Building a Business That Thrives Without You with Mike Andes

Speaker 1 Think of your career in 10-year swings. And if you think of that way in your 20s, you have five, six solid swings left in you.

Speaker 1 And if you actually committed yourself for 10 years, and let's just say it didn't work out, I happen to believe you would have learned so much more and gone so much deeper in that industry, your second swing would be that much more precise.

Speaker 2 Welcome to the Home Service Expert, where each week Tommy chats with world-class entrepreneurs and experts in various fields like marketing, sales, hiring, and leadership, to find out what's really behind their success in business.

Speaker 2 Now, your host, the home service millionaire, Tommy Mellow. Before we get started, I wanted to share two important things with you.
First, I want you to implement what you learned today.

Speaker 2 To do that, you'll have to take a lot of notes, but I also want you to fully concentrate on the interview. So I asked the team to take notes for you.
Just text notes, N-O-T-E-S to 888-526-1299.

Speaker 2 That's 888-526-1299. And you'll receive a link to download the notes from today's episode.
Also, if you haven't got your copy of my newest book, Elevate, please go check it out.

Speaker 2 I'll share with you how I attracted and developed a winning team that helped me build a $200 million company in 22 states. Just go to elevateandwin.com forward slash podcast to get your copy.

Speaker 2 Now, let's go back into the interview. All right, welcome back to the Home Service Expert.
I got a special one for you guys today.

Speaker 2 Mike Andes is here. I've known Mike for a long time now.
Spoke at your event, I don't know, six years ago now. Yeah.
Has it been that long? I think it's been three or four. Three or four.
Time flies.

Speaker 2 The funny thing is, is Mike's a badass when it comes to landscaping. And I had a landscaping company in Michigan and Arizona.
And I love landscaping because

Speaker 2 there's a lot of money to be made in landscaping. It's kind of hard if you're just mowing lawns with a 22-inch Honda.
But once you really master it, it's something that a lot of people could get into.

Speaker 2 And you had a lot of successful people at the event, but you, you're a busy man. You've got your own CRM.

Speaker 2 You've got Augusta lawn care.

Speaker 2 You've got anytime fitness.

Speaker 2 And you're the host of your own podcast called the Home Service Millionaire Podcast. Very similar to mine.
Yeah. But mine's a home service expert.

Speaker 1 Yeah, I still remember way back in the day listening to your podcast when I was just my first location before we franchised, did the software, anything like that.

Speaker 1 And I remember very specifically one time, I think I might have shared with this you when you went on my podcast, and that was I was at a camp and the only thing I wanted to do though was go like listen to your podcast.

Speaker 1 I just found it and so I was just binging on it. And so I appreciate everything you've done for younger guys like myself in the industry.

Speaker 2 How old are you these days?

Speaker 1 29.

Speaker 2 29. Yeah.
Well, that's awesome because

Speaker 2 to get started and be as passionate as you were, when did you get into the business?

Speaker 1 So I was 11 years old when I first started pushing a lawnmower around.

Speaker 2 11 when you started pushing it and then you started

Speaker 2 Augusta in 2014. Is that right? Yep.

Speaker 1 So I was 18 when I started. I dropped out of medical school because I went to college when I was 13.
That's when I started. So I dropped out of medical school at 18 and started Augusta Longhair then.

Speaker 1 And then five years later is when we franchised.

Speaker 2 Okay.

Speaker 2 And so you've been in the franchise industry about five or six years. Yep.

Speaker 1 Going on our sixth year now.

Speaker 2 There's a lot of people that want to do franchises. Everybody and their brother's like, I think I should franchise.
I'm like,

Speaker 2 why? Yeah. Like, you better be the best of the best in like five markets, take market share.
What would you tell somebody knowing what you know now?

Speaker 1 Yeah, like

Speaker 1 I would say if you're doing it just for the money, usually it's actually not the best and fastest route to money.

Speaker 1 Usually if you have a good model and you don't have a huge amount of startup capital that is required to start in the service industry, it's actually just faster to cash in terms of just corporate expansion.

Speaker 1 You have more control. You don't have to worry about the aspect of training new franchisees and that whole aspect of liability and insurance and the legalities of it.

Speaker 1 Also, for anyone that's like tempted by it, I would also caution, like, look at the stats of the number of franchises that actually succeed.

Speaker 1 There was over 400 that were started last year in the United States. And statistically speaking, less than six of them will get to 100 locations.

Speaker 1 And the vast majority of franchises will not be profitable until they pass 100 locations.

Speaker 1 And anyone that says otherwise usually is stripping a lot of profits in terms of royalties away from the franchisees and not supporting them at the level that's required for them to be successful.

Speaker 1 So it's just one of those industries very difficult.

Speaker 1 The reason I got into it is because I wanted to get as much expansion and just the, like, our goal is to change the level of professionals in the industry.

Speaker 1 And as you know, like we talk behind a microphone or make videos, people just don't listen. Even if it makes perfect sense and we have all the data.

Speaker 1 And so I only found that when I competed with them, they would listen. So when we talk about pay for performance and P for P or we talk about estimate videos, we talk about knowing numbers, et cetera.

Speaker 1 It was like, hey, like, that's a nice influencer or consultant or someone who puts on an event but it once we start competing with people we actually see who's joining the software we can see the impact that like we answer our phone 24 seven and so like that puts pressure on them to do the same thing and to your point like with landscaping in general like we have a bad rap you know we are the guys who show up if maybe we show up and if we do it's in cut off short shirt and you know beat up truck can we change that level of professionalism and i think the only way to do that is change the expectation of the customer and the only way to change the level of you know what the customer's expecting is much faster expansion.

Speaker 1 That's why we went the franchising model. But I would just say for most people, like it took me three years to make as much revenue

Speaker 1 in the franchise system for me personally, then it took me three years to get just what my revenue from my first location was making. And so

Speaker 1 if you're in a sprint to make more money, franchising is many times, it's a completely different business than usually what you're actually doing, the service.

Speaker 2 100%. You're no longer in the landscaping business.
You're in the turnkey business. And by the way, what I've noticed, and I've spoken to probably 20 different keynotes for franchises.

Speaker 2 And

Speaker 2 when I talk to the franchise or they're like those four companies, they're our bread and butter. Yeah.
The other 60 or whatever it is, they're barely getting by. Yeah.

Speaker 2 Because they're not bought in, blah, blah, blah, blah, blah. But here's the thing.
It would be very hard to get into my franchise. I would not sell you a franchise.
You know what McDonald's does?

Speaker 2 They make sure you're a millionaire. You got to go to their McDonald's school for a long time.
Like, you can't just say, hey, I'm worth a billion.

Speaker 2 I want to buy a bunch of stories. They're like, no.
You got to learn everything from A to Z.

Speaker 2 What would you say

Speaker 2 about

Speaker 2 how many franchises do you have?

Speaker 1 Just under 160, 160. Right around 100.

Speaker 2 So you got 160. How many of those would be,

Speaker 2 would you consider just murdering it? Like just out of the park? Like you would,

Speaker 2 they're emulating what you've, what you build.

Speaker 1 It's the classic 2080, right?

Speaker 2 8020, well, yeah, the Pareto.

Speaker 1 You have 20% of the owners that are probably making 80% of the profits. And so what we've really focused on the past year is, like, how do we make it dummy-proof?

Speaker 1 And I don't mean that in the way that people that use the systems are dummies, but rather, how do we take all the variables of their success away?

Speaker 1 Because what you're doing is you're like, what is the 20% doing? And then can we make that enforce it for everyone else? So whether that be, okay. Answering your phone is important.

Speaker 1 Well, we're going to answer your phones for you. We're going to run your payroll for you.
We're going to run pay-for-performance for you.

Speaker 1 And then a matter of like what most recently we've really been going after is like we know from getting someone just from zero to 500,000 is the biggest hurdle.

