matters, every single job matters, and it's going to show up on their next paycheck. When it comes to managers, general managers, regional managers, executives, leadership team, that's when usually they're going to first off have a higher base in general so they can cover their living expenses. But then that's when I can get more creative with tailoring the incentives around profit sharing, revenue bands, etc. But the reason I'm saying all of this is do not think you're going to go get a manager to manage your business for the same or slightly more in base pay than what they're currently making as a technician with a whole bunch of upside for profit sharing. Because if they take that job, they are likely an entrepreneur. Meaning you're going to say, "Hey, look, I'm going to give you this new title and there's all this upside if you do really good." But the base pay is essentially the same. And I say this because I see so many people getting wore out and thinking that they're doing something wrong when it comes to taking technicians and making them managers. But you have to remember, the reason they're an employee is because they're looking for stability and they want to have their base pay increased. This is a big unlock for me, is that if I am selling out of my own wallet when it comes to incentives, bonuses, pay structures, compensation bands, I will likely want more risk. I will want a piece of the pie with, like, lots of downside but no ceiling. Most employees don't want that. They would rather have higher degrees and confidence that their base pay is going to pay the bills and they're going to be able to add to their lifestyle. And so this is just a side tangent and a warning. I've seen this happen. I saw a a manager the other day that their technicians were consistently making more on pay for performance on a daily, weekly basis than the base pay of the general manager. But the general manager was given 40% of profits, which sounds good assuming that the location was in profit mode, had consistent profitability, but it wasn't. It was in growth mode. It had just started a few months ago. And so, of course, the general manager gets disillusioned when his whole team is making more money than him on a paycheck-by-paycheck basis. And so, we have to make ensure that we are selling to the role that we actually need. And if you want longevity, if you want an employee that doesn't wanna become an entrepreneur and go start their own thing or compete against you, make sure that your compensation says that by ensuring that the base pay is the thing you look at. I have made this mistake and that is thinking about commissions and thinking about percentages and profit sharing and then I, Go and I talk to people and like, "I just want more base pay so I can reliably increase my budget and my lifestyle for my family." Awesome, heard, very much. I will take the same revenue bands and same profitability and just tie it now to base pay instead of percentage basis. And for everyone that's different. If someone's really heavy in sales, they like commissions. They like big wins. They like having months where they make twice as much as the month before. But for other people, that would drive them crazy. For technicians, the ability to have where every single day, the harder you work, the more money you make, allows them to be able to put discretionary effort in today and get money back this paycheck. For a manager, and the higher up someone goes in leadership, typically the longer and longer that horizon of discretionary effort comes back to them in the form of more cash. So keep that in mind. Alright, we're gonna give this another shot. Welcome to the confession booth. Thank you for coming on. Can you hear me a little bit better this time?

Uh, yes, I can.

Fantastic. How can I help?

So I'm having an issue where, um, so for the last couple years, every time like taxes came due and, uh, you know, I've had to pay, you know, my income tax and all that for the business. Um, so I haven't been able to, and I've had to put it on payment plans. And I've been— I've always tried to save up the money to do so. And at the point I'm at right now, I have 2 employees, um, and, you know, I'm trying to figure out the best way to go forward. Like, I need to catch up on this. I need to figure out my best way to catch up on paying my taxes and not keep going on a payment plan. But it seems like all my money is just disappearing, you know, so I don't really have much to save for taxes.

Totally. Right now, what's the monthly payment on the payment plan?

$500.

Okay, and what's the business doing in revenue right now?

So, um, from 2025, the gross profit was about $150,000.

Okay, and of that, you said gross profit, how much did that actually hit the bottom line that you could take out of the business?

Um, so you're talking about what's the, uh, net profit? Correct. Or after, um, so that was about after paying the bills and all that, that was about $80,000.

Got it. And so right now you're making— do you think this year you'll probably make around $80,000 net profit as well?

Uh, probably it'll be between $80,000 and $100,000. I have been changing some things in the business because I've really been trying to follow you. I started going on homeworks and I'm really trying to up the business.

Okay, so right now we're paying $6,000 a year on the payment plan. Is that, is that still feeling like there's no cash available for you?

Yeah, to save up for, you know, the next year.

But it's just gonna stay at $500 a month, like, for taxes, correct?

Yes.

Okay, and are you— do you feel like the— that you need to pay this off sooner, or can you just stay on that monthly payment?

Well, my only issue is, um, You know, I can stay on the monthly payment and I can get on a monthly payment probably every year. My worry is at some point, you know, will, will I still be able to? Like, I, I think I will, but I'm kind of worried I'm going to get to the point where, you know, I'm still paying from 2024 and I'm having to start paying from for 2025 as well.

But this is federal income tax, right?

Is this—

is IRS?

Yeah.

Like, why would you not be paying your current year's— like, okay, wait, is this 2024 and you're worried that 2025 you might get audited? Is that what you're asking?

Well, I'm not worried I'll get audited.

I'm just— The issue is I just don't have, like, I haven't had the money to start paying for the current year. So I'm always paying for the last year. Got it. And so I just don't know, like, at some point, like, I'm trying to figure out a way where I can finally get ahead.

Yep.

But right now I'm just playing the catch-up game.

Got it. So we've got to make more money in the business. Because ultimately, we only need to add around 10% more profit for you to cover the monthly payment, the $6,000. But what I want you to do once you get past this is be able to pay your taxes on a quarterly basis instead of annual. 'Cause you're paying for this, it's just a matter of do I want to spread it over the course of 24 months or do I just pay for it every quarter? And you also have penalties and fees when you don't pay quarterly. Even if you pay annually, If you don't pay quarterly, there's still fees that are being put into that calculation. And so I would love it to be where we first figure out how much do you need to make personally, and then we lock that number in. So then when we grow the revenue and profits of the business, we can take that extra money and throw it at this ex— this outstanding tax obligation. But then once that's done, we got to do a better job of budgeting to make sure that every quarter we're paying our taxes, not waiting until the end of the year, because you're relatively profitable. Like, $80,000 to $100,000 of profit is decent. Do you need basically $80,000 to $100,000 for your personal expenses though?

Uh, yes.

Okay. And so in terms of gross revenue, top-line revenue, what's the business doing in revenue right now?

Um, you mean before expenses or, uh, before expenses, like top line revenue?

What are you doing in 2026?

Um, as far as it's looking like, I'm going to be hitting about $200,000 for 2026.

Okay, and is it you and one employee, or how many employees do you have?

I have two employees.

Got it. And right now, are you overwhelmed with work or is it kind of hard to get leads right now?

Uh, we're overwhelmed with work.

Okay, and how much of your revenue is recurring or is most of it one-time projects?

Pretty much all of it is recurring.

Got it. And right now, when you give out bids and estimates, what percentage of them on average get accepted? Like 50%, 80%? If you had to guess, what percentage of your estimates get accepted?

I would say 50 to 75%.

Got it.

Okay.

