Latest / Home Service Millionaire with Mike Andes / Only 1% of Owners Make it Past $1M. Will You?

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Only 1% of Owners Make it Past $1M. Will You? · Home Service Millionaire with Mike Andes

• 0:00
  If you look at some data, it looks like 9% of overall businesses get above a million.
• 0:04
  Roughly say one out of 10 get to a million, one out of 100 get to 10 million.
• 0:08
  Otherwise you run out of ammo when the business plateaus or if it starts to even start dropping off because the economy or whatever, you want to be able to pull that lever.
• 0:16
  And if you don't have that in your arsenal, it's not only a matter of business stalling out or not growing.
• 0:21
  It's also like it's very hard to sell.
• 0:23
  We got to stop this machine.
• 0:25
  So you call your marketing agency.
• 0:27
  Hey,
• 0:28
  Can we pause our $1,500 a month SEO this month?
• 0:31
  Like we're, you know, I can't take all these phone calls.
• 0:33
  This is the problem.
• 0:35
  And it's been the problem forever.
• 0:36
  Nobody has a marketing problem.
• 0:37
  Everybody has a hiring problem.
• 0:39
  Keeping the wrong person for too long slows down the growth massively.
• 0:43
  It will be the difference between a business growing quickly or not growing quickly, a business being a nightmare to run versus being a great business to run.
• 0:51
  A huge component of enterprise value is, is the owner required to be there to keep these two engines like you mentioned running?
• 0:59
  If so, the enterprise value drops dramatically.
• 1:02
  Well, last week we were talking about how do we get you to a million dollars?
• 1:06
  We talked about the six ways to do that.
• 1:08
  And there's infinite ways to do it.
• 1:10
  But we talked about six we thought were pretty important.
• 1:12
  This week, we're going to go a different direction.
• 1:15
  Now you're at a million.
• 1:16
  How do we get you past a million?
• 1:17
  We're going to get greedy.
• 1:18
  We're going to get greedy.
• 1:19
  You know, millions are enough.
• 1:21
  Exactly.
• 1:22
  Is it two?
• 1:23
  Is it five?
• 1:23
  Is it ten?
• 1:24
  I don't know.
• 1:24
  Whatever you want, these principles, what we're going to talk about are the ways that you go about getting to that next level, that next number.
• 1:31
  Mike, I've heard you talk before about how few people get there.
• 1:35
  And I remember back in the SA days looking at data, kind of thinking about how many people get to a million or two million.
• 1:43
  Do you have any numbers or current numbers on what percentage of companies get to a million and what percentage get passed?
• 1:50
  It's super blurry.
• 1:51
  I've looked at this a lot and...
• 1:54
  If you look at some data, it looks like 9% of overall businesses get above a million.
• 1:58
  It's lower generally in home services because there's so many solo operators and people are just out there doing their own thing.
• 2:06
  But yeah, it's probably, I would roughly say one out of 10 get to a million.
• 2:11
  One out of 100 get to 10 million.
• 2:15
  And so if you're in those echelons, it's pretty exclusive.
• 2:19
  Yeah, I know that it's a small number that even get to a million.
• 2:23
  Yeah.
• 2:24
  Cool.
• 2:24
  So let's start.
• 2:25
  We're going to do six again, just like last week.
• 2:27
  So why don't you kick it off with your first question?
• 2:31
  way to get us to 10 million bucks or whatever your number is.
• 2:33
  So I had this one as my third one.
• 2:35
  I was like, you know what, this one's the sexy one.
• 2:37
  So I'm gonna put this one to the top.
• 2:38
  Oh, okay.
• 2:39
  All right, we're gonna try to hook them early so they don't turn off the video.
• 2:42
  There you go.
• 2:43
  So I put paid ads are fuel to go faster.
• 2:46
  And it's hard to use word of mouth only and get to $10 million inside of a decade.
• 2:52
  And so I'm sure there's someone in the comments to me, like, I build a $10 million business in two years.
• 2:56
  Awesome.
• 2:56
  You are better than I, but for most people, it's hard to do it based on word of mouth, I kind of think of it like a sailboat versus a motorboat.
• 3:04
  A sailboat is kind of at the whim of the wind and the currents versus like a motorboat, like you don't even think about the wind is like, okay, it's choppy, but like, I'm just going to gun this thing and put more fuel into it.
• 3:15
  And so if you have the fuel to be able to spend, i.e.
• 3:18
  cash, and you can deploy it against paid ads, you can just go so much faster and you can control the speed versus waiting on the wind, i.e.
• 3:27
  referrals, word of mouth, people seeing your truck.
• 3:29
  Those things are all good and we all want those things because your customer action cost is the lowest.
• 3:34
  But to do it in any meaningful
• 3:36
  window of time that most of us want to, you know, before we retire, it usually requires paid ads.
• 3:42
  And so even with Five for 50, it's like, it's five years of focus.
• 3:47
  It's very hard to build a $10 million business in five years.
• 3:50
  And so I would say figuring that out is like, is a key element.
• 3:55
  Yeah, I'd agree.
• 3:56
  Yeah, it's just too slow.
• 3:57
  And that's what you see a lot of companies that get really big or even get to a million.
• 4:03
  You see that it took a very, very, very long time to get there.
• 4:06
  And so- And if you start being profitable, even say you're two or three years in, you're really profitable, where do you put that cash?
• 4:12
  Otherwise it's gonna get taxed, you know, 25, 30%.
• 4:16
  It's a tax advantage way to actually know, okay, if I put dollars and cents into my business, what is the return on invested capital based upon me knowing my CAC,
• 4:24
  knowing my lifetime value, and hopefully being in the market, but also being able to avoid taxes.
• 4:31
  Yeah, boy, I agree.
• 4:33
  And I think you started by saying Facebook.
• 4:37
  Maybe I'm misremembering, but when I think about Facebook,
• 4:42
  the things you tend to advocate for.
• 4:43
  It does see, it seems to be of course website and SEO, but it very much paid ads.
• 4:49
  And Facebook seems to be the one I hear you talk about the most.
• 4:52
  Is that where you kind of stand right now?
• 4:54
  I didn't say Facebook in here.
• 4:55
  Oh, you didn't?
• 4:56
  But you've been hearing it in your dreams because I heard a lot of your videos and you're the first line was like, Mike Andes has been pestering me to do Facebook ads.
• 5:03
  I'm like, I've been doing my job.
• 5:05
  I've been doing my job.
• 5:06
  And Jonas Olson, I just wrote a 5 for 50 video just came out.
• 5:09
  Jonas Olson today.
• 5:10
  I spent two days with him.
• 5:11
  He's like, Facebook ad, man, they're killing it.
• 5:14
  They're killing it.
• 5:15
  And so that's what I heard for two days.
• 5:16
  So I think I did tell you, it's like Facebook ads for me were a 2027 initiative at some point.
• 5:22
  And now I'm like, I keep talking to people are like Facebook ads.
• 5:24
  So I'm questioning myself now.
• 5:26
  So, okay.
• 5:28
  Like you said, I'm imagining things.
• 5:29
  I think the big thing- So what did you say at the very beginning?
• 5:31
  You just said paid ads?
• 5:32
  Just paid ads in general.
• 5:33
  I think whether it be postcards or door hangers, I don't care if you've got knock on doors, whether it be Google ads, LSA, like if you're on a paid strategy because otherwise you run out of ammo when the business plateaus or if it starts to even start dropping off because of the economy or whatever, you want to be able to pull that lever and if you don't have that in your arsenal, it's not only a matter of-
• 5:53
  business stalling out or not growing it's also like it's very hard to sell if someone coming into this business if you're building a 10 million dollar business assuming you want to sell this thing or pass it along very hard for them to have confidence that they can maintain or grow that business if there's not a solid customer acquisition strategy and that includes some form of paid ads
• 6:11
  And so I would encourage everyone to figure that out, whether that be door hangers or flyers or every door direct mail.
• 6:16
  I don't really care if it's online.
• 6:17
  It's just figure out what that strategy is.
• 6:19
  So you at least have a dollar and cents of a, I put money in, I get money out.