Speaker 1 If we do that, we have exactly zero people who have ever quit the franchise. So getting them to that level is like the activation point that we have to focus on.

Speaker 1 And so the number one thing from zero to 500,000 is like sell, sell, baby, sell.

Speaker 2 But marketing requires that. Are they outbounding? Are they not going to what? What do you do as far as marketing to get them to sell? Because you can't have a sale without marketing.

Speaker 1 Right. And so what we've done in the past is more or less, here's the guide for your Facebook ads.
Here's the guide for your Google ads. Here's the templates that you use.
And we have it all there.

Speaker 1 But it's more

Speaker 1 done for you.

Speaker 1 It's not as much done for you. What they want is like, we want to pay you, and we want you to give us customers.

Speaker 1 And so really, the thing we're focusing on the next couple of years is, how do we actually, can I actually tell you, hey, when you start, you're going to get 200 customers within the first 60 days, and here's how much it's going to cost.

Speaker 1 And then we have to, like, we take on the shoulder the burden of actually figuring out the customer acquisition cost, your cost per click, and your cost per lead.

Speaker 1 Because that's the part that most most people come into this business and they don't know. And so even though we have the tutorials, I can track and see still half of them don't put up

Speaker 1 their Google tracking code. Still half of them don't do their Facebook pixel, even though I show them how to do it.
And so we're really trying to,

Speaker 1 franchising is a matter of like you're giving up some control for the constraints that hopefully is leading to success.

Speaker 2 See, you know what is hard for me is you just said, we're going to handle the payroll. We're going to do the call center.
Now we're going to handle the marketing. It's like,

Speaker 2 we're going to do the purchasing. You're going to buy my stuff.
You're going to buy my best soil, my best fertilizer. You're going to buy it from our vendors.

Speaker 2 At what point are you like, man, if I did this on my own? Number one, you got all these CC and Rs, like this covenants and restrictions, and you got all these things where there's like

Speaker 2 someone does something wrong, runs over a dog or a cat, and like you're in the news. I get funny.
Your whole franchise gets screwed. You're the franchise or gets busted.
Yeah.

Speaker 2 Is that really like going back? And I know what you mean by changing the client's perspective of what to expect from a really good landscaper.

Speaker 2 But I think what you're going to realize is, wait a minute, now I'm doing their hiring.

Speaker 2 Now I'm training them on a corporate level from the franchise or that we're flying them out to the franchise.

Speaker 2 And I think every year that goes by, you're going to be saying, well, now we're doing all the purchasing of the vehicles.

Speaker 2 And now we're actually offering financing through the SBA and doing the handling that for them. And now we're actually doing, like,

Speaker 2 after all this is said and done, and you're still going to be the 80-20 rule, by the way. It's just, it's the way it is.

Speaker 2 Is it worth it?

Speaker 2 And I'm not saying if it is or not, and I don't think you know that yet because I think it's going to take you a decade, and I think you're going to be successful no matter what you do.

Speaker 2 But I think you're always going to wonder in hindsight, man, was the juice worth the squeeze? But either way, you're going to do very, very well.

Speaker 1 You know, I would 100% agree. Like, the corporate expansion route is easier because I don't have to worry about all the other parties involved in the decision.

Speaker 2 Yeah.

Speaker 1 So, like, when I make a decision for the franchise a level, I am not thinking about what's best for my locations because I own personally locations in the systems.

Speaker 1 I have to think about 160 other people and their opinions and get their buy-in, even though I might have all the data and know 100% this is the right way, the way I have to roll that out is completely different.

Speaker 1 And so I think it comes down to like, what is the goal of franchising? And if it's simply the money, I don't believe it's the right path.

Speaker 1 It's much more a matter of, I don't believe I could have the level of like 150 locations, 160 locations now that we've done in five years if I was doing all my own capital.

Speaker 1 So the advantage from a franchisor's perspective is I can access the capital of other people

Speaker 1 and they actually pay to be in that system.

Speaker 2 Yeah, what percentage do you take of their revenue?

Speaker 1 Just a flat monthly fee.

Speaker 2 So it's not a percentage of revenue?

Speaker 1 No, correct.

Speaker 1 So it really is incentivizing them to scale up, you know, because it's a flat monthly fee of $1,200.

Speaker 1 And so anything in addition to that is simply what they would, we charge per minute at our command center for all those back-end admin tasks. But those are are all completely optional.

Speaker 2 So the way I picture franchise, and by the way, this podcast is not all about franchising. I just, I think it's a good starter point.

Speaker 2 So I think about franchising and I go, okay, if I charge just 6% of revenue, that's fair.

Speaker 1 It's less than most. Usually 6% and like a 2% marketing fund.

Speaker 2 And then what I would charge them is a bunch of shared services. Like, you're going to pay me for my call center, but it's better than yours.
You could have your own, but ours is better.

Speaker 2 You're going to pay me for the CRM.

Speaker 2 You're going to pay me for this. You're going to pay me for the vendors.
You're going to pay me for this. And

Speaker 2 what I probably do too is you're going to use my real estate. I'm going to buy the real estate.
You're going to put it like McDonald's does.

Speaker 2 But that's next level. That's expensive to do.

Speaker 2 But yeah, I thought a lot about this because people are like, would you do a franchise? And I'm like, yes, I would, but I was too far down owning A1 to want to do that.

Speaker 2 But if I did a franchise, I would go, I need to own payroll. I need to own recruiting.
I need to own merchant service. Every aspect and just tap into the money.
Yeah.

Speaker 2 Because I can scale the people that do franchising well like i happen to know very well the new ceo of neighborly okay yeah his name's mike davis yep and we were on the phone the other day and he was asking me about a few tools we use he used to be the ceo of lpac that's how i knew he had me always come speak at his events did he come in recently after the kkr yeah okay he just he just onboarded like two or three months ago okay okay cool dude is sharp as a tact and he's like

Speaker 2 You realize, Tommy, out of all my franchises, we only control less than 1%. He goes, if we get to 2%, we're worth 24 billion.
And he was explaining to me all these things.

Speaker 2 And I'm like, yeah, you know that the home service is well over a trillion dollar industry. Yeah.

Speaker 2 Just HVAC Columbia Electrical is 200 billion. That's crazy.
Yeah. When you include home improvement and home service, it's nutty.
Yeah.

Speaker 2 And it's the golden years for us. Yeah.

Speaker 2 So we talked a little bit about franchising.

Speaker 2 Landscaping is a tough industry. What do you think was the key? And landscaping is a really open.
If you're talking about just cutting lawns versus, I know guys that charge $90,000 for landscaping.

Speaker 2 They just, they deck it out. They do like their arborists.
They set up the trees and they do the bushes and the rocks. And

Speaker 2 sometimes they even interact with the pool and whatnot. It's the curb of pillow of the home.

Speaker 2 But what was that stepping point that you were like, this is more than just a career? This is actually going to be a massive, massive company.

Speaker 1 Yeah. So it was about three years into starting Augusta Lawn Care.
I was the classic working 80, 90 hours a week situation. Didn't have systems and procedures.

Speaker 1 I got underneath the dump truck and was turning on the PTO of an old dump truck, as a manual line had broken from inside the cab. PTO is a power takeoff, makes the thing spin, dumps the bed.

Speaker 1 My hoodie got caught in that. And so basically I was in the hospital for two weeks recovering from that and realized my business had no systems.

Speaker 1 And fortunate enough, I didn't have a family, I didn't have kids, I didn't have dependents, but if I would have, I would have gone bankrupt.

Speaker 1 And so I realized that the business was personality dependent and not system-centric. And I was on the hospital bed with my phone, FaceTiming my crew to walk through the next project.

Speaker 1 And so from that time, two weeks later, I started a landscape business course and just started making videos online about like, hey, here's what I'm doing.

