Why 80% of Home Improvement Businesses FAIL in 5 Years

Hey everyone, it's Mike Gandies. And today I'm talking about something that really ticks me off. It makes me mad because so many homes from business owners go out of business because of the things I'm talking about today. And ultimately, a lot of the reason why home improvement businesses fail is because the seasonality of our work. We have these massive spikes of revenue, massive spikes of incoming leads, followed by months where we can't get any customers, there's not enough work. Revenue is a fraction of what it is during the busy season. And it's extremely hard to make any sort of cash flow make sense because we use extreme swings of demand. And today I want to talk about being able to actually turn your business into consistent revenue throughout the whole year and trying to avoid these boom and bust cycles, these feast and famine that really causes so many business owners to go out of business in the home services. And I truly believe that it takes a good solid three to five years to really understand your local demand curve. And I actually believe the reason that so many businesses fail in their first three to five years is not because the industry's hard, not because the work itself is difficult or anything like that. It is because understanding the demand curve in your market to know when spring rush is and when you should be marketing and when you should be hiring based upon when demand comes pouring in, I. E. The spring rush versus the off season. In my opinion, that's why so many people will close up shop. It's exhausting. It's exhausting to go into a spring rush thinking that you're well staffed, thinking that you're able to handle everything, and by, you know, four to six weeks later, you are overworked, your team is leaving you, leaving you abandoned, and you are left to basically cancel jobs, take, disappoint customers, and work seven days a week. That's why, in my opinion, so many home improvement businesses fail. So what can we do to fix this? First and foremost, you can get data and you can talk to other competitors and people in your industry that are in your market to be able to understand what that demand curve looks like. And when I talk about the demand curve, I simply mean when does it get busy and when does it stop getting busy? When is the off season and when is it go time? And then being able to forecast ahead of time, when you should be hiring, when you should be marketing. And those are the things that are so important to be able to capitalize on the spring rush, capitalize on when it's really busy. And then furthermore, you'll extend recurring revenue into the off season to be able to help with cash flow. And so the number one thing you can do is get data, talk to other people. And instead of it taking three to five years to figure out what that demand curve looks like, you might be able to do it in one or two seasons if you just talk to the right people. This is why I'm such a big proponent of courses and conferences and getting inside masterminds and talking with your competition. This boggles my brain that people can't just talk to each other in their market to be able to understand more about our industry. And so here's how I tackled the spring rush and what took me five plus years to figure out. And that is something I want to share with you today on the whiteboard. So in my opinion, when it comes to making sure that we're able to take advantage of the spring rush, but also make sure that we have recurring revenue throughout this winter season is I want to focus on selling recurring.

And time sensitive jobs during spring rush. Recurring and time sensitive. All right. What this means is I'm going to use my industry, Lawn care landscaping. Sensitive.

I'm gonna use lawn care landscaping. Just an example. You can really use this for any industry. And that is during the spring rush, you're gonna have a ton of work come pouring in from projects. One time jobs, recurring work. And it's just gonna, it's gonna go from zero to 60 very quickly. And it's not linear for most of us in terms of seasonality during the spring, you might literally get 10 to 15 times more estimates than you do in the off season. And it's not really a great business model to have 10 to 10 to 15 times as many revenue coming during one part of the year and then another part of the year having hardly anything. It's a bad business model. So how do we fix this? Well, what I try to do is during the spring rush, which in my market is March, April and May and June, four months out of here, March, April, May and June, I make sure that I sell recurring and time sensitive jobs. What that means is I'm going to get other leads that come pouring in throughout the spring rush. However, if they are not recurring, in other words, they are one time jobs.

Or.

They are time insensitive.

I am going to book them out into the off season. Send. I'm misspelling things. Great. Sensitive.