• 6:23
  And knowing what that equation looks like.
• 6:25
  Yeah, and similar to what you're saying,
• 6:29
  If you look at the math of these businesses, especially... Well, it doesn't really matter.
• 6:34
  I was going to say, especially if it's a low transaction size business.
• 6:37
  Like you're selling mowing, something that's $50 a week versus an $80,000 job.
• 6:42
  But this actually applies to both.
• 6:44
  Where I'm going with this is, if you look at the math, if you're not marketing, that business will slow down and it will eventually... We'll call it...
• 6:54
  level out or plateau simply because if you don't have tons of lead flow, your churn, your just natural churn, no matter how good of a job you're doing, will start to equal out to your conversion.
• 7:05
  So you get all these leads, you convert this many, starts to equal out to the churn, just a natural loss of clients.
• 7:12
  And that's how most businesses... One of the big reasons the bigger businesses just plateau.
• 7:17
  And they often think,
• 7:20
  What are we doing wrong?
• 7:21
  What are we not getting right?
• 7:22
  It's a marketing problem.
• 7:23
  It's not...
• 7:25
  Sometimes it's not even a retention problem.
• 7:26
  You might be doing everything right.
• 7:27
  It's just a marketing problem.
• 7:29
  And that problem doesn't just suddenly one day appear.
• 7:32
  As the business is growing, it grows slower and slower and slower because that problem is starting to happen to the business.
• 7:38
  And that's why it just takes forever to grow these businesses by word of mouth to any size.
• 7:44
  And I think...
• 7:46
  We assume here that you have built a million dollar business and you're getting trying to get a 10.
• 7:49
  I think that's the part that we, we gloss over here is that most people don't go to a million.
• 7:53
  And the reason is because they don't do the basics that don't cost them anything.
• 7:56
  Like if you don't have SEO and you don't have a website, you don't have your trucks wrap and you don't respond to Google reviews, you don't collect those reviews.
• 8:02
  Then yes, we are absolutely not even getting like those are table stakes after that.
• 8:07
  scaling past a million, that's where you have to have this lever.
• 8:10
  And right now I feel like there's this wave of like against ads and hey, I'm all for doing the basics.
• 8:17
  But if you're trying to go from a million to 10 and you have that kind of ambition, it's not just about the growth, it is the ability to be able to pass this as an asset to someone else with confidence knowing that you can acquire customers, even if something does happen to the wind of referrals and word of mouth.
• 8:34
  When you say this is a wave of not doing digital ads, is that on social media right now that people are talking about that or what?
• 8:40
  Yeah, just a lot of like, hey, don't pay ads.
• 8:42
  And I agree with them, but then when I look at the people that are in these communities, a lot of them are under a million or two million, like the vast majority.
• 8:50
  And so, again, we are talking to the person that's trying to scale beyond that.
• 8:53
  And that's where I think you've changed the belief of, it's not just gonna be a word of mouth game, unless you're willing to do it for,
• 8:59
  20 years because ultimately to your point it's like you can slowly get more leads every year by word of mouth getting more slowly more reviews You can increase you reduce your turn So allowing the business to continue growing, but this is a long and most will just they quit like When just such a slow growing business
• 9:18
  It's back to what I keep saying here and in other places.
• 9:21
  The biggest problem in these businesses, people get tired.
• 9:24
  They burn out.
• 9:25
  And you get tired and burn out because you went too slow and it was too hard for too long.
• 9:29
  You don't get through that really, those difficult phases fast enough.
• 9:33
  And so just you grind into the ground.
• 9:34
  And one day, you kind of like throw in the towel.
• 9:37
  You can't.
• 9:37
  You're mentally done.
• 9:39
  I want to go back to this no ads thing.
• 9:41
  I'm stuck on this.
• 9:43
  So what are they, are they saying do SEO, do something else?
• 9:47
  What are they saying if, if you're not, and I, there's all kinds of ways to market your business.
• 9:52
  Ads is just part of it, but what's the core argument?
• 9:54
  I'm not understanding.
• 9:56
  It's, it's doing the basics.
• 9:57
  And again, doing the basics is for the 90% of people.
• 10:00
  And so I'm, I'm trying to differentiate those things are important.
• 10:04
  Getting to a million, but getting from a million to 10 is a very different equation.
• 10:07
  And,
• 10:08
  if you're not doing the basics do them first you can't just go run facebook ads but then not have your google business profile set up correctly not have an address verified but like what a lot of them are saying is actually factually true for most people but that same logic doesn't apply once you've done all those things and you're trying to get to the next level i see okay that makes a lot of sense to me i was
• 10:30
  I was trying to figure out what we were.
• 10:31
  It's also good clickbait.
• 10:32
  It's good clickbait to say, don't pay Facebook.
• 10:34
  Don't pay Mark Zuckerberg.
• 10:37
  That's true.
• 10:38
  The $400 million yacht needs some fuel, you know?
• 10:41
  Okay.
• 10:42
  Yeah, I'm more of an advocate of do it all.
• 10:44
  Do the basics first, but just keep on marching.
• 10:46
  Yeah.
• 10:47
  Yeah.
• 10:47
  All right.
• 10:47
  What's your first one?
• 10:49
  So I'm going a little more macro on these because we're going from 1 to 10 million.
• 10:56
  So what are the big, big things that move the needle?
• 11:00
  And so I'm going to bring up what I brought up last week again.
• 11:03
  But it's like a core theme that I have.
• 11:07
  It's so critical.
• 11:09
  I mentioned it last week.
• 11:10
  It's this idea of these two machines running in your business.
• 11:19
  living this and thinking about it.
• 11:22
  And you have one machine, which is your growth engine.
• 11:26
  It's got to be spinning and firing and working to bring in clients and bring in work.
• 11:31
  So it's not just clients.
• 11:32
  It's like bringing in enough work.
• 11:34
  And then we've got this other machine that's, we'll call it recruiting or people.
• 11:40
  And this is the capacity to do the work.
• 11:44
  And what happens in almost every business in every industry around the world of any size doesn't matter.
• 11:52
  These two machines do not spin together.
• 11:54
  This one's spinning really fast over here, the growth machine.
• 11:57
  And I love working on the growth machine.
• 12:01
  It's so much fun.
• 12:02
  I love it.
• 12:03
  I love a big engine in my car with lots of horsepower.
• 12:07
  We're all wired some way.
• 12:09
  A lot of entrepreneurs love this part of the business.
• 12:12
  Then there's this other machine over here.
• 12:14
  It's just barely moving.
• 12:17
  And that's the one that brings in the people to do all the work.
• 12:20
  And so what happens?
• 12:22
  What happens is like, well, we got to stop this machine.
• 12:25
  So you call your marketing agency.
• 12:27
  Hey, can we pause our $1,500 a month SEO this month?
• 12:31
  I can't take all these phone calls.
• 12:33
  Like there's some, something that happens because this machine's spinning and this one over here is not working properly.
• 12:39
  You don't have enough people.
• 12:40
  You don't have enough capacity to serve all the people or you're trying to serve all the capacity and you're doing a lousy job.
• 12:47
  Now you're getting callbacks.
• 12:48
  You're having problems.
• 12:50
  You're getting bad reviews.
• 12:51
  Like it's just, there's a lot of symptoms in a business where I can look at them and say, ah, your engines are not spinning together.
• 12:56
  This engine is spinning really fast and this one's not.
• 12:58
  So,
• 12:59
  A little deeper.
• 13:00
  What happens when the growth engine is just spinning full speed?
• 13:03
  It's killing it.
• 13:05
  Back to my point.
• 13:06
  You call your SEO company.
• 13:07
  Hey, let's stop this.
• 13:08
  Hey, let's stop the door hangers.
• 13:10
  Hey, we can't run any ads this month.
• 13:12
  Whatever.
• 13:13
  You put brakes on everything because you live in fear you won't have enough people to do the work.
• 13:17
  Well, the inverse is also true.
• 13:19
  And that is that you have enough people.
• 13:23
  and the growth machine, you're not doing the ads.
• 13:25
  You did the basics.
• 13:26
  Good, great.
• 13:27
  You did the basics, but the basics only got you so far.