And you're saying to me that right now you got tons of leads coming in, 50 to 75% of them get accepted. We need— let's just call it an extra $20,000 a year in profit. Which is about a 10% increase in revenue. And so I know this sounds really simplistic, but it is actually the fix. All right, I know it's gonna sound really, really stupid, but you got to raise your prices by 15 to 20%. If you do that, you pay the $6,000 a month— or sorry, $6,000 a year immediately, but you're gonna have extra on top of that to start stacking away. And what I want— what I want you to do is get, get your close rate down to the point where it's at 35 to 40%, and you're going to do that by having higher prices. But right now, right now you have so much work coming in, you're probably like— correct me if I'm wrong— you're probably either turning away work or getting— you're slow to respond to new leads because you're so busy.

I am slow to respond to new leads, and I have been, you know, before the season started, I did raise the prices of all my clients by about like 10%.

Okay, and so again, I believe if you did a well-crafted email, and you can put this in the Facebook group for homework, for example, and I can help, help out with this or put on the mastermind. But like that letter is well-crafted, say, hey, due to the price increases or due to the cost of fuel, insurance, everything going up, we're raising prices to this starting this date. This will be your new price. Let us know if you have questions. The bottom line is you need to lose some customers so you can make room for new, better-paying customers. Because you're also going to raise your prices to new leads that are coming in so that way you don't get 75% of your estimates being accepted. And it's going to feel really bad because you're going to get customers or leads saying that you're really high priced, but I need you to get your close rate under 50%, ideally 35 to 40%. And the only way to do that is to Raise prices. And you're like, well, I don't have any room on my schedule. Great, that's why we're going to raise our prices and some people will leave. Like, how many recurring customers do you have on a week— uh, like right now in your whole database? Like, how many recurring customers?

Um, I think it's about 80 to 100.

Got it. So we have 80 to 100 recurring customers and honestly, we need to get that down to about 70 just so you have some breathing room in terms of the schedule so that when you do sell more jobs at a higher price, there's room for them to actually fit on the schedule. And in the long run, you probably want to have a better close rate if you want to grow past $250,000 in annual revenue. But for now, to pay off this debt, get your feet underneath you, and then be able to start making quarterly payments on your taxes, this is an immediate fix. And that's a 20— that's a 15 to 20% price increase. If you do that, let's do 20%, you will do the same amount of revenue— or sorry, the same amount of work, but you'll make $240,000 instead of $200,000. That extra $40,000 is straight profit and is going to be the thing that pays off your taxes.

Now, is it okay? Because like I told you, like the beginning of the year, like right before mowing season started, I did increase most of everybody's, you know, rates by at least, at least 10%. And then I did have— because going into this year, I did have about 100 clients, and then I raised everybody's price like, you know, 10% at least. Um, and I lost probably 20, 10 to 20 of them.

Yeah, I understand. I understand that's happened, but at the end of the day, you have more leads than you can properly serve. Like, that's why I asked you very clearly, is like, do you— are you overwhelmed with work? And if the answer to that is yes, meaning that demand is higher than supply, we've got to raise prices or increase supply, like go hire another employee. And so in this case, when we're in the hole, I'm not going to keep growing and increasing supply, like hiring more people, buying more trucks and equipment. I'm going to focus on raising prices So that the demand for my services actually comes down to meet where I'm at in terms of supply. And so I understand like in the past you've raised prices. Hey, I'm raising my price again. Well, for some reason, no one felt bad when the cost of fuel has gone up by like 80% in the past few months. Insurance has gone up, everything's gone up. And so we've got to pass that cost along to customers. Or we've gotta go hire someone so that when leads come in, they're not waiting days. And I want you to be able to take the time that right now you're spending on these customers, these 80 to 100 customers that you currently have, I want to lose 10 or 15 of them so that I can actually get to new customers in a timely fashion where I'm following up with them, I'm getting the estimate to them as fast as possible. You're not doing that right now, and this is why a lot of times people just stay in this broken cycle of low prices and low profit is because, "Oh man, I'm not getting a lot of new customers, so I can't get rid of the old." If you got rid of some of the old ones and you actually had some bandwidth and time, you'd focus on sales more, you'd do a better job of getting to the lead faster, and you'd end up selling more jobs at a higher price. So, I know it seems very simplistic. I understand you've raised prices by 10% in the past, and that could be playing mind games with you, But at the end of the day, you have more work than what you can currently get done. And you're overwhelmed with work. And you need the profit. Raise prices by at least 15%. Not 10%, 15% minimum. And if you do that, you will be able to pay the monthly payment for taxes as well as start chipping away whatever the extra principal is. And in the future, once this is paid off, we've got to make sure we have quarterly payments going out. We've got to get a really simple app like EveryDollar that we can track our budget, make sure we don't let our personal income dictate what our budget is to make sure we only need the $80,000, $90,000, $100,000 personally. And then every dollar above that, this extra $40,000 goes straight to making sure that we're paying our taxes on time. Thank you for the call. I really appreciate it. Next call. Welcome to the confession booth. Thank you for coming on.

Hey Mike, uh, I guess I won't say my name, but I've been watching you for a while since I was pretty young, and I'm not too old right now, but I'm 23. I'm a little older, and I finally started my business. And, uh, I guess I don't really even know, I don't even have a question, I'll be honest with you.

I kind of got a basic one that I've been thinking of for a couple months here, but essentially I'm real spread out. We're here in Houston, Texas, and, uh I'm really spread out and I've started my business over the course, like, probably 3, 4 different neighborhoods. And, and, uh, I don't really know where to go from here as far as, like, obviously Spring Rush is kind of done, but, um, I just don't really know if I should— I've been hitting one neighborhood pretty hard that's closer to our shop, and in my head that was the, the right idea, but, um, I don't know if I should try specifically raising client, uh, prices on clients that are in the areas I don't want to be in and just try and get out of those areas, or if I should just, you know, keep making money where money's being made.

Yeah, when you say spread out, are you in the truck? You're fine. When you say spread out, are you mean like your service area?

Yes, sir.

Okay, and so right now, from one side of your market to the other, how far would you drive? Like 30 minutes, an hour, between one side of your service area to the next?

About—

I would say maybe an hour in total from one side to the next.

Okay. And are there pockets where most of your revenue is coming from, or is it actually evenly distributed throughout that entire hour-long drive?

Uh, it's, it's pretty evenly distributed between one area that we're fairly new in, and that's kind of the area that's closer to us and I'm trying to hit really hard.— and it's just more luxury. It's mixed between that and an area that we just have a lot more volume in, in one day, I guess.

Okay, and is most of your work and your revenue coming from recurring jobs right now, or is it mostly one-time jobs?

Recurring. Pretty much lawn maintenance, some landscaping maintenance.

Okay, and if you drove 30 minutes, are most of them in a pocket, or is it— Like, so for example, when you say, hey, there's one spot where we go over there for one day and like we're good, but then is it the extra 45-minute drive back home, like back to the shop, that's killing you every day?

Uh, yeah, I could say that.

