The Offseason Book: Chapter 2: The Curse of the Home Service Industry

Chapter 2 the Problem with Home Services 5 years ago I franchised my business Augusta Lawn Care. We've since grown to more than 180 locations and counting. To change the level of professionalism in the lawn care industry, we need to reach a thousand locations. To do that, I knew something had to change. This story begins in Las Vegas in February 2024 when I went to acquisition.com headquarters. I met Alex Hormozi. There. He's an entrepreneur and investor. He built a portfolio of companies worth over $500 million. He also wrote some best selling business books. Alex is an expert in making businesses run better. I told Alex about my business and asked for his thoughts. I shared my goal of reaching a thousand locations. He told me to look at the unit economics. How much money does each Augusta Lawn Care franchisee make? He gave me the target I need to hit average $200,000 in annual profits and franchises will sell themselves. I asked myself, what problem must we solve so that $200,000 in annual profits occurs every single time? Not sporadically, not at one off best performing locations, but every single time. This became the Augusta business model. Grow to $500,000 in annual revenue. Optimize for profits and raise prices. Target $800,000 in annual revenue and $200,000 in profit. This led to a six week deep dive into spreadsheets and reports. I looked at the unit economics of Augusta Lawn Care. I examined all our locations. I studied the green industry, lawn care, landscaping and tree service. I I also looked at home services as a whole. This included janitorial window cleaning, roofing, pool cleaning and handyman services. In total, I analyzed financial statements from over 250 home service businesses. I noticed a trend. I found that most home service businesses are seasonal. They don't have many leads. For three to four months out of the year, they average single digit profit margins. If you remove one quarter, profit margins skyrocket. The drop in revenue is dramatic. I call this Q4 collapse. 1/4 any quarter of the year. During that time, the business still has bills to pay. The banker isn't going to push off loan payments until after the off season. The landlord isn't going to forgive rent payments for three months. Regardless of revenue dropping, you still need to pay for general liability insurance, software, subscriptions, truck payments. And so I developed an idea. Turn that negative quarter into a profitable one. Doing so will have a dramatic effect on your profits. I don't mean make it a record high quarter either. What if you looked at the other 3/4 of the year? Take the median profitable one. Not your best quarter, not your worst one. Then use the average quarter as their revenue target for the worst quarter. I found that in doing so, businesses in my test group increased profits by an average of 72%. Some businesses were more severe. They had large negative profits for one quarter. Making this change could double or triple their profits for the year. Here's a case study. This is from an actual lawn care and landscaping company. I removed their name, but the numbers are real. Lead count by quarter. Quarter 1, 79 leads. Quarter 2, 490 leads. Quarter 3, 311 leads. Quarter 4203 leads. Revenue by quarter. Quarter 1 $80,000 Quarter 2 $330,000 Quarter 3 $420,000 Quarter 4 $290,000. You can see the massive seasonality. The spring rush brings a huge spike in leads during Q2. Revenue peaks in Q3. This is because it takes time to convert leads into completed work and then collect payment. Here's what their profit looked like throughout the year. Q1 Negative $60,000 Quarter 2, $50,000 in profit. Quarter 3 $60,000 Quarter 4 $20,000. Profits peaked in the third quarter. Then they tapered off as the year ended and entered a slow period. Case study number two. I checked out a company that puts up Christmas lights and provides other winter services. They do snow plowing and salt spreading. Its business shows the opposite seasonal pattern. Their lead count by quarter tells the story. Quarter one, 10 leads. Quarter two, five quarter three, 40 quarter four 170 leads. They completely shut down during Q2 and Q4. Their business booms. Most of their revenue comes from Christmas light installation. The demand for that service speeds up after Thanksgiving. Their revenue follows the same pattern. Quarter 1 $70,000 Quarter 2 $30,000 Quarter 3 $90,000 Quarter 4 $390,000. Their profit also demonstrates this seasonal swing. Order 1, $10,000 in profit. Order 2 negative $50,000 Order 3, $30,000 and Quarter 4 negative $90,000 in profit. During Q2, they hardly get any leads. Their revenue drops to almost nothing and they lose $50,000 in three months. But what happens when we take our worst quarter and improve it to our median earnings? Let me show you. With our lawn care case study, this company made $1.1 million in annual revenue. Their off season is January, February and March. During these three months in Q1, they lose $60,000 in profit. To find the median, I examined their three other quarters of the year. Q2, 3 and 4. Their profits are $20,000, $50,000 and $60,000. Arranging these from smallest to largest, I take the middle value 50,000. Not the best quarter, not the worst, but the median. To remember, think of the median as the divider in the middle of a highway. Now I replaced their worst quarter, Q1, with this median value. Instead of losing $50,000, what if they made $50,000? The results are dramatic. Their yearly profit jumps from $70,000 to $180,000. That's over twice the yearly profit. By making their worst quarter like their average one, I call this virus Seasonitis. You're infected with seasonitis when your revenue drops by more than 50% in any month of the year. Seasonitis also occurs when you have any month of the year with a negative Profit. There's a 26 page PDF workbook that accompanies this book. Find it@mikeandies.com workshop. Fill out page one with your quarterly leads, profit and revenue. This will help you determine the impact of seasonitis on your business. I know, I know. If you're like me, you rarely look at attached PDFs. Please make sure to use this one. We will use the workbook throughout this book. It will become your roadmap to curing seasonitis in your business. It is free. You will get twice as much from the book. If you use the workbook alongside reading, you have the game plan to