Would Private Equity Even Want Your Business?

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There's no magic number.
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There's no magic multiple.
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It's whatever somebody is willing to pay.
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And then it's like, they're profitable, but why are they going out of business?
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But they got bought up by private equity that stacks so much debt on them.
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And then those debt payments are due from the business.
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I've been talking to private equity for way over a decade.
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And thesis is the word.
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The first thing they did when they came into your business was raise prices across the board prior to the sale.
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It was for sure $10 million.
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It was no less.
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You go from solving problems to like creating systems and really trying to solve the root of the problem.
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Instead of fighting the fire, I'm building hydrants.
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Like how do I prevent this fire from happening again?
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But there's gotta be a happy medium that as an operator or someone that does care about the people and the longevity and more of the 20 year term, not the five year term, I can borrow elements of this that are healthy for the business.
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Ladies and gentlemen, welcome back.
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To the podcast.
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This is now our 12th episode.
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We have been consistent.
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Yep.
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Now, that being said, on last week's episode...
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There was a little bit of beef that one of our viewers had.
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Oh, really?
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Jonathan made the comment.
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Yeah.
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Okay.
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You said that soccer is way better than American football.
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I mean, I enjoyed it.
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I like it better than watching football, like American football.
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I enjoyed it.
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Which is basically blasphemy for 90% of our audience.
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Yeah, I understand that.
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The context is you were raised, like your kids, I guess Riley was in soccer a lot.
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Riley and Gage.
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And then Gage switched.
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He's our youngest.
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He switched from soccer to football.
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He played American football.
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And yeah, no, I like soccer better.
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I don't know why, but I do.
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I like them both.
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I think if I had kids, I'd probably put them in soccer too.
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The running is just so good without all the impact and head injuries and all the other aspects.
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Yeah, that's probably what it is.
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Okay, well, today...
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Today, you know, I'm a man of the numbers, and the numbers say that everyone really enjoyed your cold open because our retention was incredible for the first three to four minutes of last week's episode.
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Oh, really?
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Okay.
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For last week, yes.
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Okay.
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And so I think people really enjoy, you know, so I am now naming this part of the cold open.
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Okay.
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Well, we switch it up every few weeks.
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But this is now called Pick Your Poison.
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This is Pick Your Poison.
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Pick Your Poison, okay.
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So instead of hot takes, instead of A or B, this is just Pick Your Poison.
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Because now, cat's out of the bag.
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Now everyone thinks we're arch enemies and going against each other.
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I hate to break it to everyone, but I'm not competing in Jonathan's market.
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I took some liberties to be able to do that little bit at the beginning last time.
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It's okay.
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We're leaning into it.
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So let's assume for a moment that, you know, a few years down the road, I am in your market.
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Okay.
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You've got to pick your poison.
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All right.
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Okay.
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You did a great job.
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I have to give you all the credit in the world for coming up with the idea last.
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And that took me off guard.
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So now that you have, you know, you've thought about it since you've been having all these meetings at CityTurf about Augusta coming in.
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And it's been a constant theme.
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It's the only thing we're working on right now.
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The only thing we're working on.
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Yeah.
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You should have, exactly.
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You should have definite answers here.
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Okay.
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So first off,
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Would you rather I recruit away your top five salespeople or...
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Hire your former customers to make testimonial ads explaining why they switched to Augusta.
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Oh, geez.
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That's a tough one.
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I'm going to go with how many of my clients are you going to take and get testimonials from?
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I think I will.
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All of them.
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All of them.
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Oh, geez.
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I'm going to replace myself.
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Every bad, every bad review.
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We'll just search that person's name up.
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That will live forever.
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I'll probably replace my sales team.
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Okay.
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Okay.
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All right.
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How many salespeople do you have, by the way?
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Like dedicated salespeople.
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I don't know.
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I'm not working on that part of the business that much.
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Yeah.
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I've been listening to call recordings.
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So I'd say we predominantly have three that are, you hear the most on the phone.
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Okay.
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So I take those three and the following two.
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Okay.
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So number two, would you, would you rather I mail every city turf customer a custom quote that is 10% cheaper?
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Okay.
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This is actually a strategic question.
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I think it's actually adds some value.
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Or offer them their first month free if they switch.
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Rephrase the first one.
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Yeah, yeah.
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So rephrase, you're going to give them a 10%.
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You're going to mail them all a 10% cheaper?
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Exactly.
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I think, ooh, okay.
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It may not make any difference if they don't want to switch, but I think the 10% cheaper probably won't matter that much.
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It's hard to say.
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I think I'm going to go that one.
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I would take your worst customers.
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That would actually probably be a benefit.
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Exactly.
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Either one of these.
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Okay.
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Third one.
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This one's fun.
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Would you rather I buy the domain cityturfreviews.com or bid on cityturf as a Google ads keyword?
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I've already got people bidding on cityturf as a keyword.
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I would rather you bid on it.
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We haven't seen that work super well.
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We haven't seen that work super well.
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Well, that's like, yeah, just as a side note.
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I would not do that.
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That supports my decision that I want you to bid on that.
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That's what I was going to say.
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So since you aren't seeing it work well, let's go that direction for sure.
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And then we will definitely be hitting up cityturfreviews.com.
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I didn't check if it was available.
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I was making a note.
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Okay.
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You know what's funny?
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I already bought a URL.
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It's called, oh man, I think it's like longcarepricesintexas.com or something like that.
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Okay, yep.
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Lompterpricesindallas.com or something like that.
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Good idea.
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Anyways, number four, would you rather I pay for a billboard near your shop telling techs they can make more money with me...
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Or I pay $100 to every past client to leave a bad online review.
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Billboard.
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Billboard.
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The Billboard.
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Oh, man.
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The bad reviews, Dan.
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Both of those are nuclear.
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They are horrible.
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That's nuclear.
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Bad reviews.
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Oh, my gosh.
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Like, that's terrible.
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The reviews matter so much.
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Lots of confidence in your technicians.
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Let's go.
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CityTurf technicians.
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We're in it for the long run.
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All right.
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So...
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Now that we picked, you chose your poison, I want you to relish, just have a quick victory lap.
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And that is a couple of weeks ago, you had to have some humble pie and say that you sold SpaceX at 150.
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Well, I want you to realize that just a couple of weeks later, it is now at 135.
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Oh, that was my- And so we have a victory lap.
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Yeah.
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That was my buy price.
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It was a great sell target.
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Let's go.
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Oh, is it really?
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Yeah.
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That was what, so if you were able to buy before it hit the market, you were buying at 135, it hit the market at 150.
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So I bought it 135 and sold at 150 or 155.
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Yeah.
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When it opened.
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Okay.
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Quick 10%.
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A little quick 10%.
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Yeah, it's quick.
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I wish I'd wait until the end of the day or the next day, but whatever.
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Yeah.
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It was free money.
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Oh, man.
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Let's go.
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Okay.
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What have you been working on this week?
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I know you've been back in town, hustling.
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Yeah.
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What have you been working on?
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Yeah.
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So I've talked about that to-do list, that task list thing in my marketing calendar.
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I'm done with that.
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Okay.
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But just to keep a theme, because there's other things I'm working on.
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Obviously, I'm not listing everything I'm doing.
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But what I'm working on and kind of finished it up today is,
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and handed it off.
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And the reason why those things were so critical is I've been back in the city turf business for let's call it a year.
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But the end of last year, I was gone quite a bit.
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I had three big international trips, but I've been back in the business for a year at least maybe more actually, but off and on.
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And it took me a while to get my head back into working.
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It took me a while to get my head back into the city turf business and kind of, I don't understand everything about it yet, but just have a good idea of where we're at, what we need to do, what the focus is.
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And that's what originated this whole calendar task list.
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But the other big reason why that was important is I...
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a while back, hired somebody to run all projects and really push to get more throughput in the organization from on my side.
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And so to manage all the projects, to make things happen faster, to find and work with contractors, to keep everything moving as fast as they can, and then to utilize me more as a resource.
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I'm the single biggest bottleneck on almost everything right now.
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But I want this person to push on me all the time.
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I need this.
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I need this.
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You're holding this up, that kind of a thing, but they own it.
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And so this week was taking all that stuff and the official handoff to this person.
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It'll take a little while for it all to spin up and that person to do a great job and be confident.
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But that was all that I've been talking about was to build up to this moment to try to start over the next couple of months, reducing my workload where now I'm just a resource like a designer or a web developer or anyone.
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else.
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I'm unfortunately still the most important resource, but that's what this has all been about.
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And so that was my biggest goal for the week to get done and it's done.
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What is that person's job title?
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Chief, chief annoyance officer.
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So, hey, Jonathan, hey, just in case you didn't know, there's five more things you need to do today.
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And I mean, so this individual worked with me.
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He joined the Service All-Py team back in 2015.
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And so I've worked with him for a long time.
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He's a super optimistic, positive person.
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just like super healthy works out.
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Like he's got all the attributes of just, you know, the right personality and the right attitude.
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And I've always really liked him a ton and we've always got along great.
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And so my instruction, I think he's probably heard it like four times from now.
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Hey, you know, you, we've worked together a long time.
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you know me well, I'm dead serious when I say annoy me.
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Like push, push, push, harass me to get this stuff done because that's your job.
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So I've said that because that's a weird position for somebody to be in.
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And so I've told him, this is what I want.
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You have to do this because I got 90 other things coming at me.
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And the number one priority for me is the CityTurf business.
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So...
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A super optimistic, annoying person.
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Yes, exactly.
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He's like, all right, Jonathan, you got this.
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Emotional, like a motivational quote sent me away.
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You got three more hours.
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You got this.
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He might do that.
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Oh, man.
252
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Good stuff.
253
00:10:35.350 --> 00:10:37.091
So you've been handing that off to him.
254
00:10:37.231 --> 00:10:37.691
Yeah.
255
00:10:37.971 --> 00:10:39.011
He's taking it off your plate.
256
00:10:39.352 --> 00:10:40.952
Do you already know what you're working on next then?
257
00:10:41.832 --> 00:10:42.873
Oh, I'm working on...
258
00:10:44.035 --> 00:10:44.956
I've already started it.
259
00:10:45.496 --> 00:10:52.342
I started it on the airplane back from Wyoming, and it's everything related to pest control right now.
260
00:10:52.482 --> 00:10:54.323
So I'm kind of trying to work in themes.
261
00:10:54.984 --> 00:11:03.931
So you have to create the offers and the hook and maybe a guarantee, the angle, and that.
262
00:11:05.172 --> 00:11:05.372
So...
263
00:11:06.543 --> 00:11:10.426
Boy, I don't want to get too long winded here, but there's lots of ways we touch a client.
264
00:11:10.506 --> 00:11:14.609
Like we touch a client by you become a client, you get a welcome package from us.
265
00:11:14.789 --> 00:11:18.832
OK, so there's an angle there where if you didn't buy pest control, we promote pest control.
266
00:11:19.353 --> 00:11:20.173
So I got to get that done.
267
00:11:20.213 --> 00:11:28.400
Then I have pest control could be a lead for new client acquisitions in the form of direct mail to the very best types of clients that we want more of.
268
00:11:29.460 --> 00:11:37.229
Direct mail, or then it could be upsell emails to our existing client, to those that are not currently buying pest control.
269
00:11:38.010 --> 00:11:43.435
It includes Google ads for pest control, like really reworking them.
270
00:11:43.676 --> 00:11:43.836
So,
271
00:11:44.176 --> 00:11:54.925
This theme of pest control touches about four or five different aspects of marketing for the business, acquisition and expansion being the concept, but it's still about five different ways I have to implement it.
272
00:11:55.285 --> 00:11:58.127
So the idea is I'm working on all of that at the same time.
273
00:11:58.187 --> 00:12:07.015
So it's very, well, the offers might be different depending if it's Google ad versus the welcome package versus an email to an existing client.
274
00:12:07.655 --> 00:12:09.717
The general structure of the
275
00:12:11.308 --> 00:12:16.851
The ad itself, the thinking, the understanding, the buyer getting in their head, all of that similar.
276
00:12:17.432 --> 00:12:24.036
And then you but you have to tweak the copy and design and such, depending on who you're going after and what media you're using.
277
00:12:24.056 --> 00:12:29.979
So that's my big overarching project that's going to I'm working on this week and will take me a good bit.
278
00:12:30.039 --> 00:12:32.461
It'll all work well into next week on that project.
279
00:12:32.581 --> 00:12:36.925
if not longer, because once I get my part done, it goes to designers.
280
00:12:36.965 --> 00:12:38.206
Then we have to build landing pages.
281
00:12:38.227 --> 00:12:39.528
There's just like so much that has to happen.
282
00:12:39.788 --> 00:12:43.051
Then there will be a back and forth for a while where we finish all the assets.
283
00:12:43.452 --> 00:12:47.135
And then once it gets implemented, it has to keep happening.
284
00:12:47.455 --> 00:12:50.378
So it's gonna continue on for quite some time.
285
00:12:50.618 --> 00:12:51.780
I kicked it off last week.
286
00:12:52.300 --> 00:12:56.121
I would assume you almost have to stack rank which of the services you are prioritizing.
287
00:12:56.461 --> 00:13:01.703
Correct me if I'm wrong, because, for example, if you do pest control, they need to fertilize and weed control.
288
00:13:01.923 --> 00:13:02.944
They need to do other services.
289
00:13:03.424 --> 00:13:10.566
If you're not careful, you're sending five emails to the same person because they didn't choose five of, you know, they only have two out of seven services.
290
00:13:10.586 --> 00:13:14.407
They get five emails from these other sequences that were built in a silo.
291
00:13:14.687 --> 00:13:16.428
And so I'm assuming there's some sort of stack rank.
292
00:13:16.628 --> 00:13:18.469
Yeah, and that's 100%.
293
00:13:18.489 --> 00:13:19.330
There's a stack rank.
294
00:13:19.490 --> 00:13:22.152
And for a couple weeks, like, what are you working on?
295
00:13:22.232 --> 00:13:23.673
My task list and my marketing calendar.
296
00:13:23.693 --> 00:13:29.436
That marketing calendar was so complicated because the marketing calendar is themed by time of year.
297
00:13:29.797 --> 00:13:30.737
It's themed by month.
298
00:13:31.618 --> 00:13:34.460
And on top of that, it has to handle the segmentation.
299
00:13:35.180 --> 00:13:38.381
And it has to handle exactly what you've just described.
300
00:13:38.421 --> 00:13:42.981
So this marketing calendar is really hard to create, to handle.
301
00:13:43.301 --> 00:13:47.822
We have five really, we have five core services, four really important services.
302
00:13:48.382 --> 00:13:51.343
And so, and then within the, I'll give you an example.
303
00:13:51.383 --> 00:13:53.643
Fertilization weed control is our number one most important service.
304
00:13:53.703 --> 00:13:56.444
It's the biggest revenue driver in our business.
305
00:13:56.804 --> 00:13:59.684
Almost all of our clients buy it.
306
00:13:59.804 --> 00:14:01.885
Like 95%, I think, buy that service, maybe 93%.
307
00:14:04.645 --> 00:14:09.788
Well, that, so it's not really, it doesn't get a lot of touches to, for expansion.
308
00:14:09.868 --> 00:14:15.010
Like there's not a lot of marketing touches that are going to happen to the client base because almost everybody's buying it.
309
00:14:15.030 --> 00:14:17.552
So it's predominantly an acquisition service.
310
00:14:18.596 --> 00:14:21.757
So that one will hit a small number of our base.
311
00:14:21.777 --> 00:14:29.220
But then once you get to things that involve our arborist, all the tree health and the deep root feeding and all that, that can touch a ton of clients.
312
00:14:29.780 --> 00:14:32.501
But that one really requires tiering clients.
313
00:14:32.541 --> 00:14:38.904
So across almost 12,000 clients, there's a ton of clients that we serve that are not really buyers of that service.
314
00:14:39.344 --> 00:14:42.465
And so I can immediately knock a percentage of them off.
315
00:14:43.045 --> 00:14:55.682
the target list and just maybe just to make it simple, just hit the top 50%, not hit the bottom 50% whatsoever so that I'm reducing the number of touches they're getting from a marketing standpoint.
316
00:14:55.702 --> 00:14:58.546
Whereas pest control, that's a service I touch everybody with.
317
00:14:59.282 --> 00:15:04.304
And so there's a lot of that kind of thinking that goes into it.
318
00:15:04.544 --> 00:15:09.106
And then you have to time everything for the time of year when people might most likely have pain.
319
00:15:09.126 --> 00:15:13.228
Because I could talk about every service I offer in March, but that's not possible.
320
00:15:13.268 --> 00:15:17.710
So what is the most important thing to talk about in March versus the most important thing to talk about in July?
321
00:15:18.090 --> 00:15:20.951
That's some of the logic that went into the calendar itself.
322
00:15:21.352 --> 00:15:22.172
So you're exactly right.
323
00:15:22.688 --> 00:15:23.528
Yeah.
324
00:15:23.588 --> 00:15:29.451
And do you use your stack rank based upon like lifetime value or profitability of service?
325
00:15:29.471 --> 00:15:33.653
So if someone has like two services, you could sell them five other things at the exact same time.
326
00:15:34.353 --> 00:15:35.774
How are you prioritizing those?
327
00:15:36.755 --> 00:15:39.496
So we think about everything in a couple of ways.
328
00:15:41.577 --> 00:15:43.858
Number one, retention.
329
00:15:45.488 --> 00:15:50.911
And what I mean by retention, there's a couple of things I can't go too deep into because they are a competitive advantage.
330
00:15:51.271 --> 00:15:52.512
I usually say everything.
331
00:15:52.772 --> 00:16:06.960
There's just a few things, but there's some things that we have identified that are really critical to keeping a client and preventing churn, like getting way in front of the risk of the churn.
332
00:16:07.946 --> 00:16:10.447
And so those are really important messages.
333
00:16:10.667 --> 00:16:14.589
And some services better support that than other services.
334
00:16:14.709 --> 00:16:19.911
And so that's a massive consideration for me as I'm working through things.
335
00:16:19.971 --> 00:16:21.611
It's not just about selling stuff.
336
00:16:21.691 --> 00:16:23.612
It's about preventing churn.
337
00:16:23.652 --> 00:16:24.733
It's about happier clients.
338
00:16:24.753 --> 00:16:26.433
It's about clients that talk in the marketplace.
339
00:16:26.673 --> 00:16:28.114
It's about clients that give us good reviews.
340
00:16:28.154 --> 00:16:30.355
So there's that element that's considered.
341
00:16:31.055 --> 00:16:32.916
And then after that, there are goals.
342
00:16:33.616 --> 00:16:36.457
A goal, the biggest goal is grow pest control.
343
00:16:36.817 --> 00:16:39.499
That's my number one initiative is to grow pest control.
344
00:16:40.619 --> 00:16:55.726
And then with our services that involve arborists, they only, if you look at the data, they're best sold to a more affluent client or clients in certain areas with more trees.
345
00:16:55.746 --> 00:16:55.866
Right.
346
00:16:57.128 --> 00:17:02.329
And there seems to be a correlation between stickiness and that service.
347
00:17:03.390 --> 00:17:06.070
And so it depends who I'm talking to.
348
00:17:06.170 --> 00:17:13.592
With certain types of properties and certain types of clients, it's really valuable for me to sell that service because it appears to be a very sticky service.
349
00:17:14.752 --> 00:17:17.293
And you can kind of see it in the data.
350
00:17:17.453 --> 00:17:22.354
And so that's why it's a hard question to answer because there's a lot of moving parts here.
351
00:17:22.654 --> 00:17:23.855
But the simple answer would be,
352
00:17:25.072 --> 00:17:29.033
For acquisition, fertilization weed control is my number one most important service to sell.
353
00:17:29.473 --> 00:17:35.015
For expansion, pest control is my number one most important service to sell, if you boil it down to something that simple.
354
00:17:35.555 --> 00:17:35.915
That's funny.
355
00:17:36.075 --> 00:17:36.996
Yeah, it was funny.
356
00:17:37.016 --> 00:17:40.537
A couple weeks ago, we had a conversation about attribution and just how important and how hard it was.
357
00:17:40.717 --> 00:17:40.897
Yeah.
358
00:17:41.277 --> 00:17:44.378
And so I looked at the beta testers.
359
00:17:44.398 --> 00:17:46.419
There's about 80 people using the homeworks.
360
00:17:46.779 --> 00:17:50.960
And the level of amount of people hitting attribution-related tests
361
00:17:51.140 --> 00:17:54.424
stuff inside the API the next week, like 4X.
362
00:17:54.444 --> 00:17:57.907
So people are obviously listening to this and being like, I will go hit that and get that data.
363
00:17:57.927 --> 00:18:06.456
But to your point, like it's the, all of those data points that you just mentioned, that's the hard part, the clarity around that data to then be able to stack rank the marketing calendar.
364
00:18:06.476 --> 00:18:07.077
Very difficult.
365
00:18:07.317 --> 00:18:10.721
And you could see stuff in the data and you're like, I think this is what it means, but...
366
00:18:11.451 --> 00:18:12.011
I don't know.
367
00:18:12.111 --> 00:18:15.393
And AI could say, this is what I think it means.
368
00:18:15.433 --> 00:18:16.774
But I'm like, I still don't know.
369
00:18:17.714 --> 00:18:19.836
So it's never, it's never easy.
370
00:18:19.876 --> 00:18:21.076
It's easier than it used to be.
371
00:18:21.116 --> 00:18:26.119
But it's still, it's still fuzzy sometimes to figure out the very best thing to be doing.
372
00:18:26.319 --> 00:18:26.519
Yeah.
373
00:18:26.539 --> 00:18:27.099
So what about you?
374
00:18:27.460 --> 00:18:28.060
What are you working on?
375
00:18:28.360 --> 00:18:31.663
This week, events refactor, pretty much the same thing.
376
00:18:31.683 --> 00:18:32.744
Phase one is out.
377
00:18:33.124 --> 00:18:33.745
That's all events.
378
00:18:33.805 --> 00:18:36.867
The next one is what I'm excited for is calendar and then the dispatch board.
379
00:18:37.388 --> 00:18:39.830
And so those will be meaningfully different.
380
00:18:39.970 --> 00:18:42.132
And they're also some of the most used pages.
381
00:18:42.152 --> 00:18:51.399
But yeah, when we did the refactors, do we just do parity or do we actually take all the feedback that we've always wanted to implement and just do it right?
382
00:18:51.820 --> 00:18:52.641
And so we're doing the latter.
383
00:18:52.661 --> 00:18:54.082
So it's actually going to change a lot.
384
00:18:54.822 --> 00:18:55.743
And I'm looking forward to it.
385
00:18:55.763 --> 00:18:57.726
Like the calendar dispatch board are going to look completely different.
386
00:18:57.906 --> 00:18:59.127
They're going to super good.
387
00:18:59.848 --> 00:19:00.849
I'm really looking forward to it.
388
00:19:00.989 --> 00:19:03.612
So they're going to be completely redesigned and re react and.
389
00:19:04.133 --> 00:19:04.833
Okay.
390
00:19:05.174 --> 00:19:05.614
I'll be curious.
391
00:19:05.634 --> 00:19:06.575
I've never actually seen it.
392
00:19:06.695 --> 00:19:07.917
So I'd be curious to see it someday.
393
00:19:08.688 --> 00:19:09.148
Yeah.
394
00:19:09.168 --> 00:19:09.268
Cool.
395
00:19:09.308 --> 00:19:11.209
And then the other thing is the school community.
396
00:19:11.229 --> 00:19:12.009
So it's a first week.
397
00:19:12.489 --> 00:19:12.709
Oh, yeah.
398
00:19:12.729 --> 00:19:19.491
And it's been really fun just to see because the very first module and then we do 30-day challenges is just exercise and diet.
399
00:19:20.131 --> 00:19:25.112
And so people have to track what they do and then they have to report back to the group and we have like an accountability tracker.
400
00:19:25.433 --> 00:19:26.193
So that's been a lot of fun.
401
00:19:26.353 --> 00:19:31.234
Just people for the first time ever tracking their steps or what they eat and using the macro factor app.
