The Real Reason You Can’t Pay Yourself at $2M Revenue

I run a $50 million long hair company with almost 200 locations, and I've seen a pattern crush profit more than any other admin bloat. The bigger you get, the heavier back office gets until it quietly eats your margin alive. In this episode, I'm going to show you how to cut hidden overhead, double your admin team's output, and finally get leverage from your office and not just more payroll. We'll break down exactly how to measure admin roi, when to hire, local versus virtual versus overseas, and how to rebuild your systems so your admin staff amplifies results instead of just cleaning up chaos. If your business keeps growing but your profit isn't, this episode will tell you exactly why. My name is Mike Andes and this is the Home Service Millionaire podcast. I'm going to go through five topics and if you want to submit one, go to mikeandys.comquestion, submit a quick video and we'll get you on the next podcast. We're talking about the hidden overhead, how admin bloat is eating your margin. First on the docket, when was the last time you actually measured how much revenue your admin team produces relative to their payroll? And are you brave enough to look at that ratio? So the hardest thing about admin, as a rule of thumb, is the fact that it's overhead. It doesn't actually generate revenue. Whereas your technicians and even your general managers you can attribute to bringing in revenue. Sales. Sales and then operations, doing the work. That part is required in order to grow accrual accounting and revenue. On paper, the last part, the admin side, is required though, to make sure the greases, the grease of the engine continues and that we actually get paid. And so a lot of people will focus on sales, they'll focus on operations. And admins is just this thing in the background they don't really think about, but all of a sudden they start realizing they're spending 25, 30% of revenue on overhead bloat. And so I like to most in the past couple years, what we really focused on at Command center is how do we actually measure the sales productivity of admin? Because in the perfect world, admin should make your operations go smoother because they're answering customers questions. They are creating.

Because in the perfect world, admin should make operations go easier. It should make sales go easier. They're communicating with customers, they're making sure the crew's happy by paying them like their payroll. They're emailing, they're sending out text messages, they're answering the phone. These Are all admin tasks that don't have any attributable value, but should grease the gears for operations and sales to work more efficiently. And so one of the things that we've been able to measure most recently is how much, how much do we actually sell in upsells? The challenging part with upsells from an admin perspective is really that what's the actual value gets very hard to measure once the customer is like the lifetime value. Or what happens if we sell them two or three services? What happens if we send them an upsell and they accept one out of three? So what we really just tried to focus on is we're trying to always give a thoughtful upsell. And when we say thoughtful, we're talking about it's comparative to the services they already have or are asking for. So if they're an existing customer, can we give a thoughtful upsell to something else that would pair well with what they currently have? If they are a new customer and they're asking for services, is there another service that we offer that would pair well, be adjacent to it, and would potentially double or triple the annual customer value? And I like for recurring customers measuring annual customer value, not just lifetime value, because lifetime value has churn baked into it. Where I want to get as much revenue as possible from the customer in the first year. So I guess I potentially can keep them for mowing, let's say for example, for three or four years. Awesome. But what if I could also get them on a property cleanup, a leaf cleanup and a mulch install in that first year. Now all of a sudden I go from $1,500 I collect for just mowing to 3,000 or $4,000 in that same year in the first 12 months, allowing my cash cycle for customer acquisition cost to be recouped and give me more capital, continue growing the business. And so I think one of the key functions that I would be tracking from an add in perspective as it matures is how can we go from defense to offense? How can we go from just answering calls, answering texts and answering emails, which is very important for operations sales to actually occur. But how can we actually start attributing a real value, a dollar amount? So something we're working on right now is trying to figure out what is the average value of a property Camp was the average value of getting someone to accept a treatment program. What's the aver value of them accepting snow service? Because if we can have the average values, we can at least approximate how much revenue we're Actually driving to the organization. Because if you continue adding people from defensive to offensive measures, it's so much easier to warrant paying people and paying for an admin function, feeling like they're actually contributing to the top line and bottom line of the business. Because otherwise defense is so important. Like defense wins championships and administration is your defense. They're the person that blocks when customers are mad. Make sure that jobs happen on schedule, coordinate with the customer, communicate. It's very important. But if I can measure their offense and how much more revenue, more jobs they're bringing to the bottom line, super, super valuable. And so I would try as you mature. And the reason I said mature is if you're just getting started and your business 5, 600,000 in annual revenue and you just got someone in for a month or two, they have to learn so many tasks in admin, payroll, email, how do you handle text messages, all the different offers. They have to learn about the services that you do. There's so much to teach them. Don't, in my opinion, don't immediately jump into like, okay, here's how you sell and here's the up. You'll scare a lot of admin people away. And what I like to do is get them very, very firm on the defensive