EP192: Scaling Success: How Mike Andes Built Augusta Lawn Care into a Franchise Powerhouse

Absolutely. Thanks for having me on, Brad. I appreciate it.

Yeah, absolutely. So I think for like a lot of other home service business owners, I got started really, really young in the industry. So I was 11 years old, started mowing grass, did that to be able to save up for college. I went to college pretty young. I was 13 years old when I started college. I did that because I thought I wanted to become a doctor. And so all throughout college, I paid my way through using grass mowing. And my brother and I did it. We kind of grew up between 20, $30,000 a year annually, but that was enough for us to both pay our way through college. At 18, I dropped out of medical school and went full-time into Augusta Lawn Care. And it was really the only skill I had was mowing grass and doing business. So started doing lawn care. And then at night did my master's in business administration. And then, yeah, that was 10 years ago this year.

Yeah. So I guess I wasn't enrolled yet. So I was, I had finished my undergrad. I'd gone to Africa for a couple months and volunteered there in clinics and things and got kind of a lot of experience there. When I came back, I was, I was registered to go to medical school, but I just dropped out. I canceled my applications and everything and decided just to stick with lawn care.

Correct. Yeah.

Yeah, I did early. Like, um, I skipped several grades, did one year at home. I was able to do a few years in one, play a ton of golf when I was at home doing homeschooling. Uh, but yeah, I kind of got ahead a little bit there just so I could jump right into college. I want to get over with, I didn't want to go into debt. Um, my family didn't really have much money growing up. My dad's a minister. And so resources were always a little strapped. And so I kind of looked at it as a college is my way out. It's the only way I had been told, you know, you go to college and you make money. So, uh, that was, that was kind of the pre-described, uh, path I was on.

Uh, originally I was born in Kentucky, Louisville. Uh, but I've been up here in Washington state, uh, just North of Seattle for pretty much my whole life.

absolutely. One of our franchisees, Connor, is down there. He's awesome.

Yeah. When I went full-time, I branched off on my own. He was still doing college and going to school to be a teacher. So he kept Andy's lawn care, which was our previous business. And then I went full-time into Augusta lawn care.

So when I went to Africa, I went to Kenya, Tigoni and Kalangwari, just outside Nairobi. And so there's a couple of clinics and then orphanages there that we did crazy procedures like birthing, operations, injections. I worked a lot in the pediatric burn unit. So like tons of experience for someone that like has spent your whole, you know, educational career thinking about bones and skeletons and muscles and surgeries. And you watch that for entertainment. This was awesome. I'd usually see 40 to 60 patients a day. Coming back to the U.S. and started shadowing doctors, especially in the specialty I wanted to go to, which was either neurosurgery or heart surgery. I started realizing I was going to be doing like three or four patients a day. I was going to be doing like the same few procedures the rest of my career. And I really started to see how much of their day was spent with paperwork, insurance, how are things getting paid? And that was not my passion. If I'm going to do a business, I'm going to run a business. I'm not going to try to mix it with my other love in life, which is helping the patient. And so I really saw medicine going very, very political and being governed by a lot of this bureaucracy around insurance. And I didn't like it. So coming from where in Africa, it was like people walked in the door and we just helped them because it was a nonprofit. Coming over here was a little bit of a shock. And I didn't want to do that for the rest of my career.

Oh, I saw that on your website. Let's go.

So yeah, it would have been when I was 18 years old. So I guess that would have been 2014.

Yep. First year, I was working by myself. And as I kind of ramped it up, I was still working as a personal trainer at Anytime Fitness. I ended up purchasing that Anytime Fitness a few years later to learn how franchising worked. But at the beginning, that first year, it was kind of part-time. Second year, I went full-time and hired an employee also. And in that second year, when I went full-time and had that employee, we did right around $200,000. Okay.