402
00:19:31.334 --> 00:19:31.994
So it's been fun.
403
00:19:32.394 --> 00:19:37.036
I was actually thinking about that because you had announced the school thing.
404
00:19:37.056 --> 00:19:38.136
Yeah.
405
00:19:38.388 --> 00:19:41.851
You've got Augusta, in my mind, the way I think about it.
406
00:19:41.871 --> 00:19:42.732
You've got Homeworks.
407
00:19:42.752 --> 00:19:43.753
You've got Augusta.
408
00:19:44.213 --> 00:19:46.275
You have all your media stuff.
409
00:19:46.655 --> 00:19:47.676
Now you have school.
410
00:19:48.257 --> 00:19:51.680
How do you, like, what in the world does it look like behind the scenes?
411
00:19:51.700 --> 00:19:57.004
How do you, oh, then you're going to come to Dallas for a while and you're going to build the million dollar business.
412
00:19:57.044 --> 00:19:59.426
How do you do all the stuff?
413
00:20:00.067 --> 00:20:02.449
Who's behind the scenes running different parts?
414
00:20:02.729 --> 00:20:04.631
What's your world look like?
415
00:20:06.070 --> 00:20:07.591
Each of the departments have a leadership team.
416
00:20:07.811 --> 00:20:08.011
Yeah.
417
00:20:08.131 --> 00:20:14.374
And so most of the time it's divided into like technical and operations for each department.
418
00:20:14.394 --> 00:20:17.055
So whether it be Augusta, Homeworks, or the media side.
419
00:20:17.655 --> 00:20:22.237
And my time is like, what are the things that I must be involved in specifically on the media?
420
00:20:22.677 --> 00:20:24.758
Because like with Augusta, it's pretty straightforward.
421
00:20:25.499 --> 00:20:26.939
Now it's been in business for so long.
422
00:20:26.959 --> 00:20:29.520
There's not as many, like a frequency decisions is less.
423
00:20:29.760 --> 00:20:32.782
It's more like I need to define what are we doing for the next six, 12 months.
424
00:20:33.602 --> 00:20:36.503
Homeworks is the one I'm still very much involved in terms of product decisions.
425
00:20:37.004 --> 00:20:38.504
There's a lot of more moving parts.
426
00:20:38.584 --> 00:20:41.285
The team is only one to three years old.
427
00:20:41.786 --> 00:20:43.767
And so a little bit more hands on there.
428
00:20:45.367 --> 00:20:50.770
But yeah, with the school committee, it's actually really easy because it's really just the leadership training I went for the owners of Augusta.
429
00:20:50.790 --> 00:20:55.592
So most of the people in the group are just owners in Augusta that are one, two, three million in revenue.
430
00:20:55.992 --> 00:21:04.658
And I needed to train them anyways, but I wanted to get some of that outside industry feedback and some other people in the group to bounce ideas off for them.
431
00:21:05.239 --> 00:21:07.340
And so it was just like I was going to do it no matter what.
432
00:21:07.400 --> 00:21:11.744
It was more a function of I wanted the dimension of like we got gate people in there.
433
00:21:12.144 --> 00:21:17.108
We got pool companies in there, like just a lot of different industries to get them around those people.
434
00:21:17.848 --> 00:21:19.928
And so far, they're loving it.
435
00:21:20.108 --> 00:21:24.229
And I'm seeing like really good engagement, which was my biggest focus is like, how do we get engagement?
436
00:21:24.269 --> 00:21:26.009
And that's where the 30 day challenges came in.
437
00:21:26.029 --> 00:21:28.050
It's like, and it's like public accountability.
438
00:21:28.750 --> 00:21:32.991
And instead of trying to bite off like huge chunks of content, I don't have to do that.
439
00:21:33.011 --> 00:21:34.911
It's more a matter of, here's what we're talking about this month.
440
00:21:34.951 --> 00:21:36.151
Here's the topic of focus.
441
00:21:36.631 --> 00:21:38.592
And then here's a challenge that we all are going to do.
442
00:21:38.972 --> 00:21:41.152
So this month it's like health and the next month is marriage.
443
00:21:41.172 --> 00:21:45.653
And then we go into communication and more stuff around like general managers and things like that.
444
00:21:46.193 --> 00:21:47.854
But it's just one concept per month.
445
00:21:47.974 --> 00:21:53.436
And so in reality, I need to carve out a few hours a month to sit down and create the training.
446
00:21:54.336 --> 00:21:55.697
And it's not a huge suck on my time.
447
00:21:55.917 --> 00:21:56.197
Okay.
448
00:21:56.217 --> 00:21:56.437
So.
449
00:21:56.717 --> 00:21:56.977
All right.
450
00:21:57.217 --> 00:21:57.838
That makes sense.
451
00:21:58.578 --> 00:22:01.339
I'm not surprised to hear that Augusta doesn't take that much time.
452
00:22:02.399 --> 00:22:02.579
Yeah.
453
00:22:02.919 --> 00:22:07.921
It's more like, what are the, the changes made, even like the meeting I had before this, it's like, okay, this is gonna take six months.
454
00:22:08.442 --> 00:22:12.583
And so it's having the man, like the leadership team and then their managers underneath them.
455
00:22:12.623 --> 00:22:13.523
Like, here's what you're doing.
456
00:22:13.804 --> 00:22:14.724
Everyone has marching orders.
457
00:22:14.764 --> 00:22:15.984
I'll check in with you once a month.
458
00:22:16.325 --> 00:22:16.425
Yeah.
459
00:22:16.465 --> 00:22:20.586
And so, but yeah, homework is still the one I'm very much like this button needs to be changed.
460
00:22:20.626 --> 00:22:21.567
That word needs to be different.
461
00:22:21.587 --> 00:22:22.487
It's just still very hands on.
462
00:22:22.507 --> 00:22:23.427
That's what I would imagine.
463
00:22:23.667 --> 00:22:23.887
Okay.
464
00:22:24.208 --> 00:22:24.328
Yeah.
465
00:22:24.348 --> 00:22:24.788
It's a lot of sense.
466
00:22:24.808 --> 00:22:25.008
Okay.
467
00:22:25.628 --> 00:22:26.789
Let's jump into the docket.
468
00:22:27.049 --> 00:22:31.692
Let's start off now that we have, again, been nice and long-winded 20 minutes deep into this thing.
469
00:22:32.933 --> 00:22:42.399
Let's go a little more operational and talk about our businesses in lawn care, landscaping specifically, but home services and talk about upselling and cross-selling.
470
00:22:42.899 --> 00:22:45.120
Specific strategies you might be using right now in CityTurf.
471
00:22:45.140 --> 00:22:47.641
I know you've been doing this marketing calendar that might play into it a lot.
472
00:22:48.202 --> 00:22:57.726
But what are specific tactics you're using now that might be novel or new to CityTurf in the past, say, 12 to 24 months that you're using now?
473
00:22:58.327 --> 00:22:58.627
I would.
474
00:22:58.927 --> 00:23:00.168
So I've got answers to that.
475
00:23:00.208 --> 00:23:02.869
But there's quite a lot that we're not doing.
476
00:23:03.709 --> 00:23:08.732
As we, you know, people have probably heard me say, this is why I'm back involved in the business.
477
00:23:08.752 --> 00:23:10.073
This is the stuff I'm working on.
478
00:23:10.872 --> 00:23:16.717
But a couple of things that we're doing, and let's actually make sure we've defined.
479
00:23:16.757 --> 00:23:24.104
So when you say upsell, what I think is I'm going to take a biweekly, just as an example, I'm going to convert a biweekly mowing lead to weekly.
480
00:23:24.284 --> 00:23:25.365
That to me is an upsell.
481
00:23:25.665 --> 00:23:31.571
Whereas a cross-sell is I'm going to take a mowing client and add fertilization weed control as well.
482
00:23:31.591 --> 00:23:32.231
They're going to do both.
483
00:23:32.291 --> 00:23:33.893
That's how I think about it when I hear this.
484
00:23:33.953 --> 00:23:35.815
So from the...
485
00:23:36.930 --> 00:23:40.415
we'll call it more cross-sell scenario.
486
00:23:41.437 --> 00:23:47.165
We, two things that I've done in the last, call it year, one,
487
00:23:48.759 --> 00:23:58.023
And both of these go back to, if you'll remember my theme, or what I said earlier, whenever I'm thinking about marketing, I'm not just thinking about driving revenue.
488
00:23:58.043 --> 00:24:00.244
I'm thinking about preempting problems.
489
00:24:00.724 --> 00:24:02.384
I'm thinking about preempting churn.
490
00:24:02.405 --> 00:24:05.106
I'm thinking about making people happier.
491
00:24:05.246 --> 00:24:06.846
I'm thinking about better serving them.
492
00:24:06.946 --> 00:24:07.847
All these types of things.
493
00:24:07.907 --> 00:24:09.347
It's not just about driving revenue.
494
00:24:10.048 --> 00:24:15.450
So this one, one of the first things I did when I got back involved is whenever we do
495
00:24:18.833 --> 00:24:20.033
We leave something on your door.
496
00:24:22.574 --> 00:24:26.655
And I like the leaving on the door, even if you email the client as well.
497
00:24:26.915 --> 00:24:29.836
I still like the leaving something on the door for a variety of reasons.
498
00:24:30.456 --> 00:24:38.958
And so previously what we were doing is we were leaving something on the door that had probably been created by me or maybe Philip.
499
00:24:39.018 --> 00:24:39.918
I don't remember correctly.
500
00:24:41.355 --> 00:24:43.576
a long time ago, maybe when we started service.
501
00:24:43.776 --> 00:24:48.817
No, it had been improved, but maybe around the time I started service off pilot, like that's how far it went back.
502
00:24:49.377 --> 00:24:58.620
And so it was more of just the notification of we did this thing and we redesigned it and then we turned it into a themed cross-sell
503
00:25:00.036 --> 00:25:05.677
that every time, because every time we're leaving something on your door, we might as well be reminding you of all the different services we offer.
504
00:25:06.197 --> 00:25:08.698
If it's the right time of year, we should be talking about mosquitoes.
505
00:25:08.758 --> 00:25:10.838
If it's a different time of year, we should be talking about irrigation.
506
00:25:11.158 --> 00:25:12.539
So that was one of the things.
507
00:25:12.639 --> 00:25:14.579
That's an example of a cross-sell that we do.
508
00:25:15.239 --> 00:25:23.481
Another project that was implemented, and this was a lot of work, and I don't actually have data on it to know how successful it is,
509
00:25:24.430 --> 00:25:26.711
we have these things called recommendation door hangers.
510
00:25:27.351 --> 00:25:30.351
So as an example, people have all kinds of problems.
511
00:25:30.511 --> 00:25:31.652
They're not watering enough.
512
00:25:32.552 --> 00:25:35.273
They've got an issue in their property.
513
00:25:35.293 --> 00:25:37.613
They've got brown spots or bare spots.
514
00:25:38.193 --> 00:25:41.414
They probably don't understand why they have those.
515
00:25:41.494 --> 00:25:42.434
It could be a shade issue.
516
00:25:42.454 --> 00:25:43.315
It could be rabbits.
517
00:25:43.875 --> 00:25:46.095
It could be fungus.
518
00:25:46.375 --> 00:25:48.836
It could be a whole ton of different things.
519
00:25:49.376 --> 00:25:53.077
And so for the majority of the things that can go wrong,
520
00:25:53.677 --> 00:26:09.923
we have what we call internally a recommendation door hanger that our team can leave on their door that will notify them about the thing, educate them very briefly on the thing, drive them to a place to get more information, and then there's an internal process for our team to follow up with the client.
521
00:26:10.732 --> 00:26:14.953
And so that's an example of a cross-sell, but it's meant for way more than just a cross-sell.
522
00:26:15.274 --> 00:26:18.855
So that was a big project that took some time to build out.
523
00:26:19.355 --> 00:26:24.757
And then we do internal email marketing, but it's not very sophisticated.
524
00:26:24.817 --> 00:26:25.397
It's more...
525
00:26:26.622 --> 00:26:28.184
We're going to grab a segment.
526
00:26:28.264 --> 00:26:30.488
So these people aren't buying this thing.
527
00:26:31.049 --> 00:26:33.092
Or there's a big grub issue.
528
00:26:33.452 --> 00:26:34.854
This is grub season time.
529
00:26:35.295 --> 00:26:37.318
25% of our clients already buy grubs.
530
00:26:37.358 --> 00:26:40.923
So 75% are getting an email about the grub service.
531
00:26:41.930 --> 00:26:45.333
That is another example of a cross-sell that we do.
532
00:26:45.893 --> 00:26:48.716
And so that's the big stuff.
533
00:26:48.736 --> 00:26:52.739
There's other things we do, but it's more one-off type email blasts.
534
00:26:53.400 --> 00:26:57.723
There's other email stuff we do that could be considered marketing, but we don't think of it that way.
535
00:26:58.144 --> 00:27:08.072
And then the two things I described before, but where I'm moving to is more multi-step segmented upsell marketing or cross-sell marketing.
536
00:27:08.532 --> 00:27:16.720
And so what it will look like is smarter sequences where we talk to the client about an issue.
537
00:27:16.980 --> 00:27:17.741
We follow up.
538
00:27:17.981 --> 00:27:19.903
This could be email, could be texting as well.
539
00:27:20.844 --> 00:27:23.987
I use texting, but we're careful with texting.
540
00:27:24.187 --> 00:27:25.488
To me, it's a sacred thing.
541
00:27:26.807 --> 00:27:31.608
and I've talked to Riley quite a bit about texting because he's got a lot of people using it for every chat.
542
00:27:31.728 --> 00:27:35.649
And we talked about how different people are using it.
543
00:27:35.689 --> 00:27:37.570
And I see a lot of people just doing blasting.
544
00:27:38.150 --> 00:27:39.390
I don't do much blasting.
545
00:27:39.430 --> 00:27:41.091
We do very little blasting.
546
00:27:41.191 --> 00:27:45.032
I think it's a feature you've got to be somewhat careful with, just personal philosophy.
547
00:27:45.492 --> 00:27:48.193
And so my multi-sequence could be
548
00:27:49.213 --> 00:27:52.358
Email, maybe text, but be very careful.
549
00:27:52.899 --> 00:27:54.040
Maybe voice blast.
550
00:27:54.120 --> 00:27:55.222
I'm not doing that in the future.
551
00:27:55.362 --> 00:27:55.723
Maybe.
552
00:27:55.863 --> 00:27:56.504
I got to test it.
553
00:27:57.285 --> 00:27:58.226
I've actually never done it.
554
00:27:58.807 --> 00:28:01.812
And then print for a segment.
555
00:28:01.832 --> 00:28:03.554
So let's say you segment the list.
556
00:28:04.135 --> 00:28:08.797
and you take, there's 80% of the client base that doesn't buy this thing, and so we wanna upsell it.
557
00:28:09.117 --> 00:28:14.780
I might hit them with an email, and then whoever doesn't buy, I hit the rest of that list again.
558
00:28:15.220 --> 00:28:22.263
Whoever doesn't buy, within that list, I might hit my tier one and tier two clients with a postcard.
559
00:28:22.604 --> 00:28:23.524
It's that kind of a concept.
560
00:28:23.544 --> 00:28:28.186
So that's a more sophisticated direction that we're building towards right now.
561
00:28:28.866 --> 00:28:31.648
That's when you start bringing in some direct mail for upselling.
562
00:28:32.508 --> 00:28:36.251
And then later, I would like to get this in 2027.
563
00:28:36.331 --> 00:28:37.012
I don't know.
564
00:28:37.932 --> 00:28:39.494
It's where you start doing more packaging.
565
00:28:39.994 --> 00:28:47.580
We got to packaging up fertilization we control with pest or pest fertilization we control plus mosquito or those.
566
00:28:47.660 --> 00:28:51.103
It's the packaging and the combining good, better, best kind of stuff.
567
00:28:52.445 --> 00:28:58.909
And then one of the things that we're really weak on is we really don't do a lot of upselling and cross-selling on the phone.
568
00:28:59.289 --> 00:29:13.698
Some of our original team members on the sales side who had been with us for a really long time, we had really great success with some older individuals that were, call it retired, that just were fantastic.
569
00:29:14.079 --> 00:29:16.260
And they had a lot more experience there.
570
00:29:17.358 --> 00:29:20.402
in the business and they can naturally do the upsells and cross sales.
571
00:29:20.763 --> 00:29:21.724
We've lost some of that.
572
00:29:21.764 --> 00:29:24.568
So that'll be another thing that we'll, that we'll bring in.
573
00:29:24.648 --> 00:29:25.849
So that's how I think about it.
574
00:29:25.869 --> 00:29:31.517
And that's the direction is how to where I, what I'm working on to, to bring in more of this into the business.
575
00:29:32.770 --> 00:29:34.231
Yeah, so I kind of thought of two things.
576
00:29:34.371 --> 00:29:35.572
One kind of actually really said that.
577
00:29:36.112 --> 00:29:48.060
So basically using AI, gain the transcripts from all the calls, we're able to create a numerical representation of who's doing the upsells and what their percentages are.
578
00:29:48.540 --> 00:29:57.866
And so then be able to take like calls from our best agents on the phone that are doing upsells at say 40 or 50%, which is very high versus someone who's doing five or 10%.
579
00:29:57.886 --> 00:29:58.046
And so-
580
00:30:00.267 --> 00:30:01.928
we've kind of like narrowed down to three things.
581
00:30:01.948 --> 00:30:03.109
They're all getting measured on every call.
582
00:30:03.129 --> 00:30:04.689
And one of them is, did you do an upsell?
583
00:30:05.309 --> 00:30:11.752
And besides a complaint, almost every call can be turned into an upsell of some sort, or I should say cross sell.
584
00:30:12.993 --> 00:30:21.417
But what we had to do to make sure the AI was, wouldn't get confused is make the connection between what service the customer accepts or has, and,
585
00:30:22.057 --> 00:30:25.420
to the potential service that they should be getting as a cross sell.
586
00:30:25.700 --> 00:30:28.942
So the AI would know, okay, this person has accepted mowing.
587
00:30:29.402 --> 00:30:33.545
The agent should now be offering them one of these three other services.
588
00:30:33.926 --> 00:30:35.367
And so it can look out for those words.
589
00:30:36.047 --> 00:30:37.428
And that's been really helpful.
590
00:30:37.729 --> 00:30:43.633
And so we basically had to train the agents on like, if they accept X service, offer Y as the upsell.
591
00:30:43.933 --> 00:30:47.135
or Z if this one's not available, or they already have this other one.
592
00:30:47.476 --> 00:30:52.660
And so again, so you can see for even the agent training of what, which cross cell to use.
593
00:30:53.000 --> 00:30:53.380
That's good.
594
00:30:53.400 --> 00:30:55.181
Do you use a tool like Gong to do that?
595
00:30:55.281 --> 00:30:59.945
Or are you dumping the transcripts and running your own model across them?
596
00:31:00.684 --> 00:31:04.145
RingCentral has its own thing that is using the transcripts.
597
00:31:04.345 --> 00:31:10.668
And so I've seen other platforms that have like the plugin with AI, but all they're doing is pulling the transcripts.
598
00:31:11.128 --> 00:31:12.728
I've just seen consistently, yeah.
599
00:31:12.768 --> 00:31:22.172
And I've just consistently seen like, even one thing that's really useful for training even inside RingCentral is the live transcription of calls for when you're doing a training of an agent.
600
00:31:22.192 --> 00:31:24.872
Someone can sit next to you and just be reading what the customer is saying to you live.
601
00:31:26.739 --> 00:31:30.991
and their integrations are getting better and better, like internally versus bringing something third party.
602
00:31:31.011 --> 00:31:34.441
Cause I've looked at lace or other, other products and it's just,
603
00:31:35.620 --> 00:31:44.646
From a cost perspective, as well as from like what they're iterating on at RingCentral or Dialpad, et cetera, they're building pretty good AI stuff inside the platform now.
604
00:31:45.186 --> 00:31:48.248
So we just use RingCents, which is inside of RingCentral.
605
00:31:48.548 --> 00:31:49.069
Okay.
606
00:31:49.489 --> 00:31:58.215
The second kind of cross-sell thing that we've been doing a lot recently, I've just been really trying to focus on like, how can we customize and personalize it as much as possible?
607
00:31:58.755 --> 00:32:04.879
Because if we put them into a sequence of an email or text messages, there's got to be some – I can customize their name.
608
00:32:05.479 --> 00:32:10.602
But I feel the more personalized I can make it, especially when it comes to text, I won't get blocked.
609
00:32:11.082 --> 00:32:14.604
And I can make it really, really like this was made for me.
610
00:32:14.624 --> 00:32:16.866
And so one of the things that we're doing a lot of is video.
611
00:32:17.026 --> 00:32:19.447
So the technicians, when they see the problem, take the video.
612
00:32:19.687 --> 00:32:20.368
It's in the app.
613
00:32:20.828 --> 00:32:29.660
we can right click on that, copy the link, and then send it via text message, and just tell the customer, hey, the crew is at the job, or at your property, here's what they saw, and here's what I recommend.
614
00:32:30.341 --> 00:32:36.169
And that has been really helpful, because I'm not as afraid to text them and get blocked when they can see it's their property,
615
00:32:36.770 --> 00:32:38.070
And like they were there today.
616
00:32:38.471 --> 00:32:40.211
And so that has been really useful.
617
00:32:40.291 --> 00:32:44.353
It takes a little more extra work on the admin side to see, okay, there's media attached.
618
00:32:44.833 --> 00:32:46.193
Okay, I need to send this to the customer.
619
00:32:46.774 --> 00:32:53.476
But it has allowed us to keep using text message without getting blocked or any sort of spam related stuff.
620
00:32:53.676 --> 00:32:56.058
Yeah, that is actually one of the most successful.
621
00:32:56.138 --> 00:33:02.182
I don't know what success you're seeing with that, but that has historically, this goes back to Academy days and Service AllPyatt.
622
00:33:02.202 --> 00:33:05.585
That has been one of the single most successful strategies for driving revenue.
623
00:33:06.426 --> 00:33:14.852
And it is an initiative on my list to make that much bigger, like really implement that in a much bigger way than we're doing.
624
00:33:15.823 --> 00:33:23.385
Because we used to have, like, we used to have, like, from Fieldforce, I can put it in the customer portal, but then the customer has to, like, go to the portal.
625
00:33:23.566 --> 00:33:23.726
Yeah.
626
00:33:23.746 --> 00:33:28.487
And so now it's a matter of, like, okay, we just right-click on it, take the link, and put that in the text.
627
00:33:28.607 --> 00:33:28.827
Yeah.
628
00:33:28.887 --> 00:33:35.730
So that way it's like, hey, here's a video that the crew made, and it just, it just goes into AWS and seeing the video file directly.
629
00:33:35.750 --> 00:33:36.210
Yeah.
630
00:33:36.230 --> 00:33:36.550
And that's.
631
00:33:37.210 --> 00:33:37.790
been way better.
632
00:33:38.271 --> 00:33:39.151
All right, let's move on.
633
00:33:39.212 --> 00:33:41.854
This one is going to be in your ballpark because you've seen this firsthand.
634
00:33:42.534 --> 00:33:54.803
And this was a question, I think from several weeks ago that someone put inside the comments, but really how private equity runs a business, thinks about a business, how they operate a business versus the average owner.
635
00:33:55.684 --> 00:34:00.567
And obviously there's downsides to how they think about how they run a business, but in terms of
636
00:34:01.693 --> 00:34:04.794
let's just take it from pure numbers, pure data perspective.
637
00:34:05.195 --> 00:34:12.458
How do you see that differ, how private equity looks at a business and operates it versus the traditional home service business or operator?
638
00:34:13.978 --> 00:34:16.059
Yeah, I think there's quite a few differences here.
639
00:34:17.860 --> 00:34:28.705
So kind of two top level things that are definitely different about private equity would be they're maniacal about this idea of growing enterprise value.
640
00:34:29.937 --> 00:34:37.242
So generally in home services, the way our businesses are valued is going to be on EBITDA, a version of profit.