measures. And then in training, start baking in more and more abilities of how you upsell. Here's what you say when the customer says this. Here's what a thoughtful upsell is. Here's when you don't upsell because the customer's mad. That sort of training can come later. Because I need them especially to 5, 6, $700,000 business. I need them to play defense asap so I can focus on being offense in sales. And so the reason I say that is because if you're listening to this and you just got your first admin person, if you start spending weeks training them on how to do upsells and how to answer the phone so you can sell more jobs, be wary of the fact that you just spent three weeks of your time that could have otherwise been spent in sales doing the same thing at a very high level of productivity because you've been doing it for years. And so be very careful with that. This is why I like to get an admin person in the swing of things, being productive, making sure calls are getting answered, having more SOPs and checklists, and they're actually hitting KPIs around defensive measures before I start drilling offensive measures. Because the smaller your business is under 3 million, the more tasks that an admin person has to do. Because you don't have the ability to specialize in your office at a 5, 10 million dollar organization. You have someone for accounts receivable, you have someone for payroll, you have someone for email, you have a call department, you, you have more admin departments. And so they can specialize, but at the beginning when they need to learn 20 different tasks, I would highly recommend making sure they're efficient and productive at those before trying to pour more on them. Because you watch this podcast and you're like, I wanna make sure they do upsells. Number two on the docket. Is your office staff truly creating leverage or are they just cleaning up the chaos your system's should have prevented? So I'll turn this around. I'll say that the best admin people are people that like systems. They like order, they like checklists, they like SOPs. And they're usually really, really helpful for making systems in the business. So I know the producer was trying to get a spicy take on this one, but what I think is that an admin person inherently usually likes more structure and organization and most entrepreneurs is quite the opposite. We don't do well at creating systems and checklists. And so I would depend on and lean on a great admin person to help you build systems and sales, build systems and operations and build systems in the admin role. I would bake that into their job description and make it part of their job to create the systems alongside you in the different departments of the business, including their own. And I'd put it in the job description because I a lot of times I see with office and admin is they hold the keys to the business and one or two people in the organization, even a million plus dollar business, one or two people in the office, if they left, there'd be so much knowledge and so much tribal knowledge lost to the company. And a lot of times in home services I see this being the spouse. And in the perfect world, your spouse would always be there. They real work alongside you at the hip for years to come. But things happen. People get pregnant, pregnant people get sick, people have life events, people have mental health issues, they get burnt out and sometimes if it starts putting the personal relationship at risk. We needed to create division. We have, okay, we're not going to have you in the office anymore. It's creating too much stress for our relationship. Great. I don't want the business to fail because of that. And in order to prevent that from happening, I gotta make sure there's systems and there's checklists. And there's screen recordings and things are documented as to how things are done. And so even at Command center for Augusta lawn care, about 10 to 15% of locations at Augusta have their own office. But what we encourage them to do is use the exact same systems that we train at command center. So you can always within a day, hand things back to command center and they run things for you. Because I see this over and over and over again for bigger, like I'm talking two, $3 million businesses losing one or two people in the office, there's a coup, someone says something stupid, someone has a weak moment and bad things are said or does something dumb. And all of a sudden they lose their admin and the business gets cut in half. And most businesses can't survive that. And so I don't want a family relationship to be broken. I don't want health to be broken. I also don't want the business to be broken because of those other things happening, whether it be with a spouse or someone in the office that leaves the business. And the whole thing just grinds to a halt. Why? Because admin greases the gears of the business and operations and sales will grind to a halt if there's no good admin in place. And so the way to protect against this is create systems. And a great way to create systems is have the admin person help you build the systems. Because they're usually much more analytical and they like structure, they like checklists. These are the things they're good at. Bake it into their job description that they need to build that for their department and for their role. And how you make sure that someone is growth minded is if they start being worried because they want to have that tribal knowledge as job security, just realize that is not the type of person that's going to grow the organization with you. The reason is because if they're not willing to create systems for them to be replaced, they think that their job security will lock them into their role. And they're right because it will have to delegate. They will have to create systems in order for them to be able to hand things off and then move up in the organization. But a lot of times people think with a scarcity mindset and will simply think that if they're creating systems to replace themselves, it means you're trying to get rid of them. And if they think that way, maybe they stay in that role for a long time and they just, they do have the job security and they know everything about the business. But I know personally, I'm not going to be able to move them up