It was actually a few years later. So a few years to starting Augusta, we were probably doing our seven to $800,000 annual revenue and growing pretty good. But one day I got in an accident and I was underneath a dump truck and my hoodie got caught in the PTO. So fortunately, after a couple of weeks at the hospital, I was fine. But that really waked me up to the realization that my business was very, very constrained by me being there. And every job was being sold by me. Walkthroughs of projects, the efficiency of the crew, all depended on me being there, the equipment being maintained, et cetera. And so it was actually at that moment. two to three weeks after I got to the hospital, I started making videos online. And I started landscape business course because that was literally the thing I typed into my computer in Google and I couldn't find it at the time. Now there's plenty of content and people have made courses and things around just the business side. But at that time, didn't have anything. So that's when I started making videos. And what I found out is that people very quickly, they were really receptive to hearing the information, but no one was doing stuff. Like implementation execution was like, really, really poor. And so I figured, look, the way for me to be able to actually make an impact in this industry is I need these people, I need pay for performance. I need estimate videos. I need all these systems to be adhered to. But in order for that to happen, people are only going to do it if I have skin in the game with them. And so the unique thing about franchising is I am in business with my franchisees. We are partners doing this together. We use the same brand and what I do affects them and what they do affects me. And so when I say something for them to do, they know it's in their best interest because I have skin in the game. And so my goal now is like we will scale Augusta to a thousand locations and in doing so compete with most landscapers and in competing with them, hopefully then they'll start to listen because. Their customers will demand certain things. Their employees will start to demand certain things based upon the systems we talk about.

Yes, actually, this week is exactly five years ago since the first 10 franchisees came for training. And so it would have been five years ago from now. About a year before that, a year and a half before that, I purchased Anytime Fitness, a franchise locally, and I had worked with them previously. The owner was wanting to get out, so I bought it and wanted to learn how they did franchising. in 2013, or 2012, been the ranked number one franchise by Entrepreneur Magazine. And so I was like, hey, they're definitely something I can learn from. They have 4,000 plus locations. And so going to their training, understanding their systems and their academy and their dashboard, what does coaching look like and all these other aspects was super helpful. And then, yeah, the next year started franchising.

No, five years. Five years into Augusta full-time, and then we started franchising. And it had been only a couple years previous to that that I really started changing the systems. And that's when I went from making no money to being very profitable in my one location. And we just took all those systems and started duplicating them, but then also refining them for other markets, et cetera. And that was kind of the blueprint at the beginning.

and just like what works and what doesn't work for franchising so like i interviewed about 50 a little over 50. you know, other franchisees in different home services in different industries, completely like quick service food, obviously gym space with Anytime Fitness and lots of different home services and just trying to understand like what works well with franchising, what doesn't work well. And it's a tough business. Like the vast majority of franchisors won't get to 100 locations, like the vast majority. And most of them will fail. The failure rate of franchisors is usually worse than franchisees simply because. it's very difficult to actually become profitable. And for most people, like until you get to a hundred locations, you're not making money. And so a lot of times people think it's really easy. Hey, you can get your legal docs together. You start franchising, you sell these things for a bunch of money. And from day one, you're profitable. And if you're supporting your franchisees to the extent that they need to be, that's usually not the case. Like we had a full out call center and all the rest of it. Like the first three years of franchising, I made more money for my location than I did. from the franchise uh and and so anyways does side tangent

I wouldn't say it was, it wasn't necessarily a mistake. It was definitely a hard thing to do. Um, I, I definitely think we could have rolled it out with less services to our franchisees to make it a little simpler for us, uh, to be able to deliver on our promises. And, you know, there was a couple of times that we had to like scale things back at the call center. Cause like, you know, it's one thing to have a call center for your location, right? But when you have a hundred locations, you know, every single market slightly different. You have time zones that are different. You have service offerings that are different. You have climates that are different. Some people do snow and other people during that same period of time, the next phone call you pick up, they're literally doing irrigation repair in the middle of December. So it's just very, very difficult to kind of try to standardize a lot of these procedures. And that's been one of the most difficult things to scale.

Yeah. And it wasn't the technology's fault. It was my fault. Like I, the way I rolled it out to our owners was really poor. Yeah. Yeah. The technology itself was, was, was good. It was just a matter of how I did it. And I think, you know, one of the things that. I learned as I grew the businesses is especially as you have other stakeholders, whether it be employees and their families, or in my case, like franchisees, the way you roll things out, even if it's a positive thing, if done in a manner that's too fast, creates a lot of havoc. And so that's one of the biggest realizations for me is like at the beginning of your career, pivoting very quickly and adjusting. is rewarded. It's very important. But then as you scale and get a larger organization and more people depending on you, being more calculated and know exactly what your next step is going to be is really, really important because now a lot of people can be affected by a poor decision.

