This $3M Business Can't Pay Rent or Employees!

My main guy embezzled. 40 people lost their jobs in one day, and it took me six months losing everything I had.

My name is Mike Andes, and I.

Travel around the country turning around small.

Businesses that are struggling.

I had my leaders not cash their checks for a couple of months.

There's no money in the bank.

Businesses all have cash flow issues.

We die without money.

I think he had like 15 grand in checks piled up, just not cashing them.

This handyman service does over a million dollars in annual revenue, but has 22 employees and has over $600,000 in debt.

And Lia House caught fire.

Her husband died in that fire.

So that was a $200,000 loss on that job.

My guys are making more money than I do. That sucks.

It's going to get messy.

It's going to be tough, but let's see if we can turn this thing around.

To be in business, you have to be either crazy or stupid.

Mike. Vitaly.

How's it going, brother?

Good to finally meet you.

Yeah, man.

My name is Vitaly Tormzov, and as a company, we fill the gap between handyman and contractors. And so we mostly focus on small repairs and remodels.

So how long have you been at this shop?

We moved in last spring.

Okay.

We were renting a 40 by 40 just down the street from here. The people moved out, abandoned this place, and they moved out and they go, can you help me look through this place? I go, wow, this. This would be amazing place for all fix. But about two years from now, you know, because we were just not capable. So he comes back a month later. He goes, I'll let you have it for $4,000. I'm thinking, well, this is way too early. This is still.

But we got almost 909,000 square feet here of floor space. Our real focus is the speed, being able to get in and get out of the house fast. With that, we ended up adding the building supply division, which allows us to supply materials faster and more accurately, keep our technicians out of the stores. We had an issue with guys sitting at the store way too much, and we still had to pay somebody to buy the materials. And then we have leftover materials that we have to deal with. Either return them or store them. So we go, okay, so if we're going to move in here, let's go ahead and open up the building supply store and use that margin by buying wholesale to cover those guys buying and sort and dealing with materials.

How much of it. How much of it do you do where you sell? You're selling at retail.

Retail. Nothing yet.

Oh, nothing. Okay, got it.

Nothing yet.

You're buying it wholesale.

So the, the, the whole point of the supply store would be to serve remodelers to be able to fill that gap and keep the guys out of the stores.

Got it.

Switching from a service business to then being retail, where you're actually selling products is a completely different business. It's not even like adjacent to the service they're offering. It's like, well, we have to have it, so we should sell it to the customers. Yes, you should have it as inventory, but do we really need to sell it to the customer? That's a totally different business.

So the systems that we're putting in into supply is once the material list gets approved, 24 hours to put the material kit together and 15 minutes to load.

Got it.

We're awfully close. The hardest part that we found in the supply side is the vendor acquisition. All our vendors are able to bring us material, deliver material within a week. So. So the goal is without overloading it, and we're trying to make this whole thing scalable to be about 3,000 square foot places that we can restock easily and get guys started fast.

So the goal is like, don't let them go to the stores.

That's correct.

I'm hearing a lot.

That's correct. So, you know, unless there's a po, don't go to the store.

I think we use that logic as small business owners based upon Fortune 500 companies that will like, go build their own solution to their problem.

It's like, look, if you have a.

Small business and you have a problem, instead of going and building a new business to solve one small problem, which is literally the time it takes for.

People to go pick up materials.

Okay. We still have to put the materials in the truck. So the only thing we're saving is the time in the store. And so instead of figuring out a whole business to fix that problem, should we just compensate the guys based upon efficiency to get in and out of.

The store as fast as possible?

This is kind of a stock area where they're prepping for the jobs and so on. In the morning, the supply guy is pretty much going to take the stuff out and get them out of here. So we were kind of hoping to be able to go to public this spring, and we did not have a product that we could feel that we could market.

And it's tough sometimes blending it too, like bringing other contractors in.

Yeah.

I question whether or not the building supply division is a Distraction from the core business. Because what we're not taking into account is the fact that it takes a couple employees to manage, manage this retail division as well as this entire building. We have to rent it, we have to heat and get the utilities to actually warehouse and store all this inventory. There's actual cost to that. And yes, it could also be inventory at Home Depot or at Lowe's. And yes, it'll take time for me to drive there, but that's a lot of time that is otherwise spent on wages is now being spent on rent, utilities, and team members just to manage the inventory.

Also, these trucks. How many trucks do you have total right now between the vans and the trucks?

So between the vans, I think there's total of 15. We just had one that got wrecked. One of the guys relapses, and when we hired him, I gave him my personal truck because, you know, we were just short on vehicles already. You know, he wrecked that one. So I don't have a truck. It was one of those. We came in tough and then we had one of those country songs, bad country songs, you know, we had one of our best guys skip a step and we spent two weeks, the entire crew, scrubbing cabinets and scrubbing the paint off and repainting them.

