Why Home Services Are a Terrible Business

The home service industry is a horrible business to start. And in this video I'm going to tell you exactly why. I'm also going to tell you what you can do to take advantage of these weaknesses in the industry to make millions of dollars. My name is Mike Andes. I'm the founder of Augusta Lawn Care. We have over 150 locations around the world. I've been in business in home services for more than 18 years. So I know where the weaknesses are, what most people fail on, and what you can do to make sure you beat your competition. The worst thing about the home service industries is that no one wants to work. Even if you get the business started, you get great customers and you try to SC scale the business as soon as you want to hire people. It's very, very difficult to find people who want to work inside toilets, want to work outside and when it's hot, when it's raining. And also it doesn't help the fact that it's extremely low unemployment rate right now. Everyone's trying to find new employees. So you're competing at every other home service business that is looking for entry level employees that just need laborers. It's easier than ever now to get handouts from the government or get paid to go to college. So who in their right mind wants to go work hard and sweat and actually do work? If I just sit at home, watch Netflix and get paid from the government, it's really difficult because most home service businesses, it's an entry level position which means people are coming to work for three or four or five months. They don't think of this as a career. And because of that, you're constantly hiring, constantly firing and always looking for open positions instead of being actually grow your team sustainably. And furthermore, it's hard to give the wages required to keep good people because we're kind of wage bound. We can't charge 3, $400 per hour to do basic labor services. Another reason why starting a home service business is a horrible idea is because it's a hard business to scale and actually grow to a million plus. Why? Because when you're first getting started, relatively easy, I'm pressure washing, I do a great job, all my customers love me. But once I get employees and I start training them and they go out and do the job themselves, I start getting callbacks, customers start complaining, they start leaving bad reviews online, and then I spend a bunch of time training new employees only for them to leave like three or four months later. Ultimately, if I want the job to be done right I feel like I have to be on every single job site and if I'm not on every job site, I have to come back at the end of the day, at the very least, talk to the customer, do a walkthrough and. And so I just spend my day hopping from job to job, fighting fires, trying to fix all the mistakes for my employees, and making sure I talk to the customers at the end of each job. Because if I'm not around, the jobs done sloppily and I get one star reviews online. One of the worst parts about having a home service business, especially if you have a recurring service or you keep customers for a long time, is that baked into home services is a horrible churn rate of like 15 to 30%. Even if you do a great job and you never make a mistake, 15 to 30% of your customers will leave every year. Why? Because they move houses. Just customers moving is going to make up 15 to 30% of your customers leaving every single year. In addition to them leaving because they move, they leave because of like a few dollars price difference. They're extremely price sensitive, especially in a bad economy. And furthermore, they have unrealistic expectations of employees. I'm under here fixing the sink, and if Billy Bob, my employee comes in fixing the sink and leaves one little speck, one little mistake down here underneath the sink, I'm going to get a call over unrealistic expectation, price sensitivity, and the fact that most people move so often kill my business. Another thing that makes home services such a bad industry to start your business in is that it's technologically behind so many other industries by at least 10 or 15 years to the vast majority of vendors. For example, when it comes to a website, most home service business owners don't have a website. Or if they do, it looks like it was built in the 1990s, it's not mobile responsive, it doesn't rank well on Google, and it takes forever to load. Furthermore, once the site actually loads, there's no web chat, there's no ability to actually communicate with somebody in the office, ask for an estimate, ask customer service questions as they're looking at your website. And then when it comes to actually collecting payment, a lot of home service business owners, they don't accept credit cards, they don't accept bank transfers or ach, and instead they allow the customer like stuff cash underneath the mat, or they stuff the invoice in their mailbox instead of using a CRM. A lot of home service business owners are like tearing off a piece of paper and writing down the quote, or they're texting someone, or they're just verbally saying how much the job is going to cost and who knows where that pricing is coming from. I'll tell you, thin air, this sort of unprofessional behavior is what puts this industry way behind the competitors. One of the worst things about the home service industry is the fact it's very hard to automate your operations. Operations is the actual doing of the work. There's elements of sales you can operate or of admin. When it comes to actually doing the work, robotics are a long ways away from being able to do the type of work that most home service businesses require. Not only does the robot need to know how to do the work and be able to juggle multiple pieces and parts, but also be able