Why Ryan Trahan FAILED, The WRONG Time for P4P, Creating an Efficiency Scoreboard

Welcome to the Mike Gannies Podcast, where we discuss the ins and outs of owning your own small business. We have some great content for you today about the very basics here. First off, we'll see what Mike has to say about Ryan Trahan's attempt at buying a plane ticket in one day just by mowing lawns. Next, we talk a lot about P4P here on the Mike Andes Podcast, but when is the right time to make the switch? Lastly, how to create efficiency scoreboards for your employees so that you can track their efficiency and actually know your numbers. You can find all the video versions for these on YouTube under Mike Andes. But let's jump into it and hear about what went wrong with Ryan Trahan's mowing business.

Recently, Ryan Trahan went on a quest to use one penny and get across America and deliver that penny to Mr. Beast. Along the way, he had to come up with money and generate some income. How did he do that? One day he actually mowed lawns. You don't make any money mowing someone's lawn one time. I've mowed lawns since I was 11 years old. I have 15 years of experience. And then at Augusta Lawn Care, we have almost 100 locations that I helped start. So I have a thing or two to say about how he did his business, what you can learn from it and potentially actually grow a real lawn care business that doesn't just get one customer for $20. So we're gonna go ahead and watch the video together. I'm gonna break down his performance. How did he do mowing the grass? How did he do when it came to business and running a lawn care company? And let's go ahead and jump into it.

Okay, let's go get this lawnmower.

We made it to the lawnmower rental. I put my bike on a discreet Wal. It's kind of hard to spot. Fingers crossed it doesn't get taken by anyone. But if it does, it's my fault. Let's be honest. I don't have a lot, but I'm going to go in here, get our $31 lawnmower rental, and then I'll tell you the gameplay.

Howdy. Hey. I have a lawnmower rental for the day. You know what I mean? Gotcha.

Yeah.

Yeah, for sure.

Thank you so much. Have a good one. All right, lawn mowing Mafia, it's time.

For the game plan.

I was like me pulling a lawnmower.

So the first thing is to pay $30 for a lawnmower. Just remember that if you mowed, like 15 lawns, you'd be able to afford this lawnmower. This lawnmower is probably worth about $300 to $400. It's not super complicated, not a commercial. It's just a residential Honda push mower. You could probably get this for about $400, $500 with inflation. It's expensive. It probably used to be 300, but you can absolutely get 15, 20 lawns, and you'll be able to pay this thing off. So if you actually want to build a business, you don't need to be spending months or years saving up for a mower like this. This is relatively cheap.

That was. Come on, we've all been there. Step one, mow at least two lawns today so that we break even and profit a little bit. My plan is to charge $20 per lawn. I feel like that's a pretty good deal. I'm not going to be able to weed, eat, or do so.

These are bad profit margins. Because think about it. If you got $30 to rent the lawnmower and you're going to get two push mowing jobs, $20 each, that's only $40 in total revenue, which means I'm only going to make 25% profit because $40 in revenue, 30, $30 in cost. And by the way, that doesn't include things like gas. So not great profit margins through the.

Edge of the driveway or anything. So I think that's fair. I think that's a good deal. Step two, push the lawnmower two miles to a neighborhood. There's literally no houses over here, so I'm gonna have to walk for about an hour. But, hey, we're here. I have it all day. Step three, mow as many lawns as it takes to buy a plane ticket by the end of the day. I am so serious. We're getting the heck out of here tonight. No, it won't be tonight. I'm pretty sure the cheapest plane ticket is in a few days. So regardless, the goal is to lock it in and get to the next city as soon as possible.

Screw you.

Great reset. How about that? How about them apples? All right, I'm gonna start walking.

That's actually this way. Actually, I picked the camera as well.

Let's go.

To a neighborhood. I'm gonna go knock on doors and ask if they if I can mow their lawn for $20.