I mean, I have it pretty well sectioned off as far as once we're in one area, I know we can get everything done in one day. Okay, so I would say that is—

yes, sir. So it's the drive, it's the 30 minutes in, 30 minutes out every single day essentially that's killing an hour of your drive time. For your crew?

I would say yes, sir.

Yeah. Okay, here's a crazy idea. Let me throw this one at you before we try to start cutting things out. Um, have you ever thought about having your crew take their trucks home?

We—

so I actually do that with one of the vehicles, um, and it's worked up until now because actually some of the crew members live in one of the areas that we have a what bulk amount in. So I do do that. I'm actually, I was about to take it away from them like starting in a couple of days just because I'm getting a little worried about the health of the truck itself. But yeah, I mean, I'm not totally sure if you have any thoughts on that.

I think a lot of times it's easier to just keep them coming back to the shop because it's easier to maintain systems. But I'm going to go out on a limb and say there's not clear systems like, hey, end of the day, you need a picture of the equipment, you need a picture of the exterior, you're going to have once a week where you have time to go and clean the truck. Um, I'm assuming those systems aren't in place now, are they?

No, no, they're not. And the only reason I haven't done that is because really we're only in that area one day a week, and that's kind of the area just from the beginning I've been trying to get out of. It's where I started my business, and it's in, uh, I've just been kind of trying to get out of there, and that's gotten me to where I am now, where I'm in like a million different areas, and I've got a small group in each one.

So when you say one day worth of work in one area you don't want to be at, how much, is that literally like 20% of your revenue in that area?

I would say yeah, nothing more than that.

Okay, like I think it might just be a matter of marketing in the areas you do want, and to the point where you, don't have any left capacity left over. Like you're at max capacity and you got to cut stuff out and then you cut out the customers, you know, you don't want.

It's like, right, but basically, yeah, they just grow out of it.

Like essentially right now, how many customers, like assume you didn't change anything in the business, how many more customers you could you take on before you need to buy more trucks and hire more people?

Uh, probably another 10 regular maintenance clients.

Oh yeah, this is easy. Yeah, so then I would just go get 10 regular maintenance clients in your market that you want and force your hand into having to let go of these customers you don't want 30, 40, 50, 60 minutes away. But only do that when you're at capacity. And so the reason you're balking right now is because you have excess capacity. Your truck could go do 10 more customers. Go get the 10 customers, and if that means you gotta go spend $1,000 in marketing or whatever to get 10 customers in the market you want, do that, 'cause then you'll have a lot of confidence to either raise prices or just cut completely the service areas that you don't want.

Okay, understood.

That makes a lot of sense, and I've, uh, I guess, like I said, I'm a young dude and I just get stuck on an idea and I get going. So every year I've kind of jumbled the spring rush and done it at the wrong time. And we're still getting leads now, but if I had hit the really nice neighborhood when I should have, we probably would be in the position you're describing right now.

That's fine. Hindsight is 20/20.

I think it's kind of pushed through it a little bit.

You're fine. Hindsight is 20/20, and I would change 100 things about my business if I could go back in time. That being said, I think you can solve this entire problem in probably 2 weeks if you just really buckle down on advertising to your service area that you do want. All problems become smaller when you're at capacity. All problems become smaller when you hit capacity. And so I want you to hit capacity and then give yourself the option to let go of customers, because if you don't let go of customers, you can't take on any new customers. Because you haven't got rid of the ones that are far away from you. And so same thing when it comes to profitability. On the last caller, it's like, as soon as you have more work than you can handle, it opens up a lot of options in terms of raising prices, cutting out service areas you don't want, cutting out customers you don't want, cutting out services that you don't want to offer anymore. So hit capacity and then give yourself optionality. Next caller. Welcome. To the confession booth. Thank you for coming on. How could I help?

Yeah. Hi. Can you hear me?

Absolutely.

All right. Well, thanks for taking my call. I've been listening for a long time. So I have a business. I'm in New York, a little bit upstate. We do about $350,000 revenue. I've been somewhat stuck in that range. As you know, I have 2 kids, a wife, a house.

I have—

I have to take a lot of money out of the business every time, but I produce about 35 to 40 budgeted hours a week. The issue I'm having is I have a great employee finally. He's been with me about 3 years. We do pay for performance. He gets 33% of his labor revenue. The issue is that we're just past the point of, you know, kind of us being able to handle it all. I really need more employees. I have a couple part-time employees, but splitting the revenue between 2 people, you know, it really kind of pisses off the one person who's been rocking, you know, 10, 11 budgeted hours solo for a while. So I've been pulling, you know, he— the split's different. It's like 33%, 27% for the worker. But I'm trying to toy with some other ideas on paying him more to keep him happy and to keep our revenue going up with the same amount of equipment. Do you have any recommendations on things that work?

Yeah, so two things. The first is when it comes to solo operator or solo person, like a solo crew, versus 2 people, typically they do make less on P4P 'cause there's more windshield time as a percentage of their day 'cause there's more stops. And so also, it sounds like this guy's really, really good. Whoever you hire is probably gonna slow him down a little bit as an average. So there's 2 things you can do. The first thing you can do is just say, hey, whenever you're with 2 people inside of the truck, you get a higher percentage on P4P. All right, the reason I'm okay with this is what you're doing is you're exchanging CapEx for OpEx. So what that means is instead of buying another truck and a whole bunch more equipment, a whole other setup, that's CapEx. I'm willing to give someone more on operational expenses, OpEx, because I don't have to go buy twice as much equipment. And so I'm okay if you really have to do this. I think a lot of times you don't need to because it's like most people like to work with someone else, that's from a morale perspective. But if someone's— yeah, if someone's in a pinch, I, I'm okay with increasing his percentage by, let's just call it 10%. So like instead of 30%, it goes to 33%, for example, if you're going to not have to buy another truck and equipment and you can half the amount of trucks and equipment that you buy as you scale the business. So first, that's like the first thing.

And so what's— yeah, what's like a maximum of percentage of revenue that you would pay total to to do a crew. I guess it's dependent on the situation. I mean, buying another truck wouldn't be completely out of the question. Um, but again, it's like, you know, vacations, injuries, sickness. It's like you lose a day, kind of everything gets messed up. So we really need to be running 2-man crews. So, um, what, you know, if I'm given— I try and net out at like 30% because we do use, uh, 72-inch mowers. You know, we do big properties up here. Uh, we're, you know, we're getting well over 100 on most lawns an hour. Um, what kind of percentage revenue are you capping at?

Yeah, like I never want to go over 40%. Never. Um, and right now what is he at?

He's at 33%.

Got it. So I would do, I would do two things. Number one, I would play with the idea of giving him 36% when he's with someone else. Okay, that's the first thing you could do. Basically, that gives them about a 10% bump, by the way. It's not huge. So just keep that in mind. It's not a huge bump. The other thing you could do, though, is just give him a manual adjustment whenever he is with— like, let me back up. Is he always going to be with someone in a second, a second person in his crew, or is it going to be like once in a while?