641
00:34:37.822 --> 00:34:39.924
So it's profit times some multiple.
642
00:34:40.304 --> 00:34:41.445
There's no magic number.
643
00:34:41.465 --> 00:34:42.665
There's no magic multiple.
644
00:34:42.685 --> 00:34:44.287
It's whatever somebody is willing to pay.
645
00:34:44.687 --> 00:34:49.290
You'll hear people say companies are worth four times or five times or eight times or 12 or whatever the number is.
646
00:34:49.770 --> 00:34:52.391
There's no magic number that everybody's like, oh, we'll pay at 12.
647
00:34:52.451 --> 00:34:54.292
Everybody makes their own decision on what they're going to pay.
648
00:34:54.672 --> 00:34:58.593
But at the end of the day, they're trying to maximize the value of the company.
649
00:34:58.613 --> 00:35:06.175
And the way you maximize the value of the company is by growing the profits of the company because the valuation is going to be based on that.
650
00:35:06.716 --> 00:35:09.677
But valuation is also based on how fast the company is growing.
651
00:35:10.697 --> 00:35:12.538
Valuation is based on what market you're in.
652
00:35:13.198 --> 00:35:16.059
Valuation is based on how that business works.
653
00:35:16.799 --> 00:35:24.903
whomever the buyer is, how that business is, where they're geographically located, how it fits into the bigger business, what services you're offering.
654
00:35:24.923 --> 00:35:27.164
There's all these factors that go into valuation.
655
00:35:27.184 --> 00:35:34.507
But if you want to just talk at the most elementary basic level, it's some percentage, it's some percentage.
656
00:35:36.665 --> 00:35:38.487
Multiple of profit.
657
00:35:38.667 --> 00:35:38.927
Okay.
658
00:35:38.947 --> 00:35:46.034
So if that's how it works, then they are maniacal about growing profit because that's how they're going to grow their enterprise value.
659
00:35:46.114 --> 00:35:48.156
So that's a difference.
660
00:35:48.176 --> 00:35:52.420
And the reason I mentioned it is because that's not necessarily how most owners think.
661
00:35:52.960 --> 00:36:00.787
And one of the biggest reasons why most owners may not like private equity is because when private equity owns your business, they're going to do everything.
662
00:36:01.628 --> 00:36:10.750
all the stuff that makes your company more profitable, whether you like it or not, whether it's good for the business long-term or not, but that's how they grow their enterprise value.
663
00:36:10.770 --> 00:36:17.972
So a lot of the things that means a lot more profit really fast are things that feel like massive change to most of our businesses.
664
00:36:17.992 --> 00:36:20.492
It doesn't mean they're all good, but that's just how it works.
665
00:36:21.233 --> 00:36:22.713
Otherwise, they wouldn't give you a bunch of money.
666
00:36:22.733 --> 00:36:26.334
It would make no sense for them to buy your company if they couldn't make it a lot more profitable.
667
00:36:26.354 --> 00:36:27.454
So that's the gist of it.
668
00:36:27.994 --> 00:36:31.015
The other one that's really different is they use debt.
669
00:36:31.975 --> 00:36:36.499
And so the reason they use debt is because they're trying to get a return on money.
670
00:36:37.360 --> 00:36:45.808
And so if you look, if you were an investor and you're investing in private equity companies, what's going to happen is you're going to lock up.
671
00:36:45.828 --> 00:36:49.110
Like, let's say I'm investing $5 million into a P fund.
672
00:36:49.491 --> 00:36:54.375
OK, so my money is going to be locked up for probably five to 10, 12 years.
673
00:36:54.415 --> 00:36:54.595
Yeah.
674
00:36:55.656 --> 00:36:58.199
And what's happening is some people invest in private equity now.
675
00:36:58.719 --> 00:36:59.841
It's been 10 years.
676
00:37:00.421 --> 00:37:02.423
The private equity fund isn't even returning their money.
677
00:37:02.443 --> 00:37:04.005
They're rolling their money into a new fund.
678
00:37:04.025 --> 00:37:07.529
So your money could be locked up where you can't get it back for a really long time.
679
00:37:08.029 --> 00:37:15.017
So if you're an investor and you're thinking about putting your money into a private equity fund, you are really worried about what's the return going to be.
680
00:37:15.377 --> 00:37:25.365
So if, for example, I can get on average 9% of return in the stock market, why would I ever invest in a private equity company that's returning 9% and my money stuck for a decade?
681
00:37:25.585 --> 00:37:29.088
Like if my money stuck for a decade is 13% even enough.
682
00:37:29.568 --> 00:37:38.095
So investors are hyper focused on private equity returns and on any individual private equities, historical funds.
683
00:37:38.895 --> 00:37:40.657
to decide if they're going to invest in that company.
684
00:37:40.677 --> 00:37:53.112
So a private equity company, to get better returns, what they do is let's say they buy a $100 million company, just to give an example, maybe not an exact example, but let's just imagine they put down...
685
00:37:53.833 --> 00:37:55.775
30 million of their investors' money.
686
00:37:55.875 --> 00:38:01.579
So let's say there's a private equity company and they came to Mike and I, and they're like, hey, will you guys invest in my fund?
687
00:38:01.859 --> 00:38:03.801
Mike and I each give them 15 million bucks.
688
00:38:04.321 --> 00:38:09.025
They take that $30 million, they buy a $100 million company and they use 70 million in debt.
689
00:38:09.966 --> 00:38:12.367
So later when they're calculating the returns,
690
00:38:13.259 --> 00:38:22.908
Like, in other words, if they sold that company for $300 million later, they bought it for $100 and they sold it for $300, the return is not based on the $100 million versus $300 million.
691
00:38:22.928 --> 00:38:27.052
The return is based on the $30 million because the $30 million is what's invested.
692
00:38:27.092 --> 00:38:33.157
So it's advantageous for them to use debt because they get more leverage, which makes the returns better.
693
00:38:33.678 --> 00:38:37.501
Another similar, just kind of going in the weeds in case this is interesting for people and then I'll move on,
694
00:38:38.182 --> 00:38:41.043
Another thing that will happen is like, let's say you're a private equity investor.
695
00:38:41.303 --> 00:38:44.984
And so again, they come to me or I go to them and say, hey, I want to invest in your fund.
696
00:38:45.004 --> 00:38:46.265
They'll be like, okay, cool.
697
00:38:47.425 --> 00:38:49.286
I need you to commit 5 million bucks.
698
00:38:49.386 --> 00:38:50.786
Okay, I commit $5 million.
699
00:38:51.106 --> 00:38:53.267
They don't take my $5 million right then.
700
00:38:54.221 --> 00:38:56.803
What they'll do is they'll ask for my money in tranches.
701
00:38:56.863 --> 00:39:00.146
So they'll come to me and they'll say, okay, we need a million of the five million.
702
00:39:00.166 --> 00:39:01.207
We're gonna make a capital call.
703
00:39:01.227 --> 00:39:02.688
We want another million of the five million.
704
00:39:02.848 --> 00:39:03.749
We're gonna make a capital call.
705
00:39:03.769 --> 00:39:04.730
We want the last three million.
706
00:39:04.950 --> 00:39:11.596
The way they do this is their timing when they get the money because the returns that are calculated are based on when they had the money.
707
00:39:12.196 --> 00:39:15.319
So in other words, if I commit $5 million, I'm gonna make a capital call.
708
00:39:15.439 --> 00:39:22.065
If they take my money at the beginning of the year, but they don't use it till the end of the year, they got no return for a year on that money.
709
00:39:22.125 --> 00:39:24.407
It brings down their overall returns on their fund.
710
00:39:24.807 --> 00:39:27.649
So they make calls and get the money when they need it.
711
00:39:28.010 --> 00:39:29.191
So it doesn't go against them.
712
00:39:29.331 --> 00:39:31.793
Does that make the way I've described it as make sense to you, Mike?
713
00:39:32.213 --> 00:39:32.853
Yeah, totally.
714
00:39:33.053 --> 00:39:36.515
And they're going to get their six or seven hundred thousand dollars per year.
715
00:39:36.555 --> 00:39:42.538
And they're two percent from us every single year, regardless of what happens to the fund.
716
00:39:42.718 --> 00:39:43.158
Absolutely.
717
00:39:43.198 --> 00:39:45.879
So that's a little bit of how private equity works.
718
00:39:45.919 --> 00:39:51.642
And the reason I went into the weeds for those that are interested, it also explains why they need to use so much debt.
719
00:39:52.851 --> 00:39:57.654
And so that's a massive difference in how private equity works versus us.
720
00:39:57.754 --> 00:39:57.954
Okay.
721
00:39:58.274 --> 00:39:59.675
So now getting into stuff.
722
00:39:59.695 --> 00:40:02.577
So the first two, like you really should think about profit.
723
00:40:03.017 --> 00:40:07.119
But if you're in, like, absolutely, that's the point of business is to generate money.
724
00:40:07.279 --> 00:40:08.240
Otherwise, what are you doing?
725
00:40:08.720 --> 00:40:23.716
But we as owners might say, well, I will generate more profit on a longer time horizon so that I don't accidentally do things that will harm my reputation or turn my clients off to me or get a bad name in the marketplace.
726
00:40:23.736 --> 00:40:30.143
Like I'm willing to go a little slower to maximize that profit where private equity needs to go a little faster.
727
00:40:30.924 --> 00:40:36.369
Because otherwise, if they don't, then nobody's going to invest in private equity and there will be no private equity world.
728
00:40:36.990 --> 00:40:41.074
And I think another note, too, is when they take the debt, a lot of times they'll put the debt on the business.
729
00:40:41.834 --> 00:40:54.947
And so from a liability perspective, but also if you ever have seen someone just more for educational perspective, you've seen someone get bought out by private equity and then it's like they're profitable, but why are they going out of business?
730
00:40:55.107 --> 00:40:58.790
So for example, like Medallia, this just recently happened, where they do a lot of customer surveys.
731
00:40:58.810 --> 00:40:59.851
We actually use them at the gym.
732
00:41:00.212 --> 00:41:01.913
And they're a great product, very profitable.
733
00:41:02.133 --> 00:41:05.496
But they got bought up by private equity that stacks so much debt on them.
734
00:41:05.797 --> 00:41:08.059
And then those debt payments are due from the business.
735
00:41:08.579 --> 00:41:15.425
And that's where the cash flow that is really healthy can get jeopardized if they've really levered the business very heavily.
736
00:41:15.445 --> 00:41:18.228
Because that debt usually falls on the business, not the firm.
737
00:41:18.468 --> 00:41:20.811
Yeah, I mean, there's been a ton of these.
738
00:41:20.891 --> 00:41:23.053
Toys R Us, I think they no longer exist.
739
00:41:23.334 --> 00:41:27.598
I think Steak and Ale, I don't know if that was around the country, it was definitely big in our area.
740
00:41:27.618 --> 00:41:35.687
You could go down the list of these, especially in the restaurant world, these deals where they layered in a lot of debt and then they go under for that reason.
741
00:41:35.788 --> 00:41:36.608
The underlying business-
742
00:41:37.209 --> 00:41:38.489
Wendy's, another example.
743
00:41:38.590 --> 00:41:39.250
I didn't know that.
744
00:41:39.410 --> 00:41:40.050
Wendy's too.
745
00:41:40.630 --> 00:41:43.471
They're public, but they're thinking about going private because of the same thing.
746
00:41:43.491 --> 00:41:45.892
They have $2.3 billion of debt.
747
00:41:46.192 --> 00:41:48.453
They have the valuation of the company is similar.
748
00:41:48.893 --> 00:41:51.774
And so it's very much same thing.
749
00:41:51.954 --> 00:41:52.234
Yeah.
750
00:41:52.294 --> 00:41:53.955
So this is just a big...
751
00:41:54.695 --> 00:41:55.915
It can work wonderfully.
752
00:41:56.176 --> 00:41:57.096
Debt can work wonderfully.
753
00:41:57.116 --> 00:42:00.497
But it's just a thing that most of us aren't doing and shouldn't be doing.
754
00:42:00.797 --> 00:42:01.978
It's a different way to play the game.
755
00:42:01.998 --> 00:42:04.779
So that's got to be two of the most dramatic things.
756
00:42:04.799 --> 00:42:12.262
Like, number one, just to restate them, like, they move faster on generating profit than most of us are comfortable doing or even know how to do, frankly.
757
00:42:12.602 --> 00:42:14.102
And then two, the debt.
758
00:42:14.202 --> 00:42:18.284
Okay, so now there's several more things that make private equity different.
759
00:42:19.184 --> 00:42:22.026
If you talk to enough private equity guys, you'll hear a word.
760
00:42:22.046 --> 00:42:22.667
They all use it.
761
00:42:22.707 --> 00:42:23.507
It's called thesis.
762
00:42:24.148 --> 00:42:26.550
We have a thesis on the market.
763
00:42:26.570 --> 00:42:27.851
We have a thesis on the industry.
764
00:42:27.871 --> 00:42:29.252
We have a thesis.
765
00:42:29.472 --> 00:42:31.213
Just replace it for story.
766
00:42:32.134 --> 00:42:34.415
Like we're going to go mine asteroids.
767
00:42:34.535 --> 00:42:35.656
That's your story.
768
00:42:35.676 --> 00:42:36.537
This is our story.
769
00:42:36.577 --> 00:42:37.618
This is our theory.
770
00:42:37.638 --> 00:42:38.478
This is our bet.
771
00:42:38.518 --> 00:42:39.159
However you want to say it.
772
00:42:39.479 --> 00:42:44.583
I've been talking to private equity for way over a decade and thesis is the word.
773
00:42:44.883 --> 00:42:45.163
Yeah.
774
00:42:45.563 --> 00:42:49.886
And so the idea here is, and it's smart, like it's not dumb.
775
00:42:50.206 --> 00:42:52.648
So private equity guys are smart, most of them.
776
00:42:53.108 --> 00:42:55.550
And they're like, okay, there's a big giant world.
777
00:42:55.570 --> 00:42:56.750
There's a big giant country.
778
00:42:57.011 --> 00:43:00.793
There's a million different ways to make money, millions of ways to make money.
779
00:43:01.253 --> 00:43:05.056
And so we have decided that we really like the green industry right now.
780
00:43:05.176 --> 00:43:10.740
We really like the green industry because we think in five to 10 years, there's going to be tons of people to buy these businesses.
781
00:43:10.800 --> 00:43:10.960
Right.
782
00:43:11.520 --> 00:43:15.225
And they're all going to be scared of AI even then, or AI is going to screw everything up.
783
00:43:15.586 --> 00:43:16.367
And we don't know.
784
00:43:16.427 --> 00:43:16.947
Nobody knows.
785
00:43:17.168 --> 00:43:19.431
And so these businesses are still going to be good.
786
00:43:19.471 --> 00:43:20.893
That's part of the thesis.
787
00:43:21.213 --> 00:43:24.978
So then they're like, okay, what are the best services in the green industry?
788
00:43:25.099 --> 00:43:26.440
Oh, we like recurring revenue.
789
00:43:27.061 --> 00:43:29.102
Okay, which ones have the best gross margin?
790
00:43:29.282 --> 00:43:32.403
Oh, we like, you know, whatever, pest control and fertilization.
791
00:43:33.183 --> 00:43:37.405
They just go down the list and say, what would the very best business look like?
792
00:43:37.425 --> 00:43:39.086
And they're like, okay, where are we going to do this?
793
00:43:39.226 --> 00:43:41.427
Oh, we love the southeast of the United States.
794
00:43:41.487 --> 00:43:42.327
This is our market.
795
00:43:42.787 --> 00:43:46.933
You know, and that's a thesis and it just gets built over time.
796
00:43:46.953 --> 00:43:50.077
Like what's going to be a defensible business that will last a long time?
797
00:43:50.378 --> 00:43:53.622
What's going to be a business where there's going to be a lot of buyers in the future that want it?
798
00:43:54.123 --> 00:43:55.946
What's going to generate a lot of profit?
799
00:43:56.266 --> 00:43:57.688
What's going to have low chance?
800
00:43:57.748 --> 00:43:58.168
churns.
801
00:43:58.228 --> 00:43:59.469
It's going to be very sticky.
802
00:44:00.070 --> 00:44:00.930
Can we get to the clients?
803
00:44:00.950 --> 00:44:03.512
They're asking themselves all these questions.
804
00:44:03.932 --> 00:44:04.753
That's the thesis.
805
00:44:04.813 --> 00:44:05.633
That's the story.
806
00:44:05.673 --> 00:44:06.273
That's the bet.
807
00:44:06.554 --> 00:44:07.534
Then they arrive at it.
808
00:44:07.875 --> 00:44:08.815
They raise capital.
809
00:44:09.195 --> 00:44:11.597
Then they go out and they start buying companies.
810
00:44:11.617 --> 00:44:12.277
That's what happens.
811
00:44:12.297 --> 00:44:12.558
Okay.
812
00:44:12.838 --> 00:44:12.938
So
813
00:44:14.343 --> 00:44:15.004
Is that a difference?
814
00:44:15.044 --> 00:44:16.765
Have most of us put that much thought into it?
815
00:44:16.785 --> 00:44:20.589
Or did we like, I was born in Fayetteville, Arkansas.
816
00:44:20.709 --> 00:44:24.053
Guess we're starting lawn care because I started mowing grass when I was four.
817
00:44:24.873 --> 00:44:26.755
And I, you know, I did the same thing.
818
00:44:26.775 --> 00:44:28.597
I was like, I started a business where I'm at.
819
00:44:28.737 --> 00:44:32.020
And thank goodness it turned out to be a good market.
820
00:44:32.040 --> 00:44:35.104
So that's a big difference in how all of us operate.
821
00:44:37.346 --> 00:44:37.947
A few more.
822
00:44:38.107 --> 00:44:41.451
So let's now say the private equities bought your company.
823
00:44:41.591 --> 00:44:44.554
I'll tell you quickly, they are aggressive on finding deals too.
824
00:44:44.794 --> 00:44:46.056
Oh, sure.
825
00:44:46.356 --> 00:44:48.439
So usually about once a month, I'll put something out.
826
00:44:48.579 --> 00:44:51.102
Can I try to build kind of in public with the businesses?
827
00:44:51.542 --> 00:44:53.124
So like, for example, last week it was...
828
00:44:54.205 --> 00:44:58.009
We cross $5 million in daily transactions through HomeWorks.
829
00:44:58.250 --> 00:45:00.793
So I made a post about it saying congratulations to the HomeWorks members.
830
00:45:01.113 --> 00:45:04.857
There's one next week about like $22 million was our revenue for Augusta last quarter.
831
00:45:05.478 --> 00:45:11.465
Every time I post that, there's going to be three to four emails or they'll get my, I don't know how they get my phone number and text me.
832
00:45:11.805 --> 00:45:15.388
Cause like, I don't answer my phone, but like they can text, like they are vicious.
833
00:45:15.408 --> 00:45:17.590
Cause there are people just trying to get the deals.
834
00:45:18.070 --> 00:45:21.152
And there was one guy, he's like, Hey, I'm, I'm going to fly to Bellingham.
835
00:45:21.433 --> 00:45:25.596
I don't know exactly where you live, but I would like to have, I would like to have breakfast with you tomorrow.
836
00:45:25.676 --> 00:45:28.618
I was like, no, no, you can't.
837
00:45:28.939 --> 00:45:29.559
But they're aggressive.
838
00:45:29.579 --> 00:45:30.320
They are aggressive.
839
00:45:30.640 --> 00:45:30.840
Yeah.
840
00:45:31.000 --> 00:45:31.801
It's intense.
841
00:45:32.041 --> 00:45:33.362
And they talk behind the scenes.
842
00:45:33.462 --> 00:45:39.547
So like when we were doing the deal on service autopilot, everybody wanted to talk to us and everybody wants to.
843
00:45:40.990 --> 00:45:42.191
get in your good graces.
844
00:45:42.251 --> 00:45:43.911
And so I can just like- Share your thesis.
845
00:45:44.111 --> 00:45:44.592
Yeah.
846
00:45:44.732 --> 00:45:44.892
Yeah.
847
00:45:44.912 --> 00:45:47.953
Well, I'd be like, hey, what do you know about Jobber?
848
00:45:48.513 --> 00:45:49.934
Hey, what do you know about LMN?
849
00:45:50.074 --> 00:45:55.797
Like, and it's amazing how much, like, so they'll talk or they'll talk about who else is working on deals and what's going on.
850
00:45:55.817 --> 00:45:58.498
So these guys are also talking to each other.
851
00:45:58.858 --> 00:45:59.979
Is that how you kind of knew?
852
00:45:59.999 --> 00:46:05.641
Cause I knew when we talked a few years ago, you were kind of like, oh yeah, like mentioning those businesses, like what they were kind of planning to do.
853
00:46:05.661 --> 00:46:09.303
Is that kind of how you got to know Inside Baseball is through the PE guys?
854
00:46:09.323 --> 00:46:09.423
Yeah.
855
00:46:10.406 --> 00:46:13.987
Definitely some of it, but I also knew some of those guys a little bit.
856
00:46:14.167 --> 00:46:24.409
Or I also, um, I would have been pretty careful about what I would say, but when we did the essay deal, the plan was we were going to do some acquisitions.
857
00:46:24.449 --> 00:46:27.730
So I worked on a bunch of deals to acquire some big names.
858
00:46:28.770 --> 00:46:32.070
And, um, so I, I, but I wouldn't have been able to say too much.
859
00:46:32.090 --> 00:46:37.352
So that would have probably come from private equity or come from my conversations with some people is my guess.
860
00:46:37.592 --> 00:46:37.772
Yeah.
861
00:46:38.552 --> 00:46:38.752
Um, yeah.
862
00:46:39.825 --> 00:46:41.246
So anyway, back to the private equity.
863
00:46:41.526 --> 00:46:42.667
But now they've bought your business.
864
00:46:43.048 --> 00:46:44.029
Yeah, so they bought you.
865
00:46:44.049 --> 00:46:46.791
So like, just kind of think about how they think about this stuff.
866
00:46:47.531 --> 00:46:49.173
And they thought about this going in.
867
00:46:49.193 --> 00:46:51.455
They thought about this when they first started talking to you.
868
00:46:51.475 --> 00:46:57.620
They thought about this in due diligence, but they're really concerned with, is this business targeting the best kind of clients?
869
00:46:58.020 --> 00:47:02.703
that can buy a lot of services, that will stick around, because it's all growing.
870
00:47:02.803 --> 00:47:06.785
It's all about growing the business, all about growing the profits of the company.
871
00:47:07.445 --> 00:47:19.713
They are, and I alluded to this earlier, they tend to like recurring revenue, but one-time revenue and project-based businesses, those valuations in many of the trades have been getting better and better, whereas they used to be terrible.
872
00:47:19.733 --> 00:47:25.056
There used to be a time where, whether it's exactly accurate or not, I'd kind of think about...
873
00:47:27.417 --> 00:47:32.080
project-based work is getting a fraction of the valuation as recurring-based companies.
874
00:47:32.400 --> 00:47:39.644
I don't know if that's quite the same anymore because it has changed, but recurring has long been a more desirable part.
875
00:47:39.664 --> 00:47:43.346
They think about the revenue mix, or they'll call it the quality of the revenue.
876
00:47:43.366 --> 00:47:44.747
That kind of goes back to the clients.
877
00:47:45.027 --> 00:47:46.208
It goes back to geography.
878
00:47:46.228 --> 00:47:47.929
It goes back to the type of service.
879
00:47:48.109 --> 00:47:49.930
They're really analyzing all this stuff.
880
00:47:49.990 --> 00:47:54.293
In a business, when they were buying it, they might know coming in, it's like, hey, what
881
00:47:54.393 --> 00:47:56.214
80% of this revenue is pretty good.
882
00:47:56.554 --> 00:47:59.496
This other 20% of the revenue is actually not very valuable.
883
00:47:59.556 --> 00:48:01.797
It won't be very valuable to us when we sell this business.
884
00:48:02.198 --> 00:48:03.378
It's just a distraction.
885
00:48:04.099 --> 00:48:07.060
It's just, it's hard to find people.