All right, so let me just say this. If you're trying to do one day's wor and make money to, like, go on A flight, for example, don't do lawn care and mowing. Cause it's such a low margin Service. It's only $20 like he's charging. I would have preferred he actually not rent the mower and go buy a rake or even just rent the rake for like five bucks and go do a property cleanup where you trim these. You know, look at this person's lawn here. You got some ground cover and bushes that could be trimmed away from the house. That could be a couple hundred dollars. Instead of just going after the lawn which, which you have to rent the piece of equipment for and is expensive and you gotta push around, just go after the low hanging fruit. You don't need the mower even to get started with lawn care and mowing services. Just go ahead and get a rake or a bin and a broom and get started. It's really, really simple. And you can get a higher ticket per day in terms of $20 for a cut instead of, you could get $200 for trimming their bushes, maybe get some loppers or even just rake out their beds, pull their weeds. You get 200 to $300 for one of those property cleanups.

I don't think they're home.

Nothing.

Oh gosh. Hey, you know what they say, three Ls, six Ls make a W.

Let's go. This is the one. Hi. Hey. I'm just trying to make some mowing lawn. Okay, no worries. Have a good one. Hey, at least we got a human. He said no, so.

We got a client. We got a client. Thank you.

So you got to remember when it comes to knocking on doors, it's simply a numbers game. So it took him 15 houses basically to get his first customer. That's actually really, really, really good. You're going to see afterwards because he knocks on another 50 probably and gets all rejected. But it's simply a numbers game. And if you do the math, you can make this work. When it comes to knocking on doors, it's going to take a lot of rejection, but you absolutely can make it work. And trust me, it's probably the best ROI compared to any other marketing service when it comes to lawn care and mowing services, especially if you're young, especially if you're hungry. And he could have done a little bit better on the professionalism side. You know, if you would've had a nice Carhartt pants on, a nice polo shirt like this, some ear protection and a nice mower and maybe a nice truck they roll up in, he'd probably do Better at knocking on doors. If you just roll up like he is, with a backpack on and a shirt and shorts. Like, the person doesn't think you're serious, they potentially might think you're gonna do something wrong to their property. So if you have a professional service, you'll get, when you're knocking on doors, started.

All right, Kyle, Come on, baby. Come on, Come on. We've all been there.

All right. So bad mistake here by Ryan. He started mowing in one direction next to the driveway there. And then he switched directions. Perpendicular, 90 degree difference. Stay in the same direction when you're mowing. Go back and forth. Go around that flower bed. Yes. It takes a few extra seconds, but it looks so much better. And if you have those lines going to and away from the road, that's when you see them the best, going perpendicular to the vision, the sight. You don't see the lines as well. So just my two cents.

Oh.

This is why you have to make sure that if you're going to do mowing services, that you charge more for the initial cut, because this lawn is going to take three to four times longer to mow it now than it will next week. Because the first cut takes so long. So the first cut, Instead of charging $20, the first cut really should probably on this lawn be at least $80 or $90 or $100. Then again, that's gonna include edging and getting those edges nice and crisp and established, which he's not doing, but it's definitely worth a lot more than $20. Just the wear and tear on this piece of equipment probably cost you five or ten bucks. And then you got fuel. Like, you're not making any money on $20 per cut.

We're almost done mowing the lawn. J.C. brought me water. Technically part of the pay it. Look at that. Alkaline.

What does that mean?

Do you know?

It's like to balance out the acidity.

This is alcohol.

No.

Now, I don't have a weed eater. I only have a lawnmower. I got my own weed eater right here, buddy. I'm gonna use my hands to get some of the extra big ones.

Let's get it.

Okay. In my opinion, what actually sets a lawn apart from being a professionally cut lawn to someone, some Joe Blow homeowner doing it is the edging. So get yourself a weed eater, and you'll be able to charge inst. Instead of $20, you'll probably charge 30, 40, or $50 for the same one because your edges are nice and tight. And then you're able to blow things off. So I know Ryan's just doing this as a one time project, but if you're actually wanting to make a business, get yourself a weed eater, get yourself a blower, it's going to make it look ten times better. And instead of just cutting the lawn, getting those nice crispy edges where the concrete ends, there's a nice little quarter inch gap and then the lawn starts. It's a beautiful thing.

JC all done. What do we think?

Dude?

