Watch these 78 minutes to build a $1M business in 2026

So nine years ago, I was 18.

At the time, and I just finished my pre med degree, my undergrad. And then I'd gone to Africa for six weeks. And at that time, I'd now determined that I wasn't going to go in the medical field in the US And I was left out. What am I going to do now? And for the past seven, eight years of my life, all I had ever known was medicine. And I was the guy with all the muscle diagrams and the skeletons in my room and all the rest of it. And that was my life. And I dedicated every single minute to reading textbooks and doing flashcards and memorizing synapses and nerves and every single part of the body. And I got back and I didn't know what I was going to do. I had no idea what I was going to do. I just felt super lost because that was my identity. That's what everyone knew me for. I was the young kid that was going to become a doctor when he was really young. And so I remember very specifically where we live. We live on a place called North Golf Course Drive. I'm sorry, Castle Rock Drive. My bad. And I was upstairs in my room and I literally just remember sitting down at my computer and typing in Landscape Business course. And I was like, I had seen all the stuff on YouTube and I knew that that wouldn't make me successful and I didn't really want what anyone was showing. And it's crazy that nine years later we're in this room. It's almost exactly nine years because I got back from Africa in December, and so it's crazy what nine years can do. And so if there's any source of inspiration or you look at what we've done and it's like, hey, that's pretty cool. Just know 10 years putting your head down and grinding, like you can make something pretty cool and you can help a lot of people. And ultimately, several years later, after realizing that my business wasn't built correctly and wasn't built on systems, as most of you know, I got caught underneath the dump truck in the PTO and was put out of commission for a bit. And realizing that my business did not work without me, and that was really tough. And that's when, if you look at Landscape business course, I kept the old videos in there.

But the very first ones, if you look on my neck, you can still see the lacerations from getting caught underneath the pto. And that was a crazy part in life. Both those periods of time, right after getting back from Africa, realizing I Didn't really know what I was going to do. It was the first time in my life where I was like, I don't know what I'm going to do next. And then the next crazy period in time was realizing that what I had built and had left that medical career for wasn't worth a dime because it couldn't run without me. And so I hope that over the past four or five years, Snap.

Something would be said that would encourage you, hopefully inspire you. I told the team, all the hardworking people in the back that deserve all the credit for this call conference, that part of why we come here is sort of like why you go to an NFL event or you go to a concert. And that is some people just want to disconnect and see how it's how the game's really played. And it's not from a point of being cocky or being boastful or proud. That's definitely not my intention. But the reason why the quality of people that I wanted at this conference this year, it might seem unattainable. It might seem like these massive millions of dollars and all this stuff and it might seem like it's out of reach.

But whatever your capacity is for your life, that's what I want you to achieve. And that might be $100,000 a year business where you can provide for your family and you're only used to making minimum wage. And maybe it is a hundred million dollar business or a massive company or multiple locations.

But if you're in that period of life like I was, either A, you don't know what you're doing and you feel lost and you don't have any direction or B, you're in a place where you realize what you have built isn't worth anything and you're really starting to question whether or not you even want to do this. I hope this weekend helps. It's why we put this on. And yeah, statistically speaking, who here believes that we're in a recession or going into a recession? One of the two. Just raise your hand, either in one or going into raise them really high. I'd probably say it's 80, 90% of the room.

Based upon that, we would have to then assume that one third of the people in this room will not be in business in 24 months. And so those are the type of things I think about when I come into a conference like this. That's why we don't have sponsors, that's why we don't have equipment. That's not going to get you through this recession. It's not. And so I hope that Tommy, Corey, myself, even just this evening and the speakers coming up this weekend.

I don't take it lightly. You guys fly across the country and spend days and all the time and energy. It costs about $2,000 to get a person here, a ton of airfare and tickets and rental cars and hotels and food. And I do not take that lightly at all. And so I hope that every dollar you spent comes back to you in spades, in value. And I take it very seriously. The team knows I push extremely hard on them to make it worth your time and money. And I just want to say thank you for coming. Appreciate it.

All right, let's rock and roll. All right, numbers now we're good.

Perfect size business. That's what we're going to talk about. I know it was on Saturday. I think it was on Saturday in the. In one of the event schedules.

I switched it last minute.

I felt like we need to catch up on certain things.

And so for some of you, this.

Is going to be a review if.

You follow my content religiously.

But I need to catch everyone up.

On a few things before we jump into the rest of the conference. All right, I'm going to go pretty fast.

Because Tommy was so short, I literally.

Went in the back and added more slides. So the last six or seven of.

These slides were made about 15 minutes ago.

So it's going to be great.

All right, so we're going to talk about several different things. We're going to talk about debt, key performance indicators and capacity based growth. Again, if you know what those are, don't think this will be the same.

As everything else I've said. I'm adding a little bit to this. I want to bring this home for everyone.