It would be like, like 3 days a week. And then I told him one of the routes that he kind of built through door hangers and has been doing a great job that he crushes, you know, 10, you know, 1,000, 1,200 in revenue that day. That he'd be able to keep that solo as long as we have people trained in the background ready to come up and fill in for a day if we need to, you know.

And is he training? Is he training the new employees?

He does, but not well enough because he's still trying to push the pace too much.

Okay, well, that's not a bad thing. I don't want to take that away from him. Let's go.

No, exactly, which is why I have a hard time, you know, and there's no disciplinary action when he's still making the revenue.

So this is what I would do. I would give him a per-hour payroll bonus as a manual adjustment on P4P whenever he's training a new employee, and he only gets it if they don't have any callbacks. Okay, so for example, he works— let's just call it 8 hours in the day. He's still getting his P4P at 33%, but you say, hey, at the end of the day, because you're with someone else and you were training them, is what's called a trainer bonus. Are you using P4P software, just doing this manually right now in spreadsheets?

No, I just built an Excel spreadsheet. Cool. I use Jobber.

Yep. So, if you do 8 hours, let's say for example, and you say, "Hey, we're going to give you an extra $4 per hour that you're with someone else." So, he's going to get an extra $32 per day added to his P4P if they don't get any callbacks. So, now he's incentivized. It'll balance out his P4P, but he will also be incentivized to slow down with this person and make sure there's not any callbacks.

And would you, would you maybe like a 2, like a 2-week period at $4 and then like a 2-week period at $2 or something, like a ramp down? Or, um, how long would you generally give a bonus for?

I would do something like this. This is what like trainer bonuses we do. So we usually start it at $4 per hour, but then we have a governed amount of time where they're eligible for it. At the end of that time, they lose the trainer bonus, but if the trainee is fully trained up then they get a one-time bonus, which is usually pretty hefty, like $200 or $400, depending on how generous you want to be. If the employee they've trained up is good to go solo.

Okay, now, like that.

Now, in your case, they might not go solo, but if they're trained up and able to go solo, then they get the big-time bonus, and then that kind of, uh, softens the blow of them losing this per-hour trainer bonus, but you make it very clear, hey, this is a 2-week or 4-week stint where during this time when you're training, we're gonna manually adjust your P4P by X amount per hour, assuming that you have no callbacks, no yellow slips, and then at the end of, let's just call it 4 weeks, if that person is good to go and they are capable of being solo, we're gonna give you a big fat check And then from then on, we're back at 33%.

I like it.

But now you've tied this to a trainer bonus and you haven't tied this to something arbitrary because that percentage will never come down. Like, as soon as you give the 36, like, you're— it's not— it's never going away.

Yeah, you can't— yeah, you can't take back money once you give it out. Um, yeah, that's a good idea. I like that.

Awesome.

And then, uh, real quick, uh, I know, I know you got a bunch of callers, I'm sure, but, um, when you do general— I mean, I'm not at this scale yet, but at least, like, you know, plan one step in the future— when you do general manager, uh, percentage bonuses based on profits, you're, you're taking out owner's salary and stuff like that out of that first, and you're using the very bottom number, or how are you calculating that? Yeah, I guess the You know, what do you recommend?

Yeah, like if an owner is involved in daily operations, they need to take a W-2 salary, assuming you're an S-corp. Now, if I'm hardly there, I'm gonna take a very, very small W-2 salary. It's incentivized for me because from a tax perspective, and so it really just correlates with how much you're involved. If you're still working there full-time, yes, you should take owner salary. It should be part of the wages inside the business, and they should only be getting a piece at the bottom of the pie. But if you're there like 1 hour a week and taking a $5,000 or $10,000 a year salary just to be able to say you're taking one from the IRS, then just— right, that's where like, do what's right. It's not fair. Exactly.

And then last question on that topic is, you know, we— how do you calculate your depreciation of assets into that? Because we don't figure that out until the end of the year. So I'll be showing $60,000 profit and then it'll go down to $10,000 when I do my taxes because of all the depreciation. Do you do that on a quarterly basis instead, or?

Yeah, you can, you can determine how you want to do with your general manager. If you're using a bunch of debt, that's where you got to be careful because you could on the P&L look like you are profitable on paper, but then because you're doing principal pay down on the debt, that's off the P&L And you could be cash flow bad, like not making money. This is why I'm usually a fan of not calling it really profit. It's called profit sharing, but they get a piece of how much cash is in the bank account. Meaning that if I need to go buy a piece of equipment, that cash account's coming down. Right. And even if I go out and get debt, at least it's affecting the cash balance every single month with the payment. And so I'm usually giving a piece of distributions, not a piece of the profit and loss statement, because that profit and loss statement can be gamed. With depreciation, with all sorts of stuff.

Right, that makes sense.

So what I like to do—

All right, I really appreciate your answers.

Yeah, you got it. What I like to do is say, hey, look, here's a threshold of how much working capital stays in the business. Anything above that we'll consider distributable, distributable cash, and you're going to make a percentage of that. Now, as the business grows, you're going to increase that threshold of distributable cash in the business to make sure you can accommodate how much all of your payments and expenses are going out. I usually like to have 1 month of revenue in the bank account. Anything above that, I'm willing to distribute. That means that if I'm going to go out and buy trucks, I'm going to buy equipment that's going to draw down the cash balance either now or in the future if I'm doing— taking a debt because the payments still come out of the bank account. That's the most simplistic way to do it if you're doing profit sharing, in my opinion. And it really depends a lot on how much debt do you have? How is the owner involved in taking salary up above the bottom line? Like, you could make the bottom line look like no profit by just increasing your salary. And so to the caller's point, you've got to be fair about how much salary are you actually taking for the business. Because if someone else is getting a piece of the bottom and you're just taking all of it halfway through on the, on the W-2 wages, that's not fair. And you might trick them once or twice, but you're not going to trick them long term. And when they find out, they'll just leave. And so the last thing you want to do is lose a good person over you just trying to hide stuff. All right, next caller. Welcome to the show. Thank you for coming on to the confession booth.

Hey Mike, um, we've talked several times. I'm in the Midwest, got a guy that I just promoted to general—

sorry, I'm gonna say general manager—

operations manager. And I just pulled the bandaid off and said, instead of $50,000, how about— I told him, give me a number. And, you know, gotten to the head decision. What is the number to do all the things we've been talking about the past 10 years? He said $50,000. I said, I'm thinking bigger. How about $60,000? And we know what we need to do. You want this like exact to-do list. But it's like, don't even think about that. Like, we'll keep working towards it. Um, I've locked in the lease like you told me to, um, where I'm currently at, selling the old shop eventually, getting closer to being finished and being distracted. Um, what my question is, is from— I'm 10 years in I see another 10 years, but I don't want it to be the same 10 years that I spent. Uh, well, over the next year or two, like, what's my highest leverage thing to focus on? Um, like, my guess, I think, like, what I'm thinking is, is just like I have to maybe lower my expectations which no entrepreneur wants to hear or say probably, but it's like I'm trying to duplicate it one day. Like, I feel like that's the only way that me personally— like, I finally switched this mindset to let go and grow him, and that's going to take some time. Um, but it's like, I feel what I'm scared of is I'm gonna have to keep living too thin in the meantime. And it's like, I feel like sometimes I'm like, man, I'm, I'm growing this business for someone else. But I think that's just small thinking and I'm exhausted. And I like just replaced 3 crew leaders last week, um, within 2 days. But I'm just trying to keep my head on straight and, you know, keep going and see what— there's so many things I can work on. Like after switching the CRM, um, get it fully built out, P4P. I like, intuitively my body and mind and soul's telling me like slow down, but I'm afraid that like, if I slow down, I'm not going to be this business isn't going to serve me or the people in it, if that makes sense.