It's beautiful. It's beautiful. I got you a tip. Yo, are these lottery tickets? Dude, thank you. That's so good. $20 for the yard. I appreciate you. Cheers, man.

You can't not pay the camera guy, so.

Oh, thank you, man.

Thank you, brother. Bro, thanks so much. So nice to meet you. Take care of it.

So this outlines the next problem with this whole equation that is don't take cash from your customers. If you actually want to run a legitimate business, I recommend that you invoice them at the end of the week or end of the month so they can have it on file. A credit card on file that you can charge or potentially at least just keep track of their payments. So if you're wanting to run a real long care business, use what's called a CRM. Customer Relationship management. You keep track of all their payments, all their invoices, all their jobs, and stay organized. You might be able to do what he's doing here with cash right after the job for a few customers. But even 20, 30, 50, 100, 1,000 customers, you gotta have a software system to keep track of everything. And don't take cash from the customer. What happens if this cash blows away in your truck? Or if you're at the next job and you got some cash sitting in a truck, someone just snatches it out or it gets lost underneath the seat. Like that happens all the time. Just don't take cash, go without cash, Just go cashless, take credit cards and don't take cash right after a job. And by the way, if you're taking cash after the job, what happens if they're not home right after the job? You don't get paid. So I recommend use some credit cards, use a CRM, scratch these bad boys off.

Oh, this is nuts. Okay, this one is your number, winning number and prize.

No matches. This is the one. This is the one. 50 ring, cactus 27. Oh, bro, I feel like we're gonna win something.

$500.

Imagine.

Nothing.

Hey, it was fun. I had a good time. So back to mowing. We are getting rejected over and over and over and over and over.

Okay, so here's the deal. I feel like there's more pain. Like if you look at these, these properties that he's going to look at the flower beds, they're overgrown, there's weeds, there's leaves in the flower beds. That could absolutely be a bigger pain point than some of these lawns that are, you know, maybe an inch or two overgrown. So address the need and the pain point of the custom. Potentially get 5, 10 times more from them in one service. Like, I love mowing because recurrence all the time. But in the case of Ryan, he's only trying to do a one time job, go after the thing that's $200, not the thing that's $20. I genuinely believe he could have got two or three property cleanups out of all these properties and gotten $100 or $200 per cleanup and not even need the mower. So again, a great way to get started. Just focus on pulling weeds and property cleanups where you're going to have a higher revenue per service. And then down the road you want to build out the recurring revenue, you want to build up the customers. Because honestly, that mowed that grass for. He could have easily told him, hey, I'll be here next week and the week after you give me $20 every single time. Of course, again, I think he should have got a weed whacker and a blower and went up to 30 or 40 or 50. But he could absolutely have sold that on a recurring basis where every single week he was coming back and doing the lawn.

Game plan update. Hey, we mowed a lawn. We did for $20. We also lost four and a half hours of daylight. That's not amazing. So in total, we lost $11 on this money making method. That's what I call a bad investment. I probably knocked on the doors of 100 houses. Truly, the walk there, the walk back, it's gnarly. I figure I'd cut my losses and go back to more reliable money making methods. It's going to be tough to get a plane ticket by the end of the day. It will, it will. But all I can do is keep moving. I'm going to return this, have a quick water break and then we'll get back out there.

All right, so let's break this down. So he did a hundred doors. He said he knocked on. He said about four hours. Probably an hour of that was actually mowing the grass for the one customer. So just say it took three hours. He knocked on 100 doors and got one customer. This is the thing. If you're actually trying to build a real business lawn care mowing company, you could easily make this. This is great. This is just a numbers game. In three hours you get one customer. Now if you can sell that customer on a recurring basis where you come back to their property every single week and mow the lawn for $20 and you get one customer a day. So you knock on doors for three hours, you get one customer, knock on doors the next day for three hours, get one customer. You do that for several weeks or a couple months, you literally have yourself a little business get started doing that and then you take those customers, make sure you sell them on a recurring basis, not just a one time mow. You don't make any money mowing someone's lawn one time. That's what just happened to Ryan. You never make money mowing someone's property one time. You make money when you get them on a recurring basis, but then once you get them on a recurring basis, you try to upsell them and do property cleanups. You can install some mulch. These are all things that you can do to make more money from these mowing customers and actually make a legitimate business.