That was a $200,000 loss on that job.

We were repainting kitchen cabinets and my main guy, my most experienced guy, decided to change a step. Instead of doing it the way we did the bond test, painted it his way, and it peeled the labor that costed two weeks to scrape that off and redo it. That was between loss of opportunity to labor cost. That was, you know, almost $60,000, you know, for a $5,000 job. And then the other thing is, we ended up. We had a whole bunch of this influx of Ukrainian refugees and we ended up bringing on seven. So then we ended up. Some of the people from last year, they just could not. They could not adjust. So we. We ended up with 15 brand new people this year. We ended up with some rock stars out of there. Just some really, really amazing guys and just talented tile guys and.

And we added some drywallers through that too. So it was a good experience. It was really hard, but it was worth it.

Right now there's about 15 trucks, 22 guys working.

Well, that's between the three companies.

Okay, okay, so where are those three?

The two guys are on the supply. One is vendor acquisitions and vendor relationships, and the other one is supply management.

Got it.

Then we have electric and plumbing, which were. We lost our Plumber. So we're kind of screwed a little bit there. So. But we have our electrician. He's my oldest son.

Okay.

He's not planning on going anywhere, so thank God.

And then the third part is more of the.

The maintenance side of things. Yeah, Property maintenance and repair.

Got it. And so if you look at those three parts, what do you think? Expect like 2024's revenue to be across those three divisions.

So we were supposed to be at 3 mil.

Okay.

Between the three, I think we'll probably 2.4 is where we'll. And that's. To me, that's about $600,000 loss on training.

Like, the main thing when I went into this turnaround was really like, there were so many different divisions of the business. Even though it was big in terms.

Of revenue, there was everything from the.

Finishing department to the painting, the electrical, the plumbing. There's so many different aspects that each of those could have been a million.

Dollar business or more.

But when you have that many businesses in one entity and then you have retail and all these other aspects, that just scares me.

Throughout the last seven years, every time we would bring a new person on, it would be a drop in our efficiency or revenue, about 60 to 80 grand. So that's kind of what I've been figuring on our training costs.

Got it.

You know, when you bring in 17 or 15 new guys, that's a lot of money.

Yeah, yeah.

You know, so 60 to $80,000 to train up one new team member is a lot. Now let's just say that we're hiring entry level, no skills, very green team members. I want to make sure I'm doing simpler services, that I can get them profitable for the business within a matter of a few weeks. Because what happens if I train someone up over the course of six or 12 months and I spend 60 or $80,000 and they're a great employee and they leave after six months, I'm in the hole 60 grand. We cannot build a sustainable business relying on people staying as laborers for decades on end. They're going to usually be 6, 12, 18 months at our business. And if we can't make them profitable in that amount of time, we're never going to be able to grow the business.

When you look at the normal training cost of 60 to 80,000 and we're $300,000 in the hole, all of a sudden that hole doesn't look all that big when it could have been way worse, you know, if it wasn't for God's mercy.

So this is our fab shop. This allows us to fabricate anything that you can't buy.

Got it.

So this area is kind of our catch all. We have a mechanic, he's kind of got engineering mind, so he's bringing in and servicing our equipment. And you know, we got engine to replace right now, so he's going to be pulling that in hopefully today.

Good for painting too.

So. Yeah. So that we drop this and we do our painting in here. And so any of the assembly. Then over here it's more of woodworking only. And anything that's, you know, they're building cabinets or something, you know, because sometimes you're remodeling kitchen and you got same cabinets throughout the house, but they want to just add a little bit. Yeah.

So we can't find those anyway.

You can't? Yeah, you can't. And this is more of when any of the equipment, shared equipment comes in, it comes into here, it gets serviced here and before it gets put on the shelf.

Got it.

That's very much it.

This is kind of like the whole shop space, basically.

This is. Yeah, this is kind of the shop. Yeah.

Okay. No, I like it, man. So this is one building, number one.

There you go. That's Aaron.

Aaron, good to see you, man. Nice to meet you.

And what do you do here?

Estimate.

Okay, Very cool. What percentage of the projects do you have to do estimates on versus just like sending the crew there? About 100%.

Really?

Really?

We try to put our eyes on.

Everything, make sure everything's going smoothly. Cool, cool. And what. Approximately what percentage of your jobs that you send out estimates get accepted? Do you know? Approximately. Like 50%.

So probably right around there. You've been with us for how long now?

Three and a half, four months?

Yeah.

Okay.

So his conversion rate's really good.

Yeah. Okay.

Yeah. Probably closer to 50.

Okay, cool.

Good stuff.

Good to meet you, man. Absolutely. Yeah.

What's kind of like the blended hourly rate, do you think? If you had to.

We're 120.

Okay. 120. Okay.

Yeah. This is Max. He's a supply guy.

Great work. Thanks for that.

So that's Cameron. He's the bookkeeping Cameron. Yeah, that's Garrett. He's the dispatch and customer relationships.