Have you defined what you would have to do in terms of the business, in terms of revenue and profit for you to feel like it is serving you and the other people around you?

Yeah. And I actually had a conversation with him. I was like, I think we need to redefine our goals because it's blurry, but for me, um, it's hard. I'm trying to— I should be able to like say that and throw, throw it down. And that's probably where I need to spend time. I've heard you say like a lot of times you're just trying to make— like give people the answer to make the business fit their goals. And like, I used to think like, oh, I got to make $100,000 or $150,000 a year to be happy, even though I've never had that. But it's like, that's— I come from like scarcity and, uh, like you said one time, it's really hard for people like us to like not think so transactional. Like, that's where I'm at. And it's like, well, maybe if I do have a business that works for me, I don't have to be in it every single day. I can be home, not in a truck, or be home at a good time to like see my family, future family, in a good time and not just run around ragged. Like, maybe that's what it takes, like, paying a manager $60,000 to $80,000 to run an $800,000 business. Um, I mean, I can— it's like, what I'm scared of is I'm not gonna get it to that point, and like, of having a second location. That makes me at least, I gotta make $60K. That's hardly making it by, but, um, I'm scared I'm not gonna get it big enough for that second location, and then I'm gonna get distracted again. I'm sure you know who you're talking to most likely, but I'm really good at getting distracted. I don't want to, I just feel like I'm so hungry to learn and learn more about this business. And keep like growing it. I just, I don't know, it's been a hard past few years, but I've created it.

Yeah, I'm just trying to—

at the end of the day, at the end of the day, if we do not know what the goal is, we can make a lot of progress and get nowhere. And so if we don't know clearly that this is the finish line, we can be making all sorts of progress And me moving and making all sorts and energy. And like, I've heard everything from like multiple locations. And then we like got and went and bought other shop space and then like all of these things, but we aren't actually making any progress for the actual goal because we haven't defined it. Like, do we need multiple locations to achieve what you just said, which is an $800,000 business where GM runs the business and you don't have to be out in the truck? No, we don't. And so being really clear.

No, but I gotta go make money somewhere else. Somehow, right?

What do you mean someplace else? Geez, like, how big is your market?

Oh, well, if 800— um, that's— well, there— it's— I don't care if you don't care, but it's Springfield, Missouri. We're the third largest city, but like 500,000 people in the area is what like the population signs say, but then you look it up online, it's like 260,000, I believe.

Okay, but like you can, you can build an $800,000 business inside that size population, no problem. So why do you need a second location?

We're only $100,000 away.

Okay, so, so what's— what is the goal? $800,000 in revenue and a business that runs without you?

Uh, yes. Okay. I feel like, I feel like an $800,000 business can't pay me and the general manager plus some admin, oh, to be able to step away.

Well, it can if it's mostly recurring, maybe on— services, and that general manager spends half their time out in the field producing revenue, and the admin person is able to sell everything over the phone. It's like the construction of the business is dictated by the goal that it has. And so if you're trying to build a business that does $800,000 in revenue, you will feel like a chicken without a head cut off if you have $500,000 coming from one-time projects that you're running around getting materials and equipment and driving stuff around all the time. It'll also be very hard to hand it off to a general manager because they're likely not gonna have the skill or the stomach. Just like you don't wanna do it for more years, they're not gonna wanna do it. And so you'll probably churn through more of them. And so, if you're trying to, if we establish that the goal of the business is $800,000 in annual revenue, a GM, that can manage the business without the owner being there. If we identify as that as the goal, meaning that is where I will feel like the business is serving me and my team at its highest level. That's what to me success is. And so, if we have defined that, we then work backwards as to what kind of business allows that to happen. Is it a business with simplified services, recurring services, and where the general manager is not running around bandaging and trying to find gaping wounds in everyone's businesses or in everyone's job sites, that it's everything going wrong. Bad reviews are happening, job sites going wrong, designs on paper, patterns. Like, if that's all happening, we'll never be able to systematize it, or we can't work there. And then if we do, if we construct the business that way, which is recurring revenue, simplified services, and then we grow to capacity using good website, great advertising, and then we raise prices That's what allows us the profit to be able to then afford the admin person, the general manager, and then step away from the business. But that likely looks like a 3-year process of re-engineering the business to better align with the goal of where we actually are trying to get it to, which is $800,000 in a row. You do not need a second location. $800,000 in annual revenue in a location that is 250,000 population, you do not need a second location. You need to build the business better, and when I say better, I mean closer aligned with the goals that you have stated. And if you don't know what those goals are, we've gotta start there and define what those are and then reverse engineer how should we build a business that gets us there. And if the two things I've heard is $800,000 in annual revenue and the owner doesn't have to show up. Okay, $800,000 in annual revenue, doable as long as we stay in this market. We do not need a second location. Second, we simply need to focus on reverse engineering the business in a way that does not require you to be there. Meaning every time you get a call out to a job site, every single time you get dragged into a customer dispute, you have to ask yourself, "Can I remove this from the business?" And right now at $700,000 in revenue, maybe only half of your revenue is comprised of services that you actually do this. Meaning you could very well be at $700,000 for the next 2 or 3 years trying to restructure and improve the quality of the revenue in the business to the point where it's mostly recurring and it's mostly simple services. Now, when I say simple, it could also just be 1 or 2 services, even if they're really complex. Like, we do excavation. Great. We only do these type of drain— these type of drains. We only do this type of dirt work. And then we just focus on those two things. All 10 services you're offering in your business right now are good. Every single one of them. Every single one of them could be a million-dollar business. It's when you combine all 10 of them that you end up having an $800,000 or $700,000 business that looks very chaotic and very unprofitable. But the reason most of us add 10 services is 'cause it's the fastest way to grow revenue. Instead of just focusing on 1 or 2 services, taking twice as long to build a business that is actually profitable and can run without the owner because it is focused on just a couple core things. All right, next caller coming into the confession booth. Welcome to the show. Thank you for coming on.

Hello?

Hello, can you hear me?

I can hear you.

Yeah.

Oh, great.

Uh, appreciate your time, Mike.

Um, what can I help?

I am calling.