It's all about turning those one time jobs into recurring customers. Make sure you upsell your first time customers after the job to get them on the schedule. If you're new to the lawn care industry and are looking for a guide, Landscape Business course is right for you. Landscape Business course is a step by step resource showing you exactly how to grow your monthly revenue to $100,000 in just three years, including over 30 plus lectures and tons of bonuses to dive into. You can find out more@landscapebusinesscourse.com alright, let's dive into it and figure out the right time to have your business switch over to the pay for performance model. Could there actually be a wrong time? Let's find out.

I'm giving a warning and something that's very time sensitive when it comes to your business. As we're in the summer period now, a lot of people are procrastinators. We as business owners get very busy and so when we know there's a deadline, that's usually the only time we react. Because like we're so busy with so many other things, emails and phone calls and customers and employees and marketing and all these things happening and we forget sometimes to take care of the biggest things in our business that would actually move the needle. The Most and actually solve a lot of the little problems that we spend so much of our time focusing on. And what I'm talking about today is, is P4P pay for performance. Now, before you click off like, oh, Mike's going off on P4P again, you know, he's. He just has a software he wants to shill us. Okay? So before we get, you know, go down that rabbit hole, let me just be very, very clear. There's two times in my mind where it's an appropriate time and the best time to implement pay for performance. You don't know what that is, is where the employees are going to get a percent of the labor revenue they earn for the business every single day. No longer paying the employee by the hour or salary. That is not efficient. It's not going the highest performers. P4P is a way to pay more to the people who work harder, work longer, work more efficiently. And so if you're wanting to do that, and you've heard me talk about it for a long time, and you've kind of been putting it off, and you're like, man, I know I need to. I know that's what I have to do to be able to attract good talent. But I'm just, you know, it's just I have to change and I have to figure out budgeted hours and all this other stuff. There are two times in the year, in my opinion, when it's the best time to make the switch. One is during the winter, because you have the time to make the switch. You have the time because you don't have customers pouring in. And for most home improvement businesses, we don't have as much work happening during December, January, February. And so that's when most people will and have historically switched to P4P. But it is, in my opinion, that the second time of the year is the best time of the year to implement P4P, and that is during July, August, and September. The reason for that is because for most of us, the spring rush, March, April, May, June is insane because weather is unpredictable. You know, if you're in lawn care, landscaping the lawn, the grass grows crazy, crazy fast. It's muddy if you're working outside at all.

Like.