I'm going to book them off into the, into the offseason. I'm going to only focus on recurring and Time sensitive. Now in mowing, that's going to be the most important thing during spring rush because recurring I can get this customer every single week for the majority of the year and then I can sell them winter services throughout the off season. Time sensitive. I cannot have mowing services be pushed off five, six, seven weeks into the future. I just can't. It's time sensitive. I did that. The lawn would be literally 2ft tall by the time I got back to it. It would look bad, the customer would be unhappy. I would not be able to sell the job. However, for a paver patio or a walkway or a flagstone patio, these are the type of things that are one time and they're time insensitive. They can wait until June, July or August. I can usually push those out and I can usually sell the customers that because all my competitions also getting booked way out into the summer as well. And so as I get into the summer, guess what? I'm selling into the winter. And so I'm trying to ask myself, when you get the deluge of leads coming in, which ones are the jobs that bring in recurring revenue that I want to focus on because that helps me cash flow throughout the off season and then which ones are time sensitive? In other words, if I can't get them in within the next week, I'm going to lose them as a customer. So for me in lawn care landscaping, that's mowing. But if someone comes along with a massive project, I'm going to try to sell them. If it's like, oh, it's April, it's in the middle of spring rush, I should be focusing on recurring and time sensitive jobs. A paver patio is a one time and it's time sensitive. I can book that out three to four months into the future and be like, oh no, that won't work in my market. Well, I would, I would venture to believe that during the spring rush, all of your other competitions also booking their schedule way out as well, especially the ones that have been around for a while and understand their demand curve. And that's typically why I see so many home service businesses go out of business, is they try to take on all the recurring, all the time sensitive jobs, all the one time jobs, all the time insensitive jobs during the spring rush when all the leads are coming in and ultimately, ultimately you are not serving people on a first come, first serve basis. This is something that comes intrinsically to us as humans. Like, well, if they ask for the estimate first, they should get service first. I don't believe it serves your business well to do a first come, first serve basis. Again, if it's recurring and if it is a time sensitive job, I'll book you right away during the rush. Otherwise I'm going to be pushing you off into the off season. Now, to visualize this a little bit, I want to look at this. We look at the year and this is January, this is June, July, and this is December. So this is the, you know, the months of the year.