Yeah. And I think when I first started Augusta and we franchised, I was like, look, this needs to be a franchise that I would want to join. And one of the biggest things is your point is if the franchisor does something stupid. And it's going to affect my livelihood to the point where I can't get customers. I want out. And so for the vast majority of franchise agreements or FDDs, if you read them, like you basically can't get out of this document unless you die. And even if you die, most of the time it'll go to your heirs in terms of the royalties, et cetera. And so my biggest two things was like, number one, I want to be where I can leave at any time. That's what I would want if I was a franchisee and without any penalty. And then secondly is I want a flat monthly fee. If I grow my business, I'm not getting penalized and paying a franchisor more. And so those are the two things we do at Augusta. And so whether that's a good or bad decision, I guess we'll find out in the future.

Yeah, absolutely. And it's, it's also a matter of like, complicates a little bit more for us even too, is I make a decision, but I have to remember I have entrepreneurs that are my partners, my, my franchisees in this case. And so. An entrepreneur in general is striving for freedom. They don't want to be constrained. They don't want to be put in a box. And whether you're talking about executives, managers, employees, the vast majority of us, especially in America, like we strive for freedom. And so anytime that someone is going to feel constrained, they're going to buck the system. And so one thing that I always think about, it's like I can either A, put the dog feed inside the kennel and lure them into the kennel, or I... force them, I push them into the kennel and I lock it. And so when it comes to employees or managers, or in my case, like working with the owners inside of Augusta nation is like, instead of what in the past was like, Hey, this is a decision. This is what we're doing. What I'm doing is I'm putting them in a box. I'm constraining their freedom and any constraint to freedom will cause a backlash. It will cause people to buck that system. And so even if it's good for you, it's like, look, going in the kennel is healthy. Like people might have seen before you try to get a dog in a kennel, like go on a flight, for example. And you can see the person trying to force that thing in. And it's just freaking out. It's like, look, it's good for you to be inside this kennel. It's the safest thing for you to do. And so even times where I know it's. the best system or the best decision for their business. If I force it on them, they will retaliate. And that's just human nature because we're looking for freedom. And so I think it's a very helpful thing, not just for owners like at Augusta, but like employees in general, it's like, how do I convince them that they came up with this idea? How do I use the indirect approach for them to see that? this is actually in their best interest and they decided to do it. And so there's a massive change we've made in the past 12 months at Augusta. It's like most of the new initiatives that we offer, now they opt into them. They can decide to come into them and bring it down to your frontline team members. Like instead of you enforcing something, just use positive reinforcement, reward the people that do it the way you want to. And then basically be the dog feed inside the kennel that they actually go in there because they want to, instead of you forcing them.

Yeah. Like thinking about from their perspective, right? Like this is taking away from them and doing their job. This is annoying. I don't want to have to do more paperwork. I don't have to fill in more. I don't have to push buttons every single job. And so. If you take it from their perspective, unless you align the incentives of the business with the incentives of the employee, then they have every right to question whether or not they should be added more of these, quote, frivolous tasks to their job. And so it's a matter of like, okay, well, can we type their actual pay to it? For example, in Copilot, you can have like where there's an upsell button. So when they're at a job, they can click one button and it sends the upsell for specific. service to that customer that they're on the property. And if you tie that to the fact that, hey, if you use the software and you click it, you'll get 50 bucks if they just accept the estimate. And now there's actually an incentive of, oh, the software actually helps me make more money. And if they came to a job to make more money, so like if I can put incentives around them making more money and that aligns with the business. being on software or doing a certain system, that's probably a pretty good synergistic parallel that they're going to want to follow. Same thing with something like pay for performance. It's like, I don't want to have to be tracking. I don't want to be worried about my efficiency. Look, if you can just open up the app, you'll actually see how much you're going to make for today. And as you complete the jobs in the app, you're going to see exactly how much you've earned so far today. And it can be way more than your hourly rate. And so aligning the incentives of the company with the employee is the trick. Instead of it just jamming down their throats like you've got to do this and i go to a lot of team meetings uh for home service businesses and everyone's looking at the floor and it literally feels like a punishment of the manager or owner going over the same three or four or five things. And in my mind, like those are valid things. Like we need to clean our trucks. Yes. We need to punch in and out of the jobs. Yes. These are all things that we know we should do. And it's the same three or four things just being reiterated instead of how do we align the incentives of the employee with getting these things done so the business can move more efficiently. And I think if we do that, it'll be better for the employees and better for the business.

