Why Your $20K Jobs Are Keeping You Broke (Home Service Q&A)

Hey everyone, it's Mike Andes. And this is a special episode because it's actually part of a in person seminar that I recently did. And it includes not just home services, but a vast variety of different industries, including a coffee shop, bookkeeping, dog breeding. And the list continues on variety of questions I've never answered before. Hopefully they're helpful for you.

So material, what are like top three books, top three, top maybe three podcasts. Learned about like sales, marketing, Facebook, Instagram. My business uses Facebook right now, Instagram. And we have a website.

Yeah. So first in terms of books, I would say $100 million offers is what it's called. I'd recommend that. I would say from a social media perspective, if you have a local business, you really want to focus on being the mayor of your town. What I mean by that is when you go on Instagram or you go on Facebook and you post, you are marketing to the entire world. But you can't serve the entire world if you are serving coffee in Bellingham. So I don't care about anything besides what's happening in Bellingham. And so what you actually are trying to do is become like the local newspaper or the local mayor that kind of digests everything in your local community. And people look to you as the resource for information in that market. And so like on my social media, I only talk about lawn care, landscaping, home services. Cause I was like, that is what only people I'm trying to target. I'm not trying to target like politics and health. Like, I'm not going after this. I'm going after my market. And so I would just recommend if you have a local business, you go very narrow and become the local mayor of your town. So if something crazy like a massive crash happens, you're like taking pictures and you just synthesize it for your local market. They begin to know like and trust you. And the goal of social media with a home service business or a local business in general is my only goal is for them to trust me. Because they trust me, they will buy from me.

So I do plumbing. So on the side. So for like, I should probably focus on sales. So the key things for that would be, so I gotta get a website that's good. And then for like the, I guess like the thing that does like the biggest bang for the buck for like cheap, what would it be? Would it be like door to door, going to door to door flyers or.

Who are you selling to? Are you selling to contractors? Are you selling to homeowners?

I guess it would be both.

But okay, who do you want to sell to? Homeowners. Okay. What value do you offer to them?

Fixing or installing, whatever.

Okay, which one do you prefer doing.

In storage soon?

I guess Reynolds Renault's. Great. Is that usually a subcontracting position though?

Like, usually they're a contractor that's subbing out the plumbing to you.

Usually just be a homeowner.

That's just one. Okay, great. Okay. So I would be going into. I'm just going to go very tactical instead of broad. So I would be going to.

Neighborhoods that are 40 to 50 years old when I know plumbing usually starts breaking down. And when there's a market where there's a lot of money moving into it and they're doing renovations. So if you go in the middle of July down certain neighborhoods, there is contractors in every other house because they're doing renovations, decks, all sorts of improvements. I'm just hitting those markets. I'm not going to go after a new build construction. They just had their plumbing done. They're not going to think about it for 20 or 30 years. And so being very focused in terms of what my market is, most people think about what's the marketing channel I need to use, like door hangers, flyers, every drawer, direct mail, Facebook. What do I do? If you have the right audience, you can sell anything. If I sell this water to people that are parked and haven't drank for three days, they will pay more for it. So I should find that audience instead of trying to think about how do I reach everyone and try to sell them water. I just need to find the right audience. And so the vast majority of us just need to figure out where's the starving crowd that I can sell a hot dog to instead of how do I sell hot dogs to everybody? Just figure out who really needs your service and go after them. And so I would be really looking at neighborhood that have a certain. So specifically with plumbing, when people switch away from copper or certain types of galvanized the pipes, that's like a certain age of house. And so when you're hitting that is like, that's my opportunity. So I am literally looking on Zillow. When are these. This track house? These were all built in 1970. Great. That's a great opportunity. I know they're getting leaks, there are furnaces. Like I just did a plumbing company the other day and I said the only thing I wanted them to focus on was replacing hot water heaters. I said instead of telling people their ad was like tankless water heater, this and all this stuff, I'm like, no one cares about it. They care about there's a ticking time bomb in their 50 year old house downstairs that if it blows up, it's gonna cost $50,000 worth of damage. And by the way, yes, you can fix it for $3,000, but. But why not just go to this tankless model? Well, what does tankless mean? That doesn't mean anything to me as a homeowner. And so there's your upsell. It's like you have a ticking time bomb. Let's solve that right now. And so if I was you, I'd be going to markets where, you know their hot water heaters giving out based upon the date of the build. And I'd be pitching all of them on. You have a ticking time bomb in your house. Like door hangers, Door hangers, knocking on doors, every door, direct mail. You go to a very local. You do next door. Even on Facebook ads, it would work. I'm just going to target the areas of my city though, where I know the building construction is lining up with a replacement of their water heater. And I'm going to try to convince them that you don't want the ticking time bomb. I don't want to replace that ticking time bomb. You want a tankless water heater.

