When Should You Stop Reinvesting in Your Business?

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When should a small business owner invest outside their business?
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Most of us, we're really going to create all of our wealth by concentrating, like concentrating on the business we have or concentrating on building a business.
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And so that's how you get wealthy.
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You're going to get way wealthier doing that if this is what you're going for.
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Are we really investing in the business or are we telling ourselves a story that makes us feel good about the fact we're not really taking much money out of the business or making that much money?
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And that is usually what I see.
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Most people say I'm investing in the business and I'm like...
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That's not what I'm seeing.
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I literally this morning looked at someone's financials.
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They had 66% gross margin, but yet they're still barely breaking even.
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This is going to be the best way to democratize getting data to smaller operators that in the past, you would have a data analyst at a 20 or $30 million company running this sort of stuff.
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And now it's gonna be in your fingertips.
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Welcome back, everyone.
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The weekly show that continues to persist.
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We're gonna do a cold open.
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I'm gonna ask Jonathan some questions today.
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I'm gonna pitch him some startups.
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Yeah.
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Okay, so I'm going to pitch you three startups, Jonathan.
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Okay.
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And you've got to give me, which one would you invest in?
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All right.
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So you've got to hear all three.
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I'll give you the two-sentence pitch for each one, all right?
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The first one is called FAS.
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All right, F-A-A-S. Kind of like SaaS, but instead of software as a service, it's firing as a service, all right?
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Oh, okay.
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So here's my pitch, all right?
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Small business owners will pay recruiters thousands of dollars to hire someone, then tolerate a terrible employee for six months because they're afraid of one 15-minute hard conversation.
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Okay.
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FAS monetizes managerial cowardice.
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Passwords, payroll, credit card, shop keys, a team explainer video to your existing team.
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All of it handled, okay?
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That's option number one, okay?
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Okay.
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Number two.
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Now this one's the name, I'm not really sold on the name, but let's just go with the concept, okay?
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It's called Rent-A-Grandpa.
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Okay, so probably need to workshop the name a little bit, but the concept is true.
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Okay, here we go, the pitch.
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Home service companies spend years trying to turn inexperienced technicians into seasoned troubleshooters.
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Rent-A-Grandpa lets them borrow 40 years of trade judgment for 25% of the cost of another full-time tech.
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He rides along, diagnoses the weird equipment issues, calms the customer, and teaches the young technician what no training manual can.
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That's number two.
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Rent a grandpa.
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Okay.
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The name needs some workshop again, but go with this notion of retired technicians.
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Okay.
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Yeah.
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Yeah.
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Number three.
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This one has some legs, I think.
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Okay.
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Okay.
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The name of this one is Omni.
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All right.
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Omni.
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Yeah.
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Omni.
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Yeah.
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Here's the pitch.
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Homeowners do not want six contractor relationships, 12 invoices, and a Saturday spent finding someone to clean the gutters.
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Omni becomes a single subscription for maintaining the entire home.
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The customer calls one number.
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Omni dispatches vetted contractors, manages the scheduling, the quality, takes a margin out of every service, and is the property management for people who own the houses they live in.
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So which of the three, FAS, Rent to Grandpa, or Omni, which one would you invest in?
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So all of them actually have a place.
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The first one.
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Doing generous over here.
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You're great for Shark Tank.
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You're like, yes, I will miss.
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All right.
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So I'm going to strike the fire as a service.
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Oh, really?
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Okay.
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Yeah, yeah.
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I like it, but there's actually a movie.
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I think George Clooney's in a movie about that.
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Really?
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Yeah, he's like, that's what he does.
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He fires people.
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He flies into companies and fires them.
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It's like, I think I'm correct.
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It was a way long time ago.
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That's hilarious.
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It's like the opposite of the turnaround show.
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We just show up and we just cause mayhem.
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Yeah, you fire everybody.
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I'm almost positive I'm correct about that.
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I think there was a movie about that.
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The problem is you still got to get the company owner to do the thing.
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Well, you've still got to get them to agree to it, not do it, but they agree to it.
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Like they got to still get Sally.
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Oh, yeah.
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See, the mother law of the team.
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Totally.
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See, in this case, they've agreed that they want this person fired.
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They don't want to have the hard conversation or go through all the compliance.
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OK, all right.
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You know, embarrassing that would be for me as the owner.
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Like I have to bring something else in to do.
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It's like, how's anybody going to respect you?
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OK, anyway, so I'm going to strike that one.
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OK, yeah.
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I like, so I'm going to go with the Omni concierge service.
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Oh, snap.
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Yeah, the concierge service.
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is, it's been a concept for quite some time.
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I mean, there's, there's an angle there and there are people doing it.
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I've actually met with some people that do this.
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They're trying to figure out how to do it right in the last year.
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I've seen a lot of people fail at it.
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They all fail.
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I don't know if they really all fell at it.
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It's such a great concept, but like every single time you fast forward three years later, it's like, Oh, I was like, yeah, it didn't work out.
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It's the equivalent of robotic mowers for me.
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Yeah.
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It's a dream.
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Like that is like people.
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That would be really cool if you could pull it off.
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I just haven't seen anybody pull it off really well.
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Yeah.
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But the one I most like though is the grandpa.
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That's the one I like.
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Okay.
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I'm shocked.
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Let's go.
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Yeah.
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I thought for sure fast was going to be the move.
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I just, I just think the other ones have a bigger revenue potential.
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Okay.
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I just feel, I feel like, do you have a better name than rent a grandpa?
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uh
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I don't know.
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A former Fortune 500 CEO?
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I don't know.
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Oh, okay.
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So you're going after the executive side.
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That makes a lot of sense.
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Okay.
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Yeah, I'm just, but no, I liked what you said, like at all levels.
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So it's the fractional concept, fractional CFO, fractional CEO, or not CEO, but CFO, like the fractional operations manager.
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I love the concept of we'll come in and help you for a period of time, but we'll coach all, we have people that'll coach all the way down through the org.
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Like, I love that.
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I think that's like, that's the one that would get me personally excited.
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Like I, maybe I should have said that one because that's the one I'd actually want to do.
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Yeah.
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Well, there's the name fraction and it was take out the C and the T and put it with the S and an H. Very vibey fraction.
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Oh, just fraction.
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Yeah.
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Just fraction.
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And it's a fractional of every single level of your team.
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I think a guy I know has an accounting company named that.
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Are you serious?
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Strike it from the option.
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If I'm wrong, I think that might be his name.
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So anyway, so the one I would want to do is the middle one.
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The one I would bet the most money on is the concierge one because it takes just the right people to scale the middle one.
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Okay, so you're high risk.
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You want to go along with the graveyard of other people that have tried the concierge service.
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Yes.
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Like I said, I'm going to do that one alongside my robotic mower dream so I can just set my money on fire.
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Okay.
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There you go.
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All right.
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Let's move on.
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We're not done yet.
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The cold open continues.
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Okay.
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Now, there's just one hole in your resume, Mr. My resume?
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Yeah, just one.
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Just one.
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Okay.
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You have not wrote a book yet.
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So I wanted to help you.
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I wanted to help you.
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You want to give me titles?
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Of course.
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Of course.
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Of course.
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This was... You know exactly.
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This was...
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This was inspired by the All In Podcast.
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So a little asterisk to our friends over at the All In Podcast.
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Okay.
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Coming to you now, Ferrari on my wrist, how to win at life and afford a $250,000 watch from David Sachs.
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Oh my God.
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We're going to need to get that done.
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Here it is, The Fight to Save America, Destroying Socialism, Shrinking the Debt and Winning AI by David Friber.
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I like that book.
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Okay.
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So the first one, I'm going to show you three different books.
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And you got to tell me which of these you would be most likely to publish.
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All right.
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So the first one is from grass to sass.
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One man's journey to a recurring real.
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Okay.
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All right.
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I'm on a little screen.
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That's all right, though.
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Can you see it?
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Can you see it?
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Yeah, I'm looking at it.
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It's just like not.
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Not super big, but yeah.
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Okay.
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From grass to sass.
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Grass to sass.
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Okay.
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That's the first one.
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I like it.
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All about recurring revenue.
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Next option is the lost American landscaper.
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Responsibility, recurring revenue, and the crisis of modern masculinity.
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Very patriotic one there.
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Yes, very good, very good.
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You know, we can go full out Jordan Peterson on it.
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So that's the lost American landscaper.
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That's option number two.
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Jordan Peterson, I need to really elevate my vocabulary.
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He can be the forward.
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Then you can just go after that.
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Okay.
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I'll just say a lot of big words nobody understands.
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Fantastic.
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There you go.
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Okay.
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Last option.
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This is the third option.
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The Potosnik principle.
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How to build, sell, and critique every business in America.
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Every business in America.
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Wow.
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You're giving me a lot of credit there.
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Oh, yeah.
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Let's go.
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So which of the three?
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We got grass to sass.
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We got the lost landscaper and we got the Potosnik principle.
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I like the alliteration of Potosnik principle.
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I'm a little bit.
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That one feels a little too pretentious, but that's the one I'm drawn to.
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Well, hey, look, let's just be clear.
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We were stuck with one image of your face.
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So this is also an announcement for everyone that hopefully by next week, because tomorrow we have a photo shoot schedule.
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Tomorrow, 1 p.m.
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Yes, thank you.
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We will actually be able to have a different image of Jonathan's face and the thumbnails because we won't have one image.
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Because the only other one is like 20 years ago.
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Oh.
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Is it the one in the blue shirt?
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Yes.
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I wish that image was nowhere on the web.
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I hate that image.
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It's like it got out there on one thing, and now everybody grabbed it.
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00:09:15.773 --> 00:09:16.173
Okay.
257
00:09:16.273 --> 00:09:17.993
Okay, so we're going with the Potoshtick principle?
258
00:09:18.013 --> 00:09:19.013
I'm going to go that direction.
259
00:09:19.053 --> 00:09:19.313
Yeah, yeah.
260
00:09:19.333 --> 00:09:19.854
Okay, all right.
261
00:09:20.134 --> 00:09:26.815
If we could figure out, like, there could be a 3P in there, make a real alliteration happen, but we'll stick with the Potoshtick principle.
262
00:09:26.915 --> 00:09:27.155
All right.
263
00:09:27.415 --> 00:09:27.835
All right.
264
00:09:27.855 --> 00:09:30.116
Last question to finish off the cold open.
265
00:09:30.736 --> 00:09:34.457
And I mentioned last week that we would talk about it, so, you know, we can't leave loose ends here.
266
00:09:34.897 --> 00:09:42.099
Someone texted me the other day that said, we really got to know how Jonathan spent $450,000 on longevity.
267
00:09:42.459 --> 00:09:44.539
I'm like, that was a topic for another day.
268
00:09:45.539 --> 00:09:46.359
Don't remember.
269
00:09:46.459 --> 00:09:48.860
$450,000 spent on longevity.
270
00:09:49.060 --> 00:09:54.841
Jonathan, I need to know what my spending, where should I spend the money and what was the bad use of money?
271
00:09:55.001 --> 00:09:58.202
So when you look at the money you spent on longevity, what's good, what's bad?
272
00:09:58.802 --> 00:10:00.565
So I actually have a video on this coming.
273
00:10:00.825 --> 00:10:01.727
Oh, okay.
274
00:10:01.807 --> 00:10:02.949
It lays the whole thing out.
275
00:10:03.029 --> 00:10:03.670
All right.
276
00:10:03.730 --> 00:10:03.950
Yeah.
277
00:10:03.970 --> 00:10:05.012
Can you watch it next Wednesday?
278
00:10:06.474 --> 00:10:08.097
I got a different video ready scheduled for next.
279
00:10:08.197 --> 00:10:08.417
Yeah.
280
00:10:08.437 --> 00:10:08.557
Yeah.
281
00:10:09.616 --> 00:10:12.258
I might be able to do it by, I could switch it around.
282
00:10:12.298 --> 00:10:15.039
Do you really need it for next Wednesday or do you just say that?
283
00:10:15.099 --> 00:10:18.301
I'll be able to say like, click this link, go watch the video here.
284
00:10:19.122 --> 00:10:21.783
Oh, let's not commit to that just in case.
285
00:10:21.843 --> 00:10:23.884
I don't want to detour Steven.
286
00:10:24.144 --> 00:10:31.749
But yeah, no, in that video, I do go through what I learned and like the 80-20 of what I would do for a fraction of the cost.
287
00:10:32.689 --> 00:10:41.274
So the way you spend that money, like there's a lot of ways that people, if they pay attention to longevity, they'll spend it doing all kinds of crazy procedures and things.
288
00:10:41.834 --> 00:10:47.277
I more spend it on like super high end concierge, not it's higher level than concierge medicine.
289
00:10:47.297 --> 00:10:54.641
So you're paying, if you're heard of like a Peter, a Tia or any of those kinds of people, like you could spend a lot of money working with them for one year.
290
00:10:54.701 --> 00:10:55.742
That's how I spent the money.
291
00:10:56.062 --> 00:11:04.825
So then it would, so you do different things with them, but you don't necessarily do like there's, if you watch Brian Johnson, like he'll do the blood transfusions.
292
00:11:04.885 --> 00:11:05.745
I didn't do any of that stuff.
293
00:11:06.045 --> 00:11:06.145
Okay.
294
00:11:06.165 --> 00:11:08.126
Like I didn't, yeah, I didn't do any of that kind of stuff.
295
00:11:08.426 --> 00:11:11.427
So, but I'll, I'll break it down and it's broken down in that video actually.
296
00:11:11.447 --> 00:11:11.927
Okay.
297
00:11:12.147 --> 00:11:16.251
I gave a presentation to Tiger 21 on it.
298
00:11:17.052 --> 00:11:24.801
And so I redid a version of that with taking out some of my metrics and stuff that I don't see any point putting out on the internet.
299
00:11:24.961 --> 00:11:28.605
You want to put your testosterone and your sperm count on a slide.
300
00:11:28.625 --> 00:11:28.865
Exactly.
301
00:11:28.885 --> 00:11:29.646
Yeah, yeah, yeah.
302
00:11:29.726 --> 00:11:30.827
Yeah, so...
303
00:11:31.207 --> 00:11:34.328
Yeah, so, but I gave a version to Tiger 21.
304
00:11:34.368 --> 00:11:35.168
It went over really well.
305
00:11:35.188 --> 00:11:36.028
And so that was the inspiration.
306
00:11:36.048 --> 00:11:36.548
Like, you know what?
307
00:11:36.588 --> 00:11:39.669
This is good stuff because most people I talk to don't know what to do at all.
308
00:11:39.829 --> 00:11:39.989
Yeah.
309
00:11:40.149 --> 00:11:42.429
And so that's why I decided to make it a video.
310
00:11:42.509 --> 00:11:48.010
Okay, so give us a small, if someone had, let's say 20 grand.
311
00:11:48.771 --> 00:11:48.951
Yeah.
312
00:11:49.011 --> 00:11:58.493
Where's the first place they should spend that money if they're thinking about longevity and this kind of more, I don't know if you call it alternative medicine, but like this classification of longevity.
313
00:11:58.713 --> 00:12:00.393
I mean, the spoiler before that,
314
00:12:01.720 --> 00:12:03.260
is everybody wants a magic...
315
00:12:03.300 --> 00:12:04.681
Exercise and sleep well.
316
00:12:06.141 --> 00:12:10.002
I mean, if you really want to, it boils down to that at the end of the day.
317
00:12:10.022 --> 00:12:18.584
So if you're not doing that, let's just say next step after you do that, my argument would be it's about catching things really early.
318
00:12:19.384 --> 00:12:24.285
And so there's specific tests you can do where you're every year...
319
00:12:25.237 --> 00:12:27.421
So it'd be, I would say twice a year blood work.
320
00:12:27.761 --> 00:12:30.606
And then there are two different kinds of tests you can do twice a year.
321
00:12:30.646 --> 00:12:34.252
There's infinite number of tests you can do that I would recommend that will cost you
322
00:12:36.790 --> 00:12:38.031
$3,000 or less a year.
323
00:12:39.031 --> 00:12:41.552
And so that would be the next thing I'd do.
324
00:12:41.572 --> 00:12:45.854
If I'm already on top of my stuff, I just want to catch something before it's an issue so I can deal with the thing.
325
00:12:46.134 --> 00:12:47.274
That's how I would think about it.
326
00:12:47.474 --> 00:12:47.715
Got it.
327
00:12:48.075 --> 00:12:48.315
Okay.
328
00:12:48.415 --> 00:12:49.135
I need to do blood work.
329
00:12:49.195 --> 00:12:50.476
I haven't tested my blood.
330
00:12:50.496 --> 00:12:52.196
I don't think I've ever tested my blood.
331
00:12:52.636 --> 00:12:52.897
So...
332
00:12:52.997 --> 00:12:56.698
I think, yeah, I mean, as much as you already think about health, why wouldn't you?
333
00:12:56.978 --> 00:13:00.740
And now there's so many on-demand services for it that you just...
334
00:13:01.480 --> 00:13:03.421
Yeah, go go down the street.
335
00:13:03.821 --> 00:13:05.062
I don't know where you in your area.
336
00:13:05.082 --> 00:13:06.543
I haven't seen where you live exactly.
337
00:13:06.583 --> 00:13:10.525
But in many places in America, yeah, I don't know how far you'd have to drive.
338
00:13:11.225 --> 00:13:13.086
But there's probably a place right near you.
339
00:13:13.106 --> 00:13:13.786
I'm going to guess.
340
00:13:13.846 --> 00:13:15.027
Have you ever taken your own blood?
341
00:13:15.187 --> 00:13:16.127
Have you ever taken your own blood?
342
00:13:17.688 --> 00:13:18.909
No, you know, it's funny.
343
00:13:19.349 --> 00:13:21.790
So I went like I was doing medical school stuff, right?
344
00:13:21.830 --> 00:13:23.651
I went to Africa, pool, all sorts of blood.
345
00:13:24.652 --> 00:13:26.853
When I had to take my own blood, I fainted.
346
00:13:27.847 --> 00:13:28.148
Really?
347
00:13:28.348 --> 00:13:32.714
Yeah, I don't know if it's like a mechanism like with the human body, like you just, like preservation.
348
00:13:32.734 --> 00:13:35.157
But like when I took my own blood, I had never done it before.
349
00:13:35.798 --> 00:13:37.340
And man, I literally fainted.
350
00:13:37.501 --> 00:13:37.641
Just.
351
00:13:38.081 --> 00:13:38.502
Interesting.
352
00:13:38.582 --> 00:13:39.443
Yeah, super weird.
353
00:13:39.463 --> 00:13:40.825
So you wouldn't be good at taking drugs.
354
00:13:41.246 --> 00:13:41.646
Yeah.
355
00:13:43.268 --> 00:14:09.974
peptides are not in my future i guess i've done well peptides are a little different though because you're just kind of going into the fat or whatever that kind of thing pulling the blood i don't even know how i would but you have a level of expertise i don't have but i don't know how i take my own blood that's just like a weird thing like to get that in a vein that would be hard so i've had my blood taken a million times but yeah you i mean it's like cost almost nothing and i i like the idea of taking blood especially around if you're going to take supplements
356
00:14:13.115 --> 00:14:15.656
And so I want to know what my levels say to know.
357
00:14:16.297 --> 00:14:17.537
So yeah.
358
00:14:17.697 --> 00:14:20.378
Anyway, you're not going to do the Jonathan, uh, what's it called?
359
00:14:20.539 --> 00:14:21.819
Uh, what's his name?
360
00:14:21.839 --> 00:14:22.499
The Johnson guy.
361
00:14:22.680 --> 00:14:26.641
He's been like two million Johnson, Brian Johnson, like $2 million a year on all this stuff.
362
00:14:27.342 --> 00:14:33.625
And then he got that diagnosis and yeah, I think it was actually a previous condition, but it sounds like it.
363
00:14:33.645 --> 00:14:33.825
Yeah.
364
00:14:33.965 --> 00:14:38.767
I think the 90% of it is eat right, exercise, sleep good.
365
00:14:39.367 --> 00:14:40.048
And no one wants that.
366
00:14:40.068 --> 00:14:40.528
So it's like,
367
00:14:41.328 --> 00:14:43.353
Yeah, so that's what everybody wants to pill.
368
00:14:43.654 --> 00:14:43.974
Yeah.
369
00:14:44.215 --> 00:14:47.101
And so, but the pill is like so far downstream.
370
00:14:47.783 --> 00:14:50.429
And I actually, in the video, talk about the whole...
371
00:14:51.746 --> 00:14:52.886
taking different stuff.
372
00:14:53.186 --> 00:14:54.486
I'm pretty dang conservative.
373
00:14:54.747 --> 00:14:55.007
Yeah.
374
00:14:55.027 --> 00:14:58.167
So I'm not the guy, I'm not a Brian Johnson.