to lift up heavy things, operate around other people and not hurt them. So robotics are probably 10, 20, 30 years away from being able to actually automate much of the operations. Because it's so hard to automate or have robotics to do the work. That means you're dealing with humans. And because you're dealing with humans, there's people that call out, there's people that don't show up, there's people that show up hungover to a job site. These are the type of things that really make it difficult to schedule jobs and get them done effectively because you can't automate it and you depend on humans. Also, when it comes to the mobilization, the transport of vehicles, equipment, tools, supplies and materials to job sites, this is also a process of, that's very, very manual and leads to a lot of headache when it comes to just managing the daily operations of a home service business. One of the hardest parts about scaling up a home service business is the fact that the customer acquisition cost or the CAC continues to go up. When it comes to Google, when it comes to Facebook, we're constantly having to pay more and more for leads. Every single year, more people are spending money. Big corporations are spending all their marketing dollars on these digital platforms. And so what does it do? Drive up the cost per click for us to be able to get new customers? Unfortunately, the vast majority of home service business owners spend go of money on five or six different channels of marketing, whether it be ever door, direct mail, door hangers, Google, Facebook next door, other platforms. And they have absolutely no idea how to track and know where the leads are coming from. They just blindly spend this money and they've heard in some book that you're supposed to spend 10% of revenue on marketing and they just blindly spend the money, have no idea where customers are coming from. And all the while, the cost per lead, the cost per customer is going up. To make matters worse, the vast majority of home service business owners will spend most of their marketing budget during the off season. When customers aren't even looking for our services, we're doing it because we don't have enough work yet. All the while we're spending twice, three times, four times more per customer to get a new customer because we're spending money on marketing at the wrong time of year. The absolute worst part about home services is the fact you have a massive dip in revenue for the off season. I call it Q4 collapse. One quarter out of the year where we start to lose money, the leads drop off, revenue collapses. And because of this, we save all of our profits for the first three quarters of the year, only to spend it during Q Q4 when we have negative cash flow, we get no leads coming in. And this is because of the off season. This also makes it really difficult to be able to hire employees because you get a great employee and what do you have to do? Lay them off in the winter or you keep them on like I used to do and we do random tasks around the shop to keep them busy, but all the while I'm paying them to essentially do nothing. I'm not making any money. So what can we do to make that our advantage? Well, the fact is the rest of the industry is also having a decline in revenue. They're having an off season. So what can we do to make sure that we are actually hiring when everyone else is laying people off so we're advertising when everyone else has stopped running ad campaigns, when we're buying trucks and equipment, when no one else is doing that and they're actually selling their equipment. How can we do that? We can create season specific offers with season specific services. In other words, if I do lawn care during the summer and spring, I might have to do snow plowing during the winter. I'm going to be able to make an offer for my customers, keep my crew year round, and be able to make revenue every single month of the year. In order to do this, I'm going to have to upsell my customers, I'm going to have to cross sell my customers. I might have to create a completely different department in my business to make sure I can keep my revenue consistent year round, but if I do that, I'll be able to grow when the rest of my competition is on their heels, sleeping in the middle of the off season. This is going to be the main topic for Blue Collar summit for the entire day. We're going to do a workshop and come up with five options for you to solve this problem and prevent from having any off season in your business. Now, we already covered that. No one wants to work in home service industries and it's very difficult to find employees for your business as you begin to grow. There's a limited number of supply of laborers that want to do this type of work. And in order to get them, I've got to be able to build my business in a way that I can pay them more, five, ten dollars more per hour and use pay for performance instead of hourly wages to do just that. Also, I'm going to make sure I build the business in a way that I use simple services. And even if they stay for three, four or five months, I can make them profitable within a couple of weeks. Because if I can make them profitable in a couple of weeks and they only stay three to four or five months because it's a short term gig, that's fine. Simple services, great training systems allow me to take these short term workers and make them profitable for my business. And if I focus on investing back into my employees, giving them skills and actually TR training them like they were going to be with me for five years, they might actually stick around. Now I invest into them and they move on to a different career or a different job. That's awesome. Have that culture of investing back in your people and they'll be able to stick around longer. We