Cool.

Awesome. And that's John.

Hey, John.

He's the vendor acquisition.

Good to meet you.

Good to meet you. Absolutely.

My name's Mike. Cool. Good stuff.

Ed lives over here.

Ed, how's it going? I'm Mike. Good to meet you, Mike. Absolutely.

My name is Ed. Been working here for about five Years or so. Started off as a mechanic and then just worked my way up. I'm a project manager now.

In terms of the.

From your perspective, when you look at the operational side, where do you see a lot of the waste? Like, I know we're really trying to keep guys from stopping at the convenience store and like getting the supplies to them, etc. Like, where are you seeing that as kind of a bottleneck? Is there anything specific?

I want to say anything specific. It's just, I think just a lot.

Of little things that add up. Okay.

Yeah.

Because when I see. When I see we have like our hourly rate being like that $120 marker and I look at how many labor hours we're actually producing, there's a big drop of how many billable hours are we getting out of an eight hour day. Right. Just from a math perspective, if you take 2 million divided by how many labor hours there are, you're more like $60 an hour, like the effective hourly rate. And so it's like there's a big chunk of time we're not billing to the customer.

Exactly.

So does it go estimator then to. Then you, and then you go to the leads? Is that kind of how the flow works?

Okay, cool. On right now, we're doing that only on bigger jobs. On the smaller jobs, we're trying to have the estimators just go directly to the leads.

Got it. Cool. Very, very good to meet you. Awesome, man.

Whether it be a percentage of the job revenue, whether it be based upon how fast they get from the shop to the job site and doing some sort of compensation there. Or like, do something, make it a game. Do something other than create a whole nother business to solve the problem. It's just a matter of like, fix the actual root of the problem, which.

Is you have wasted when it comes to labor this past year. I know we had that couple jobs that went south, but like the debt, why did it bloom this past year? Mostly like this year?

Yeah, I think it's the training.

All the new team.

All the new team. Because yeah, no matter how much I look, we had that big old dip in the spring. So commonly during the winter, we hit break even about May. And this year we still haven't even hit it. And to me, that's the only biggest expense that we've been finding is that training.

Was it kind of like a one time, like you had to kind of clear house, or was it a matter of like just massive amounts of churn happening consistently?

It was clear house type really?

Okay. Okay.

Yeah, yeah.

Getting rid of kind of the old culture, you have to refresh everything. Yeah, got it.

As we grow, as we develop, we learn to look for a different talent. And up to beginning of last year, like my administrative assistant dispatcher, her personality just would clash with everyone in the office. She was doing such a good job, but the personality would just clash. At that point, our estimator quit because of that personality conflict. And then we had to part with her. So that all of a sudden that put a lot of strain on few guys that were here.

It's rare that a business that is this old and this large actually has to go through a cultural reset. Like it happens. Like we all know the stories of big companies that get bought out, for example, and like everyone just gets.

The deck gets cleared.

We went into overtime trying to see how we can fill that gap or that void that was left by those two positions and so trying to distribute the weight. And that was, that was tough. So they saw the financial strain of moving into this location. The administrative assistant went into panic and just became.

Really not compliant on a lot of things. So when you're already in that kind of situation, it's already hard. And some people can't handle hard.

And this is usually a result of a leader coming to the realization that they're way behind the times on systems, procedures, software, they're running a very unprofitable business. And that's what he woke up to and has already made a lot of these changes. But in order to make those changes, sometimes you do have to just clear the deck.

And the current team is now on basically all brand new.

And so, so, so we have five that are original.

And what was the main reason for having to do that? Was it just a matter of cultural misfits? Was it just kind of inefficiencies? What was like the main driver of that?

It was.

It'S kind of like, I have a couple of guys here.

Yeah.

You know, he's gone now.

Right.

But this guy and this guy, I can't get them to, to grow.

Okay.

You know, they're just, they're they're good, but not excellent.

Right.

You know, so. So in other words, if somebody comes along, that's better.

Right.

You know, we'll be swapping. In the process, we end up just parting with anyone who just wasn't growing, with the company who wasn't improving. They were good at certain things, but they just couldn't make it to that excellent, excellent stage. Because we are faith based and people are Important to us. We take that really hard.

Yeah. Like in the perfect world, you would have, you know, three or four new employees that are good, you train them up correctly and, and then push out the three or four bottom performers and you do that over the course of a year or two and everything would go smoothly. But usually that doesn't work because if I'm going to replace the software and I have half my team that doesn't want to do it, I'm going to have to let them all go. And so sometimes, like, you got to tear the band aid off. And for most small businesses, unless you have a ton of debt and loans.

You can go get to kind of float the boat.

In the meantime, you've got to do things quickly. And all fix doesn't have the money. Like, okay, over the next two years, we're going to continue losing money. We're going to continue being super inefficient, and then we'll slowly migrate into this more efficient business. We don't have the money for that.