• 13:31
  You have enough people.
• 13:32
  You're one of the few people and you're one of the lucky people that can find enough people to do the work.
• 13:36
  Now you've got more people you could even hire.
• 13:38
  You could do more work tomorrow, but you haven't done the ads.
• 13:42
  You haven't done the extra stuff.
• 13:44
  You're not spending enough time thinking about this machine.
• 13:46
  So now you live in fear of the growth.
• 13:48
  So you can't keep your people busy.
• 13:51
  So back to last week's episode, you're bleeding profit.
• 13:55
  in the middle of the year, in the winter, whenever.
• 13:57
  You can't keep them fully busy.
• 13:58
  Or you've got all these people you could hire, but you can't hire any of them.
• 14:02
  Because it's like, well, I'd love to get Bob on my team.
• 14:04
  He's awesome.
• 14:05
  But I don't know if we can bring in enough clients.
• 14:07
  So you always live in fear of one of the other clients.
• 14:10
  one side of the business.
• 14:11
  Either we're not going to get enough clients and enough revenue or enough work, or we're not going to get enough people to do the work.
• 14:16
  And this concept, these two machines, is just imperative so that you can constantly be thinking about how well are these machines spinning and are they spinning in unison?
• 14:28
  If we're going to really start doing the marketing, are we thinking about this other side, which is producing the capacity, the people to do the work?
• 14:35
  And this is the never-ending state of business.
• 14:37
  And they're never spinning perfect.
• 14:39
  That's not the example.
• 14:39
  It's not like they have to be in perfect balance all the time.
• 14:42
  It's this constant awareness of, hey, based on everything that's going over here on the growth side of the business, we're going to be needing to spin up this recruiting machine a little bit faster.
• 14:52
  We let it run all the time.
• 14:54
  We're always looking for people, but we really need to dump a little more money in this and go faster.
• 14:58
  Or we're about to have a big bottleneck
• 15:00
  going back to this idea, I want to go from a million to 10 million.
• 15:03
  And we all make up stories and like, hey, next year, I'm gonna grow the business by $2 million.
• 15:07
  We just make stuff up and say, this is what we're going to do next year.
• 15:10
  But we never back into it to think, okay, that means we're gonna have to get this many leads.
• 15:14
  If we get this kind of conversion, we're going to need this many people.
• 15:17
  When you think about your machines like this, or you think about your business like a machine, you're constantly thinking about which one needs more fuel right now.
• 15:27
  it's going to make the whole process stop.
• 15:30
  If we can't find the people, that we can't do the marketing, and that $2 million goal we made up that we're going to grow the business by this year, we're not going to hit it.
• 15:38
  It was just talk.
• 15:39
  So this is, to me, one of the single most important concepts.
• 15:43
  And that's why I bring it up again this week.
• 15:46
  I think the part that makes that so difficult for home services is that the speed of the growth engine changes throughout the year.
• 15:54
  It's not like it slowly increases and you slowly get more, you know, okay, we need one more employee.
• 15:59
  Okay.
• 15:59
  Three more months, another employee.
• 16:01
  It goes really fast and then it slows down and that natural demand, I think it kind of ties into the ability to have paid ads to keep that growth engine turning at a similar rate.
• 16:12
  to be able to govern how fast it goes because it's harder to hire and fire people as fast as you get and leave customers leave.
• 16:19
  And so the growth engine can move much faster and change acceleration, negative or positive, much faster than the supply or the labor engine.
• 16:29
  Yeah, I agree.
• 16:30
  And
• 16:31
  But I would also argue that this happens in most... You're not saying the opposite.
• 16:35
  But it just happens in so many industries.
• 16:38
  I've always thought about the businesses that we're in and I think about the seasonality.
• 16:42
  And I've looked at so many deals and so many other companies and got to know so many other people.
• 16:47
  It's like, wow, I'm always amazed by the seasonality or the selling season across every business.
• 16:52
  I had no idea there was such a selling season in that, whatever your business is.
• 16:56
  So everybody kind of feels this.
• 16:59
  And the most basic argument for the recruiting engine is it's not that people are struggling to
• 17:08
  keep the thing spinning at the right pace.
• 17:10
  It's that the thing is completely shut off.
• 17:14
  It isn't even spinning because we don't even think about it.
• 17:17
  It's like, oh my gosh, we need some people.
• 17:20
  We need some people.
• 17:21
  What do we do?
• 17:21
  What do we do?
• 17:21
  And then you spend an hour on it and you find a guy and it's like, okay, we'll never think about that again until when we have a fire.
• 17:30
  It's like emergency.
• 17:31
  We need another person.
• 17:33
  That's almost the bigger problem.
• 17:34
  It's like we, it's back to, I think I said this last week as well.
• 17:39
  if you think about what's important, or you could say whatever you want to say about what's important in your life, but just look at what you do.
• 17:47
  Like, look at your calendar.
• 17:49
  We all moan and groan.
• 17:51
  We all, all of us.
• 17:53
  We moan and groan about getting enough people to do the work, but look at how little time we're spending on this day
• 18:01
  part of the business.
• 18:02
  This is why I frame it as this core thing.
• 18:03
  They're the two most important engines of the business.
• 18:06
  Growing to getting the clients and the work and having the capacity to perform the work.
• 18:12
  Two most important engines.
• 18:14
  If one of them never runs, you'll never build a company.
• 18:17
  Period.
• 18:19
  And so the recruiting one is the hot topic because it's the one we all, all of us talk about it.
• 18:25
  We all say there are no good people.
• 18:26
  We all say I can't find enough good people.
• 18:28
  We all say it, but we're spending no time on it.
• 18:32
  Nobody's spending enough time on it.
• 18:33
  And that's why I love to talk about this concept.
• 18:36
  Yeah, like I talk about the 4L framework where labor can become the constraint to growing the business.
• 18:41
  And whenever someone points out like they can't find good people, what I usually like to do is I like to pull up their P&L and just compare their ad budget versus what they're spending on Indeed.
• 18:50
  Now, are there better ways than Indeed to help the recruiting engine?
• 18:53
  Yes, absolutely.
• 18:54
  But it's a good proxy for like you spent.
• 18:56
  $3,000 last year on Indeed, and you spent $60,000 on Facebook ads and Google ads and door hangers.
• 19:04
  And why are we wondering why we can't find any good people?
• 19:07
  And so I think it's a good sometimes check that if you actually say those words, like I am supply constrained, I cannot find good people, no one wants to work for me, I can't find any employees.
• 19:15
  Look at your P&L and be like, where am I spending money to get attention from either customers or prospective employees?
• 19:22
  And it's a good just reality check of where are you spending your money?
• 19:27
  Yeah.
• 19:28
  And I don't talk about this to sound like I'm preaching.
• 19:31
  I assure you.
• 19:32
  We're here for it.
• 19:33
  We're here for it.
• 19:35
  No, no.
• 19:37
  I've looked at our business, our city turf business.
• 19:39
  The number one problem with that business is this problem.
• 19:43
  It has been.
• 19:44
  It's getting better, but it has been this problem.
• 19:48
  It's like mowing capped because we lived in fear of H2B visa, or we lived in fear of finding enough people to do the work without carrying them on our payroll for a long period of time.
• 20:00
  Or we lived in fear of finding enough people to do the work that we were only going to keep on payroll for, you know, not our normal years and years and years like we do people.
• 20:08
  And so it,
• 20:10
  put us in a place where we didn't grow that business.
• 20:14
  We didn't try to grow that business anymore.
• 20:15
  We got to a place where like, hey, we don't want to grow this anymore.
• 20:18
  It's not worth the people problems.
• 20:19
  So this is not preaching.
• 20:22
  Also, looking at so many businesses of people that are past a million and they're going.
• 20:28
  They have a lot of the right stuff in place.
• 20:31
  Over and over, this is the problem.
• 20:34
  And it's been the problem forever.
• 20:35
  It's not a new problem.
• 20:36
  I remember I did it started Academy.
• 20:39
  Basically, it launched in the end of 2014, officially started January of 2015.