375
00:14:58.187 --> 00:14:59.767
I would never experiment on myself.
376
00:14:59.787 --> 00:15:01.368
I'm not a Tim Ferriss back in the day.
377
00:15:01.488 --> 00:15:01.628
Yeah.
378
00:15:01.668 --> 00:15:05.048
I don't really want to try all the things on my body and hope it goes okay 20 years later.
379
00:15:05.148 --> 00:15:05.408
Yeah.
380
00:15:05.548 --> 00:15:08.069
So I'm kind of conservative when it comes to this stuff.
381
00:15:08.349 --> 00:15:08.589
Oh, yeah.
382
00:15:08.669 --> 00:15:11.129
And that's also a big point I make in the video.
383
00:15:11.509 --> 00:15:16.050
When you think about what the future is, like you say, oh, well, we're probably gonna live to a hundred years old.
384
00:15:16.250 --> 00:15:20.051
It's like maybe, but you're gonna have to do a bunch of stuff now.
385
00:15:20.811 --> 00:15:22.251
That's not FDA approved.
386
00:15:22.391 --> 00:15:26.772
That's only been tested in mice and rats, barely been tested in humans.
387
00:15:26.932 --> 00:15:32.554
But we theorize these are good things to do, but there will be no proof for another decade or 15 years.
388
00:15:33.034 --> 00:15:34.114
That's the challenge.
389
00:15:34.494 --> 00:15:38.995
So on one hand, it's easy to hold this belief in our mind that everything's going to be great.
390
00:15:39.315 --> 00:15:40.435
We were born at just the right time.
391
00:15:40.455 --> 00:15:41.616
You were born at a better time than me.
392
00:15:41.636 --> 00:15:42.516
You got 20 years on me.
393
00:15:42.816 --> 00:15:42.996
So-
394
00:15:43.456 --> 00:15:46.097
You got 20 more years of science progress than I do.
395
00:15:46.438 --> 00:15:54.101
But my point there is like, you can say, hey, I'm going to live this amount of time, but there are things you might have to do to make that possible that do you really want to do them?
396
00:15:54.962 --> 00:15:56.983
And so that's the question for a lot of people.
397
00:15:57.303 --> 00:16:01.445
Do you want to live one year, the risk of living only one year or the risk of living past 100?
398
00:16:01.525 --> 00:16:02.986
There's a gamble.
399
00:16:03.346 --> 00:16:04.446
Exactly, so.
400
00:16:05.087 --> 00:16:06.567
What have you been working on this past week?
401
00:16:07.168 --> 00:16:11.610
I would say almost exclusively pest control stuff, which will probably be the story for a bit.
402
00:16:13.820 --> 00:16:19.082
There are a lot of projects I was working through with CityTurf, and the project list is still massive.
403
00:16:19.182 --> 00:16:23.083
But now I'm to this place where I'm taking one service at a time.
404
00:16:23.683 --> 00:16:27.485
So pest control, next will be the arborist-related services.
405
00:16:27.505 --> 00:16:28.825
Then it'll be fertilization weed control.
406
00:16:28.845 --> 00:16:29.845
Then it'll be irrigation.
407
00:16:30.586 --> 00:16:32.866
And I'm building all material around it.
408
00:16:33.186 --> 00:16:37.228
So rebuilding digital ads, landing pages, everything.
409
00:16:38.324 --> 00:16:42.865
offers, USPs, copy, everything.
410
00:16:43.745 --> 00:16:44.325
Direct mail.
411
00:16:44.765 --> 00:16:55.068
Like I'm just taking one service and only thinking about one service and then going super deep with it, building out everything, updating some other assets that touch that service.
412
00:16:55.908 --> 00:16:57.248
And so it's gonna take me a while.
413
00:16:57.408 --> 00:17:00.089
I'll probably be saying roughly the same thing for a few weeks here.
414
00:17:00.329 --> 00:17:06.850
But I'm a fair ways down into this project and that's almost, I'm trying not to do anything but that.
415
00:17:08.498 --> 00:17:08.858
Very good.
416
00:17:09.399 --> 00:17:11.220
I still think you need to hire a marketing manager.
417
00:17:12.100 --> 00:17:12.481
I do.
418
00:17:13.541 --> 00:17:13.801
I do.
419
00:17:13.861 --> 00:17:17.624
I think about it all the time, but, but I have this other problems.
420
00:17:17.644 --> 00:17:19.445
Like, I don't really want the marketing manager to do this.
421
00:17:19.805 --> 00:17:21.486
This is, I want to get this my way.
422
00:17:21.706 --> 00:17:23.588
I got kind of on this, but I, I,
423
00:17:24.498 --> 00:17:25.359
we probably talked about here.
424
00:17:25.379 --> 00:17:26.459
I'm really conflicted on this.
425
00:17:26.479 --> 00:17:27.440
Like, what am I doing?
426
00:17:27.500 --> 00:17:29.361
I should be working on all these other things.
427
00:17:29.421 --> 00:17:33.903
But, but then I also kind of remind myself, this is the most important stuff.
428
00:17:33.943 --> 00:17:37.125
Like this is what is going to make the company go.
429
00:17:38.106 --> 00:17:39.667
And I have to work through it.
430
00:17:39.927 --> 00:17:46.050
And I just kind of want to do it and be done, but you've got to stay on it, iterate and figure it out and test and try stuff.
431
00:17:46.831 --> 00:17:46.991
And I,
432
00:17:48.802 --> 00:17:53.086
I can get a marketing manager can help with it, but there's nobody that understands this stuff better.
433
00:17:53.146 --> 00:17:57.851
Maybe I'm just telling myself a false story here, but this is kind of my thing.
434
00:17:58.312 --> 00:18:03.857
And so I just feel like I need to stay on it for at least into early next year.
435
00:18:04.338 --> 00:18:05.119
It's kind of my theory.
436
00:18:05.159 --> 00:18:11.285
And then I will have the bulk of the stuff done where now I can have somebody else start to step in, which would reduce my workload.
437
00:18:11.526 --> 00:18:19.628
And then that person probably would be more of like almost a media buyer potentially because they can just execute on what you've already built.
438
00:18:19.808 --> 00:18:21.489
Like you have the guardrail built.
439
00:18:21.929 --> 00:18:23.469
I built my entire marketing calendar.
440
00:18:23.489 --> 00:18:25.450
I built that entire task thing we've talked about.
441
00:18:25.810 --> 00:18:27.271
Again, nobody's seen it.
442
00:18:27.291 --> 00:18:29.711
It has a vision of exactly what I'm talking about when I say it.
443
00:18:29.731 --> 00:18:35.413
But it literally defines exactly what we do and what order and what has to run and what has to happen every month.
444
00:18:36.233 --> 00:18:39.456
down to these are the metrics that need to be updated.
445
00:18:39.516 --> 00:18:43.759
This metric, these metrics data, or these data points need to be updated monthly.
446
00:18:43.779 --> 00:18:45.120
Like it just defines everything.
447
00:18:45.160 --> 00:18:46.681
So somebody just executes the plan.
448
00:18:46.921 --> 00:18:47.942
That's what I'm trying to get to.
449
00:18:48.262 --> 00:18:50.704
Just like follow the plan and execute the plan.
450
00:18:51.064 --> 00:18:53.106
And that's where I also get a little confused.
451
00:18:53.126 --> 00:18:55.427
Like how much of a marketing manager do I need?
452
00:18:55.788 --> 00:18:57.189
I don't, I don't need strategy.
453
00:18:57.469 --> 00:19:00.871
I don't even figure out what I've, I've laid out the whole entire thing.
454
00:19:00.911 --> 00:19:04.334
I just need it followed within the right people to do their parts.
455
00:19:04.394 --> 00:19:04.974
And so, yeah,
456
00:19:06.049 --> 00:19:07.690
I think that's what makes it more complicated.
457
00:19:07.730 --> 00:19:14.036
If I didn't have so much expertise and interest in this, it would be so much easier to just get this off my plate.
458
00:19:14.436 --> 00:19:16.358
But I could be pretty happy.
459
00:19:16.538 --> 00:19:17.399
I thought about this.
460
00:19:17.799 --> 00:19:23.785
I could be pretty happy if for the rest of my career, all I did was do marketing and advise people.
461
00:19:24.827 --> 00:19:27.650
I'd be and do some product creation.
462
00:19:27.730 --> 00:19:30.853
Like I've missed old days of software product creation.
463
00:19:31.394 --> 00:19:32.895
Those are probably my three favorite things to do.
464
00:19:33.155 --> 00:19:37.359
So if I could just be the marketing guy that for a bunch of companies, I don't want to get paid.
465
00:19:37.439 --> 00:19:38.580
I've been still point doing that.
466
00:19:38.620 --> 00:19:39.241
I'd have to own them.
467
00:19:39.601 --> 00:19:42.744
But like, if I could just do that, I would be thrilled.
468
00:19:43.265 --> 00:19:46.408
I like, this is the stuff I like and I most enjoy.
469
00:19:46.788 --> 00:19:47.529
So let's go.
470
00:19:47.869 --> 00:19:48.510
Anyway, what about you?
471
00:19:49.558 --> 00:19:54.721
Um, the MCP and API thing probably next week is going to be going general audience.
472
00:19:54.981 --> 00:19:56.782
So looking forward to that.
473
00:19:57.223 --> 00:20:00.385
Kind of like putting the fine tuning on a lot of those elements.
474
00:20:00.605 --> 00:20:03.006
We've been working a lot on the write access.
475
00:20:03.026 --> 00:20:11.211
So not just the read access, but having the ability to actually create an estimate, create an invoice, make a payment, um, do the MCP and the API.
476
00:20:11.731 --> 00:20:13.492
So, um, yeah, I'm looking forward to that.
477
00:20:13.512 --> 00:20:15.534
And then the other thing is video.
478
00:20:15.874 --> 00:20:17.095
Video is a beast.
479
00:20:17.115 --> 00:20:17.215
Yeah.
480
00:20:18.115 --> 00:20:23.796
When you allow it to be on mobile and you allow it to be uploaded when you're offline.
481
00:20:24.516 --> 00:20:32.638
And so the edge cases around like devices, whether it's a tablet, a phone, if it's 4G, 3G, 5G, how long before.
482
00:20:32.658 --> 00:20:34.939
If it's a cheap Android plastic cheapy phone.
483
00:20:35.319 --> 00:20:36.819
Oh, man, there's so many little edge cases.
484
00:20:37.399 --> 00:20:38.359
Yeah.
485
00:20:38.379 --> 00:20:40.040
Because we're doing compression too, right?
486
00:20:40.060 --> 00:20:45.021
So if someone shoots in 4K and I have a 2 gigabyte file, I've got to smash that down to 500 megs.
487
00:20:46.361 --> 00:20:53.604
So there's compression aspects and then device parameters and then connectivity, Wi-Fi versus 3G, all that stuff.
488
00:20:53.904 --> 00:20:58.847
So all the edge cases, we're finally getting to the point where I feel it's pretty solid.
489
00:20:59.087 --> 00:21:00.367
But every week, I'm just surprised.
490
00:21:00.387 --> 00:21:08.071
Like, it's a device we've never seen or it's like some weird Motorola thing or like if it goes on 4G, but it's like this.
491
00:21:08.551 --> 00:21:11.492
Anyways, lots of those little edge cases, but it's going pretty good.
492
00:21:11.652 --> 00:21:12.913
So that's what we're figuring out.
493
00:21:13.633 --> 00:21:20.574
Do you have some structure in place where if people store over a certain amount of video in your system, there's an upcharge?
494
00:21:21.255 --> 00:21:24.076
So, yeah, you mentioned that to me like way early on.
495
00:21:24.096 --> 00:21:26.077
So immediately I was like, all right, let's figure this out.
496
00:21:26.137 --> 00:21:28.557
So I went and checked on our, we call them stew.
497
00:21:28.597 --> 00:21:31.838
It's the open claw and was playing around with it.
498
00:21:31.998 --> 00:21:39.221
And so far the cost, no one's abusing it, but we do know we need to put parameters just to make sure we protect ourselves.
499
00:21:39.421 --> 00:21:42.922
Same thing with the OAuth and like the API and the MCP.
500
00:21:42.942 --> 00:21:46.183
Like we've got to have certain levels that we have to cap people.
501
00:21:47.423 --> 00:21:48.684
But so far it's not been bad.
502
00:21:48.704 --> 00:21:50.784
And Amazon's pricing for the storage is not so bad.
503
00:21:50.864 --> 00:21:51.764
And we're doing compression.
504
00:21:52.164 --> 00:21:59.946
So we are compressing the files down to about 360, 540, 480, something.
505
00:22:00.026 --> 00:22:00.367
Yeah.
506
00:22:00.587 --> 00:22:02.107
In terms of the file sizes.
507
00:22:02.127 --> 00:22:03.027
So it hasn't been so bad.
508
00:22:03.507 --> 00:22:05.548
But it's going to get there because it just accumulates.
509
00:22:05.888 --> 00:22:07.869
And you have to eventually have a time where those suns set.
510
00:22:08.249 --> 00:22:10.889
So it would be a year or two years or how old do we go back?
511
00:22:10.929 --> 00:22:12.770
But if someone says on like a recurring visit –
512
00:22:13.710 --> 00:22:16.392
it could potentially be on there and needed for some time.
513
00:22:16.472 --> 00:22:18.694
So we'll have to cross that bridge.
514
00:22:18.714 --> 00:22:21.616
But right now, we haven't put any sort of metering in place.
515
00:22:21.636 --> 00:22:24.558
It took a while, and then at Service All Pie, it just felt like it went like that.
516
00:22:25.379 --> 00:22:27.140
Same thing happened with SMS.
517
00:22:27.220 --> 00:22:29.442
When we started SMS, I did the dumbest thing ever.
518
00:22:29.902 --> 00:22:36.147
And I was like, hey, we haven't really figured out how to meter this correctly and track all the edge cases of SMS and tracking your characters.
519
00:22:36.367 --> 00:22:38.849
So we're just going to allow unlimited free texting.
520
00:22:39.129 --> 00:22:39.289
Yeah.
521
00:22:39.469 --> 00:22:43.231
And so recently we've had to put metering in place because you just get one bad actor in there.
522
00:22:43.572 --> 00:22:47.214
There's people running up like thousand dollar bills per month of SMS text.
523
00:22:47.794 --> 00:22:49.435
And and it's not fair to other members.
524
00:22:49.695 --> 00:22:53.017
And it's bad for the deliverability for Twilio.
525
00:22:53.458 --> 00:22:55.279
And so it's hurting the whole platform.
526
00:22:55.779 --> 00:22:57.780
And so we recently had to like meter that.
527
00:22:57.840 --> 00:23:02.683
So I anticipate down the road with video as that happens, we're going to have to put parameters in place.
528
00:23:02.703 --> 00:23:04.705
But like with SMS, for example, the top.
529
00:23:05.425 --> 00:23:09.647
12 people in the system used more text messages than the bottom 50%.
530
00:23:10.407 --> 00:23:15.330
So you have this massive spike of people that use it.
531
00:23:15.350 --> 00:23:18.351
But we will have to eventually do that probably.
532
00:23:18.651 --> 00:23:18.891
Yeah.
533
00:23:19.231 --> 00:23:19.431
Yeah.
534
00:23:19.592 --> 00:23:19.992
Interesting.
535
00:23:20.692 --> 00:23:21.513
I remember all that stuff.
536
00:23:21.673 --> 00:23:21.994
Oh, yeah.
537
00:23:22.194 --> 00:23:22.414
All right.
538
00:23:22.434 --> 00:23:26.979
So today, for everyone listening, I am taking some questions that came in from a poll on the channel.
539
00:23:27.660 --> 00:23:35.889
And I wanted to kind of take a step back from private equity, AI, and some of those higher level concepts and topics we've been discussing the past few episodes.
540
00:23:36.590 --> 00:23:46.454
And I looked at our most highest performing videos and it is more in the weeds for the vast majority of our audience that is still between that, you know, getting started to a million dollar business.
541
00:23:46.874 --> 00:23:49.595
So I wanted to kind of take a step towards those topics today.
542
00:23:50.055 --> 00:23:56.498
But I did want to discuss something that I've been talking about recently in my channel and with Augusta, and that is about diversification.
543
00:23:57.278 --> 00:24:03.721
And the question I want to kind of pose to you, Jonathan, to get things kicked off is when should a small business owner invest outside their business?
544
00:24:04.461 --> 00:24:11.167
And whether it be real estate or the stock market, index funds, even a 401k, if they put that for their team and then they start investing into it.
545
00:24:11.908 --> 00:24:20.475
And what is sort of the balance between diversification versus the ideology like, hey, I put all the eggs in one basket and then I protect the basket.
546
00:24:21.135 --> 00:24:22.176
And where do you stand on it?
547
00:24:22.256 --> 00:24:24.979
Is there a tipping point in terms of profitability or tax?
548
00:24:25.439 --> 00:24:32.305
What is sort of your way to identify when is the right time to diversify and invest outside the business?
549
00:24:34.130 --> 00:24:38.013
Yeah, it's definitely a personal thing, and I don't think there's a tipping point based on tax.
550
00:24:40.415 --> 00:24:46.059
I wouldn't want to try to keep my income under any certain level or anything like that.
551
00:24:47.360 --> 00:24:52.463
It's going to come down to, in my opinion, what does the owner want?
552
00:24:52.643 --> 00:24:54.365
They've got to get clear on what do they want.
553
00:24:55.410 --> 00:25:08.916
And the principle that I really believe in is that most of us, we're really going to create all of our wealth by concentrating, like concentrating on the business we have or concentrating on building a business.
554
00:25:09.376 --> 00:25:10.736
And so that's how you get wealthy.
555
00:25:11.216 --> 00:25:14.298
You're going to get way wealthier doing that if this is what you're going for.
556
00:25:15.138 --> 00:25:17.581
than investing in other things.
557
00:25:18.402 --> 00:25:23.970
And you do the investing more to diversify, which is for protection.
558
00:25:24.270 --> 00:25:26.473
Like that's the high level of how I think about it.
559
00:25:26.513 --> 00:25:32.120
It's how I think about my life, create the vast majority of my wealth is created through business,
560
00:25:32.961 --> 00:25:35.302
And then I take money off the table.
561
00:25:35.802 --> 00:25:39.262
And then I grow that money slower than I would grow it in the business.
562
00:25:39.602 --> 00:25:41.963
But I have it spread across lots of different places.
563
00:25:42.003 --> 00:25:43.863
So hopefully, it's pretty safe.
564
00:25:44.163 --> 00:25:45.004
And it lasts forever.
565
00:25:45.224 --> 00:25:46.204
That kind of a concept.
566
00:25:46.764 --> 00:25:50.285
And so for the owner, I think they have to understand what is the goal they're going for?
567
00:25:50.305 --> 00:25:51.845
Am I building a big business?
568
00:25:51.865 --> 00:25:52.905
Am I building a small business?
569
00:25:52.925 --> 00:25:57.306
Because that really dictates when you start taking money out of the business.
570
00:25:57.726 --> 00:26:00.887
And then I think you have to be pretty clear on what phase of the business you're in.
571
00:26:02.178 --> 00:26:05.639
And so there's a lot of things we can talk through here.
572
00:26:06.079 --> 00:26:14.862
And one I would start with that I really observed over the Service Autopilot Academy days is that a lot of people will say, I'm investing in my business.
573
00:26:15.862 --> 00:26:20.904
And they haven't really been taking money out of their business for 10 years, 15 years, 20 years, whatever that number is.
574
00:26:21.144 --> 00:26:24.345
And they're just like, yeah, I'm growing my business, I'm investing my business.
575
00:26:25.025 --> 00:26:30.027
they're running a million dollar business or it's not whatever the number is.
576
00:26:30.067 --> 00:26:31.548
It's just not that big of a business.
577
00:26:31.588 --> 00:26:41.131
And so the one thing that I want to be really clear on is when you say, if you say to yourself, I'm investing in my business, that's why I'm not taking any money out of the business.
578
00:26:41.511 --> 00:26:45.893
Then my question is, okay, how much money did we spend on marketing last year to grow the business?
579
00:26:46.173 --> 00:26:47.394
That's investing in the business.
580
00:26:48.254 --> 00:26:52.056
How many people did we hire a little before we needed them?
581
00:26:52.256 --> 00:26:56.578
Because we knew we were going to be growing pretty quick because of all the marketing we've been doing.
582
00:26:56.878 --> 00:27:01.480
So I got to get the people in place to handle the phone calls, to do the work, to manage the people.
583
00:27:01.781 --> 00:27:07.263
So you're wasting some amount of money in preparation for when all the work comes in.
584
00:27:07.663 --> 00:27:09.004
That's investing in the business.
585
00:27:09.504 --> 00:27:12.506
You're buying new trucks and equipment before they're at full capacity.