All right, so everyone knows I'm typically.

Known as the guy who likes cash only.

Let's run actually the numbers and look.

At how this actually impacts your business. Cash Only option number one, let's assume.

That you're doing $70,000 of cash invested.

Is typically what we spend about to.

Start a new location. This could also be, though, what you would spend to start a new crew, start a new division, buy a truck and equipment to be able to get the business expanded, et cetera. But you're in this scenario, going to spend $70,000. $70,000 is what we're going to spend in cash. Because I invested $70,000, we're going to assume that that led to $300,000 in new revenue. We're going to Assume that we have a 20% profit margin in this business, net profit that I can take out of the business at the end of the day, 20% of 300, that's $60,000. If you take 60,000 or, sorry, $70,000 invested, divide that by, sorry, I did it wrong. You take $60,000. There you go, $60,000. And divide that by 70,000, your investment. You come up with a return on your investment of 88.7%. Now, let's look at the same example, but this time we're going to use some debt. So Instead of doing $70,000 worth of cash, we're going to take option two, where we take a $25,000 loan, sorry, cash, and then $45,000 loan of debt. Now, that same $70,000 investment is spent on the exact same thing, whether it be marketing trucks, whatever you need in order to be able to expand the business by 300,000. And therefore, regardless of whether you get cash or debt, the. The effect is still the same. We're going to buy the same stuff. $300,000 in annual revenue is added to this business if we assume a 20% profit margin, still $60,000 in profit. However, now we need to pay interest because of inflation and all this other stuff. Maybe we're going to pay 10% interest on this loan. That's $4,500. $4,500 is 10% of 45,000 net net. My profit on this debt is going to be $55,500. If I take $55,500 and I divide it by the actual cash invested, $25,000. So I take 55,500 divided by 25,000. My return now is more than double. It's 222% return on investment. And this is the thing that seduces many people into debt, because you can grow faster and you can do it in a manner that literally skips years of time. And if you're trying to grow quickly.

And I'm not to say which of these two you should do.

And I think a lot of times.

I get thrown into number one, mostly because I see people misusing option number two under the guise of.

Creating tax benefits, or B, because they simply want equipment and fancy trucks to boost their ego. And ultimately it leads to something that's very bad, because although this bottom part has a higher return on investment, if you go to zero in option number one, guess what? You lose $70,000 in option number two. If you go to zero and you fail, you've lost your $25,000. You have a $45,000 debt, and now you're paying $4,500 a year for absolutely nothing. All right, so. So there's risks involved, but you can absolutely use debt as a way to improve your return on investment. Most companies that grow and scale very large use debt. Just because someone is big and uses debt does not mean everyone should go into debt in order to grow quickly. Growth sucks cash. And at the same time, you're growing and expanding and presenting all sorts of new challenges to you. Your business style, your management skills, and. And at the same time, you're cash strapped because all the cash is going out the door. It can lead to financial suicide. And I think this is the case that's going to happen over the next 12 to 24 months. And if you actually believe we're in a recession, this will happen over the next year or two. The second option will happen. Those that have used debt in a manner to be able to buy the things that they cannot afford and live a lifestyle that their business and their personal life can, cannot maintain will go out of business.

That's what happens in a recession.

We're going to talk very deeply about tomorrow morning about the recession and go very deep on how the macroeconomics and the timing of all that works. I'm not too concerned about that today. I want to move along because I'm literally just trying to set some groundwork for what I need everyone to be brought up to speed for, for the.

Rest of the weekend.

So I'm going to move along. KPIs key performance indicators. All right, we're gonna talk about something that Tommy touched on for a little bit, and that's attrition, all right? That is how many customers you are losing every single day, week, year, etc. Now.

I know Ohio's pretty butt hurt recently about their football team, but.

When.

It comes to football, you typically have three parts of football. You have defense, you have offense, and you have special teams. When it comes to your business. The defense in your business is attrition, because ultimately going out the door every single day. The thing that we don't track so often of the times is how many customers you are losing.

Who here could tell me how many recurring mows you have? Raise your hand.

This is not a trick question.

How many people know approximately how many mowing customers you have? Fantastic.