Like weather is going to play a part in the efficiency that your crew is capable of performing. And what you've got to make sure is that when you switch from hourly or salary to P4P pay for performance, that within the first couple paychecks, your employees see an increase in their compensation. They see performance dollars and performance Dollars is anything above base pay on P4P, they need to see that as soon as possible. Now, if you implement during the winter when you have time, that's fine. You're going to feel more controlled going into the spring rush in terms of understanding P4P. Getting all of the which is available for free@p4psoftware.com training, you're going to feel more in control. However, it's going to be harder for your employees to get above base pay during the spring rush. When you got new customers, new employees, you're trying to grow the business, you're getting more equipment, you're marketing. You got all these leads coming in and estimates and complaints and yellow slips. All of that is going to create that chaos that is going to prevent employees from getting above base pay and making really good money on P4P. What you want to happen is when you switch to P4P, it's almost immediately see a bump in their paycheck. 10, 15, 20, 30, 30% increase in pay is very, very common when you switch to P4P. And the reason you can afford that and afford that increase in wages is because the employees become 25, 30% more efficient and they cut out the waste in their day, the stops at the gas station, the 25 smoke breaks, the little siesta and snooze they take at lunch, all those things get cut out when they're getting paid based upon their production. They make more money and they can make more money and you can afford it because they're more efficient. And so this is the thing, you want to choose a time of the year when that's going to work in your best interest. And yes, the winter is fine. We've talked about that. You feel more control. But if you can come and install P4P in your business during June, July, August and September, when you're probably the most efficient during that period of time, there's not tons of leads coming in. You probably have your crew more solid, they're trained up, they're more efficient at their job. You're not training a bunch of newbies. And that's when they make the best money on P4P. The grass isn't growing as crazy. It's not pouring down rain one day and then three days of delay and it's muddy and things get stuck and trucks don't sl start cuts cold. And you know, all of a sudden a random snow in the middle of May, like what in the world like that happens during the spring rush. And it's very Difficult to have a sustained and efficient route of high performance for the entire pay period because of all those unexpected rain delays and new hires and all the rest of it. So I would recommend the best time of year to make the changes. Actually, right now, as I'm recording this, it's the end of June, but July, August and September, that's what I would recommend. And that's when we originally implemented P4P at the very first Augusta Care location. We implemented pay for performance during July, August and September. And at the end of September, it was like no more hourly. It was like a hard set reset. We'd never looked back. We've never looked back from that moment. But it was during those months because they Instead of making 17$18 per hour, the employees are making 23 24$25 per hour on P4P. So of course they want to vote on the implementation of PvP. They're all for it. Now, if you wait until the winter, yes, you can implement PvP and you're going to have more time and you're going to explain it better maybe, and all the rest. But going into spring rush, they might be hitting up against base pay and they might not like P4P and you might have a cultural issue in your hand because no one wants P4P to be the way that they get compensated. But if you do it now, when lawns are easy to mow, the weather is better, your crew is more efficient because they're trained up and you're not getting new customers every single day with overgrown lawns and projects that go south and the weather's crazy. This is the time to do it. This is the time to institute P4P pay for performance. Now, if you go to the training, it's going to walk you through this three step process of switching to P4P. The first one is running the numbers in the background. You don't have to tell anyone that you're doing anything. Just run the numbers in the background and start figuring out, okay, is someone going to make more money on P4P versus hourly? What are they doing right now? That's the first step. Run the numbers in the background. The next step is explain P4P and we give you all this materials to show your team. Explain it to them at a very high level and then institute a two pay period implementation trial period where for two pay periods they can't make less than what they're currently making on hourly wages. Wages. Now, if your base pay is $18 an hour on P4P and they were getting paid $18 per hour on hourly. They only have upside. There is no downside. You're not going to have any problem getting those employees to switch to P4P because there's only upside potential for them if they work hard. So if you have employees that are like 20 or 21 though on hourly and you're going to move the base pay to 18, you've got to convince them that they're going to make 23, 24, 25 on P4P as long as they're efficient. So that's why step one, you run the numbers in the background, then you explain it to them. And then in that second step you have that two pay period, trial period where they can only make the higher of P4P versus their old hourly wage. And then the third step is voting on the implementation of P4P. If you run through the training, it's going to exactly show you how to roll out P4P. And it's the easiest to show that discrepancy and that increase in pay during the summer months when you're not in the middle of spring rush and when you're not in the winter when work is sparse. So I highly Recommend Go to p4psoftware.com training and you can see all the training for free. And you can also book a zoom call directly with Brad, who's a cpa. He's worked with me for years. He was actually part of the original time we switched over to P4P. And he's a numbers guy, right? He's also worked out in the field and actually knows lawn care and landscaping and all the rest of it. So he's a great resource for you to reach out to ask your questions. He can see your CRM and potentially some modifications that you might need to make in your business to make P4P work. But trust me, P4P works for literally like 99% of the small businesses and service based home improvement companies that come to us. You might have to tweak a little thing, add budgeted hours, make sure you tighten up your routes a little bit, cut out some projects that are so far out or under budgeted or underestimated in terms of price, you might have to do that. But ultimately it's going to make your business better. And as we head into recessionary time, this is absolutely the time you must implement P4P. When it's hard to find employees and when employees are going to start really caring about making the extra couple dollars, you better make sure you have a system like P4P where they're getting paid by their performance and not just because they clocked in. I see it time and time again where I try pass companies and you got an entire crew of guys sitting there for 20, 30, 40, 50 minutes, maybe an hour, two hours. And I go by like the afternoon, they're all still sitting there. I go by in the evening and they're all still sitting there. They're just like in their truck, eating, playing the music, taking smoke breaks. That is going to kill your small business as we go into a period where you might have got away with that for a long time. Because the economy has been booming for the past 14 years and everything's great. As we see margins compression, the companies that will survive are the ones that will be the most efficient. So that when everyone's profit margins get slashed in half that they can actually survive because they had 20, 25% margins and they're willing and able to get by on 10, 12, 13%. As we head into a recessionary time. If you're at 10, 15% margins right now and we go into recessionary time, you're not going to be be able to operate on 3, 4, 5% profit margins. You're going to get wiped out. I don't want that to happen. I beg, I implore you to implement P4P now. It's not going to get any easier to find workers that want to work hard outside in the ELE elements, getting dirty and doing hard physical labor. The only way to do that is to create a meritocracy. Meritocracy that means the harder they work, the more money they they can make. And the way that you do this is implementing P4P and what is going to keep great talent and great employees and people that do want to work hard and are frustrated by working with co workers that slack off and take 500 breaks a day. It's going to be a system like this.