586
00:27:12.526 --> 00:27:13.126
Okay.
587
00:27:13.206 --> 00:27:14.406
That's investing in the business.
588
00:27:14.426 --> 00:27:23.369
So, and there's other ways to invest in the business, but if you just think about like how much money of your profit last year is being dumped back in to go faster this year, how many people are being hired?
589
00:27:23.709 --> 00:27:36.132
And if those numbers are small, then I'd say, are we really investing in the business or are we telling ourselves a story that makes us feel good about the fact we're not really taking much money out of the business or making that much money?
590
00:27:36.432 --> 00:27:38.172
And that is usually what I see.
591
00:27:38.232 --> 00:27:40.673
Most people say I'm investing in the business and I'm like, wow.
592
00:27:41.043 --> 00:27:42.344
That's not what I'm seeing.
593
00:27:42.404 --> 00:27:43.524
That is so common.
594
00:27:43.544 --> 00:27:45.025
So I wanted to really put that out there.
595
00:27:45.425 --> 00:27:50.187
And for anybody that says, I'm in the investing phase, I'm not in the extracting phase.
596
00:27:50.387 --> 00:27:54.169
I want you to challenge yourself and say, but are you really growing quickly?
597
00:27:54.589 --> 00:27:55.869
And are you doing the things I just said?
598
00:27:55.889 --> 00:27:56.590
That's investing.
599
00:27:57.230 --> 00:28:08.415
Okay, so let's just say you are investing in the business and you're kind of to this place where,
600
00:28:09.970 --> 00:28:11.591
you're starting to build up money.
601
00:28:12.191 --> 00:28:13.951
So before, we'll kind of go down that road.
602
00:28:13.971 --> 00:28:22.694
Before I ever invest anywhere else, and I know you've talked about this, I've talked about this as long as I can remember, it's this idea of building an emergency fund in the business.
603
00:28:23.134 --> 00:28:35.418
So before I'm taking money and I'm putting it anywhere else, an office building, real estate, or same thing, stock market, anything, have I set aside money to protect the business?
604
00:28:35.458 --> 00:28:39.379
Because to your point, protect the basket, build the thing, protect it.
605
00:28:39.879 --> 00:28:45.824
Well, part of protecting it in my mind is having a pile of cash sitting aside to protect the business.
606
00:28:46.204 --> 00:28:52.009
Another version of that is taking some amount of money out of the business and having an emergency fund in your own life.
607
00:28:52.089 --> 00:28:59.716
Because so many people have a good business, but then they do things in their personal life or bad things happen to them in their personal life.
608
00:28:59.756 --> 00:29:01.357
And that drives business decisions.
609
00:29:01.397 --> 00:29:02.338
It can harm the business.
610
00:29:02.718 --> 00:29:05.180
So I want a business emergency fund.
611
00:29:05.261 --> 00:29:06.862
I want a personal emergency fund.
612
00:29:08.273 --> 00:29:11.396
So that's like next, in my opinion.
613
00:29:11.777 --> 00:29:23.348
And then even before I start taking money out of the business, my question to myself is, if I could deploy this money via marketing back into the business, if I could invest $10,000,
614
00:29:25.670 --> 00:29:32.752
and grow the business by $50,000, which produces hypothetically another 10,000 in profit.
615
00:29:32.772 --> 00:29:34.492
So it's 100% return on money.
616
00:29:34.972 --> 00:29:37.713
I invest 10,000, I make an extra 10,000 take home a year.
617
00:29:37.753 --> 00:29:38.993
That's 100% return on money.
618
00:29:39.433 --> 00:29:44.514
It's gonna take you seven years to get that in the market if averages hold up or whatever the number is.
619
00:29:44.534 --> 00:29:46.715
It doesn't make any sense to put the money in the stock market.
620
00:29:47.474 --> 00:29:49.136
It doesn't make any sense to put the money in real estate.
621
00:29:49.176 --> 00:29:52.340
It makes sense to just keep putting in the money or putting the money into the business.
622
00:29:52.360 --> 00:30:05.795
So that's the big litmus test is to myself, can I invest more money in this business in the ways I talked about spending money, hiring people, buying trucks and equipment and get that kind of a return?
623
00:30:06.135 --> 00:30:07.857
And as that return diminishes,
624
00:30:08.925 --> 00:30:14.067
as I start to realize, no, I can't really move the needle by putting more money in the business because I'm not doing the marketing.
625
00:30:14.227 --> 00:30:16.427
I'm not ready to do the marketing or whatever the story is.
626
00:30:16.748 --> 00:30:22.429
If you're to that place that you're not going to get a return, then we start to say, okay, what outside the business makes sense?
627
00:30:23.110 --> 00:30:28.631
And then I think when you get to that level, the no brainer is you should be investing in a Roth IRA.
628
00:30:29.092 --> 00:30:30.212
It's just a no brainer.
629
00:30:30.232 --> 00:30:33.113
It's one of the first places you take money, set it aside.
630
00:30:33.853 --> 00:30:37.436
And then after that, I tend to prefer liquid investments.
631
00:30:37.456 --> 00:30:41.599
So liquid investments are going to be, money market's barely an investment.
632
00:30:41.899 --> 00:30:48.764
It's essentially cash, but money markets, bonds, stock market, things of that sort.
633
00:30:48.944 --> 00:30:52.127
Liquid just simply means I could get the money back almost immediately.
634
00:30:52.147 --> 00:30:57.931
Like you could even invest in gold if you invest with a gold ETF, like GLDM or something like that.
635
00:30:57.951 --> 00:30:59.632
You could sell that in an hour.
636
00:30:59.732 --> 00:31:01.413
You could sell it in 30 minutes and get your money.
637
00:31:04.835 --> 00:31:08.616
physical gold is not liquid, but gold as an ETF is liquid.
638
00:31:08.637 --> 00:31:11.477
So there's, that's what I'm referring to when I say liquid.
639
00:31:11.497 --> 00:31:18.399
Just you have the ability to sell it and get it fast because if something really bad happens in your personal or business life, there's this element of protection.
640
00:31:18.499 --> 00:31:19.680
So I tend to like liquid.
641
00:31:20.380 --> 00:31:20.980
investments.
642
00:31:21.120 --> 00:31:28.264
And then once you have all the other stuff taken care of, I can't find places to invest for my business to go way faster.
643
00:31:28.664 --> 00:31:35.187
I've got plenty of money in the bank personally and in business to protect the most important thing, my business asset.
644
00:31:35.647 --> 00:31:37.448
I'm funding my Roth IRA.
645
00:31:38.068 --> 00:31:40.029
That's when you might think about
646
00:31:41.535 --> 00:31:42.356
locking up money.
647
00:31:42.876 --> 00:31:47.058
So locking up money would be as the most common example everybody thinks about is real estate.
648
00:31:47.558 --> 00:31:56.023
And the reason that you lock up money is there's only one reason you do it because you can get a better return on the money locking it up versus not.
649
00:31:56.403 --> 00:32:02.667
Like a lot of investments where you have to lock up money don't actually outperform the stock market over a long period of time, that's a bad trade.
650
00:32:03.027 --> 00:32:07.670
But if it's a legitimate investment where it can outperform liquid investments, hopefully I'm making sense,
651
00:32:08.130 --> 00:32:13.877
then that's when you start to think, when you have everything else taken care of, that's when you think about those things and you do those things to get a better return.
652
00:32:14.297 --> 00:32:16.780
So for some people, that might be buying an office for the company.
653
00:32:17.441 --> 00:32:22.206
And on the office front, I tend to be negative on an office if you're going really big with your business.
654
00:32:22.547 --> 00:32:27.012
I tend to be fine with an office, just my personal opinion, if you're not going very big with the business.
655
00:32:27.480 --> 00:32:38.177
The reason I tend to say, wait as long as you can on an office is because if you're really gung, it's money that will never get the same return as investing in your business and, you
656
00:32:39.157 --> 00:32:41.478
A lot of people buy what they can afford for an office.
657
00:32:41.618 --> 00:32:45.559
And as soon as that business gets bigger, that becomes the constraint.
658
00:32:45.979 --> 00:32:46.759
And then what do they do?
659
00:32:47.439 --> 00:33:00.863
And so once you get big and you can really understand how fast the business is growing and you understand all the details of your business and you have a bunch of money, you can buy a business or office that's maybe three times bigger than what you need in the long term.
660
00:33:00.883 --> 00:33:01.683
It's that kind of thinking.
661
00:33:01.703 --> 00:33:04.984
So that tends to be the hierarchy that I think about it.
662
00:33:05.064 --> 00:33:07.465
So the quick summary would be,
663
00:33:08.165 --> 00:33:11.047
You have to understand, what kind of business am I building?
664
00:33:12.448 --> 00:33:13.970
And am I trying to go big?
665
00:33:14.310 --> 00:33:21.976
And if I'm trying to go bigger, then can I continue to invest in this business and get a good return on the money I'm putting into the business?
666
00:33:22.928 --> 00:33:32.235
Yeah, I think a lot of times the struggle is the stock market has decades and decades of stable returns or predictability.
667
00:33:33.036 --> 00:33:37.959
And my challenging advice for owners is they don't have anything to compare that return to.
668
00:33:38.440 --> 00:33:41.722
They don't know if I put $10 in, what do I get on the other side?
669
00:33:42.123 --> 00:33:45.345
And because they don't know that number, it does feel like gambling.
670
00:33:45.825 --> 00:33:50.689
And it is like, OK, I'll just put the stock market because I know it's going to grow over the course of time 8% to 10%.
671
00:33:51.830 --> 00:34:02.592
Versus like, I don't really know that if I spend this extra money on an extra truck or buy it, get a couple extra employees before I really need them or spend $20,000 in marketing, what is the return going to be?
672
00:34:02.612 --> 00:34:03.532
Because I don't know my CAC.
673
00:34:03.632 --> 00:34:04.253
You don't.
674
00:34:04.313 --> 00:34:05.553
I don't know my LTV.
675
00:34:06.213 --> 00:34:15.615
And not knowing the numbers is that time where I feel some people will start diversifying away from their business mostly just because they don't know their numbers.
676
00:34:16.742 --> 00:34:17.825
Yeah, that's a great point.
677
00:34:17.985 --> 00:34:25.584
And my argument for why you continue to put some money into the business is so you can learn those numbers.
678
00:34:26.608 --> 00:34:30.251
But if you're just putting the money in and you're not learning the numbers, you're accomplishing nothing.
679
00:34:30.731 --> 00:34:33.213
It's just part of growing up and maturing as a business owner.
680
00:34:33.233 --> 00:34:34.934
We all have to do it and go through it.
681
00:34:35.335 --> 00:34:37.316
That's what really running a business means.
682
00:34:37.937 --> 00:34:41.880
And so if you're tracking those numbers, the clarity will eventually come.
683
00:34:42.400 --> 00:34:43.541
And you've just got to do it.
684
00:34:43.621 --> 00:34:45.522
And you do it in small little chunks.
685
00:34:45.642 --> 00:34:47.204
And you watch things like this.
686
00:34:47.224 --> 00:34:48.144
You're like, okay, what did I try?
687
00:34:48.204 --> 00:34:49.966
Okay, you try it with small amounts of money.
688
00:34:49.986 --> 00:34:51.207
They're not going to hurt you badly.
689
00:34:51.667 --> 00:34:52.488
If you hear me say...
690
00:34:53.148 --> 00:34:56.251
direct mail, I highly encourage you not to do direct mail.
691
00:34:56.271 --> 00:34:58.534
That's the fastest way to burn money.
692
00:34:58.634 --> 00:35:01.057
Like really probably close to the fastest way to burn money.
693
00:35:01.657 --> 00:35:03.519
You have to really know what you're doing.
694
00:35:03.539 --> 00:35:08.425
And so if you ever, it's my example of if you ever do it, you do it like a teeny little bitty bit of it.
695
00:35:09.165 --> 00:35:12.027
and then you do a little bit more, you really step into that thing slowly.
696
00:35:12.047 --> 00:35:15.169
And so, but you've got to spend some money to start to learn these things.
697
00:35:15.209 --> 00:35:17.611
And also you can listen to us talk all day long.
698
00:35:17.651 --> 00:35:18.811
You can listen to Alex Hermose.
699
00:35:18.831 --> 00:35:23.234
You can read all the books you want, but until you do it, it never quite sticks.
700
00:35:23.614 --> 00:35:24.995
It never is quite real.
701
00:35:25.295 --> 00:35:30.899
And it's another reason why for years, you just kind of got to get in the game and spend a little money and try things and experiment.
702
00:35:31.279 --> 00:35:36.503
And eventually, to your point, Mike, it's like, well, right now in your life, it might feel like I haven't the famous idea.
703
00:35:36.723 --> 00:35:38.004
This feels like a complete waste.
704
00:35:38.444 --> 00:35:38.684
That's what
705
00:35:38.704 --> 00:35:40.444
how it's felt for all of us.
706
00:35:41.265 --> 00:35:45.666
And even with what I'm doing right now in CityTurf, building all this stuff, we are going to blow some money.
707
00:35:46.306 --> 00:35:47.486
There's just no way around it.
708
00:35:47.566 --> 00:35:50.167
I'm just going to blow some money to figure out the numbers.
709
00:35:50.407 --> 00:35:52.987
There's just, it's the reality.
710
00:35:53.067 --> 00:35:54.708
And so, and I'm a bigger business.
711
00:35:55.448 --> 00:35:58.149
And if I, and that's just part of the game.
712
00:35:58.569 --> 00:36:00.629
And so you just got to go on that journey.
713
00:36:00.689 --> 00:36:05.550
But the key here is when you're spending that money, are you collecting data so that the
714
00:36:09.247 --> 00:36:21.012
And last night I was working, we have an internal tool that we're using the API for, and it's going to help the owners when they log in their dashboard, it shows their 90 day churn and then their annual churn.
715
00:36:21.632 --> 00:36:30.256
And I was scrolling to locations and I have never seen such a great correlation between profitability and 90 day churn.
716
00:36:30.436 --> 00:36:31.436
It's crazy.
717
00:36:31.876 --> 00:36:36.138
And so even like my location, it was like, I think 12 to 15% annual churn, but it's
718
00:36:36.479 --> 00:36:38.446
Also, another 10-12% 90 day turn.
719
00:36:40.605 --> 00:36:42.726
And so aggregated, that's not great.
720
00:36:42.806 --> 00:36:49.488
It's like maybe 25% year over year churn, but it's all in the first 90 days.
721
00:36:49.808 --> 00:36:55.750
And so being able to track that is just like, this is the type of thing that gets me super excited about the whole AI thing.
722
00:36:55.950 --> 00:36:58.490
This is where I believe it's going to help home service business owners the most.
723
00:36:58.511 --> 00:37:03.552
Because we've always talked about knowing your numbers, but no one pulls the data and runs the spreadsheets.
724
00:37:04.052 --> 00:37:05.373
Most people don't do it manually.
725
00:37:05.393 --> 00:37:06.033
They don't know their...
726
00:37:06.993 --> 00:37:08.815
where the leads are coming from, like lead attribution.
727
00:37:08.835 --> 00:37:11.416
They don't know what their churn is, they can't really figure out their lifetime value.
728
00:37:11.877 --> 00:37:20.523
And so they don't really know what investing in their business looks like other than I bought another truck and I spent some money on marketing and whether or not I even know that.
729
00:37:20.543 --> 00:37:31.050
A lot of times, for example, if you keep a customer seven years, it's sometimes hard unless you're tracking the data and can extrapolate out what your lifetime value is based upon churn.
730
00:37:32.011 --> 00:37:34.194
Am I going to wait seven years to determine what my churn rate is?
731
00:37:34.214 --> 00:37:37.457
No, like I need to know, okay, this year I lost 10 out of 100.
732
00:37:37.517 --> 00:37:38.278
That's 10%.
733
00:37:38.538 --> 00:37:43.324
And then be like extrapolate into the future to know whether I should spend more money in the business.
734
00:37:44.345 --> 00:37:44.545
Yep.
735
00:37:44.805 --> 00:37:45.306
Totally agree.
736
00:37:45.847 --> 00:37:51.613
And so like, yeah, I think the conversations we've been having about AI, I know some people have been lost on the smaller end of it.
737
00:37:51.833 --> 00:38:03.865
But like this to me is a part that I've been like, when we saw what was happening earlier in 2026, I said like all a lot of resources we put towards us because I believe this is the future for AI and for all the data center stuff and the political stuff.
738
00:38:04.225 --> 00:38:15.369
We have to turn that off for a minute and realize this is going to be the best way to democratize getting data to smaller operators that in the past you would have a data analyst at a $20 or $30 million company running this sort of stuff.
739
00:38:15.629 --> 00:38:17.010
And now it's going to be in your fingertips.
740
00:38:17.310 --> 00:38:19.031
Hey, where am I losing customers?
741
00:38:19.151 --> 00:38:21.712
Oh, you're losing them between September and October because they're not renewing.
742
00:38:22.112 --> 00:38:25.173
Or you're losing them the first 30 days because they're not renewing.
743
00:38:25.793 --> 00:38:29.634
They're not, uh, there's cancellations happening due to low quality.
744
00:38:29.834 --> 00:38:32.335
Like you can just zero in on what should I fix in the business.
745
00:38:32.995 --> 00:38:42.818
And, uh, I would just encourage anyone that has been felt lost in the past few conversations that we've been talking about AI stuff to realize that this is going to be very important that we lean in at this time for this industry.
746
00:38:43.118 --> 00:38:46.359
I don't care if you're $300,000 or $3 million in revenue.
747
00:38:46.379 --> 00:38:48.399
This is like our golden time, I believe.
748
00:38:50.400 --> 00:38:51.120
So did I hear you right?
749
00:38:51.140 --> 00:38:53.021
Did you say you look at churn on 90 days?
750
00:38:53.081 --> 00:38:53.241
Yeah.
751
00:38:54.075 --> 00:38:55.336
90 days and then annual too.
752
00:38:55.656 --> 00:38:55.836
Yeah.
753
00:38:56.056 --> 00:38:56.277
Okay.
754
00:38:56.457 --> 00:38:57.057
That's what we do.
755
00:38:57.337 --> 00:38:58.858
I was just, I thought I heard that.
756
00:38:59.078 --> 00:39:03.501
I call it returns in the first 90 days and then churn after, but okay.
757
00:39:03.702 --> 00:39:04.242
That's interesting.
758
00:39:04.442 --> 00:39:05.103
I had debated.
759
00:39:06.263 --> 00:39:07.424
Should I look at it in 30 days?
760
00:39:07.724 --> 00:39:09.205
Should I look at it in 60, 90?
761
00:39:09.285 --> 00:39:10.126
I had debated that.
762
00:39:10.146 --> 00:39:11.287
So it's interesting.
763
00:39:11.667 --> 00:39:12.568
We landed on 90.
764
00:39:12.588 --> 00:39:14.449
So it's interesting to hear you landed on the same thing.
765
00:39:15.146 --> 00:39:23.432
Yeah, when I did 30, it was challenging me because a lot of times someone, they'll play the system of like, let's sign up for service and they bail after one or two services.
766
00:39:23.913 --> 00:39:24.953
So I saw that skew the numbers.
767
00:39:24.973 --> 00:39:27.896
It was too like up and down, whereas 90 was a little more consistent.
768
00:39:28.296 --> 00:39:29.297
Makes sense, yeah.
769
00:39:29.757 --> 00:39:30.538
But it was so interesting.
770
00:39:30.558 --> 00:39:33.740
Like there was one of the locations I was looking at and they've struggled.
771
00:39:34.240 --> 00:39:38.123
And 40% in the first 90 days, after that, it was like 12%.
772
00:39:38.664 --> 00:39:42.166
But if you're losing 40% of your customers in the first 90 days,
773
00:39:43.147 --> 00:39:45.108
Is that on a monthly basis or annual basis?
774
00:39:46.449 --> 00:39:46.850
What do you mean?
775
00:39:46.890 --> 00:39:47.170
Sorry.
776
00:39:47.730 --> 00:39:50.432
Are they losing 40% of their clients each month or 40%?
777
00:39:51.032 --> 00:39:52.573
In the first 90 days, in the quarter.
778
00:39:52.613 --> 00:39:53.134
In the first 90 days.
779
00:39:53.154 --> 00:39:54.154
Yeah, 90 days, 90 days.
780
00:39:54.635 --> 00:39:58.817
So annualize is horrible because that's like 200% annual.
781
00:39:58.897 --> 00:39:59.998
That's what I was asking.
782
00:40:00.018 --> 00:40:00.718
That's where, yeah.
783
00:40:00.879 --> 00:40:07.423
Yeah, what I kind of did is I took the first 90 days out so I could actually identify, is it in the first 90 days or is it after?
784
00:40:08.223 --> 00:40:09.384
And it's also very interesting.