And then you go from a $3,000 ticket to a $6,000 ticket.

How do you increase the quality in a very, like.

Saturated.

No, very niche business like floral printing? How do I, like, I originally buy whatever originally is. We created our website and started ranking it in bigger cities. The issue is that people started thinking that we had a location in those bigger cities. So I got to make it clear on the website, like, no, our main location is in Fernando Washington, but we service all over the US.

But that still hasn't really increased our lead quality.

So I actually don't believe you have a lead quality problem. You have a lead volume, a number of leads problem that if you had enough leads, if you had a thousand leads, lead quality would be like, I'm just gonna filter them all out. And you just create filters. Like you would say on the website, are you willing to spend at least a minimum order of X amount? And you would weed people out. So lead quality is not the problem. Lead volume is still the problem. Because if you had a thousand times more leads and only one out of 10 were good, you would find the hundred. Right. And so I think it's much more a function of your offer to them. Like what are you trying to solve for Them. And really, I think the part we've talked before, getting crystal clear what your icp, your ideal customer profile is really crystallizing that and then finding out where they're at. I would venture to believe there are less than 10,000 people that can even buy from you or that you would want to buy from or that you would want to buy from you. And so that's when you have a market that small, a total address. Mark Tam. Like, when you have a market that small, you call them and you just one by one by one, hustle them.

Yeah. So what Karim's talking about is business to business, or B2B. He only has so few customers that he can even can come to him and do business with him. And if you have a very small total addressable market, I'm not going to do Facebook ads. I'm not going to go after the entire world. And even if I try to filter them down, like there's tens of thousands of them versus, like, oh, I literally have the contact list of the 100 people that can buy from me. Just go through those. So, for example, Johnny, like, there's only so many welding shops that I can work for. Great. Let's get the list of 300 in the local area in greater Vancouver area, and I'll just work my way down the list. I will email them, I will text them, I will walk into their shop. And so getting like business to business communications look very different than a business that you can sell things like products online.

Obviously you are doing that. You make more. So outsourcing to like the Philippines or India. How do you do that safely and.

Legally in terms of like the X's and O's of legally? Talk to ChatGPT. It'll give you the exact things to do. So specifically in bookkeeping and tax, your clients have to fill out a certain form in the US that allows you to be able to say, someone else is going to look at this. So we have Home Service CPAs. So, like, we have to, you know, we have other people we delegate their tax return to. We have to have them sign something saying that we're going to do that. That's the X's and O's of legally in terms like the $100 per hour, because let's say they're $20 an hour. The thing that you're taking on is management gap, right? So, like, you're not going to make 80 an hour because you have to manage them to some extent. And the challenging part with outsourcing overseas is the Management is higher because there's gaps in their knowledge. There's like words. It's like we have people in the Philippines, like we have to teach them like what lawn and grass is. So like the training gap is much higher. They don't get colloquialisms over the phones. You got to train them more. So there is always. There's cost to everything. It's not always monetary. And if you're going to get someone overseas, your costs are going to be much more in your time to train them. So it's something to keep in mind.

So is it better to hire someone in the States?

I think that if your cost financial will be greater in the States, but your cost on training will be less because they will probably have a quickbook certification. They will have English nailed down. They'll be able to communicate with the customer directly from versus through you. And so sometimes it's easier to start with on the US side before you have systems in place, because down the road you have systems in place. And a lot of those things can be. You can take the hit on the management side in exchange for the less financial.

This one I don't expect you to really know, but when you're talking about roofs and upselling or recurring, I was thinking the same thing. And she said, what would you do? If I'm breeding puppies, a Puppy's gonna live 15 years.

Hey, let's go 15 years a customer. Let's go outlive some of your customers.

Well, how am I going to get reoccurring?

People do come back to me for a second. That's years and years later.

So what service are you offering for the dog thing?

I'm breeding.

Breeding. So it's not daycare or anything like that?

It's not training.

It's not.

It's really. Basically you're breeding monkeys. And how do you upsell that? How do you recreate sale that?

Okay, so what's some of the pain, the pains of someone who has a bred dog? Like, do they ever contact you after they buy the dog?