inside the org because someone needs to be creating systems, making the uniform, we call it like, hey, you need to make the jersey better, like the position, the role so that you can move up in the organization. Number three, should your next admin be a local in office hire? Ooh, this one's good. A virtual assistant or an overseas team? This is a great point. Everyone thinks they can immediately go overseas and over and over and over again people are disappointed by the fact that it's way more management, way more training and way more oversight of someone that's not in the office. And more if they're overseas. There's language barriers, there's understanding what your services are. There's a lot of issues if you don't have systems in place to monitor like screens, clicks, every single phone call. AI is doing transcripts and screen. If you don't have that in place overseas can sink your adminship very quickly. And so we have done all three. We have done overseas, we have done remote us and we have done in person, office and time and time again. The in person consistently gets trained fastest and has the highest level of compliance to the standards and hitting their benchmarks. That being said, does that mean that someone overseas and someone remote, local or remote, like in English speaking, for example, cannot do that? No, that is not true. There are fantastic team members, they do phenomenal job and they actually outperform local people sometimes. But from a distribution perspective, we are talking about having to go through so many people overseas and so many people remote to finally be able to get someone that performs that level. And I'm not willing to burn through two, three weeks of training just to get them up to speed and then do that two or three times because I have churn in this role. Churn at the admin level will crush your business. If you're doing under 5 million and you have admin churn, it will crush the business because it takes so much longer to get them trained up and they're not producing revenue, they're straight cost. So if someone takes that, call it three, four weeks to become halfway decent, six to eight months to become super efficient and everyone's churning out after one or two months at the admin level, your business will just hurt so much. And this is why most home service business owners will turn to their spouse because they know that least there won't be churn. Knock on wood. At least there won't be churn at the admin role because losing someone that has those Keys in the business. I see this over and over and over again. No one talks about this. But divorce, when you have an admin role, that is a spouse crushes, crushes businesses because it usually gets really bad. It gets sour between the two people and then they sour sales and operations. And also they usually have a whole bunch of tribal knowledge because no systems were created in the third thinking that, oh well, we're together, like they're not going anywhere. And as soon as you have the thought like, oh, they're not going anywhere, even if they're your spouse, even if they are a great team member, even if they're in leadership, even if they're paid really well, even if they're really happy, we need to create systems for them at the very best, for them to move up at the very worst to protect the rest of the team and the business if they were to leave. And so when we think about overseas, remote and then in person, I would say the goal is to go in person. Once you build a profitable enough business, it is time and time again. I've seen the benchmarks. We have tested this over and over. As a rule of thumb. They're just so much more efficient at getting up to speed and then hitting benchmarks and compliance. If you can get someone that is remote, that is in the US Though, the nice thing is you don't need an office space. So there's a huge drop down in overhead. The wage per minute or per hour that you might spend, if you're paying like a service to pay per minute, it's going to usually be higher, but it makes up for the fact that it's not a fixed expense in the form of a two or three thousand dollars a month payment on rent. I've seen a lot more than that getting office equipment, utilities. I'm talking for a lot of home service businesses to do. Just install the infrastructure required for an office is six to $7,000 a month, not including wages, like wages on top of that. And so I'd be very careful about that. I think that most people should probably stay in the middle until they're over a million. And that is hire someone that is not overseas, that is, that is, you should get charged by the minute or in packages of hours, for example, even if it's a dollar or two minutes per hour per minute. I'm okay with that because I want my admin expense in the perfect world to be variable. I want that when we spend, when we have less calls, we spend less. Not we have people on salary and People burning the clock. It is incredible to me. Like there's just so much inefficiency inside the admin role that I am very happy if I'm only paying for the time I'm actually using of an admin person. So I think most people just start there and then as you get to 3 million, probably likely go in office because now spending 10, $15,000 a month to have an office in place starts to make some sense. I would only go overseas, man, that's tough. I would go overseas. Once you have established systems, processes, you have measurements of management, you have a way to use AI to be able to track every word that's being said, to flag calls. Until you do that, this is usually a chaos. Like I'd say 60 or 70% of time chaos. And it takes a year to kind of recover and move back in this direction of more in person or US based. And again, I want to be very clear because we have team members in both these other categories. There are phenomenal team members. Phenomenal. I'm just saying from a distribution perspective and percentage of success if you don't have super solid systems and tracking and so much of that oversight and management in place. A lot of times I see people drop the ball in admin if they start trying to go cheap. I understand the desire to want to go cheap and get things done in a more save cost on admin. But saving money on admin almost always leads to the deterioration of sales and operations.

