Why a $700K Business Might Be Better Than $1M!

I was wrong. Building a million dollar home service business is not a good target. It was just a big round, easy number. And seven figures just sounds sexy. Today I will share the results of analyzing the finances over 200 home service businesses and why I think a million dollar business is a bad benchmark. My name is Mike Andes. I'm the founder of Augusta lawn care the that is over 150 locations around the world and I've been in home services for more than 18 years. This video is relevant for you if you check all of these three boxes. First off, you want to make more profit in your business and you don't care about top line revenue flexes on Instagram. Secondly, I'm going to assume that you want to get out of daily operations and hand off all of those daily operations to a general manager within the next five years. And third, we're going to assume that you're wanting to build a sellable asset that you can sell to a potential buyer or hand the business off to your kids down the road. I'm going to break up my recommendations based upon what you're currently doing in revenue per year. There's three ranges of revenue. The first is from 0 to $500,000 in annual revenue. The next stage is from $500,000 to $800,000 in annual revenue. And the third stage is annual $800,000 in annual revenue or more. Now, the vast majority of my audience is probably making less than $500,000 in annual revenue. So what should you be focused on in order to maximize profit at this stage of business? First off, you want to sell like mad. You've got to get past $500,000 in annual revenue as quickly as possible. Now, you might be a solo operator right now and you can make a 200 to $300,000 annual revenue business pretty profitable. But again, we're assuming we're trying to build this business to the point where you can get out of daily operations. And it's very difficult to get out of daily operations if you're making less than $500,000 in annual revenue. And if I'm going to try to get out of daily operations within just five years, I want to get past 500,000 as fast as possible. How am I going to do that? I'm going to sell like mad. I'm going to focus on my close ratio, not my profits. I am not interested in building a business that is $110,000 in annual revenue and I'm really, really profitable. I make 60% profit. You're making 60 to $70,000 in annual revenue and once you hire a general manager, you'd be making nothing. And so I'm gonna focus on close ratio. I'm gonna be trying to close at least 70% of all my estimates. I wanna make sure they're accepting the job. I'm not going to care about my profit margin quite yet. I'm also going to focus on my marketing efforts to, to recurring revenue. If I get projects and people come for one time jobs, that's great, that's gravy on top. And I can probably make a lot of profit on those one time projects. But in terms of my marketing efforts, I'm going to focus on recurring jobs. Why? Because I know that that's going to steadily grow over the course of time. In the event of an economic crisis, customers are less likely to cancel their maintenance or contracts and that are recurring every week, every month or every quarter instead of one time projects that are going to be much more volatile based upon the housing market and the economy. Because I'm trying to build a sustainable business that's profitable and I can pass along to a general manager. I want the revenue to be sustainable and very, very consistent.

Stage two is if you're making between 500,000 and $800,000 in annual revenue, and you might be doing that now in revenue, or, or you're planning to start your business and grow to $500,000 very quickly. So once you've hit $500,000 in annual revenue, what should we do to maximize profit? My suggestion is do not buy more trucks and equipment. Well, wouldn't I need to do that in order to grow? No, you can actually just raise your prices. So what I'm trying to do is grow as fast as possible to $500,000 in annual revenue. And I'm gonna fill to capacity. I'm gonna make sure my trucks and my employees are being used all the time and then I'm gonna keep raising prices. And every single time I hit capacity, for example, if I'm doing mowing services and I have the capacity with my current trucks, equipment and employees to do 200 yards per week, if that's my capacity, every single time I get to 201 yards, I am going to raise prices on my existing customers and raise prices to new customers. And every single time I get above 200 yards, I'm just going to keep raising my prices. And you're like, well, is that literally all I'm going to do once I hit $500,000 in annual revenue? Yes, And I'm going to grow from 500,000 to 750 to $800,000 in annual revenue just by raising my prices. And like that's impossible. Over the course of three years, I've seen consistently businesses that have $500,000 in annual revenue and are charging about $70 per hour of labor to their customers over the course of a few years. It if they can raise the price from $70 per hour to 100 or $110 per hour, then they're able to essentially go from $500,000 in annual revenue to $750,000 in annual revenue without getting any more trucks, without getting any more equipment, and without getting any more employees. This rinse and repeat process of hitting capacity and raising prices. Hitting capacity and raising prices only happens when you're trying to maximize for profit. On Also during this stage, I am going to remove any services that add a lot of complexity to the business or have low profits because I'm trying to optimize which services are the highest profitability and the least complex and most simple for my business to run without me. Now stage three is if you've grown the business past $800,000 in annual revenue. If I've done that at one location and I want to hand it off to a general manager, I'm going to stop all marketing and I'm going to raise my prices until I'm under my my max capacity. I'm also going to make sure that my max capacity is eight or less employees. Why? Because it's very hard as a general manager to run more than eight to 10 employees out in the field by myself. And if I'm going to grow past eight to 10 employees, I'm probably going to have to hire a second general manager or another overhead person. And at $800,000 in annual revenue, a business simply can't afford two full time management, very experienced overhead positions. And I'm going to simplify the business until only one overhead role is required and that is my general manager. If you're doing over $800,000 in annual revenue and you don't have any profits, here's some of the things you could do right away. Sell any unused trucks and lay off any of your current part time employees. What are you doing there? You're reducing the capacity of the business. Because I know that the closer I get to capacity, the more, the more profitable my business is. If you have a bunch of employees that you're having to manage, it's taking you a lot of time to make sure, they're clocking in and out. You run payroll for everyone. You manage their paid time off and their benefits. That's a lot of excess management for a bunch of employees that you don't need. If you're not using all of your trucks every single day, all day long, sell them. They're currently costing you maintenance, storage, and the cost of insurance. Just reducing those fixed expenses, especially if you have debt on the trucks, can immediately make your business more profitable. Now, if this sounds crazy, I want you to go back and watch the prerequisites to whether or not I suggest you grow your business to this size.