I would guess and imagine that less than 10% of the people that raise their hand actually know how many customers they lost. Last year you said, oh, no, I went from 100 to 200, great. But actually you got 150 new customers and you lost 50. Your net might have been 100, but you lost 50 of your customers. That might be 20, 30, 40% of your business being lost every single year. And here's what's really scary about a recession. Attrition goes up at the exact same time that new customers filling that attrition stop coming in anyways. Attrition is your defense close ratio. How many jobs you close is your offense. Okay, so attrition is the clients that you lose per unit of time, day, week, year, however you want to break it down, divided by your total clients. In this industry, it's very common to have 20 to 30%. If you're in residential, it's a little bit less if you're in commercial simply because your contract size is larger. Ultimately though, your attrition is a number that we need to know in our businesses because that's how many customers you need just to keep the revenue the same as last year, how many clients you lost. Let's say, for example, you have 100 total mowing customers. If you lost 10 customers last month, you have a 10% monthly churn or attrition annualized. That means over 100% of of your customers are going to leave 10% every single month. That means that every single year you will have to get 100 customers just to stay at the same revenue that you are today. And yet most of us know our offense. If you go back to number four, and that is our close ratio or how many jobs we're getting in the door, that's the thing that we usually obsess about, because offense is sexy. Everyone knows who Tom Brady is. Everyone knows the wide receivers and the running backs because why they they're all on offense. What's not so sexy, what's not so cool is playing defense. And we've become obsessed in this industry with new customers growth numbers. And you will not hear me say a revenue number this weekend. Oh, we want it. Who cares if the things that I say need my numbers to back me up? Please walk out. They either work or they don't. Me bragging about the numbers that I have means nothing. But when it comes to close ratio, that's a number that we typically know more about. We know how much our top line revenue is. We know how many jobs we got last week. We know our revenue is anticipated for 2023. And the vast majority of us, if I asked you what your target projection for revenue is in 2023, you'd have a number in a matter of a couple seconds. But very few of us know our defense, and we all know the saying, defense wins championships. And let me tell you, your defense will be the thing that allows you to win during a recession. If we all believe that's where we're at, this is something we need to start to focus on. How many customers are leaving the back door every single day? Now, when we talk about our close ratio, all close ratio is essentially, how many estimates did you close or got accepted in any given period of time? Let's just call it months. Let's say you closed 30 and. And you had 50 estimates that were total. Given 30 estimates accepted, divided by the total number of estimates that were sent out is 50. That would be a 60% close ratio. Everyone following? Is everyone following?

All right, let's go. We got to stay on track here.

Now, what I want to talk about, though, when it comes to the key performance indicator of close ratio, which I believe we should all be tracking, like, every single week, you don't know the efficiency of your salesperson. If you've grown to the size that you have a salesperson in. If you do not track their close ratio, you don't know if you're a good salesperson or not. And be able to judge like Tommy did, in terms of whether or not you should be the salesperson or the ops person, if you don't know your close ratio. These key performance indicators are KPIs for a reason, and that's because you must know them. I do not care about the size of the tires on your truck or which brand of mower you have. It will not move the needle for your business. And in a recession, everyone that thinks it isn't as consumed their time is, it is going to be caught with their pants down.

When it comes to your close ratio, there's two things that ultimately affect it. If we look here at the bottom, how do you improve or adjust your close ratio up or down? And you do want your close ratio to go down sometimes, and we'll talk about that. But ultimately it's speed and price. These are the two main factors that go into affecting your close ratio. Now, how we can determine this and how you come to this conclusion is the fact that all humans at the top value time and money. Basically, most of us are here in part because we want to make more money. Another reason why we will pay for Uber or we'll use Airbnb, or we'll do a myriad of other things in our day and pay for those services is because we either believe or do save or make time.

Time and money is the thing that we sell to our customers. That's what you buy every single day from the products and services that you purchase. You're usually either chasing money or time. All humans, therefore, if we know that time and money is something that everybody values and is basically everything that everyone goals are oriented towards, we can assume that all our customers, because they value time, want things faster and because they value money and they want money, they want things to be cheaper and because in order to be faster, we need to improve speed and because we want things cheaper. Your price is going to be a dictating factor of what your your close ratio is. These are the variables that go into the KPI of close ratio. I need you to know this number. The last session of this entire weekend is going to be simply about one thing only. I'm going to spend an entire hour talking about one kapi and that is your close ratio is the determining factor of almost every single aspect of the business. When we talk about this, and most of you have seen me talk about this before, when we talk about the top here, we got clicks, referrals, leads. These are the new leads. These are the prospects coming in the top of your funnel. All good things start with the funnel. We got clicks from Google, from Facebook, from nextdoor. Whatever you're trying to drive, you might be doing every door, direct mail and driving phone calls, but ultimately you have new leads and people coming at the top of your funnel. Now on the right hand side, based upon these clicks, we can calculate a CPC our cost per click. This is usually very easy to determine because Google and Facebook love giving you this number. It's very easy for them to track how many people clicked on your ad and how much you spent. Very easy to determine cost per click. And you have people say, well, I spend a dollar per click, I spend 15 cents per click. I spend this on Facebook or Google or whatever it might be. Ultimately, you're simply paying for someone to click on an ad, regardless of whether it's on YouTube or any other online medium. You are trying to get them to click on something. You could also flip that around and use it for something like every door, direct mail. You're just gonna change the language slightly, but ultimately cost per click. You could also call this like a.