I stay in contact with everybody.

Okay, and what are you solving for them? Like what's the problem they're having?

Yeah, we just stay in touch. And if they have problems with behavior rule or if they have any health problems or whatever, they'll ask me.

Questions. Great. So for the person who's buying a new dog, what are some of the stresses they're having? Like what are they afraid of? The dog is gonna die, the dog is gonna be unhealthy, You've bred them incorrectly. This is great. This is great. Really easy. So on a typical dog purchase. So I'm not in the dog world. What's the cost? Oh, this is all the same stuff. Lawns, roofs, dogs. Let's go. I just need to know this. How much does a dog usually cost?

Great. And okay, that's easy. So I would be trying to get $1,000 a year in recurring from every person I sell. I almost had a truck, a dog too. And so that's about $100 a month. I think that you could create a concierge service that you sell people to buy a new dog and say it is cheaper for you to have this service than to go to a vet. I am not a vet, but I am going to be able to service this dog very well because I literally made the dog. And so they have anxiety around like they haven't seen the dog for the first few months. They don't know everything about this dog. Especially if they're in first. First time dog owner instead of a first time homeowner. Okay, first time dog owner. Like they're a little bit worried and stressed. And so I would be trying to build a package that they subscribe to that you can produce value. It'd be around things like consultation in person. I would do an in person looking at their surroundings at their house and they probably have a kennel, they probably have the dog feeding station. They probably have certain things. You would do an inspection and you would sell that as part of the subscription. Every six months we come and I will assess everything. I'm going to assess the dog's living conditions, the health of the dog, X, Y and Z. And this is way cheaper than going one time to a vet. And so you're going to think of all their pain points as a dog owner and you're just going to solve every single one. But put them on a recurring subscription. So this could be quarterly or biannual. Six months visiting their house, like that's a huge value that they can't go on ChatGPT for. So there's things like health wise, they could just go on ChatGPT and figure it out. But inspecting their house is a whole nother level and I think you'd actually enjoy it. Like going, meeting them, seeing the dog again, seeing what their surroundings are. So like, I think it'd be helpful, useful and you'd enjoy it and I think you could really sell it on a $4,000 ticket to say 2% a month, come back to me and save Yourself money against the vet and I'm gonna make sure this dog stays healthy. I think it's a slam dunk.

One other little thing there. So if I'm working on a full time job, I'm working almost gonna come in Denver. It'll be after 4 o' clock.

Whatever.

Do contract. I guess I'll find out. Do contractors that okay with contractors that more okay with homeowners? Honestly probably my experience so far they're more okay with homeowners.

But contacting them after hours.

Contacting them and then working after hours. But do actually work.

I would imagine most contractors don't care about you working after hours. But you'll probably won't get a hold of them if you call them at 6pm Less likely that you have the 1% ratio.

Yeah. Cool.

I got a question.

Yeah.

So for like a business that is like a support business.

Okay so say like a bunch of.

Fat shops, super busy help for X amount of time, two a month, whatever. However long you're scheduling then so you're, you're pitching that as a business. Then a problem that I haven't figured out how to the solution for it yet is. So you have like six clients and you're their support person. They call you and they need you. What if two customers need you at the same time?

You sell priority service.

So you say, hey, here's our packaging for pricing for two weeks, four weeks, six weeks and eight weeks. And if you want a higher tier of service which is prioritized above everyone else, here's this other subscription. You sell one of those, but you're making an extra $2,000 a month for doing nothing. Yeah. Then you could also hire someone. That would be the next step. If you're getting so many leads you can't serve now you get a second and a third person that wants the priority service. You hire someone knowing that your margin is twice as much.

Yeah, I understand that was mainly an issue.

If you're a one man show, that's what I'm saying. You can only do one. If you do sell priority in the, in this case like I will drop everything and be at your shop within eight hours of any call. That is very valuable. Certain sectors and they're willing to pay twice as much. So when I say 2000, that's probably too low. It's probably like hey, there's a $2,000 package, $4,000 package, $6,000, $8,000 package. Add three grand, any of those and I will be at your service within eight hours of any service I don't think people would take that on a.

Monthly basis because maybe they can't like, guarantee any work. Like, unless they have po, they've got funding, they're not going to be like, commit to like $2,000 a month or whatever. But if it's like, for example, if it's an hourly rate, right? You would just put that in the hourly rate if they were to call you.

Because, like, they're. You know what I mean?