I'm calling. I'm one year in business, or one year and a half. Um, I run an excavation kind of septic company in the South. Uh, I am just struggling with all the Uh, debt that I have and just all this like constantly hustling, hustling to make this money. And at the end, I'm almost like reaching zero. Uh, and I'm just kind of getting tired and I'm just not sure what I'm doing wrong or where I'm not correctly doing some stuff. Uh, I have one employee and Roughly, I have about $10,000 a month that I need to keep up with. And the personal and the debt is about $216K, and that's personal and business mixed.

Okay, and how much of that $216K is equipment?

Um, Roughly, probably like 160 to 180, pretty much most of it, I would say.

Okay. And so outside of that, let's just call it 180. There's another, let's just call it $35,000 to $40,000 in personal. Is that correct?

Yes.

Okay. So That's mostly credit cards, or what is that debt?

Uh, personal is a bit of credit cards. Um, I do have just some loan to personal family. Um, pretty much that's it. Uh, I just recently— why I'm just— I'm getting really serious and really tracking because I recently got married, just learned that I'm having a kid. 9 months.

It's—

and I just, I need to get stuff serious. I need to lock it down. Um, I'm always struggling with leads. Sometimes I'm either overwhelmed or I don't have enough. Right now I'm kind of on the low end.

Um, why did you start this business?

I've been watching your videos and, uh, to be straight up, I just, I just want to make a lot of money. I guess get rich in a way.

Okay.

And freedom.

Yeah. What could you make if you went and got a job? I'm not saying you should get a job. I'm asking if you went and got a job tomorrow, what would you get paid?

In excavation or construction?

Whatever you could do and get a job for doing, whether it be project management, or actually just in an excavator, how much could you make in a year?

I mean, I'm not, I'm not even sure, to be honest. Probably $25 an hour, which I don't know how much that correlates to.

Okay. And okay, in revenue this year, what do you think you're going to do for the business?

Last year I did $200,000-$300,000 in revenue. This year I am— I mean, there was a lot of hectic with the marriage and everything. I bought a house also on top of this.

Um, I'm—

if I really hustle, I think $500,000, $400,000-$500,000.

Okay.

So if you're going to—

I kind of think my prices are too low, potentially.

Okay, so you're going to do $400,000 to $500,000 in annual revenue. You have $10,000 a month in expenses. Is that your personal expenses that you're saying, or is $10,000 a month kind of like inclusive of like your debt payments, etc.?

$10,000, that's in just business side. That's nothing with personal. Okay, and so So if I, if I look at those expenses a year, for what, a year, for business expenses.

Okay, so if I take $400,000 to $500,000, I take, let's call it, $100,000 in business expenses, I take out loan payments on the equipment and even the personal side, where's the rest of the money going?

Probably to my personal, and maybe I'm— I mean, I just bought a house for $280K. I mean, um, there's just been, uh, the wedding cost itself was like $30,000, $40,000, so they just kind of picked up on some debt.

Yeah. Okay. Um, Is your wife stressed out by this?

Um, she doesn't really know much. She's the type where we just talk, where she just wants to know if everything's good or not good.

Does she think it's good right now or not?

Um, I tell her that we need to watch our finances.

She—

I don't want to stress her too much, especially when she has a baby.

No.

Yeah.

I can't. So when you play this out, if you don't have that conversation, a lot more stress ensues. And that is like when payments don't go through, she goes to the store and the credit card doesn't go through. And so I understand not wanting to give her stress. I also think she would feel a whole lot worse if you get to that late stage without first addressing it. Because here's the thing, you had marriage, you had a house, now you have a kid. There's gonna just constantly be new and different versions of expenses that are gonna pop up in your personal life that if we don't manage it, will continue to spiral. So the $30,000 or $40,000 wedding and the down payment on the house, now the kid's gonna be expensive too, like, right? Like it's gonna be another $20,000 by the time you get clothes and a new room and you get all the crib and the stroller and everything else and gotta upgrade the car And so all of these things will not stop happening. They will only continue to ramp up. And so I personally, this is my personal opinion, this is my opinion, you got to have her on the same page as you because otherwise this is going to continue to happen, which is your personal expenses. Like on $400,000 to $500,000 in annual revenue, if you have $100,000 expenses, then let's just say we have another $100,000 when it comes to wages and other expenses for the employee. And then you have debt payments. Let's just call it $5,000 a month, even if it was that high, which it probably isn't. But $5,000 a month, even like you should be okay. I believe that your personal, your personal expenses are starting to get bloated. And to no fault of your own, you have got a lot going on the past couple of years. You started a business, you went and bought a bunch of equipment, you got married, you bought a house. Now you're about to have a kid. And I'm just afraid that your personal lifestyle costs are slowly increasing to the point where no matter how much you make in this business, we're going to be struggling.

Is there a way to increase prices on my jobs if I'm— how far, actually, too low?

How far are you booked out right now?

Probably a month right now.

And are leads pretty inconsistent?

Yes, right now it's very gradual, I would say.

And do you have— how do you get your leads right now?

Um, I just signed up about a month or two ago. I have your Home Design Team did my website. Right now leads are just word of mouth, a little bit of Facebook. I'm trying to get my Google reviews up and trying to put a location on my Google My Business, really activated. But leads are coming—

are they coming from contractors? Who actually gives you the jobs?

Uh, builders per se, more builders than homeowners. Um, a lot of construction is going around in the South, South Carolina area, and, um, just who I know pretty much. Um, but sometimes they, they haggle on price. It's more about price than really just doing the septic or So I don't really know where I should kind of just increase my prices, but I'm scared to not have enough work and keep my worker busy.

Yeah, I would agree to not raise your prices first. Right. So I'll kind of switch to the steps here I would take. This is my personal opinion. Take it with a grain of salt. I think price is the last thing we change. It is the thing that we need to do to solve the, solve the business, and that is make more money. However, it's not the first thing. The first thing we got to do is plug the leaky bucket, and that is the personal expenses that are creeping higher and higher. And so the first thing I do is talk— not I, I would, I would do if I was you is I would talk to your wife about where you're at financially, personally, and not make her feel guilty. There is no guilt in anything that's been done. Everything you have done has likely been because you wanna provide for them, you wanted to have a great wedding, you wanted to be able to provide a house for them, now you have a kid, that's awesome. But you gotta get on the same page, otherwise you're gonna just constantly have this bloat of personal expenses. And I have seen this time and time again, regardless of how much money you make, 'cause we can fix the price problem. And if you just make more money and you spend it all, we'll be in the same spot. And so the first thing we gotta do is have a talk. This is, again, me personally, what I would do, is have a talk with my spouse, get on the same page. Create a personal budget. Use EveryDollar, it's a free app. Both of you are on it. Both of you are tracking how much you're spending to ensure that as we fix the business and make more money, we don't just have more personal expenses. 'Cause there will always be a good reason to spend money when you're growing a family. There just will be. The next thing will be is like another kid or we'll need to get a bigger house or a bigger car. Then we'll need to get them in school. Then there's call, like, it'll just always keep going. So we've gotta create a budget and then, once we've done these things, which I do believe you can do this in about 1 week. Have the talk, create a budget, stick to it, and then we can go fix the leads problem. The leads problem is gonna look like going to contractors and talking to them. And this is going to need to probably be done in evenings and weekends because right now you're busy doing the work. Making the money. And so this is why we need to have the talk with your wife is because she's going to need to allow you a little bit of grace for a few months to go get more leads. And that time is going to be spent going after B2B, business to business, going to contractors. And now that your website's going to look good, when they go check you out, you'll look awesome, but you're going to show up at job sites, you're going to go to builders associations, you're going to go to local meetups of contractors, you're going to be going out and trying to get more leads. And you're gonna have to— the reason we gotta have this talk with her is to get her buy-in so that even though you're about to have a kid, she gives you a little bit of grace in the evenings and the weekends to go get more leads. Because once you get the leads and you're confidently booked out several months, that's when you'll raise your prices. And I understand this is the fix we want to get to, but we've got to get enough leads in order to make that happen and have the backlog of work in the pipeline. In order to do that, we've got to make sure that we get buy-in from our spouse so we don't cause personal issues by going out and spending discretionary time in the evenings, on the weekends, finding those leads. And I don't want to do any of those things without having a budget in place, because we could grow this business to the moon and make more profit. But if we personally don't have a budget in place, we're just going to constantly keep losing money out the bottom of the leaky bucket.