Because, like, what I'm trying to prevent is like a spring like we had this year will kill us for two to three years, like in terms of the hole that it builds. And so if the Achilles heel that caused this past spring is finding great laborers that are super skilled, the question is, can we reduce the threshold of skill required for people to be profitable?

That's a tough one because we pretty much been weeding out our low skill, which isn't bad.

It just, it's more a matter of like, for example, if you only have one or two people that can do one service and one person leaves, you just bottleneck the entire organization if they're waiting on that one person for different.

Projects, for example, we're not in a way, because we're cross training everything.

Okay. So everyone is kind of cross.

Everyone is cross trained.

Got it. Okay.

We just have experts.

Got it. Okay.

Yeah.

But if the cost to train someone to be that jack of all trades is to your point, 50, 60, 70 grand, is there certain one or two services that take the majority of that time? Because that's a huge cost of onboarding somebody.

I think we already reduced it just, just by changing the way, the way we're approaching and having multiple people to train.

Got it. So kind of batching them and that's.

Kind of something, you know, last couple of quarters I've been talking about, we got to get this down to about 10, 10 grand. So we can, so we can onboard.

So what's the retention like? If you Train someone up. Do they usually. So at least this year, have they been sticking around the whole time or is there a pretty good fall off after a few weeks?

We had only two people quit in seven years. Okay, well, we noticed and parted with quite a few.

Right, right. I like how delicately you say we parted with them. That's a much better way of saying fire.

We parted ways.

We found that our paths did not.

Cross any longer.

By firing all the employees at exact same time. There's massive inefficiencies because you have people getting trained that don't really know what they're doing. Leads to callbacks, inefficient labor. And ultimately this is what caused a huge amount of debt being required, dumped on the business.

Is the current team here leaving at like just the leadership level?

No.

Kind of financially where the company's at?

Absolutely. Everything's open.

Okay.

Everything's wide open. That's one thing I won't hide.

And so, so right now like I looked at the balance sheet but from a, from like just like a top level view from a debt perspective, where are we at?

Probably about 400. Let's see. So. So this is the last quarter.

Okay.

The improvement has yeah.

Dramatically since the first two quarters.

And then we, we look at, you know, the, the first two quarters, that's, that's where it was, you know. Yeah, it was really the first quarter that really made a big old hole. Yeah.

And on that 400,000 on the debt side, what's the monthly. Just payment straight on that per month.

I think probably about three grand because yeah, it's not bad.

So most of these all 0% interest.

Well, so one of our landlord has been awesome.

Okay.

He's, he's let us default for a while, pretty much giving us an interest free loan.

So that was kind of like the personal loan side of things.

Well, no, he just, he just said, you know, just keep, keep trying, keep paying and then we'll catch up later. So there's about 30 grand on that. And then we ended up to be able to fund this whole, whole thing. We sold our rental properties, we took out a line of credit from under a house and yeah, so it's this, this year has. So I think we're probably running out of borrowable money. So we, we got to make this work. Right.

Oh, the positive, from the positive aspect, this past quarter has been far better than the first few.

Oh yeah.

Like the first few is really, really concerning your gross margin. 400,000. Most of that will be on five year terms then because like how are we only paying $3,000 a month?

Well, I missed the SBA.

Okay.

We have a 30, $30,000.

So you're leaving that one?

For now we're just making the minimum payments on that. Yeah. Just so we're pretty much just kind of defaulted to, to minimum right now.

Credit cards just.

Yeah, yeah. As far as monthly, I don't think it has been over five grand. Well, the weight is heavy. The weight is heavy. But one, one thing I've done is really make sure I have weekly communication with everyone I owe. And it's, it's been incredible how they've come around us. Most of the people you owe, most of the vendors, and as long as you're working, as long as they see you working your butt off, just constant communication that, you know, this is where we're at. Sorry, we can't quite fulfill our commitment. It just, it's just been cool to see. We had a store, you know, once we got behind on paying that off, they actually paused our account and paid that account off. The CEO of that store sent us a letter and a check back for all the interest, interest in late fees saying thank you for pushing through and making it happen. Yeah. So when, when we're communicating and, and making that minimum payment, just sending them a check with a thank you for, for your patience, you know, even if it's a $20 check.

My concern is actually like what happens in the winter when you don't have all the work?

That's my concern.

Yeah. And so what's been the strategy in the past? Has it been like, hey, we kind of just do as much as we can, whatever leads come in.

So as far as workload, we never really slowed down. It's efficiency that, that hurts because, because what we do is right about this time we start scheduling indoor work and we have lots of it. So, so right now, like this project where it's in the planning stages right now because we're waiting on permits, this is a six hundred thousand dollar remodel.

Right.

And so by December we're gonna be inside.

Okay.