I 100% agree what you're saying, but what I'm trying to do is get recurring revenue and guaranteed income. Instead of. When they call you, you're like, yeah, I'm making more money for the next few hours. I want it locked in. And because you're only selling one, there's way more value. You just be honest. I'm like, hey, I'm doing this on the side. You're hiring me part time. I have other customers. If you want to be put to number one, this is the equivalent of like you go to Disney and pay twice as much to cut the line.

I got one customer that I'm willing to serve at this premium price. It's X amount per week, X amount per month, or however you set it up. And you just immediately go to the front of the line, regardless of what job I want. And that also sets up the expectation if they don't accept that, you might have to walk off the job because there's someone else that is higher priority. Because I agree with the rate thing, but the problem with that rate thing is if you're not on emergency jobs, you're not making that money. I want it to be where that's locked in. And if you're serving five, six customers, I believe there's one that's like, hey, if we call you, we want you here now.

It's a little bit too saturated to like present a company like that with, like, hire somebody directly pay me like a monthly rate when there's like a million other contractors they could, you know, call. It's a very saturated market, right? So I like that idea, but I feel like it wouldn't really work.

I wouldn't use hourly rates either. I would productize the service. So you give bundles of hours. So for example, right now, let's say you're $200 an hour. I'm not going to say, hey, I'm $200 an hour. I'm going to say, if you buy a bundle of 40 hours in a month or 20 hours in a month, or 80 hours in a month, you get a certain price and it's a bundle, which means if you don't use it all, that's fine, which means your pricing will actually go down per hour. So instead of charging 200, so say for example, if you buy 40 hours, I'm not gonna charge you 8,000, I'm gonna charge you 6,000. And in their head they're like, oh, it's $150 an hour. You know, they're not gonna use all 40 hours in the month. So you sell packaged good, like a package of hours. You see what I'm saying? And then it gives incentive for them to buy more. It locks in how much revenue you're making, so it's not as lumpy. And you know exactly what your schedule is going to look like because you're selling packages of hours. And then on top of that, you could just offer that premium service to one only customer. And I genuinely believe you would be, you would get one of five, one of 10. They're like, yes, I'm willing to pay 20% more, but we want you here within eight hours or 16 hours of us calling. But I think the bigger, the bigger option, bigger opportunity for you to stop selling per hour, sell packaged of hours and bring your pricing down, knowing they will not use all of the hours. Especially because more like on call, slash, project here, project there. Like that's a horrible business to be in your selling time. Productize the service. And then also the way to scale this is you just know your demand and how many hours on average people are using and you can forecast demand. Now you have five customers on average. They get 14 hours per month or whatever. It is much more stable income.

How can I increase my conversion rate being that like, technically my clicks for copy is like, okay, the click is like on Google Maps, go to high tide. But then how can I increase the conversion rate that they actually get in their car income the difference between that.

And like the close ratio, I would challenge the assumption they need to get in their car because all I needed to do is give me money and I can get them to give me money online. And this is where ordering online is a big part. Because your conversion rate is higher, they don't want to drive to your shop, they want a coffee. So I need to expedite that as much as possible, which is give me money and then I guarantee you they will come get it. So I would think about conversion in the form of I need a paying customer by the end of this. And when someone goes to your website, they're doing one of three things. One, looking at your menu. Two, looking for directions. Three, they're looking to buy coffee. Ideally all three of those. But I need to make those three things the only thing they see when they get to that page. I want them to order, I want them to get directions, I want them to see my menu. That's it. That'd be conversion. And then the second part was what, sorry.

What would be the close people.

Showing up, something's not on the menu, them showing up and thinking you're too expensive. So for example, how often do people walk up to your thing, see the menu and like is it too expensive? And walk out?

Your close ratio is high. Back to what we talked about at church the other day. Raise your prices. Like raising your prices during peak time because remember your asset capacity, we're hitting it for three hours a day, we're hitting it on the weekends. So having surge pricing during that time because I'm already hitting capacity makes a lot of sense. Especially when no one's showing up to my thing, seeing the prices and walking out.

And then it's also a function of how do I increase my lifetime value. That's when things like your loyalty program is important, your upsells. So I would compensate my baristas on upselling them into a second product because one product is going to get me $6 or $7, two products $15. The lifetime value of the customer just doubled and I didn't get any more leads delivery.

So yeah, that's what I would be focused on. Improving lifetime value by raising prices during surge pricing. I would be doing making it easier for people to give me money on my website. And then I would be doing upsell compensation for my baristas to get them a $6 into a $20.