886
00:48:07.180 --> 00:48:15.805
So what if we got rid of this 20% and we reallocated those people to do other things inside the business and we grew the other parts of the business.
887
00:48:16.326 --> 00:48:19.227
So they are thoughtful about pricing.
888
00:48:19.387 --> 00:48:21.909
Like they're probably gonna raise your prices as soon as they buy your company.
889
00:48:22.169 --> 00:48:23.472
They're thoughtful about pricing.
890
00:48:23.492 --> 00:48:25.115
They're thoughtful about revenue mix.
891
00:48:25.135 --> 00:48:26.237
They're thinking about all this stuff.
892
00:48:26.558 --> 00:48:30.064
So they have a plan after they buy the company of how they might want to make changes.
893
00:48:30.746 --> 00:48:32.509
So that's something.
894
00:48:32.569 --> 00:48:33.972
They'll do things online.
895
00:48:34.690 --> 00:48:36.111
that you probably would never do.
896
00:48:36.151 --> 00:48:39.472
And they'll look at data and look at your business in a way you probably have never looked at it.
897
00:48:39.512 --> 00:48:43.114
Because again, the goal is to grow the business quickly.
898
00:48:43.174 --> 00:48:45.055
The goal is to generate profit.
899
00:48:45.155 --> 00:48:50.377
The goal is they understand that there's only so much capacity for people to do things.
900
00:48:50.737 --> 00:48:54.359
How can we have people doing the highest value things that grow the business?
901
00:48:54.379 --> 00:48:56.620
So they're gonna be ruthless in those ways.
902
00:48:57.060 --> 00:49:02.843
They're gonna look very closely at the people of the business, who they wanna lock down, keep, who they wanna move on,
903
00:49:03.383 --> 00:49:06.566
They're going to be very thoughtful about the management team.
904
00:49:06.586 --> 00:49:06.946
They're not.
905
00:49:07.126 --> 00:49:09.648
No private equity company is looking to run your business.
906
00:49:10.749 --> 00:49:11.449
They are not.
907
00:49:11.830 --> 00:49:14.171
Private equity founders have no desire to run your business.
908
00:49:14.191 --> 00:49:15.312
They just want to advise.
909
00:49:15.833 --> 00:49:20.036
They probably have a team of people within their company that are experts in different areas.
910
00:49:20.256 --> 00:49:23.659
Maybe the private equity company has some experts in marketing.
911
00:49:23.679 --> 00:49:25.100
They have some experts in recruiting.
912
00:49:25.320 --> 00:49:27.722
They have some experts in data and finance.
913
00:49:27.962 --> 00:49:30.464
They may or may not have these people, or they may...
914
00:49:30.884 --> 00:49:42.559
consult with other contractors, consultants that have this expertise, they're going to bring those ideas to your company, they're going to analyze your business, and they're going to try to figure out how do we make this thing go faster, bigger, make more money.
915
00:49:43.040 --> 00:49:46.384
And so they're going to very much look at who do we have on the team.
916
00:49:47.225 --> 00:49:48.286
And who do we need on the team?
917
00:49:48.326 --> 00:49:52.329
Because they don't want to run the business, they're going to fill in the big management positions.
918
00:49:52.469 --> 00:49:55.252
We have a real gap, for example, in finance.
919
00:49:55.712 --> 00:49:58.074
We need a finance person in this business.
920
00:49:58.494 --> 00:49:59.195
We have a gap.
921
00:50:00.076 --> 00:50:05.040
We could grow this business all day long, but we don't have any people to staff the business.
922
00:50:05.080 --> 00:50:07.582
We need somebody to own the staffing of this business.
923
00:50:07.602 --> 00:50:10.344
They're going to look for those gaps and they're going to bring in management people to run it.
924
00:50:10.825 --> 00:50:12.926
And they're not going to generally bring in somebody
925
00:50:13.787 --> 00:50:15.429
that they're going to train for three years.
926
00:50:15.729 --> 00:50:21.214
They're going to be bringing somebody that's already done it and put them in place so that person can build that function in your business.
927
00:50:21.495 --> 00:50:22.596
That's how you go fast.
928
00:50:24.077 --> 00:50:28.922
And then one last thing I would say is they're probably going to make acquisitions.
929
00:50:29.303 --> 00:50:32.326
So this sort of depends on the type of private equity company that...
930
00:50:33.234 --> 00:50:41.538
you're we're talking about some private equity companies, their ideas that I'm just going to buy lots of businesses, put them all together, flip the thing and sell it.
931
00:50:42.398 --> 00:50:46.620
That's generally the kind of private equity companies that most of us get a bad taste in our mouth about.
932
00:50:47.080 --> 00:50:51.782
There are other private equity companies are going to come and say, Hey, we're going to really invest in this business over the long term.
933
00:50:51.822 --> 00:50:52.803
It's a growth investment.
934
00:50:52.823 --> 00:50:55.164
We're going to make a lot of improvements.
935
00:50:55.204 --> 00:50:56.904
We're going to support a lot of what you've already done.
936
00:50:57.145 --> 00:50:58.665
And we're just going to grow this thing.
937
00:50:58.705 --> 00:51:00.266
And we want more organic growth.
938
00:51:00.526 --> 00:51:02.387
We're spending way more money on marketing.
939
00:51:02.407 --> 00:51:02.827
Yeah.
940
00:51:02.947 --> 00:51:04.588
And we're going to bring in a lot of new clients.
941
00:51:04.668 --> 00:51:08.271
But to go even faster, we're going to make a few careful acquisitions.
942
00:51:08.571 --> 00:51:10.112
They'll call them tuck-in acquisitions.
943
00:51:10.512 --> 00:51:14.595
So maybe you're a $15 million lawn care company.
944
00:51:15.055 --> 00:51:19.118
And they're like, hey, we could buy this $3 million fertilization weed control company.
945
00:51:19.518 --> 00:51:22.840
That's really valuable revenue for when we go to sell the business in the future.
946
00:51:23.201 --> 00:51:25.102
And we'll buy them and we'll bring them in.
947
00:51:25.122 --> 00:51:26.103
And that'll be a tuck-in.
948
00:51:27.199 --> 00:51:30.322
And so they'll make some number of these tuck-in acquisitions.
949
00:51:30.662 --> 00:51:36.507
Then eventually, once that business is really solid, they may do another acquisition to expand into another market.
950
00:51:37.368 --> 00:51:40.030
So they'll go buy another business in another market.
951
00:51:40.290 --> 00:51:41.651
They may or may not rename it.
952
00:51:41.731 --> 00:51:43.673
And then they'll start to expand geographically.
953
00:51:44.273 --> 00:51:46.075
And so that's where acquisitions come in.
954
00:51:46.095 --> 00:51:47.776
And some are aggressive with acquisitions.
955
00:51:47.856 --> 00:51:48.717
Some are aggressive.
956
00:51:48.917 --> 00:51:50.139
not aggressive with acquisitions.
957
00:51:50.159 --> 00:51:51.941
They're very methodical and careful about them.
958
00:51:52.221 --> 00:51:58.308
That's all, those are some of the big things that you would notice are very different in the thinking and how we run businesses.
959
00:51:59.665 --> 00:52:00.225
Yeah, it's interesting.
960
00:52:00.245 --> 00:52:04.307
I had watched a podcast the other day, Cale Owen.
961
00:52:04.767 --> 00:52:07.848
He used to be the CEO of Gym Lunch.
962
00:52:08.428 --> 00:52:12.889
And he came with Alex and Layla and then took it over once PE came in.
963
00:52:13.570 --> 00:52:23.813
And so hearing his perspective, even trying to deal with private equity as a CEO, I was like, it takes a special person to be a CEO of a company with private equity over you.
964
00:52:24.253 --> 00:52:26.355
We did not see eye to eye.
965
00:52:26.535 --> 00:52:27.395
Did not see eye to eye.
966
00:52:27.615 --> 00:52:28.296
The private equity firm.
967
00:52:28.436 --> 00:52:28.596
Yeah.
968
00:52:28.656 --> 00:52:34.580
And I realized that I was not going to be the best person to move forward because I still wanted to do this thing.
969
00:52:34.600 --> 00:52:43.987
I had been through so many ups and downs in gym watch, going through the model change in 2019, then going through COVID, then going through the build, then going through due diligence, then going through the rebuild, then going through all this stuff.
970
00:52:44.167 --> 00:52:47.830
And I just was like, at this point, I was like, I don't want to do this anymore.
971
00:52:47.850 --> 00:52:48.270
Yeah.
972
00:52:48.598 --> 00:53:07.322
I would never want to be in that position, but there's a special breed of person that can really operate at this level of removing emotion from a lot of aspects and strictly looking at the data and executing on that playbook, whether it be acquisitions or tuck-ins or roll-ups or financial engineering and trying to go public or whatever it might be.
973
00:53:07.662 --> 00:53:10.943
It certainly takes a special type of executive, and I feel...
974
00:53:12.065 --> 00:53:16.108
not all the time, but many times it's not necessarily an entrepreneurial person that's needed.
975
00:53:16.608 --> 00:53:26.835
It is someone that is going to be much more focused on the numbers, on the execution, and able to separate the business from the emotion of aspects of our own pricing.
976
00:53:26.875 --> 00:53:28.396
Customers have been with us for a long time.
977
00:53:28.436 --> 00:53:29.717
Vendors that we've been with.
978
00:53:29.757 --> 00:53:31.358
Team members that have been with us for a long time.
979
00:53:31.719 --> 00:53:40.225
And I think that the balance between those two is likely that us as operators or our founders can borrow parts and pieces of this sort of
980
00:53:41.045 --> 00:53:43.928
you know, regimented look at our business.
981
00:53:44.368 --> 00:53:54.458
And even what we had talked about a couple of weeks ago around like coming back from a extended vacation or a sabbatical and having this sort of clarity that I would imagine is somewhat like a private equity person.
982
00:53:54.498 --> 00:53:56.180
Like let's look at this objectively and,
983
00:53:56.520 --> 00:54:08.584
instead of subjectively with emotion, with all the past kind of rolled up into it, whether it be team members that shouldn't be there anymore, initiatives that are wasting our time, customers that need to be, their prices need to be increased.
984
00:54:08.604 --> 00:54:18.307
And one of the things that always resounds in my mind is I remember a talk that you did back at SaaS Academy, where it was like the first thing they did when they came into your business was raise prices across the board.
985
00:54:18.967 --> 00:54:26.410
And if I remember correctly, you'd said something like $10 million or more you left at the table just by not you doing that prior to the sale.
986
00:54:26.530 --> 00:54:27.911
It was for sure $10 million.
987
00:54:28.351 --> 00:54:29.072
It was no less.
988
00:54:29.512 --> 00:54:29.692
Yeah.
989
00:54:30.212 --> 00:54:31.233
If we just made that change.
990
00:54:32.053 --> 00:54:32.513
Yeah.
991
00:54:32.893 --> 00:54:37.455
And you still had to do, you had to still deal with all the fallout too because you were still at the company.
992
00:54:37.495 --> 00:54:44.439
And the crazy thing, John and I had already talked about the thing, but it just got lost over time in the whole thinking about selling the business.
993
00:54:44.879 --> 00:54:47.020
Yeah, that was, yeah, that one hurt.
994
00:54:47.040 --> 00:54:47.140
Yeah.
995
00:54:47.820 --> 00:54:49.822
But they do it everywhere.
996
00:54:50.862 --> 00:54:51.403
You're dead on.
997
00:54:51.523 --> 00:54:55.666
I don't think most entrepreneurs can live in a private equity world.
998
00:54:55.706 --> 00:54:57.427
It's a smaller number.
999
00:54:57.448 --> 00:55:05.954
I think I could have because I wanted to learn everything I could, and I'm already kind of interested in private equity.
1000
00:55:06.054 --> 00:55:08.616
I just think it's an interesting world they live in.
1001
00:55:09.197 --> 00:55:11.078
But there's a lot I do not like about it.
1002
00:55:11.298 --> 00:55:14.100
I don't know if I – I don't think I would rather be an entrepreneur every day of the week.
1003
00:55:14.160 --> 00:55:15.662
That's what I would rather do.
1004
00:55:15.722 --> 00:55:15.902
But –
1005
00:55:17.260 --> 00:55:25.204
what you'll notice and what I've noticed is that there are executives that just go from private equity company to private equity company.
1006
00:55:25.824 --> 00:55:35.569
There's it's a, it's if you want to be a leader and run private private equity backed companies, you can make a lot of money, a lot of money, like more you can make.
1007
00:55:35.629 --> 00:55:39.811
If you're good, you will make more money than I'm making this up.
1008
00:55:40.271 --> 00:55:42.352
98% of all founders of companies will make.
1009
00:55:43.092 --> 00:55:44.933
Because these private equity companies make money.
1010
00:55:45.613 --> 00:55:53.315
And so a guy is brought in to run a private equity company, and he will do far better than he probably would have done if he'd started a company, frankly.
1011
00:55:53.575 --> 00:55:57.676
And so there's a ton of these people that are out there that just go.
1012
00:55:58.016 --> 00:55:59.397
They run a private equity company.
1013
00:55:59.417 --> 00:56:01.657
When it gets sold, they go do another private equity company.
1014
00:56:01.677 --> 00:56:03.038
When that gets sold, they go do another one.
1015
00:56:03.378 --> 00:56:04.678
And they make incredible living.
1016
00:56:04.738 --> 00:56:07.659
So you do tend to see more of a professional experience
1017
00:56:08.319 --> 00:56:15.145
business operator, leader running these things than entrepreneurs sticking around.
1018
00:56:16.263 --> 00:56:20.385
Yeah, like I've read even like Brad, I think it's Brad Jacobs, how to make a few billion dollars or whatever.
1019
00:56:20.425 --> 00:56:24.747
He talks a lot about roll-ups and acquisitions and it's all about the private equity world.
1020
00:56:25.127 --> 00:56:32.951
His book, several others that have been, I read them a lot, mostly to balance out the fact that I'm probably in the extreme opposite, like probably too emotional about my business.
1021
00:56:33.452 --> 00:56:37.934
I think too much about aspects outside the numbers and the data that's screaming at me.
1022
00:56:38.354 --> 00:56:40.935
And so I kind of almost use it as like, hey, I never want to be this.
1023
00:56:41.036 --> 00:56:45.398
I would rather not even be in business, but there's got to be a happy medium
1024
00:56:45.958 --> 00:56:58.107
that as an operator or someone that does care about the people and the longevity and more of the 20-year term, not the five-year term, I can borrow elements of this that are healthy for the business because obviously it works.
1025
00:56:58.427 --> 00:57:03.851
Like there's, it would not exist if it was not beating the market, if financially it was not a good thing.
1026
00:57:04.111 --> 00:57:12.537
Whether or not people misuse these tools is a different topic, but I think it is certainly elements of those things that could be used for us as founders.
1027
00:57:12.557 --> 00:57:12.777
Yeah.
1028
00:57:12.837 --> 00:57:16.260
Yeah, there would not be trillions and trillions of dollars locked up in private equity.
1029
00:57:16.520 --> 00:57:18.802
Like, as I talked about earlier, you're locking your money up.
1030
00:57:18.982 --> 00:57:21.024
You can't get it back.
1031
00:57:21.344 --> 00:57:24.247
Nobody would do this if these companies weren't getting great returns.
1032
00:57:25.088 --> 00:57:29.672
And now that's a separate issue from, are they good companies?
1033
00:57:30.212 --> 00:57:32.954
I mean, they might be good companies in that they...
1034
00:57:34.000 --> 00:57:42.166
generate a lot of returns, but they could be bad companies, some could argue, for the future of America, or they could be bad companies in other ways for the future of the consumer.
1035
00:57:42.687 --> 00:57:48.912
But it also cloudies the reality that, we've said this before, there's so many different flavors of private equity.
1036
00:57:49.752 --> 00:57:57.378
There are great private equity companies that buy companies and may even hold them for maybe forever, right?
1037
00:57:58.179 --> 00:57:59.460
Not everybody sells them.
1038
00:57:59.480 --> 00:58:06.109
There are other private equity companies that buy them and they'll hold them for a very long time and they're just going to grow really great companies over the long term.
1039
00:58:06.810 --> 00:58:11.456
And they've raised different money from people that understand what they're doing.
1040
00:58:11.917 --> 00:58:14.540
The promise wasn't, you'll be out of this deal in six years.
1041
00:58:14.580 --> 00:58:15.421
The promise was,
1042
00:58:16.122 --> 00:58:18.124
This is the kind of business we're building for the long term.
1043
00:58:18.144 --> 00:58:19.185
We'll distribute profits.
1044
00:58:19.625 --> 00:58:21.486
You may not get your money back for a really long time.
1045
00:58:22.027 --> 00:58:28.252
So private equity can get a really bad name, but there's legitimately fantastic private equity companies out there.
1046
00:58:29.312 --> 00:58:40.502
And I know right now, even from a legislation perspective, there's some sort of a push to allow non-accredited investors into private equity or allow them into getting deals before they go on the public market.
1047
00:58:40.842 --> 00:58:55.175
And as much as I see the one side of it being more democratized access to these great deals, I also see this as a problem that there's so much now money in that system that we start the private equity firms have to start buying lower and lower quality businesses because
1048
00:58:55.795 --> 00:58:57.175
just to deploy the capital.
1049
00:58:57.756 --> 00:59:00.276
And because they're making money on the upfront, like they're making the 2%.
1050
00:59:00.296 --> 00:59:01.296
That's what they're making their money.
1051
00:59:02.077 --> 00:59:15.600
And I feel like regardless of whether or not there might be a good reason as to why we should allow everyone to participate in an entry-level fund or an entry-level business that's not publicly traded, I feel like that could be
1052
00:59:17.393 --> 00:59:18.033
really risky.
1053
00:59:18.473 --> 00:59:18.673
Yeah.
1054
00:59:18.874 --> 00:59:20.614
So I'm actually on the same page on that.
1055
00:59:20.654 --> 00:59:21.975
I can argue both sides of this.
1056
00:59:22.935 --> 00:59:27.116
And I hear a lot of people saying this is good for the average retail investor.
1057
00:59:28.297 --> 00:59:29.057
And I get it.
1058
00:59:29.277 --> 00:59:32.058
I get the argument, but they're all the people that have funds.
1059
00:59:32.918 --> 00:59:34.839
All the people saying that are the ones that have funds.
1060
00:59:35.870 --> 00:59:40.114
Or I sometimes think people that don't really understand how this can go badly.
1061
00:59:40.194 --> 00:59:43.017
Like just on the surface, it sounds so good.
1062
00:59:43.057 --> 00:59:44.478
But I think about a couple of things.
1063
00:59:44.819 --> 00:59:49.123
One, you gave the example, like now we could have more private equity companies doing worse and worse deals.
1064
00:59:49.664 --> 00:59:54.088
Another one is if you're – there's a lot to this investing stuff.
1065
00:59:54.108 --> 00:59:57.791
Like there's a lot of people – it's shocking how much –
1066
00:59:59.005 --> 01:00:02.187
how often deals go really bad and investments go bad.
1067
01:00:02.748 --> 01:00:07.631
And so somebody that's, a lot of bad decisions are made on Robin.
1068
01:00:07.651 --> 01:00:09.753
Now I wouldn't argue Robin should, wait, Robin.
1069
01:00:10.534 --> 01:00:10.894
Robin Hood.
1070
01:00:11.094 --> 01:00:11.534
Yeah, Robin Hood.
1071
01:00:11.554 --> 01:00:11.834
Thank you.
1072
01:00:11.995 --> 01:00:12.615
Okay.
1073
01:00:12.775 --> 01:00:13.676
All of a sudden it sounded wrong.
1074
01:00:13.716 --> 01:00:14.056
Robin Hood.
1075
01:00:14.176 --> 01:00:18.319
A lot of really bad decisions are made there, but I wouldn't argue it shouldn't exist.
1076
01:00:18.760 --> 01:00:20.101
I think there's also positives.
1077
01:00:20.541 --> 01:00:24.764
But if you kind of think about, there's so many young people
1078
01:00:25.013 --> 01:00:31.397
investors, young as in young in age or young, they haven't been investing for a long time, there's a lot of lessons that need to be learned.
1079
01:00:31.437 --> 01:00:41.803
And if they just hear, oh, private equity, it returns 15 to 20% a year or whatever that number is, they rush in, they're going to be the very ones sold the really bad private equity deals.
1080
01:00:42.203 --> 01:00:43.304
And they're going to get burned.
1081
01:00:43.684 --> 01:00:46.786
And that's, and so I understand as much as I'm
1082
01:00:48.041 --> 01:00:52.983
I like the free market economy a little bit more libertarian than I am in that sense.
1083
01:00:53.463 --> 01:01:01.306
I understand how we've ended up with these rules in society because I guarantee we're going to have a ton of examples a decade from now if this happens.
1084
01:01:01.726 --> 01:01:12.750
Again, I don't know if it should or shouldn't happen, but we're going to have a ton of examples of why the little guy got screwed yet again because there's going to be crummy people that prey on him and people are going to make bad decisions.
1085
01:01:13.958 --> 01:01:19.002
Yeah, I think anytime you have tons of money sloshing around and then it enters a market, valuations go up too.
1086
01:01:20.103 --> 01:01:25.227
One example of this is like even the Seahawks just got purchased by, and it's like fractional shares.
1087
01:01:25.247 --> 01:01:30.711
They've allowed that in the past 12 months where NFL teams can be purchased by private equity.
1088
01:01:30.991 --> 01:01:34.594
Well, they just got purchased for like $9.6 billion or something crazy.
1089
01:01:35.214 --> 01:01:38.257
And I think even four or five years ago, it would have been less than half of that.
1090
01:01:38.537 --> 01:01:42.698
But there's just so much money in demand for a good business, nonetheless.
1091
01:01:43.219 --> 01:01:44.659
But the valuations go through the roof.
1092
01:01:44.959 --> 01:01:46.880
But to your point, you get an influencer.
1093
01:01:47.240 --> 01:01:52.502
And back to the NFT days when it was like similar because we democratized everything.
1094
01:01:52.522 --> 01:01:58.704
Like under the guise of democratization of currency, a ton of scams happened.
1095
01:01:58.804 --> 01:02:06.147
And so that's my concern by allowing someone who is not a sophisticated investor cannot actually look at a P&L and know whether or not this business is solvent.
1096
01:02:06.167 --> 01:02:06.327
Yeah.
1097
01:02:06.867 --> 01:02:11.190
To allow them to invest in an early stage company is risky.
1098
01:02:11.210 --> 01:02:12.951
But to your point, I'm like, you know what?
1099
01:02:13.011 --> 01:02:14.232
I just want people to do whatever they want.
1100
01:02:14.713 --> 01:02:16.134
But will that just make the rich richer?
1101
01:02:16.154 --> 01:02:20.017
Because whoever can just scam the most people and suck money out of the system, they win.
1102
01:02:20.217 --> 01:02:21.197
Yeah.
1103
01:02:22.318 --> 01:02:23.979
That's kind of how I think about it.
1104
01:02:24.079 --> 01:02:28.863
I imagine all these private equity companies who have a whole portfolio of companies that they can't sell.
1105
01:02:29.243 --> 01:02:31.285
They can't get out of the deals because the returns are going to be bad.
1106
01:02:32.005 --> 01:02:33.826
So they're going to keep them going.
1107
01:02:34.066 --> 01:02:36.948
So they roll them into a new fund and then they sell.
1108
01:02:37.389 --> 01:02:42.092
They have all the retail investors invest in this new fund, which is basically a package of crummy companies.
1109
01:02:42.372 --> 01:02:43.973
I imagine a lot of that stuff happening.
1110
01:02:44.493 --> 01:02:45.514
Who knows though?
1111
01:02:46.514 --> 01:02:53.099
When JP Holdings comes out with the new private equity firm, we'll be in line to buy.
1112
01:02:53.319 --> 01:02:57.341
Or are you lumping me within all the crummy deals to prey on the retail investors?
1113
01:02:57.522 --> 01:02:58.202
Oh, no, no.
1114
01:02:59.852 --> 01:03:00.232
There you go.
1115
01:03:00.333 --> 01:03:01.594
There you go.