P4P enables your business to maximize efficiency efficiency and keep your employees motivated like no other system. You can pay your employees the smart way with our new P4P software automatically updating efficiency numbers, real time project tracking and individual employee metrics on a day to day basis. You can learn more about that today@p4psoftware.com finally, is there a better way to find out the real numbers behind your business's health? We'll learn how to create an efficiency scoreboard so that you can keep a finger on the pulse of your business.

Today I'm talking about the Most important thing for every single home improvement business.

I don't care what industry you're in.

I don't care how big you are. At the end of the day, knowing how efficient your labor is is the most important thing. For most small businesses that are doing landscaping, lawn care, roofing, construction, whatever it is you do, pool service or janitorial, whatever it is, this is the most important thing for your business and that is how efficient is the labor that is going out to the customer? Because ultimately in the home improvement industry, really all we're doing is selling labor at a marked up cost. We try to buy labor for 20$30 an hour from an employee and sell it to a customer for $70 $80 per hour by making sure there's scheduling and there's routing, also having inputs of material and equipment that we need to get the job done. So all we're trying to do is sell labor for a marked up cost. That's all we're doing. The same way that you would sell a shirt, buy it for $5, and sell it to the customer for $20 at a retail store, we're trying to do the same thing with labor. Trying to sell one hour's worth of labor from an employee and mark it up to a customer. And that is how we make money. So knowing how efficient you are with that labor is extremely important. Now this is something we track all the time@p4psoftware.com and you go there, check out all the training for free. Just go to p4pssoftware.com training but these two numbers, you've got to know how to detect and be able to analyze the efficiency of your employees, who are your highest performers. And over the course of time, how efficient is all of your team? Not only who's the best performers, but over the course of time, are you improving or are you decreasing in your efficiency and how well you are allocating hours and labor inside the business. Let's jump into it. But before we do, I wanted to say a big thank you to everyone that supported the channel. We're actually hiring another person on the media team to be able to make this content even better. And I put every single dollar in from lawncarewebdesign.com, homeservicewebdesign.com, p4P software.com, lawncaremedia.com, the MBA for Entrepreneurs course. All of that money goes back into making this change and this content better. And so I just wanted to say thank you. As we grow the team it's because of all of you supporting the channel and all that's in the links, in the description. Or just go to mikegandy.com I just want to say thank you. As you see the channel continue to grow. We're over 44,000 subscribers now.

It's going to start growing here.