785
00:40:09.404 --> 00:40:12.006
If you keep them 90 days, they kind of stick around for a long time.
786
00:40:13.075 --> 00:40:18.540
So, but just even like the customer success of like, how many times do I touch point with them, call them?
787
00:40:18.760 --> 00:40:20.962
Do I go visit their property after their first visit or two?
788
00:40:21.182 --> 00:40:23.404
Like, what do I need to do in the first 90 days to keep them?
789
00:40:23.424 --> 00:40:25.206
Because after that, they kind of stay around forever.
790
00:40:25.827 --> 00:40:26.027
Yep.
791
00:40:27.182 --> 00:40:28.542
You actually got me thinking about something else.
792
00:40:28.602 --> 00:40:31.483
So my churn number actually still includes the first 90 days.
793
00:40:31.763 --> 00:40:34.484
I do a return, which is like a zoom in on churn.
794
00:40:34.904 --> 00:40:38.265
But it sounds like you only look at churn after 90 days.
795
00:40:38.845 --> 00:40:40.106
We had both data points.
796
00:40:40.366 --> 00:40:42.406
So that way they can see like really the impact.
797
00:40:42.426 --> 00:40:48.188
Because we found if we included the first 90 days in the annual number, it just kind of smashed the numbers together.
798
00:40:48.548 --> 00:40:51.149
But when I separated them, then I could really tell what was going on.
799
00:40:52.249 --> 00:40:53.269
I wonder if I should separate that.
800
00:40:53.289 --> 00:40:53.830
That's interesting.
801
00:40:53.850 --> 00:40:54.590
I got to think about that.
802
00:40:55.530 --> 00:40:57.112
I debated that and then I was like, ah, you know what?
803
00:40:57.132 --> 00:40:57.692
I'll leave it in there.
804
00:40:57.712 --> 00:40:58.393
Okay.
805
00:40:58.993 --> 00:40:59.634
So thank you.
806
00:40:59.794 --> 00:41:01.816
I think annual turn though is so much easier in general.
807
00:41:01.876 --> 00:41:07.001
If you do smash it together, it's an easier number to talk about because it's just conceptually you can understand it a little bit easier.
808
00:41:07.762 --> 00:41:07.922
Yeah.
809
00:41:08.647 --> 00:41:09.668
Okay, we're going to move on.
810
00:41:10.168 --> 00:41:15.471
The next question, I think both you and I talk a lot about recurring revenue, the quality of revenue.
811
00:41:16.111 --> 00:41:21.814
And I know that for a lot of people listening, they don't have a recurring revenue that's usually inside their business.
812
00:41:22.255 --> 00:41:26.437
It's one-time fixes, one-time installation, repairs, et cetera.
813
00:41:26.957 --> 00:41:28.298
And so we actually had someone write in.
814
00:41:28.338 --> 00:41:29.759
They said they have a garage door business.
815
00:41:30.599 --> 00:41:35.948
And he was asking, how can I make this business more recession-proof or add recurring revenue?
816
00:41:35.968 --> 00:41:45.582
So I don't know if you want to smash those two together, but he was specifically asking about recession-proof because seeing when we go into a recession, less likely people are going to replace their garage door.
817
00:41:46.203 --> 00:41:54.370
And so he was interested about us talking how to increase the quality of the revenue, moving away from one-time jobs into recurring.
818
00:41:54.671 --> 00:41:58.854
But he kind of is also conflating recession-proof, which I kind of feel like is two different topics.
819
00:41:58.874 --> 00:42:00.656
So I'll let you attack it however you like there.
820
00:42:01.917 --> 00:42:02.117
Yeah.
821
00:42:02.638 --> 00:42:04.119
So I definitely have some thoughts on this.
822
00:42:04.139 --> 00:42:04.600
Yeah.
823
00:42:06.373 --> 00:42:16.436
I suppose the top level thought is, and I don't know the answer to this because I'm not in the garage door business, but how much of a recession risk is there really in the garage door business?
824
00:42:16.636 --> 00:42:19.818
If your garage door doesn't open, you have a big problem.
825
00:42:19.838 --> 00:42:21.138
I got a credit card.
826
00:42:21.158 --> 00:42:26.740
I mean, it kind of to me feels like every time I've had to do something with my garage door.
827
00:42:28.003 --> 00:42:30.766
over the homes I've owned over the years, we were doing it.
828
00:42:31.467 --> 00:42:32.127
I just don't know.
829
00:42:32.367 --> 00:42:34.269
You know, I've done some extra stuff, but.
830
00:42:34.470 --> 00:42:39.254
I would imagine it's the replacements because the replacement is probably a higher ticket in comparison to repair.
831
00:42:39.815 --> 00:42:40.816
Yeah, I would imagine.
832
00:42:40.976 --> 00:42:42.618
So it's some kind of an upgrade.
833
00:42:42.658 --> 00:42:43.699
Yeah, maybe I could see that.
834
00:42:43.739 --> 00:42:49.985
The percentage of repairs is higher during a recession, but my ticket is 70% lower on the job.
835
00:42:50.766 --> 00:42:51.006
Yeah.
836
00:42:52.508 --> 00:43:01.312
And I guess what I would say, the way I thought about this one is I would tell you that this is the business you're in and I don't think I would change it.
837
00:43:02.013 --> 00:43:06.855
So I do think of quality of revenue as being a variety of things.
838
00:43:07.315 --> 00:43:12.038
I think for me, I like quality revenue is possibly recurring revenue.
839
00:43:12.718 --> 00:43:22.748
But it doesn't mean that, like that would then, if you just think about it just that way, that means the HVAC business, your garage door business, the plumbing businesses, these are bad businesses.
840
00:43:22.829 --> 00:43:23.990
I don't buy that for a moment.
841
00:43:24.010 --> 00:43:25.591
Those are great businesses.
842
00:43:25.912 --> 00:43:27.213
Great businesses.
843
00:43:27.634 --> 00:43:29.255
They're what you call break-fix businesses.
844
00:43:29.736 --> 00:43:30.597
They break, you fix it.
845
00:43:31.197 --> 00:43:35.642
And they, as the business gets bigger, you'll find things.
846
00:43:36.022 --> 00:43:37.323
stability in the data.
847
00:43:37.844 --> 00:43:42.948
You can almost predict year over year, there's going to be this many people that call you.
848
00:43:43.489 --> 00:43:47.552
Stuff is just breaking across your service area all the time.
849
00:43:47.592 --> 00:43:51.556
And so there's this stability that happens in these businesses as they get bigger.
850
00:43:52.216 --> 00:44:00.703
And so, yeah, there's a element of the business that is probably at risk for a recession.
851
00:44:01.734 --> 00:44:04.155
But that so is a recurring business.
852
00:44:04.696 --> 00:44:12.480
So you could also argue that in the fertilization weed control business, if there's a recession, maybe I cut back on that service.
853
00:44:12.740 --> 00:44:16.322
Or I have pest control and mosquito, I cut out mosquito.
854
00:44:16.823 --> 00:44:22.506
You can go through a whole list of recurring services where I could also make the exact same argument.
855
00:44:22.766 --> 00:44:24.007
People are going to spend less.
856
00:44:24.667 --> 00:44:26.909
We're going to go from weekly mowing to biweekly mowing.
857
00:44:27.229 --> 00:44:30.433
We're going to go from four times a year trimming bushes to two times a year trimming bushes.
858
00:44:30.873 --> 00:44:35.337
So being a recurring service does not protect you at all.
859
00:44:35.617 --> 00:44:41.843
So whether or not their service is at risk of recession is completely dependent on the service itself.
860
00:44:42.524 --> 00:44:43.965
So that's the first thing I'd say.
861
00:44:44.025 --> 00:44:47.127
So when I hear garage door, I just don't get overly concerned.
862
00:44:47.267 --> 00:44:48.968
And I'm not concerned that it's not recurring.
863
00:44:49.249 --> 00:44:51.070
And I also wouldn't tell you to add a service.
864
00:44:51.490 --> 00:44:54.792
I would say, stay in that lane and just do garage door.
865
00:44:55.978 --> 00:45:01.963
And what you want to be thinking about, in my opinion, so I think about this from the perspective of, I own the garage door business.
866
00:45:02.083 --> 00:45:04.224
I'm thinking about, am I pricing this right?
867
00:45:04.865 --> 00:45:06.947
Am I serving the right market?
868
00:45:07.247 --> 00:45:16.474
Am I, within my big giant service area, am I spending most of my marketing money on the best part of the market versus spreading it around the whole market?
869
00:45:17.695 --> 00:45:19.916
And so the problem isn't that it's a one-time business.
870
00:45:19.957 --> 00:45:23.940
The other problem is that in a one-time business, people forget about you.
871
00:45:24.796 --> 00:45:28.359
So in a recurring business, they don't forget about you in the same way.
872
00:45:28.719 --> 00:45:31.161
So when something happens, they're like, you're top of mind.
873
00:45:31.281 --> 00:45:31.842
You're always there.
874
00:45:32.022 --> 00:45:32.583
I'll call them.
875
00:45:33.043 --> 00:45:38.467
But in a garage store business where your garage store only needs service every whatever, four years.
876
00:45:38.528 --> 00:45:39.568
I don't know what the number is.
877
00:45:40.309 --> 00:45:43.271
Then I probably will forget who I used last time.
878
00:45:44.032 --> 00:45:48.876
And so that's what I think you want to solve for here is don't add services.
879
00:45:49.277 --> 00:45:51.518
Solve for the problem of they might forget about me.
880
00:45:51.979 --> 00:45:52.779
So how do you do that?
881
00:45:52.799 --> 00:45:52.900
Okay.
882
00:45:54.108 --> 00:45:59.209
maybe putting stickers on their garage door units, putting sticker on the inside of the garage door.
883
00:45:59.669 --> 00:46:03.010
Maybe as soon as they sign up, you text them a V card.
884
00:46:03.050 --> 00:46:04.110
So that goes in the phone.
885
00:46:04.430 --> 00:46:06.991
And then in the description, it says garage door company.
886
00:46:07.251 --> 00:46:11.112
So if they're searching garage in their phone, they find your ticket or your contact card.
887
00:46:12.232 --> 00:46:15.453
Maybe you sell them into an annual checkup or some kind of a membership.
888
00:46:16.633 --> 00:46:19.654
I was trying to picture this service for me
889
00:46:20.773 --> 00:46:25.938
The only, I have an annual membership with my HVAC company for 300 bucks a year.
890
00:46:26.578 --> 00:46:29.281
And I have an annual membership with my electrician.
891
00:46:29.301 --> 00:46:31.783
Because they're here all the time.
892
00:46:32.504 --> 00:46:34.566
Gotta get that robot.
893
00:46:34.826 --> 00:46:35.507
Get power.
894
00:46:35.687 --> 00:46:36.287
Not for the robot.
895
00:46:36.387 --> 00:46:37.448
It's always something.
896
00:46:37.949 --> 00:46:40.491
There's too many things going on in this house.
897
00:46:40.511 --> 00:46:41.292
There's always something.
898
00:46:41.332 --> 00:46:43.414
So I think that's like 180 a year.
899
00:46:43.774 --> 00:46:46.176
I've never considered it for my garage door.
900
00:46:47.472 --> 00:46:51.274
because it doesn't have the same level.
901
00:46:51.374 --> 00:46:56.017
It has the same level of urgency if it doesn't open, but it has problems way less.
902
00:46:56.577 --> 00:46:59.999
I'm just talking this through, trying to picture it from how I would think about it.
903
00:47:00.019 --> 00:47:04.521
It has problems way less than, say, HVRC, or in my case, electrical.
904
00:47:04.861 --> 00:47:06.962
And that's just because of the kind of property I have.
905
00:47:07.742 --> 00:47:12.285
And so on the HVAC, the 300 makes sense to me.
906
00:47:17.993 --> 00:47:19.353
They're changing my vents.
907
00:47:19.393 --> 00:47:20.714
They're doing some basic service.
908
00:47:20.734 --> 00:47:21.694
They're doing things like that.
909
00:47:21.794 --> 00:47:25.035
So my question to you would be, what does it need to be priced at?
910
00:47:25.615 --> 00:47:29.036
And what are those preemptive maintenance kinds of things you can do?
911
00:47:29.296 --> 00:47:37.838
When I think about my garage doors, I'm not clear on what the preventive maintenance is other than changing the battery in my unit that will periodically go out.
912
00:47:38.858 --> 00:47:39.018
And
913
00:47:40.460 --> 00:47:52.125
So what I would encourage you to do is think about what all the wear items are, understand on what schedule they tend to break, how often batteries tend to go out, and then can you get them into some kind of an annual checkup?
914
00:47:52.385 --> 00:47:54.366
I mean, even if the annual checkup was...
915
00:47:56.575 --> 00:48:03.283
like 75 bucks, even if it wasn't monthly, even if it's just some number that's small so they can't forget about you.
916
00:48:03.584 --> 00:48:05.306
You're just out there every year.
917
00:48:06.127 --> 00:48:07.768
That's the way that I would add.
918
00:48:07.809 --> 00:48:10.091
It's not really gonna drive a lot of revenue in the business
919
00:48:11.560 --> 00:48:20.466
but what the actual dollars of the membership of the annual checkup, but what it will drive is it goes back to the, it's hard for them to forget about you now.
920
00:48:20.666 --> 00:48:23.048
That's like the single biggest thing I think you're solving for.
921
00:48:23.288 --> 00:48:34.255
And the next one is it will drive work because if you get to do the annual checkup, you'll be able to do a 14 point inspection and say, Hey, springs look okay, but it's been four years.
922
00:48:34.815 --> 00:48:38.878
And by the way, we have a, if you're our longtime client, we have a running history of
923
00:48:39.118 --> 00:48:40.379
everything we've ever done for you.
924
00:48:40.599 --> 00:48:46.663
When the springs were changed, when the unit was changed, when the battery is changed, we know everything we can, we can even predict when you're probably going to need next thing.
925
00:48:46.683 --> 00:48:51.947
Like you can add some value there by tracking, by making this promise.
926
00:48:52.367 --> 00:49:01.113
And so I would put them into some kind of a membership and the membership's not about the, if it's 30 bucks or 75 bucks or 99 bucks a year, it's not about that money.
927
00:49:01.213 --> 00:49:05.577
It's about getting to, they don't forget about you and being there to do the inspection.
928
00:49:05.597 --> 00:49:06.197
Yeah.
929
00:49:06.466 --> 00:49:11.108
And then the other way I think about this is, again, not scared of this business at all.
930
00:49:11.608 --> 00:49:22.474
If you worry about recession, the way I think about a recession is, sure, I'm gonna get hit by a recession in some way, but my marketing engine is gonna outrun everybody else's marketing engine.
931
00:49:22.834 --> 00:49:26.235
And so, yeah, we'll take a hit here or there, but on the whole, we'll still outperform.
932
00:49:26.736 --> 00:49:32.518
So are you doing a really good job capturing all the emergency Google searches?
933
00:49:32.578 --> 00:49:33.939
Are you getting your LSA stuff?
934
00:49:33.959 --> 00:49:35.340
Are you doing all the stuff
935
00:49:36.100 --> 00:49:39.963
right online so that you can win the business in the first place.
936
00:49:40.324 --> 00:49:43.366
And if you are, you'll hold up much better through the next downturn.
937
00:49:44.287 --> 00:49:49.651
And then the only other thing that comes to mind is, are you working partnerships?
938
00:49:50.372 --> 00:50:01.721
So maybe in a recession, people are, Mike, you gave that, I hadn't even thought about this, but maybe people are not replacing, they're upgrading their garage doors to a nicer garage doors frequently.
939
00:50:02.758 --> 00:50:06.659
But can you, so can you partner with builders?
940
00:50:08.280 --> 00:50:18.144
This is something you'd have to do being in the business, but who, handyman, who might be the person that says, you need a garage door, you need this looked at, you need this fixed?
941
00:50:18.464 --> 00:50:20.605
Pest control companies, because you've got...
942
00:50:21.225 --> 00:50:23.627
the exclusion work that has to be done.
943
00:50:23.647 --> 00:50:25.628
It's a, the garage door has got a big gap in it.
944
00:50:25.648 --> 00:50:26.128
It can't wait.
945
00:50:26.168 --> 00:50:30.952
There's, there's probably a variety of partners you could partner with that will refer you business.
946
00:50:31.172 --> 00:50:34.534
So if you've done all that, so that's more what I'd worry about then.
947
00:50:36.395 --> 00:50:40.198
Then frankly, anything else, I wouldn't fret about this recession thing too terribly much.
948
00:50:40.238 --> 00:50:41.499
I just do all that other stuff.
949
00:50:42.073 --> 00:50:51.400
Yeah, my mind also went to more like, okay, if leads get harder to, if they're harder to come by, it just takes the froth out of the market, but all your competition is going to feel it.
950
00:50:51.880 --> 00:50:56.423
And so it's just who actually knows their numbers during that time to be able to actually go capture market.
951
00:50:56.444 --> 00:51:07.572
Like a lot of, I've seen over and over, especially 2008, 2009, 2010, like that's the last time we really had a recession that was long extended, but you look at a lot of entrepreneurs now, that's when they started.
952
00:51:08.272 --> 00:51:11.014
And is because everyone had gotten fat and lazy.
953
00:51:11.094 --> 00:51:13.835
And then when the tie went out, they all went out of business.
954
00:51:13.995 --> 00:51:15.516
And now there's a whole bunch of customers to pick up.
955
00:51:15.916 --> 00:51:17.497
And so at the same time, there's a recession.
956
00:51:17.617 --> 00:51:25.582
If it's going to hurt everyone in your market that doesn't know their numbers, has been over leveraged, doesn't know their customer average cost, doesn't know how to do any sort of marketing, they're going to go to business.
957
00:51:25.622 --> 00:51:27.383
And then all those customers are now in the market.
958
00:51:28.123 --> 00:51:35.631
And so it goes to the person that is able to actually accelerate during that time and be able to be on on the offense when everyone else is in the defense.
959
00:51:35.651 --> 00:51:38.054
And that's when I can see like the going.
960
00:51:38.755 --> 00:51:39.496
That's when you expand.
961
00:51:39.516 --> 00:51:39.976
That's when you grow.
962
00:51:39.996 --> 00:51:45.262
That's when you like just throttle it when everyone else is struggling because they haven't put things in place because it's been easy.
963
00:51:45.302 --> 00:51:46.243
Like the phones are off the hook.
964
00:51:46.303 --> 00:51:47.264
I'm super full.
965
00:51:47.524 --> 00:51:48.466
I'm six months booked out.
966
00:51:48.486 --> 00:51:49.707
There's no reason to be doing any sort of.
967
00:51:49.967 --> 00:51:53.470
advertising or optimizing my website or thinking about aEO.
968
00:51:53.870 --> 00:52:02.897
And because they haven't, when it gets hard and that froth gets removed, it's the person that's been diligently trying to make these optimizations that can actually accelerate during that time.
969
00:52:03.558 --> 00:52:03.718
Yeah.
970
00:52:04.018 --> 00:52:07.021
And the data says a lot of people cut their ad spend during those times.
971
00:52:07.081 --> 00:52:09.363
So pile onto what you just said.
972
00:52:09.383 --> 00:52:18.470
It's another reason why you have a chance to hold up way better than everybody else, because fewer people are running ads, fewer people are in the mailbox, whatever the scenario.
973
00:52:19.054 --> 00:52:19.194
Yeah.
974
00:52:19.474 --> 00:52:24.219
And not necessarily in garage door, but I always think about like, how can I put myself out of business too?
975
00:52:24.499 --> 00:52:28.502
Like if there's a cost, not necessarily with garage doors, you're not going to replace your garage door with something else.
976
00:52:28.923 --> 00:52:34.868
But specifically when it comes to like landscaping and lawn care, like, can I put myself out of business by taking out a lawn?
977
00:52:35.228 --> 00:52:41.513
Can I do things that are going to save this customer in the long term because they have a bunch of maintenance costs or watering bills or watering restrictions?
978
00:52:42.294 --> 00:52:44.255
Can I actually remove this cost from it?
979
00:52:44.275 --> 00:52:48.559
And now I am getting a four or $5,000 project because it's going to save them a few hundred dollars a month.
980
00:52:48.599 --> 00:52:51.581
And now in a recession, that's actually a really good move for them.
981
00:52:51.941 --> 00:52:59.027
And if the cost of electricity is going up, water restrictions are going up, the cost of water starts to increase, you know, with data centers, everything's going to get super expensive.
982
00:52:59.247 --> 00:53:03.371
Like if that's going to happen, can I actually save the customer money?
983
00:53:03.971 --> 00:53:05.953
and do things that are actually going to bring down their costs.
984
00:53:06.954 --> 00:53:07.114
Yeah.
985
00:53:07.775 --> 00:53:07.995
Yeah.