You know, it's, it's addition, it's, we're redoing the roof and everything else. You know, one of the things that we've been trying to do for last few years as a, is a service contract. I'll show you what, what it looks like. It's a.4 quarterly visits. We got a quarterly meeting coming up and we're going to try implementing that and really putting the fall service in fall inspections.

This would Be sold basically as kind of like a year round. Checkups quarterly on your property. Here's everything we're hitting.

Got it. Yeah. So just really just preventative maintenance. Yeah, you know, mostly inspections and touch ups. And any of the repairs would be the upsell. Got it.

Even if we fix all those mistakes and then we fix the off season, the amount of debt that's currently on the business is going to take a few years just to pay it all off and really establish the business financially. But right now we have a cash crunch. We don't have a lot of money in the bank. So how do we solve that in the short term? Well, first off, we could see sell off all the supplies that we have as inventory inside of our warehouse. We could sell off some of the trucks that we aren't using because there's a bunch of them sitting around outside in the yard. Or we could look at the accounts receivable and see if we can't collect on some of the money that customers owe us.

There's no money in the bank. So like we die without money. So I think the short term Fix is probably gonna go after his receivables, which is $130,000 that people owe him. So I think like a relentless program over the next 14 days to get at least 60 grand from customers that owe him something. But that's like fix, you got to solve the profitability problem too. I think there's a lot of good positive things that where the company is going. Honestly, I really do. I'm mostly concerned in two things. One is the short term, like just some of the cash position. And then secondly is how do we prevent this past spring from ever happening?

That's, that's where I'm at with you.

Because it will sink a business for literally three years. What happened this spring will take us two to three years to financially recover.

Absolutely.

And so then it's a matter of like, how do we build the business in a way that that will never happen again. That's why you're here from a short term cash position. Because I know there's like a lot of stress in that area right now. What's the kind of strategy around receivables? Because there's, there's a good chunk there that we could get a little bit of breathing room on.

Well, and yeah, so 140. But realistically it's probably minus.

Minus 36 over 90 days.

Yeah.

You're not gonna get it. Basically.

No. So every, everything is here.

Got it.

We don't have a Whole lot of bad debt coming up.

Okay.

Okay. You know, we got one that we are going to write off which isn't all that big. You know, after the job was done, we did some work outside their house, caught fire. Her husband died in that fire. She sweet thing, she tried making payments and we go, yeah, that's enough. You know, so it just, just those kind of things. And then because like from a short.

Term perspective, even though a lot of it's not going to go bad, debt we're collecting in 60 to 90 days, a big chunk of it. And that, that will, that is like gonna really hurt mostly when you, you do have that winter lull because now the 36 a day will catch up to you.

Yeah.

And so like if you, if you're starting to change it now, like one thing we, we will do with projects is like look, when you do the walkthrough, you collect the final check and then dispatch isn't having to worry about the admin time required to collect on. It's like the lead is required to collect final check and final payment at the walkthrough.

So we did that with the sales guys right now. So the estimators to do that 10, 80, 10. So that the final 10 they come.

Back to the project.

Yeah.

Okay.

Yeah.

What percentage, what percentage of the project total do you think the estimator is actually going back? Because it pretty much, that's like standard operating procedure. Estimator goes back to the end of the job.

That's, that's been new.

Okay. Yeah, I really like that because the thing with handymans is that there's unending things they can do.

That's correct.

And so like that walkthrough process I think can become collections and then it becomes this thing.

Yes. And that's, that's, that's something that we've been working on this month.

With a handyman business. There is an endless amount of work that can be done on someone's property. And when you just solve their biggest pain point like the roof leak, there's probably five other things that also need done around their house. And so if I can solve the problem and then while I'm collecting the final payment, the estimator can give them a bid for the other five problems they also see that could be fixed. This would be a great option to be able to upsell the customer and improve the lifetime value that we get from them.

I really like this because like I would love to see some recurring revenue. And what's nice about all these projects like the install. Etc, like everyone wants a warranty on stuff and so your warranty becomes your maintenance package. Like we will warranty all our work. As long as you're on this maintenance package. We're coming every quarter.

Yeah.

And I would assume you probably have thousands of contacts in your database, all of which you've done projects for.

Yes.

And all those one time projects can be sold into.

We have about 70% retention.

Yeah.

From all the people that we've done projects for. They keep going, keep calling us back. We partially lost a few last fall, last winter, just because with us changing people.

Our customer care went down quite a bit.

So we have a similar thing, but it's for outdoor only and that's like basically winter services. And it's like, hey, we're going to do all these things. We're going to come up every two weeks, here's the price. And then what we've done is like a price comparison and it's like, hey, if we come to your property literally twice, it's going to cost more than we come every other week and do all of these things. I think to your database that has never seen this product, it's a way to upsell them, which is like, hey, look, we service you for five years. We appreciate your business. We've created a budget friendly way of making sure property always looks good. And we can do this because we're coming more frequently. And so it's a volume discount to you. And here's the price for your house and here's all the things that we're going to cover. And then I would just put a limit on your tip time there. So for example, if you're charging, you know, $215 every month, you know, okay, that's like about two hours a month that I can bill for. That's 24 hours in a year. And you can just simply say like if your quarterly visit is going to be more than six hours, then we'll do an estimate or something like that.