It's because all of you just supporting so much, and I'm able to invest that back into making the content better. So thank you so much. But back to our regularly scheduled program. We're talking about efficiency. So this is the first way that you can calculate efficiency and you can get your effective hourly rate divided by your target hourly rate. And you're like, okay, this is too much, too much math for this early in the morning. Okay, let me explain. Okay, so effective hourly rate right down here is basically the labor revenue that the employee earns for the day, week, year, whatever, divided by clocked hours. So let's run the math on a daily basis to find our effective hourly rate for one employee. Let's just say that they earned $600 in labor revenue for the business. Doesn't matter what services they're doing, mowing, landscaping, whatever they've got in labor revenue. Not total gross revenue, that includes supplies and materials, all the rest of it, but labor revenue, how much they earn for the business. Divide that by how many clocked hours that they worked in that day. So just say it's 10. They worked 10 hours in the day, and that's how long they clocked in to clock out was 10 hours. That would mean that our effective hourly rate would be $60, $600 in labor revenue divided by clocked hours. That is our effective hourly rate for that employee. Now let's say that our target hourly rate or the amount that we try to charge the customer per hour on the job is $80. And so when you go to an estimate, you're like, that's going to take five hours. Well, if your target hourly rate is 80, that would mean that 80 times 5 equals 400. So that's what our target hourly rate is. Simply the number that we are charging per hour to the customer on a job. So if we're going to determine that as being 80, well, that means if we take our effective hourly rate of 60 and we divide that by 80, that is going to mean that this efficiency score is 75%. And this is the number you want to track. Because look, if this person was more efficient, and instead of taking 10 hours to get that $600 in labor revenue, if it only took them nine hours. All of a sudden, now you do the math. 600 divided by 9 is approximately 67. So now if I take that 67, divide that by 80. Now all of a sudden my efficiency score jumps up to 84, approximately percent. So this is a score that you can track for every one of your employees and simply a matter of how efficient are you. The higher this number is, the more efficient the employee is. The higher this number is over the course of time would mean that you're becoming more efficient with your labor. Alright, the same thing can be said. Okay, you just do the math here. Like if they made more money, this number is going to go up. If this number goes up, then their efficiency score is going to go up. This is a great way to do it. Effective hourly rate divided by your target hourly rate. You can do this for every single day. All you need to know is how much labor revenue did that employee or crew make. And divide that by their total number of clocked hours. And if you have two people on a crew, that's fine. Maybe they make $1,600 a day and they worked 18 hours combined. You can do this math. As long as you're consistent every single day, this percentage will tell you how efficient that crew or employee is. Now another way that you can do this is use budget hours divided by clocked hours. For example, you have a big project and you're like, hey, hey, I think it's gonna take 68 budgeted hours to get this paver patio installed, this retaining wall installed.

Great.

Well how many clocked hours did it take to get the job done? Well, it took 40. Okay, well if you do the math on this, literally this comes out to 170%, very, very high. What happened here was we budgeted the project would take 68 hours. They got it done so fast. So that's why they have such a high efficiency score.

Now maybe you're on a mowing route.

For the day and we're gonna use the same method. Again, you can use either of these methods and really what's it gonna come down to is if you use budget hours in your commonplace in your business, and this is what we Recommend inside of p2psoftware.com this is kind of simple method we call it and it's called the advanced method, where in the advanced method you have the budgeted hours on every single job. So for example, what I'm going to do is for a mowing route, for example, budget hours for the day, I might have have eight budgeted Hours on the cruise route, on one employee's route, solo person in the truck working all day long.

Okay, great.

Well, they're going to get the jobs done and it's going to take them 10 clocked hours. All right, so they're going to work from say 7am till 5pm That's 10 clocked hours. And they're going to complete eight budget hours worth of work. Again, eight divided by 10, what is that? 80%. So they're getting is my efficiency score. Now you're asking, everyone always asks what is the right score and what is the right a good number for me to be targeting.

In my opinion, you want to be.