Yeah, it's an optional like paid version is the software and the app for people to track it. But the actual book, it's online. You can actually get it for free. And then even the training is completely free. So you can take this part out if you don't want. MikeAndy. com slash P4P. It's free training on P4P. You don't need our software. Only if you're scaling a business, you have a lot of employees. It's nice to have the software just to keep all the numbers in your track of those.

Very similar. So like. we have two different versions of P4P. One's called the simple version. One's called the advanced version. The simple version is basically all you need to know is how much labor revenue was earned in the job. So as long as in your quote, you're breaking out materials, you're good. As long as you're not just showing up to drop like, ah, $5,000. As long as you're like, well,3,000 of that is labor and 2,000 of that is materials. As long as you're breaking out labor revenue. you can use P4P simple mode. The advanced mode is you have budgeted hours, and that's typically going to be for a type of job that is like custom to your point. It's going to be more routinized, maintenance driven, or projects that have a certain amount of budget hours on the estimate. And then you can create that as the benchmark for the employee to beat.

Yeah. Like the biggest. Concerns that everyone has around P4P is number one, if I incentivize people to move fast, they will do a poor job. And I would agree with you if you don't have the full system installed. And what we have is called yellow slips. It's basically callbacks, complaints from customers, and they get penalized for those. And so they quickly start to realize that doing a walkthrough with the customer is in their best interest. Again, I'm aligning the incentive of them making more money with doing the walkthrough that I need them to do to make sure the customer's happy. And so we actually saw about a 30% decrease in yellow slips or callbacks from customers once we instituted pay for performance because now the crew makes sure they do a walkthrough. They make sure that before they leave, they take the extra few seconds, scan the property, make sure it looks good before they leave. And so that's probably the biggest fee that most people have is around, you know, when it comes to performance pay is... Are people going to move fast? Are they going to make me lose customers, et cetera? And we haven't seen that in the case. The second thing is, well, how do you deal with varying degrees or experience or different types of services? Some services you're using an excavator. That's a very skilled thing. Sometimes you're pulling weeds. How do you actually make sense of paying the employees the same amount? And the bottom line is if your rate, your hourly rate that you're charging the customer goes up for a specific service, I'm paying them a percentage of labor revenue. And so if they're making $600 and working six hours or $100 per hour, I'm going to give them 33% of that. I'm going to give them 200 bucks. And so on a mowing route, they make $600 in labor revenue. I'm going to give them $200. Now, if they did that in five hours or 10 hours or 15 hours, it doesn't matter. They're making $200. But then there's going to be other services like excavating where like, well, I'm paying, I'm charging like 250 bucks an hour. Great. That's six hours now is. What is it? $1,500. And they're going to make one third of that. And so it scales with the type of services. It scales with having more experienced crew members. We have what we call project management bonuses. You can manually adjust someone's pay for things like damages, yellow slips. if they're doing maintenance on your equipment, you don't want that hurting their pay. So you manually adjust their P for P. So there's a little, a lot of little things that like, I just tried to make it where I wanted to pay someone based upon their performance. Like it kind of makes sense. The harder you work, the more money you make. And that made sense to me, but I could never like figure out like five or six little tweaks. in the system to actually be able to do that and i did it out of a place of necessity like it wasn't like me dreaming this up because i was smart it was like my business was not making money and there are people in my business working really really hard but making a dollar or two dollars more per hour than someone else that was sleeping around chilling out lazy and sometimes they would make more money than the person working super hard because they asked for a raise That makes no sense to the employee, to the business. It just isn't fair. And this is why most people can't open up their books or share numbers with their team is because all these weird price incentives between employees based upon they know them, they ask for a raise, they've been there a long time. There are people that have been in your organization for 10 years and make less money for the business than the guy who just started last week, but is hustling and working hard. And I don't think it's fair that the person that hasn't been there for 10 years gets paid less. And so that's ultimately what P4P was kind of started and built upon.