1116
01:03:01.794 --> 01:03:05.458
So in that same vein, like I wanted to kind of go down this path a little bit.
1117
01:03:05.818 --> 01:03:09.902
I know private equity kind of lead us in the direction of like, okay, how do we structure our businesses?
1118
01:03:10.643 --> 01:03:15.748
And someone might be saying, okay, private equity, I'm never selling a private equity or like that's so far down the road from me.
1119
01:03:15.768 --> 01:03:16.989
I'm never even going to get to build a size.
1120
01:03:17.069 --> 01:03:20.333
I don't even want to build a size of business where private equity comes and knocks on my door.
1121
01:03:21.702 --> 01:03:27.884
how can I get some of these benefits and think about my business more as an investor instead of an operator?
1122
01:03:28.444 --> 01:03:44.568
And is there some sort of a middle ground that I can use these principles to get out of an operator's mindset and do as much more of an investor, not like private equity, but what are the sort of mental shifts or even the skillset shifts that someone can adopt to take on more of an investor mindset in their own business?
1123
01:03:44.948 --> 01:03:48.289
Well, it really goes back to much of what I said.
1124
01:03:48.429 --> 01:03:55.091
So the first question you asked was, in hindsight, the perfect buildup for this, because if you, I think it's really valuable.
1125
01:03:55.131 --> 01:03:58.392
We spent a lot of time talking about how a private equity company would look at a business.
1126
01:03:58.952 --> 01:04:05.194
If that's how they look at the business, then what can you extrapolate from that that maybe you should be doing?
1127
01:04:05.754 --> 01:04:09.535
So I'll kind of think about that list again as I rattled it off.
1128
01:04:10.895 --> 01:04:13.618
You want to be very thoughtful about the market you're serving.
1129
01:04:13.978 --> 01:04:16.941
Okay, so I used to give this analogy in Academy.
1130
01:04:18.062 --> 01:04:18.983
And I'll come right back to this.
1131
01:04:19.403 --> 01:04:22.586
So if you did sell your business and suddenly you had $100 million, okay?
1132
01:04:23.822 --> 01:04:28.286
Would you really just say, oh, I happen to, I'll use my Fayetteville, Arkansas example.
1133
01:04:28.346 --> 01:04:31.628
Would you really say, oh, I happen to live in Fayetteville, Arkansas.
1134
01:04:31.989 --> 01:04:36.933
I wanna start buying real estate with my money that I got from selling my company.
1135
01:04:37.113 --> 01:04:40.956
So I'm just gonna buy up as many residential homes in Fayetteville, Arkansas as I can.
1136
01:04:41.196 --> 01:04:42.297
Maybe an okay market.
1137
01:04:42.557 --> 01:04:43.678
It's a college town.
1138
01:04:43.999 --> 01:04:45.019
Who knows?
1139
01:04:45.340 --> 01:04:46.220
You might be okay there.
1140
01:04:46.661 --> 01:04:51.164
But somebody that's sophisticated enough to have built a big enough company
1141
01:04:52.450 --> 01:04:59.216
sold it for enough money to pay all the taxes and have $100 million left over, probably is going to think about and say, I got $100 million.
1142
01:04:59.576 --> 01:05:04.180
Where is the very best place in the world or in the United States to deploy this country money?
1143
01:05:04.200 --> 01:05:04.800
And how would I do it?
1144
01:05:04.921 --> 01:05:08.083
Much like how I described a private equity person would think about it.
1145
01:05:08.143 --> 01:05:16.831
So if you were thinking the same thing about your business, you would say, okay, I got to where I'm at today because I started here and I serve this client.
1146
01:05:16.871 --> 01:05:18.012
I offered these services.
1147
01:05:18.672 --> 01:05:23.758
But if I'm creating a strategy, boy, this video, I just recorded a video for 5 for 50.
1148
01:05:23.778 --> 01:05:24.418
It comes out Friday.
1149
01:05:24.458 --> 01:05:25.740
It's actually kind of like this.
1150
01:05:26.160 --> 01:05:30.545
So there's going to be a little bit of similarity here.
1151
01:05:31.626 --> 01:05:32.167
And that is,
1152
01:05:33.620 --> 01:05:44.167
If I want my business to be different than what it is today and be better five years from now or a decade from now, using that example I just gave, you have $100 million, how would you deploy it?
1153
01:05:44.488 --> 01:05:46.489
You want to look and say, okay, this is where I'm at.
1154
01:05:46.809 --> 01:05:48.450
But where are the best clients?
1155
01:05:48.510 --> 01:05:49.751
Where is the best market?
1156
01:05:49.791 --> 01:05:56.176
The best markets are markets where people are moving to that market, not dying and the market shrinking.
1157
01:05:57.372 --> 01:06:02.959
Yeah, you could argue in Florida there are great markets because people move there and retire and those people die and more people move there and retire.
1158
01:06:03.199 --> 01:06:07.604
That could be okay, but you're really thinking about is this a growing market or a dying market?
1159
01:06:07.624 --> 01:06:12.509
You're thinking about is this a client that has enough disposable household income to buy my stuff?
1160
01:06:12.889 --> 01:06:14.971
You get really thoughtful about that stuff.
1161
01:06:15.052 --> 01:06:18.916
You say, okay, in the market I'm in, what part of the market is the best?
1162
01:06:19.354 --> 01:06:24.739
I've been talking to everybody in all the cities I live or I serve, but these three cities are the best.
1163
01:06:25.220 --> 01:06:29.724
These neighborhoods, these carrier routes in these cities are the best.
1164
01:06:29.764 --> 01:06:32.967
So I'm going to focus my attention and my money and my marketing to that.
1165
01:06:33.850 --> 01:06:36.411
I'm going to, that's strategy.
1166
01:06:36.751 --> 01:06:43.833
And so that's a good word to use when you think about how would an investor think about their business differently than we think about it.
1167
01:06:44.273 --> 01:06:50.315
We think about it strategically as a private, it's similar to how private equity business would be.
1168
01:06:50.355 --> 01:06:51.376
So again, top level,
1169
01:06:52.176 --> 01:06:52.916
Who am I serving?
1170
01:06:53.116 --> 01:06:54.037
What area am I serving?
1171
01:06:54.257 --> 01:06:55.577
What services am I offering?
1172
01:06:55.797 --> 01:06:57.438
What's the gross margin on those services?
1173
01:06:57.758 --> 01:06:59.038
What's the cogs on those services?
1174
01:06:59.918 --> 01:07:00.639
Directly related.
1175
01:07:00.959 --> 01:07:04.620
I'm thinking about all that stuff to decide what I keep, what I prune.
1176
01:07:04.640 --> 01:07:11.822
Going back to our show last week when we were talking about when you add services, when you get rid of services, that's very much in line in what I'm talking about now.
1177
01:07:12.202 --> 01:07:14.323
An investor would do that.
1178
01:07:14.683 --> 01:07:17.524
If you came to me and said, hey, will you invest in my company and help me grow it?
1179
01:07:18.691 --> 01:07:20.353
It's another frame for me to think about this.
1180
01:07:20.933 --> 01:07:22.355
That is where we would start.
1181
01:07:23.076 --> 01:07:27.821
Like, are we even serving the right people, the right market with the right services at the right frequency?
1182
01:07:28.161 --> 01:07:30.203
Next, I'm going to look at everybody in your company.
1183
01:07:30.323 --> 01:07:31.625
Like, do we even have the right people?
1184
01:07:32.005 --> 01:07:33.166
There's no emotion for me.
1185
01:07:33.627 --> 01:07:36.510
I don't care that she's your mother-in-law.
1186
01:07:37.151 --> 01:07:38.232
She's a drag on the business.
1187
01:07:40.113 --> 01:08:06.239
and so this is not good if we can't fix this i don't want to invest in your business i don't care that the guy has been there for 19 years but now he's a pain in the butt nobody wants to talk to him he can't keep being here he's got to go because it's a drag on the business and unfair to all the other people oh you've got a massive gap in the business we can't grow to my those that follow five for 50 my two engine philosophy there's a revenue engine and there's a recruiting
1188
01:08:09.961 --> 01:08:11.682
we actually do good marketing.
1189
01:08:11.822 --> 01:08:12.563
People love us.
1190
01:08:12.603 --> 01:08:17.327
We've got reviews, but we won't grow this business because we don't do recruiting.
1191
01:08:17.788 --> 01:08:18.488
I'm an investor.
1192
01:08:18.508 --> 01:08:19.309
That's what I'm looking at.
1193
01:08:19.509 --> 01:08:20.370
Like, where's the hole?
1194
01:08:20.410 --> 01:08:21.391
Where's the bottleneck?
1195
01:08:21.771 --> 01:08:23.053
What's slowing this whole thing down?
1196
01:08:23.093 --> 01:08:24.994
What's the few things that are breaking it all?
1197
01:08:25.395 --> 01:08:27.497
And I'm looking for those things and I'm fixing them.
1198
01:08:28.868 --> 01:08:30.730
And that's what you do.
1199
01:08:30.810 --> 01:08:31.912
That's what private equity would do.
1200
01:08:31.952 --> 01:08:33.293
That's what an investor would do.
1201
01:08:33.373 --> 01:08:36.036
So if I'm investing in you, I'm looking at that.
1202
01:08:36.156 --> 01:08:37.197
We're looking at pricing.
1203
01:08:37.237 --> 01:08:39.960
We're looking at what the competitors price, how they price.
1204
01:08:39.980 --> 01:08:41.042
We're looking at packaging.
1205
01:08:41.062 --> 01:08:42.643
Like, how do we package up these things?
1206
01:08:42.683 --> 01:08:44.265
Like, how do we add more value?
1207
01:08:44.746 --> 01:08:45.326
How do I...
1208
01:08:46.167 --> 01:08:56.532
If everybody's selling lawn mowing and it's such a commoditized service that I generally know as the buyer, that's going to be $40, $42, $33.
1209
01:08:56.592 --> 01:08:58.473
I kind of figure out the pricing really easy.
1210
01:08:58.893 --> 01:09:00.374
I just had somebody clean my carpet day.
1211
01:09:00.394 --> 01:09:04.496
A lot harder to figure out what it's going to cost to clean stone in your house.
1212
01:09:04.876 --> 01:09:07.437
So if you kind of think about how do we even present price?
1213
01:09:07.458 --> 01:09:08.638
How do we package up price?
1214
01:09:09.098 --> 01:09:12.060
How do I position things where it's not apples versus apples where...
1215
01:09:12.660 --> 01:09:16.522
They look at it and I'm 40 bucks and my competitor is 33.
1216
01:09:16.842 --> 01:09:22.444
Well, they discount me and go with the 33, but they don't understand all the value I'm adding.
1217
01:09:22.724 --> 01:09:26.206
Customer service, the staffing of the team.
1218
01:09:26.246 --> 01:09:29.607
Like, think about my recommendation door hangers I was talking about earlier.
1219
01:09:29.627 --> 01:09:33.689
Like, the amount of work that goes into, I'm not talking about just producing them, but actually...
1220
01:09:34.429 --> 01:09:58.851
deliver like thinking about how do we proactively fix things for our clients like that's not how most companies work and that costs money and a lot of time but you can never you can never give the buyer all those differences in sales points you just can't convey all that buying criteria to them so they're going to hear a few bullet points on why you're different than everybody else they can see why your reviews are different
1221
01:09:59.351 --> 01:10:02.934
They, they, but they're still going to kind of look at pricing.
1222
01:10:02.974 --> 01:10:04.575
So how do you package things?
1223
01:10:04.615 --> 01:10:06.396
So the pricing is really hard to even look at.
1224
01:10:06.637 --> 01:10:08.658
Not so you can scam people, not so you rip them off.
1225
01:10:08.678 --> 01:10:09.819
I'm not into any of that stuff.
1226
01:10:10.199 --> 01:10:20.947
I'm just saying so that you have a better chance of selling the service and getting paid a fair amount for all the money that you're spending to be able to deliver a higher level of service.
1227
01:10:20.967 --> 01:10:21.928
So I'm thinking about that stuff.
1228
01:10:22.208 --> 01:10:24.110
That's what an investor is going to be thinking about.
1229
01:10:24.130 --> 01:10:24.490
Yeah.
1230
01:10:24.730 --> 01:10:32.668
And they're going to be methodical about going through this and making sure we have data on everything because data answers all questions.
1231
01:10:33.690 --> 01:10:34.252
Most of us.
1232
01:10:35.240 --> 01:10:38.062
me included, we just feel our way through this.
1233
01:10:38.082 --> 01:10:39.564
Like, I think we should do this.
1234
01:10:39.644 --> 01:10:45.228
I think I, the client doesn't like this, but really we heard four clients complain about something and we've got 2000.
1235
01:10:45.288 --> 01:10:46.569
Like, was it real?
1236
01:10:46.710 --> 01:10:48.151
Like we have all these feelings.
1237
01:10:48.751 --> 01:10:52.414
A team member doesn't want to be troubled by their job being complicated.
1238
01:10:52.494 --> 01:10:55.537
So they say, everybody hates this thing, but it's like,
1239
01:10:57.377 --> 01:10:58.878
It's again, like nobody cares.
1240
01:10:58.938 --> 01:11:05.121
It's just they care or they are tired of dealing with a few clients once a month that complain about something.
1241
01:11:05.141 --> 01:11:06.482
It's not really even a problem in the business.
1242
01:11:06.722 --> 01:11:07.603
I hope I'm making sense.
1243
01:11:07.623 --> 01:11:08.844
Like I'm just trying to make the point.
1244
01:11:08.864 --> 01:11:10.304
There's all this noise.
1245
01:11:11.996 --> 01:11:15.621
And the data tells you if it's noise or if it's signal, as they say.
1246
01:11:16.162 --> 01:11:18.204
Signal is like, should we take action or not take action?
1247
01:11:18.224 --> 01:11:19.406
The data answers the question.
1248
01:11:19.426 --> 01:11:23.291
So a sophisticated buyer, a sophisticated investor, doesn't matter.
1249
01:11:23.791 --> 01:11:29.539
They will install these data systems to understand what you should and shouldn't be doing.
1250
01:11:29.719 --> 01:11:32.142
So it's a lot of stuff I talk about in 5 for 50.
1251
01:11:32.182 --> 01:11:33.603
It's all the same stuff we talk about here.
1252
01:11:33.623 --> 01:11:36.447
We're going to stack, we're going to think about things.
1253
01:11:36.587 --> 01:11:40.932
We're going to stack rate things, stack rate things and think about what moves the needle the most.
1254
01:11:40.952 --> 01:11:42.894
We need to drive more leads.
1255
01:11:43.455 --> 01:11:44.796
We need to convert more leads.
1256
01:11:44.896 --> 01:11:46.618
We need to sell more profitable work.
1257
01:11:46.658 --> 01:11:47.439
We need to get paid 50%.
1258
01:11:47.459 --> 01:11:48.960
faster to fund the whole thing.
1259
01:11:49.420 --> 01:11:51.322
We need more people to do more work.
1260
01:11:51.582 --> 01:11:57.647
You kind of just go through the list of the biggest levers in the business that will move the needle the most.
1261
01:11:58.007 --> 01:12:01.490
And there's going to be literally 700 things to work on.
1262
01:12:01.930 --> 01:12:03.031
And you can only do five.
1263
01:12:03.891 --> 01:12:06.013
And you can only do three in the next two months.
1264
01:12:06.473 --> 01:12:08.995
And they just, they will go through all that stuff.
1265
01:12:09.055 --> 01:12:12.578
Much of what I've talked about, they'll stack rank it and they'll just start working down the list.
1266
01:12:12.898 --> 01:12:15.140
And it will take years to execute on this.
1267
01:12:15.160 --> 01:12:16.301
But that's how an investor thinks.
1268
01:12:16.693 --> 01:12:23.899
Yeah, I think one of the things too is whether you've got private equity or an investor coming to your business doesn't have the ties emotionally.
1269
01:12:23.919 --> 01:12:30.385
A lot of times they'll even, private equity will lean on consultants, whether it's internally or like the higher industry.
1270
01:12:31.145 --> 01:12:33.047
People have offered like, hey, we're buying this company out.
1271
01:12:33.347 --> 01:12:35.449
We'd like to hire you just to come look at this thing, right?
1272
01:12:35.909 --> 01:12:37.291
And so I think...
1273
01:12:37.891 --> 01:12:46.464
There's elements of that you can get though before you need to go sell your business or even you don't ever want to sell your business, whether it be getting other eyes on the business, someone else to look at the P&L.
1274
01:12:46.544 --> 01:12:52.392
It's probably the biggest thing I've ever taken away from private equity is like when they are looking, I've just was like, what do you see?
1275
01:12:52.913 --> 01:12:56.636
Like obviously I want to know what's a problem here because I don't see it.
1276
01:12:57.116 --> 01:12:58.797
And so that's been very beneficial.
1277
01:12:58.837 --> 01:13:05.202
And I think if we can even create communities or if you have a competitor or someone that you can meet at a conference, be like, Hey, look at my numbers.
1278
01:13:05.222 --> 01:13:17.110
Like, here's the, what do you see without all this emotion and 20 years of knowing everyone inside the company and Miss Sally down the street and all my customers, what do you see as the constraint and identifying that?
1279
01:13:17.130 --> 01:13:19.632
Cause most of the time we just kind of keep, I feel like.
1280
01:13:20.483 --> 01:13:24.726
especially if you're not trying to sell, if you're not trying to grow massively, it's, you're not really trying to identify a constraint.
1281
01:13:24.746 --> 01:13:30.649
You're just solving the next problem that's in front of your face, instead of like, what's the constraint as to why this problem keeps existing?
1282
01:13:31.029 --> 01:13:33.971
And we never question what's the root cause of things.
1283
01:13:34.371 --> 01:13:40.275
And I think the biggest, when I was looking at this question, it was like, you go from solving problems to like creating systems.
1284
01:13:40.955 --> 01:13:43.057
And really trying to solve the root of the problem.
1285
01:13:43.077 --> 01:13:45.278
Instead of fighting the fire, I'm building hydrants.
1286
01:13:45.539 --> 01:13:51.203
Like, how do I prevent this fire from happening again versus just on this cycle of like fixed fire, fixed fire, fixed fire.
1287
01:13:51.223 --> 01:14:02.651
And we just kind of like fall into this treadmill of doing that versus stepping back, assessing why this is happening, and then creating systems to ensure it doesn't happen again when it comes to like problems inside the business.
1288
01:14:02.851 --> 01:14:03.051
Yep.
1289
01:14:04.072 --> 01:14:04.492
I 100% agree.
1290
01:14:04.512 --> 01:14:04.633
Yeah.
1291
01:14:06.735 --> 01:14:09.816
All right, we will move on to the fourth part of the docket today.
1292
01:14:09.836 --> 01:14:12.897
I wanna talk about data and knowing your numbers.
1293
01:14:12.977 --> 01:14:18.399
I know this was a topic that I have heard you talk a lot about when it comes to building out the marketing calendar.
1294
01:14:19.019 --> 01:14:28.963
And for those that have heard you talk about it over the past few months, I think the thing that I always think about as you're talking about is like, this all has been informed by data.
1295
01:14:29.463 --> 01:14:33.965
And without that information, without that data collection, without that reporting, without that dashboard,
1296
01:14:34.963 --> 01:14:38.365
there is a level of you are shooting in the dark.
1297
01:14:38.866 --> 01:14:47.331
And I think whether it be attribution or elements of what strategy you're using, there is certain levels of gut instinct and data can't tell you everything to do in your business.
1298
01:14:47.691 --> 01:14:56.477
But it certainly gives you direct, are you directionally correct if you're offering this service at this time of month to this customer, but without the data, you really can't
1299
01:14:57.645 --> 01:14:58.746
make an informed decision.
1300
01:14:59.366 --> 01:15:04.430
And so I kind of on the docket today, I wanted to break it down to three different categories, three different sizes of business.
1301
01:15:04.851 --> 01:15:12.737
So a business that has $500,000 in annual revenue, a business that has $2 million in annual revenue, and then a business that has $10 million in annual revenue.
1302
01:15:13.217 --> 01:15:20.963
And I wanted to talk about when someone says build systems or know your data, know your numbers for those sizes of businesses,
1303
01:15:21.864 --> 01:15:38.860
What specifically, tangibly, should they be trying to build or trying to get from software or what dashboard should they be building at those different sizes of business to make sure that they can actually optimize their business and use more of this investor mindset to be able to make good decisions?
1304
01:15:39.181 --> 01:15:39.381
Yeah.
1305
01:15:40.662 --> 01:15:42.284
So let's talk through it.
1306
01:15:43.583 --> 01:15:48.205
at a high level first, and then we can get a little more granular in terms of the sizing.
1307
01:15:50.146 --> 01:15:52.787
You touched on something, and I think it's an important point.
1308
01:15:54.567 --> 01:15:59.529
Most people don't really have that much data in their business, so they're not really making decisions based on data.
1309
01:16:00.309 --> 01:16:00.950
And so...
1310
01:16:02.223 --> 01:16:06.548
I have just come to believe that the data is imperative because it guides decisions.
1311
01:16:06.608 --> 01:16:10.272
I've always liked that statement that accounting is the math of business.
1312
01:16:11.493 --> 01:16:17.479
Accounting, we all believe we need accounting so we can do our taxes and generally understand how much money we're making.
1313
01:16:18.160 --> 01:16:19.521
And then there's, that's data.
1314
01:16:20.061 --> 01:16:21.803
And then there's other levels of data.
1315
01:16:22.403 --> 01:16:30.309
And when I talk about how important data is and how it tells you what to do, what you touched on, Mike, was there is this other side.
1316
01:16:30.509 --> 01:16:32.270
It's actually not all about data.
1317
01:16:32.810 --> 01:16:43.418
The problem is that when we're only making decisions on data, or when we're not making decisions on data, we are absolutely going to lose to a company that is, right?
1318
01:16:43.778 --> 01:16:44.098
Period.
1319
01:16:44.739 --> 01:16:46.260
But there's a finesse in business.
1320
01:16:46.280 --> 01:16:47.801
There's a creative element in business.
1321
01:16:47.861 --> 01:16:54.746
There's that element where there is a gut instinct and a gut feeling and there are bets that are made and there are tests that are run.
1322
01:16:55.366 --> 01:17:00.150
And so if you're just 100% data driven, I think it's a different side of the problem.
1323
01:17:00.952 --> 01:17:05.275
where you never take any risks, you don't try anything, and the data usually tells you not to do anything.
1324
01:17:06.096 --> 01:17:08.418
Or you destroyed the culture because you just look at the numbers.
1325
01:17:08.438 --> 01:17:13.582
Yeah, which can happen in private equity because the whole company is being ran on numbers to hit an outcome.
1326
01:17:14.162 --> 01:17:17.344
And so it's like, how can we get 1% more profit?
1327
01:17:17.745 --> 01:17:19.226
That's what kills people.
1328
01:17:19.646 --> 01:17:23.549
It's not improving the company by 5% or 7% profit-wise.
1329
01:17:24.049 --> 01:17:25.911
It's the getting the last percent.
1330
01:17:26.331 --> 01:17:30.833
out of the business that just destroys the culture inside businesses, in my opinion.
1331
01:17:30.853 --> 01:17:31.814
That's one way I look at it.
1332
01:17:31.894 --> 01:17:34.936
I'm not optimizing for the last couple points of profit.
1333
01:17:35.456 --> 01:17:36.276
That's how I think about it.
1334
01:17:36.356 --> 01:17:42.419
I'm optimizing my business to have strong profits, but I'm not going to burn the business down for two more points of profit.
1335
01:17:42.920 --> 01:17:47.902
That's another way to say how I see private equity in the way I choose to live differently.
1336
01:17:48.483 --> 01:17:48.803
So...
1337
01:17:50.089 --> 01:18:03.994
And my point here is simply that it's a combination of data and a combination of gut feeling and being highly connected to your client and really understanding what they're asking for and understanding their pain and getting in the mind of the buyer.
1338
01:18:04.054 --> 01:18:13.517
And sometimes making decisions are like, you know, the data doesn't show us that this is the right thing to do, but I really based on doing this for a bunch of years and knowing these clients, I think this is what the market wants.