986
00:53:08.676 --> 00:53:09.557
I agree with all that.
987
00:53:10.277 --> 00:53:10.518
All right.
988
00:53:10.578 --> 00:53:13.741
I would just, whoever asked the question, I encourage you not to worry too much about this one.
989
00:53:13.761 --> 00:53:14.161
Just go.
990
00:53:14.401 --> 00:53:15.563
Just a feature, not a bug.
991
00:53:15.783 --> 00:53:16.784
Just, yeah, just build.
992
00:53:17.204 --> 00:53:17.364
Yeah.
993
00:53:17.745 --> 00:53:18.005
All right.
994
00:53:18.045 --> 00:53:18.686
Third question.
995
00:53:18.826 --> 00:53:19.567
I think this is a good one.
996
00:53:20.187 --> 00:53:24.211
And I can write if you need me to on this one, Jonathan, on the whiteboard.
997
00:53:24.632 --> 00:53:24.792
But,
998
00:53:25.132 --> 00:53:26.132
This one's probably a good idea.
999
00:53:26.192 --> 00:53:29.974
This one's a more complicated question to answer by just talking it through.
1000
00:53:30.114 --> 00:53:30.554
So, yeah.
1001
00:53:30.594 --> 00:53:30.974
All right.
1002
00:53:31.055 --> 00:53:38.958
So the question is, could you do a deep dive on exactly how to calculate the gross margin and the net margin for specific services?
1003
00:53:39.618 --> 00:53:41.299
So I'll let you take a crack at this one.
1004
00:53:41.319 --> 00:53:50.783
I know you've been talking about knowing this for individual services inside the business and not just my COGS and my net income, but a level deeper in terms of service.
1005
00:53:51.657 --> 00:53:52.278
Specific.
1006
00:53:52.318 --> 00:53:55.324
So I'll take a stab at it and fill in any gaps that you see.
1007
00:53:56.847 --> 00:54:04.300
So the way I, you know, the backstory on this, and I think it's probably the backstory for many people is I just think back in my career and
1008
00:54:05.603 --> 00:54:09.266
I was really, this goes back before city turf.
1009
00:54:09.587 --> 00:54:18.175
I was doing some stuff in the cleaning industry and we were cleaning seats and we were cleaning movie theater screens and wall carpet and carpet cleaning.
1010
00:54:18.936 --> 00:54:23.020
We were doing all these things and I just knew the pricing wasn't right.
1011
00:54:23.320 --> 00:54:24.081
I just knew it.
1012
00:54:24.801 --> 00:54:29.406
And I really had started reading about this kind of stuff, but I, I, I,
1013
00:54:29.966 --> 00:54:32.967
it seems so ridiculous now, but it's like it didn't immediately click.
1014
00:54:33.067 --> 00:54:37.029
It's like I could kind of regurgitate it, but we weren't really living it or getting it.
1015
00:54:37.109 --> 00:54:38.350
I don't know what the problem was.
1016
00:54:38.410 --> 00:54:41.571
I just think back to, and this goes back a long time now.
1017
00:54:42.392 --> 00:54:44.413
And so I think that happens to a lot of people.
1018
00:54:44.433 --> 00:54:51.296
I think these conversations right here are kind of like in one ear and out the other, or you kind of get it in the moment and then you don't think about it for a week.
1019
00:54:51.316 --> 00:54:52.236
You're like, wait, what?
1020
00:54:52.757 --> 00:54:56.038
Like it just, there's something about this that's just hard.
1021
00:54:56.078 --> 00:54:57.339
But one day when you get it,
1022
00:54:58.299 --> 00:55:00.241
It's like, gosh, how could I not get that before?
1023
00:55:00.261 --> 00:55:01.702
It's really actually not hard.
1024
00:55:02.022 --> 00:55:03.343
In a way, it's not hard.
1025
00:55:03.403 --> 00:55:06.946
So I want to kind of define these terms first.
1026
00:55:07.646 --> 00:55:13.571
And so somewhere I had heard it described this way.
1027
00:55:13.631 --> 00:55:14.671
So gross.
1028
00:55:15.012 --> 00:55:16.833
So we're talking margin, gross margin, net margin.
1029
00:55:16.893 --> 00:55:17.113
Okay.
1030
00:55:17.333 --> 00:55:18.114
Not net profit.
1031
00:55:18.414 --> 00:55:19.675
I'll mention that again in a moment.
1032
00:55:20.035 --> 00:55:21.296
Gross margin, net margin.
1033
00:55:21.477 --> 00:55:21.737
Okay.
1034
00:55:22.410 --> 00:55:25.371
So gross is what the job makes.
1035
00:55:25.931 --> 00:55:28.232
So gross margin, that's how much the job actually makes.
1036
00:55:28.292 --> 00:55:29.193
I'll define that better.
1037
00:55:29.813 --> 00:55:35.795
And then net margin, that's what's left over after the company takes all its money, which will make more sense.
1038
00:55:36.576 --> 00:55:40.637
Okay, so gross is how much you're actually making when you do this job.
1039
00:55:41.558 --> 00:55:45.179
And net is what's left over after the company takes money.
1040
00:55:46.272 --> 00:55:47.854
what it takes to run the company.
1041
00:55:48.174 --> 00:55:48.374
Okay.
1042
00:55:48.775 --> 00:55:48.995
All right.
1043
00:55:49.035 --> 00:55:51.878
So gross margin is like two things.
1044
00:55:52.139 --> 00:55:54.962
It's two, it's two big buckets of numbers.
1045
00:55:55.262 --> 00:55:56.924
The first one is it's the revenue.
1046
00:55:57.224 --> 00:55:58.646
So we're going to talk at a job level.
1047
00:55:58.786 --> 00:55:59.046
Okay.
1048
00:55:59.607 --> 00:56:05.193
And we, you, but you also think about these numbers at a company level, but let's just, let's just do the job level.
1049
00:56:05.954 --> 00:56:09.055
And at the end, I can say a few things about the company level, if I remember.
1050
00:56:09.495 --> 00:56:09.955
All right.
1051
00:56:09.975 --> 00:56:14.917
So kind of imagine gross margin is I have a job that's $100.
1052
00:56:15.137 --> 00:56:16.417
So that's the revenue.
1053
00:56:17.078 --> 00:56:22.539
We go out and we see it doesn't matter what doesn't matter if you're doing design build, mowing a lawn, doing HVAC.
1054
00:56:23.079 --> 00:56:23.920
It's all the same.
1055
00:56:23.940 --> 00:56:26.961
Like where we're probably most of us are all in home services.
1056
00:56:26.981 --> 00:56:27.941
We're just selling time.
1057
00:56:28.781 --> 00:56:34.203
We're renting a human to another person or to a business and they're paying us money.
1058
00:56:34.583 --> 00:56:34.823
Okay.
1059
00:56:34.863 --> 00:56:39.324
So at the end of the day, it's all figured out based on an hourly basis.
1060
00:56:39.384 --> 00:56:41.365
This episode is sponsored by Rent-A-Grandpa.
1061
00:56:41.385 --> 00:56:42.025
Just want to plug it in.
1062
00:56:42.065 --> 00:56:42.505
Yeah, exactly.
1063
00:56:42.525 --> 00:56:43.086
Yeah, there you go.
1064
00:56:43.406 --> 00:56:44.306
All right.
1065
00:56:44.446 --> 00:56:46.167
All right.
1066
00:56:46.187 --> 00:56:49.068
So $100, that's what we bill Miss Smith or whomever.
1067
00:56:49.928 --> 00:56:52.489
Now, we don't really make $100.
1068
00:56:52.789 --> 00:56:53.269
You know this.
1069
00:56:53.289 --> 00:56:56.390
I'm trying to be very simplistic to work through this because I know that it's easy.
1070
00:56:57.579 --> 00:56:58.740
I just, I've been through this.
1071
00:56:58.780 --> 00:57:00.480
I know it's, you forget this stuff.
1072
00:57:00.500 --> 00:57:02.241
So $100 to do the job.
1073
00:57:02.962 --> 00:57:05.883
That's not what you really make because you have to actually do the work.
1074
00:57:06.223 --> 00:57:09.625
And the doing of the work is what they call the direct cost.
1075
00:57:09.905 --> 00:57:11.866
Like it's the cost to produce the work.
1076
00:57:12.506 --> 00:57:14.948
So again, we'll use, let's just use, um,
1077
00:57:16.189 --> 00:57:17.069
I'll just use mowing.
1078
00:57:17.590 --> 00:57:19.250
It costs, I bill $100.
1079
00:57:20.251 --> 00:57:23.232
Actually, I'm going to use a fertilization and we control example later.
1080
00:57:23.252 --> 00:57:24.173
So let me not get into this.
1081
00:57:24.573 --> 00:57:28.835
I bill $100 and it costs me $50 to do the work.
1082
00:57:29.135 --> 00:57:31.016
So what's the $50 to do the work?
1083
00:57:31.076 --> 00:57:34.817
That is the people, the labor, it's the materials.
1084
00:57:35.238 --> 00:57:36.638
So like, did I have a chemical?
1085
00:57:37.038 --> 00:57:40.300
Did I have mulch that was included in that hundred bucks?
1086
00:57:40.320 --> 00:57:42.521
Did I have a part that was included in the hundred bucks?
1087
00:57:42.941 --> 00:57:44.782
And then maybe the fuel, okay?
1088
00:57:44.802 --> 00:57:44.902
Okay.
1089
00:57:46.064 --> 00:57:48.025
I say maybe, I'll say why later.
1090
00:57:48.465 --> 00:57:58.750
So that cost, what we call the direct cost, is what it only incurred if you actually do the work.
1091
00:58:00.111 --> 00:58:01.892
Okay, that's really important.
1092
00:58:01.912 --> 00:58:03.332
That kind of simplifies this idea.
1093
00:58:03.452 --> 00:58:04.853
That's really important to understand.
1094
00:58:05.273 --> 00:58:09.235
If I bill $100, what cost do I incur if I do the work?
1095
00:58:09.275 --> 00:58:11.316
But if I don't do the work, I don't incur the cost.
1096
00:58:11.616 --> 00:58:14.658
So if I'm paying Bob 40 bucks an hour,
1097
00:58:16.287 --> 00:58:19.168
but Bob doesn't do the job, I don't pay him the 40 bucks an hour.
1098
00:58:19.188 --> 00:58:21.068
I only pay him the 40 bucks an hour when he does the job.
1099
00:58:21.508 --> 00:58:27.590
If I use $9 worth of fertilizer, I don't incur the fertilizer cost if I don't do the job.
1100
00:58:27.910 --> 00:58:31.451
If I don't drive to the job, I don't incur the fuel to drive to the job.
1101
00:58:31.511 --> 00:58:34.272
So those are variable costs or direct costs.
1102
00:58:34.932 --> 00:58:35.852
That's the concept.
1103
00:58:35.872 --> 00:58:40.013
So again, Mike, I'm probably going to spend a bit of time on this one.
1104
00:58:40.033 --> 00:58:42.354
So I hope so by all means, redirect me if you want to.
1105
00:58:42.414 --> 00:58:42.534
But
1106
00:58:44.046 --> 00:58:50.131
The gross margin is the revenue minus what it costs to do the job, and we would not incur those costs if we didn't do the job.
1107
00:58:50.491 --> 00:58:54.534
You'll hear all these terms, and a term you'll hear a lot is COGS.
1108
00:58:54.915 --> 00:58:57.817
This direct cost, what it costs to do the job, it's COGS.
1109
00:58:58.157 --> 00:58:59.478
Cost of goods sold.
1110
00:58:59.738 --> 00:59:00.779
Cost to do the work.
1111
00:59:01.920 --> 00:59:04.502
Does that feel, before I move on, does that feel clear?
1112
00:59:04.522 --> 00:59:05.382
Fantastic.
1113
00:59:05.402 --> 00:59:05.703
You think...
1114
00:59:06.423 --> 00:59:06.543
Okay.
1115
00:59:06.563 --> 00:59:07.203
All right.
1116
00:59:07.283 --> 00:59:11.085
I'm spending a lot of time on this one, but my goodness, this is so valuable.
1117
00:59:11.225 --> 00:59:12.246
I added subs for those.
1118
00:59:12.266 --> 00:59:12.706
Yeah, subs.
1119
00:59:12.726 --> 00:59:13.086
Perfect.
1120
00:59:13.106 --> 00:59:13.446
Subs.
1121
00:59:13.486 --> 00:59:14.106
Exactly right.
1122
00:59:14.327 --> 00:59:16.708
You wouldn't incur the sub cost if you didn't do the job.
1123
00:59:17.088 --> 00:59:17.568
It's perfect.
1124
00:59:18.028 --> 00:59:18.268
All right.
1125
00:59:18.308 --> 00:59:20.089
So now net margin.
1126
00:59:21.010 --> 00:59:22.550
So we've got our gross margin.
1127
00:59:22.710 --> 00:59:24.431
We built a hundred bucks.
1128
00:59:24.451 --> 00:59:25.992
We took out the cost to do the work.
1129
00:59:26.672 --> 00:59:30.996
Now, whatever's left over, let's just make up a number and say it's 50 bucks is left over.
1130
00:59:31.576 --> 00:59:33.318
I've still got other costs in the business.
1131
00:59:33.758 --> 00:59:36.481
And those costs are generally just called overhead costs.
1132
00:59:37.041 --> 00:59:45.608
You have an office, you have rent, you have admin people in the office, you have marketing expanse, you have managers, you have trucks, you have equipment, you have trash bags, you have...
1133
00:59:46.568 --> 00:59:50.892
janitorial soap in the bathroom in the, you just go down the list of all the stuff.
1134
00:59:51.132 --> 00:59:56.136
That's the stuff that takes, you know, that that's what you, you have to do all that stuff to run the business.
1135
00:59:56.697 --> 00:59:59.920
So then you subtract all that stuff out and that gives you the net margin.
1136
01:00:00.380 --> 01:00:03.343
So if we go back to my first statement, gross is what the job makes.
1137
01:00:03.843 --> 01:00:05.344
The job didn't make a hundred dollars.
1138
01:00:05.444 --> 01:00:09.408
The job made whatever was left over after you did the work.
1139
01:00:10.494 --> 01:00:12.755
So the gross is what the job makes.
1140
01:00:13.115 --> 01:00:16.076
That's the money left over to actually run the business.
1141
01:00:16.296 --> 01:00:19.297
And then the net, remember, I think I, how do I say that?
1142
01:00:19.538 --> 01:00:22.599
The net is what's left over after the company takes its part.
1143
01:00:23.159 --> 01:00:28.061
The company's part is the running of the company, the office, the rent, the admin, the marketing, the management.
1144
01:00:28.901 --> 01:00:29.141
Okay.
1145
01:00:29.161 --> 01:00:30.542
So that leaves you with your net margin.
1146
01:00:31.778 --> 01:00:33.581
Tracking, does it feel okay so far, Mike?
1147
01:00:33.701 --> 01:00:34.001
Amazing.
1148
01:00:34.021 --> 01:00:34.302
All right.
1149
01:00:34.782 --> 01:00:35.003
Okay.
1150
01:00:35.263 --> 01:00:35.503
All right.
1151
01:00:35.523 --> 01:00:39.529
So now you're like, okay, well, I get the gross part.
1152
01:00:39.569 --> 01:00:41.912
That's not too terribly hard to comprehend.
1153
01:00:41.932 --> 01:00:44.416
But how in the world do I get my net part?
1154
01:00:44.796 --> 01:00:45.858
Because that's the overhead.
1155
01:00:46.459 --> 01:00:48.381
This is where it gets a little more tricky.
1156
01:00:48.942 --> 01:00:52.145
And this is where I'll kind of tell you how you might do it yourself.
1157
01:00:53.025 --> 01:00:55.648
I'll tell you, like maybe you sometimes get a consultant to do this.
1158
01:00:55.708 --> 01:00:59.571
Maybe if you have an accountant that's better than just doing taxes, maybe they can help you with this.
1159
01:01:00.151 --> 01:01:07.538
But really the way I think about it, and there's probably arguments on this, and I'm going to leave all kinds of gaps out in my explanation here, because otherwise I'm going to,
1160
01:01:08.493 --> 01:01:09.073
I'm going to lose you.
1161
01:01:09.493 --> 01:01:17.516
But the way I think about it is the simplest, since we're selling time, the simplest way is to figure out how many billable hours.
1162
01:01:17.576 --> 01:01:22.337
And by all means, I'm going to, don't let me forget, Mike, if you have an alternative for this, let's talk about it.
1163
01:01:22.698 --> 01:01:26.659
But the way I've always thought about it is like, how many hours did I bill for the year?
1164
01:01:27.512 --> 01:01:27.712
Okay.
1165
01:01:28.072 --> 01:01:32.336
And because I was in the software business and I had a software system, you could pull those hours out of the system.
1166
01:01:32.356 --> 01:01:36.439
We can figure out how many hours we build because they have to run across an invoice.
1167
01:01:36.459 --> 01:01:37.300
They get scheduled.
1168
01:01:38.301 --> 01:01:41.764
It may not be perfect, but you can generally get there.
1169
01:01:42.044 --> 01:01:46.468
You can do, and even guesstimating is way better than what 99% of people do.
1170
01:01:46.488 --> 01:01:50.571
It's like, I kind of think based on looking at my data, we do about 15,000 hours a
1171
01:01:52.953 --> 01:01:55.495
plus or minus 15%, I kind of don't care.
1172
01:01:55.776 --> 01:01:57.798
It's kind of close enough for what we're trying to do here.
1173
01:01:58.338 --> 01:02:01.501
So let's just imagine you're, let's do some numbers.
1174
01:02:01.541 --> 01:02:03.463
Let's imagine you're a million dollar business.
1175
01:02:03.563 --> 01:02:15.735
So you do your taxes, you use QuickBooks, and you're basically, when you take out your COGS or your cost to do the work, and then you look at all the other expenses, let's just say it's $300,000 on a million dollar business.
1176
01:02:17.697 --> 01:02:22.587
I would literally just take the $300,000 and divide it by the billable hours for the year.
1177
01:02:23.348 --> 01:02:26.895
And that gives me my hourly rate, which is my overhead to run the business.
1178
01:02:26.935 --> 01:02:28.298
It's 20 bucks in that example.
1179
01:02:29.690 --> 01:02:29.870
Okay.
1180
01:02:30.370 --> 01:02:33.772
So now let me just make sure we don't confuse anything.
1181
01:02:34.213 --> 01:02:35.554
I've been talking about net margin.
1182
01:02:36.014 --> 01:02:37.955
Net profit is not what we're talking about.
1183
01:02:38.075 --> 01:02:39.696
None of this gets you to net profit.
1184
01:02:40.016 --> 01:02:46.660
Net profit is that thing that's at the bottom of your profit loss statement in your accounting system.
1185
01:02:47.641 --> 01:02:50.863
And we're not talking about that at all in this conversation.
1186
01:02:50.883 --> 01:02:51.883
I just want to be really clear.
1187
01:02:52.244 --> 01:02:52.444
Okay.
1188
01:02:52.844 --> 01:02:53.044
All right.
1189
01:02:53.104 --> 01:03:07.239
So let me before I get into an actual another numbers example, the other thing that I think it's really to try to simplify this in your mind, there's two ways your business is broken financially or two ways that you could run out of money, go broke.
1190
01:03:08.240 --> 01:03:12.945
Either the job doesn't make enough money or the company costs too much to run.
1191
01:03:13.908 --> 01:03:17.090
Now, there's a lot of stuff that could go into those two things, but it's kind of that simple.
1192
01:03:17.610 --> 01:03:21.672
Either this work we're doing, these jobs we're doing, they're just not making enough money.
1193
01:03:22.133 --> 01:03:23.634
Now, why might they not make enough money?
1194
01:03:24.234 --> 01:03:25.995
One could be we're underpricing.
1195
01:03:27.220 --> 01:03:27.961
That could be it.
1196
01:03:28.581 --> 01:03:31.423
Another could be we're ridiculously inefficient.
1197
01:03:32.284 --> 01:03:36.406
Inefficiency can come from having bad humans that don't know what they're doing, doing the work.
1198
01:03:36.887 --> 01:03:38.508
It could come from terrible training.
1199
01:03:39.008 --> 01:03:41.350
It could come from horrible route density.
1200
01:03:41.670 --> 01:03:43.051
It could come from lots of places.
1201
01:03:43.071 --> 01:03:49.896
So efficiency, pricing, these are factors that lead to we don't make enough money on the job itself.
1202
01:03:50.276 --> 01:03:51.777
Okay, so that's one of your two things.
1203
01:03:51.837 --> 01:03:53.738
It's probably broken if you're not happy with your business.
1204
01:03:54.079 --> 01:03:55.780
The other one is the company just costs too much money.