If we look at this, we've got to figure out what our demand curve looks like. I just told you that. I know in my market, spring rush looks something like this. It goes March, April, May, June, then it kind of dies off during the summer a little bit, then kind of comes back for the fall and then dies off again during the off season. That's kind of what my demand curve looks like. Now the question is, when am I going to hire people? When am I going to start marketing again? The best time to be able to spend my marketing is going to be during the spring rush. Why? Because that's when demand is high. And when demand is high, I can get more customers for the same amount of money that I spend on advertising. My customer acquisition cost is lowest at that point. So ideally I'm able to market in this phase. All right, that's going to be the time that I wanted to spend the majority, if not all of my marketing dollars. However, as you begin to figure out what the spring rush looks like, if you did that and you actually spent all your money on marketing during the spring rush, but you serviced all customers on a first come, first serve basis, what would end up happening is you'd end up having very little revenue in the off season simply because you did not book out one time jobs into the slower time of the year. And instead you have this massive boom of jobs during the spring rush. And that's what leads people to want to give up. It's absolutely demoralizing to go from one month making 100,000amonth in revenue and just a few months later you can't get any work on the schedule. And it's literally 10, $15,000 a month and you're not even breaking even and you're losing money because of overhead costs. So to avoid that, we're going to ensure that we try our very best to actually change this demand curve. So instead of having these massive peaks and valleys, my goal is to try to even it out. Because during the spring rush, I'm actually going to say no to some jobs I'm going to tell some customers, hey, I can't serve you right now. And what that's going to do is take out these massive highs. And so what this is going to start looking like if I start looking at my, my spring rush is going to actually mute my spring rush a little bit. I'm not going to get as much revenue during the spring rush. However, I'm going to be able to move some of that revenue into the off season when I would otherwise not have that revenue because I focused on recurring jobs and I moved one time projects into the off season. And this is more of the demand curve that I'm hoping to be able to get. I'm still going to be, have, have some fluctuations, but my goal is that my revenue and that my demand curve looks much more muted, less high highs, less low lows. Because instead of taking all this work during the spring rush, I moved off some of those projects into the off season to where I would be able to even out my cash flow and be able to make sure that that recurring revenue stayed with me throughout the entire season. Now the next question is, well, when should I be hiring again? Knowing your demand curve, if you're going to have a massive spring rush like that, it's not a good time to be hiring when you need the workers, which is going to be halfway through the spring rush. Why? Because the rest of your competition is also hiring at that exact same time. And so a lot of times home service business owners will start hiring when they need the labor. And the reason for this, because they don't know what their demand curve looks like. If you knew what the demand curve looked like, you would start hiring a couple months in advance of the spring rush to be able to increase your capacity by having more labors so that then you can grow into that capacity during the spring rush without overworking your crew or going into overtime. And so the way to do this is start off four to eight weeks prior to when, you know spring rush starts again. Knowing when that starts is the thing that usually takes three to five seasons. And you can get around this by like, this is why Augusta Nation exists and why I'm a big believer in franchising. Like, figure out from other people close by you and learn from their data to be able to understand what your demand curve looks like. And so for us, what we will do is eight weeks before spring rush, when everyone else, by the way, is laid off their employees, when everyone else is like, you know, just hanging on for the off season and just everything Is, you know, locked up and they're just doing shop maintenance while they're doing that. I'm going to go and hire their employees and I'm going to hire them and then stagger them into the spring rush. Because now I know what that demand curve looks like. I know that going into market March, I need to have my first few crews started and that by going by, by the end of March I need to have trained up several crews. So what do I do? Let's just say like for example, though, the one shop that I'm thinking about in my local market, they're hiring 20 plus people and they're going to be starting them in shifts of four every single week for the next five to six weeks. And so what that's going to do is ramp up with demand of the spring rush with my, my labor so my supply will meet my demand. But if I waited, and I just waited till I needed the workers and went out and tried to find them, not only would everyone else be looking for workers and be very competitive, also by the time I actually hired them and then I trained them, I would now be completely overworked. I would have too much work coming in because it takes three to four weeks usually for them to get efficient and profitable. And in that three to four weeks, the spring rush has already continued, is always going, already going forward. And I've seen many people get in the middle of spring rush and turn away leads simply because they know about the. By the time they actually found more laborers and trained them up and made them efficient, spring rush would be over, the leads would have stopped coming in and they'd actually have the exact opposite problem, which is they can't find enough workers to keep those team members, they can't find enough work to keep those team members busy. And so this is the roller coaster. It is part of having a seasonal business. I truly believe that by focus on recurring and time sensitive jobs during the spring rush and pushing off all one time jobs that are time insensitive to and they can, they can be pushed off, they don't have to be done tomorrow, which goes in the off season, you will dramatically change what your demand curve looks like. And by knowing what that demand curve looks like, you'll be able to hire and market correctly, to be able to capitalize on the spring rush and actually make it your best, your best year, but just your best year, but also thinking about your winter and your off season as actually your advantage. And this is like the crux of the matter, and this is Why I put at the end because I like to hide the good stuff at the end. I truly believe that if you actually thought about your business as two different seasons instead of the off season and then your spring rush, think of it as well. During the, during this season I do mowing recurring jobs. During this season I do one time projects and larger jobs that are not recurring. One off taught, one off jobs. Great, there's your business. And now instead of going into hibernation during the winter, I, I want to actually focus on what services can I provide during that time of year. I guarantee if you just change your mindset, you can actually go on the offensive during your off season. For example, at Augusta Lawn Care, we do winter services, which is we're going to come mow your grass, but we're going to come turn the bushes off the house, we're going to check your gutters, we're going to blow off your walkways, pick up any branches from any, you know, windstorms that might have come around. We're going to edge up the lawn even though it doesn't need mowed, we're going to make sure everything looks tidy, rake up the beds, etc. These are the type of things that we do do in winter services. And typically people think about that as the off season because we're not mowing the grass. However, think about it like this. Instead of us being Augusta Lawn Care Services, what if we were Augusta Winter Services? Well now all of a sudden, when the mowing season ended, that would be go time. Like that would be the time to actually grow and expand and market and hire and go on the offense instead of defense. And so if you actually can change your mindset to say what services can I offer during the off season? And then approach those as your spring rush of that service, you might do Christmas lights, you might do snow plowing, you might do a whole lot of, you know, tree service. I see other people do it in the lawn care landscape industry. But even if you're in cleaning, for example, if you're doing cleaning, there's a really good chance for janitorial in your house. You want to focus on recurring and time sensitive jobs of customers that want to be on a weekly or bi weekly schedule all year round. Focus on them during spring. You can push off the big cleaning projects, the one off jobs during the off season in every industry, I believe we can do this. And if you can't, you can look at a supplementary service that's adjacent to your industry that you can really focus on. And just think about it. What if this was the only service I offered? Well, if I could build a million dollar mowing business, can I build a million dollar winter service business? I really believe we just change our mindset. We could look at take strip out this whole notion of off season and actually turn into the massive advantage. Because if you can spend money on marketing, if you can hire people at a time when the rest of your competition is on the defense and is hibernating for the off season, just waiting for the spring rush, you'll be able to take massive, massive market share.