1339
01:18:13.997 --> 01:18:15.378
And then data might give us a...
1340
01:18:15.998 --> 01:18:17.299
like feedback on if it's working.
1341
01:18:17.319 --> 01:18:21.603
So as an example, we launched a new service offering, gut feeling it's going to work.
1342
01:18:22.603 --> 01:18:24.965
And the data shows us, are people buying or not buying?
1343
01:18:25.566 --> 01:18:27.227
It doesn't mean you kill it if they're not buying.
1344
01:18:27.267 --> 01:18:28.588
It means, oh, it's not working.
1345
01:18:28.628 --> 01:18:30.310
I need to tweak it, test different ways.
1346
01:18:30.810 --> 01:18:34.633
And if like after some period of time, the data continues to say this is not working, then you kill it.
1347
01:18:34.893 --> 01:18:36.495
It's that kind of a use of data.
1348
01:18:37.475 --> 01:18:38.556
That's one way to think about it.
1349
01:18:38.576 --> 01:18:38.816
All right.
1350
01:18:38.877 --> 01:18:44.781
So to be really simple about data, I think it's easy to rattle off all the things you should track.
1351
01:18:44.821 --> 01:18:45.062
And I...
1352
01:18:46.070 --> 01:18:47.911
I just don't think that's the right way to think about it.
1353
01:18:48.571 --> 01:18:53.294
So to be really simple, I think about tracking data in three buckets.
1354
01:18:54.355 --> 01:18:57.697
Okay, so one bucket is what makes a business go?
1355
01:18:58.137 --> 01:18:59.478
We need to generate work.
1356
01:19:00.118 --> 01:19:01.659
That's the revenue we need to sell.
1357
01:19:02.079 --> 01:19:03.220
So we got to generate the work.
1358
01:19:03.360 --> 01:19:04.200
That's bucket one.
1359
01:19:04.761 --> 01:19:07.843
And then the second bucket is we need to actually do the work.
1360
01:19:09.383 --> 01:19:10.524
That's like bucket two.
1361
01:19:10.884 --> 01:19:13.126
And then bucket three is we actually need to make money
1362
01:19:13.866 --> 01:19:14.466
doing the work.
1363
01:19:15.146 --> 01:19:20.268
And I know there are other buckets, but if you think about this at a really high level, this is what makes a business work.
1364
01:19:20.308 --> 01:19:25.950
If we generate work and we do work, but we make no money and we're losing money and we're running up our debts, bye-bye.
1365
01:19:26.530 --> 01:19:31.432
If we generate work and we don't have any people to do the work, the business is going to plateau or eventually go away.
1366
01:19:31.912 --> 01:19:35.493
If you have lots of people do the work, but you can't sell the work, it's the same thing.
1367
01:19:35.533 --> 01:19:37.954
These are the three big things I think about it.
1368
01:19:38.334 --> 01:19:40.255
So for the majority of owners,
1369
01:19:41.075 --> 01:19:48.620
and leaders, if you just think about your business in this way, like let's just get the basic data for these three buckets.
1370
01:19:49.081 --> 01:19:57.227
And if you're doing accounting, which my gosh, if you're not highly concerned for you, then you're going to kind of satisfy the, the,
1371
01:19:57.947 --> 01:19:59.889
the profit bucket to a large degree.
1372
01:20:00.049 --> 01:20:09.516
This is where a CPA can help you, even if they don't have a lot of experience in your industry and they can't really talk to you about what your COG should be or what your gross margins should be.
1373
01:20:09.836 --> 01:20:13.119
You could at least kind of, they can help you with this profit side.
1374
01:20:13.379 --> 01:20:13.619
So...
1375
01:20:14.380 --> 01:20:16.141
That generally is handled with accounting.
1376
01:20:16.161 --> 01:20:21.284
So let's talk about, and some of the profit is handled under do work.
1377
01:20:21.304 --> 01:20:25.327
So let's kind of talk about generating work and doing the work, okay?
1378
01:20:25.647 --> 01:20:38.135
All right, so when you get into those areas from the generating the work, which is the revenue, that's selling, the bare necessities in my mind, it might be great if you chime in on some of this because you think about this stuff too.
1379
01:20:38.535 --> 01:20:41.757
Like, just like, I don't want to go too far here because it's overwhelming.
1380
01:20:42.378 --> 01:20:43.639
How many leads are we generating?
1381
01:20:44.563 --> 01:20:46.764
How many leads are we generating by service?
1382
01:20:47.385 --> 01:20:51.207
How did people, when we got the lead, how did they find us?
1383
01:20:51.567 --> 01:20:52.628
Did they see our truck?
1384
01:20:52.668 --> 01:20:54.229
Did they click on a Google ad?
1385
01:20:54.769 --> 01:20:56.350
Did they click on a Facebook ad?
1386
01:20:56.370 --> 01:20:57.491
Did they get a postcard?
1387
01:20:57.831 --> 01:20:58.131
How?
1388
01:20:58.391 --> 01:20:59.052
How did they find it?
1389
01:20:59.072 --> 01:20:59.852
Was it LSA?
1390
01:20:59.872 --> 01:21:03.655
Okay, so we just want to, it's like very elementary right there.
1391
01:21:03.955 --> 01:21:09.798
And to go just a little deeper on that one, like the most elementary version of that one is you just ask.
1392
01:21:10.159 --> 01:21:10.559
Right.
1393
01:21:11.107 --> 01:21:13.028
You ask them how they found you.
1394
01:21:13.088 --> 01:21:15.049
It'll be right most of the time.
1395
01:21:16.950 --> 01:21:18.911
Most of the time they'll say, I found you on Google.
1396
01:21:18.971 --> 01:21:20.612
It'll be kind of right.
1397
01:21:20.692 --> 01:21:22.834
It's not perfect, but it's something.
1398
01:21:23.214 --> 01:21:24.054
Oh, it's a referral.
1399
01:21:24.274 --> 01:21:25.215
Oh, they saw the truck.
1400
01:21:25.515 --> 01:21:26.976
It's directionally accurate.
1401
01:21:26.996 --> 01:21:28.017
It gives you a feel.
1402
01:21:28.037 --> 01:21:28.137
Yeah.
1403
01:21:29.244 --> 01:21:33.869
Okay, so that's the leads, the how do you find us?
1404
01:21:34.830 --> 01:21:37.613
And then the next one I think about is conversion.
1405
01:21:37.974 --> 01:21:40.376
Okay, we've got X amount of leads coming in.
1406
01:21:40.697 --> 01:21:42.639
What percentage of those leads are we tracking?
1407
01:21:43.039 --> 01:21:44.080
I'm sorry, are we converting?
1408
01:21:44.180 --> 01:21:46.323
Meaning they're becoming a client.
1409
01:21:46.703 --> 01:21:47.944
Real basic stuff here.
1410
01:21:48.765 --> 01:21:55.049
And then of our clients, what number of clients are leaving and when are they leaving?
1411
01:21:55.749 --> 01:21:58.631
So this is where I'm just going to go a little further here.
1412
01:21:58.651 --> 01:22:05.074
I don't want to get too far in the weeds, but most of what I'm giving you right now, I'm sure HomeWorks does all this.
1413
01:22:05.614 --> 01:22:07.576
And a lot of software packages will do this.
1414
01:22:07.876 --> 01:22:09.597
And that's the beauty of the basics.
1415
01:22:10.317 --> 01:22:17.770
If a software package can't do this stuff I'm talking about here, it's not the right software product because these things all need to come from your software product.
1416
01:22:18.230 --> 01:22:21.716
So lead comes in, it needs to be date and time stamped.
1417
01:22:22.057 --> 01:22:23.519
We need to know how they found us.
1418
01:22:25.123 --> 01:22:26.124
An estimate is sent.
1419
01:22:26.645 --> 01:22:28.306
We need to know if it converted.
1420
01:22:30.348 --> 01:22:33.251
The lead converts to a, the estimate is accepted.
1421
01:22:33.591 --> 01:22:34.872
The lead becomes a client.
1422
01:22:34.892 --> 01:22:36.254
We need to know when that happened.
1423
01:22:37.435 --> 01:22:39.396
And you can kind of, it's like the life cycle.
1424
01:22:39.697 --> 01:22:41.739
Then eventually that client canceled.
1425
01:22:41.759 --> 01:22:45.002
We need to know when they canceled and we need to know why they canceled.
1426
01:22:45.142 --> 01:22:45.322
So,
1427
01:22:45.662 --> 01:22:48.043
All that can be tracked in the majority of systems.
1428
01:22:48.544 --> 01:22:57.408
And when you have that data and you also know what service they bought, most of these systems can then tell you you're getting this many leads for this service.
1429
01:22:58.748 --> 01:23:06.772
You get a conversion percentage of leads of 52% for mowing and 48% for fertilization weed control.
1430
01:23:06.932 --> 01:23:07.893
You get all that data.
1431
01:23:07.913 --> 01:23:09.614
So this is the basics.
1432
01:23:10.414 --> 01:23:13.796
And then where it gets a little more sophisticated on this revenue side is,
1433
01:23:14.416 --> 01:23:17.598
And there's so many more metrics here, but I just want to do the basics first.
1434
01:23:18.098 --> 01:23:27.043
The one that as early as you can in the business is you want to think about that concept that you hear Mike and I say all the time, which is CAC, client acquisition costs.
1435
01:23:27.063 --> 01:23:28.905
Like how much did I spend to get them?
1436
01:23:29.445 --> 01:23:42.312
And I tend to think, and again, Mike, chime in whenever you feel appropriate, but I tend to think if we can just kind of understand what we're acquiring a lead at initially, like, oh, it's costing me 10 bucks to get a lead versus 100 bucks to get a lead versus 200.
1437
01:23:42.332 --> 01:23:42.513
That's...
1438
01:23:43.353 --> 01:23:45.217
For a really small company, that's something.
1439
01:23:46.399 --> 01:23:54.255
Eventually, you want to get a little bit more sophisticated where you want to understand the total cost of acquiring the lead and converting the lead into a client.
1440
01:23:55.065 --> 01:23:58.906
And that gets into, depending on how you calculate CAC, this is where it gets more complicated.
1441
01:23:58.926 --> 01:24:02.907
Most software packages can't actually do this because they don't have your accounting data.
1442
01:24:03.447 --> 01:24:11.369
It needs to know the sales software involved, the sales people cost involved, the marketing expense involved.
1443
01:24:12.029 --> 01:24:13.910
That's where CAC gets more complicated.
1444
01:24:13.930 --> 01:24:17.050
So I could say you're $300,000 in revenue.
1445
01:24:17.070 --> 01:24:17.791
You should know your CAC.
1446
01:24:17.871 --> 01:24:19.451
It's like you're probably not going to know your CAC.
1447
01:24:20.212 --> 01:24:27.759
So as you start passing the, as you get closer to that million dollar number, I really would want you to be dialing in your CAC.
1448
01:24:28.080 --> 01:24:33.365
Earlier is better, but could you at least know what it's costing to acquire leads from different channels?
1449
01:24:33.765 --> 01:24:38.690
Because then you can kind of back and say, hey, I'm getting leads for $10 on Facebook.
1450
01:24:38.710 --> 01:24:40.051
I think, Mike, you've said you do that.
1451
01:24:40.872 --> 01:24:43.134
And I know that I convert 40% of that.
1452
01:24:43.154 --> 01:24:44.374
We'll do easy math for me.
1453
01:24:44.775 --> 01:24:45.795
50% of them.
1454
01:24:46.036 --> 01:24:48.077
So that means it's costing me 20 bucks to get a client.
1455
01:24:48.297 --> 01:24:49.998
It's not perfect, but it gives me a general idea.
1456
01:24:50.339 --> 01:25:00.085
I can at least compare that to whenever I get a lead through a postcard, it's costing me $100 to get a lead.
1457
01:25:00.625 --> 01:25:03.007
And I'm converting them at a whatever percentage.
1458
01:25:03.047 --> 01:25:07.630
And so it's generally costing me $300 to convert them to a client.
1459
01:25:07.650 --> 01:25:08.591
I can now do the math.
1460
01:25:08.611 --> 01:25:09.151
Like, oh, wow.
1461
01:25:09.411 --> 01:25:09.932
Facebook.
1462
01:25:10.472 --> 01:25:13.193
way cheaper than postcards.
1463
01:25:13.213 --> 01:25:13.954
I don't have much money.
1464
01:25:13.974 --> 01:25:15.315
We'll do more Facebook for now.
1465
01:25:15.935 --> 01:25:17.916
It's that kind of, at least you have that.
1466
01:25:18.656 --> 01:25:20.557
So I'm going to pause on the revenue side.
1467
01:25:20.597 --> 01:25:21.578
What would you add?
1468
01:25:22.098 --> 01:25:25.720
Cause there's a lot of, I can go another level here, but what would you add to this?
1469
01:25:27.101 --> 01:25:30.542
Yeah, I think one thing you, you kind of mentioned too, there is the CAC side.
1470
01:25:30.802 --> 01:25:35.705
Cause that's when I think about what number do I need to know for generating work from a simplicity perspective?
1471
01:25:35.825 --> 01:25:38.446
I need to know how much do I need to spend to get one new customer?
1472
01:25:38.506 --> 01:25:39.347
Cause if I don't know that,
1473
01:25:40.342 --> 01:25:44.824
you know, where they came from is important, but if I don't have any customers, I have nothing to track.
1474
01:25:45.284 --> 01:25:48.726
So I've always just tried to bend like, okay, just my CAC.
1475
01:25:48.846 --> 01:25:58.050
But one thing that you brought up really briefly that I wanted to highlight is the type of service being requested and the way that you do your sales motion
1476
01:25:59.010 --> 01:26:04.155
dramatically impacts the actual cost to the business to get that customer onboarded.
1477
01:26:04.636 --> 01:26:15.848
Meaning if I can sell that job over the phone, it might take an extra, let's just call it five to $10 for someone to answer the phone, give the pricing, follow up with an email, get them on the schedule, get their card information.
1478
01:26:16.428 --> 01:26:31.334
If I have to send an estimator in person and it takes 30 minutes to talk to the clients, a bunch of drive time, and then I close maybe 30% of them, I've now spent three or four hours of a very valuable person's time, the expense of a vehicle getting rolled out there.
1479
01:26:32.395 --> 01:26:34.315
That's usually not baked into CAC.
1480
01:26:34.836 --> 01:26:37.617
And I have seen that not be taken into consideration.
1481
01:26:37.637 --> 01:26:39.497
And it's very hard to track, to your point.
1482
01:26:39.517 --> 01:26:42.559
It's very, very difficult to start figuring out that real number.
1483
01:26:43.399 --> 01:26:51.441
But I have seen people take a lower cost lead or type of service that allows them to get a bunch of leads, but they don't take into account that.
1484
01:26:51.601 --> 01:27:08.764
They have a full-time estimator rolling around all day long, going after five to 10 leads a day for this service that they have not figured out the fact that your cost on ads might be $50, but you're spending an extra 70, 80, $100 to get that lead actually to the customer.
1485
01:27:09.244 --> 01:27:16.008
And so I like made up this term and it's like not just customer acquisition costs, but like cost to get the lead to the customer.
1486
01:27:16.588 --> 01:27:22.932
Because now the type of service being requested plays a lot into what sales motion I use.
1487
01:27:22.972 --> 01:27:37.080
And that sales motion has a very different cost based upon whether they go to my site and click a button and sign up and literally there's no admin or am I paying a very expensive salesperson to go have an in-person meeting and I'm rolling trucks all day long.
1488
01:27:38.051 --> 01:27:44.233
So if I hear you right, there's different CAC numbers by service is another way to say it.
1489
01:27:44.873 --> 01:27:45.233
Totally.
1490
01:27:45.273 --> 01:27:46.533
Very hard to determine.
1491
01:27:46.873 --> 01:27:49.334
I think a lot of times when people think CAC, they think ad spend.
1492
01:27:49.494 --> 01:27:49.934
Yeah, yeah.
1493
01:27:50.134 --> 01:27:51.314
And it's the easiest to track.
1494
01:27:51.334 --> 01:27:52.294
You can track a lead.
1495
01:27:52.315 --> 01:27:53.235
You can track the conversion.
1496
01:27:53.255 --> 01:27:53.795
You hit a pixel.
1497
01:27:53.855 --> 01:27:54.415
You hit a code.
1498
01:27:54.735 --> 01:27:55.155
And we're good.
1499
01:27:55.555 --> 01:27:59.276
But they don't take into account the sales part of that equation.
1500
01:27:59.516 --> 01:28:01.837
And that just gets lumped in with overhead wages.
1501
01:28:01.857 --> 01:28:02.377
Yeah.
1502
01:28:02.537 --> 01:28:05.938
But it's like those overhead wages exist because you offer certain services.
1503
01:28:06.338 --> 01:28:12.901
Back to what we talked about last week is like, well, I had more services, but be careful because now all of a sudden your CAC is no longer just the CAC.
1504
01:28:13.061 --> 01:28:17.883
It's the fact that you're rolling an estimator to every single lead and only closing one out of three of them.
1505
01:28:18.163 --> 01:28:22.324
And you're spending four hours per accepted estimate on the salesperson.
1506
01:28:22.605 --> 01:28:22.845
Yeah.
1507
01:28:23.025 --> 01:28:28.167
When I'm trying to be super precise, sometimes I'll say loaded CAC, but I don't know if that means anything to people because-
1508
01:28:29.207 --> 01:28:33.970
Over the years, I've definitely concluded, which is what you just touched on, people calculate CAC differently.
1509
01:28:34.010 --> 01:28:35.570
Some will just think about it.
1510
01:28:35.630 --> 01:28:46.256
It's just the glorified expense to, it's just what it costs to acquire a lead divided by the acquisition or whatever, the percentage of, the conversion percentage.
1511
01:28:46.556 --> 01:28:47.336
Like that's all.
1512
01:28:47.436 --> 01:28:49.497
So it's just the media spend, as you said.
1513
01:28:50.298 --> 01:28:54.020
And so that's one way, but I think about, and I actually track at CityTurf both.
1514
01:28:54.842 --> 01:29:01.184
media CAC, or I don't even call it CAC, just media spend or what it equates to to acquire a client, and then fully loaded.
1515
01:29:01.445 --> 01:29:03.065
Fully loaded is the one that means the most.
1516
01:29:03.585 --> 01:29:09.568
And the nuance you gave was a really perfect example of why you want to look at fully loaded.
1517
01:29:09.968 --> 01:29:11.728
It can be very deceiving otherwise.
1518
01:29:12.289 --> 01:29:23.473
It's also the reason when you talk about things like gateway services, the thing that so many people that knock mowing and say mowing's a terrible business miss, it's the greatest gateway service that exists.
1519
01:29:23.493 --> 01:29:23.873
Right?
1520
01:29:24.193 --> 01:29:26.634
It is the easiest business to grow.
1521
01:29:27.155 --> 01:29:30.116
It's, well, I mean, who knows if it's easy.
1522
01:29:30.156 --> 01:29:34.198
It's one of the easiest businesses to grow because so many people will buy that service.
1523
01:29:34.558 --> 01:29:36.539
It's one of the cheapest services to sell.
1524
01:29:36.999 --> 01:29:38.860
In a lot of markets, you don't have to roll the truck.
1525
01:29:39.340 --> 01:29:41.862
So you get the client with that service.
1526
01:29:41.922 --> 01:29:42.742
It's the gateway.
1527
01:29:42.782 --> 01:29:44.303
It's the cheapest way to acquire a client.
1528
01:29:44.323 --> 01:29:48.525
And then you expand the value of the client by selling them other services, like,
1529
01:29:49.005 --> 01:29:55.547
To get a pure fertilization weed control client is way more expensive than getting a mowing client.
1530
01:29:56.207 --> 01:30:03.829
So if you can handle unlimited mowing, then you go get as many mowing clients as you can, and then you sell them fertilization weed control.
1531
01:30:04.249 --> 01:30:05.950
That's how you get your cack down.
1532
01:30:06.230 --> 01:30:08.630
So that's just another real-world example.
1533
01:30:09.011 --> 01:30:13.872
So that's a really, really valuable depth that you gave there.
1534
01:30:14.651 --> 01:30:21.918
I talked to someone the other day and we were talking about cutting out a service and they were talking about how their CAC numbers were so much better for the service.
1535
01:30:22.379 --> 01:30:23.920
And I said, well, let's be clear.
1536
01:30:23.960 --> 01:30:26.763
You have a full-time salesperson for this one service doing estimates.
1537
01:30:27.104 --> 01:30:29.947
I said, you're paying them $80,000 a year after commissions.
1538
01:30:30.307 --> 01:30:33.951
And they did about a thousand estimates last year and half of them got accepted.
1539
01:30:34.471 --> 01:30:35.772
So when you do the math on that, it's $160.
1540
01:30:35.792 --> 01:30:35.893
$160.
1541
01:30:37.454 --> 01:30:41.481
extra cost per accepted estimate for that person to exist.
1542
01:30:42.082 --> 01:30:43.505
And all of a sudden, a $250 CAC...
1543
01:30:45.779 --> 01:30:48.721
What used to be 90 doesn't make any sense on paper.
1544
01:30:49.401 --> 01:31:13.474
And so it's one of those things where it's hard to calculate for some people because if you don't have a big enough business for someone to purely just be doing the sales process or purely doing admin, for example, if you're juggling sales, you're kind of out in the field, you're doing operations, you're answering the phone, that's difficult to track and actually have data around what is actually the fully loaded CAC as an operator that does 500,000 in inner revenue and kind of juggles everything.
1545
01:31:15.275 --> 01:31:17.237
And you're not going to get this out of your software system.
1546
01:31:17.677 --> 01:31:19.838
I can't give it to you because it doesn't have all the data.
1547
01:31:20.318 --> 01:31:26.162
So this is an example of where, to be realistic, you're not really going to probably have this when you're a little bitty company.
1548
01:31:26.182 --> 01:31:34.527
But as you get bigger, and bigger doesn't really always define – you can't say, oh, you should do this at a million dollars or you should do it at two million.
1549
01:31:34.567 --> 01:31:36.949
It's more when the owner is ready.
1550
01:31:37.089 --> 01:31:38.209
And it's more when –
1551
01:31:39.170 --> 01:31:41.972
Like you should be ready as soon as you can, but how fast are you growing?
1552
01:31:41.992 --> 01:31:45.053
The faster you're growing the business, the faster you need the data.
1553
01:31:45.414 --> 01:31:48.035
The more complicated your business is, the faster you need the data.
1554
01:31:48.695 --> 01:31:54.819
If you're not really spending any money on marketing and you're scrolling through referrals, probably don't need this data because you're not doing anything with the data.
1555
01:31:54.999 --> 01:31:55.899
It's that kind of a thing.
1556
01:31:55.919 --> 01:32:01.623
So when you need the data and when you should prioritize, it really varies by business.
1557
01:32:02.723 --> 01:32:07.665
but it's generally a number that a little company isn't going to have because they can't get out of their software.
1558
01:32:08.186 --> 01:32:15.609
They can get parts of the number out of their software, maybe their operational software system, and then they get parts of the number out of their accounting system.
1559
01:32:15.629 --> 01:32:19.411
This is where AI, I am the most excited about for smaller operators.
1560
01:32:19.451 --> 01:32:19.811
It's incredible.
1561
01:32:20.131 --> 01:32:24.433
It's being able to take those two things and just be able to have where it's like, hey –
1562
01:32:25.374 --> 01:32:33.325
My agent is talking to my operational software, but also pulling it from QuickBooks to know my cogs, know my efficiency, know what my labor expense is.
1563
01:32:33.345 --> 01:32:33.786
It...
1564
01:32:36.293 --> 01:32:42.255
Man, I'm super excited because everyone, when we've been doing this MCP stuff, a lot of it's been the larger operators that feel more comfortable.