• 20:45
  In 2015, a decade ago, 11 years ago, I was telling the Academy members, nobody has a marketing problem.
• 20:53
  Everybody has a hiring problem.
• 20:55
  The marketing is the easy part.
• 20:57
  Like I want to talk about marketing all the time in Academy.
• 20:59
  That's the easy part.
• 21:00
  We could solve that like that.
• 21:02
  It's a getting people problem.
• 21:04
  This has always been the problem.
• 21:06
  This is going to be the problem for the next decade.
• 21:08
  And so that's why I just can't help but bring this up over and over again.
• 21:12
  I agree.
• 21:13
  All right.
• 21:13
  Let's go.
• 21:14
  Oh, Bally, back to you.
• 21:16
  What's next?
• 21:16
  All right, so this is the one I actually think is the big one, but it's not as sexy, so I put it second.
• 21:21
  All righty.
• 21:21
  And I think the difference when you're going from a million to 10 million is really learning the skill of leadership.
• 21:28
  And creating a clear vision that allows other A players to fit their goals inside of the vision you put forth.
• 21:35
  And it's funny, a few years ago, I didn't really listen a lot to Jocko, I know who he was.
• 21:41
  But one of the things that he would always say is leadership is a skill.
• 21:45
  It's interesting that people think you'd be able to fight without training, but you, why wouldn't you be able to play guitar without training?
• 21:51
  People think, oh well, you can't really learn leadership.
• 21:55
  It's like, no, leadership is a skill just like guitar is a skill.
• 21:58
  There's moves that are just like playing chords and people don't understand that.
• 22:03
  And that's one of the reasons I am able to have, that's why I have a company teaching leadership.
• 22:09
  And I didn't really believe that.
• 22:10
  I was like, he's saying that because then he can sell me leadership training.
• 22:14
  And I think my mind has changed dramatically as the business has grown to a certain size where it only becomes about leadership because I physically can't do all the tasks in the business.
• 22:24
  And I kind of think about the evolution of the entrepreneur going from doing to teaching to leading.
• 22:30
  And I kind of feel like,
• 22:32
  from zero to 250 000 in annual revenue you just have to do the work really well like you do good work quality talk to customers good you work hard you put in the you can get to 250. then to get to a million you really have to be able to teach like be able to take those skills and teach it to someone else
• 22:48
  And I think the last part that so many people beat their head up against is teaching is a very different skill than leading, because now there's someone else that's teaching the technician how to do the work and you're removed to two different steps away from doing of the work.
• 23:03
  There's the teacher mid level managers and those mid level managers are the keys.
• 23:08
  Going from a million to 10 million.
• 23:09
  Because you can be the genius with a thousand helpers or a genius with 20 technicians and run a two or three million dollar business.
• 23:16
  But to get to 10, there has to be that mid-level manager.
• 23:20
  And in my opinion, that is the person that is able to be the link between the leader and the person doing the work and make sure the work gets done correctly.
• 23:27
  And that's a teacher, the person that loves pouring into their team, loves pouring into the clients.
• 23:32
  Like you've mentioned before, like a killer in operations of doing the work.
• 23:36
  Really, it's the person that teaches the people how to do the work.
• 23:40
  And that frame has always helped me.
• 23:41
  And when I've talked to entrepreneurs, okay, where are they at mentally?
• 23:45
  And what does their business need?
• 23:46
  Are they doing the work?
• 23:48
  Are they teaching other people how to do the work?
• 23:50
  Or are they actually leading so that the entire organization can move forward?
• 23:53
  They create the systems for teachers, managers, mid-level managers to help the technicians do the work.
• 23:59
  And I feel like this is where people beat up their head because they have a successful business at a million, two million.
• 24:03
  And it's because they're a really good teacher.
• 24:05
  They know how to manage their technicians, train them to do the work, but then they can never get other mid-level managers to stick inside the organization.
• 24:14
  And that prevents them from going past three, five, and all the way up to 10.
• 24:18
  Yeah, I agree.
• 24:19
  This is very similar to my number two.
• 24:21
  So a lot of crossover here.
• 24:24
  How do you talk to people about learning to be a leader?
• 24:27
  Man, it's so hard.
• 24:29
  I think I've tried to encapsulate more and more, but I think it just keeps coming back to humility, especially when you realize that it's the constraint.
• 24:37
  Usually you've built a bigger business and you're doing probably the best of anyone you know.
• 24:42
  You're running a $2 million business.
• 24:43
  You might not have anyone you know in your local area or your family that has made as much money as you, been as skilled as you in a trade, has the house that you have.
• 24:52
  You might not know other entrepreneurs.
• 24:55
  And a lot of times it comes down to that has been your,
• 24:59
  identity that you do know everything and it takes a level of that humility and sometimes public failure to realize I Lack something that I is preventing me from attracting great talent And if someone else was able to do it, they have they know something I don't and I've got to figure out whatever that sauce is and that's why I kind of tied it into having a clear vision because the thing that
• 25:22
  finds those great mid-level managers, wants them to stick with you, is learning the skill of leadership.
• 25:26
  The thing that always is like the first step is like, well, where are we going?
• 25:29
  Because if you're gonna lead, you're out in front, you better know where we're going.
• 25:32
  And if that's not clear, we're just gonna, we're gonna make a bunch of progress, but never make actually directional progress towards a certain goal.
• 25:40
  You mentioned Jocko, I've never read his book, but did you get anything of high value from it?
• 25:46
  Is it something you would point people to?
• 25:49
  I like the Extreme Ownership, that's like his first book.
• 25:53
  But the book I love the most, we give it to all of our owners, is Leadership Training and Tactics.
• 25:59
  And it's an- Is that by him?
• 26:00
  Yeah.
• 26:00
  That's by him, I take it?
• 26:01
  It is, but it's more like,
• 26:04
  built for like a handbook.
• 26:06
  It's like, if this happens, do this.
• 26:07
  If this happens, do this.
• 26:08
  It's a shorter read.
• 26:10
  I really enjoy it.
• 26:11
  It's less, not high brow, but it's less theoretical.
• 26:14
  Like extreme ownership is more of a concept in life.
• 26:16
  This is specifically for like leadership training and tactics and I really enjoy it.
• 26:23
  I can't recite this book to you.
• 26:24
  I read it a long time ago.
• 26:25
  A book that comes to mind that I always really liked was What Got You Here Won't Get You There.
• 26:30
  Can't remember who wrote it.
• 26:31
  I can't recite many details.
• 26:33
  I've read too many things over the years.
• 26:35
  But I mean, there's a few things I remember from it.
• 26:37
  But that may be a book for some people to look up as well that I just remember thinking was a top book.
• 26:42
  You know, I think the thing that you brought up here too is the key part.
• 26:45
  Like if you become humble enough to say, I need, I lack something, you open yourself up to this idea that, okay, what books, what podcasts, where can I go around people that can potentially give me some critiques that show me the next level?
• 26:59
  And- Yeah.
• 26:59
  Yeah.
• 27:00
  It's very different than the pride of doing the work, the pride of teaching someone is, I've gotta change myself to be able to attract the type of people that I can never attract.
• 27:09
  And this was like my big humbling thing a few years ago, to be able to attract talent when it comes technically from really good software companies,
• 27:19
  And to like what to thought of them was like, it's a influencer run business.
• 27:23
  It's like, oh, like whatever.
• 27:26
  And to be able to track them, it's like, oh, my goodness, I've got to get really clear on it.
• 27:29
  What is our vision?
• 27:30
  What are we doing?
• 27:30
  Why are we doing it?
• 27:31
  How does this all play together?
• 27:33
  How does their role play into it?
• 27:34
  What's the metrics of success?
• 27:36
  How long is this going to take?
• 27:37
  And that forced me to like it was very humbling.
• 27:40
  It was also publicly humiliating because like it was publicly showing my my incompetencies.
• 27:46
  But
• 27:48
  I wish to anyone that is hitting their head up against that $1, $2, $3 million marker to be able to find great people that can work inside the organization and take on that management from them.
• 27:59
  Yeah.