At least 70 to 80%. Anything above that usually is really efficient. What that means is, is there's not a lot of waste because the difference between budgeted hours and clocked hours is waste. The difference between eight budget hours on my mowing route and then the 10 hours it takes me to clock for the day is drive time. Fueling up, unloading the equipment, loading it back up, that's all wasted time. So what that would infer is if I'm 80% efficient, it would mean that I'm 20% inefficient, or there's 20% of my day that is spent on wasteful activities. And not necessarily wasteful. They might be actually crucial, getting the jobs done, like fueling up and taking care of the equipment, but it's not actually producing revenue. So 20% of my day would be considered waste. Okay, now for different types of services or different types of areas of the country, this might be different for you. For example, if you're doing really high end design, build commercial work, 50 or 60% might be fine for you because you're charging such a high hourly rate, a target hourly rate of $120 or $150 per hour you're doing excavation, for example, this number could be a lot lower because you have a lot more load time picking up materials, et cetera. But in general, I consistently see companies that have under 60, 65% of their efficiency score, this number right here, if they're consistently under 60 or 65%, they will almost never be profitable. And the businesses that I see in the home improvement industry that consistently have an 80, 90, 95% efficiency score, they're the ones that constantly are running very high profit margin businesses, businesses that have management in place run without the business owner because you need these type of margins in order to run without the owner. Because guess what, if I have a really a crew that's just not very on top of their game. Instead of taking 10 hours, it takes them, let's just say 16 hours. Maybe a crew, a crew of two people. They work eight hours. So a total of clocked hours of 16. So now instead of this one person getting eight budget hours done, it takes two people working eight hours each. 16 clock hours. All of a sudden, look what happens. Eight divided by 16. And I am now at 50%. I can guarantee you, I can guarantee you this company is inefficient. There's lots and lots of waste, and they're not gonna become profitable because that means that 50% of their day, 50% of their clocked hours are spent driving, sleeping at a gas station, going to the bathroom, taking a nap, smoked breaks, loading and unloading, getting coffee in the morning, jibbering, jabbering, whatever it is, they're wasting time throughout their day. And at a 50% efficiency score, it means that literally 50% of their day is waste. It's not producing revenue for the company. I can almost guarantee you this company will not be able to make money. They will definitely not have high profit margins. And so what I recommend you do, there is no right or wrong percentage. I've kind of given you a general theme of, hey, shoot for above 70%. That's what I want you to shoot for. Anything below that, I'd try to be working on your efficiency. Anything above that, I'd be knowing that there's always room for improvement. You can always make your routes tighter. You can always make sure that you cut out. The jobs are way far away. You can make sure that your trucks are parked in a way that they can get out the door faster in the morning. Make sure your crew understands how P4P pay for performance works so that you are motivated to get get working and have as few clocked hours and get as many budget hours done in their day as possible to improve the score. You can do all those things, but it's not so much about having a good number. I want you just to start tracking it over time so you can see what is the trend over time for every employee and for my team and my business as a whole in terms of efficiency, this is a number that you must know. This is actually why@p4psoftware.com we are in the next few weeks rolling out a feature. Because we've always tracked this number. We've always tracked the efficiency score and the target hourly rate, the effective hourly rate. We've been tracking this for a long time, but over the next few weeks, we're actually rolling out a feature where you're gonna be able to see these numbers over the course of time for your whole team, your whole business, and for each employee. And furthermore, the employees are gonna be able to see it too. So when they might get just get started, they're just learning how to do their job, getting trained up, first few weeks, and they're going to see they're not very efficient. They might see a 30, 40, 50% score, but over a course of time, they say they've seen 60, 70, 80%. And then all of a sudden on P4P pay for performance, they actually start making more money and getting more incentive and more bonuses because this efficiency score starts to go up. And depending on how you do your calculations inside of P4P. And again, we can help you with that. Our team, Brad, he's a cpa. He's happy to get on a zoom call with you, make sure you get set up correctly. But when you start getting above 70% is usually about the time they start making above base pay. They start making performance dollars, we call it. When they start making more money on their paycheck and they're incentivized to get out the door faster in the morning, they're incentivized to move quicker throughout the day, not take 5,000 breaks, not take three stops at every gas station. They see that is the ability for them to make more money. The business being more efficient and everyone's able to benefit because ultimately waste people stopping doing absolutely nothing makes no money for the business. The customer is not helped, and the employee. There's no meat on the bone. There's no profit for the business for them to make more money, or performance dollars, as we call it. And bonus on their paycheck for being efficient. The harder they work, the more money they can make.

As always, know your numbers. Hope that these were helpful to you. If you want to get some more Mike Andes content, head over to mikeandys.com or check us out on YouTube. That's all we got for you today. We'll see you next time.