1205
01:03:56.788 --> 01:03:58.549
You've been buying really cool equipment.
1206
01:03:58.749 --> 01:03:59.429
Equipment's fun.
1207
01:03:59.449 --> 01:04:01.150
You've been buying some pretty cool trucks.
1208
01:04:01.571 --> 01:04:02.531
You bought an office.
1209
01:04:02.691 --> 01:04:04.332
You got a cooler office than you needed.
1210
01:04:04.392 --> 01:04:07.254
You got a cool office and you put a lot of cool stuff in your cool office.
1211
01:04:07.274 --> 01:04:09.855
Like there's a million, you made some bad decisions.
1212
01:04:10.175 --> 01:04:13.537
Overhead wages, like salespeople, admin people, all that.
1213
01:04:13.597 --> 01:04:14.077
Exactly.
1214
01:04:14.117 --> 01:04:15.858
We got, yeah, just keep going.
1215
01:04:15.938 --> 01:04:18.940
And that's actually going to be the biggest defender for almost everybody.
1216
01:04:19.180 --> 01:04:29.387
If if you're even I, I tend to argue in most of the businesses I've seen, the problem tends to be for most people, not the how much it costs to run the business.
1217
01:04:29.447 --> 01:04:33.149
It can be it tends to be the job is not making enough money for some reason.
1218
01:04:33.990 --> 01:04:38.092
Most people are just not doing blatantly stupid things like, yeah, some bad things might have happened.
1219
01:04:38.112 --> 01:04:38.813
You got into some debt.
1220
01:04:38.833 --> 01:04:39.834
You made a few bad decisions.
1221
01:04:40.034 --> 01:04:41.194
That's part of the learning process.
1222
01:04:41.214 --> 01:04:41.875
You'll clean it up.
1223
01:04:42.115 --> 01:04:43.156
Things will be great in the future.
1224
01:04:43.736 --> 01:04:46.877
Some people do legitimately make really bad decisions running their company.
1225
01:04:47.157 --> 01:04:48.578
And the company part is the problem.
1226
01:04:48.918 --> 01:04:54.920
So again, two ways you go broke, the job doesn't pay enough, or the company costs too much to run.
1227
01:04:55.581 --> 01:05:00.283
And I am just adamant about, it's one of the reasons why I'm not big on buying offices too soon.
1228
01:05:00.703 --> 01:05:05.925
I'm adamant about keeping the cost to run the company as low as you can keep it without being cheap.
1229
01:05:06.545 --> 01:05:10.247
And cheap means we're being, as they said, what is that saying?
1230
01:05:11.348 --> 01:05:13.389
Penny wise, pound foolish or something like that.
1231
01:05:13.429 --> 01:05:16.451
Like it's this idea that we're being so cheap.
1232
01:05:16.811 --> 01:05:19.312
We're not reinvesting in the company to make us more money.
1233
01:05:19.793 --> 01:05:20.573
It's that kind of thing.
1234
01:05:20.593 --> 01:05:26.096
But you do, I just think you want to be careful on, on the amount of, on how you spend your money inside the business.
1235
01:05:26.116 --> 01:05:34.301
So the inverse, like again, trying to be super simple here is that if you want to get really wealthy and rich, then there are two ways to do that.
1236
01:05:34.841 --> 01:05:41.048
make sure the jobs make a lot of money or make sure or spend less money running the company.
1237
01:05:41.829 --> 01:05:51.819
So you'll see sometimes, and this may be slightly off in the weeds, but you'll see if you ever hear somebody talk about, like my COGS is 32, my COGS is 41, my COGS is whatever, 53.
1238
01:05:52.100 --> 01:05:56.564
And you're like, well, how could the guy that has 53 COGS be making any money
1239
01:05:57.225 --> 01:06:07.148
compared to the guy that has 30 something, because that guy's cost structure, the cost to run the company is a fraction of what the guy who has 30 COGS, and that's a little bit of a city turf story.
1240
01:06:07.188 --> 01:06:09.429
And some of our stuff, our COGS are really low.
1241
01:06:09.709 --> 01:06:14.951
Some of our service is a little bit higher, but our cost structure to run our company is really good, really good.
1242
01:06:15.291 --> 01:06:19.032
And so we can run a little bit higher COGS and make a lot of money.
1243
01:06:19.552 --> 01:06:23.694
So again, I just add that little detail to help add some clarification.
1244
01:06:24.748 --> 01:06:28.490
Okay, so I'm going to walk through some numbers for fertilization weed control.
1245
01:06:29.970 --> 01:06:32.912
Anything that you feel you should interject, Mike, before I do that?
1246
01:06:33.112 --> 01:06:35.473
No, I think you were going where I was about to say, so go for it.
1247
01:06:35.993 --> 01:06:36.433
Okay, cool.
1248
01:06:36.613 --> 01:06:38.774
All right, so let's just use a fertilization weed control example.
1249
01:06:39.935 --> 01:06:43.436
So imagine that your fertilization weed control app is $75.
1250
01:06:43.936 --> 01:06:49.759
If you're doing a $50,000 a year job in construction, it all scales, what I'm about to say, okay?
1251
01:06:50.139 --> 01:06:54.141
So on my little fertilization weed control job for $75, that's what we're billing,
1252
01:06:55.257 --> 01:06:59.239
That job is going to take us a half an hour, a half a man hour.
1253
01:06:59.259 --> 01:06:59.819
Okay.
1254
01:07:00.560 --> 01:07:04.461
So what, so if I'm calculating my gross margin, how do I do that?
1255
01:07:04.562 --> 01:07:06.542
Like, okay, the job was $75.
1256
01:07:06.983 --> 01:07:08.964
Now, what does it cost me to do this job?
1257
01:07:09.204 --> 01:07:10.264
So I've got my labor.
1258
01:07:10.704 --> 01:07:12.405
I got a guy working for half an hour.
1259
01:07:12.826 --> 01:07:15.427
So I've got whatever he makes or she makes, that's the labor.
1260
01:07:15.447 --> 01:07:15.887
Okay.
1261
01:07:16.147 --> 01:07:17.549
Then I've got product.
1262
01:07:18.009 --> 01:07:28.059
So I'm putting down for granular fertilizer, maybe, maybe we're spraying some material out of the tank, we're spraying 20 gallons, I don't know, whatever, you get the idea, you got some cost there.
1263
01:07:28.480 --> 01:07:29.961
And then maybe you do fuel.
1264
01:07:30.342 --> 01:07:31.983
And I'll just say my word about fuel.
1265
01:07:32.624 --> 01:07:35.807
I a lot of people like to put fuel in cogs or put it in this number.
1266
01:07:36.007 --> 01:07:36.988
I personally do not.
1267
01:07:37.829 --> 01:07:41.150
Because it's just too dang complicated to track the fuel back to the job.
1268
01:07:41.490 --> 01:07:47.351
So I just personally, for me, like if a lot of the textbook definitions you'll read, this is why I added this.
1269
01:07:47.491 --> 01:07:49.692
I just, this is how I always had learned it going way back.
1270
01:07:49.972 --> 01:07:52.072
They always talk about, well, fuel's a variable cost.
1271
01:07:52.392 --> 01:07:54.833
If you don't incur the cost, if you don't do the work, they're like, I agree.
1272
01:07:55.353 --> 01:07:55.913
Totally agree.
1273
01:07:56.133 --> 01:07:59.294
But there's perfect and there's realistic.
1274
01:07:59.394 --> 01:08:03.175
And for me, it's not realistic for me to track fuel back to a job.
1275
01:08:03.195 --> 01:08:03.295
So
1276
01:08:05.035 --> 01:08:06.217
I personally don't track that.
1277
01:08:06.317 --> 01:08:11.685
I just think about labor and materials and SOPs and labor is employees and SOPs.
1278
01:08:11.705 --> 01:08:11.945
Okay.
1279
01:08:12.126 --> 01:08:13.167
I'm glad you went that direction.
1280
01:08:13.187 --> 01:08:15.571
You're like, man, I don't know how he's going to explain this easily.
1281
01:08:15.891 --> 01:08:16.091
Okay.
1282
01:08:16.111 --> 01:08:16.352
Good.
1283
01:08:16.372 --> 01:08:16.552
Okay.
1284
01:08:16.752 --> 01:08:17.093
Yeah.
1285
01:08:17.173 --> 01:08:17.373
Okay.
1286
01:08:17.393 --> 01:08:17.594
Good.
1287
01:08:17.634 --> 01:08:17.814
Good.
1288
01:08:17.874 --> 01:08:18.655
All right.
1289
01:08:18.695 --> 01:08:18.916
So.
1290
01:08:19.957 --> 01:08:21.559
All right, so $75.
1291
01:08:21.619 --> 01:08:23.300
I'm being really long labor.
1292
01:08:23.440 --> 01:08:24.862
I'm going into great detail here.
1293
01:08:24.882 --> 01:08:27.264
I hope you're with me because this is so important.
1294
01:08:28.125 --> 01:08:29.206
Mike, I hear you say it.
1295
01:08:29.246 --> 01:08:29.486
I say it.
1296
01:08:29.506 --> 01:08:30.627
We're always talking about numbers.
1297
01:08:30.647 --> 01:08:33.229
This is the core numbers right here.
1298
01:08:33.850 --> 01:08:36.993
This is what makes or breaks the business, knowing this stuff right here.
1299
01:08:37.453 --> 01:08:43.779
This will take years off the building of a business because it just gives you clarity on what to do, what not to do, what's not working.
1300
01:08:43.799 --> 01:08:45.981
When you say, I'm investing in the business,
1301
01:08:46.902 --> 01:08:48.623
All I have to do is know these numbers.
1302
01:08:49.283 --> 01:08:51.645
And if they're bad, you're not investing in the business.
1303
01:08:51.745 --> 01:08:55.727
If they're killer and you're dumping money in the business, you might actually be investing in the business.
1304
01:08:55.747 --> 01:08:57.348
Like this is what matters.
1305
01:08:57.448 --> 01:09:00.829
So back to the 75 bucks to do the fertilization weed control.
1306
01:09:01.150 --> 01:09:06.692
In my little example here, that's the price we charge, the cost to produce the work.
1307
01:09:06.933 --> 01:09:08.834
I'm going to call it 25 bucks, okay?
1308
01:09:09.334 --> 01:09:11.575
So my gross margin is $50, okay?
1309
01:09:13.796 --> 01:09:14.977
All right, so now...
1310
01:09:16.212 --> 01:09:19.533
The $50 hasn't actually paid for anything to run the company.
1311
01:09:20.014 --> 01:09:21.774
The $50 is just what's left over.
1312
01:09:22.115 --> 01:09:23.295
That's actually what we're making.
1313
01:09:23.615 --> 01:09:25.896
So now we can run the company with that $50.
1314
01:09:26.516 --> 01:09:33.059
And again, the running of the company with that $50 is the office, the marketing, the salespeople, the trucks, the equipment, all that other stuff.
1315
01:09:33.299 --> 01:09:34.940
The fuel, it's all those things.
1316
01:09:35.300 --> 01:09:35.500
Okay?
1317
01:09:36.121 --> 01:09:36.341
All right.
1318
01:09:36.381 --> 01:09:39.242
So now I've got to add back in my overhead.
1319
01:09:39.322 --> 01:09:45.205
Remember earlier we determined that our overhead is estimated to cost us about $20 an hour.
1320
01:09:47.788 --> 01:09:49.569
Well, we only did it half an hour of work.
1321
01:09:49.649 --> 01:09:52.270
So I'm going to take $10 off the 50.
1322
01:09:52.611 --> 01:09:54.572
So I make 50 bucks, my gross margin.
1323
01:09:54.592 --> 01:09:56.033
I'm going to take 10 bucks off it.
1324
01:09:56.413 --> 01:09:57.593
Now I have $40 left over.
1325
01:09:59.853 --> 01:10:04.615
So that's $40 from which my profit in the business will come.
1326
01:10:05.235 --> 01:10:08.537
It just gets a little complicated right here to calculate net profit.
1327
01:10:08.597 --> 01:10:14.640
It's like pretty much, in my opinion, near impossible because there's still some other things you haven't accounted for that in this.
1328
01:10:15.320 --> 01:10:17.481
The $40 is the way I...
1329
01:10:17.581 --> 01:10:19.582
This is where it can get confusing, so I'm not going to say too much.
1330
01:10:19.902 --> 01:10:25.925
The $40 is based on this idea that the job from Ignition and Ignition went perfect, really well.
1331
01:10:26.205 --> 01:10:27.565
We didn't waste material.
1332
01:10:28.966 --> 01:10:31.446
We didn't use, we didn't go overboard.
1333
01:10:31.486 --> 01:10:33.307
We like stayed within budgeted hours.
1334
01:10:33.327 --> 01:10:37.688
Like there's just, there's a variety of things there, but then it goes another level deeper.
1335
01:10:38.208 --> 01:10:40.508
It doesn't include all the non-billable time.
1336
01:10:40.588 --> 01:10:43.129
Remember our overhead is built on budgeted hours.
1337
01:10:43.629 --> 01:10:51.411
There's all this other labor in the business that is loading the trucks, unloading the trucks, callbacks,
1338
01:10:52.111 --> 01:10:54.273
drive time, morning routine.
1339
01:10:54.673 --> 01:11:01.379
Then there's also, remember, there's materials in this number of gross margin.
1340
01:11:02.199 --> 01:11:03.220
Materials get wasted.
1341
01:11:04.221 --> 01:11:05.262
Materials get stolen.
1342
01:11:05.902 --> 01:11:07.203
We have interest on the business.
1343
01:11:07.224 --> 01:11:07.924
We have taxes.
1344
01:11:07.944 --> 01:11:11.267
We have all these other things that will come out of the $40.
1345
01:11:11.307 --> 01:11:17.552
So that's why it's like, I just want to be clear, the $40 isn't actually your net profit, but it's in the ballpark.
1346
01:11:17.792 --> 01:11:17.912
It's
1347
01:11:22.322 --> 01:11:27.243
Let me just say a couple other things at the risk of confusing you, but I think this is really important.
1348
01:11:28.463 --> 01:11:37.865
So one of the problems that happens with businesses, because I've worked with so many different businesses, and also I've built all my businesses from zero, so I've experienced this.
1349
01:11:38.625 --> 01:11:40.626
Let's just say you're trying to figure out your overhead.
1350
01:11:41.326 --> 01:11:48.147
Your overhead number when you're 300 grand is a different number than when you're a million, and it's a different number than when you're 5 million.
1351
01:11:48.187 --> 01:11:49.708
It's a different number than when you're 10 million.
1352
01:11:53.523 --> 01:11:58.126
This is really important to understand because it can lead to inaccurate thinking around pricing.
1353
01:11:59.327 --> 01:12:01.108
And it can lead to other mistakes.
1354
01:12:01.188 --> 01:12:09.794
So when you're really small and you're calculating your overhead, it could be artificially low to support the business you're building to.
1355
01:12:10.702 --> 01:12:10.922
Okay.
1356
01:12:11.302 --> 01:12:16.665
So I've got a $300,000 business and I have no operations manager.
1357
01:12:16.845 --> 01:12:17.926
I have no office team.
1358
01:12:18.266 --> 01:12:19.107
I have no office.
1359
01:12:19.287 --> 01:12:21.588
I have a storage unit or out of my garage at my house.
1360
01:12:21.928 --> 01:12:25.870
I have almost no marketing expense and I'm not even on the payroll of the company.
1361
01:12:27.011 --> 01:12:30.713
Like those are all examples of things that are now not in your overhead number.
1362
01:12:31.613 --> 01:12:34.575
And so when you calculate your overhead number, it's just way low.
1363
01:12:34.675 --> 01:12:39.037
And so what happens to some companies, and we're not going to go down this
1364
01:12:41.620 --> 01:12:51.508
they price their services way too low early in their business because they don't, they, it works for the numbers they have today, but it doesn't work for the numbers.
1365
01:12:51.568 --> 01:13:00.034
As soon as they want an operations manager, they want to actually spend some money on marketing and they need to get a real office because those numbers are not baked into how they came up with their pricing.
1366
01:13:00.655 --> 01:13:02.216
So a little deviation here.
1367
01:13:02.296 --> 01:13:03.177
I tend to say, um,
1368
01:13:04.868 --> 01:13:10.113
you probably should just pay attention in the very, very early days to what your best competitors are pricing at.
1369
01:13:10.433 --> 01:13:16.399
And Mike, you may have a different way to direct people on this, and I'd love to hear it, but this does touch a little bit on pricing.
1370
01:13:16.459 --> 01:13:23.605
It's like, if you try to back into these numbers, which a lot of books will tell you or some consultants will tell you if you just read their articles...
1371
01:13:24.546 --> 01:13:26.787
You're going to really find yourself underpricing.
1372
01:13:26.867 --> 01:13:34.452
I can tell you when CityTurf started, there were a few commercial contracts that we signed multi-year deals on.
1373
01:13:35.252 --> 01:13:38.394
We signed multi-year deals because those people knew something I didn't know.
1374
01:13:38.735 --> 01:13:45.939
I was way underbidding because my cost structure was really, my pricing was based on a cost structure that wasn't going to hold up when the business size doubled.
1375
01:13:46.299 --> 01:13:50.844
You know, so just be really aware that if you like, oh, man, I get this number thing.
1376
01:13:50.864 --> 01:13:52.105
I'm going all in on this number thing.
1377
01:13:52.125 --> 01:13:53.186
It's going to help me figure everything out.
1378
01:13:53.206 --> 01:13:54.968
It's like there's this little caveat here.
1379
01:13:55.328 --> 01:13:56.750
Your overhead is going to go way up.
1380
01:13:57.571 --> 01:13:58.812
You're going to get on payroll one day.
1381
01:13:58.892 --> 01:14:04.037
And if you don't build that in now, then you haven't priced your work to let you grow.
1382
01:14:04.378 --> 01:14:06.240
And this happens to so many people.
1383
01:14:07.834 --> 01:14:12.256
The last thing I'll say is you want to try to look at these numbers at a job level.
1384
01:14:12.796 --> 01:14:17.899
I'm really big on this, especially in the early days, because it teaches you your business.
1385
01:14:18.579 --> 01:14:22.441
But ultimately, you want to be looking at the numbers I just said.
1386
01:14:22.941 --> 01:14:25.003
at a company level and at a division level.
1387
01:14:25.063 --> 01:14:30.707
So our service level, so mowing versus fertilization, we control versus pool cleaning versus pest control.
1388
01:14:31.067 --> 01:14:42.055
I need to know this number, gross margin, net margin, by those different divisions, because I need to understand how does fertilization we control compare to mowing in terms of its contribution to our business.
1389
01:14:42.395 --> 01:14:45.877
So I wanted to give you the basics, which is at the service level.
1390
01:14:45.957 --> 01:14:48.619
And if you learn it at that level, you'll totally get this.
1391
01:14:48.940 --> 01:14:50.681
And then you scale it up to the company level.
1392
01:14:51.068 --> 01:14:52.069
That was a lot.
1393
01:14:52.209 --> 01:14:52.650
You're fine.
1394
01:14:52.790 --> 01:14:59.918
How would someone go about doing this if they had a technician or the direct labor was being done across different services?
1395
01:15:01.930 --> 01:15:03.571
That's where I feel like a lot of people get pretty confused.
1396
01:15:03.591 --> 01:15:04.432
At the company level?
1397
01:15:05.113 --> 01:15:11.398
If at the company I have a technician that does mowing, they do fertilization, and they also do some pest control, how do I figure out that number now?
1398
01:15:11.858 --> 01:15:13.079
It's hard.
1399
01:15:13.159 --> 01:15:21.826
So this is where you're going to have to go to a payroll report, and on your payroll report you're going to have the name of all these employees.
1400
01:15:22.607 --> 01:15:27.651
And so you dump it into Excel, and you literally just put F&W, mowing,
1401
01:15:29.928 --> 01:15:37.634
you know, past 50% mowing, 50% past 50, like you break it down and then you just do the math in a spreadsheet and you bring it over.
1402
01:15:38.095 --> 01:15:38.355
Got it.
1403
01:15:38.375 --> 01:15:46.182
So like running a report on their payroll for a two week pay period, be like, okay, how approximately 30% one service, 40% another service.
1404
01:15:46.242 --> 01:15:47.363
Okay, got it.
1405
01:15:48.003 --> 01:15:48.864
It's in the ballpark.
1406
01:15:48.924 --> 01:15:50.305
It's not perfect, but it's in the ballpark.
1407
01:15:50.545 --> 01:15:57.952
So just to kind of like zero out for a second, I think for some people just, we lost some people at the fact, like what's overhead versus not necessarily, not necessarily,
1408
01:15:58.592 --> 01:16:00.613
defining it, but finding what that is for you.
1409
01:16:00.673 --> 01:16:01.714
And so I would just say this.