Or this, this includes up to six.

Hours worth of work.

And, and I'm, I'm guessing your first month we won't be as efficient.

Right.

But once we sell enough of them because we got filters, lights, batteries at that point seasonally. And, and I broke them up into seasonally. So, so we can stock material, Right. We can buy bulk and stock material for that season. You know, batteries, you know, smoke alarms, you know, filters and things like that. I'm thinking what's, what's the repetition in the services? I, I think will be a lot more efficient. But I also think the amount of upsell from those is going to be way more.

Yeah.

Because at that point we're inspecting, we're creating recommendations.

Right.

Of what things need to be replaced.

If we can take a one time job and sell them into a recurring service that we come back to their property every month or every quarter, that would be ideal. Well, I like the idea of monthly.

Pricing and then quarterly inspections and then, then it's a matter of like every single estimate goes to a project. Once completed. It's yes, we're collecting, collecting final payment, but we're also selling them this. And we already know the price going into it. Like this is like just a fantastic value proposition. Honestly, like the amount of stuff that you're checking, every single one of these maintenance is, is huge. You're checking your roof, you're checking gutters, you're cutting crawl spaces. Like it's a significant amount of value add.

Yeah.

And the monthly price to someone that just paid $30,000 for a remodel is not bad.

Yeah, that's kind of what I'm thinking.

Because it would really help during the, the slow season to have that base of. Even if it was like 50,000amonth, what is it, five? It's like two. If you got 200 customers on this and there's gonna be people like to Garrett's point, that will call in just for this service. And then to your point, it's like if you're not selling just $3,000 a year, you're gonna sell two big projects to them because they actually have a roof leak.

Yeah.

Currently almost 100% of all fix's revenue is coming from projects. And it's not that I'm against projects.

Or that one time jobs or a bad thing.

There's actually three different ways to make revenue in a home service business when it comes to the jobs that you do. The first is what all fix is.

Doing and that is one time projects, you serve the customer, one time, it's all done.

The second type of revenue is reoccurring revenue. This is where you're going to serve the customer again. But there's no frequency that's set. It's like once in a while they'll call you again. But the best type of revenue in.

My opinion is recurring revenue.

That's where I have them on a schedule, weekly or bi weekly or monthly or quarterly. To be able to know in the future and project exactly how much revenue.

I'm going to make.

This increases the valuation of my business and make sure I don't have massive.

Ebbs and flow in revenue throughout the year. And then my thought is, like, from a marketing perspective is we actually pitch this because we know this will bring in the leads for all the other services, but we get them. And even if we don't make a ton of money on this, if you're worried about the pricing, this is your lead gen because you just make them happy. They're satisfied with the service.

I've been excited to get this thing going. For some reason. I've been just. I have been waiting for somebody to look at it and to kind of give us a little guidance on, you know, especially like you, you've been in the repetition service. That's kind of why I had this.

Thing most of the time. We as business owners have so many things on our plate to do that in the name of efficiency and getting things done, we knock out all the small things. What if we just attack the largest problem that we kind of keep putting on the back burner that we know needs to happen, but if we just attacked it and spent six months ripping the band aid, doing like open heart surgery on the business, it would fix a lot of the other things.

It's crazy. If you had. If you have, you know, many contacts in your database you have.

So it's probably about 2,000.

Yeah.

Like, let's say out of 2,000, you probably have a thousand that have done work relatively recently and love 1500. Okay.

Yep. I just send out stuff.

If we can get a hundred of those to convert to this, that's. That's, that's 30, 40 grand a month. Yeah. If we can eventually get to the 50 or 60, I think you solve your winter issue.

Yeah.

And then you've solved your lead flow issue. Because if you're paying home advisor for anything.

Yeah.

We want that capped by the fact that we know we have 200 people that we. We just got to go to their inspections and we're going to get three other four or five other jobs.

Yeah. Yeah, I agree.

So. Okay. I like that a lot.

Yeah.

Winter issue is just gonna kill us. So in the name of efficiency, because we can get this one done in a week and this one done in three days, we knock all the small stuff. It's just like tackle this, which we usually know what it is, but it's daunting. It's. We're afraid of it. It usually means systemic change in entire business. And that's freaking.