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Number four. Are you using admin roles to make your life easier or to avoid training your managers to think for themselves?

Here's the thing. A lot of home service businesses don't need an office manager with multiple assistants until you're well over a million. The kicker for me was when we were doing like 1.5, 1.7 million in revenue and my first location and we didn't have command center yet at the time, during the spring rush, we needed three admin assistants in addition to Liz at the time the office manager and what was brutal is I have to hire them a month early just to get them up to speed for spring rush. But then I have to lay them off. So it's very difficult to hire someone. I only really need you for three months because during the winter I didn't even need to have an office manager for full time. Like there wasn't even enough hours for her. And so having her on salary was expensive and worth every penny. However, very, very expensive and didn't make any money until finally moved things over to command center once that was established with the franchise. And then we can make significant amount of profit not having three admin people in addition to the office manager. And what was brutal is I knew in the spring, in spring rush, as soon as I had three people underneath Liz as the office manager, I knew she was basically rendered ineffective as an individual contributor. Like she wasn't answering calls and doing emails, she was training, she was supporting them, she was managing their time clocks, making sure they're comfortable, setting up their computer, answering their questions. And, and there's always so much banter in the office when you have people sitting next to each other. Like there is a lot more waste. Whereas during the, at least during the off season Liz was handling everything, actually doing the tasks. But when you have three or four people you're trying to manage, you don't actually get a lot done. And so I knew there was so much waste happening. And so I would say if you have a manager of assistants, you really got to have your efficiency scores and dial in your tracking so you actually can measure whether or not having a manager of your admin assistants is worth it. I have seen time and time again where people have three people in the office and I look at the organization, I'm like, this could easily be done with one person and they have a flex individual for two to three months of the year, 100%. And yet they keep three people busy year round simply due to the fact that I don't wanna lose them. They're really good, I understand they're really good. But you're gonna go bankrupt trying to keep everyone busy year round. And so I would say a really nice medium when you're going for that 1 million part. So again to be very clear, I really like the idea of having a service that does per minute or per hour bundles or, or having a remote but US based or North American answering service and does admin task. It's more of a variable expense, it's higher per minute, but I'm okay with it. As you start getting past the million, moving towards three, what I would say is get your office manager, lock them in, make sure they use systems exactly as what has been given to you by the agent, the company that was giving you per minute or per hour chunks, so that during the spring rush you don't have to go up to 2, 3, 4 assistants, but rather the overflow can just go to the call center. So that way, yes, it'll be very expensive, but it's a lot cheaper than training people for six weeks and then having to find new ones every year because no one wants to leave, or keeping them busy for nine months doing busy work in the office when you don't really need them. And so that would be my recommendation. Once you pass 3 million, that's when you're going to start hiring more people, multiple people full time in the office to be able to specialize in different roles of admin, like payroll, accounts receivable, and so many different levels of admin that you want a specific person just doing that. But I believe that that is sort of my perfect world is I use virtual as much as possible and then I slowly migrate into, okay, I have someone in person and they work year round. I'm willing to take that fixed expense. Maybe it's once you take like, just like the cost of rent for a physical space, you take the salary of a full time office manager, you're looking at ten grand a month. Like just that's, that's the truth. But once you can afford that, as you're going from a million to 3 million, you take that overhead hit. I'm going to make sure that I use systems so that overflow can still go to my variable expense. So for nine months of the year, I'm not busy making busy work and I'm not trying to always train people for six to eight weeks prior to the spring rush, when that's usually my worst cash position is right before I get busy. Number five, how much inefficiency is acceptable in an admiral before it becomes waste? And are you tracking that or just hoping busy equals productive? Oh man. This is what kills me about admin. All right, so if you actually track every click, every screen, and every single thing that an admin person is doing, they are productive, maybe 50 to 60% a day. All right? Our highest performers are 70%, like the best of the best. They literally sit next to the phone just waiting for it to ring. 70%? Why? Because when you hang up a call, you still have some notes you got to put in you got to move some things around. You got to take action on the call sometimes. So, like, it's impossible to be on the phone 100% of the time. And even if you're like running payroll or answering emails or doing texts, there's always gaps in between. And the same thing