Cost for impression if you were doing.

Every door direct mail and flip it around. But all that to say if you're doing online marketing, you have a cost per click and let Me just say, by the way, everyone that thinks that they've got through their business without marketing.

Is gonna have a rude awakening in 2023, because their attrition is gonna go.

Up and they're gonna have no way.

To bring in new customers.

Conversion rate. So once we have clicks coming in the door, then we need to have a conversion rate. What percentage of those clicks are gonna be converted into leads? This means how many people that come to your website are actually gonna fill out your estimate request form? How many people are actually gonna click on the phone number and give you a call? How many people are gonna send you an email? How people? Many. Ultimately, how many people that click are going to actually become a lead and submit their information to you? This is typically mostly having to do with web design, search engine optimization. But again, SEO doesn't have a lot to do with the fact that they're already clicked, they're already on your site. So typically, design is going to be the thing that affects your conversion ratio the fastest or the most. How fast your website loads, where the placement of your estimate request form is, et cetera. Based upon our cost per click, let's just call it a dollar and let's just say that our conversion rate is 1 out of 50 or 2%. Which means that out of every 50 clicks that I get, I'm going to get one lead. If I have to pay $1 as a cost per click CPC and I have a 1 out of 50 or 2% conversion ratio, my cost per lead is going to be $50. Cost per lead, $50. Now, a lead is not moneying the bank and any marketing agency that brags to you about their lead acquisition cost, they are not at the bottom of the funnel. And it does not matter. All leads are not created equal. A lead from one avenue is not the same as from another. Talk more about that tomorrow. But cost per lead now is at $50 accepted estimates divided by total estimates. That's your close ratio. Let's assume for now that that number is 50%. So 50% of the leads that ask for service, you're going to close. You're going to get them to accept and become a customer. So if we have a $50 cost per lead and 50% of those leads become customers, what is our customer acquisition cost? $100.

That means that if I put $100 into my business, I'm going to get $100 out. Here's another really interesting fact. If you lose a customer, you just lost $100. And he's like, well, Customer service, you know, I'm just trying to grow it. We've got all these complaints. Customer service issues are costing you a lot more than your marketing spend. The reason we like marketing spend is it's something you can keep tapping into and spending more. Whereas attrition takes some deep work on customer service and changing your systems. And for the people that can't have good customer service and also cannot market that equation, when attrition goes up and they cannot get the leads it in for the cost of acquisition, that is acceptable. They will fail in 2023.

All right, so at the bottom of this funnel, this is where most people stop, and that is new customers. That's number one. That's our offense. That's what everyone loves to talk about. That's what most people know. That's the things we understand. That's the thing that's sexy. That is the quarterback. That is the running back. That's the front of the magazine. That's what every single company in this industry is trying to sell you. On offense.

You'Ll make more money, you'll be more efficient, you'll save 50%. You'll be able to do twice as many jobs if you buy this piece of equipment. If you buy this, if you buy this. They're always talking about this. You know why? Because it's hot as hell, it's sexy, and everyone likes to talk about it. I want to talk about the bottom part, because this is what we all need to know. Going into recession, when we start to lose customers, and that's when you get a new customer that leads, that became a customer drops out of that funnel and goes into this bucket. And in that bucket, this is where you actually make money. By the way, a new client doesn't give you anything. They don't give you a single dollar. This is your customer base. These are the recurring customers. These are the projects that you consistently are able to upsell a project to a property cleanup, a mulch install, a leaf cleanup. These are the people inside the bucket of your business. And the holes at the bottom is where there are customers leaving every single day. These are the ones that quietly quit on you. These are the ones that just say, hey, we're going to go ahead and just do it our own. And really, they're hiring the guy next door. These are the guys that get laid off from their job. They used to be making $100,000 a year. They get laid off from their job, and now they need to cut back out some expenses and they're going to Try to cut out that $200 per month mowing bill by doing it themselves. This is the guy that you miss your edging on two or three times in a row and finally he's just fed up with it and he cancels. This is the person that tries to contact you asking for an upsell and asking for a property cleanup and you don't get back to you for five days. And so he just does it himself. And so next spring he just decides he won't use your service, he'll use somebody else. And these are the silent killer of almost every single service based business and why most service based businesses will plateau if they're trying to grow and they don't understand why. And they're constantly trying to feed money and marketing and more customers and more equipment and more trucks. And they've bought into the lie that getting more customers somehow makes you more money when you, when getting new customers makes you not a single penny. Keeping the customers that you have and keeping them for a long time over and over and over again and delivering on the promises that you made to them when they came out of the bottom of this funnel, that's what makes a real business.