All of that is like ancillary to like that answers the question of how do I get people to buy more from me. Like gift cards, you get loyalty programs, et cetera. But I also know that if you raise prices by 50 cents per drink during 11 o' clock to 3 o' clock on a Saturday and you're making an extra $100 for doing nothing besides changing the menu out.

Do you think I should tell people that I'm doing that?

No. No. Unless you start getting people saying no, this is too expensive and you say great, you can come back in two hours and it's gonna be cheaper. Because right now the other problem is your close ratio is actually lower than 100% because you have people driving in, seeing five cars stacked up and driving out. And so whenever you have that capacity limit, I am trying to reuse price as a way to push that down.

No one will notice. If they do, you tell them, hey, during the peak hours, we charge a little bit more because there was so many people stacked up in the parking lot. Great problem to have.

His face. And they see his prices, right? Yeah.

Great. Then if they ask about your pricing, you tell them, hey, during our surge hours, we have so many people here we can't serve them. So we put our prices 50 cents more per drink. And if you don't want that, just don't come during these hours. And if they put you online and say you're so like, this is what you're afraid of them posting on social media and saying that you guys are a bunch of greedy people money hungry. And then you say, have you seen our truck? We just got started. Like, what do you think this is? And everyone will be on your side anyways.

So like they can go to woods, they can go to Starbucks and pay twice as much. Like, what do you think this is? It's a small business. Like there's the worst case scenario is good for you. You would get a whole bunch of brand in house.

Installers vs subs though. I started off with subs because I don't want to do any of the ops myself. And the numbers are predictable. I got their price list. I can bid my job. So I cost of goods. I know what the growth profit should come out to.

But is that scalable? Like I guess to continue with subs.

Everything is scalable, just FYI. Here's the real question. What do you want to build? Like, what's the business going to do in 10 years? What are you trying to do? Are you trying to sell this business? Are you trying to eventually where you work four hours a day, what's the goal of the business?

Probably eventually sell the business.

So if you're trying to sell a business in five years.

And.

You'Re good at sales, how good are your operations? Have you done the roofs themselves?

I have, yeah.

Okay, you're good. Okay. Fastest way to money is through subs because you're good at sales and you don't need to build infrastructure for operations or admin. So the fastest way to build like a $20 million roofing company top line that you make 10 to 20% off of is through subcontracting. The question that becomes debatable is what size of business will you build? If you build that operation, you build an admin, you have the employees at W2 employees, the enterprise value on that will be higher because you've built that infrastructure out. And so it really just becomes, are you so good at sales, you'll build a $50 million top line revenue subcontracting business. And if you spent five years also trying to build operations, admin would only be a $2 million company, because then I want the $50 million company. But the enterprise value, the valuation that you will get on a subcontracting sales model, very different than when you own the brand, you own the customers, you own the employees, you have all the infrastructure built, you have customers coming in, that's a different model. And so your valuation, like your multiple might be on a sales, might be 0.8 times profit. Like so if you made 10 million, they might give you $8 million for the business versus if you had a W2 employees, you built all the infrastructure out, you get like 2 to 3x multiple on profit. So maybe you have a million dollar EBITDA and you make two to three million dollars on the sale. But it just depends what you're good at. Like if you're not good at admin, you're not good at operations. In five years, do I believe you're gonna build a $5 million business doing roofing? That's risky. If you're so good at sales and you're like, tomorrow, you know, you can drive leads, get people to convert and get those jobs off to someone else and make 10 to 20% off the top and you could scale that really big. I just do that. Here's the thing, do what you're good at. Because if you have the subcontracting model, you can always go back and build the infrastructure. If you build a $10 million roofing company that is subs, you go hire an incredible operations person for a quarter million dollars a year that's done roofing and built teams out, et cetera, and then just convert over. So my cousin just did this. He started off with subs and then moved over to actually having the team once he had the money to go afford a great operations person.

So get the customer. Because the customer, whoever has the customer wins. So get them first. I would probably say, like more specifically, I would probably, if I was you, go after subs, build a huge infrastructure of how you get the leads. You just dial in your sales and lead funnel and pricing and the whole nine yards. And then if you ever wanted to convert over, you'd get an incredible operations person that's done this before and build out ten 20 million dollar roofing companies. You'd hire them, pay them whatever they want, and then you'd convert it into we own the whole model now. And then your multiple will be higher on the sale.