You have to check all three boxes, Maximizing for profit. You're wanting to get out of daily operations within the next five years, and you're trying to build the business to either sell it or hand it off to someone else down the road. Now, I've made content on YouTube for more than seven years, and in the past I always said you needed to build a business past a million dollars in annual revenue to make it something that you could pass along to someone else. But I believe that number is actually more along the lines of 700 to $800,000 per manager. And if you're wanting to hand off your location to one general manager, I recommend staying under $800,000 in annual revenue on unless you are going to jump all the way up to over 1.5 million. The reason I've come to this conclusion after analyzing hundreds of small businesses in home services is I've seen a wilderness of profitability between $800,000 in annual revenue and $1.5 million in annual revenue. Why? Because I believe every business consists of three pillars admin, sales, and operations. And usually when you grow your business to about $500,000 in annual revenue, you need help with the admin side of things. You get someone to answer the phone calls for you, get someone to send out estimates and invoices, do the routing and scheduling, and a lot of the admin tasks can get delegated off of your plate. But now, once you grow past $800,000 in annual revenue, usually between sales and operations, you need another overhead position that's going to do either estimates, sales, sales or operations. Your general manager and I don't want to have someone in the office, a salesperson and an operations manager. And if I do, I've probably got to grow the business to $1.5 million in annual revenue. Just to make sense of those three overhead positions, I personally believe that the most profitable business model for more than 90% of entrepreneurs in the home service business is to do the following. Number one, grow your business to $500,000 in annual revenue as fast as possible. Number two, once you've hit $500,000 in annual revenue, optimize for profit over the next two to four years. That's gonna get you to 700,000 to $800,000 in annual revenue just by raising your prices whenever you hit capacity. And number three is I want to target $200,000 in profits at an $800,000 annual revenue business. If I get 25% profit margins, that's $200,000 in profits. And that is what Augusta Lawn Care will be building towards over the next several years. The goal for us, Augusta, is to make sure that the admin side is going to be decentralized using our command center so you don't have to get an office or have to get an office person. The sales side, we're trying to automate as much as possible using AI, using simple services, and using instant pricing from our website. And then the only other aspect of the business that needs to be covered is operations. And that will be the main focus of the general manager. And it can all be handled by one person because the admin and sales side is covered. After analyzing hundreds of small businesses, I've seen smaller companies that are doing 7, $800,000 in annual revenue making more bottom line profit than businesses that are doing 1.2, $1.3 million in annual revenue. And the reason I see this happening is because more team members at that smaller size are able to be out in the field producing work for the business instead of having a bloated overhead structure of a whole bunch of people in the office or doing sales. Now, I'm not against you taking one location and growing it massively. However, if you're going to grow past 800,000, in my opinion, after seeing hundreds of these businesses, I believe you've got to scale to past $1.5 million in annual revenue. And that time between that is a wilderness of profitability that you likely won't see any more profits compared to when you're doing 600,000 to $700,000 in annual revenue at that location. I see so many people going for the seven figures and because of that they make less money, they get burnt out, and they usually end up giving up. This concept has completely changed the way I think about home service businesses and and thinking much more in terms of copy and paste model to be able to do multiple locations where a general manager is head over 8 to 10 frontline team members. I'm going to be doing a deep dive on this exact topic at Blue Collar Summit 2025. I recommend you get your tickets today@bluecollarsummit.com for you, your spouse and your general manager to make sure you're on the same page as we head into 2025. I promise you, you will. You will not be disappointed. And if you are, and you come do the entire workshop and all three days of the event, I'll give you your money back because I'm that confident this will completely change the way you think about your business.