That's number two. That's your defense. And a lot of people will even stop there. But there's a third part and a third component to every great football team, every great organization. And that is the fact, yes, you have your offense, your close ratio, yes, you have your defense and you need to guard attrition and you make sure that people answer the phone and do the estimates fast and all the other things that we just mentioned. But the thing that many of us also forget about, again, we just neglect this because it's not sexy and no one wants to talk about it. But the people that nail this are the ones that grow great businesses, not big businesses, great businesses. I recommend a book called Small Giants. And ask yourself if you really need to build a $100 million business to.

Be called great as an entrepreneur.

Number three is you have a special team. You have your offense, you have your defense, and then you have your special teams unit. What does the special teams unit do? They come on the field when the team has made a mistake.

They come on the field when they didn't convert on fourth down or third down, I should say. They come on the field when typically they're pinned up against their own end zone and they have to flip the field. And a good special teams unit can save and heal a lot of wounds created by a bad offense and even A bad defense because if that special team can be backed up on their own two or three yard line but kick a great punt and now you're down at the 10 yard line of the opposing side of the field, that can really flip the momentum of the entire game. But somehow we don't realize that special teams is important. You don't get to see the kickers and and the punters in the NFL on the front of magazines. Nobody knows their name and they're usually geeks and they wear glasses and they're a joke. They're the laughing stock. Are they even an athlete? And ultimately in your business, the re engagement program is what that is. How do you take someone who left your business? They've been the person that fell out of the bottom of the bucket. They are part of your attrition, they are part of your churn. How do you convert them back into becoming a paying customer again?

And some of you have never even thought about this. We talk about marketing and we'll talk about it this weekend and we'll get excited. We're gonna do this marketing. Let's go drop the marketing keynote this entire weekend. I'm not talking about marketing. I know usually I give my top five and where things are at. It does not. It's not going to be the differentiating factor in 2023. It's gonna be the people that figure out attrition, your defense and the special teams of reengaging the customers that drop out. What do you say when someone says they don't have the money to be able to continue service? What's your re engagement program? Oh, it's fork down. Well, let's give you the ball and there's the end zone. That's what a lot of small business owners are going to do in 2023. Just going to give up.

They're just going to throw in the towel because they're backed up and they feel like there's so much pressure and.

It'S like why would I even try to re engage? Why would I try to do an email campaign? Why would I call that customer when they just blasted my crew in the face? Because they haven't blown off the back porch five times in a row. It's a re engagement program on a monthly basis. You'd be contacting every single person in your database. I don't care if they cursed it. You said a negative thing. Put a negative review on to Yelp or Google or whatever it is. You've got to get them to flip the field back to Being a paying customer, because maybe you were the first service they tried and they thought you were horrible and ugly and all the rest of it, and they wrote a bad review. But then they go try three other services that don't show up. And you know, it's not so bad. At least they showed up and they did a good job and they answered my phone calls. I. I can deal with the fact that one blade of grass was on my front porch and you wrote them off.

Attrition, like we already talked about. Clients lost, time to close. This is another KPI, another key performance indicator that I think we should all know on the back of our hand. The same way that close ratio is important. Time to close is extremely important. This is the average number of days that an estimate goes from cent status to either won or lost. I don't care if it's won. I don't care if the job is accepted. I just want an answer from the client. Your clients, if they ask for an estimate, they owe you an answer. It might be no. They might think you're the most ugly, most. You know, you want to make all this money, you're ripping me off and all the rest of it, but you need an answer and it is horrible. I scrolled through dozens of CRMs every single day and see this consistently. First thing I do when someone's complaining about stagnating growth or about attrition is I go to this number. I go to the estimates page, I select how many estimates were sent and I see how many of them over the past few weeks are still their status is sent. They haven't been won or lost. It is staggering. I would imagine 50 to 60% of your estimates never get a response.

They don't say no. They don't say you're too expensive. They don't give you a reason. They just don't accept. And you're somehow okay with that. The fact that you took 15 minutes of your office to take all the notes and put them through some screening process about what projects you can and cannot do. You check the service area, you make sure they're in your area, you scheduled the estimate for them at a certain time. You slotted out a window of time in the middle of your day when you could be making 80 or $100 an hour on a job, and you drove 30 minutes to go visit with them, and you spent an hour with Mr. Jones and then you drove another 30 minutes back. That's two hours that you just spent on that. Now you spend another hour putting together the estimate, and then you send it over to your estimate. The person that sends it out, your office person, they spend 15 minutes putting together the numbers, putting in really nice detail, putting on pictures and videos, and you send it. And now all of a sudden, if you multiply the hours you've spent on this estimate, it's likely four to five budgeted hours, that if you multiply it by the opportunity cost of, let's just call it $80 per hour, you're literally paying 3 to $400 to get this estimate to a customer. And somehow we're okay with them not telling us yes or no.