covered that. The home service industry has a horrible retention because people move because people are price sensitive and it's easy to switch vendors. So what can we do to actually make that an advantage in our business? First off, survey your customers. Ask them what they liked about your service, what you can do to improve. If you just fix all the mistakes in their surveys, you'll build a business that people don't want to leave. And yes, lose some people because they move houses. But all other churn, I want to eliminate it and do a great job for my customers. Also to counteract the churn, I want to make sure that every customer I get, I'm not just getting one customer, I'm getting two or three customers because I ask for reviews and I ask for referrals. Also, I'm going to make sure my trucks and my uniforms are constantly speaking to my branding. I have wrapped trucks, painted trucks that are getting customers every single day. As I drive down the road to Combat the fact that there's churn in this industry and the customer might leave to some other service over a few bucks or because there's a crumb underneath the sink. I want to be able to get customers on such a high frequency, so many leads coming in. I don't care about unrealistic expectations or losing customers because they move. And if they do move, I have a system in place that I'm trying to get the next homeowner to use my services. So a referral program is going to be a great way to do that. Now we've mentioned that robotics are a long ways from actually being able to do the work for us in the home service industry. But one of the things that you can take advantage of is the fact that if you can automate all other aspects of the business in terms of your sales and your admin, that means you can focus on operations. When I look at a business, I think about it in terms of sales, operations and admin. It's very hard to automate the operations and doing of the work. But if I can automate as much as possible in sales and admin. So for example, I don't want to have to go out and travel to customers houses and do their sales. I want to spend time with my crew out in the field, training them, hiring better people, making sure they get to the next stage of their career and really developing the talent inside the organization. It means all my managers time, all my leadership can be focused on my team, my crew, hiring, firing and training. Because that's the part that's very, very difficult to automate. We've already talked about the fact home services is way behind when it comes to technology. And one of the biggest things is no one has a website and instead of it ranking well on Google or being designed well, it looks absolutely atrocious. Now this can be a massive advantage because if 90% of your competition doesn't have a website, guess where most of our traffic from? Augusta Lawn Care comes from? Our website. People looking up on Google for lawn care and for landscaping services. So just having a website is going to give you a huge leg up on the competition. Now if you actually make it mobile friendly, where it loads quick on a mobile device. Again, again, the vast majority of your traffic to your website is going to come from a cell phone, not an iPad, not a computer. They're going to be going on a mobile device. So making sure it's actually mobile friendly and loads quickly is going to help you get in front of more customers. Now here At Command center for Augusta Lawn Care, we also use AI, which means 24, 7, 365 on holidays, weekends, and even when everyone else is sick, we're going to have AI answering the phone. So even though we're staffed seven days a week with humans, if there's a large call volume, a backlog, or during the hours that we're not staffed, the phone still get answered every single time. And the reason that's important is because only 37% of people, when they hit your voicemail message are actually leaving a message. Which means 62, 63% of your customers that call you during your after hours, they're not even getting that lead. And so having AI to answer your phone calls humans that actually call them back quickly. This is the type of technology from a phone perspective, you can use to be leagues ahead of your competition. Because when a customer needs service and it's 11, 12 o' clock at night and they're calling all your competition or they're checking out their website, I want them to be able to call me and immediately get the pricing they need to be able to close the job. And if you can do that using AI or having extended office hours, you're going to be able to close jobs when your competition is sleeping. Having a CRM or a customer relationship management tool is also going to separate you technologically from all of your competition. You can use a CRM to not just keep track of job notes and your schedule, but also optimize your route, make sure that you're following up on estimates automatically using text and email, and use it as a marketing tool to get more leads by bulk messaging all of your customers when you have a promotion. Now, in the perfect world, I can actually use technology to be able to sell to customers 24, 7, 365 without them even needing to call into my office. And this is something we've really, really leaned into this year with Augusta Lawn Care. And that is instant pricing. That's where our customers are going to be able to come to our website and immediately get a price for whatever service they're looking for. Specifically for mowing. They're going to be able to look at a small, medium or large property, and we're going to give them a price right on the form. They can accept the quote right from the website. This is again, not going to cost me me a phone agent. It's not going to cost me any time or energy other than just setting