Essentially, right? Because let's say it's a mowing job. I'll use that one for example. It's 80 bucks. They're making a percentage of that. When they roll up, they know, okay, I'm making 33% of 80 bucks. That's how much I'm making on this job. There's other times they go to a massive project that takes two or three weeks. And on that job, they know, okay, the invoice is 24,000.12,000 of that is labor. I'm making 33% of that. Let's see how efficient we can make this thing happen. And it's going to be divided between my crew. And so it really does scale. The challenging part is jobs like yours in terms of handyman sometimes where you don't go into a job knowing how many budget hours or the quote that's given is a range. That makes it a little more difficult because you really are charging by time. I'm a huge advocate, though, of still using P for P in those cases, because what it does is it allows the employee to make more if they don't get callbacks. So, for example, if someone. bills out for eight hours, but then they get a call back, usually that's coming out of the pocket of the employer. Whereas what I would probably do is like, hey, you're gonna make a third of the labor revenue. And yes, it's by the hour we're charging. But if you have to come back to the job, there's no more revenue being produced. Therefore, you're not getting paid for that. And so it'd be more of a quality incentive. Because in handyman, a lot of times you're quote unquote boss, the customer is over your shoulder, making sure you aren't twiddling your thumbs and wasting time. And so, yeah, it's just a balance. Every industry is a little bit different, but definitely the hardest one to implement is where you do charge by the hour.

close, but we don't do it based on the profit margin. What we would say is you get a percentage of that labor revenue, regardless of how long job the job takes. And so I'm going to give them, you know, $666 out of that 2000, regardless if it takes them five hours. 20 hours or 50 hours. Now at the end of the paycheck, I'm going to make sure they make at least minimum wage or at least base pay plus overtime. I'm going to make sure that those rules are always governing that, but they have the ability to make more simply by working faster. So for me, instead of it being a variable or like my labor cost changing, it's now a fixed expense. Like when I start that job, I know I will pay $666 in labor costs. So it's not like I make money and I don't make money on a job by job basis. I know going into the job exactly how much those wages will be.

And this is the thing, especially if you have multiple stops in a day is most of the waste is not on the job. Like I found this all the time when I was first rolling out. The guys are crushing on the job. Like when I compared budget hours to actual hours, I was like, they're really doing a great job, but it was the drive time. It was the load time, unload time, coffee breaks, bathroom breaks, lunch, napping, like smoke breaks. Like you name it all of a sudden,30,40% of their day. wasn't spent on the job site where I thought they were being efficient.

And this is the thing, like I always think about Brad, is like ultimately when you think about hourly wages, right? Technically, the longer the job takes and the more time they burn between jobs behind the windshield, the more money they make. Whereas the opposite is true for an owner. The less time the job takes, the more money we make. And that's why there's this constant friction between owner and employee. And that's why we like dash cams and we track our trucks and we're rolling up on the project to see if they're still working versus just be like, hey, look, the faster we get the job done at the satisfaction of the customer, we all make more money. It's just a better way to be able to manage. And now no longer, if someone's on their phone, I don't care. As long as they're above base pay, I'm like, look, you do you. If you want to be on TikTok, that's fine. You're just not going to make as much money today. And that's up to you. But when they're making $10, $15 more per hour than base pay, they're thrilled and they're incentivized to manage their own time.

Well, here's what's crazy. Let's assume we're not on P4P. Eventually we'd find out, we'd probably have to fire someone, but it would be like months, six,12 months. You can get someone like that to kind of bumble around on a crew, being efficient, not making the company any money. pulling down the morale of a players like the worst thing you can do an a player is give them someone like that and so now on p4p when that happens what like the very first day you're gonna know if someone's lazy and you will get them rid of them immediately and in fact your high performers will dictate like they'll be like i am not working with that person because they are affecting my paycheck. But furthermore, it will incentivize that A player to actually train and make sure that that person is groomed up. So we'd give them trainer bonuses when they are first getting started with a new employee. So it compensates for that difference in their pay. So we give a per hourly bump to their pay if they're training a new employee. But from a work ethic perspective, once someone's onboarded, they keep each other accountable. And I don't have to manage them because their crew member that is making a bunch of money is like, you got to pick up the pace or I'm not like you're out. And then they'll report them back to me immediately. So we usually have like either people make it three days or make it three years because if they can make it three days, it means that everyone on the team wants to work with them. They're efficient. They're trying to work hard. They pack a lunch. They're not stopping 5,000 times because now it's affecting everyone else's pay on the team. And it gets flushed out very quickly.