• 27:59
  This whole idea of, and I have this recollection, maybe in the very beginning of doing this podcast together, we talked about this idea that some people, and I don't even know how to word it, but they're just apprehensive or they feel like it's wrong that they've got to do all this learning.
• 28:14
  I don't, I, I, there was some way that you worded it where people kind of shy away from it or feel like they're underperforming or something.
• 28:22
  And
• 28:24
  Where I'm going with this is when it comes to leadership or it comes to anything around growing the business, this idea that we should somehow just know what to do or just figure it out is just nonsense.
• 28:36
  And I think one of the things that we forget is that everybody else running an incredible company...
• 28:44
  went through the exact same process.
• 28:46
  They didn't just figure it out.
• 28:48
  They learned from somebody.
• 28:49
  And an example that I might've used the first time we talked about this is you take somebody like a Mark Zuckerberg who founded Facebook, who started really young.
• 28:56
  His first investor was Peter Thiel.
• 28:59
  Peter Thiel had done PayPal and so many other things.
• 29:01
  Like these guys didn't just come in and say, hey, Mark, here's half a million bucks, which I think is what Peter invested.
• 29:07
  They're,
• 29:07
  Good luck.
• 29:08
  No, he had guys that had already built massive things right there coaching him.
• 29:14
  Like, do this.
• 29:15
  Think about this.
• 29:16
  Maybe you need to handle it this way.
• 29:17
  Probably wouldn't talk about it that way.
• 29:19
  Then he had a coach.
• 29:21
  These guys have coaches, executive coaches.
• 29:25
  In even corporate America, people have executive coaches that coach them into you become a senior VP, you get an executive coach.
• 29:34
  This is how the world works.
• 29:35
  If you're a sports person, you get a coach.
• 29:37
  Everything's done by all the highest performers have coaches.
• 29:41
  And so anything that if you ever have this feeling like this is a waste of money or this is dumb, I should just be able to figure this out or should be able to muscle my way through it or I'm a lesser person because I'm asking for help.
• 29:56
  There's almost no model in the world of high success that didn't also come with some version of coaching and learning and reading, etc.
• 30:05
  So that's just a critical idea to cast out of your brain if you feel self-conscious about going down this road of learning.
• 30:14
  I think the other thing too is identify that your circle that you might be in might also be capping you because you don't see a good leader.
• 30:21
  And so one of the biggest things I have to do is I had to consciously ask myself, what are lead, what are examples of leaders that I know that I want to emulate?
• 30:28
  And so there was five or six that I selected.
• 30:31
  One of you, you were one of them that I identified certain traits that I was like, that is a key ingredient to what I think a leader should look like.
• 30:39
  And for you, it was your even keelness, whether or not it's just on the surface or in hut.
• 30:44
  No, no, it's legit.
• 30:46
  I think I told you my wife thinks it's too even kill.
• 30:49
  She wants more emotion.
• 30:51
  So, so like identifying those traits and then being like, I will be a student of that trait for, from that person.
• 30:57
  Cause I need that skill.
• 30:59
  And, uh, sometimes it means looking outside of your current group.
• 31:02
  Cause a lot of times if you're the biggest one in the, if the biggest fish in the pond, you might just be in the wrong pond.
• 31:08
  Yeah.
• 31:08
  That makes a lot of sense.
• 31:10
  All right.
• 31:10
  Number two,
• 31:11
  Yeah, my number two's got a lot of similarities.
• 31:13
  So I'll kind of do this.
• 31:16
  Well, I'll end up saying some similar things in maybe just a slightly different way.
• 31:20
  But on this one, I went with this idea that an operations manager, which is something we've talked about a million times, but again, there are truths.
• 31:33
  There are things that are just the facts.
• 31:35
  This is how you do it.
• 31:36
  But I want to make a bigger point.
• 31:38
  I think the operations manager...
• 31:41
  the COO, those roles progress, is the single most important hire to get you here.
• 31:48
  And the operations manager, and then you have an operations manager, and then you even have a head of operations of the whole business.
• 31:55
  I believe generally the head of operations of the business does more of the running of the business than even the CEO.
• 32:03
  And I tend to think the COO is the most important person in the business.
• 32:08
  I mean, clearly, the leader, the CEO, the visionary, bringing in the deals, like critical.
• 32:15
  It's a partnership between the CEO and the COO.
• 32:17
  But the COO is imperative.
• 32:19
  And for all of us, it starts with an operations manager.
• 32:24
  And the reason I bring this up, and we've talked about 100 times, is because not getting the right person...
• 32:32
  just means you go slower because that stuff's all on you or their mistakes being made.
• 32:37
  There's inefficiencies.
• 32:38
  There's less money available to grow the business.
• 32:41
  Keeping the wrong person for too long slows down the gross growth massively.
• 32:46
  Getting the right person, that hire is probably the single biggest unlock in the entire business.
• 32:53
  I don't think there's any more valuable role that if you get it right, it will be the difference between a business growing quickly or not growing quickly.
• 33:01
  A business being a nightmare to run versus being a great business to run.
• 33:05
  A business that attracts great people and keeps great people versus one that doesn't.
• 33:09
  It's all around this person, this role.
• 33:12
  Yeah.
• 33:13
  And this person, eventually, as the business gets bigger, becomes more than a person.
• 33:17
  It becomes maybe the equivalent of ops managers at different divisions that run different parts of the business.
• 33:24
  And it becomes that COO type person.
• 33:27
  And so this is the hire.
• 33:29
  And if you don't make it, you make the wrong one, you keep the wrong person, you try to fill this while you're also doing everything else, your business will go way slower in the way it manifests itself as you feel stuck for way longer.
• 33:43
  So this is the unlock.
• 33:44
  It's the single most important hire.
• 33:47
  The reason it doesn't get made a lot of the times is because it means...
• 33:50
  that your income has been growing, growing, growing.
• 33:54
  Oh no, got to hire this expensive guy.
• 33:56
  Your income is going to take a dip.
• 33:57
  And a lot of people don't want to take that dip.
• 34:00
  Totally get it.
• 34:01
  Or they're like, well, I'll hire a...
• 34:05
  a kind of okay, kind of good, not much experienced guy.
• 34:08
  So my income won't take that much of a dip.
• 34:11
  And it's, you just pay the price in a different way.
• 34:13
  It's like, so at some point you've got to just, this is a line in the sand kind of higher.
• 34:17
  This is the, I'm either going for it or I'm not going for it in my mind.
• 34:22
  moment in the business and the go for it is I'm going to eat this money.
• 34:27
  I'm going to spend it.
• 34:28
  I'm going to spend up to get the right person.
• 34:30
  And if I make the wrong decision, they're gone fast because it will hurt me bad financially and I'm going to find the next one.
• 34:37
  And you just you get this right.
• 34:40
  And if you get it right.
• 34:42
  The business works.
• 34:42
  If you get it wrong, businesses generally don't don't grow.
• 34:46
  You can get the millions.
• 34:47
  Just it's a lousy business.
• 34:49
  So this one, this one's a big one.
• 34:50
  Um.
• 34:52
  I got a few more things to say on that, but anything you'd offer up on that thought there?
• 34:56
  Yeah, I think even a couple of weeks ago when you were talking about the location I'm starting in Texas, like when you asked, like, what's the one thing that could happen that could knock it out?
• 35:02
  It's like my operations person doesn't work out.
• 35:05
  The only thing that can really derail it is something happening to John.
• 35:08
  Yeah.
• 35:10
  And if that is the crucible.
• 35:11
  That's why I was going to hire him away.
• 35:13
  Exactly.
• 35:13
  As fast as soon as you get it.
• 35:14
  That's like my whole strategy.
• 35:15
  That's right.
• 35:16
  Forget Facebook ads.
• 35:16
  $15,000 bonus.
• 35:17
  That's right.
• 35:18
  You're trying to run Facebook ads to attract that talent.
• 35:20
  Let's go.
• 35:20
  Exactly.
• 35:21
  I figure for like 30,000 bucks, if I do this to you twice, you'll just go back to Washington.
• 35:26
  At least drive up my cost per lead.
• 35:29
  And so if that is the crucible, kind of like your point, like if you can't find good people, that should be where your focus and your attention and your money is being spent.