up a technological advanced form on my website. And if you do that, you're going to get leads when everyone else is sleeping, when everyone else doesn't have someone answering the phone, when everyone else doesn't have a website optimized to actually collect that lead. You're going to make money. Now, we talked about how the customer acquisition cost continues to go up and we have to spend more and more money on marketing just to get another customer and scale the business. Now how can we use as our advantage, upsell your existing customers so you don't have to spend money on Google or on Facebook. How am I going to do that? I'm going to use features like inside of Copilot where I'm able to actually upsell customers. If I'm doing their lawn, I'm mowing their grass, I'm going to upsell them into bush trimming, I'm going to upsell them into mulching soles. If I'm working on their AC unit, I'm going to upsell them into a repair package or a warranty and be able to get recurring revenue for them over and over again. Now, I can use text blasts, I can use email blasts to reactivate customers that in the past I did service for. Or in the past they asked for an estimate, but they never accepted. And I can do that when I need leads the most instead of going and spending more money on these online platforms. Now, if you're going to spend money on these online platforms, make sure you actually track where the leads are coming from. Instead of blindly spending money on Facebook, actually put their pixel behind your S request form so you know whether or not a lead actually came from your Facebook ads. And ultimately, as your customer acquisition cost gets higher, you're going to have to get more creative. You have to change the pictures and the video on your ads out more often. You might have to employ other strategies like door hangers or yard signs or doing something that's more guerrilla marketing in order to compensate for the fact that these platforms continue to get more expensive every single year. The bottom line is I just want to get customers for the lowest price possible. And if the cost to get them online is going up, I might use yard signs or door hangers or knocking on people's doors. And what I want to do is I want to boil the puddle. Instead of trying to boil the ocean and going after my entire million plus population, I'm gonna go after a few neighborhoods. I'm gonna boil the puddle huddle and get customers that way. We've already talked about how hard it is to scale up a home service business because it's hard to scale quality control to where every single job, every single product is done to a high quality standard. And for this reason, a lot of home service business owners stay small or stay solo and don't hire employees. How can we make this an advantage? Well, we can hire employees and they actually do the job right. They actually do a high quality standard and make sure the customer's satisfied before they leave. But how do we do that? We've got to make sure that we align their incentives with doing a good job. We have what we call the yellow slip system. It's essential, essentially, this, when a customer complains or there's a callback, I, as the owner, I'm not running back to the job site and trying to fix it for my crew. Instead, I'm going to write out a yellow slip and that crew is going to be accountable to go back to the customer's house and make sure they're satisfied. They're going to go over the project with the customer, ensure that whatever mistake was made, whatever damage case was made, is going to be resolved, and then they have to bring it back to the crew at the next team meeting and read it aloud in terms of what they learned. This sort of accountability and taking ownership of their job is what allows the employees to be able to have an internal quality control that I'm not trying to micromanage or run around trying to make sure that every single project is handled correctly. Because I know they want to do a walkthrough with the customer to ensure they don't get a yellow slip. They don't want to have to come back to that job site. It's going to hurt their paycheck and it's going to hurt their reputation in front of their peers. And the reason it'll affect their compensation if they have a yellow slip is because we use pay for performance, where the harder the work, the more money they make. But if they don't do a good job, any bonus above base pay, I can take that off the table if they're not doing a high quality standard job. One of the worst things about the home service industry is honestly the fact there's no community. And the reason there's no community, kids really hard to share with your competitors. It's cutthroat. People are always trying to take your customers. You're afraid that they might take your customer list or take your pricing strategies or your marketing strategies. So what ends up happening is we just have to do everything alone and we can't share our big wins, we can't share the lows. And the reason we can't share our highs is because people will say that we're bragging if we go into a Facebook group and we share. They'll say that we're so horrible and we're so stupid if we tell them about how hard it is in our business right now. And community is one of the things that we as humans want to have but we can't have in this industry because we're afraid of the competition taking our customers. And that's why you should come to Blue collar summit in January 2025. It's a three day event where you can bring you, your manager and your spouse to connect with other people and have that community. You'll be able to share your wins, your losses and make sure you have a plan in place to make 2025 the best year yet for your business. Go to blue collarsummit.com today. Thanks.

I hope we got that. Yep.