Yeah, I agree, because she always wants to spend time with me. That's why you're always busy. And sometimes she spends on something that I kind of secretly kind of not really happy about. And, um, I agree that there needs to be a talk, pretty much.

And I appreciate the vulnerability in saying that, and I know exactly where you're coming from. And here's the thing: you're a blessed man that your spouse, the only thing she wants from you is to spend time with you. Like, what are you going to complain about, right? And so, yeah, also She deserves open communication and information about where you're personally at financially so that when she does make a buying decision, she doesn't secretly make you mad. You're not saying anything because you're a good husband and you want to support her. I understand that. But what will feel a whole lot worse is if you don't tell anything to her and one day it does catch up with you. And so having that conversation is important. So that when she wants to spend time with you, she sacrifices that because she knows now why you're doing it. That's why I need that stuff done first before you go out and get the leads. Because if you start disappearing instead of getting back at 5 or 6 PM, you're getting back at 7:30 or 8 PM. She's not going to like it. I need her to understand why that is necessary. And so if you don't mind me asking, how many more months till we have the child, the baby?

He's only 6 weeks in, so probably more like 8 months.

Okay.

So I would give a defined time. I would be saying, hey, I need till the end of this year. I need a little extra time to carve it out. Ask for an extra hour a day, or is it on Saturday for 4 hours? I need to be able to go to associations. I need to go to builders. I need to be able to walk in on job sites. I need to go make connections and network. "but I've got to do that outside of what I'm currently doing to pay the bills. But I need to do that so I can get a 4-week backlog. And once I get a 4-week backlog, I can raise my prices. But I'm going to need this extra time. And here's why I need to get these leads and I need this extra time is because right now we are not in a good financially. And here's everything. Here's all the numbers." Great call and I appreciate you being so vulnerable. Next call. Welcome to— The Confession Booth, how can I help? Hey Mike, can you hear me? I can, how can I help?

Yes sir, I called in your last one, I'm talking about the speeding ticket I got, uh, for reckless driving, I don't know if you remember. Besides the point, I, um, did what you said, I hired a rock star, he's absolutely amazing. My only issue now is I don't have enough work on the schedule. I don't even have backlog.

Um, I did during spring rust, but now that's kind of slowing down.

Um, we usually do mowing Monday through Thursday, and Friday, Saturday is like our property cleanup and mulch install. Um, I'm just trying to figure out how I can get, you know, more leads.

Most of our stuff comes in through the website that y'all built. I'm just kind of stuck on what I should do next.

So before people get to the website, how are they finding out about you? Are you doing any sort of advertising right now?

Um, no.

The most common thing is Google search and basically our truck drivers.

How many Google reviews do you have?

About 70.

Okay, and when someone searches in your local market, are you like first to show up?

Yes, sir.

Okay, so are you texting and emailing your customers every single month?

I'm not.

So that's the first place I'm looking, and that is I am sending a text and an email to your existing customers. Selling them more services during this time of year, especially when the recurring services start to slow down. This is my opportunity to sell everyone that I do have in my database extra work, but I've got to make sure I come up with a season-specific offer and a season-specific service and pitch one thing, not a litany, not a whole laundry list of things that I'm— I can do. Hey, this time of year, here's what we're doing, here's why it's important. Click here, sign up, respond back to me, I'll get you an estimate. And this ability to upsell your existing customers that you sold in the spring rush on recurring services is the unlock to be able to fill your schedule as you slow down. Next caller into the confession booth. Welcome to the show. Thank you for coming on.

Hey, can you hear me?

I can hear you.

Awesome.

Hey, thank you for— Thank you, Mike Andes. I've been following you for a while and So here's my situation. I am a franchisor of a mobile service business. It's in the automotive industry. My goal is of course growing the business, growing revenue as always, truly grow the franchise, acquire more franchise. Currently I have 6 locations, 6 overall locations, 3 of which is mine and I run it. I run from my home office, hire for these other ones that's far away. These other 3, these other 2 locations that's far away, I hire independent contractors and they use their vehicle. Um, and so, and this is what I have here. I have, I currently have an employee working on, besides the technicians that work out there, I have an employee that works on the calls dispatching, but I do the marketing myself. I don't have somebody to do the marketing. I hired somebody before, but I want to save more money, so I started doing it myself, which is a lot of work, as you know. My question is, I want to know where do I allocate my resources, whether it's time or more money investment, if my goal is to acquire more franchisees and grow.

Got it. Great question. I think it's the first time I've had a franchisor call in, so awesome. I can help. Okay, so you do mobile—

I'm sure.

So I'm assuming they have like a van of some sort, and are they doing mobile detailing, or are they mobile like repair techs?

Uh, detail.

Okay, cool. And these 3 locations that are franchisees, have they actually signed franchise agreements or they just glorified 1099s?

No, the franchisees are all FDD, uh, franchise agreements and all that.

Okay. All that stuff, all through FDD.

Okay, cool. And how long have you been franchising in terms of years?

Franchising for about on the third year now.

Okay. And are you taking a royalty right now?

Yes.

Okay. What's the unit economics? Like, if you don't mind me asking, like, Revenue per franchise?

No, that's fine.

Yeah, so, uh, my— the main one here, Philly, is, uh, shy of $500,000 a year. And the average, um, so, so the average revenue per franchise on average is, uh, $350,000, which is the average of the 3. We have one killer one that's on the top medium, uh, and other ones that we're working on with, with the guy to improve.

Yep. Yeah, typically 20% of your franchisees will make 80% of the profits of the system. It doesn't matter what franchise you talk about, that usually is how it will work out. And so, um, it mostly just comes down to their level of operation. And so the thing is, right now How did those 3 franchisees hear about you? Did they just see your trucks and like call you?

Uh, so not through the truck, it was one online through the website and the other one was also online. One of them, the third one or the first one, was through— I used to market on those FranchiseGator lead systems. Which I would pay monthly and I'll get 17 leads a month or so. Majority is unqualified.