I think it's a matter of like, executing on some of the things that you've kind of just gotten started. Like this is something I would go all in on from, from. So I have real estate and if someone, if my contractors would have come in when I do my remodels and I'm usually paying between 30 and $50,000 a door for them to come and remodel everything. If they give me a warranty like this, I would don every single property because if I'm, if I'm getting $3,000 a month in rent and for my apartments, I'm probably paying $165 a month just to make sure everything is like going to be looking good. That's a whole lot cheaper than me calling a plumber out once a year. Like my, like just the cost and that's only 3 or $400 for a middle of the night service call. Or like they don't change out the stinking vents for the heater and all of a sudden I'm changing out the heater.

Yeah.

And so like I think this is huge because you have 1500 people in your database that have loved you. If you can sell 100 of them, that's 30, 40 grand a month in recurring revenue. And then that, that 34,000 becomes twice as much because then you start upselling them. You get back into their properties.

Yeah.

You find a whole lot of problems and then give them the solutions.

Yeah.

Once these service contracts are set up, this allows all fix to be able to get and generate their own leads. Instead of paying for the leads from Angie's List, Facebook, Google and other third party sources. We control the lead flow and furthermore, we're getting these leads and these new jobs from customers we've already done service for in the past. They're in our database. These are warm leads, not coldly the.

Cost really they're preventing here is what would be a $300 quick roof patch. Preventing that from a $15,000 repair.

It might be worth going customer by customer.

That's what I'm thinking.

Yeah.

I think this is like an all out campaign to be like, okay, this is the goal. Like if we get a hundred, like I would probably either.

Do you mind if I get Tim over here?

Yeah, it's fine. Go ahead.

It's him. Can you come down here? All right, bye.

Do people ask for that sometimes just.

On the upfront, Tim, like when you're going to jobs that they're like, hey, can like do you warranty this or is there anything like they want you to come back and check it or anything like that.

So a lot of questions we get is, you know, you guys do inspections, crosses inspection, addict inspections, and then usually when they request that I do. Oh hey, we also have a service contract stating, you know, that we can take care of all your service needs, you know, such as inspecting battery swaps, just the full nine yards to make sure that your home is in some shape.

We're thinking about like the fact that we have like 1500, 2000 people in the contact database. Like how can we pitch them who are happy with our current service at a one time project and do the recurring revenue of this.

Right.

And then obviously like every quarter having the ability to upsell them when we, we find a roof leak, when we find this issue, it's like, hey, now we have other options. Like if we were to go after one by one for existing customers, which would be quite time intensive. But like is the return there could probably be determined if we did say a sample size of 30 or 40 customers. How, what's the pitch look like? There's two things that they save money on. One is you coming out on a service call, there's a cost already. And then secondly is them preventing a $15,000, you know, mistake or error in the house by simply having this program.

I, I, I actually just pitched one of these yesterday.

Okay, cool. To an existing customer or like brand new.

The brand new customer, but they've known about us for years.

Yeah.

And then they have their mother who lives in a trailer park. The house is kind of falling apart. After I did a full inspection, you know, exactly what they wanted to do. Then I go, well, with her being here and you know, you guys being across town, did you want to maybe you know, do a service contract as well? We provide that smoke alarm swaps. So then we break it down into four quadrants.

Right.

So what Mike is suggesting that, that we go one by one and actually pitch. Okay, so this, these are the services we have been doing for you. This is what it cost is what you spent. This right here annual would prevent some of this and things like that.

You can protect your downside too. Because what everyone always will not do this for is like, well what if there's a massive project that we got to like go fix these things? Like this is an inspection, right. We're tuning up, we're inspecting, we're making sure. And then the value prop to the customer is a little bit of savings because they're not going to have the service calls. But more importantly, you are preventing the massive repairs. And so I think it's a matter of like, even if you took your, your latest 50 projects that were completed and be like, hey, let's go try to pitch this and like refine the pitch.

Because then eventually the goal would be.

Every single time we do a walkthrough with a customer, it's like you're just going right into this. Exactly, Joe.

Yeah.

So like Christine, I think that would be the first pitch. We've been going over there and fixing stuff for last seven years. You know, she would probably be the first one that, you know. So it has to be refined to.

Her when I already mentioned, because pretty much every single one of our clients that are super happy, I always kind of segue into the service contracts. That's kind of a developing thing. So now since we got it refined, I can actually go back to 80% of them and get it to them properly.

And even if you kind of like as you like, refine the pitch, start branding it, right? So it's like we call this our certain package. We call this our certain package, they can upgrade to a different one. It's like, well, if you want the roof included, that's going to be this additional. But you brand it all around the all fixed part. So like your biggest. But your premium package would be called all fix. And then it's like half fix or like whatever you want to do. You just brand it as packages, right?

Because like, then, then like the all.

Fix is like, hey, this is our guaranteed. And then you put some sort of warranty around that. It's like, hey, if anything happens in the quarter after we inspect your roof, we cover it. And. But that, that extra all fixed stamp, you're going to get a premium price on that. You're basically selling insurance now, right? But insurance has great margins, right? Fixing like, you know what, we, our service in general doesn't have a great margin on it, but if we can sell it, the insurance, that's a whole different business model. And then it's just a matter of like, okay, out of 1500, could we get 100 people? That's a stretch. But like, there's definitely people that are.