Speaker 1 This is what worked and this is what didn't work.

Speaker 1 And so that's really why, to me, even when it comes to franchising, yes, the money is not the fastest way when it comes to franchising, but being able to see these owners that that don't have systems in their business get the systems and then turn things around is like, that's all I care about.

Speaker 1 And so, you know, to your point, there's landscapers that do $90,000 projects, but sometimes I'm labeled as the guy who just tells you to do the simple services.

Speaker 1 When in reality, it's just, I want you to be able to build a business that has systems and procedures. And for the vast majority of people, it's easy to create systems for simple and

Speaker 1 standard services instead of complex and custom services. Yeah.
And so I'm speaking more to the masses when I speak about like systematization and like run build a business.

Speaker 1 Like build to sell is a great book. I think about like build to leave.

Speaker 2 John Warlow, yeah. Right.

Speaker 1 Build to leave that thing and let it run without you. And many times the systems built to do that is through simplification and standardization.

Speaker 2 100%. That's when I met Al Levy, the seven-power contractor.
You know, I'm building a house right now.

Speaker 2 I'm building two houses, one in Idaho, which is Sam Point on Ponderey Lake, and then one just on the north side of Paradise Valley Mountain. I'm sorry, Camelback Mountain.
And

Speaker 2 my brother-in-law came into town and he goes, listen, I think we need help. He goes, there's this company I heard about.
They're called Advocates.

Speaker 2 The company's called Advocate. And they're lawyers, but they also,

Speaker 2 I met this guy several months ago, and he's like,

Speaker 2 there's a process in how you build a house. He goes, you're going to have every single price in advance.
There's going to be a contractual agreement. We're going to get five bids for every sub.

Speaker 2 He goes, I'm going to save you millions and millions and millions of dollars. There's going to be a lot of money they have to pay if they don't start on time.
We're not going to get held up.

Speaker 2 We're going to use people with an RLC that have been around 20 years, with a proven track record, that's going to make your house more valuable because they're sought after.

Speaker 2 And I'm watching this process come together. And I should have known this, but I thought building a house, man, you know, you just one brick at a time, you start and you get the next.

Speaker 2 And I'm not a subcontractor by any means or a contractor that subs out. I wasn't going to be the guy.

Speaker 2 But when I watched the precision and the process, and he's like, you got to have an interior designer after you pick the architect, but before you you pick the builder and the order of operations, I mean, I'm blown away.

Speaker 2 And I'm like, man,

Speaker 2 a lot of me feels stupid for not finding this guy sooner. And walk like, we're already halfway done with

Speaker 2 my process here in Idaho. And the guy's doing great.
It's my buddy Mitch, but ultimately, I still did not have a price on the final project, which is an issue.

Speaker 2 And he promised me 800 a square foot. We think we're going to be at 1,000 now.
So there's got to be some type of,

Speaker 2 you know, you told me this. Yeah.
So we're redoing the contract.

Speaker 2 It's complicated, but that's a good example is it's a hard process, but once you've done thousands of them, it becomes easy. And garage stores, we service 20,000 homes a month

Speaker 2 because we built these processes.

Speaker 2 We got manual standard operating procedures, checklists, a checklist on everything with a CRM that captures the proof with a data integrity team to make sure everything was right.

Speaker 2 Some clients say, I don't think you replaced my mom's springs. I think it's the old springs.
We got pictures of the before and after. We've had that happen a dozen times.

Speaker 2 We don't think you did the work. We were out at grandma's house.
Oh, no, here it is, time-stamped and everything.

Speaker 2 So, like, there's a process for everything, including how do you do PTL? Are you allowed to have tattoos on your face? What happens

Speaker 2 if there's an issue with your payroll?

Speaker 2 So you had all the answers before. Now someone else has the answers.
And when you're not there, they could run the playbook. Right.
Yeah.

Speaker 2 I love that. What other pivotal things did you learn just

Speaker 2 that third year in business when you were in the hospital for two years or two months, two weeks?

Speaker 1 Yeah, like ultimately, you know, you talk a lot about like the importance of the people. Like without the one or two key people that I had at that time, the business would have gone under.

Speaker 1 And so realizing that I had to build a business that I could not be there for a week, two weeks.

Speaker 1 I could indefinitely not be there and it still run was really what was right for the business, but also right for the team.

Speaker 1 Because I think for someone that wants to be a good steward of whether they're religious or not, what God has given you or what you are responsible for, it is a matter of build the business in a way that if you did get hit by a bus, or in my case, like almost died, that the team doesn't have to worry about their job.

Speaker 1 Like, is that really being a good steward of what you have?

Speaker 2 Well,

Speaker 2 there's a lot of people that think it's Jim Collins built to last, where

Speaker 2 certain CEOs, founders, owners, whatever you want to call them,

Speaker 2 they want the business to crumble without them there. They want to show that they're the most important person.

Speaker 2 I think most business owners want people to be like, without me, you guys can't function.

Speaker 2 And I think that's a weakness.

Speaker 2 Why do you think a lot of people are like that?

Speaker 1 We're looking for meaning and purpose.

Speaker 1 And that's why we started

Speaker 1 our business many times.

Speaker 1 But if the only purpose for you going to work is to simply keep, turn the lights on and punch in timestamps and make sure your crew shows up on time, the business will likely not scale.

Speaker 1 And so the reason we build systems and procedures is for it to A, run without you, and B to scale the thing.

Speaker 1 And so if you're, if you have the desire to either have the business not run your life and you're able to actually run your life inside of the business or you're trying to scale the thing, it is in your best interest and the best interest of your team and of the business to be able to have these sort of SOPs and standards.

Speaker 1 And

Speaker 1 it becomes where once the business can run without you, then you can step away from it. And we get locked up in manager mode of like, okay, you do that and you do this and you do this.

Speaker 1 And okay, you make sure the truck is done. And we're constantly managing.
But really, if you're going to, to your point, build a house, it's the architect that steps away from the house.

Speaker 1 They're not managing. They're not managing the labors.
They step away from the house to architect.

Speaker 1 And so if you're actually going to have a massive infrastructure and a massive skyscraper, you need architects.

Speaker 1 You don't need as many labors as the people actually thinking about how do we build this structure. And that can only be done once the systems are in place

Speaker 1 that allows the business to run without you.

Speaker 2 How do you maintain that the systems are being followed?

Speaker 1 To your point, technology is a huge like up

Speaker 1 technology was the next thing yeah and and so um i i truly believe like the past like if you look at the 2010s a great home service business many times the distinguishing factor is do you have a great looking website and you answer your phone if you did that you are ahead of like 95 98 of home service business owners and so i believe like in the 2020s it'll be the determining factor will be technology and software and i think in 2030s is when robotics and ai will actually impact our industry the most because so much of our work is manual.

Speaker 1 And I believe that the software and parts of AI on the admin side will be really important in the next five years as we head to 2030.

Speaker 1 But as we go into 2030s, like it will be the robotics companies that will start to take over this very fragmented market. Oh, yeah.

Speaker 1 This is why venture capital and private equity are just salivating at home services because it's so super fragmented.

Speaker 2 Well, it's fragmented. And the fact is, during COVID, we were deemed essential when hotels, now salons, movie theaters,

Speaker 2 everything was closing down.

Speaker 2 And they looked at us and they said, maybe these guys have a business. And service Titan just went public last week.

Speaker 2 I mean, literally looking at this, we're looking at like, wait a minute, they show up, they have key performance indicators, they have outcomes and key results, they have training.

Speaker 2 And if you look at my service titan,

Speaker 2 it it goes like this every year. It's never gone down.
It's never had a bad year, never had a bad month. I mean,

Speaker 2 31 days is better than 28, I figured out.

Speaker 2 And I look at working days versus weekends, even though we work seven days a week.