Okay.

And just to clarify, why not just scale this because mobile yourself? Because franchising is like a different game altogether. Why not just keep scaling this yourself? And I'm not saying you should, I'm just asking, like, what's the motive for the franchise?

Yeah, totally, totally. Uh, so I— so one of the other locations, uh, that's outside of the state, I manage from here, but I get independent contract, which is my affiliate. Okay, not the franchisee, my affiliate location, independent contractor, use their own van, truck, 1099, right?

Um,.

And I don't— I'm not a fan of that as much because it's— it doesn't show the branded fan, you know, and, um, it's, it's different than having— controlling it locally. And, and I feel like it's also better to expand through franchise. That's, that's why franchise, because I really enjoy the expansion mode where they can— I'll pretty much have an owner in each location, then you can grow there, um. Just like, you know, growing my own location here.

Yeah, but like, if that makes sense.

Yeah, totally. A franchise, the advantage for scaling with a franchise is that you're using other people's capital to scale the brand. The challenging part is when, if you've done it for 3 years and you sold 3 locations, you'd just be faster if you just did it corporately owned. And then as you get to 20, 30 locations, maybe that takes you 5 or 10 years. But you'd own a lot more of the revenue, a lot more of the profit. And then at that size, you'd prove the concept more toward— it actually appeals to franchisees and they come to you. And so, like, again, this is my POV. My POV is you start creating content for people that are in the detailing industry. And trust me, there's a lot of good content out there. You can absolutely do a great job of showing your $500,000 truck making that much, that kind of money. Show all the numbers, do a school community, make YouTube videos, whatever you want to do, but start creating an online community of mobile detailers. And at the same time, just focus all your time and attention on the corporate expansion, because right now you're growing at 1 location per year with franchising. I think you could do 2 locations per year corporate expansion and own 100% of the revenue instead of some tiny 5-6%, which I know you're not making money on. And so I would just grow—

then I would have to hire a manager to manage those locations, and wouldn't it, as opposed to—

yeah, but if you're doing— if you can do $350,000— okay, so the $500,000 location, how many employees does that have?

Oh, well, so for this one, I got, um, I got the technicians, but I'm here if something goes wrong. I got one, you know, guy, uh, and guy answering the calls. Uh, but I feel like if, if they are my employees, unless I'm doing 1099, then it's fine, I can do it that way. But then if they are my employees, my vans, then, um, I have to get a person to supervise it, right? To whether it's, uh, transferring the van to one person, if one gets fired, you know, send to another, clean up the van, minor things like that, right?

Yeah, but, but in exchange Like the difference is if you do franchisees, you get 5, 6, 7% of revenue. If you, if you, if the guests, you do have to get a manager, but that manager could very likely handle 2 locations or a million, like up to a million dollars of revenue and a million dollars of revenue corporate would mean $10 million or $14 million of revenue for the franchisees before you ever get a million dollars in revenue. To the franchisor. And so, when I look at 3 locations in 3 years and that's a net-net of $1 million in revenue between those 3 locations approximately. And so, if you're drawing a royalty of, let's just call it 8%, 9%, 10%, we're making $90,000 to $100,000 right now after 3 years on the franchise. If you would have started 3 locations—

Andy, I feel like it's—

Go ahead. Go ahead.

I'm sorry, I didn't mean to cut you.

You're fine.

So I feel like, so running, it's more difficult running the locations further away, right? So I understand I can increase my revenue and looking more at the resources to grow my locally here because there's still a lot of potential just locally here where I am. But I feel like, so for example, the latest franchise owner from a month ago, He did, uh, he grew in, in 90 days what it would take me from, from far away because he's there, he's hustling out there in the field as well, which would take me months, right, to, to do it myself. And, um, and even, and even have, you know, without even considering that I had to spend money for a manager to be out in the other location if I'm gonna have my own vans, um, to manage that. So the growth is a lot, uh, the growth is slower, right? If I'm gonna open, um, maximize one location and then, right, open another one, I feel like the growth is a lot slower than me leveraging from the franchise operators, from franchise owners.

I would agree if we were selling 10, 20, 30 locations a year, but I am looking at our current record of 3 per year, 1 per year for the past 3 years. And our total revenue for the franchise probably being around $100 grand plus initial fees. Whereas your current locations right now are probably doing almost $1 million in revenue and they've just been kind of like sitting on the sidelines right now. I also think that if you took your current location where you just said you could grow locally a lot more, if you just took that and grew that thing to the moon, like did 1.5 from one location and then documented it and created content and create a school community where you might charge $50 a month or $100 a month for people to come learn about how you do it. And like they just want to make $5,000 or $10,000 a month. But then the top guys in your community, they become franchisees.

Understood. Understood. So my focus now should be rather than expanding locations and using my resources to, let's say, do advertising on Franchise Gator, let's say, Uh, to grow my top line, really grow the revenue, to get my more attention.

Yeah, you figured out your bottom of the funnel, which is your franchise. All right, that's great. Right now we need to get eyeballs via social media and then have a mid-level tier, which is going to be some sort of community that's paid $100, $200 a month, $300 a month. I don't care what it is, but that's going to be your way to then vet your best potential prospects for your franchise.

Mm-hmm.

I see.

And so I believe that currently I would put your discretionary effort towards building out more corporate locations, or better yet, to what you just said, build out a million-dollar mobile detailing business in your local area. If you do that and then document it, you will have plenty of leads of people that want to become franchisees after they've joined you for 6 months in their community and they tripled the size of their mobile detailing business.

Yeah, that's, that's, uh, and then just doc—

yeah, just document everything you're doing in your corporate location to get it to a million. Use that as a funnel to get into your community, and then use your community to get you a funnel into your franchise. Because right now, in order to be able to produce the revenue that you're making from your corporate locations, you would need to get approximately 30 locations. So until— like, I happen to believe it is easier to scale this thing up to $1 million than it is to get to 30 locations. And I believe that by getting this location to $1 million, documenting all the social media, having a community, and focusing on that, I happen to believe that down the road you'll get enough franchisees to get 30 locations. All right. We're going to have to call it there. Sorry for everyone in the queue. I appreciate you all calling in. We will get to you at some point. But thank you all for calling in on the confession booth. I appreciate everyone's support. Down in the links of the description is what makes all of this possible. So thank you to everyone that has joined Homeworks as part of Augusta Nation, joins Home Service Web Design. It allows all of this to happen. We have some really cool stuff coming down the pipe for the media side. And it's all due to all of your support. So thank you. Thank you to everyone calling in for being so vulnerable with your questions. There are so often the times that entrepreneurs are in their own corner and alone, and because of that, they feel like no one else is going through their struggles or their problems. And that's what we try to have this show for, to show that other people are going through the same issues, same struggles, same problems that you are, and they get through it. And the only way to fail is to quit. And so in those low moments, I hope that this is a resource that you can turn to. Love you all. We'll see you on the next episode of the Confession Booth.