So like we're always checking, you know, inside of Copilot, you can see like every single job has actual hours versus budget hours and it goes red if they're going over the budget hours. And so there's a couple of things like when it comes to raising prices, it's determined by like, okay, if there are customers that we are always not hitting budget hours on, we need to raise prices in that area. If there are certain services when it comes to projects that we're always not nailing budget hours, we need to increase the amount of hours we're allocating per square foot, for example. And so it comes. down to simply looking in retrospect and looking at projects or recurring jobs and like were we above or below budget hours and then over the course of time two three of those projects is this a is this a trend and we actually adjust our pricing it

Across the board, it's always focusing on the wrong thing. And so I think at different stages of getting to a million, we have to focus on different things in the business to get to the next stage. And what got you here won't get you there is a very common term, but yet we don't practice it. So for example, going from zero to 200,000 or so in annual revenue, usually I see that being the role of the owner needs to be a labor. You're doing a lot of the physical work yourself. And then from 200,000 to 500,000 or 800,000, I should say, is really that of a manager like you're trying to manage your crew that's a completely different skill set to manage people and make them efficient when you are not there managing their payroll you're doing a lot more admin like the amount of work on the managerial side is much greater and then once you pass eight hundred thousand dollars in annual revenue, it's really because much more the role of the owner is an architect. Like you're not actually doing anything, but you're standing back and you're observing what's supposed to be done. You're thinking about acquisitions. You're thinking about financing new equipment. You're thinking about new service areas or new service products, lines, offers, promotions to your customer base. And I think what a lot of times happens is the person that's doing zero to 200,000 is trying to be an architect when they should just be a labor and be super efficient at getting the work done. And then there's people that are architect in terms of size of business, doing two, $3 million businesses. And yet every single day they're out in the field with their crew doing the labor. And so I think focusing on the right thing at the right stage of business is what gets you to the next level and done over and over and realize that you'll have to, there's new versions of you as an owner that will have to come as you grow the business is super important.

I really do think that the revenue still, those constraints still hold out because ultimately all of us are selling time. We're selling an hour per unit time to a customer, whether it be 80 bucks an hour for mowing grass or $150 per hour for doing electrical or $200 if you're doing some heavy equipment. Ultimately, we are selling time to the customer for some rate. And it usually transitions from like, I got to use my hands, zero to 200,000 to my head. being a manager, strategically moving things around, and then to my heart as a leader, as I begin to scale the business past a million. And failure to swap to any of those or make the transition regardless of the service, regardless of the size of projects is what I see consistently being a failure point. There's actually this coming Friday, I know this is probably after we record, but there's a $2 million... home renovation company that we actually did a turnaround for. And this company, uh, been business for a long time, family run over 20 employees,15 plus trucks. Um, but ultimately still losing money, like a lot and lots of debt. And this just comes down to like, you know is are we focused on the right things like is actually offering more services and doing something to the trucks actually the right move or is it like we need to fix the fact that every year during three months of the year we lose money And so focusing on the right thing is many times I just find the thing that we fail as home service business owners because we are distracted by the next shiny customer. We're distracted by the next shiny service. We're distracted by the next shiny truck instead of focusing on what actually is going to affect the business.

I see a lot of people when they cross 200,000. They, until they get to over 500,000 in revenue, they make no more profit. And because they're hiring their first few employees, they're starting to add overhead, their second, third truck. They have to get a shop space. They can't do it from their house anymore. They've got to get insurance liability. Like these are things that they didn't have to do before. And because now they're working on the business instead of in the business, which again, to use the email is super awesome. Also what happens is you become an overhead expense to the business. And so the financial pain that you endure from 200,000 to like 500 plus thousand dollars in annual revenue can be very difficult because you're used of 40,50,60% profit margins. But when you stop becoming the most efficient revenue producing team member from your team and now become an overhead expense to the business as estimator, boss, manager, person answering the phone. You don't make the business money. And so profit margins go from 40,50% down to 10,15, maybe 18% at a three, $400,000 business. And that plays tricks in our brain. It's like, I'm, I am working way longer. I have to deal with all these employees. I have to fix all of their mistakes. People call out all these liability. I got the shop space. Why would I not just go work by myself back to being the craftsman and do it myself and do it right, but way less stress. And from a financial perspective, they're right. And so I really see it as like the wilderness of revenue, like that 200,000 to $500,000 in your revenue. Cause you don't make any more profit and it plays tricks in your brain because like, why would I just go back to being 150,180? $80,000 a year, maybe a helper on the weekend, but making 70,80% profits. That's very appealing. And the only reason to get past that wilderness of profitability and grow a business to a million, grow it past 500,000 is to be able to build a business that runs without you. And in order to do that, it has to have systems and it has to have a high enough profit margin, have enough pricing in general to get past that wilderness. And that's why a lot of people fail at that period of time or go into massive amounts of debt is because they simply don't charge in a high enough price to compensate for the fact that they will now be an overhead position in the business instead of a revenue producing team member.