Speaker 2 Yeah, you're right. Technology is going to be a changer.

Speaker 2 I was talking to my C-suite today, and I go, I'm kind of worried about AI, not in a bad, dark way, but I'm like, I think it's going to be like whoever wins.

Speaker 2 And I got, there's a strong, strong possibility A1 will be, continue to be the largest because people come to me because of what we've done online and our Facebook groups and the way we've spoken at events.

Speaker 2 They come to me when they've got something.

Speaker 2 And I'm the first one to research and implement.

Speaker 2 And I do think there's not going to be a whole lot of winners. There's going to be a couple of winners and a whole hell of a lot of losers.
And you better join the winners quickly.

Speaker 2 That way you can participate.

Speaker 1 And if you look in history, like technology, whether you're talking 200 years ago with like steam engines or just the way war is fought, or bow and arrow and then cannons and then what.

Speaker 1 Yeah, and even more recently, when it comes to business, like you look at the, in 2005, 2006, 2007, the cab industry, no one had more than 1% of the market.

Speaker 1 Now, 76% of the U.S. market is by two companies, Uber and Lyft.

Speaker 1 And so this is what technology does. Well, what happens?

Speaker 2 It's a big disruptor.

Speaker 1 The iPhone came in

Speaker 1 2007. And then 2014, these companies started to just grow and scale and grow.
And capital came in with it once the technology was ready for it. And so that's what I think will happen in home services.

Speaker 1 Because in landscaping, for example, there's 600,000 landscapers in the United States. And so the biggest company is public.
It's Brightview. They do primarily commercial, almost 100% commercial.

Speaker 1 And they control less than 2% of the market. And so I truly believe consolidation will happen once technology and capital meet.

Speaker 1 And so even when it comes to the franchising, I'm not really in it for the

Speaker 1 software side or the franchising side. It's like, I think it'll take the capital and it will take the distribution with software to be able to actually take the market share.

Speaker 1 And it's exactly the same thing you're doing.

Speaker 2 Well, yeah, that's what's so nice is like when you win at the capital game and you've got access,

Speaker 2 it's so easy. Like right now, our database is probably one of the largest in home service.
Not to mention, like, I'm already looking at electric vehicles.

Speaker 2 There's so many opportunities, but I'm jumping on all of them right away.

Speaker 2 With AI, man, there's so much, the call centers and the way we dispatch and like the marketing, like the Power BI thing we built, it costs millions of dollars, but we've got more data to make decisions.

Speaker 2 Now we're applying the same things towards recruiting. And it's like, we're playing a different game.

Speaker 2 More people are like worrying, like, how they're going to buy their parts better. I'm like, how are we going to do regression testing of all the data? Right.

Speaker 2 That's why I'm like, listen, I don't really worry about private equity because private equity sucks at blue-collar industries because they don't know how to treat people.

Speaker 2 And I think they need us more than we need them because there's a lot of PE out there.

Speaker 2 There's a lot of money, but there's not a whole lot of people that know how to treat people that didn't have a mom, you know, like some of our my coworkers,

Speaker 2 you know, some of them didn't have the greatest upbringing. And I don't think white-collar people are going to get into home service anytime soon, like to go do the work.
Yeah, no.

Speaker 2 And that's why, you know, a lot of my guys make six figures. Yeah.
And I think that's okay because no one else wants the jobs. Before they were a dime a dozen.
Now,

Speaker 2 very few people are getting into the industry. So now you got to pay them more because there's not a lot of them out there.
Right. I mean, don't get me wrong.
I was a landscaper.

Speaker 2 I know it's hard to pay some landscapers six figures, but why put a cap on what they could make if they could outproduce anybody?

Speaker 2 You know, the pay-per-performance side of it is don't limit it.

Speaker 1 Yeah, 100%.

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Speaker 2 Now let's get back to today's episode. What did you find out when you started PayPal Performance? What were your takeaways?

Speaker 1 So, yeah, Paper Performance was basically a matter of when I first started, I did it as a necessity.

Speaker 1 We were basically break-even at best, you know, a seven-figure company, but nonetheless, break-even at best.

Speaker 1 And it came as a result of one of my employees coming and asking for a raise because, of course, I did not have a system around how do you actually give raises to somebody.

Speaker 1 It was just simply a matter of like when I needed more people to stick around, I'd probably give out raises to keep people around.

Speaker 1 He asked for a raise, he probably deserved it. He was making less than other people inside the business.

Speaker 1 And I just walked away from that conversation knowing I did not have the money, could not give him the the raise, and said, we're doing this. Because it's something that I think everyone wants to do.

Speaker 1 It's like it makes total sense logically, but then you have 10 different reasons why it won't work for you.

Speaker 1 Everyone has that. And so in Landscape, it's like, well, if you go too fast, if they go too fast and they start making mistakes, then now you're incentivizing them to start making mistakes.

Speaker 1 And it's like, okay, well, then let's fix that. It's a yellow slip system.

Speaker 1 If they make the mistake, they have to go back and fix it. Also,

Speaker 1 it can come out of their bonus if they do damage cases. If they lose the customer, it can also come out of their bonus.

Speaker 1 Okay, well, what happens if they got to sharpen the blades or they got to change the oil? Okay, well, then we're going to have no non-billable time. Okay, let's bake that in.

Speaker 1 Okay, what happens if there's one person that's really, really skilled on the crew and the other people are less skilled? How are we going to handle that?

Speaker 1 So there's all these little variables that people have as to why they can't switch to P for P.

Speaker 1 And many times that's what keeps them from going that direction. And they just switch back to hourly because it's honestly lazy.

Speaker 2 Well, there's another problem. I will say this with data.
Like when you're doing pay-per-performance, if you screw up the data at all,

Speaker 2 then they don't trust you you and they're going to quit because they're going to think you're disingenuous. I think people have a hard time tracking.

Speaker 1 Right. But I would go back to, I still think it's lazy because the reason you don't have the data is not because it's software not to do it, not because

Speaker 1 you're incapable of doing it.

Speaker 1 It's because you don't want to do the work to go get the data or build the systems to collect the data, or you don't want to spend the extra two minutes a day to track the data or create a report.

Speaker 1 And so, yes, it is easy to say, how long did you clock in for today, multiply that by an hour late, and give someone a paycheck? And because of that, we keep doing it the lazy way.

Speaker 1 And then we wonder why we don't get any better results from our team. And if they're not compensated like an owner, pay for performance, and they don't have the information of an owner, i.e.

Speaker 1 open book management, how in the world do we expect them to work like an owner? Yep. Because that's what they lack is information and compensation.
And so that's the part I get fired up about.

Speaker 1 Because like, for example, we have the P4P software to track.

Speaker 1 um you know this sort of thing to help the them save the time and track this stuff and so i can see that less than 15 of people that sign up will actually implement it and you give them all the tools and everything, but there's always that one thing.

Speaker 1 Well, we do some jobs by the hour, and so we can't really do pay-per-perns.

Speaker 1 Or we do some jobs where it's like, you know, by the square foot, or we can't necessarily adopt pay-for-performance because these multiple, or we do commercial.

Speaker 1 20, 30% of our work is commercial. We can't really mix that in.
So there's always a reason why you can't do it, but is it just laziness?

Speaker 1 Because that's why I find many times, instead of just creating a system.

Speaker 2 And again, it has a lot to do with incompetence. Like, I don't think people have the brain.
They don't even know how to use an Excel sheet.

Speaker 2 I I mean, no, no offense, they just weren't schooled to do this stuff. Like, literally, like, if I look at a pivot table, I'm not the guy to go create this complex pivot table.
Right.

Speaker 2 Uh, I'm not going to go redevelop and code something.

Speaker 1 But I would argue that you'd probably be the type of person to go on YouTube and figure out if you knew your business depended on it.