1565
01:32:42.575 --> 01:33:01.440
And my objective is this is such an unlock for what used to never be available to smaller operators, which is the ability to connect to, let's just say QuickBooks, and pull that data in and get real... For most businesses, until they're over a few million dollars, do not think about fully loaded CAC, overhead, your expense ratios of labor,
1566
01:33:02.080 --> 01:33:06.022
And so, and even like items, like the services and which ones are bringing the most.
1567
01:33:06.562 --> 01:33:09.044
So I'm super excited, like just seeing it.
1568
01:33:09.344 --> 01:33:14.026
I've seen it just a few times and I get so excited about- It is a game changer.
1569
01:33:14.767 --> 01:33:19.049
People that are new in business, just it's like an old person talking here.
1570
01:33:19.269 --> 01:33:21.370
You just don't realize how it used to be.
1571
01:33:21.390 --> 01:33:22.651
I'll give you an example.
1572
01:33:22.691 --> 01:33:25.913
Back in 2010, Service Autopilot just getting started.
1573
01:33:27.385 --> 01:33:34.511
For years in that business, this whole idea of talking about your data, people were not tracking their data.
1574
01:33:34.971 --> 01:33:38.174
The way we talk about this now was not being talked about.
1575
01:33:39.275 --> 01:33:44.639
The average guy running a million-dollar business or $2 million business was barely looking at numbers.
1576
01:33:45.540 --> 01:33:46.461
And why?
1577
01:33:46.661 --> 01:33:49.902
Well, because they didn't have software to track the numbers.
1578
01:33:50.863 --> 01:33:56.966
When service autopilot got started, there was a bunch of stuff we did, like average man hour rate, target rate.
1579
01:33:57.006 --> 01:33:58.287
Oh, there's all these things we put in there.
1580
01:33:59.682 --> 01:34:01.563
Almost hardly anybody had that stuff.
1581
01:34:01.783 --> 01:34:04.503
A few did, but hardly anybody had that data.
1582
01:34:04.563 --> 01:34:06.544
So nobody could get the data.
1583
01:34:07.064 --> 01:34:09.265
And so these companies weren't looking at the data.
1584
01:34:09.745 --> 01:34:13.526
Only the most sophisticated and biggest companies were tracking all this data manually.
1585
01:34:13.846 --> 01:34:21.328
So to go from that period of time, only 16 years ago, to where we were, call it,
1586
01:34:22.008 --> 01:34:29.893
three years ago where more and more general software systems could give you some of this data to now with AI is just unbelievable.
1587
01:34:30.334 --> 01:34:32.915
And it is a wonderful time to be building a business.
1588
01:34:32.955 --> 01:34:41.881
So now the key to this is that for another thing I've observed with so many companies is they're really slow about keeping their accounting system updates.
1589
01:34:41.901 --> 01:34:44.423
So let's say you're using QuickBooks online, like so slow.
1590
01:34:45.023 --> 01:34:50.407
They're just so slow about doing their books and they, they, they pay their accountant once a year to check things like,
1591
01:34:50.887 --> 01:34:52.188
Man, I don't care what size you are.
1592
01:34:52.208 --> 01:34:57.430
Pay your accountant more to do this faster because you need that data to go into AI.
1593
01:34:58.070 --> 01:35:07.435
If you could just download these reports, even if you don't have some sophisticated thing that's connecting them all, all you gotta do is export some reports once a month, feed them into your AI system.
1594
01:35:08.135 --> 01:35:08.836
It's easy.
1595
01:35:08.876 --> 01:35:09.256
If I...
1596
01:35:10.578 --> 01:35:13.479
If you're a software system, like Service Autopilot, I still use Service Autopilot.
1597
01:35:13.719 --> 01:35:17.340
Service Autopilot doesn't have a way for me to get a lot of...
1598
01:35:17.420 --> 01:35:19.800
It doesn't connect to an AI model.
1599
01:35:19.920 --> 01:35:20.640
So I just export.
1600
01:35:20.680 --> 01:35:21.921
I just dump the dispatch board.
1601
01:35:22.341 --> 01:35:26.622
Just dump it and put that in an AI model and you learn all kinds of crazy things.
1602
01:35:26.662 --> 01:35:35.203
So my point here is that now you have everything you need, but you've got to keep your data updated fast.
1603
01:35:35.544 --> 01:35:36.964
So if you do that, then this is...
1604
01:35:38.168 --> 01:35:38.750
I'm rambling now.
1605
01:35:38.931 --> 01:35:40.095
It's so exciting.
1606
01:35:40.597 --> 01:35:41.240
So exciting.
1607
01:35:42.242 --> 01:35:43.122
Yeah, absolutely.
1608
01:35:43.442 --> 01:35:43.722
All right.
1609
01:35:44.763 --> 01:35:48.524
We talked a lot about generation of work, just selling and some of those numbers.
1610
01:35:48.984 --> 01:35:52.245
Are there any key ones around doing the work or making the money?
1611
01:35:52.885 --> 01:35:58.947
In my kind of world, I talk about sales ops and admin, do the work, or sorry, sell the work, do the work, get paid for the work.
1612
01:35:59.287 --> 01:36:01.128
So it kind of fell into those three buckets.
1613
01:36:01.208 --> 01:36:02.888
But what are some of these other numbers?
1614
01:36:02.908 --> 01:36:05.649
We talked about generating the work a lot on the sales side.
1615
01:36:06.029 --> 01:36:08.850
Any specific ones when it comes to doing the work or making the money?
1616
01:36:09.210 --> 01:36:12.493
Yeah, on the doing the work, let me come back to that one.
1617
01:36:13.514 --> 01:36:18.838
On the profit side, because I can say this in a few sentences, get paid as fast as you can.
1618
01:36:18.878 --> 01:36:23.541
I'm pretty sure if you're living in the Augusta world, like in Mike's world, like you're thinking about this already.
1619
01:36:23.902 --> 01:36:31.007
This was the big transformational thing that we did at CityTurf, which became one of the big things I talked about like crazy back in the day on Long Care Millionaires.
1620
01:36:31.348 --> 01:36:32.749
Get paid immediately.
1621
01:36:33.049 --> 01:36:34.290
That's how you finance the business.
1622
01:36:34.470 --> 01:36:35.571
That's how you grow the business.
1623
01:36:35.871 --> 01:36:39.334
That's how you get rid of bad clients really fast.
1624
01:36:39.754 --> 01:36:41.656
And so it's the key to profit.
1625
01:36:42.417 --> 01:36:49.222
It's one of the biggest lever or ways to have a more profitable business is get paid insanely fast.
1626
01:36:50.163 --> 01:36:55.767
And that's why I'm an advocate of credit cards, even though, yeah, you're giving them X percentage of your revenue.
1627
01:36:55.787 --> 01:36:56.368
It's a bummer.
1628
01:36:56.788 --> 01:36:59.550
But if there's so many other benefits, it's worth it.
1629
01:36:59.650 --> 01:37:02.952
Just price up the service 3%, cover the credit card fee.
1630
01:37:04.053 --> 01:37:05.594
That's part of the profit equation.
1631
01:37:06.575 --> 01:37:08.957
Driving down accounts receivable, part of the profit.
1632
01:37:09.617 --> 01:37:19.959
conversation, getting rid of finding out that a client's not going to pay you and only doing one or two services and then firing them, how you drive up the profit equation.
1633
01:37:20.259 --> 01:37:21.999
It's like, this is all part of profit.
1634
01:37:23.019 --> 01:37:32.341
So then moving back to the work side, when I think about work, the goal is you have to know your cogs in your gross margin.
1635
01:37:32.881 --> 01:37:33.521
You have to.
1636
01:37:34.061 --> 01:37:35.961
And I did not in the
1637
01:37:39.718 --> 01:37:46.242
So let me come back to COGS and grow some margin here in a moment and spend a bit more time on it.
1638
01:37:46.822 --> 01:37:52.165
There's some basic data that you can know more easily that will really help you.
1639
01:37:52.605 --> 01:37:59.149
So as an example for me, I always found dollars per man hour to be incredibly valuable.
1640
01:37:59.309 --> 01:38:05.513
I need to know by service, by team, by crew, by person, how much money are we making per man hour?
1641
01:38:05.533 --> 01:38:05.653
Right.
1642
01:38:06.313 --> 01:38:11.137
Because with this one, and so I've always said per man hour is ignition to ignition.
1643
01:38:11.497 --> 01:38:12.858
Truck pulls up in front of the property.
1644
01:38:12.878 --> 01:38:14.059
I don't care what service you're doing.
1645
01:38:14.339 --> 01:38:15.300
I turn off the truck.
1646
01:38:16.341 --> 01:38:17.762
I get out, do the work.
1647
01:38:17.782 --> 01:38:22.345
When I get back in the truck, I log my notes, update my app, turn on the engine to drive away.
1648
01:38:22.746 --> 01:38:24.587
That's clock in, clock out time.
1649
01:38:24.747 --> 01:38:32.333
That time divided by, or the amount of money that that job was billed at divided by that amount of time.
1650
01:38:32.353 --> 01:38:34.174
Assuming you don't have products and materials in the job.
1651
01:38:34.455 --> 01:38:35.676
That's your per man hour rate.
1652
01:38:36.718 --> 01:38:47.243
And that one number right there, if I know nothing else, and that is the number we looked at from the beginning of Service Autopilot, CityTurf.
1653
01:38:48.243 --> 01:39:03.870
It was built into Service Autopilot from minute number one, was so critical even when I got so many other things wrong because I could look and see, oh, we're making $52 an hour with Ms. Smith and we're making $38 an hour with Mr. Jones.
1654
01:39:04.630 --> 01:39:07.373
Don't have to be a rocket scientist to understand something's not right.
1655
01:39:08.394 --> 01:39:13.460
If generally I'm making 50 an hour, but on these clients I'm making 30 something or 40 an hour, I got a problem.
1656
01:39:13.500 --> 01:39:14.321
What's the problem?
1657
01:39:15.042 --> 01:39:17.865
It's a signal that says, go investigate this thing.
1658
01:39:18.345 --> 01:39:20.327
And then if you just do simple stuff like...
1659
01:39:21.246 --> 01:39:26.507
fix the underperforming accounts that are making 30 or 40 an hour, you immediately make the business better.
1660
01:39:27.407 --> 01:39:36.649
And so the per man hour had always been one of the really, really important numbers to me, which is why way back in service off high, we had this thing called target man hour.
1661
01:39:37.370 --> 01:39:41.911
And so the idea was, and you know, whatever software your system you use, it doesn't matter.
1662
01:39:41.951 --> 01:39:44.171
It's just like, this is the concept you need.
1663
01:39:44.511 --> 01:39:48.112
I've always believed, and this applies to all this metric conversation, but,
1664
01:39:48.272 --> 01:39:51.754
There's 9,000 metrics you could track, but there's a few that matter.
1665
01:39:52.734 --> 01:40:01.019
Well, there's a lot that matter, but there's a few that really matter because they're the numbers you can watch, and then they give you a signal that something's good or bad, and you can take action.
1666
01:40:01.059 --> 01:40:07.262
So I've always felt dollars per man hour is one of the single most important numbers for a labor business.
1667
01:40:07.823 --> 01:40:10.764
And target per man hour allows me to have a signal.
1668
01:40:11.265 --> 01:40:15.947
So as an example, if I have a target man hour of $65 an hour for mowing,
1669
01:40:18.970 --> 01:40:24.011
And I have, my teams are logging, and this applies to every service.
1670
01:40:24.131 --> 01:40:26.091
I'm just using mowing as an example because it's simple.
1671
01:40:26.751 --> 01:40:28.112
My teams are clocking in and out.
1672
01:40:28.432 --> 01:40:30.452
That allows me to know per man hour rate.
1673
01:40:30.972 --> 01:40:37.914
And if my man hour rate on a job is below 65, the signal is, in my example, it's red.
1674
01:40:38.434 --> 01:40:39.574
If it's above, it's green.
1675
01:40:39.894 --> 01:40:43.255
So all I got to do is find my offenders and then I got to fix my offenders.
1676
01:40:43.695 --> 01:40:45.355
Sometimes it's an offender for a week.
1677
01:40:46.155 --> 01:40:47.636
Sometimes it's a fender all the time.
1678
01:40:47.676 --> 01:40:48.816
It's a week I'm not worried about.
1679
01:40:48.836 --> 01:40:49.697
I can look back at the day.
1680
01:40:49.717 --> 01:40:52.758
It's like, okay, this client isn't perpetually underperforming.
1681
01:40:53.459 --> 01:40:53.959
We're fine.
1682
01:40:53.999 --> 01:40:54.759
It was something else.
1683
01:40:55.040 --> 01:40:57.821
They're, you know, building a fence and it slowed down the guys.
1684
01:40:58.481 --> 01:41:01.923
But if they're a constant underperformer, you know exactly where to raise the price.
1685
01:41:02.383 --> 01:41:03.544
You know exactly what to do.
1686
01:41:04.024 --> 01:41:09.627
And so if there's one number, I'm a massive fan of that number for the majority of companies.
1687
01:41:10.107 --> 01:41:11.950
It also allows you to compare teams.
1688
01:41:12.010 --> 01:41:21.481
So if one team's generating 65 a man hour and another team is generating 58 a man hour, it's probably not that that one team got all bad clients.
1689
01:41:22.202 --> 01:41:23.984
It's probably that the team's kind of slow.
1690
01:41:24.044 --> 01:41:26.367
So I'm generally trying to look for...
1691
01:41:27.148 --> 01:41:33.232
a number that will let us like focus on a number and then talk about that number.
1692
01:41:33.272 --> 01:41:34.153
So I love average.
1693
01:41:34.373 --> 01:41:35.514
I spent a lot of time on it.
1694
01:41:35.874 --> 01:41:37.835
I love, love, love that number.
1695
01:41:38.055 --> 01:41:39.116
It's just so simple.
1696
01:41:39.396 --> 01:41:40.517
It's not hard to get the data.
1697
01:41:40.817 --> 01:41:43.659
And at this point, almost every software system can give you that data.
1698
01:41:43.939 --> 01:41:50.384
And then if you could just dump that data into a spreadsheet, you could do all kinds of wonderful things.
1699
01:41:50.924 --> 01:41:52.225
As an example, what?
1700
01:41:52.449 --> 01:41:56.532
And I did this in 2011 in service autopilot with my city turf data.
1701
01:41:57.072 --> 01:41:59.034
You dump that average per man hour data.
1702
01:41:59.494 --> 01:42:06.459
And let's say you have your square footage of a house or your square footage of turf or your gross lot square footage.
1703
01:42:07.059 --> 01:42:11.723
You can then start to see how much money you make per man hour by different square footage.
1704
01:42:12.807 --> 01:42:13.969
It tells you where to raise prices.
1705
01:42:14.009 --> 01:42:19.355
It's like, oh, we are massively underpricing on properties from 10,000 to 12,000 gross lot square feet.
1706
01:42:20.076 --> 01:42:20.737
And then you fix it.
1707
01:42:20.817 --> 01:42:23.060
Like back to like data tells you what to do.
1708
01:42:23.460 --> 01:42:30.849
And with AI, like that's, this stuff was, like some of the stuff we figured out in CityTurf way back in the day was a lot of me in a spreadsheet
1709
01:42:31.550 --> 01:42:36.374
Now, it's like all you got to do is dump the data out of your system, import it into AI and tell me what to do.
1710
01:42:36.635 --> 01:42:38.776
And it could calculate what you should raise your prices to.
1711
01:42:38.796 --> 01:42:39.777
It could do all of it for you.
1712
01:42:39.797 --> 01:42:40.398
It's magical.
1713
01:42:40.738 --> 01:42:43.380
And so I just love per man hour.
1714
01:42:44.261 --> 01:42:47.384
That was a lot of time spent on that one, but that's how much I love it.
1715
01:42:48.545 --> 01:42:50.527
Anything you'd add on that, Mike, before I?
1716
01:42:50.547 --> 01:42:50.667
Yeah.
1717
01:42:50.787 --> 01:42:50.947
Yeah.
1718
01:42:51.613 --> 01:43:02.436
Yeah, I think like I love efficiency score, but it's really a function of your hourly rate because all budgeted hours are is my target hourly rate out of how much revenue I'm making.
1719
01:43:02.956 --> 01:43:10.578
And so we always are looking like to be able to to if on a route they have multiple different services that might have different rates.
1720
01:43:10.838 --> 01:43:10.978
Yeah.
1721
01:43:10.998 --> 01:43:18.281
I can just look at how many budget hours are for that route and then divide that by clocked hours and have a pretty good idea of their efficiency.
1722
01:43:18.301 --> 01:43:19.441
So budgeted versus actual.
1723
01:43:19.461 --> 01:43:20.041
Yeah.
1724
01:43:20.201 --> 01:43:20.541
Exactly.
1725
01:43:20.581 --> 01:43:20.942
Oh, yeah.
1726
01:43:20.962 --> 01:43:21.642
Yeah.
1727
01:43:21.823 --> 01:43:24.545
That was, that's on my list as well.
1728
01:43:24.825 --> 01:43:29.249
And I just, it goes right hand in hand in my mind with the per man hour.
1729
01:43:29.289 --> 01:43:30.370
So I totally agree with that.
1730
01:43:30.630 --> 01:43:37.536
And the reason I like that one too is because the technicians, it's easy for them to understand for us to use that one in our vocabulary.
1731
01:43:37.776 --> 01:43:39.618
You say, hey, you're 90% efficient.
1732
01:43:39.638 --> 01:43:43.662
That means nine out of every 10 minutes of the day, you're out working, you're hustling.
1733
01:43:44.402 --> 01:43:49.527
And you're 64%, meaning six out of every 10 minutes you're working.
1734
01:43:50.088 --> 01:43:55.894
And then for us to be able, when we do P4P, we can pretty much know if they're over 70% efficient, they're going to make a bonus.
1735
01:43:56.594 --> 01:44:00.018
And to be able to use that language with them has been really useful.
1736
01:44:00.098 --> 01:44:04.202
Is budget versus actual for the whole day or just while they're on the job?
1737
01:44:05.683 --> 01:44:12.266
It is the budget hours is for the time on the job, meaning that windshield time is a huge component of whether or not their efficiency score is high.
1738
01:44:12.486 --> 01:44:15.687
So efficiency is actually more than actual versus budgeted.
1739
01:44:16.408 --> 01:44:17.688
I, okay.
1740
01:44:17.908 --> 01:44:22.370
Because you're thinking about load time, fuel time, drive time, all this stuff.
1741
01:44:23.111 --> 01:44:23.391
Correct.
1742
01:44:23.531 --> 01:44:24.011
Oh, yeah.
1743
01:44:24.111 --> 01:44:24.271
Okay.
1744
01:44:24.291 --> 01:44:25.552
That's, that's a wonderful number.
1745
01:44:26.262 --> 01:44:32.026
Yeah, budget hours on a job specifically is much better for determining if it should be increased in price.
1746
01:44:32.226 --> 01:44:33.768
Like, am I hitting my man hour rate?
1747
01:44:34.668 --> 01:44:53.542
I like to look at efficiency more, like it's baking in all the drive time, all the load time because they might hit budget hours on every single job, but if they're slacking off in between, stopping a gas station, take forever at the shop, they could still have a 60 or 58% efficiency score because of all the time not on the job being done inefficiently.
1748
01:44:53.602 --> 01:44:54.062
I like it.
1749
01:44:54.122 --> 01:44:57.443
I always looked at, so ServiceLawPy didn't have an efficiency score.
1750
01:44:57.723 --> 01:45:03.244
So I always looked at budgeted versus actual separate from non-billable.
1751
01:45:03.364 --> 01:45:05.704
I always, I looked at non-billable hours separately.
1752
01:45:05.744 --> 01:45:11.285
And so then when you would work on non-billable, you'd figure out your biggest offenders are non-billable and kind of same concept.
1753
01:45:11.305 --> 01:45:13.986
You deal with the number one first and work through non-billable.
1754
01:45:14.206 --> 01:45:15.726
But you just kind of brought it all together.
1755
01:45:16.986 --> 01:45:18.106
Yeah, just for simplicity, honestly.
1756
01:45:18.126 --> 01:45:19.026
Yeah, yeah, no, I like that.
1757
01:45:19.286 --> 01:45:19.767
That's smart.
1758
01:45:20.307 --> 01:45:21.827
Anything else on that list?
1759
01:45:22.704 --> 01:45:23.164
Not really.
1760
01:45:23.744 --> 01:45:25.705
I think everything you said is good.
1761
01:45:25.725 --> 01:45:33.988
And I think one of the funny thing now, when we look back on it, seems so basic, but you were really the first one that talked so deeply about getting cards on file.
1762
01:45:34.889 --> 01:45:37.650
And that was like revolutionary 10 years ago.
1763
01:45:38.170 --> 01:45:40.971
And now it's just, it's a little bit more commonplace.
1764
01:45:41.411 --> 01:45:44.853
But I think it's just the importance of getting the money fast,
1765
01:45:45.513 --> 01:45:53.455
And if you're not doing that, especially when it comes to one-time projects, I feel like this is the biggest offender, is people that allow their last 50% to be somehow going on forever.
1766
01:45:53.475 --> 01:45:54.535
They might collect a deposit.
1767
01:45:54.855 --> 01:46:03.377
They might even do progress payments, but then they have 50% of that job because the job is done, you have no leverage and the customer can wait four, six, eight weeks.
1768
01:46:04.117 --> 01:46:06.238
And that ruins so many businesses.
1769
01:46:06.418 --> 01:46:11.879
It's one of the biggest reasons a lot of people will get out of projects in Augusta is like, they just can't stand the fact that their mowing gets
1770
01:46:15.900 --> 01:46:18.102
they're on the hook for, for a couple of months.
1771
01:46:18.142 --> 01:46:23.485
And all of a sudden, of course there's, there's mistakes and errors that you did six weeks later that are popping up.
1772
01:46:23.505 --> 01:46:23.726
Yep.
1773
01:46:24.166 --> 01:46:24.306
Yep.
1774
01:46:24.326 --> 01:46:24.526
Yep.
1775
01:46:25.107 --> 01:46:25.307
Yeah.
1776
01:46:25.327 --> 01:46:34.333
Two of the most important things we ever did at city turf going back, getting paid super fast, forcing credit cards to everybody like game changer.
1777
01:46:34.953 --> 01:46:36.915
And the other one was stop rolling the trucks to sell.
1778
01:46:37.974 --> 01:46:40.176
That was just, you kind of alluded to that earlier.
1779
01:46:40.276 --> 01:46:41.116
It was killing us.
1780
01:46:41.517 --> 01:46:44.779
It's like you just, you can't turn the estimates as fast.
1781
01:46:44.819 --> 01:46:47.121
You don't win as many deals because...
1782
01:46:48.750 --> 01:46:50.651
you went to do the quote, Ms. Smith wasn't there.
1783
01:46:51.031 --> 01:46:52.352
The next competitor went to do the quote.
1784
01:46:52.372 --> 01:46:52.912
She was there.
1785
01:46:52.932 --> 01:46:53.493
He won the deal.
1786
01:46:53.753 --> 01:46:55.494
Like, it's like, you can't get them back on the phone.
1787
01:46:55.514 --> 01:46:57.755
Like, just sell them on the phone.
1788
01:46:58.335 --> 01:47:08.481
And back to your loaded CAC, if you can half that actual number, you can spend a little more on marketing, even if it's inefficient because they want that quality touch.
1789
01:47:08.621 --> 01:47:13.083
I will lose those customers, but I can market more with that same marketing spend.
1790
01:47:13.123 --> 01:47:13.903
Exactly right.
1791
01:47:14.364 --> 01:47:16.505
Yeah, so big things.
1792
01:47:17.320 --> 01:47:19.541
All right, let's move on to the last item of the docket.
1793
01:47:19.601 --> 01:47:20.161
Okay.
1794
01:47:20.201 --> 01:47:20.481
Go ahead.
1795
01:47:20.501 --> 01:47:21.141
Do you want to add more?
1796
01:47:21.562 --> 01:47:24.863
No, I thought you'd ask me something about systems, but we could move on.
1797
01:47:25.623 --> 01:47:26.503
Okay.
1798
01:47:26.763 --> 01:47:35.807
So the last one is more for probably a larger operator or someone that is trying to grow their business and might feel frustrated because they just kind of feel like they're hitting their head up against the wall.