Yeah, it's the last chapter of the book. the total business turnaround. I call it dig, build, Barry. And I think about like building a massive tower. And in order to build that tower, there's actually a moment in time where for several months, you actually dig down into the dirt and you go lower. In other words, you quit your job or you stop being self-employed and you will hire people and you actually make less money. You dig down into the dirt, but it's required to build the foundation in which. you will build this massive tower that one day people will come admire. And when you build the multiple million dollar business in 10 years, people will come and they will admire the tower that's built. What they won't see is the foundation that was dug, built, and then buried. And that's a very painful part of business. The first three to five years when you're getting through that phase and you're hiring the first employees and you're going through those razor thin profit margins and you're trying to build this tower and you can't build it without actually making less money first, without having a lower standard of living, without downsizing, without having less time off for a period of time. Because without that, you build the tower and it would eventually topple over. And that's what a lot of people do with debt. They're trying to circumvent the dig, build, bury process. by which you build a really, really messy foundation. And it's not fun. And there's people that come to the edge of the foundation, look down in the hole and laugh at you. There's other competitors. There's people you went to school with. There's friends or family that said you shouldn't have started the business. And they come and literally look down at you and laugh. And the only hope you have is the idea that one day you will build this foundation and you will build above ground level. And you actually build something worth looking for, looking at. And people will come one day, come admire the thing you've built, but they will not see the pain that you endured. to build the foundation.

If you have really good systems in place and it really comes down to your capital, right? Cause if you're not constrained by capital, you can pump leads and you can hire people and you can make more mistakes. And so if you either a have debt, and that's what most people will go if they don't have money or if you just have savings, it definitely greases the wheel of growth. And so I always talk about the 4L framework. It's liquidity, leads, labor, and leadership. And what greases that wheel of growth is more money. Like if you put more money on, you can go get more leads. If you put more money and you can hire more people. If you... put more money, you can get great leadership and a great general manager that has already done it before. And so it comes down to like, how much capital do you have is usually going to be the constraint of time. I think very realistically, someone that has a good business sense, maybe doesn't have as much capital, can do it in five years. It's going to take 10 years if you don't have skill, you've never done it before, and you have no money unless you're going to go into debt. That would be like a realistic timeframe. And for that reason, I always tell people like, if you're not willing to put in 10 years, don't get started. There's other ways to make money, more reliable ways of making money than starting a home service business. But if you're willing to put 10 years in, I think most people could build a million-dollar business. As long as they're willing to learn, they're willing to adapt, they're willing to take feedback from other people, you can build a million-dollar business because home services is always going to be needed. Even in a down market, even in a recession, people will not want to fix their house. They won't want to get on a ladder. the ability to be able to just put in the time. And unfortunately, the vast majority of home service businesses don't last five years. And the big reason for it is simply because it's low barrier to entry. You need a hammer and need a toolbox and you're good to go. Because the barrier to entry is so low, it makes the barrier to leaving very low. People can bounce very quickly. And so I think the vast majority, if I had to like bet on any one characteristics of success in home services, like have you stayed in business for at least five years? The likelihood of success is so much greater than someone getting started, even if they have more money or skill or whatever. And so just time under the bar and like getting the reps is required to get to that level.