Speaker 2 I would, but look, at the end of the day, I can't say that about everybody. I mean, I'm the biggest fan of paper performance, but I made a lot of mistakes.
Here's the deal:

Speaker 2 I've made really, really big mistakes. So, here's what I've learned.
When you do paper performance, start out with one guy,

Speaker 2 the most,

Speaker 2 the most important person that'll get the rest of the people to follow. And say, this is not permanent.
We're going to test this stuff. I went over last three months of your work.
Yep.

Speaker 2 And I got an idea. We're going to try out.
And I'm going to pay you whichever one's more each week.

Speaker 2 And then once he's making more money, but you know you're making more money and you knew you, you know, this, it's got tried and true. We tried it for 90 days.
Everything's working out great.

Speaker 2 You have him deliver it to the team. And they're going to figure out a way to break it.
And that's okay. I used to call two guys in my company every time I wanted to break the way we pay.

Speaker 2 And they figure out a way to break it. Like I pay them to figure out how to break it.

Speaker 2 And now I watch Pay for Performance and they're like, well, what if a guy makes more than you? I'm like, there's a lot of people that make more than my salary. Yeah.
Like they make more than me.

Speaker 2 And in sales, you're allowed to. But I get the enterprise value of the company.

Speaker 2 And by the way, I don't care what I've never logged into payroll to see how much I make. In fact, I've never looked at my W2 or 9 or whatever.

Speaker 2 I don't know how to look at how much I make. I just trust that it's coming through payroll.
Yeah. I don't make any draws anymore either.

Speaker 2 I literally am building the enterprise value of this company. That's what I think a lot of business owners screw up: they live off the business.

Speaker 2 They take these draws, they join these clubs, they got the cars, they got their wife and their kids on payroll, and then they go to sell and they're like, why isn't my business worth anything?

Speaker 2 Well, you should have built the sell, like John Warlow says.

Speaker 2 So, what would you say about that? Instead of

Speaker 2 divesting out of the business and picking up that nice house and having the nice vacation house and having two Mercedes and having a Harley and going to Sturges and everything else.

Speaker 2 What if you just said, I'm going to build this business as fast as possible for five years, sell 70% of it, roll the 30, work there for another three or four years.

Speaker 2 I'm going to walk away with millions and millions and millions and millions and millions of dollars.

Speaker 2 And then I learned so much during the process, I could go start five of these businesses because now I got money to work with.

Speaker 2 Everybody that I know says, oh, no, I'm going to do this for at least 10 more years. I'm like, okay, so you're going to miss your kids growing up.
Cool.

Speaker 2 Yeah.

Speaker 1 What do you think? It's the instant gratification part. As soon as the first level of that success happens is usually when people take chips off the table.

Speaker 1 And so people aren't willing to hold their breath of the five or 10 years. And so I really encourage, like,

Speaker 1 think of your career in 10-year swings. And if you think of that way in your 20s, you have five, six solid swings left in you.

Speaker 1 And if you actually committed yourself for 10 years, and let's just say it didn't work out, I happen to believe you would have learned so much more and gone so much deeper in that industry.

Speaker 1 Your second swing would be that much more precise.

Speaker 1 And if you think of it that way, in years two, three, and four, when you have no evidence of success and things aren't working out and you aren't making money, you'll stick with it.

Speaker 1 And then when you're in years six, seven, and eight, when you start to see success and have money, you'll stack it aside.

Speaker 1 Because every time I see the Mercedes or the boat or whatever that someone's purchased, I know that 30 to 40% of every dollar they made before they made that purchase went to the government.

Speaker 1 And if that money would have just been kept in the business and built the enterprise value, what would have been a dollar extracted, 30 cents gone to the government, and then they keep 70 cents is now a dollar invested in the business that becomes $5 in 10 years or five years.

Speaker 1 Yeah.

Speaker 2 I will say people overestimate what they can do in one year, underestimate what they can do in five.

Speaker 2 And I will be, I just want to say a little caveat here is most people say I reinvested in the company. The fact is they're not profitable.
Right. They invest in the wrong things.

Speaker 2 They're on cash accounting. You should be on accrual accounting when you're sophisticated.
Otherwise, you can't even get a loan. You can't get an SBA loan.
You can't get a loan to grow.

Speaker 2 You can't get a loan on your building, to buy a building. You can't, like,

Speaker 2 if the financial side is what most entrepreneurs are missing.

Speaker 2 If they knew the facts with an FP and A, financial planning and analysis, I got three full-time people that do that.

Speaker 2 And I think it's so important to understand the numbers. And I'll tell you this, compared to my CFO, I'm useless when it comes to financials.

Speaker 2 Like, he'll understand below the line, above the line, CapEx, all this random stuff that just beyond me. He's with, he goes every six months for three days with 100 other CFOs.

Speaker 2 Once a week, he hangs out and learns the newest, what's going on with the gap accounting and everything. Like, there's no way I can keep up.
He's way smarter than me. And I like this.

Speaker 2 Imagine if you walked into a room and you had a big business and you said, I'm smarter than every one of the people that work for me in every single aspect. That means you fail as a leader.

Speaker 2 What have you found when you hire people that are better than you at certain things?

Speaker 1 Yeah, well, so most recently with the software, I made massive errors in trying to scale a software company without a huge amount of experience.

Speaker 1 And I did did that with a team that had never done it before. And so I kind of think of it as like, if someone is a, is a cultural fit, that's like 101.
That's like hiring 101, that is culture 101.

Speaker 1 Business 101 is cultural fit. Then if they have experience, 201.
But the 301 level of hiring, in my opinion, is been there, done that. And then what I always say is like, expect to pay accordingly.

Speaker 1 Yep. Right.
And that was the mistake I've made always in the past.

Speaker 1 Instead of, I have always taken someone at the 101 level and trying to try to invest and pour into them and go, and that can take five, six years, and it's painful.

Speaker 1 Or you just pony up and you pay what they're worth and you go to the 201 level or better yet, you go to the 301 level.

Speaker 1 And so that was the painful thing I had to learn this year was instead of trying to cobble this thing together, make it profitable immediately, I need to go get someone who's taken an IPO as a CTO and bring that person into the company.

Speaker 2 And that's not going to be cheap. No.

Speaker 1 You know, I remember signing like for the, on their wage agreement, and like, I made less than this year.

Speaker 1 Like, my take-home pay was less than what i'm offering this person oh yeah and they're giving equity away etc and so like the idea like when you look at elon for example he owns 20 of tesla and you look at bezos he owns nine percent of amazon yeah 8.6 and then uh even mark zuckerberg owns like 13 of facebook yeah jensen yang of of of uh nvidia owns uh four percent i think it is of nvidia and so it's like Do we think so small that we don't get the big person that's done it before?

Speaker 1 We don't give away stock options. We don't give away equity.
We don't give give these other people the opportunity. Because if you don't give them that opportunity, that 301 level, you will lose them.

Speaker 1 And that was the thing I had to learn. I made so many mistakes around this time and time again.

Speaker 2 Equity, it's called an EIP equity incentive program. It could be called Phantom Shares.
It could be called profit units. There's a lot of names.
It could be called stock options if you go public.

Speaker 2 But every smart company on the planet knows this. But in home service and home improvement in the blue collar industries, we're like, no, it's all mine.

Speaker 2 And we'd rather have the whole pie, but it's tiny. I'd rather take a small sliver

Speaker 2 and give these slivers away and give away 30, 40% of the business. In fact, once you sell and take chips off the table, there's a company in Tongue called Parker and Sons.
He does 300 million a year.

Speaker 2 He's on his fifth turn.

Speaker 2 I mean, it's crazy to me. And once you learn how to buy and sell businesses, it's like everything I invest in, I have a rule, three to five years max.

Speaker 2 Typically, I want to do three years and it's all in the contract. But we'll get them the resources they need to scale quickly.
And some people are like, why are we waiting three years?