• 35:37
  If that's the thing that's keeping it one, two, three million and you're like, I wanna get to 10, why are we so A, unwilling to spend the money, but also B, unwilling to put the work in?
• 35:47
  I just see consistently people take three or four applications or a couple of interviews.
• 35:52
  And like when I was finding John, because I knew that was the most important thing.
• 35:56
  I'm talking about over 100 applications I went through and dozens and dozens of interviews.
• 36:01
  And then once I found the ten, I did more and more with them, like multiple layers.
• 36:06
  And if that is a
• 36:07
  identifying it is the constraint i think for anyone that's listening it might be that wilderness of one two three million you're feeling like hey i am i'm making good profit but i do understand this is the hire that cuts that profit potentially by 30 or 40 percent for the next year or two so i can get to the next level is the amount of effort and money that you need to spend on this hire is the unlock but most people underestimate the amount they'll have to spend on that person and the amount of time and energy that needs to be deployed to that thing but if it is the constraint that's where all your time and attention should go
• 36:36
  Yeah.
• 36:37
  Boy, I couldn't agree more.
• 36:38
  Now, the inverse of this one is maybe you're an operations person.
• 36:42
  That does exist.
• 36:43
  We always talk about the operations manager being the best, but maybe this is your thing.
• 36:47
  You're built as a process person.
• 36:49
  You love optimization.
• 36:50
  You're built.
• 36:51
  And it's like, well, this is kind of the role I want to do.
• 36:53
  I'm the best at it.
• 36:54
  Okay.
• 36:55
  That means there's a gap.
• 36:57
  So if you're me, my gap is operations.
• 37:01
  I can do it.
• 37:02
  I could do it.
• 37:03
  I just don't want to do it all the time.
• 37:05
  I'll just slow us down.
• 37:08
  It's not what I'm best at.
• 37:09
  There are people that are absolutely going to be better at me than this role.
• 37:12
  So if I can partner with an operations manager, now me and that person, we're a great team.
• 37:17
  I'm the push, push, push, gas, marketing, sales, let's go guy.
• 37:21
  They're the slow it down.
• 37:23
  Let's make it right.
• 37:24
  Let's fix it.
• 37:25
  Let's not blow up the business.
• 37:26
  Let's not get bad reviews.
• 37:27
  Let's deliver the quality.
• 37:28
  I believe in all those things.
• 37:29
  I agree with them.
• 37:30
  But...
• 37:31
  I am naturally going to want to push, push, push.
• 37:33
  And so I need that counterbalance.
• 37:34
  And I describe it this way to say, well, maybe you're my counterbalance in my example.
• 37:39
  Maybe you're that killer operations person.
• 37:41
  You love it.
• 37:42
  You just want to constantly improve the process.
• 37:44
  Those are, again, the most valuable people.
• 37:48
  Okay, so then you need to hire your gap.
• 37:50
  What are you not?
• 37:51
  Maybe you're not the, I love marketing.
• 37:54
  I love selling.
• 37:55
  I love doing the deals.
• 37:57
  I like motivating the team.
• 38:00
  There's a whole list of things you don't love doing.
• 38:03
  So you need to find that person.
• 38:06
  And this is just like, if I hire an ops person, massive amounts of trust gets deployed into that person.
• 38:13
  They could screw the whole thing up.
• 38:15
  Yeah.
• 38:16
  Well, they could destroy it all.
• 38:19
  It's exactly the same on the sales and marketing side.
• 38:22
  And so you'll feel exactly the same fear.
• 38:24
  It's like, how do I get the right guy?
• 38:26
  So you're going to... Maybe if you're a high process person and you like perfection and order and systems, you're like, these sales guys, all they do is sell stuff.
• 38:35
  They sell stuff we can't do.
• 38:37
  You may be a little turned off to this idea of salespeople, but the sales and marketing function is just as important as your function.
• 38:44
  They need to be paired together
• 38:46
  And you need to find your co-equal.
• 38:48
  You need to find your person.
• 38:50
  And generally, we've talked about this in the past.
• 38:52
  I tend to be a little bit of a fan of really great partnerships.
• 38:57
  That's not the point of this, but partnerships.
• 38:59
  Because a great partnership is one guy or gal is an operator and one is the sales and market vision side.
• 39:06
  Paired together, those teams are amazing.
• 39:08
  Yeah.
• 39:09
  They can be amazing.
• 39:11
  And those partnerships make all this stuff come together when the business is tiny versus when it's $4 million.
• 39:18
  And they just get through stuff so much faster because they had both those people that are very expensive from the very beginning.
• 39:26
  So I just want to make sure the frame is clear.
• 39:29
  Much like my two engines, growth and recruiting, we've got two really key engines when it comes to people.
• 39:35
  One is the sales marketing growth side person, the CEO side, and one is the operations side.
• 39:41
  And the magic is having two really strong people in that area.
• 39:44
  So which one are you?
• 39:46
  Find the other person.
• 39:47
  And hiring both roles, incredibly scary and expensive.
• 39:51
  But they are, as I said, the line in the sand that once you cross it with the right person, things go and your life gets better.
• 39:59
  The other thing that I wanted to say, actually, I'll pause there.
• 40:01
  Anything you'd add about that one?
• 40:03
  No, go ahead.
• 40:04
  All right.
• 40:04
  The other thing where I felt like there were some similarities in what you said is your number two and then mine is
• 40:11
  I was thinking about these phases that you go through and you alluded to it.
• 40:17
  So I think about in the earlier days of the business, you run everything, you answer everything, you do all the work or you do all the work with your team.
• 40:26
  And you get programmed to live your life that way.
• 40:30
  This is what you do every day.
• 40:31
  You are the hero.
• 40:33
  I think you've said it that way or some version of that, Mike.
• 40:36
  You're the guy.
• 40:38
  And it's all on you.
• 40:39
  And there's a lot to be proud of.
• 40:41
  And then the next level transition, I like to think of it as you're transitioning to more of a player-coach scenario.
• 40:48
  Again, this is where I thought we both had some similarities in our number two.
• 40:52
  So you're shifting to this role of you're a player and a coach.
• 40:56
  So player being you're out in the field, you're on the field, you're doing some of the work.
• 41:00
  But you also now also have to play the coach.
• 41:03
  You're the teacher, you're the trainer, you're the encourager.
• 41:07
  You're a coach.
• 41:09
  And so you've got as quickly as you can, you want to take it from being playing in the field the majority of the time to spending most of your time doing the coaching work.
• 41:19
  You still have a somewhat smaller business.
• 41:21
  Part of being the coach right now is also being a little bit of a manager, of course.
• 41:24
  I'm lumping them together.
• 41:26
  But you want as fast as you can get to this place where you're like 80% of the time you're coach, 20% of the time you're player.
• 41:32
  And the example of when you'd be the player, like you're in the field is just the emergencies.
• 41:36
  It's like you it's just like as fast as you can get there.
• 41:40
  It's in my opinion, this is if you want speed, you can decide how fast you want to do these things.
• 41:46
  This is the formula for going faster.
• 41:48
  If you want to get there faster, this is you have to do this faster.
• 41:52
  And so the faster you're in a position where you only have to jump in and be the player in the field is when there's an emergency.
• 41:59
  And then you start to look for like, well, how do I get rid of the emergency so I can be in the field even less?
• 42:04
  And now I'm living as a coach all the time.
• 42:07
  And then I think the next jump in and what will probably happen is for most companies, if you kind of think how this works, you get to being a coach over those in the field.
• 42:18
  the majority of time, almost a hundred percent of time, but you're probably now the player in the office.
• 42:22
  You're the, you're the player selling.
• 42:24
  Like, so then there's the next, you kind of move into the office.
• 42:27
  You're doing a lot of that.
• 42:28
  You're doing all the selling, you're doing all the estimating.
• 42:31
  And you, again, want to go through the same process there.
• 42:34
  You want to start getting to, okay, how can I start bringing people in contractors, uh,
• 42:40
  employees, high contractor work with agencies, whatever the case is, where now you're shifting more and more of even the other side of the business off of you and you're as much as you can becoming more of a coach there, less of a player there.