But that requires a hard conversation because you're going to have to call Mr. Jones and say, Mr. Jones, I came and met with you a couple days back. I sent the estimate over. I left you a message yesterday. And now I'm just wondering, would you like to accept the proposal? And if it's no, that's fine. I'd just like to know why. But if it's yes, I can get you on next Thursday. We can get the project started.

Well, you know what? It's just too expensive. All right? You need to have an answer for that. You need to be convinced so much of the fact that if Mr. Jones accepts anyone else besides your proposal that you're letting Mr. Jones down. And if you care about Mr. Jones and you actually believe that, that you are the best option for Mr. Jones, it is your duty to ensure that every objection is cleared for the path towards an accepted proposal. And yet somehow half of our estimates don't get any sort of answer. I don't care if you have to go to their house, print off the estimate and demand an answer. I don't care if you have to harass them, but get an answer on these. When an estimate is sent, it is not done. You made no money. It likely costed you hundreds of dollars.

There are ways to improve this.

For example, with mowing, where you do quotes over the phone, there are ways.

To reduce this by making sure you do screening projects and you're ensuring you're not going to a project, that you actually don't do those services and wasting that time. But ultimately, this is the number one deciding factor of whether or not you, your customer acquisition cost is going to be at a place where when recession happens and your attrition will go up this year, who is able to spend effectively to retain and get new customers into their funnel? That's who will win this game. Labor efficiency, another KPI key performance indicator. Every single project needs to Be tracked if you do not have a CRM, I'm begging you, flip a coin and choose one. Anyone, just please start tracking this stuff. I talked yesterday to a landscaper. I was pulling up at the bank, saw this landscaper guy. I hadn't talked to him for probably five years because I've just been out of the field locally. I saw him parked there. I rolled up on him and because now I'm out of daily operations, most of them will talk to me because they don't feel as threatened. So it's great. So I roll up to him, said hi, how you doing? And he does hardscaping. We sub stuff to him all the time, just subcontract the projects we don't do locally. And so obviously he likes us because.

We give him the work and stuff like that.

But I asked him like, do you use a CRM? Do you have any software and anything? He's like, no, man. I usually just tell my wife on text and then she'll put together the invoices and we'll do paper and we'll send it out. You can't track this on paper efficiently. And if you're one person, like, oh, it's so much work, you will never get more than one person because you'll never be able to keep track of these KPIs effectively or efficiently or know them very quickly. But this is another KPI. Key performance indicator. Budget hours. How many estimate hours do I believe the job is going to take? Typically for projects, this is extremely important. Mowing, you can get away with this sometimes, but for projects you've got to know this. For recurring jobs, it's important that over the course of a period of time you understand this number because this is the number that's going to determine where you raise prices. How should I raise prices? Who should I raise prices on? How much should I raise it? This number will tell you if on average 20% of your jobs have a higher clocked hours than the budgeted hours because they're taking longer than expected over the course of a year. That's the 20% of customers you should raise your prices on for projects. This is something you've got to know. How are you paying your people when they're taking forever, but because they work hard when you're in front of them, somehow you believe they're your best guys. It is a laughingstock when I roll up on cruise because now I don't have a Augusta vehicle, a little red Civic, I can roll up on crews and watch them all day.

Long.

And I'm able to watch crews that literally will work for about 10 minutes while the crew manager or the estimator comes and shows them the job in the morning. And I watch, watch them go back into that truck and take a nap for an hour and an hour and a half.

So why in the world will you not track this to determine that maybe Something's off that Mr. Jones job, that should take 30 budgeted hours. Somehow, boss, it took 80. The back was aching, it was wet, the tires popped, the wind was blowing from the northeast. What other excuses have we got? This is the number that's going to tell you how efficient your labor is. And ultimately the only thing we sell in this industry is time.

Say, oh no, we sell mulch and lawns.

No, no, no, no. We either are saving people time or saving them money. That's what they're buying. So you're either going to be cheaper than everyone else or you're going to save them the most time. Oh, you know how you can save people time? Making sure you answer the phone and you communicate effectively and you have automations and you can charge their credit card. These are all really basic stuff if you've been doing it for a long time. But I'm astonished. And how many people can't track that when this is. The only thing we sell is time. Labor. Your job, as in any home improvement business, any service business, is how do I take a unit of something time an hour and I spend $20 to get that hour? Say, oh, we're going to flip things on ebay. Here's a flip for you. Take that $20 worth of labor and time and create a system by which over the course of time you've made sure that you turn that $20 into 80 or 100 or whatever your hourly rate to the customer is. That's the best arbitrage most of the people in this room will ever have.