Speaker 2 Like a year and a half through, they're like, we're worth $80 million.

Speaker 2 And I'm like, no, no, no. You're going to be worth 200 million.
We are just starting to rock and roll. We're not even in that 12 months period yet.

Speaker 2 When we turn it on, this is when it's like, when you plan to go into that 12 months and you're like, you know what levers to pull and what knobs to turn. It's so much fun.

Speaker 2 If people only understood how fun it is to sell businesses, I mean, the first time you'll lose some hair, you won't sleep. You'll probably be stuck on alcohol.

Speaker 2 But once you get through the first one, it gets to be fun on the next one.

Speaker 1 Speaking of alcohol, are you,

Speaker 1 you've been off for a while, right?

Speaker 2 Yeah, so I will do like once a month, but not a lot. Like I'm really, really focused right now on fitness.
And like, I'm going to go to the next, next, next, next, next level. Breathing techniques.

Speaker 2 I was with Jocko, Willick, and Mark Devine. Okay.
Okay. The SEAL.
Yep.

Speaker 2 And just discipline, consistency, this idea of creating a new me in 2025, breathing techniques, believe it or not, yoga. I'm not a yoga guy.
Really? I want to be able to put more flexible and things.

Speaker 2 Flex. Yeah.
And just eating. Like, I want to see just

Speaker 2 this is crazy, but I want to see just how disciplined I could be. Yeah.

Speaker 1 Well, it's like Jocko says, discipline equals freedom.

Speaker 2 Discipline is the most important thing in someone's life. I think discipline is more important than motivation.
Discipline is discipline with consistency.

Speaker 2 Because discipline for four days and screwing off three days,

Speaker 2 you're not going to get any results.

Speaker 2 It's hard, man. How do you apply discipline in your life?

Speaker 1 I think it's one of those things, like the opposite of gratification today is simply putting it off for an expected future that you would rather have than what would otherwise feel pleasurable.

Speaker 1 And so whether that, to your point, like drinking, it is nice to have that or the Cheetos or the pizza or whatever vice you might have, but it is the ability to basically offset that temporary pleasure for the goals you have.

Speaker 1 And so it's like, what do you value more? The temporary pleasure or your goals?

Speaker 1 And every time you are making a vote, you're making a decision on, do I want the temporary pleasure or do I want to have the goals that I've set out to say?

Speaker 1 I've put on my wall, I put on my journal, I've put it in my New Year's resolution.

Speaker 1 It's like, well, really, how, like, the deciding factor of how much that actually is worth to you is whether or not you're willing to discipline yourself and set aside the temporary pleasure.

Speaker 1 And I think most people have great ambitions of what they want to accomplish, but then their actions don't actually line up with it.

Speaker 1 It's like, if you're not willing to actually work an all-nighter, if you're not willing to work a weekend, do you really, really want this? Like, I want to be a millionaire. Okay, great.

Speaker 1 Do you realize that a small fraction of people are going to do that? And that means that the 98% of people that won't get there, you have to do what they weren't willing to do.

Speaker 2 Yeah.

Speaker 1 And it's just like, how much do you love your goals?

Speaker 2 Well, a lot of people to me say, the only thing that matters in my life is my family. And I'm like, show me your calendar and your credit card statements

Speaker 2 because I don't see family on there on any of them.

Speaker 2 So you keep telling yourself my family is the most important thing but you don't show up to your kids' games and when you do show up you're on your phone the whole time uh you don't take your wife on dates anymore bring her flowers or tell her how much you love her on a daily basis so you say these things but you lie to yourself and when you lie to yourself your brain can't even trust who you are you say you're getting up at 6 a.m you haven't got up at 6 a.m all year except for once yeah because

Speaker 2 I will say sometimes nighttime Tommy wants more than morning time.

Speaker 2 I think we all have that little nemesis. And I call it delayed gratification.

Speaker 2 And I think that it's important to, to really, but you got to stay away from your Achilles hills too. Yeah.
Like if you know you drink,

Speaker 2 don't go to the bar with the people you used to drink with all the time. Yeah.
If you know that

Speaker 2 you got a problem with social media, figure out a way to stay away from that.

Speaker 2 Like I have a hard time staying in the cold punch for four minutes. So I always invite somebody over to do it with me.
And I'm like, dude, four minutes.

Speaker 2 I've never got out early when there's someone there to like witness me. You know, like, we're going to do this together.

Speaker 2 And that they're like go to get out i'm like no you're not you little punk you better go the whole time and like we so you set your this is the best cheat code i have is set yourself up for the the things you know are tough for you and if you set yourself up for that which few people do like when you got a plan and a system and you want to be better like it's a reward system small goals specific, you know, measurable, attainable, realistic, and time-bound.

Speaker 2 I think some people, they just set these goals, like, I'm going to work out two hours a day. And I'm like, but you don't even work out 10 minutes.
Yeah. Why?

Speaker 2 How does somebody get started with discipline?

Speaker 1 Yeah, like one of the things that has served me really well when it comes to goals in the past couple years has been, especially for business owners, the type of person watched listening to this podcast.

Speaker 1 I like to simplify it because a lot of times, like, well, I want to spend more time with my family, or I want to be able to do X, Y, and Z. Like, these are my goals.

Speaker 1 Then I always tie it back to like, how is that going to be accomplished? And then that's usually when people start falling

Speaker 2 it.

Speaker 1 Always comes back to one thing for us as business owners, and that is we need to make more money.

Speaker 1 Because see, if you actually cared about your family and you wanted to spend more time and get to their games you would make enough money in the business so you could hire a general manager and you weren't having to work and be on call 24 seven.

Speaker 1 Like if you actually cared about spending time and having date night for like less than $25,000 a year, you can have someone clean your house, do your laundry and get all your groceries for you.

Speaker 1 And so if you spent that time instead of doing those things with your spouse, that would actually align with I want to spend more time with my spouse and have date night.

Speaker 1 And so it all comes back to, if you really want to simplify it, make the business more money.

Speaker 1 Because if you did that, you'd be able to then use those economic resources to then buy your way into and buy back your time to the point of that book.

Speaker 2 You know, Piano Martel wrote Buy Back Your Time. And one of his best lessons that I've learned is when you buy back time, there's so many good things you could be doing to make you the best version.

Speaker 2 There's this thing called the law of the lid. And the business will only grow and your relationships will only grow as far as you take them.
As your lid grows, the opportunities grow.

Speaker 2 The potential of growth for the business, your relationships, your faith, the relationships you have in your family grow. And most people don't spend enough time on themselves.

Speaker 2 So when people come to work with me, I say work on yourself more than you do at the company.

Speaker 2 Like, what do you ever you want to learn? I'll put you through classes. You want to go to a seminar? I'm paying for it.

Speaker 2 Listen to a podcast. I'll get you introduced to the podcast host, whatever it is.
But you got to want it. I don't want to have to force it.

Speaker 2 One of those things that Jocko says is it's got to be intrinsic.

Speaker 2 You got to intrinsic. discipline, meaning you can't, even though I have people help me, I still got to show up to the gym.

Speaker 2 I can't say my trainer drives me to the gym and makes me work out. Like, no one makes me do anything.
Yeah. If he had a gun to my head, he would be making me, but no one lives in that life in America.

Speaker 2 Right.

Speaker 2 Your book, Total Business Turnaround, documents the systems and the playbooks that transformed your business.

Speaker 2 Thousands of home service businesses have used the 13 playbooks. Which one do you think is the most immediate impact for struggling businesses?

Speaker 1 It's the first chapter of the book. So basically the turnaround show we do on YouTube.

Speaker 1 And then the problem with the YouTube channel is in order for me to go out, fly out, and do a turnaround show, they have to get a bunch of cameras in their face.