Yeah, I think so. Last year, I was talking with Alex Ramosi, and I was asking kind of like what's a major constraint for our franchise's growth. And he said kind of like what our unit economics are and what he thinks we need to hit that, what we need to change to be able to grow to 1,000 locations. And so then I went from that, I was like, hey, what's preventing us from actually hitting these unit economics? And for that, for us, it was where our owners are making $200,000 in net profits. He's like, if you can get that, you'll sell 1,000 locations. Okay, great. So I went and I analyzed all the profit and loss statements inside of Augustination. And then I went and took over, oh, it was like 150 because there was four, and each was almost 200, almost 200 P &Ls from the turnaround show because we get P &Ls sent to us all the time. I analyzed all of those. And this is what's crazy. Across home services, almost every single business doubled their profit margin if they just took out one quarter. And so I called it Q4 collapse. And it's where there's one quarter because of seasonality that completely wrecks our year. And this is like, literally you'll see this, this coming Friday and the turnaround with a handyman repair business. Like if they just took out one quarter, they were running like an 18% margin business with that one quarter of negative profits, negative cashflow. They were down to single digits, low single digits. And so I think across the board, when it comes to home services is like. Can we take the seasonality of our industry away? It is what kills home services. It is the one quarter, the two, three, four months of the year where you don't get leads, revenue dries up, you have to lay people off. That's what creates the seasonal worker issues. And we're start, stop, start, stop. And this is why HVAC systems have become extremely very popular in venture capital and private equity is because they have heating and air conditioning. They're complete polar opposites of seasonality and therefore their revenue is much more... even keeled than something like lawn care where our grass grows and then it doesn't and then it grass grows and it doesn't and so how can we remove that seasonality how can we remove that q4 collapse and that's season specific offers with season specific services to your customers and that might mean offering a different upsell or different cross sell to your customers at a period of time to be able to make up for that revenue able to make up for those loss of leads and getting creative to prevent that q4 collapse because it across the board in home services is what kills them, is one quarter of leads drop off the cliff, revenue drops off the cliff, they have to lay off their employees, and it will just be this constant cycle every year of losing employees, losing customers, bank balances going to zero, saving up money for the winter. These are the type of things that we've got to get away from. The only way to do it is get religious about solving this problem.

Absolutely. So like, this is like a. the main thing I'm covering at our upcoming conference, because we have five different ways I feel you can solve this problem. Number one is you lock down. That is essentially you cut all fixed expenses. You literally shut down the business. And for some businesses that don't have debt specifically, this is actually a good model. You literally tell everyone there's no work for three months and you're out. And as long as you don't have a high fixed expenses and a bunch of debt, you're fine. The second thing is to be able to just do more of what you're currently doing. Like, yes, maybe customer acquisition costs goes up, but if you can actually make sure that you do the best marketing, you can still attract customers. And then it's like, well, can I offer a recurring service? Like for us, it's winter services. So we can't mow their grass, but we can trim their bushes. We can pull their weeds. We can edge the lawn. We can check their gutters. What other ancillary services can we add on? Then there's another one. It's like, can I add an adjacent service? This is going to be more along the lines of what you talk about, snow. It's a much harder lift. There's going to be more equipment involved, et cetera. But you have a customer base that you can sell to and do a cross sell into that snow service. And then the fifth one is actually opening up a different brand. So for example, like in Augusta lawn care, we've started a whole new division called Augusta lights and we have everyone's websites done. And then we do all their marketing, the whole nine yards, because like, I want you to go from lawn care to lights, lawn care to lights, season specific offers for season specific services. And so I agree with you. Adding more services is the last thing you want to do, but it's a matter of, I would rather have that than no revenue for a few months because to your point, Adding more services and adding more geographical service area is the fastest way to grow your business. It is also the least profitable way to grow your business. And this is why you have simple services that have massive companies and they're very profitable is because they stayed with one service. They got really laser-like focused on a small geographic area and then expanded then. So you can always grow by just like, oh yeah, we'll service this city and we'll go a little further out. And you can always add more services. So when I'm adding a service, the only reason, the only reason I add a service is because it has an inverse demand curve of what I currently offer for my primary service. So for lawn care, very, very, very. you know, high demand during spring and summer and fall, but winter zero. Well, the opposite or the inverse of that demand curve is Christmas lights. Everyone wants Christmas lights in Q4. That's when we slow down. So it's a perfect service to be able to offer. And it's only because the only reason I want to offer that service is because it has a different demand curve than I currently offer. And most people are like, oh, you should all these services. It's like, look, you're going to get all the leads pouring in at the exact same time that you're already getting too many leads and already turning away customers during the middle of spring. Why would you add that service? And so. Yeah, that was my little rant. There you go.

No, we got, we're at the conference we have coming up. We're doing a whole day of workshop. Everyone will kind of like create a plan, like a track for which of those five they're going to use and how to do it.

Yep. In January up here in Seattle. Yeah.

blue collar summit,

It's probably going to be 67% lawn care landscaping just because it's my, my industry, but we are getting a lot of people outside of it. So everywhere from car mechanics, we have a roofer company. We have a cleaning company that's speaking as our speakers, John Taffer from bar rescue. He's speaking. So it's gonna be a lot of fun. We're trying to, yeah, it'll be interesting. Very different than my, uh, my general thesis on stuff. So it'll, it'll be fun though. Yeah.

Oh, yeah, and 2.0. He had the second one that came out.

Thank you, Brad. I appreciate you.