1799
01:47:36.107 --> 01:47:37.667
They can't keep any good employees.
1800
01:47:38.268 --> 01:47:40.088
There's churn constantly at the technician level.
1801
01:47:40.108 --> 01:47:41.769
They're keeping people for a month.
1802
01:47:42.409 --> 01:47:42.889
two months.
1803
01:47:43.610 --> 01:47:50.555
If they try to bring a manager or an assistant manager on, they just don't stick or they get disgruntled or they sabotage them or whatever.
1804
01:47:51.316 --> 01:48:00.663
I wanted to try to do our best to identify one characteristic or trait specifically that the owner or the operator has that separates that person.
1805
01:48:00.803 --> 01:48:04.125
Maybe they're doing 500,000 annual revenue, cannot get employees to stick.
1806
01:48:04.305 --> 01:48:05.787
They're just constantly churning over.
1807
01:48:06.527 --> 01:48:14.909
And then compare them to an owner operator that might be like 5 million in revenue, has a great management team, team members have been with them for years.
1808
01:48:15.589 --> 01:48:18.370
Yes, they have churn, but they're able to replace those people.
1809
01:48:18.690 --> 01:48:20.710
There's strong cultural fits for the business.
1810
01:48:21.611 --> 01:48:29.912
If you had to narrow it down to one characteristic or personality trait that would differentiate those two operators, what would that be?
1811
01:48:30.513 --> 01:48:31.853
I thought this was a really hard one.
1812
01:48:32.942 --> 01:48:35.424
I have my one, but is it the one?
1813
01:48:35.604 --> 01:48:36.144
I don't know.
1814
01:48:36.885 --> 01:48:39.906
But it's always been my belief in operating philosophy.
1815
01:48:40.487 --> 01:48:43.249
And the simplest way to say it is people are not robots.
1816
01:48:44.309 --> 01:48:48.332
People do not want to just be said, do this, do this, do this.
1817
01:48:49.738 --> 01:48:57.141
And so I feel that the competitive advantage in the operator that wins is the person that legitimately cares about their people.
1818
01:48:57.421 --> 01:49:05.825
And everything they do demonstrates that they do not see their people as robots or people that are just there to facilitate them making money.
1819
01:49:06.585 --> 01:49:14.568
They're like legitimately valuable to the owner as a human and they're legitimately valuable to the company.
1820
01:49:15.169 --> 01:49:17.850
And you're just hyper concerned about
1821
01:49:18.650 --> 01:49:19.871
their best interest as well.
1822
01:49:20.411 --> 01:49:25.834
Doesn't mean you can pay them unlimited money because then you won't have a business, but I think that comes through.
1823
01:49:25.995 --> 01:49:27.035
I've always believed it.
1824
01:49:27.295 --> 01:49:31.698
I used to always say at Service Autopilot, you're not going to be with me forever.
1825
01:49:31.738 --> 01:49:32.619
I have no illusions.
1826
01:49:32.639 --> 01:49:33.479
You're going to take this job.
1827
01:49:33.499 --> 01:49:34.420
You're not going to stay.
1828
01:49:34.800 --> 01:49:46.387
But what I do hope is that someday in your future, when we've not talked for a decade, you look back and say, that was one of the best places I've ever been in my life and it helped me get to where I'm at today.
1829
01:49:46.907 --> 01:49:55.829
And that's how I, if you believe that as a human, that I think you naturally exhibit the leadership characteristic that attracts people to want to be there.
1830
01:49:56.489 --> 01:50:05.472
And when people treat people like robots and they're just there to do a thing for me, I don't think you are leading in the right way.
1831
01:50:05.492 --> 01:50:10.973
It's like, it's always been my reason why I've always believed people are not robots and they need a why.
1832
01:50:11.953 --> 01:50:14.514
People need to understand why am I asking you to do this?
1833
01:50:14.614 --> 01:50:16.674
Why are we saying don't do this, do that?
1834
01:50:17.154 --> 01:50:27.817
And so some people will feel that I will give my leadership team the why, but my minions out in the field doing the work, just do the work and do it faster.
1835
01:50:28.277 --> 01:50:31.597
Then people feel like they're being treated like robots and cogs in a wheel.
1836
01:50:32.218 --> 01:50:33.878
And that's what nobody wants to feel that way.
1837
01:50:33.998 --> 01:50:35.758
Everybody wants to be part of a thing.
1838
01:50:35.778 --> 01:50:38.379
And maybe you're a leader in the company and maybe you're
1839
01:50:39.281 --> 01:50:50.050
new in the company and you're out in the field doing one of the lowest rung jobs, but you want to feel like you're part of the thing and you want to feel like there's an opportunity for your life to get better and you do more in the business or if you want that.
1840
01:50:50.250 --> 01:50:54.133
And a leader gives people that feeling and it's real.
1841
01:50:54.513 --> 01:50:56.095
That's the best I can come up with.
1842
01:50:56.965 --> 01:51:00.226
What would you say to the person that says, hey, I do actually care about my team.
1843
01:51:01.066 --> 01:51:03.667
I really am genuinely invested in their future.
1844
01:51:04.047 --> 01:51:05.107
I want them to win.
1845
01:51:05.508 --> 01:51:08.769
I try to care as much as I possibly can and give them money with possible, et cetera.
1846
01:51:09.089 --> 01:51:11.049
But I still can't keep people.
1847
01:51:11.749 --> 01:51:18.992
And the reason I say this is because I have seen good-hearted home service business owners that genuinely care for their team.
1848
01:51:19.812 --> 01:51:25.474
And I don't know if it's a matter of them being taken advantage of or if there's not opportunity inside the business.
1849
01:51:27.014 --> 01:51:32.777
They just cannot keep good people and they don't make any money and they genuinely care.
1850
01:51:32.797 --> 01:51:38.240
Like a lot of times that comes from a place of giving contribute contribution, wanting to help these people.
1851
01:51:38.620 --> 01:51:45.884
But the business is failing and they still just keep burning through team members and they can't hand things off to a manager.
1852
01:51:45.904 --> 01:51:48.886
And I don't even know what to tell them sometimes.
1853
01:51:49.298 --> 01:51:57.121
Yeah, see, this is where this was a really hard question to answer because when I saw the question in the docket, my brain spun to all these things.
1854
01:51:57.141 --> 01:51:58.842
Like, okay, it's another argument.
1855
01:51:58.862 --> 01:51:59.823
I just rattled off a few things.
1856
01:51:59.843 --> 01:52:01.683
It's another argument for why I like bigger companies.
1857
01:52:01.743 --> 01:52:03.184
Bigger companies create opportunity.
1858
01:52:03.484 --> 01:52:04.925
People want to work at a company
1859
01:52:05.725 --> 01:52:08.626
And be part of a company, it feels like a good company that's growing.
1860
01:52:09.466 --> 01:52:17.149
You want to, when your buddy says where you work, you want to say, I work at CityTurf, not at Harry's lawn care company that, you know, and Harry's known to drink too much.
1861
01:52:17.189 --> 01:52:19.429
Like, you know, it's like, you want to be at the nice company.
1862
01:52:19.629 --> 01:52:20.790
You want to be at the growing company.
1863
01:52:20.810 --> 01:52:22.750
You want to be at the company that trucks look good.
1864
01:52:23.131 --> 01:52:26.372
That matters to the best employees, I think it does.
1865
01:52:26.432 --> 01:52:26.952
And so...
1866
01:52:27.732 --> 01:52:28.633
There are other factors.
1867
01:52:28.653 --> 01:52:33.839
You could be the most good-hearted person in the world, but the people leave because they don't see any opportunity.
1868
01:52:33.859 --> 01:52:34.660
Nothing's getting better.
1869
01:52:35.020 --> 01:52:37.363
They leave because it's a disorganized mess.
1870
01:52:37.764 --> 01:52:42.809
They leave because yesterday for the 19th time, Jim took my weed eater.
1871
01:52:43.571 --> 01:52:46.653
He took my weed eater because his was broken.
1872
01:52:46.713 --> 01:52:49.255
Like, you know, there's a million little things like that.
1873
01:52:49.715 --> 01:52:54.259
They leave because you're awesome, the owner, but you make me work with this dude.
1874
01:52:54.459 --> 01:52:55.940
This guy doesn't do anything.
1875
01:52:56.460 --> 01:52:57.401
He doesn't carry his weight.
1876
01:52:57.601 --> 01:53:01.344
I'm doing everything and I get beat up because we're slow.
1877
01:53:02.224 --> 01:53:04.546
I could, you could list 90 of those reasons.
1878
01:53:04.626 --> 01:53:09.790
And so again, yeah, being nice and being good and caring doesn't,
1879
01:53:10.732 --> 01:53:11.794
solve all problems.
1880
01:53:11.954 --> 01:53:13.316
It's the top level thing.
1881
01:53:13.657 --> 01:53:20.508
Because if you're not that human and you don't give a flip about these people and you treat them as robots, there's no chance it's going to work out.
1882
01:53:21.149 --> 01:53:22.431
And if you hire managers...
1883
01:53:23.258 --> 01:53:27.299
Like you're great, but you hire a manager that that way, not going to work out.
1884
01:53:27.779 --> 01:53:28.559
That's the top level.
1885
01:53:28.579 --> 01:53:29.900
That's why I answered the question that way.
1886
01:53:29.920 --> 01:53:34.901
But then we can get to 80 reasons why the lower level things will push people away.
1887
01:53:35.301 --> 01:53:36.261
You're not growing the business.
1888
01:53:36.281 --> 01:53:37.322
You're not pricing right.
1889
01:53:38.542 --> 01:53:39.982
You aren't selling fast enough.
1890
01:53:40.002 --> 01:53:40.943
So the routes aren't dense.
1891
01:53:41.123 --> 01:53:42.083
They can't make enough money.
1892
01:53:43.203 --> 01:53:46.745
you know, the equipment thing, you have crummy equipment because you have too much debt.
1893
01:53:46.766 --> 01:53:47.986
The truck's always breaking.
1894
01:53:48.366 --> 01:53:49.567
Alternator broke again.
1895
01:53:49.587 --> 01:53:53.029
And you could just imagine, I don't even have to write them off.
1896
01:53:53.049 --> 01:53:55.951
You can imagine all the reasons why somebody eventually just gets tired.
1897
01:53:56.011 --> 01:53:59.893
Like, man, I love this dude, but what, this is just tiring.
1898
01:53:59.993 --> 01:54:01.915
And so you get 50 cents more and you take it.
1899
01:54:02.655 --> 01:54:04.156
And then it could be recruiting.
1900
01:54:04.953 --> 01:54:05.633
Who are you attracting?
1901
01:54:06.094 --> 01:54:07.554
Like it's the old argument.
1902
01:54:07.574 --> 01:54:08.474
There are no good people.
1903
01:54:08.634 --> 01:54:08.855
Really?
1904
01:54:08.875 --> 01:54:09.555
There's no good people.
1905
01:54:09.575 --> 01:54:15.397
Then why, why does the dude down the street have a $15 million company with a hundred people or 150 people?
1906
01:54:15.457 --> 01:54:21.059
Like there are good people, but you're not getting the good people because they are really, really hard to get.
1907
01:54:21.299 --> 01:54:22.840
You have to bring tons of them in.
1908
01:54:23.300 --> 01:54:25.021
You got to bring in a hundred to get the eight.
1909
01:54:26.181 --> 01:54:30.403
And you know, it's like, it's so it could be that it could be that you're just not getting the best people.
1910
01:54:31.223 --> 01:54:31.363
Um,
1911
01:54:31.783 --> 01:54:34.585
So no silver bullet here.
1912
01:54:34.765 --> 01:54:35.466
So lots of things.
1913
01:54:36.267 --> 01:54:37.147
It was an excellent answer.
1914
01:54:37.427 --> 01:54:38.708
I was hoping you'd go that direction.
1915
01:54:38.728 --> 01:54:44.133
I kind of went after a little bit more from my thought process of the mid-level manager.
1916
01:54:44.153 --> 01:54:53.340
A lot of times when I see a churn at that level, it's a lot of times one of the key distinctions I've seen between the operators that keep them is emotional regulation.
1917
01:54:54.240 --> 01:54:58.043
And the distrust that's caused when...
1918
01:54:59.044 --> 01:55:02.627
The owner is extremely like top of the world.
1919
01:55:02.927 --> 01:55:04.848
We're all going to, we're going to build a $10 million business.
1920
01:55:05.229 --> 01:55:07.810
And then the next day is mad, throwing things at people.
1921
01:55:07.870 --> 01:55:08.331
I agree.
1922
01:55:08.511 --> 01:55:10.672
Freaking out over little stuff like a flat tire.
1923
01:55:11.073 --> 01:55:17.417
And so, especially when it comes to mid-level managers, because they are like the conduit for the leader to convey that vision to the team.
1924
01:55:17.798 --> 01:55:21.420
And if the chaos of the leader is too much, they're just like, I'm out.
1925
01:55:21.560 --> 01:55:23.442
Like I care about my team, but I can't handle this guy.
1926
01:55:23.462 --> 01:55:23.582
Yeah.
1927
01:55:24.162 --> 01:55:34.891
And I see that a lot of times from like, especially past a million, two million is like the emotions run too high or too low, too consistently for good people to stay.
1928
01:55:35.551 --> 01:55:37.373
And I like your answer better.
1929
01:55:37.433 --> 01:55:41.316
I would have to I would have to opt for yours as a much more general rule of thumb.
1930
01:55:41.596 --> 01:55:47.442
Yeah, that's why it's again, third time it was hard, but your point is like so incredibly true.
1931
01:55:47.863 --> 01:55:49.244
You just see so much emotion.
1932
01:55:49.605 --> 01:55:52.327
And sometimes the emotion plays in another way.
1933
01:55:52.408 --> 01:55:55.271
It's like, it leads to this lack of reliability.
1934
01:55:55.851 --> 01:55:57.913
Like the owner didn't have he was emotional.
1935
01:55:57.953 --> 01:55:58.554
He's frustrated.
1936
01:55:58.814 --> 01:56:00.536
He didn't, he didn't have the schedule done.
1937
01:56:00.656 --> 01:56:03.860
So now I'm waiting for 30 minutes because he was mad about something this morning.
1938
01:56:04.140 --> 01:56:05.601
So we're 30 minutes late getting started.
1939
01:56:05.681 --> 01:56:06.722
He's messed up my day.
1940
01:56:06.822 --> 01:56:10.005
Or he kind of makes his problems my problems, which mess up my day.
1941
01:56:10.025 --> 01:56:11.767
It's like the emotions play out so many ways.
1942
01:56:11.787 --> 01:56:12.527
You see that a lot.
1943
01:56:13.728 --> 01:56:15.270
All right, well, let's wrap it up.
1944
01:56:15.330 --> 01:56:16.471
We're at the two hour marker.
1945
01:56:16.951 --> 01:56:19.574
Any non-financial advice for the people today?
1946
01:56:20.462 --> 01:56:20.702
Yes.
1947
01:56:21.382 --> 01:56:25.003
So this was inspired by a comment.
1948
01:56:25.164 --> 01:56:29.905
So last week you asked me if I did my cold open with AI.
1949
01:56:30.745 --> 01:56:31.005
Oh, yeah.
1950
01:56:31.226 --> 01:56:31.366
Yeah.
1951
01:56:31.406 --> 01:56:32.546
And so that inspired it.
1952
01:56:33.246 --> 01:56:38.648
And I thought I would say something about this because I think this is personal philosophy, not preaching.
1953
01:56:38.768 --> 01:56:40.048
I don't know, just personal philosophy.
1954
01:56:40.629 --> 01:56:43.730
I think it's really important not to use AI for all your stuff.
1955
01:56:44.230 --> 01:56:47.631
Now, I use AI for all my stuff, but I use it in a different sequence.
1956
01:56:47.811 --> 01:56:48.111
Yeah.
1957
01:56:48.291 --> 01:56:53.093
So the idea for the cold open last week came from me riding the Peloton.
1958
01:56:53.453 --> 01:56:55.273
While I was riding the Peloton, I had this idea.
1959
01:56:55.293 --> 01:56:56.574
And so I recorded it.
1960
01:56:57.374 --> 01:57:00.695
And a little behind the scenes, what we do, and I'll get to my point.
1961
01:57:00.715 --> 01:57:04.636
It's like every other week, Mike and I take a turn and we put together a docket.
1962
01:57:04.676 --> 01:57:05.497
Hey, this is what we want to talk.
1963
01:57:05.517 --> 01:57:07.177
We don't tell each other about the cold open.
1964
01:57:07.197 --> 01:57:08.298
We keep all that as a surprise.
1965
01:57:08.678 --> 01:57:09.118
But we'll have...
1966
01:57:09.538 --> 01:57:12.241
four to six points, like, hey, we want to talk about these things.
1967
01:57:12.562 --> 01:57:14.224
And then we each come prepared.
1968
01:57:14.264 --> 01:57:15.506
We put some work into this stuff.
1969
01:57:15.526 --> 01:57:16.987
And so we each think through them.
1970
01:57:17.588 --> 01:57:19.891
I never dump my docket into AI.
1971
01:57:20.352 --> 01:57:22.354
I always answer it first.
1972
01:57:23.636 --> 01:57:24.877
And I'll tell you why in a moment.
1973
01:57:24.977 --> 01:57:27.080
And then I always dump it into AI.
1974
01:57:27.100 --> 01:57:27.320
Yeah.
1975
01:57:27.961 --> 01:57:30.122
Because I always, you know, and I'll give it a long prompt.
1976
01:57:30.142 --> 01:57:33.784
I was like, hey, is there any, you know, it knows so much about me.
1977
01:57:33.804 --> 01:57:37.926
It's like, is there anything you know about me that I should have said that I didn't say?
1978
01:57:38.326 --> 01:57:46.110
Is there anything I said here that could be misunderstood or, you know, like I don't write out, I just have a few bullet points for what I want to talk about.
1979
01:57:46.750 --> 01:57:49.693
And, um, so I always use AI to double check me.
1980
01:57:49.953 --> 01:57:51.174
So where does this come from?
1981
01:57:51.834 --> 01:57:58.580
I am convinced, and you've probably heard people talk about this, that we're just going to get dumber and dumber and dumber if we let AI do everything.
1982
01:57:58.740 --> 01:58:07.367
Because what I'm noticing in myself is every time anything's hard or I want to, I have a question, I always want to just go to AI.
1983
01:58:07.387 --> 01:58:07.587
Yeah.
1984
01:58:07.887 --> 01:58:08.267
Always.
1985
01:58:09.428 --> 01:58:18.031
And I'm also noticing every time AI, we might have talked about this before, it's like every time I'll work, I'll do, I write my, I work on my thumbnails, like my headlines myself too.
1986
01:58:18.171 --> 01:58:24.273
Then I give them to AI and then I'll have it, like I'll just have it challenge them and do all this stuff and he'll give me like, I'll say, give me 20 ideas.
1987
01:58:24.333 --> 01:58:27.755
And then it's like, just tell me which of the 20 ideas.
1988
01:58:27.795 --> 01:58:30.035
I just want it to, I just sense this in myself.
1989
01:58:30.055 --> 01:58:31.576
I just want you to give me the answer.
1990
01:58:32.016 --> 01:58:33.177
I think it's so dangerous.
1991
01:58:33.417 --> 01:58:36.338
I think that it's going to kill people
1992
01:58:36.838 --> 01:58:37.918
my creativity.
1993
01:58:38.359 --> 01:58:40.780
I think it's going to just be bad in the longer term.
1994
01:58:40.900 --> 01:58:42.100
And so I'm not trying to preach.
1995
01:58:42.160 --> 01:58:45.841
I just was, this is a little observation I'm noticing in myself.
1996
01:58:45.921 --> 01:58:52.364
And so I'm trying to first put down my ideas and then challenge my ideas with AI.
1997
01:58:52.384 --> 01:58:58.126
The other thing I think happens is when you say, when you give it a prompt and you say, Hey, I'm thinking about this.
1998
01:58:58.226 --> 01:59:02.408
It tends to kind of stay in that lane and give you ideas around that thing.
1999
01:59:03.028 --> 01:59:08.733
Whereas if I first do my own brain dump with lots of differing ideas, it doesn't get stuck in a lane.
2000
01:59:09.173 --> 01:59:17.400
So I just wanted to suggest maybe as we all get trapped by our AI tools, we try to continue to be the creative element.
2001
01:59:17.900 --> 01:59:24.185
We got to stitch together last week's non-financial advice and this week's financial advice.
2002
01:59:24.425 --> 01:59:27.348
I think last week it was like everything you do should be ran through AI.
2003
01:59:27.428 --> 01:59:30.110
This week is like, don't use AI for everything.
2004
01:59:30.570 --> 01:59:39.781
I would tell you every single idea you have, everything you're trying to solve, anything you're trying to think through, always take it.
2005
01:59:40.121 --> 01:59:41.162
Always go to AI.
2006
01:59:42.023 --> 01:59:42.884
Well, yeah.
2007
01:59:42.964 --> 01:59:45.687
We're pulling a little chamath on us over here.
2008
01:59:46.929 --> 01:59:49.512
That's how my brain works.
2009
01:59:49.712 --> 01:59:49.952
But –
2010
01:59:50.913 --> 01:59:54.235
I think I did say I'm proposing change to sequence.
2011
01:59:54.735 --> 01:59:57.836
So I use AI constantly all the time.
2012
01:59:58.176 --> 02:00:02.739
I'm just trying to get the thoughts out of my head first and then have AI challenge them.
2013
02:00:02.799 --> 02:00:04.339
So sequence change.
2014
02:00:04.419 --> 02:00:05.260
But I still use AI.
2015
02:00:06.140 --> 02:00:06.880
Very good.
2016
02:00:07.160 --> 02:00:07.420
All right.
2017
02:00:07.821 --> 02:00:10.121
My non-pledge of financial advice is very simple.
2018
02:00:10.942 --> 02:00:12.882
We just finished the site for Blue Collar Summit.
2019
02:00:13.162 --> 02:00:14.142
Jonathan might be there.
2020
02:00:14.183 --> 02:00:14.563
We'll see.
2021
02:00:14.963 --> 02:00:17.023
He might be on the road, but Jonathan might be there.
2022
02:00:17.343 --> 02:00:18.104
It's in January.
2023
02:00:18.124 --> 02:00:19.044
It's in Seattle.
2024
02:00:19.424 --> 02:00:21.385
Feel free if you'd like to sign up.
2025
02:00:21.505 --> 02:00:21.885
Also...
2026
02:00:22.445 --> 02:00:27.209
If you want to speak, we are doing quite a bit of the operators that are coming.
2027
02:00:27.349 --> 02:00:27.929
We'll be speaking.
2028
02:00:28.209 --> 02:00:29.310
So feel free if you sign up.
2029
02:00:29.490 --> 02:00:32.453
You can also register and apply to be a speaker.
2030
02:00:33.273 --> 02:00:34.394
So I'm looking forward to it.
2031
02:00:34.694 --> 02:00:36.115
And hopefully we can see Jonathan there too.
2032
02:00:36.316 --> 02:00:38.838
Yeah, my plan is like I'm coming from Antarctica.
2033
02:00:38.898 --> 02:00:40.219
So I just...
2034
02:00:41.758 --> 02:00:42.800
My plan is that...
2035
02:00:42.940 --> 02:00:45.967
If you come up with frostbite onto the stage.
2036
02:00:46.148 --> 02:00:47.591
Yeah.
2037
02:00:47.671 --> 02:00:49.676
So my plan is to do it.
2038
02:00:49.996 --> 02:00:52.141
We need to just kind of figure out how to make it all happen.
2039
02:00:52.201 --> 02:00:55.028
So yeah, I'm going to try my very best to everybody that's watching.
2040
02:00:55.910 --> 02:00:56.170
Awesome.
2041
02:00:56.411 --> 02:00:57.313
Thank you all for watching.
2042
02:00:57.473 --> 02:00:58.215
We'll see you next week.
2043
02:00:58.556 --> 02:00:58.876
See you guys.