Speaker 1 And no one wants that when you're in your lowest moment. So we just left a company here, did $1.2 million in revenue, or is doing $1.2 million in revenue.
We've been in business for 40 years.

Speaker 1 They have 22 employees. They're charging $40 to $45 per hour.

Speaker 1 And so...

Speaker 1 The fact of the matter is, it's extremely embarrassing to have cameras show up in your face and talk through the fact that you have a 3% margin business and you have $170,000 in receivables from productivity.

Speaker 2 3% of 1.2 is like 30 some odd million, 30 some odd thousand a year.

Speaker 1 Yeah, exactly. That's on the bottom line.
And they're not taking much out as owner distributions. And it's $170,000 in overdue invoices you haven't collected on.

Speaker 1 And so that's not fun to have me come out and have the world see what's going on in your business.

Speaker 1 And so what we did with the turnaround book is like, hey, here's the manual if you don't want to be embarrassed, because it is embarrassing.

Speaker 1 And so the number one most important chapter in that book is the first one. And it's just about cash.
Because ultimately, if you run out of cash, the business will die. Cash flow, cash.

Speaker 1 And so there's simply two factors.

Speaker 1 You can have a very, very profitable business on your P ⁇ L

Speaker 1 and be completely broke on your balance sheet because you're not collecting the money fast enough.

Speaker 1 And you can also, you can have plenty of cash, like from a balance sheet perspective, but if you're losing fuel in a car, eventually you'll run out of fuel.

Speaker 1 And so if you're running an unprofitable business model, you will eventually run out of cash. So there's two factors of cash.
It's like, how much do you have and how fast are you burning it?

Speaker 1 Or are you collecting more of it and you're a profitable business? And so that's like the number one thing.

Speaker 1 It just cash is top of mind, make more money is like such a, it's so simple, but it is ultimately the fix for so many aspects.

Speaker 1 Like, well, I'm just working, like this gentleman I was with, him and his wife are fantastic people, but working seven days a week.

Speaker 1 And every single day wakes up at four o'clock with dinging of his phone, hoping that some people aren't aren't going to not be showing up to work that day.

Speaker 1 The fix is make more money. Like $44, $40, $45 an hour, you're never going to be able to scale this.

Speaker 1 You're never going to be afford a general manager or an operations manager to take those calls for you.

Speaker 2 No, the deal is with them is they feel bad about it. But if you were to add up, this is a simple thing that someone taught me, the guy

Speaker 2 from Australia, he called it the break-even analysis. And

Speaker 2 he sent me this stuff. This was 2017, and it had pagers and yellow pages.
This is like from like the 90s. And he said, add up every bill you have.

Speaker 2 And when you add it all up, back then, he used to have to charge $400 an hour.

Speaker 1 For what service?

Speaker 2 This is for HIV Plumbing Electrical. Got it.
Okay. Because literally, you got to think for us to show up to a job.

Speaker 1 Sales.

Speaker 2 Just to ring the doorbell. Yeah.

Speaker 2 Tom Howard did a great job of this. I've done a pretty good job of this.
It costs about $270 to ring the doorbell. Yep.
Because you got overhead. You've got air conditioning.

Speaker 2 You got service tightened. you got your trucks, you got your fuel, you've got, we run about 15 softwares here.

Speaker 2 We run intact, we got insurance, we got workers comp, we got recruiters, we've got trainers, we've got dispatchers, we've got warehouse guys, we've got like the overhead, there's a lot of money.

Speaker 2 And people think,

Speaker 2 here's something that's funny.

Speaker 2 If you said an HAC unit costs $2,500

Speaker 2 and you guys sell it for five and you said, I make $2,500 profit,

Speaker 2 if you're working out of your house, your wife's working for free, and that you didn't have a truck, like someone gave you the truck, and you had a free gas card, and you had no insurance, you didn't have to pay any EIN update, any licenses.

Speaker 2 It still wouldn't be that.

Speaker 2 I don't think people understand $45 an hour if you're paying $20.

Speaker 1 Yeah, that's what it was.

Speaker 2 You're really burning. If you look at your complete,

Speaker 2 there's costs that you don't even realize.

Speaker 1 Yeah, like working 80-hour weeks.

Speaker 2 How much do your blades cost to Sharpen? How much of your equipment breaks down? Your gas, your oil, your truck use.

Speaker 2 Yeah.

Speaker 1 Makes no sense. So many bad business models are hidden by an entrepreneur that is working 80 hours a week.

Speaker 2 I worked at

Speaker 2 a couple of my buddies. I helped them start a Christmas late business.
After the first year, I said, guys, I'm looking at this. We got to double prices.
Yeah.

Speaker 2 You're kidding. I go, no, they're like, we can't do that.
Did I tell you the story? No. We doubled the prices.
Guess how many people canceled?

Speaker 1 Less than 10%.

Speaker 2 It was 40%. Oh, really? But hey, you doubled prices.
You doubled. 120% collected.
So if you were collecting $1 million, now you're collecting $1.2 million.

Speaker 2 And you were only doing a little more than half the work. Yeah, yeah, yeah.
So I said, guys, this is amazing.

Speaker 2 I said, you got rid of the worst 40%. Yeah, yeah.
And most of the people I tell to raise their price, I don't tell them to double it. I say, just add 20%.

Speaker 2 Doubling is pretty sharp. If you're paying $1,500 for lice, now you're paying $3,000.
Clients are like, dude,

Speaker 2 but 60% said you guys did a great job. It's Christmas.
Yeah, we'll do that. I thought you guys were giving us a smoke a deal anyway.
Yeah. And that's the deal.
So what do you do with somebody?

Speaker 2 How do you fix their

Speaker 2 you said they've been doing this 40 years? They're charging 40, $45 an hour.

Speaker 2 How do you that's a mindset? They're broken.

Speaker 1 It's tough because I don't like to go in there like the Gordon Ramsey and yell at people. Yeah.

Speaker 2 Although it's like, so how I approach it on bar rescue.

Speaker 1 Is I, yeah, well, John Taffer's coming to our event here in a couple weeks.

Speaker 2 I'm looking forward to that.

Speaker 1 That's not my, my usual genre of dealing with it. But, like, my thought is I get mad at the problem for them because I know what it's like to be in that situation.

Speaker 1 And I remember the pain that I went through, and I hate to see someone in their 60s going through that pain because they have not dealt with the problems of the business.

Speaker 1 And they still are clouded with the mindset that I can't charge more. And everyone else is more expensive.
I'm like, wait, wait, wait. What's your close ratio? Almost 100% of my jobs get accepted.

Speaker 1 I said, I don't care about the cost of what you charge versus your competitor or any, or if a customer says it's too expensive. If you're closing 100% of your jobs, you are too cheap.

Speaker 1 The market is yelling at you to raise your prices.

Speaker 2 70%, raise your prices. If you're closing anything more than 70, raise your prices.
100%.

Speaker 2 And I had a buddy I told this to. He's like, I've already tripled my prices.
I like to keep going because guess what? You're booked out three months. Yeah, exactly.
There's no limit. Yeah.

Speaker 2 Like, and guess what he got to?

Speaker 2 49% net.

Speaker 1 Let's go.

Speaker 2 But his service was that good.

Speaker 1 Yeah.

Speaker 1 I think the problem, too, with the home services is when we hit that capacity, instead of booking out three months, we just go buy more trucks and equipment instead of raising our prices and extend it out further.

Speaker 1 Yeah. And that's the fallacy of being stuck in growth mode for so long.
And then people are like, well, it's an unprofitable industry.

Speaker 1 Well, yeah, you stay in, you got stuck in growth mode for 10 years. You just kept buying more trucks and equipment instead of raising your prices when you hit capacity.

Speaker 1 And I think I'd rather have a 49% margin business than running a 10% margin business, but being five times larger.