• 42:53
  And then the next and the final shift that you'll live the rest of your life is kind of this shift from what we'll call a coach to a leader.
• 43:01
  And this is very much what you were talking about.
• 43:04
  Even as a coach, you're a leader.
• 43:06
  Absolutely.
• 43:06
  But what I mean here is now you're a coach or a leader of leaders.
• 43:11
  You're developing yourself and now you're developing your leaders that will be the coach in the field, the operations manager, the office manager, the sales manager, depending on how big you want to take the business.
• 43:22
  And so it's a frame I like to think about.
• 43:24
  You start out doing everything, then you shift to just being a coach.
• 43:29
  most of the time to the people in the field.
• 43:31
  But now you're kind of the player in the office.
• 43:33
  Then you shift more and more of your duties in the office to being the coach over the team.
• 43:38
  And then you shift to building the managers.
• 43:41
  And the managers build the company.
• 43:43
  And that's when it goes.
• 43:45
  If you don't build that, the thing never goes fast.
• 43:48
  You have to eventually build all the people under you.
• 43:50
  And you're the coach just to the leaders.
• 43:52
  And the leaders build the company.
• 43:54
  That's what a company is.
• 43:55
  Other people build it, not you eventually.
• 43:57
  It takes a long time to get there, but that's the progression.
• 43:59
  One of the things you said in the past too is once a business gets past like around $10 million in revenue, it's almost hard to slow the momentum down.
• 44:06
  And I think a lot of times I see from taking the revenue dollar amount away at that size, though, typically it's when this occurs.
• 44:14
  And that is when those mid level managers have been installed, there's a leadership team, the business can run without that genius.
• 44:20
  that is always there, always able to do everything, and it can just operate and it can continue to grow because that momentum now is not just the owner or the CEO, there's that mid-level management that has been established and can actually drive the business forward.
• 44:35
  100%, the magic isn't the 10 million, the magic is what had to be built to get to the 10 million, and the thing that got built is what keeps it going or keeps it growing, 100%.
• 44:44
  It ties a lot in my number three.
• 44:46
  So- Okay, great.
• 44:47
  So for number three, I put morphing from a manager into an architect, and what you're building as the architect is enterprise value.
• 44:56
  And I've been using this a lot recently, and that is like, especially once the business starts kicking off cash, is like, even if you're never gonna sell,
• 45:05
  It is a valuable metric to know because it really is just grading the business as to how well is it run?
• 45:12
  How is it systems?
• 45:13
  How have you been a leader and been able to establish these mid-level managers inside the organization?
• 45:19
  It really reflects in your enterprise value.
• 45:21
  And so enterprise value is simply your earnings times some multiple.
• 45:25
  And so the goal as you get, you start growing the businesses, you're, you're yes, growing your earnings, but the multiple part is really where you have a lot of leverage to grow the enterprise value of the organization.
• 45:36
  And this actually ties back to a video you made a few months ago on five for 50.
• 45:40
  And that is sometimes you, your cashflow might be the same from year to year over the next over three to four years.
• 45:46
  But if the business has been growing it, you've been installing systems, adding in managers, improving it, your enterprise value or the net worth.
• 45:53
  of might have gone double or triple.
• 45:55
  And so you're like, well, I only went from a million to 3 million, but my take home profit because I got my operations manager has still been around 10%.
• 46:03
  It's just still been the same.
• 46:04
  Okay, great, that's your earnings.
• 46:06
  But now the multiple might've gone from a 2X to a 4X, for example, and you've doubled the enterprise value, but that doesn't show up on a profit and loss statement.
• 46:15
  And so one of the things that I've been really encouraging our larger operators to start doing is like you have your revenue, you have your profit, and then you have enterprise value and that enterprise value in the multiple that is assumed with it, I don't really care what metric you use, but it's going to be some synthesis of questions around.
• 46:32
  the quality of your revenue, how involved you as the owner are, do you know your customer acquisition costs, there's 10 or 15 questions that you can come up with a decent range of what that multiple should look like.
• 46:43
  And that's a really good benchmark for am I actually improving the business, even though as I'm growing, my earnings might be somewhat the same.
• 46:51
  And I think the biggest part going from like a manager into an architect and like, how do I build that is finding the people that can do what you've always done in a smaller business, which is identify a problem, identify a solution, and then go and execute on it.
• 47:07
  And.
• 47:09
  You cannot build a $10 million business if you're the only person that can walk into your business, see all the problems, be the only person that can then be like, here's how you fix them, and be the only person that can actually push the ball down the field and get execution accomplished.
• 47:22
  And so whether it be an operations manager, a sales manager, someone in the office manager, there needs to be people that when you're not there, they walk into the business, they can see all the problems,
• 47:31
  the things that are wrong and why you're getting better views and why there's customer complaints and all the issues.
• 47:36
  They can also identify a solution like without having to bring you as the owner in there was a this is what needs to happen.
• 47:42
  It's going to take me six months to fix.
• 47:44
  But here's the solution.
• 47:45
  And this is like next level.
• 47:47
  If they can do all three, actually go and do it.
• 47:49
  And when you're able to find those kind of people,
• 47:52
  and switching from being doing the work, managing the work, but then architecting the business in a way where I'm increasing enterprise value.
• 47:59
  And a huge component of enterprise value is, is the owner required to be there to keep these two engines like you've mentioned running?
• 48:07
  If so, the enterprise value drops dramatically.
• 48:11
  And another part that I've been thinking a lot when it comes to enterprise value is a lot of times you had mentioned a few weeks ago about the thesis when it comes to private equity.
• 48:19
  Does your business have a thesis?
• 48:21
  Does your business have a vision that everyone's driving for?
• 48:24
  We know where we're going, what we're trying to accomplish.
• 48:26
  We know the size of business we're trying to go for, what service we do and what we do not do, what we stand for, what the values of the company are.
• 48:33
  That's the story that gets you the talent that allows you to step into the architect role.
• 48:38
  And so I almost think of it as like a compounding machine.
• 48:41
  Like I need to have this vision to attract the talent.
• 48:44
  That talent then allows me to step into architect mode so they can push the business forward without me being in that manager mode.
• 48:50
  So, sorry, I rambled a little bit.
• 48:52
  No, it's great.
• 48:53
  From an architecture standpoint, you said, you know, you don't want to be the sole architect, like maybe you cast the vision, but you need other people.
• 49:01
  They're going to help architect the business.
• 49:03
  I think I heard you correctly.
• 49:05
  Do you build these people?
• 49:06
  Do you buy these people?
• 49:08
  Or do you hire them?
• 49:09
  Like how do you think about that?
• 49:12
  I don't think I have a perfect answer on this because I think we're still so far away from where I wanna get.
• 49:17
  But like I try to reverse engineer for like, okay, if we hit this goal, would this person have the skill to be able to be in their current role at that size?
• 49:24
  Can they get me here?
• 49:25
  If not, I need to either A, invest into them, get them a coach,
• 49:29
  it pour into them, educate them, get them around the type of individuals they need to gain those skills.
• 49:33
  Or I have to be really clear with them that, Hey, your skills are here and I'm happy, but unless you upgrade those, I'm going to have to eventually hire above you.
• 49:41
  And that was a mistake I made early on is giving people's titles way too high in the organization before it was necessary.
• 49:47
  And then actually have to say like, I'm gonna have to bring your title down because there's another skill here that is required for us to continue growing.
• 49:55
  Yeah.
• 49:56
  Makes a lot of sense.
• 49:58
  Fantastic.
• 49:59
  All right.
• 49:59
  What about yours?
• 50:00
  Last one.
• 50:00
  Ready for my next one?
• 50:01
  Go for it.
• 50:01
  All right.
• 50:02
  So my last one is you are doing all this stuff.
• 50:06
  Hiring people, buying trucks, growing fast, doing your marketing.
• 50:11
  How in the world do you pay for it?
• 50:12
  So when I...
• 50:15
  there's a number of things that are required in my mind to really be able to pay for this growth.
• 50:19
  Cause I think obviously growth costs a lot of money.
• 50:22
  And we've talked about this idea of complexity.