But we've got to know what our budget hours are very quickly. If your budget hours and your clocked hours are not being managed, you can be running extremely inefficient operation and scale massively. Because your marketing is on point. That is your offense is on point and your defense can't stop anything because you stink at customer service. You can't flip the field because once you get a customer that swears at you, you write them off, you swear back at them and you pound them and you, oh, you go do this seriously. Where's the re engagement program? Where's the thought that I'll get Them in three months, they'll come back. I'll keep working on them on the email. I'll call them next month to see how they're doing. Where is it in this industry? Because that's who's going to win when customer acquisition cost goes up and attrition also goes up. The only people that will win is when the top of that funnel is now no longer making any sense to any of us in this room. And you can't buy customers for anything. You have to rely on a good defense and a great special special teams field.

Project completion percentage if you're doing projects. This is again, pretty basic stuff, but you've got to know how many hours have been clocked on the job, on the project, divided by what's the budget hours on the project. How long should this job take? Well, if there's 50 budget hours, it's already clocked at 60. We're over budget. Where are the red signals going? Hey, we're over here. Let's talk to the crew manager. What happened? What went wrong? Let's have a recon. Why did this go 20% over budget? Either you as the estimator, if you're doing sales, is incorrect and needs to be corrected and modified, or B, you have a problem with that crew. But if you don't track this, you're going to judge their efficiency based upon how they feel at the end of the day, the jokes they tell you and what they do on the weekend with you. And that's what you'll incentivize too.

All right, let's talk about capacity based growth. Is this helping anybody? That did not sound very convincing. Is this helping anybody.

Spend too much energy for not enough response?

Come on, people.

All right. Capacity based growth. So this is extremely important. If you can figure this out and this makes sense to you, by the end of this weekend, I guarantee you this will change your business.

And I'm not charging you for it or anything. So, like, there's no perverse incentive.

Just do it. It's great.

Okay.

Capacity based growth is the key way to, as the title of the keynote says, determine exactly how big your business should be to maximize profit.

Let's go ahead and do some math. Everyone ready? I know it's late. You guys are all in Eastern standard time. You got a little yawn. Let's go. Stretch it out. Let's go. We're going to get into some math. All right? Capacity based growth. Follow me. And if you lose, just try to hop back in.

Okay? Get the concept.

All right. We have one person out in the field, one man, 35 budget hours per week. Like oh no, we work 40 or 50 or 65. Okay, fantastic. Let's assume that you're a regular human being that is going to get 35 budget hours done in a 40 hour week. That is extremely high, by the way. I would rather you budget for 30. So if these numbers seem a little bit high to you and you're going to do these yourself, I would recommend using 30 budget hours. That's a 75% efficiency rate. 30 divided by 40. Remember back labor efficiency, you got your budget hours divided by your clocked hours. 75%.

That is assuming 25% of wasted drive time, load time, unload time and whatever else they waste time on throughout the day. All right, so if we have 35 budget hours per week, which again is very, very good, and we multiply that by 4, we can assume about 140 budget hours worth of labor being completed on a monthly basis.

Now you can punch your numbers in.

Here, 140, multiply that by 80. That's $11,200 worth of labor revenue per month per person. So if I have one person out in the field working full time, again, very efficient. $35 or 35 budget hours, and I'm charging a good rate, 80, $80 per hour. But if I do that, that means I should be able to, based upon the labor capacity, I should be able to do up to $11,000 worth of labor revenue. Like, well, we do $40,000. You're probably in projects or chemicals.

All right, take it easy, buddy.

But if you're doing mowing and you're doing 80 and we're not taking into account chemicals or we're not taking into account product costs or estimate fees or dump fees, labor revenue, that's what we're tracking here.

All right.

Yeah, like what Liz said at the beginning.

I didn't tell her to say that.

But the whole ego thing, we gotta kick the thing out the door. People like, come on this weekend, if anyone's like, oh, I'm so like this, just seriously, please, you have my full permission to sock them in the mouth.

It'd be great. That should not be on camera.

Alright, so $11,200 is what we can expect in terms of capacity for having one person. Which means if I have two people, people assuming an efficient system, obviously there's waste. As you start to add more people, you're going to have more meetings, you're going to have less efficient use of labor. But just follow me for an example, $22,000 is going to be my labor capacity. That means I should be able to do about $22,000 per month in labor revenue before I would need another employee or I go beyond capacity, which typically means you're not working 40 hours a week. Now you, you're working 45, you're working 50, you're working overtime. And we'll get into why that might not be a good idea in just a second. Three man, four man, et cetera. We're just doing the math based upon 35 budget hours, an hourly rate of 80, et cetera. So that is labor capacity. Freeze frame that in your mind, there's labor capacity. Now let's talk about asset based capacity. Because if we're going to assume that the maximum number of people that you want to have in one truck is going to be. And you can change the math on this, I'm just doing this as an example. But if we assume that it's going to be two people in each truck, that's your max that you will put in a truck, which if you're doing residential mowing, is typically a good idea. If you're doing commercial, you can usually get 3, 4 more if you're doing 16, 18 budget hours on one stop. But anyways, if we're going to assume a two man crew is the max that you would allow on a route, we can then assume that because we have one truck, that would assume two employees. Therefore we know our capacity based upon assets that we have. The trucks that we have, that we can do $22,400 in labor revenue if we have two trucks.