execute. Instead of theorizing, go to mikeannies.comworkshop. i added video training to support the book's concepts and show visual examples. Fill in page one with your business's revenue, lead count and profit numbers. Take your worst quarter and replace it with your median profitable quarter. What happens? Many home service business owners see their profits drop or vanish for three to four months each year. So many of us in the home service industry accept seasonality as part of the business. In doing so, we consent to living on the edge of a dangerous precipice. Many home service companies don't break even until summer. They dug a deep hole in the off season. It takes over six months to escape negative cash flow. Is that you go to page three of the workbook. Enter your revenue and profit for each month. Circle the month that you get above the break even point for the year. That's actually the root of many problems inside our companies. This is what makes home services a horrible business. Nonetheless, we neglect the most obvious gaping hole in our business model. That gaping hole is something I call Q4 collapse. Q4 collapse and seasonitis go hand in hand now. Why do we ignore Q4 collapse? It is the most important problem to solve but we replace it every single day with urgent tasks. A customer calls and they're angry. Someone leaves a bad online review. Customers threaten not to pay. There's a flat tire on one of the trucks. A piece of equipment breaks down. Employees don't show up for work or threaten to leave. The transmission blows up on a truck. A lawsuit from a past contractor gets delivered. An unexpected tax bill shows up at the mailbox. These fires demand our attention 24. 7. We often miss the main issue that could fix many problems in the business. Solving the Q4 collapse. Now let's figure out how much more money you'd make if you solved your Q4 collapse. Subtract last year's actual profit from your projected annual profit. Use the median quarter instead of your worst quarter for this projected number. You can find this activity on page four of the workbook. I call this difference the jackpot. This is the extra money you'd earn if you fixed your Q4 collapse. It assumes your worst quarter could match the median of your other three quarters. On average, I saw a 72% increase in profits when I analyzed over 250 home service businesses. Let's calculate your projected profit margin increase. Start with your projected profit for next year using the median quarter instead of your worst quarter. Next, subtract last year's actual profit from this number. Finally, divide that result by last year's profit. This will show your percentage increase. I've seen businesses increase profits by 50, 80, or even more than 100% by addressing this one problem equation. Projected profit for next year minus last year's profit divided by last year's profit. Now I want to make this tangible. Money is paper. Let's examine what this can do for your business and for your family. Maybe it's always been your dream to drive a luxury car. A leased vehicle worth $100,000 costs about $1,400 each month. This covers all your expenses like insurance and the lease payment, so it totals around $17,000 per year. If your jackpot exceeds $17,000 per year, you could afford this by solving the Q4 collapse. If family time and vacations are important to you, a family of four can take a trip each year. Options include a cruise, Disney World, or travel within the US that costs around $8,000. If college matters for your kids in state, tuition costs around $10,500 each year per student. Once you add rent and living expenses, this could total between 20 and 30 thousand dollars each year. If your goal is to buy a house and you earn over $60,000 a year from solving Q4 collapse, you can afford an average home costing $800,000. This includes mortgage, taxes and insurance totaling around $5,000 a month in the U.S. even if you aren't saving for a major purchase, the money can be life changing. For an extra $25,000 a year, you can delegate many of your least favorite household chores. Cooking, meal prep, cleaning, even grocery shopping. By hiring out these household tasks, you can save between 40 and 80 hours a month. That's two hours every workday evening, plus an extra date night with your spouse every week. This is a golden ticket. What would solving Q4 collapse do for you, your business and your family? Don't be vague. Be very specific. If you want to travel, where do you want to go? Who's going with you on the trip? The clearer you can envision your goal, the more motivated you feel to pursue it. Are you flying first class? What are you going to do on this trip? What color is this car? How will you use your free time once you've delegated all your household chores? This is your golden ticket. The goal of this book is to help you get rich. Together we will figure out what problems are making you poor and then fix them. In the chapters that follow, we will define five cures for seasonitis. Each cure has a clear game plan. You can use it to fix Q4 collapse and avoid off season unprofitability. You can hit your jackpot and get your golden ticket. So back to going to Las Vegas and visiting Alex Hormozi. Now what did I do after that? I spent eight months creating a plan to fix seasonitis. I realized the real issue was Q4 collapse. Fair warning it will take time. At Augusta Lawn Care, we have over 180 locations. It will take two years to achieve complete integration of the ideas in this book. That's a reasonable timeline to expect for your business as well. You may experience positive results and wins right away, but our goal is to completely replace your Q4 collapse with median quarterly revenue. Abolish your off season. This will take time and commitment to the plan we create. First, let's define when your business gets sick. Seasonitis happens when monthly revenue falls over 50% from your best month. It also applies to your business has a negative profit for any month of the year. Check your monthly revenue and profit numbers to spot seasonitis in your business on page two of the workbook. Mark an X on any month where your business is sick. This is where revenue falls below 50% of your best month or where profit goes negative. These marked months represent when your business needs treatment. Pinpoint when your business has seasonitis. Now we can create specific solutions to boost these tough times. Are you ready? Let's go.