• 50:24
  Complexity is I'm doing a lot of different services or complexity is I'm serving a lot of different areas or I'm serving a lot of different types of clients.
• 50:32
  All those things are complexity and complexity eats even more money.
• 50:37
  It eats more time and it eats more money than a more simple business.
• 50:40
  We've hashed that out.
• 50:41
  We're both in agreement on that.
• 50:43
  And so,
• 50:46
  every business is going to have a different appetite for money and cash.
• 50:49
  And so how are the ways you pay for all this growth and especially fast growth?
• 50:53
  That's what's really more at risk here is fast growth.
• 50:58
  A lot of companies might even be able to do it.
• 51:00
  They just can't pay for it.
• 51:01
  So they don't get the fast growth.
• 51:02
  So last week, we talked about this idea of getting paid super fast.
• 51:06
  I won't rehash all that, but how do you get your money as close to the moment that you actually perform the work as possible?
• 51:13
  And ideally, before you pay the people
• 51:15
  that did the work.
• 51:17
  So, because that just solves so many problems.
• 51:19
  If I got to pay Bob today and then I'm going to get paid in 30 days, I am floating all that money that I could have used to spend on marketing or buy the next truck or have less debt on my line of credit.
• 51:32
  So how do I get paid for Ms. Smith before I pay Bob?
• 51:36
  Just that one change because your labor is in most companies, 40 to 50% of the business or more.
• 51:44
  Because you think about, we'll just think about cogs and gross.
• 51:48
  The field work is probably, we'll call it for most companies, 35 to 50% of revenue, the labor.
• 51:54
  And so if you could just solve that one problem right there, you change everything.
• 51:58
  But that's just part one of thinking about how do you pay for all this growth?
• 52:03
  The other one that's incredibly important, and what I just said is a version of cash flow.
• 52:08
  It's like, it's the flow of money into the business and the flow of money out of the business.
• 52:13
  So we've got income coming in, we've got expenses that have to get paid.
• 52:17
  And I just gave a perfect example of that.
• 52:20
  I have income coming in from Ms. Smith, and then I have an outflow, which is paying Bob, the fellow that did the work.
• 52:28
  And how do I get those as lined up as possible
• 52:32
  Where, again, what I said, I'm either...
• 52:35
  I'm bringing the money in right before I have to pay it or I'm bringing the money in really, really close to when I have to pay it.
• 52:42
  But that cash flow isn't just about labor.
• 52:44
  That cash flow then spreads across your expenses throughout the business that are not labor-related.
• 52:52
  The purchasing of equipment, materials.
• 52:54
  Are you pre-buying materials at the end of the year to save money?
• 52:58
  But that's putting you into a financial jam?
• 53:01
  Or the cash flow of you do pre-pays, but you don't really understand how much money you really have at any one moment because we had all this money.
• 53:09
  It seems like we have tons of money, but then somehow we get to the middle of the year, we have like no money.
• 53:14
  Where'd all the money go?
• 53:15
  That's understanding the cash flows of your business or you take deposits on big jobs.
• 53:21
  Then there's a misunderstanding of how much money do we really have to grow the business with versus how much of the money we have in the bank is already committed to future payroll and future materials.
• 53:29
  Yeah.
• 53:30
  All that stuff right there gets really confusing for a lot of companies that are growing really fast or are running non-simple businesses.
• 53:39
  I like, as an example, construction-based or design-build type companies.
• 53:46
  It gets really confusing around deposits and...
• 53:51
  around phase billing, around material purchases, around when the work's actually going to get performed, how much money do we really have.
• 53:58
  And so unless you have data to understand the cash flows of your business, you are flying so blind, you will get into a world of hurt.
• 54:09
  I have seen it so many times.
• 54:11
  And so if you want to go fast, you got to get paid fast.
• 54:15
  If you want to go fast, you have to really understand how much money do I really have at any moment that is not committed capital to the future.
• 54:22
  Committed as I'm going to have to pay people.
• 54:24
  I'm going to have to buy materials.
• 54:26
  It's money we can actually use to grow this business.
• 54:29
  You got to understand that.
• 54:31
  And then it's the general data, which I won't go into the weeds on that we talk about now.
• 54:36
  How's my CAC?
• 54:37
  Like, what's it costing me to acquire people?
• 54:38
  What's my conversion rate?
• 54:39
  Understanding all that data is imperative to being able to make predictions and to make bets and to make decisions about how to spend money.
• 54:48
  And then the other one I'd add to this, how do you pay for it is...
• 54:52
  There's no way you can not underprice.
• 54:57
  It's very rare that any one of us is going to start a business.
• 55:00
  It's going to be priced perfectly from the beginning because you can price one way in the beginning and you're making great money.
• 55:06
  Life is good, but you can't really yet see all the costs that are coming to the business.
• 55:12
  Mary in the office, the operations manager...
• 55:16
  The trucks don't last as long as I thought they would.
• 55:19
  The mowers don't last as long as I thought they would.
• 55:21
  I'm buying equipment and materials and I have to...
• 55:25
  I have to have all this money up front to buy that stuff and I get paid for it later.
• 55:29
  Back to the cash flow thing.
• 55:30
  There's all these ways that it costs a lot of money to run a business.
• 55:33
  You can't possibly understand those things until you get experienced them.
• 55:38
  And then you're like, wait a second.
• 55:40
  Apparently, I wasn't pricing quite right.
• 55:42
  So as this business grows and grows and grows, you have to make pricing adjustments as you learn.
• 55:47
  That's why I said you have to understand your cash flow.
• 55:50
  That's why I said you have to understand your data.
• 55:52
  That tells you what's going on in the business.
• 55:55
  will have the confidence to like, oh, this business is costing more and more to run.
• 56:01
  We need to keep our prices up so we can hit our gross margin target.
• 56:04
  It's that kind of thing.
• 56:05
  So those are the four legs I think about.
• 56:07
  Getting paid fast, cash flow, data across the business, and then constant pricing adjustments as the business gets to its next level.
• 56:15
  Yeah, I think your point too about being profitable at certain size might not necessarily mean as you grow, you're still profitable because the business demands more overhead many times.
• 56:24
  So the reason I don't get that operations manager is because the drop in profit.
• 56:28
  Well, that might be more of a pricing situation where I need to take a 10% price increase and pass that extra cost along to my customers to be able to afford the thing that allows me to get to the next level.
• 56:39
  Yeah.
• 56:40
  It's why the big companies are generally more expensive.
• 56:44
  It's why when you're a small company and you're entering the market, you're like, they're charging $60 for that or they charge $10,000 for that.
• 56:52
  Those people are just ripping everybody off.
• 56:54
  Yeah, it's because you don't understand the numbers yet.
• 56:57
  One day, if you get big enough, you'll be like, okay, I understand why you need to charge that money.
• 57:02
  And so it's just a part of the learning process.
• 57:05
  And so
• 57:09
  I agree.
• 57:10
  Well, that's been one hour.
• 57:12
  There are, there are taxes in this world and we have payroll tax, we have income taxes.
• 57:16
  We have all these taxes.
• 57:17
  The one tax we have here on the channel is that at the end of this, you put in the comments, what you learned and what your takeaway is and what you're going to execute on this week.
• 57:26
  Like in the next seven days, what are you doing based upon what are the things that was talked about in the past hour?
• 57:30
  That's the one tax for today.
• 57:32
  JP, any closing thoughts before we wrap this up, getting to $10 million, since everyone watching this is going to get to 10 million.
• 57:39
  everybody.
• 57:39
  Yeah.
• 57:40
  You don't know.
• 57:40
  I, uh, no, it's just like, this is where you put your address for those royalty checks.
• 57:45
  Cause once you hit 10 million, that's when you get the real, recurring revenue.
• 57:49
  Well, I'm waiting for those.
• 57:51
  All right.
• 57:51
  Yeah, no, I, nothing just, it's the basics.
• 57:53
  It's showing up in every day and just doing the work and, uh, yeah.
• 57:58
  And we will continue to show up on the podcast another week podcast.
• 58:01
  Thank you all for watching.
• 58:02
  Yep.
• 58:03
  See you next week.