It's just math, right?

So two, two trucks.

You can see the math.

If you have six, we should expect that if we have three trucks, six employees, that the absolute capacity. Keep this all in mind, absolute capacity is going to be $67,000. 10, 200 in this case. Cool. Now freeze frame that for a second. Right? So we got labor based capacity based on how many employees we have. And then we have truck capacity or asset based capacity based upon the trucks that we have. Freeze frame that, because we're going to add a third one in a second. But I need to explain this.

All right.

I'm going to step over here.

Sorry, guys.

All right, so we got revenue over here. As we increase in revenue, whether you're doing $20,000 a month in revenue or $60,000 a month in revenue, there's going to be certain fixed expenses. Basically, fixed expenses are things that do not change the cost that you Pay for rent, for insurance, whatever it might be that do not change based upon your production or the amount of revenue. Just call it revenue because we're selling time. So that's ultimately production. As your revenue goes up, if that fixed expense stays the same, that's a fixed expense. If it stays the same, things like your insurance, your rent, it's not like your landlord's like, oh, you made less money in winter, we'll dock the rent. Not happening. That's a fixed expense. Does not change month to month based upon the revenue. Everyone clear on that? Very cool. So that means regardless of how much revenue I do on that bold line, this fixed expense is basically the same. Typically, fixed expenses over the course of a revenue on a chart like this will do step ups because you'll have to upgrade your insurance or upgrade your shop space. It's usually steps, but over the course of any smaller unit of time, your fixed expenses do not change. If next month you doubled in revenue, your insurance wouldn't change immediately. It'd change on your next renewal and it'd step up. Does that make sense? Fantastic. We got fixed expenses. We're looking right here though at this is not time. This is not time on the bottom. This is revenue. So as I increase increase in revenue, my fixed expenses stay the same and my variable expenses do go up in time. Why? Because the biggest variable expense that we have is labor. And if you do project based work, you're going to have materials in there too. But it makes a lot of sense that it's a variable expense because it varies based upon how much revenue you do. So if you double in your revenue next month, it's very likely that your variable expense of labor and materials is also going to approximately double. Make sense? Fantastic. It's a variable expense. It varies based upon the revenue you produce. And you cannot just double your revenue without moving variable expense up. Typically, wages and product cost are the largest factors when it comes to your variable expense. This is also called cogs, cost of goods sold, direct labor for us in the service industry. Pop it in there. All right, so what this means is as I grow my business, I am eventually going to hit something called a break even point, which means I cover my fixed expenses, but I also have to cover these variable expenses that I have in my business. I have labor and I have other costs like fuel. A variable expense, the more I drive typically correlates with how much revenue I make. So as I make more revenue, I expect to pay more in fuel. Is this okay? Is everyone following?

All right.

Fantastic. So this is your break even point. This is where you hit a certain dollar amount and you start to make profit. Anything below that on a monthly basis, you are losing money. So anywhere on this chart where I'd be making this amount in revenue, you can put whatever numbers you want. You'd be losing money because you're below break even. You might cover your rent, you might cover the fixed expenses, you might cover your insurance, but if you can't cover your wages, you eventually go broke because you're, you're losing money. As soon as that line crosses this one though, I start making profit. Here's what's really cool.

So let's go ahead and use this example. I'm just going to use this example. You can throw your numbers in here. I'd recommend taking pictures of these slides. Revenue. Let's just assume that we're doing $42,000 per month in revenue.

We have a fixed expenses of $35,000 that we must cover in order to be able to just cover costs. This is the revenue to cover our fixed expenses. Now over here we have our capacity of three trucks, which is $67,000. Okay. Our revenue here, 42,035 is our cost to break even on our fixed expenses. Here we go. So our break even, we're going to assume is $35,000. Just assume that. Let's just peel some stuff away. If you made $35,000 a month in this business, you'd break even, right? No profit lead. Breakeven. Everyone following, let's just make 42,000. That's the revenue for this month.

The most profitable revenue in your business is this part from break even forward. The part between where you're currently at the 42,000, that's your revenue. And what your capacity is, is lost opportunity. Because this is where all of the profits in your business are. And people are like, oh man, I just can't make any profit. I'm running a 3, 4, 5% margin business and I ask them how many trucks they have and I find out that their capacity is literally double or triple what their revenue is. This is where all of your profits are sitting. Every single person in this room. If they could just calculate their capacity, what their revenue is, what their break even is, and realize that anything on the right hand side of that break even is way more profitable on the left. Because guess what, Your profit margin up to break even is 0%. Because guess what? If you make 35,000 revenue, your cost of 35,000 all in break even 35,000.