Speaker 2 Well, the deal is I tell people, if you're into growth, don't ever fall below 10% profit. Don't ever fall.
If you fall below 10%,

Speaker 2 and by the way, I've been at 10%,

Speaker 2 I've been at 20%, I've been at 30%.

Speaker 2 I think there's a happy medium when you're trying to take market share. It's kind of like

Speaker 2 I tell the best story is when you're trying to gain muscle, it's very hard to get cut.

Speaker 2 You know, Arnold will tell you, listen, during the offseason, I used to gain a lot of weight and right before three months out, I'd cut. And I think cutting means becoming extremely profitable.

Speaker 2 So planning on selling means I'm cutting 18 months in advance, going into that 12-month spurt, because that's what I get valued on is a multiple of EBITDA.

Speaker 1 Yeah, in software, they have the 40% rule, which is

Speaker 2 good benchmark. EBITDA, and you got to grow growth.

Speaker 1 Yeah, it's like, look, you have 40%, but if you grew by 20%, then you should have a 20%

Speaker 1 profit margin. And if you grew nothing last year, you should have a 40% profit margin.
And so that's kind of like a healthy kind of rule of thumb.

Speaker 2 I love that. Software is how sticky is it? What's their change cost? Service site's really hard to change.

Speaker 2 I mean, we've been using that since the last seven, eight years. It's going to be very hard to change.
But I told them straight up because I talked to their investment committee.

Speaker 2 I said, if you guys doubled my prices, I'd seriously start looking at another opportunity because what's stopping you from doing it again? Right.

Speaker 2 And the thing is, is that's why they got valued at five, six billion dollars. Well, yeah, I mean,

Speaker 2 look at they got 12,000 companies on them. Yeah.

Speaker 2 I'm going to see what the market does. I did pretty well with the stock already, but now that I think about it,

Speaker 2 it's going to continue to go up. It's going to have a little bubble.
It's going to fall. And then, you know,

Speaker 2 I don't know. I don't, don't ask me about stock.

Speaker 2 Well, listen,

Speaker 2 let's go through a couple more here. What has been the largest challenge you faced as being a young entrepreneur in business?

Speaker 1 I think if you're really young, sometimes it's easy to default to like the age thing.

Speaker 1 I think being young is, it's like, so when I went to college when I was 13 and everyone always asked, like, was that weird? Was that strange, et cetera?

Speaker 1 Ultimately, because like the way my parents raised me and the way we never mentioned, like, it was never a thing. We never talked about me being young.

Speaker 1 In hindsight, a kid going through puberty in like college and university seems really strange. And so I do think it's like, who do you surround yourself with and what are they telling you?

Speaker 1 Because if they tell you it's weird that you're young and that it's strange that you're hiring people that are older than you, then you will believe that.

Speaker 1 But like, I was very privileged to have parents that like, we never talked about it. Yeah.
It was like, I'm just going to school. I took the bus and I went to school.
I couldn't drive.

Speaker 1 So I took the bus.

Speaker 1 And I think the same thing is true. If you're in a circle of friends or even in your family, you might have to break away from them.

Speaker 1 And like I've said sometimes, sometimes your goals will outgrow your friends.

Speaker 1 And in the event that you're a young entrepreneur needing to hire and interact with people that are older than you, you might have to break away from your friend group and your age group

Speaker 1 in order to chase the goals you have.

Speaker 2 I think you should break away. I told, so I just did my orientation the last three and a half hours.

Speaker 2 I told the whole group, I said, you know what people tell me is that they feel like I'm in a time machine because I'm able to pivot to different circles and I stay humble.

Speaker 2 I never look at an entrepreneur that's ahead of me and say, I'm going to beat you. Wait, just wait, just wait till I get started.
I'm like, look, teach me. Yeah.

Speaker 2 Like, yes, I've had some successes in my life. I'm very fortunate.
I've got great parents. I love my family.
I just respect you so much. I want to learn more.
I've read y'all your books.

Speaker 2 I'll buy you lunch. I'll buy you dinner.
I'll always pay it forward. Any stage I talk on, I'm going going to tell them what you taught me.
And I take notes, meticulous notes.

Speaker 1 Can I say something on that? Yeah.

Speaker 1 I really respected you a lot more, although I've always had a lot higher regard for you, when I saw the Dan Martell vlog and the way that you interact with him and that of a student instead of that of a teacher.

Speaker 1 Yeah. And it to me proved the fact that what you teach, you actually do yourself.
Yeah. And that is when you went into

Speaker 1 learner mode and student mode, and there's certain aspects you have potentially even surpassed him in, to be honest, in terms of like dollars amount, certain industries, et cetera.

Speaker 1 However, you were able to slip into learner mode, student mode. And

Speaker 1 I really respect that.

Speaker 2 I have a lot of consultants.

Speaker 2 And I ask them questions. I never speak up.
I never tell them what to do. I hired them to teach me something.

Speaker 2 And that's when I ask questions and I write stuff down and I go, all right. And by the way, I need those people.
I need mentoring all the time.

Speaker 2 The day I stop needing mentoring, I mean, you should bury me.

Speaker 2 So I do go into student mode all the time. I I mean, when I'm around my parents, I still like to listen to them and learn from them.
But

Speaker 2 do you got any few books that you'd recommend that people starting to try to kill out of business other than the e-myth and some of these books on the wall?

Speaker 1 Yeah, like one that I actually really like is Made in America from Sam Walton.

Speaker 2 Oh, I like that book a lot.

Speaker 1 It's just the general ethos of like the way that he even looked for new properties. He'd fly in his plane around and just look for

Speaker 1 traffic patterns, where to put a Walmart. I just think that's the coolest thing.

Speaker 1 I like the stories. I just enjoy that more than just the theory sometimes.
That's great.

Speaker 2 Yeah. Made in America.
And

Speaker 2 listen, if someone wants to get a hold of you, Mike,

Speaker 2 what's the best way to reach out to you?

Speaker 1 Just go on YouTube, Mike Andy's. You'll find stuff there.

Speaker 2 YouTube's your favorite way. Yeah.

Speaker 1 Watch the turnaround shows. They're fun.

Speaker 2 And if somebody wants to call you and get coached or just reach out to you or ask a question.

Speaker 1 Well, there is a way to do that. You go to mikeandies.com, but usually not the best way to do it.
Okay. It's just, I don't have that time yet.

Speaker 2 Okay. Yeah, you're a busy man.
And finally, we talked about a lot of things, things, Mike. Is there something we missed?

Speaker 2 I would just want you to take the time to close us out with whatever we might have missed or not talked about.

Speaker 1 I just want to acknowledge you for all the work that you've done on yourself in the last three years. Thank you.

Speaker 1 The man I met three years ago when you came to Ferndale at that, or Bellingham at that event center is different than I see today.

Speaker 2 Thank you very much. I appreciate that.
And by the way, you'll see somebody else in hopefully another year.

Speaker 2 And you keep it up, man. You're doing great.
Congratulations on everything. Thank you very much.
Appreciate you, brother. Yes, sir.

Speaker 1 Absolutely.

Speaker 2 All right. Thanks for listening, guys.
Leave a review and like this channel. Hey there, thanks for tuning into the podcast today.

Speaker 2 Before I let you go, I want to let everybody know that Elevate is out and ready to buy. I can share with you how I attracted a winning team of over 700 employees in over 20 states.

Speaker 2 The insights in this book are powerful and can be applied to any business or organization.

Speaker 2 It's a real game changer for anyone looking to build and develop a high-performing team like over here at A1 Garage Door Service.

Speaker 2 So if you want to learn the secrets to help me transfer my team from stealing the toilet paper to a group of 700 plus employees rowing in the same direction, head over to elevateandwin.com forward slash podcast and grab a copy of the book.

Speaker 2 Thanks again for listening, and we'll catch up with you next time on the podcast.