is true with your team out in the field. And, and there's. Every time you have a stop, you have a higher propensity to reduce efficiency. So if you have one project they're working on all day long, there's a good chance they're gonna be on the project for 95% of the day. But as soon as you have 20 stops on a route based job, route based work, you have 20 times, they're getting in and out of the truck and there's waste at every single time. There's a switching cost of switching between different tasks, going from driving to working, working to driving, driving to working, like that, back and forth. The same thing is true in the admin perspective, but they switch tasks hundreds, maybe even thousands of times a day. Going from a phone call, then an email, then they're doing the text. Then all of a sudden you message them and there's a fire. Then all of a sudden the crew's messaging them because there's a problem out in the field. Then a customer calls and they're complaining. Then a bad review comes in, then someone posts on Facebook messenger and is asking for a quote, and then all of a sudden a contact form goes. They're switching every single time. They do that hundreds of times a day. And every time you have switching, you have waste. And so this is why eventually you want to be able to have specialized roles. But until you get there, and even as you get there, the efficiency is very low. I see average admin people that are not tracked usually with efficiency score of 30 to 35%. Once you track them, you have efficiency scores in place. You're actually using AI to, you know, record screenshots, record what they're doing on their computer, etc. I can see 50% being very average. Your top performers are 60 to 70%. It just, just like. And so what that means is the difference between someone doing 70% and someone literally doing 15 to 20%, which I see all of the time in inefficient shops where they're actually doing work for 15 to 20% of their day. Why? Because they're going to the bathroom, they're putting on the coffee, they're vacuuming. Important to vacuum. They're turning on the lights they're sweeping out the shops. It's all very important. Like these things, these things have to get done. But their efficiency of actually doing admin tasks, especially during the off season, I have seen many shops go down between 10 and 20% and it is very difficult to make a business profitable when someone is being doing productive work. Not labor, revenue producing, but just productive work that is needed for the business 10 to 20% of their time. And when you get multiple people in an office, there is so much banter that happens. They talk about their weekend, they talk about this, they get off a call and they die. They break down what happened on the call. Then they get a text message from an angry customer, they got to go talk about it. And immediately when someone is talking to someone else, you just cut your efficient score in half. Because nothing's getting done by this person talking with this other person about what they're doing. So there's so much inherent waste. And you, as you build your admin, what you're pushing towards is aligning their incentives with efficiency, aligning their incentives with being productive, aligning their incentives. Like there are members of our team that they're like, hey, we are happy not taking our lunch break. We'll take one break so that we don't have to stop multiple times throughout the day. We literally have to have them in our state sign something saying, hey, that's what I'm doing. Because they know they can be more efficient if they don't have to stop two or three extra times out the day to take their 10 minute break.

Admin is just a waste, is an absolute waste. But you can turn it into offense, you can turn it into a productive part of the business. But 20%, 30% is not bad in terms of what percent is being lost or the inefficiencies throughout the day. In admin very much. Okay. Like I always say, at 90% or above, efficiency score in the field is elite. I would say anything over 60% in the office is elite because there's just so much more waste when you start having office, office space and then again your admin. And if you're tracking this stuff, you can see the deterioration between in house versus remote versus overseas. Again, there's anomalies, there are all stars. But we typically see that. And you got to manage it, you got to, you got to coach against it, you got to train it, you got to measure and see how many minutes are productive, how many minutes they spend on the phone, how many minutes they spend on email, how many minutes they spend on payroll. And if you're not able to do that, that's when usually you've got to have someone in person and then you got to really dial in. What is their productivity? Because every admin person, bar none, thinks they're busy, bar none, they always think they're busy and they need more help. And so they can become an absolute vacuum of talent, an absolute vacuum of payroll, because everyone always is busy. And you're like, man, I go in the office and everyone's busy. People are sweeping the floor, making sure things are turned on. They're making sure answering the emails, they're sending out messages. And all of a sudden, you have way too much admin bloat. 20, 30% of your revenue is going out the door to admin. I want that under 15% of revenue going to all admin related tasks, salaries, rent, utilities. All of that needs to be covered, in my opinion, under 15% of revenue. If it starts creeping above that, it's very rare. I've seen a profitable location. All right, that's it for the Home Service Millionaire podcast. If you have a question, go to mikeandys.comquestion, submit a quick video, and I'll answer it on the next podcast.