1410
01:16:01.954 --> 01:16:02.234
Oh, yeah.
1411
01:16:02.354 --> 01:16:14.701
If you have a QuickBooks, assuming that you've done a decent job of bookkeeping and actually put things in the correct categories, QuickBooks, if you dump your report from last year, and for example, it can help you walk through what's overhead and what's not.
1412
01:16:14.761 --> 01:16:20.384
So you can actually come up with some of these numbers and then ask when you dump it into your chat, GPT or Claude, say, hey,
1413
01:16:20.704 --> 01:16:27.932
Ask me five questions to clarify what services I offer and how I run my business to be able to identify what's a direct cost versus overhead.
1414
01:16:28.333 --> 01:16:31.617
That will help you get you a starting point with some of the things that we just talked about.
1415
01:16:32.771 --> 01:16:33.311
Yeah, good.
1416
01:16:33.471 --> 01:16:51.356
And one addition to that, some companies I've seen who work with CPAs and accountants, sometimes even the accountants will just put, or maybe they're using more bookkeepers, and they'll just put all the expenses in as expenses and they don't associate them to the COGS.
1417
01:16:51.496 --> 01:16:53.337
You literally associate things to COGS.
1418
01:16:53.577 --> 01:16:54.717
That's really important.
1419
01:16:54.817 --> 01:16:55.738
So in the future, you can
1420
01:16:57.398 --> 01:16:59.179
from all your other expenses.
1421
01:16:59.439 --> 01:17:03.661
And so you can separate COGS by division or service line.
1422
01:17:03.922 --> 01:17:16.909
So for people using QuickBooks, when you're creating a chart of accounts, you can create an expense, you can create income, but above that, you can create what type it is, whether it be a cost of goods sold, a direct cost, et cetera.
1423
01:17:17.149 --> 01:17:23.772
And then you have this built into your P&L where you're gonna have COGS coming out the top and it'll actually show you this gross margin.
1424
01:17:24.133 --> 01:17:26.414
And it's not just income with a bunch of expenses.
1425
01:17:27.162 --> 01:17:27.342
Right.
1426
01:17:27.462 --> 01:17:31.183
And also make sure, so much information, just rewind this and watch it again.
1427
01:17:31.503 --> 01:17:40.525
But also make sure when you're categorizing your revenue in QuickBooks or you're bringing in from another software system that it just doesn't bring it all in as revenue.
1428
01:17:40.805 --> 01:17:51.327
It needs to break it into the different service buckets because you need to be able to take the pest control service bucket against the cogs, as we described, the labor.
1429
01:17:51.367 --> 01:17:52.608
We talked about that from payroll.
1430
01:17:52.628 --> 01:17:54.408
We need to be able to match those two things together.
1431
01:17:54.780 --> 01:17:55.120
Yep.
1432
01:17:55.140 --> 01:17:58.643
And I've rarely seen people do the sync with QuickBooks and actually do that.
1433
01:17:58.984 --> 01:18:11.014
So like you mentioned, export your by service, your revenue from your CRM with that QuickBooks and then like the AI will be able to figure out, okay, how much of this revenue came for specific services.
1434
01:18:11.315 --> 01:18:21.243
And then if you dump also your payroll reports in with some of that granular data of what percentage they're working on certain services, this is where AI can really help synthesize some of this.
1435
01:18:21.824 --> 01:18:22.004
Yep.
1436
01:18:23.120 --> 01:18:24.744
Yeah, boy, I agree with you.
1437
01:18:25.546 --> 01:18:28.633
The AI thing is so exciting for the smaller companies, especially.
1438
01:18:28.653 --> 01:18:29.615
It's exciting for everybody.
1439
01:18:29.675 --> 01:18:31.138
It's really exciting in this example.
1440
01:18:31.554 --> 01:18:31.714
Yeah.
1441
01:18:32.214 --> 01:18:34.595
And so like, yeah, I just encourage anyone that's like, this is over my head.
1442
01:18:35.115 --> 01:18:41.898
QuickBooks report service by revenue or revenue by service report from your CRM and your payroll reports.
1443
01:18:41.958 --> 01:18:46.940
Put that into QuickBooks or sorry, put it into AI and just tell it what you're trying to do.
1444
01:18:46.960 --> 01:18:48.240
I'm trying to figure out my gross margin.
1445
01:18:48.600 --> 01:18:49.961
I'm trying to figure out my net margin.
1446
01:18:50.241 --> 01:18:52.582
I'm struggling to understand what's considered overhead, what's not.
1447
01:18:52.762 --> 01:18:55.983
It's going to ask you questions like, okay, all of your wages, was that all...
1448
01:18:56.603 --> 01:18:59.085
technicians or is that some of your salary?
1449
01:18:59.365 --> 01:19:02.227
Is it some of your admin salary and breaking apart?
1450
01:19:02.247 --> 01:19:05.990
Some of these things is going to be what it'll help you do to come up with these numbers.
1451
01:19:06.751 --> 01:19:06.911
Yep.
1452
01:19:08.292 --> 01:19:08.472
Cool.
1453
01:19:08.492 --> 01:19:10.233
Did you want to add, did you want to add to any of this?
1454
01:19:10.273 --> 01:19:15.877
Like once we have found this, this information out, um, how is this useful?
1455
01:19:15.917 --> 01:19:21.041
When you look at your business and you say, okay, this service has this margin, this what's the next step?
1456
01:19:21.061 --> 01:19:24.263
Like, what are you using that information to make decisions with?
1457
01:19:24.904 --> 01:19:25.204
Right.
1458
01:19:25.284 --> 01:19:25.584
So, uh,
1459
01:19:27.886 --> 01:19:31.067
Well, I can compare services.
1460
01:19:31.407 --> 01:19:37.289
So one service is producing this margin versus this service is producing a different margin.
1461
01:19:38.009 --> 01:19:40.009
Maybe it tells me where we want to focus more time.
1462
01:19:40.489 --> 01:19:42.850
Which one do we want to spend our most marketing dollars building?
1463
01:19:43.250 --> 01:19:44.891
There's other factors that come into that.
1464
01:19:44.991 --> 01:19:46.091
It's not just margin.
1465
01:19:47.091 --> 01:19:56.114
Again, we use a lot of lawn care examples, but you might find for some people that their lawn mowing is a lower gross margin.
1466
01:19:56.974 --> 01:19:59.455
and then fertilization weed control.
1467
01:19:59.775 --> 01:20:04.777
But mowing might still be the single best service to market because it's the gateway service that brings in all the clients.
1468
01:20:04.797 --> 01:20:07.418
It's the easiest, least expensive way to acquire new clients.
1469
01:20:07.518 --> 01:20:09.279
And then you sell them into fertilization weed control.
1470
01:20:09.479 --> 01:20:21.044
So it's not just as simple as margin, but that is an example that I can see how different services compare from a margin standpoint that tells me where I might want to spend my time and money in terms of growing the business.
1471
01:20:22.148 --> 01:20:24.449
Also, it tells me what to work on.
1472
01:20:24.569 --> 01:20:26.170
It can inform pricing.
1473
01:20:26.771 --> 01:20:36.476
So if my margin was, like, let's say my COGS or my gross margin, they're the inverse of each other, but let's just, my brain thinks in terms of COGS.
1474
01:20:36.956 --> 01:20:49.903
But if I have a gross margin of 55% and my gross margin drops to 50%, then something's happened.
1475
01:20:50.668 --> 01:20:52.328
There's inefficiencies in the business.
1476
01:20:53.348 --> 01:20:54.809
Labor cost has gone up on me.
1477
01:20:55.529 --> 01:20:57.169
Material cost has gone up on me.
1478
01:20:57.289 --> 01:20:58.209
Something's happened.
1479
01:20:58.769 --> 01:21:08.451
So if I want to maintain the overall margins of the company and my gross margin has just become worse, I have two options.
1480
01:21:08.631 --> 01:21:11.232
I need to reduce what it costs me to run this company.
1481
01:21:11.252 --> 01:21:13.152
I have three options, probably more.
1482
01:21:13.672 --> 01:21:15.312
I need to reduce what it costs me to run this company.
1483
01:21:16.432 --> 01:21:19.493
I need to become more efficient at producing the work.
1484
01:21:20.987 --> 01:21:22.369
Or I need to raise the price.
1485
01:21:23.290 --> 01:21:29.316
And so it's a leading indicator of things that you're probably missing where vendors are increasing their prices.
1486
01:21:30.017 --> 01:21:32.160
Your labor cost is becoming more expensive.
1487
01:21:32.200 --> 01:21:34.162
This one number tells you something's up.
1488
01:21:35.303 --> 01:21:38.206
And so that's another really important way to think about it.
1489
01:21:38.286 --> 01:21:40.349
It informs pricing and it calls out issues.
1490
01:21:41.682 --> 01:21:50.026
Yeah, I think the biggest thing I've seen when someone does this math is giving them clarity in terms of where is the weak point, because it is only a couple things.
1491
01:21:50.186 --> 01:21:53.467
It is, am I not charging enough for the work, i.e.
1492
01:21:53.487 --> 01:22:00.570
the job, or is the company sucking out of the money because I have a huge office space or inefficient admin or three salespeople on a million-dollar business?
1493
01:22:01.091 --> 01:22:05.392
And so I literally this morning looked at someone's financials.
1494
01:22:05.553 --> 01:22:10.715
They had 66% gross margin, but yet they're still barely breaking even.
1495
01:22:11.672 --> 01:22:13.813
And so when you look at that, it's like, oh, the money's going to the company.
1496
01:22:13.833 --> 01:22:15.935
And sure enough, there is extra admin.
1497
01:22:16.315 --> 01:22:19.737
There is a building that's far too large for what they're renting.
1498
01:22:20.038 --> 01:22:26.682
And I said, look, we need to just get through this lease because once we do that, you just do the math and all of a sudden you're 20% profitable.
1499
01:22:27.403 --> 01:22:32.106
But the reason we're skating along here is because 12%, 13% of your revenues go into this lease.
1500
01:22:34.102 --> 01:22:34.382
Okay.
1501
01:22:34.542 --> 01:22:34.743
Yeah.
1502
01:22:35.123 --> 01:22:35.363
Yeah.
1503
01:22:35.383 --> 01:22:36.544
That's a perfect analogy.
1504
01:22:36.884 --> 01:22:40.648
One other is it just allows you to benchmark over time how you're doing as a business.
1505
01:22:40.988 --> 01:22:46.032
Or if you have operational people leading divisions, it's the number, it's the KPI that they manage to.
1506
01:22:46.232 --> 01:22:48.054
It's the number they're responsible for.
1507
01:22:48.334 --> 01:22:50.155
If that number is creeping up, doing a bad job.
1508
01:22:50.196 --> 01:22:52.057
If that number is coming down, doing a good job.
1509
01:22:52.337 --> 01:22:53.118
It's that kind of stuff.
1510
01:22:53.198 --> 01:22:59.222
And I think to what I thought was really important that you said is it's not so much there's a right or wrong percentage.
1511
01:22:59.682 --> 01:23:04.606
It is tracking over the course of time to be informed to where your attention should be at in the business.
1512
01:23:05.246 --> 01:23:10.450
Because over the course of time, if you see your cogs going up or you see your overhead go up, then you can put attention on it.
1513
01:23:10.990 --> 01:23:13.732
For anyone that comments like, oh, I got 30% this or 50.
1514
01:23:14.192 --> 01:23:15.413
It's so hard to compare.
1515
01:23:15.473 --> 01:23:16.193
It means nothing.
1516
01:23:16.213 --> 01:23:17.534
It means absolutely nothing.
1517
01:23:17.634 --> 01:23:25.659
And I appreciate you saying that because I just get really fresh when people are comparing COGS and you're in different markets, you're in different stages of business, you're in different services.
1518
01:23:26.019 --> 01:23:31.022
There's no way to compare this outside of over the course of time.
1519
01:23:31.202 --> 01:23:33.083
Is this trending in a positive direction?
1520
01:23:33.423 --> 01:23:37.145
And is what I'm doing in the business having a positive impact on these two numbers?
1521
01:23:38.726 --> 01:23:40.147
Yeah, I agree with all that.
1522
01:23:40.802 --> 01:23:41.923
Yeah, incredibly important.
1523
01:23:42.003 --> 01:23:47.305
I would really, again, encourage you if this is something that's like, I think I kind of got that.
1524
01:23:47.845 --> 01:23:48.426
Rewind it.
1525
01:23:48.446 --> 01:23:49.306
Listen to it again.
1526
01:23:50.627 --> 01:23:51.747
Listen to it again in a week.
1527
01:23:52.307 --> 01:23:57.170
I think repetition is all that's really required here because when you boil it down, it's really...
1528
01:23:58.070 --> 01:24:01.051
I don't think I'm incorrect in saying it's really not that hard.
1529
01:24:01.071 --> 01:24:03.352
It's like eventually you just see it and it's like, oh, okay.
1530
01:24:03.372 --> 01:24:05.013
This is, it's just a few numbers.
1531
01:24:05.093 --> 01:24:05.333
Really.
1532
01:24:05.353 --> 01:24:09.855
It's kind of, especially if you're looking at your income statements, like it's a group of numbers here and it's a group of numbers there.
1533
01:24:09.875 --> 01:24:18.980
It's like, it's like, it's kind of, it becomes more clear, but, but if you think about it now and then you think about it again at the end of the year and you think about it again in nine months after that, it just never clicks.
1534
01:24:19.020 --> 01:24:22.021
So I'd encourage you to go through this a number of times.
1535
01:24:22.405 --> 01:24:32.032
I have one more thing I just want to clarify with you before we move on, because as I was scanning what we've talked about for the past 20 minutes, one question back to what I have written on my board here.
1536
01:24:32.952 --> 01:24:36.175
We talked about having AI help find maybe potentially what your overhead is.
1537
01:24:36.655 --> 01:24:38.236
Billable hours, just really quickly.
1538
01:24:38.396 --> 01:24:44.300
Is this going to be, I put my payroll ports in, it's how many hours did I pay my employees for the year?
1539
01:24:44.420 --> 01:24:46.162
So for example, a full-time person, 2,000?
1540
01:24:46.702 --> 01:24:50.845
Or is this another number I need to be looking at to find this number here?
1541
01:24:51.265 --> 01:24:54.466
See, this is, yeah, there's a lot of different ways that people will calculate this.
1542
01:24:54.586 --> 01:24:59.488
And I have always been on the side of doing billable hours.
1543
01:24:59.588 --> 01:25:03.189
How many hours did we sell this year that turned into invoice hours?
1544
01:25:04.309 --> 01:25:09.631
You could do it as clocked hours.
1545
01:25:10.171 --> 01:25:13.772
You could do it as clocked hours, but there's... You're baking in that net margin.
1546
01:25:14.465 --> 01:25:14.986
Yeah, yeah.
1547
01:25:15.026 --> 01:25:17.668
It's like it's better than nothing.
1548
01:25:17.708 --> 01:25:18.609
I'll put it that way.
1549
01:25:19.550 --> 01:25:29.219
I'd have to put some thought into how to argue for or against that idea, but it's not as accurate as billable hours when you're talking about at the job level.
1550
01:25:29.319 --> 01:25:29.519
Yeah.
1551
01:25:30.059 --> 01:25:33.703
But when you're talking about the company level, the other one sort of works itself out.
1552
01:25:35.032 --> 01:25:36.993
Yeah, I would say I agree.
1553
01:25:37.033 --> 01:25:39.074
That's usually the most precise find the job.
1554
01:25:39.534 --> 01:25:46.338
I think if you're sometimes the reason I vote for doing both or trying just clocked is number one, it's easier.
1555
01:25:46.358 --> 01:25:49.439
Everyone's track clock hours and they have that information.
1556
01:25:49.679 --> 01:25:53.541
Some people don't have the budget hours for everything combined or be able to run a report on that.
1557
01:25:54.041 --> 01:25:57.983
The second thing is I have seen some people run this math and it looks really good.
1558
01:25:58.303 --> 01:26:03.086
And then I look like, whoa, 25 percent of your guys day is spent at windshield time.
1559
01:26:03.726 --> 01:26:05.367
And that's not being calculated in this number.
1560
01:26:05.387 --> 01:26:15.012
And all of a sudden I've inflated margins that don't really exist because I'm not taking into account the drive time, load time, unload time, and all the inefficiency is sitting right there.
1561
01:26:15.692 --> 01:26:16.813
So there's no right or wrong.
1562
01:26:16.833 --> 01:26:22.476
I think it's just a matter of like being aware that if you're just using the billable hours, it could hide something there.
1563
01:26:22.956 --> 01:26:24.117
I'm glad you asked that question.
1564
01:26:24.157 --> 01:26:24.397
Yeah.
1565
01:26:24.417 --> 01:26:25.257
Just using the bill.
1566
01:26:25.317 --> 01:26:25.498
Yeah.
1567
01:26:25.718 --> 01:26:30.140
I like, I'll say one other reason why I like the billable hours again is that I'm not
1568
01:26:31.019 --> 01:26:39.990
specifically at the job level, is the way I learned over the years, think about all the individuals who do project-based work or construction,
1569
01:26:40.966 --> 01:26:42.927
you kind of build up the estimate.
1570
01:26:43.667 --> 01:26:49.110
And so when you're building up the estimate, you've got these materials that are going to go into the job.
1571
01:26:49.350 --> 01:26:50.711
You've got this amount of time.
1572
01:26:50.971 --> 01:26:52.932
You've got the dumpster rental.
1573
01:26:52.952 --> 01:26:59.375
You've got all this stuff, but you've got these labor components like prepping the property, doing the work, the hallways.
1574
01:26:59.395 --> 01:27:04.338
You've got all this stuff and they might all carry different billable rates, but basically have labor.
1575
01:27:04.878 --> 01:27:08.059
I want to be able to attach my overhead to that labor directly.
1576
01:27:08.480 --> 01:27:08.800
I don't...
1577
01:27:09.460 --> 01:27:20.009
It just feels so much more accurate to build up a bid that's going to, if you get that wrong and you bill 80 when you should have been billing 70,000, you might not win the job.
1578
01:27:20.469 --> 01:27:28.316
And so the billable approach always, as I learned it, always felt more accurate when you're in a competitive environment, you're trying to win big deals.
1579
01:27:28.857 --> 01:27:30.158
Yeah, it's trackable.
1580
01:27:30.921 --> 01:27:31.141
Yeah.
1581
01:27:31.601 --> 01:27:31.801
Okay.
1582
01:27:31.821 --> 01:27:33.282
I want to close it out on the last one.
1583
01:27:33.302 --> 01:27:35.083
We're not going to get all everything on the docket today.
1584
01:27:35.383 --> 01:27:39.585
This one is a little bit more dark, but it came from someone I felt like might need help.
1585
01:27:39.645 --> 01:27:41.365
So question from the audience again.
1586
01:27:41.785 --> 01:27:44.687
And that is, I kind of try to summarize this question because it's kind of long.
1587
01:27:45.547 --> 01:27:49.989
Under what conditions would you actually encourage someone to close their business and go out and get a job?
1588
01:27:50.909 --> 01:27:56.411
And this specific individual is over $100,000 in credit card debt, and they've been running their business.
1589
01:27:56.551 --> 01:27:59.993
I don't know what size it is, but five years unprofitably.
1590
01:28:00.693 --> 01:28:07.900
And so when would that be, would you ever, have you ever said, Hey, like, is entrepreneurship not for you?
1591
01:28:07.920 --> 01:28:08.780
You should just go get a job.
1592
01:28:08.860 --> 01:28:13.765
And what sort of reasoning would you ever give that kind of advice?
1593
01:28:14.706 --> 01:28:14.886
Yeah.
1594
01:28:15.607 --> 01:28:26.677
I think there's an argument to, I'll be specific here, but I think there's this argument that you should probably just close the business if you can't recover.
1595
01:28:26.697 --> 01:28:26.797
Yeah.
1596
01:28:28.262 --> 01:28:29.243
I don't mean financially.
1597
01:28:29.363 --> 01:28:30.043
I mean mentally.
1598
01:28:30.843 --> 01:28:36.565
And what I mean by that is it takes optimism and energy to build something.
1599
01:28:36.805 --> 01:28:42.507
And if you've gotten to a place where you're so beat down, you might frankly need a break.
1600
01:28:43.427 --> 01:28:44.828
And you might be an entrepreneur.
1601
01:28:45.028 --> 01:28:46.368
Just this wasn't the win.
1602
01:28:46.889 --> 01:28:49.249
If you think about the data, most people build...
1603
01:28:51.995 --> 01:28:55.956
there's some stat around it's the third business or the second business that is the winner.
1604
01:28:56.576 --> 01:28:59.857
And historically, I think the age had been something like at 42.
1605
01:28:59.897 --> 01:29:02.177
Like there's data around this.