Actually 100 people is very realistic. Really, a lot of people are very interested, especially when it comes to people that have their parents still living in the home.

And the snowbirds. Oh yeah, right.

They show up in the spring and that's the thing that keeps them up is what is our house going to look like when we come back.

So even if you took your current database and you segmented them so it's like, okay, these are the snowbirds. These are the people that are secondary home, et cetera, et cetera. And then you pitched it slightly differently to each. So, like, the snowbirds, like, hey, have the peace of mind that your property is looking good while you're away and you're not coming back to a property. Like, so I have like a little secondary, little tiny house. I hate going there after, like three or four weeks, I'm like, I know the pool is going to need maintenance. I'm just hoping I. When I walk in the door, there's not a broken window. Right. That's what they don't want to see when they come back from their vacation.

Right.

And so that's. You'd segment to them then the people that like, are needy. Like, you always have been going to their property anyways. It's like, hey, you can actually save money doing this. You know, when you get there, you're going to sell them one or two other big projects. But now it's on this recurring revenue. If you think you can get 100 people on this, that's 30, 40 grand a month. And a lot of that straight margin because you go to these properties, you know, you have budgeted three hours or four hours, and it took 30 minutes because everything checked out.

Yeah. After the first two visits, everything's pretty well checked out.

And the customer is paying for the peace of mind. They're literally paying for insurance. And then, then it starts to become just a matter of when you do work. Now, the warranty is our service plan, so we will guarantee 100% in perpetuity that this sink will never leak as long as this is signed. And so if someone asks, well, what happens if there's a problem? Everything's covered 100%. You just have to get on our service plan because, you know, in maybe six or seven years, yes, it'll need a replacement, but they've been paying you $300 a month and you can cover it.

Yeah, that's true.

And then, and then, then you start pitching the warranty like the aspect of a remodel. But, like, all of the plumbing, all the electrical, everything's warrantied. And I, as a homeowner, never have to worry about a short circuit, something blowing out. Like, any of that is nice. And then their point of active, highest point of activation is right after the job is done. And they're like, whoa, this is great. This is amazing. That's when you sell them this. Right.

Q4 collapse is essentially what every home service business struggles with when it comes to seasonality, there's 1/4 in the year, a period of 3 months where revenues drop, leads drop and we actually lose money throughout those months. If you're tired of saving up all of your profits for the entire year, but then them all getting completely wasted during your off season, come to Blue Collar Summit. Blue Collar Summit is a three day event with John Taffer from Bar Rescue, Myself and a host of other seven and eight figure entrepreneurs. But on the Friday of the event is an entire day a workshop with just myself. We're going to go over five different.

Options for you to be able to.

Solve Q4 collapse just like all fix. How do we fix this problem of having seasonality in your business? Go to blue collarsummit.com and book your tickets today.

If you've got a home services business, come to Seattle. We'll see you there. At the Blue Collar Summit.

I think it's definitely an opportunity. Going into our kind of our slower season is taking the 1500 people, really segmenting them and then starting like going pitching this differently to them. It's really how we found it is like we've got to be able to explain this in one sentence. Like this is like a packaging problem. If I'm trying to sell someone after the job, what do I say? We will warranty our work forever. As long as you're in one of our service plans. And here's the three options. It's our XYZ package, our Z package and our all fix package. Which one do you want? And forever. This is warrantied. Or maybe the all fix package is the one that we forever will fix. Anything that we have touched will be warrantied. If there's a nick on the wall and we painted the wall, we'll attach it up. That's the all fix package. Also what's nice with the warranty is if there are things that you have to actually do repairs on, you get to move those where you're slowest. It's not like it needs to be done right now.

Yeah.

So you can kind of move where the projects fit in.

Yeah.

When allfix does the warranty inspections, it doesn't mean that all of the problems they find have to be fixed right away. This allows them to do these quarterly inspections, but then schedule the projects to get completed during their off season.

Yeah, like I think it's just a matter of like we create three packages like basically good, better and best models for this and then we take that same, the same three packages and then just wrap them together slightly differently for our different customer segments. So the Airbnb people, the people who are snowbirds, the people have a second house, the people that are taking care of their family, right? Like, if I'm taking care of my family's house, like, I would be doing this in a heartbeat because, like, I know their AC breaks all the time. I know there's always a leak.

Like they're gonna call you in the middle of the night and I'm gonna.

Pay 500 bucks for someone to go.

There in the middle of night. Whereas if this, like, I don't have to think about it and then if there's mistake, if there's our problems, like you're just going to send me, hey, there's the estimate that we think this should be done. It probably has another 6 to 12 months in it. But if you want to take care of it now, we can get it done right.