1606
01:29:02.697 --> 01:29:11.219
So if somebody starts a business and it doesn't make it like you're actually in pretty, I mean, you're a lot of people have been through the exact same thing.
1607
01:29:11.839 --> 01:29:13.339
And so it might be that you
1608
01:29:22.294 --> 01:29:25.395
And then to come in with a whole new approach and do it completely different.
1609
01:29:25.775 --> 01:29:26.596
That could be the case.
1610
01:29:26.636 --> 01:29:30.898
And so it's not whether or not just because you fell does not mean you're an entrepreneur.
1611
01:29:30.938 --> 01:29:33.559
But also for some people, maybe they aren't an entrepreneur.
1612
01:29:33.579 --> 01:29:35.079
They hated every single thing about it.
1613
01:29:35.199 --> 01:29:35.900
Probably don't do it again.
1614
01:29:36.180 --> 01:29:38.701
But here's how I, to be more specific, how I think about it.
1615
01:29:39.181 --> 01:29:46.564
I think you, in this exact scenario, I think you quit if you are digging a ever bigger financial hole.
1616
01:29:48.468 --> 01:29:50.471
And nothing has changed.
1617
01:29:50.951 --> 01:29:51.992
You haven't changed anything.
1618
01:29:52.052 --> 01:29:55.416
Like you're just, you're generally doing roughly about the same thing you've always done.
1619
01:29:55.836 --> 01:30:00.742
The hole's getting bigger and you don't have any energy for what I would call a drastic change.
1620
01:30:02.208 --> 01:30:03.789
We'll call it a Hail Mary.
1621
01:30:03.869 --> 01:30:05.090
I'll explain what I mean by that.
1622
01:30:05.130 --> 01:30:10.493
But you don't have the energy to do a complete tear down and rebuild of your business.
1623
01:30:11.274 --> 01:30:20.040
And so if the hole's just getting deeper, nothing has really substantially changed, and you don't have the energy, I'd say call it.
1624
01:30:20.920 --> 01:30:22.601
And I'll talk about that a little bit more in a moment.
1625
01:30:23.462 --> 01:30:28.405
Now, if you do have a last little bit of gas in the tank and energy,
1626
01:30:33.197 --> 01:30:38.281
You might as well just see what you can pull off and don't be stuck.
1627
01:30:39.542 --> 01:30:43.325
Don't be trapped by any of the way, the traditional ways of doing business.
1628
01:30:43.385 --> 01:30:45.087
Don't be trapped by any of the customers.
1629
01:30:45.107 --> 01:30:46.408
Don't be trapped by anything.
1630
01:30:46.788 --> 01:30:49.450
Don't like, I don't, I want to use the sunk cost fallacy.
1631
01:30:49.470 --> 01:30:50.812
I don't want just, I don't even want to go.
1632
01:30:51.012 --> 01:30:54.274
Just don't get stuck trying to do what you've done before.
1633
01:30:54.354 --> 01:30:57.077
And like, look at this and say, what if,
1634
01:30:57.617 --> 01:31:00.660
I were to go down the list and get rid of every customer I don't like?
1635
01:31:00.940 --> 01:31:05.023
What if I went down the list and got rid of every customer I don't make much money on?
1636
01:31:05.263 --> 01:31:08.806
What if I got quit doing every service I don't like, I don't make money on?
1637
01:31:08.846 --> 01:31:18.714
What if I got rid of all the employees that I can't stand, that drive me crazy, that don't pull the weight, and I just shrunk this sucker down to a much different smaller business?
1638
01:31:18.734 --> 01:31:24.398
What if I said, I am out of this service and I'm doing that service and only keeping 50% of my previous business?
1639
01:31:24.759 --> 01:31:26.120
I don't know what the fix is.
1640
01:31:26.680 --> 01:31:30.221
without seeing the business, but I'm saying radical change.
1641
01:31:30.541 --> 01:31:31.541
It's a Hail Mary.
1642
01:31:32.021 --> 01:31:35.762
If I were to make all these changes, would it actually give me a business that made money?
1643
01:31:36.502 --> 01:31:39.523
I would try that test if you have the energy before you throw in the towel.
1644
01:31:39.723 --> 01:31:43.243
If you don't have the energy, I throw in the towel because it's going to take some energy to do that.
1645
01:31:43.563 --> 01:31:45.884
It's going to take some courage to fire some people.
1646
01:31:46.164 --> 01:31:49.665
It's going to take some courage to raise prices drastically.
1647
01:31:49.725 --> 01:31:55.426
It's going to just take that courage and the comfort that I think you want to have in this situation.
1648
01:31:56.687 --> 01:31:57.207
what's it matter?
1649
01:31:57.448 --> 01:31:58.509
It's over regardless.
1650
01:31:58.569 --> 01:31:59.511
So why not try it?
1651
01:31:59.972 --> 01:32:03.156
Because this could work because that's worked for a lot of people.
1652
01:32:03.938 --> 01:32:07.243
And so that would be what I'd do before I'd close it if you have the energy.
1653
01:32:07.363 --> 01:32:11.990
Now, if you're just like, I'm done, then I would say, get a job.
1654
01:32:13.332 --> 01:32:21.014
And is there any really, maybe this is a good idea, maybe it's not, but is there any really profitable work you already have, like where you could just keep some for the weekends?
1655
01:32:21.454 --> 01:32:24.215
Because now we need to like dig ourself out of a debt.
1656
01:32:24.555 --> 01:32:26.516
That's just going to be a mental load on you as well.
1657
01:32:26.536 --> 01:32:27.576
It's always going to hang over you.
1658
01:32:27.776 --> 01:32:29.837
It's always going to remind you of the thing that didn't work.
1659
01:32:30.717 --> 01:32:34.518
And you probably want to get rid of that debt in case you want to go for it again later.
1660
01:32:34.558 --> 01:32:39.720
So is there an idea around, I just, I'm done except for my favorite parts of the business.
1661
01:32:40.535 --> 01:32:45.362
And if you keep any employees, it's just your favorite team members, your favorite clients, the most profitable stuff.
1662
01:32:45.642 --> 01:32:46.563
We do it on the side.
1663
01:32:46.603 --> 01:32:47.404
We get a job.
1664
01:32:47.705 --> 01:32:48.806
We just, we're done.
1665
01:32:49.688 --> 01:32:51.130
We work down the debt.
1666
01:32:51.330 --> 01:32:53.773
And then someday, if it makes sense, we come back to this.
1667
01:32:54.074 --> 01:32:55.315
That's kind of how I would think about it.
1668
01:32:55.596 --> 01:32:57.759
Again, without knowing all the details of the situation.
1669
01:32:58.564 --> 01:33:03.426
I think it's hard for a lot of people to take that step back and be like, I'm going to take three or five years.
1670
01:33:04.507 --> 01:33:06.528
Strength the size of the business, but make it profitable.
1671
01:33:06.808 --> 01:33:12.150
The challenging part becomes, too, if this is a smaller business, $100,000 of credit card debt.
1672
01:33:12.470 --> 01:33:12.970
Could be hard.
1673
01:33:13.851 --> 01:33:14.791
My goodness.
1674
01:33:14.871 --> 01:33:19.133
That could be a high enough payment per month if it's 20% interest.
1675
01:33:20.374 --> 01:33:23.575
In which world would you consider bankruptcy as an option for this person?
1676
01:33:26.477 --> 01:33:27.357
How do you define that?
1677
01:33:28.891 --> 01:33:37.156
I'm trying to think because, say, for example, this person is able to quit their business but get a job that's maybe making $60,000 a year.
1678
01:33:37.717 --> 01:33:39.778
That's not even going to hardly pay the interest.
1679
01:33:40.018 --> 01:33:49.205
And so now that becomes an option, and they keep doing this digging, digging, digging their business trying to fix it when in reality it's because they can't go get the job and keep paying down the debt.
1680
01:33:50.198 --> 01:33:50.398
Yeah.
1681
01:33:50.678 --> 01:33:53.519
I don't, without looking at it, I don't know how to give a rule there.
1682
01:33:54.599 --> 01:34:00.000
I would say that I would try everything I can not to do bankruptcy because it's just a different problem.
1683
01:34:00.100 --> 01:34:01.480
But if you have to, you have to.
1684
01:34:04.541 --> 01:34:07.462
I would first try my approach to the drastic change.
1685
01:34:07.522 --> 01:34:12.323
That has fixed a lot of people get trapped doing the same thing.
1686
01:34:12.483 --> 01:34:18.424
And when they depend on the business for any amount of income, they just can't change it.
1687
01:34:19.637 --> 01:34:21.378
And so I would go there first.
1688
01:34:21.899 --> 01:34:30.585
And after, if that fails, then I think it is based on how much money are you able to find a job and get paid.
1689
01:34:31.930 --> 01:34:38.371
And that's going to determine if you can even make the bills and that's going to inform if you can even shoulder this debt or if you need to file bankruptcy.
1690
01:34:38.391 --> 01:34:39.612
But I don't know how to give a number for that.
1691
01:34:39.632 --> 01:34:41.192
Do you have a way to think about that?
1692
01:34:41.472 --> 01:34:41.792
Not really.
1693
01:34:41.812 --> 01:34:43.393
I just want to see kind of how you thought about it.
1694
01:34:43.413 --> 01:34:53.975
I think, too, for someone that might be going through this, it's like you will have to reduce if you've had pride around the sacred cows of the business of what services you offer, which client you offer, how you do your branding.
1695
01:34:54.495 --> 01:35:11.155
who you're serving like you're gonna have to get that pushed aside and likely get some other eyes on the business because if you're so drained and depleted you don't have the energy you probably need someone else's eyes that is not going to look at all the sacred cows that you're not you're afraid of slaughtering like oh no we have to do fertilization we can have
1696
01:35:11.155 --> 01:35:12.736
We have to do this other service.
1697
01:35:12.756 --> 01:35:13.616
It's like, whoa, whoa, do we?
1698
01:35:14.196 --> 01:35:23.840
Having the secondary set of eyes that have not been inside the business is usually a useful way to come up with what are the drastic changes that need to happen.
1699
01:35:24.200 --> 01:35:26.481
And one thing I've been thinking a lot about is like blue sky thinking.
1700
01:35:26.601 --> 01:35:27.702
Like, okay, if...
1701
01:35:28.502 --> 01:35:30.845
we cut the business in half, which half would we take?
1702
01:35:31.585 --> 01:35:36.010
If we stopped servicing that area 45 minutes away, what would actually happen?
1703
01:35:36.070 --> 01:35:46.221
If we cut out half the team members, if we stopped having this lease, if we moved everyone to where they took their trucks home instead of coming to the shop, what are the drastic blue sky measures
1704
01:35:46.862 --> 01:35:49.664
that we've never even thought about because we've just kind of been stuck in this.
1705
01:35:49.904 --> 01:35:50.665
This is how we do it.
1706
01:35:50.725 --> 01:35:52.446
And like, I just need to keep doing more and better.
1707
01:35:53.047 --> 01:36:00.953
And sometimes people, because they're so focused on optimization of 1%, it's like, well, can we step back and just completely X this off the business, completely change the way we do it.
1708
01:36:01.393 --> 01:36:07.638
And there's, in most businesses I find, depending on the size, there's enough of a kernel of profitability.
1709
01:36:07.999 --> 01:36:10.060
If shrunk down to, we can grow off of that.
1710
01:36:10.400 --> 01:36:12.462
But it does require someone with enough confidence
1711
01:36:12.582 --> 01:36:13.962
intestinal fortitude to go do it.
1712
01:36:14.203 --> 01:36:18.944
And to your point, when someone's beat down mentally and they don't have the ability to do that, that's tough.
1713
01:36:19.624 --> 01:36:20.024
Yeah, it is.
1714
01:36:20.465 --> 01:36:20.705
It is.
1715
01:36:20.785 --> 01:36:22.185
But I would sure want to try that first.
1716
01:36:22.225 --> 01:36:23.506
So could you find that person?
1717
01:36:23.526 --> 01:36:24.566
I think that's good advice.
1718
01:36:25.246 --> 01:36:25.546
All right.
1719
01:36:25.746 --> 01:36:27.067
Let's move to non-financial advice.
1720
01:36:27.127 --> 01:36:28.127
Close it off for the day.
1721
01:36:28.147 --> 01:36:30.628
Do you have any non-financial advice for the people?
1722
01:36:31.392 --> 01:36:41.316
I actually kept reiterating it while we were doing the, I guess it's kind of financial advice, but it's this idea of we just talked about all these numbers.
1723
01:36:42.016 --> 01:36:43.777
Go back through this several times.
1724
01:36:44.257 --> 01:36:45.197
Listen to it several times.
1725
01:36:45.897 --> 01:36:49.099
Go to YouTube and click on the transcript at the bottom.
1726
01:36:49.499 --> 01:36:51.940
Take that transcript, copy it, paste it into AI.
1727
01:36:52.620 --> 01:36:55.781
and then have, and just tell it, hey, I want to learn these numbers.
1728
01:36:56.001 --> 01:36:57.741
Ask me questions, walk me through this.
1729
01:36:58.061 --> 01:36:59.702
Explain it to me like I'm five years old.
1730
01:36:59.762 --> 01:37:10.945
Like whatever you got to do, but literally use AI as like a little teacher to help me quiz you or quiz you and you answer the question and finally get this information.
1731
01:37:11.325 --> 01:37:12.225
It's just a game changer.
1732
01:37:12.725 --> 01:37:19.992
Yeah, and just to build on that for anyone that is watching this on YouTube, if you go, we will put a chapter for that segment on COGS and figure out these numbers.
1733
01:37:20.352 --> 01:37:28.159
So you can then, when you pull the transcripts on the right-hand side of the desktop, you can see the time codes and just take that segment of the episode and drop that in.
1734
01:37:28.499 --> 01:37:29.781
And just talk to AI.
1735
01:37:30.421 --> 01:37:31.983
Be humble enough to figure out…
1736
01:37:32.878 --> 01:37:33.078
Yep.
1737
01:37:33.539 --> 01:37:35.520
You know, answer the questions and it'll be very useful.
1738
01:37:35.880 --> 01:37:36.441
So, all right.
1739
01:37:36.461 --> 01:37:38.062
My non-financial advice is not as fun.
1740
01:37:38.322 --> 01:37:38.542
Okay.
1741
01:37:38.562 --> 01:37:48.870
So, I think I've shared this before, potentially, but if anyone struggles with sleep, I just recommend three things, an eye mask, white noise maker, and earplugs.
1742
01:37:49.810 --> 01:37:56.195
And I, I've done it the past couple of years out of necessity because I had, I got married and I was like, I now have a wife.
1743
01:37:56.215 --> 01:38:04.682
So like I had to add extra, I used to have like blacked out because I lived in the closet for a couple of years and I got used to pitch, pitch, pitch black and cause there's no windows.
1744
01:38:04.882 --> 01:38:15.951
And so, uh, I would highly recommend if you struggle with sleep, get an eye mask, get a good, really good quality one, get a white noise maker, put it right next to your head and then get some really good quality earbuds or earplugs.
1745
01:38:15.971 --> 01:38:17.292
Have you ever tried eight sleep?
1746
01:38:18.297 --> 01:38:20.319
Oh, man, I so badly want one.
1747
01:38:21.159 --> 01:38:21.720
It's the...
1748
01:38:22.260 --> 01:38:22.600
I know.
1749
01:38:22.660 --> 01:38:26.883
I think there are a few things I own that I value so much.
1750
01:38:26.904 --> 01:38:28.004
Now I have to buy one.
1751
01:38:28.144 --> 01:38:28.645
Sick.
1752
01:38:29.205 --> 01:38:30.466
It is worth every cent.
1753
01:38:30.506 --> 01:38:30.886
Really?
1754
01:38:31.647 --> 01:38:31.927
It is.
1755
01:38:32.287 --> 01:38:35.330
If it broke, I would order another one tomorrow.
1756
01:38:35.530 --> 01:38:36.711
That'd be your garage door.
1757
01:38:37.812 --> 01:38:38.072
It is.
1758
01:38:38.132 --> 01:38:40.814
There is almost nothing I would order that fast.
1759
01:38:40.854 --> 01:38:41.114
Right.
1760
01:38:41.815 --> 01:38:42.776
Tiffany feels the same.
1761
01:38:42.856 --> 01:38:44.497
Almost everybody we've ever recommended it to.
1762
01:38:45.198 --> 01:38:47.420
I used a chili pad years and years ago.
1763
01:38:48.040 --> 01:38:48.701
Not nearly as good.
1764
01:38:48.901 --> 01:38:50.303
Spend the money, buy the eight sleep.
1765
01:38:50.323 --> 01:38:51.484
It's absolutely fantastic.
1766
01:38:51.764 --> 01:38:58.290
I mean, to the point, so to the point, this is how I've... You can't travel without it now?
1767
01:38:58.430 --> 01:38:59.871
Is that what you're going to tell me?
1768
01:38:59.952 --> 01:39:03.895
Well, it makes a difference, but that is where I'm going.
1769
01:39:03.915 --> 01:39:04.336
Yeah.
1770
01:39:04.856 --> 01:39:10.562
We've got a few more major trips that we have hit all the major countries that we've done all the big stuff we want to do.
1771
01:39:10.582 --> 01:39:11.403
There's still more to do.
1772
01:39:11.804 --> 01:39:16.909
Next, we're moving to a phase of renting homes all over, like even outside the United States for extended periods of time.
1773
01:39:17.810 --> 01:39:21.575
And I have already found a company that will create up all my stuff and ship it.
1774
01:39:21.955 --> 01:39:24.137
And the eight sleep is one of my biggest motivations.
1775
01:39:24.518 --> 01:39:26.320
It'll be shipped to wherever we're living.
1776
01:39:26.580 --> 01:39:27.501
Oh, that's hilarious.
1777
01:39:27.521 --> 01:39:28.442
It's that good.
1778
01:39:28.823 --> 01:39:29.443
It's good.
1779
01:39:29.724 --> 01:39:34.549
So the iMask thing, I love that because I need the dark, but did it, do you have any problem getting used to sleeping with it?
1780
01:39:34.569 --> 01:39:37.052
Like I hate stuff on me.
1781
01:39:37.072 --> 01:39:37.792
Does it bother you?
1782
01:39:37.812 --> 01:39:41.176
I get the full cloth ones that wrap around and it's like, it's thick.
1783
01:39:41.857 --> 01:39:42.818
Like it's almost like a whole face.
1784
01:39:42.838 --> 01:39:44.239
Does it go over your nose?
1785
01:39:44.300 --> 01:39:46.021
No, it goes a little notch.
1786
01:39:46.041 --> 01:39:46.202
Okay.
1787
01:39:46.662 --> 01:40:09.649
and it doesn't bother you or anything i tried the like really expensive ones i forget the name i think fanta or something and they have like the cups and everything but now i just like it's a cloth mask uh or not mask but like a you know eye mask i guess but it goes all the way around with velcro at the back at the back it took like one night to get used to it's the best i have i have a bunch of them i have one for travel i have like yeah i have them all over
1788
01:40:09.849 --> 01:40:13.632
That's smart because, man, when we travel, you never know what you're going to get.
1789
01:40:13.892 --> 01:40:14.052
Yeah.
1790
01:40:14.132 --> 01:40:14.772
I like black.
1791
01:40:14.792 --> 01:40:15.933
But, man, now you made me.
1792
01:40:16.093 --> 01:40:21.157
Because, see, the one part of my sleep that is unoptimized is if I get hot, I can't sleep.
1793
01:40:21.777 --> 01:40:22.318
By any sleep.
1794
01:40:22.398 --> 01:40:25.820
And a lot of times when I'm working in bed, my legs will get sweaty or something.
1795
01:40:26.060 --> 01:40:27.801
And I can't sleep after that, so I just keep working.
1796
01:40:28.222 --> 01:40:28.422
But.
1797
01:40:29.134 --> 01:40:29.776
Buy an 8-Sleep.
1798
01:40:29.796 --> 01:40:31.502
It'll make you more money.
1799
01:40:31.522 --> 01:40:32.023
There you go.
1800
01:40:32.284 --> 01:40:33.508
There's a promo we need.
1801
01:40:33.528 --> 01:40:34.371
That's what we need.
1802
01:40:34.571 --> 01:40:35.494
A coupon code.
1803
01:40:35.795 --> 01:40:39.447
Because there's absolutely hundreds of dollars being thrown around for these 8-Sleep mattresses.
1804
01:40:39.467 --> 01:40:39.728
Oh, man.
1805
01:40:40.309 --> 01:40:40.771
All right, everyone.
1806
01:40:40.851 --> 01:40:40.992
Cool.
1807
01:40:41.012 --> 01:40:42.115
Thank you so much for watching.
1808
01:40:42.135 --> 01:40:42.918
Great seeing you, everybody.
1809
01:40:43.479 --> 01:40:43.861
See you later.