The Home Service Expert Podcast - Applying the Grow, No Grow Strategy to Make Over 20% Net Profit Consistently

Episode Date: April 16, 2021

Kim Archer is the Vice President of Coaching for Business Development Resources, Inc. and the lead trainer for BDR’s financial courses, Accounting & Office Management and QuickBooks for the HVAC Contractor. The architect of BDR’s Profit Launch business planning workshops, she created the templates used to produce hundreds of monthly financial statements, with combined client revenues over 1.8 billion dollars in annual client revenues. In this episode, we talked about team building, coaching, leadership...

So training is essentially, in short, is a transfer of knowledge. I'm just transferring knowledge to you. It's a learning experience. Whereas coaching, what we're really doing is, coaching is more about goal achievement. It's laying out a plan to achieve that vision. It's bringing clarity to the goal. I know I've said that a lot, but there's so many business owners that have not really solidified. They can't see their vision with absolute clarity. And if you can't see it with clarity, how the hell are you ever going to

get there? So the training process is a transfer of knowledge. The coaching process is about mentoring, holding accountable, clarifying, bringing people to the point where they can actually each week Tommy chats with world-class entrepreneurs and experts in various fields like marketing, sales, hiring, and leadership to find out what's really behind their success in business. Now, your host, the home service millionaire, Tommy Mello. Well, welcome back to the Home Service Expert. My is tommy mellow and today i have a guest visiting us from seattle we've got miss kim archer here i'm excited to have you here expert in team building coaching lead leadership development based in seattle business development resources incorporated vice president of coaching since 1997. Kim Rookstra is the Vice President of Coaching for Business Development Resources. She's also the lead trainer for BDR's financial courses, accounting and office management,

and QuickBooks for the HVAC contractor. She is the architect of BDR's profit launch business planning workshops and created the templates used to produce hundreds of monthly financial statements or with combined clients revenues of over $1.8 billion in annual client revenues. Kim, pleasure to have you on today. How's it going in Washington? Oh, it is going great. Thank you, Tommy. Thanks for having me. And I have to say happy birthday since you told me it was your birthday. Oh, yeah. Thanks. You know, 95 was a good year. So, uh, you know, what I'd like to do is just tell us a little bit about your career. You know, I want to hear more about BDR. I want to

hear more about the business development resources and just what you enjoy doing and what brought you to what you do today so um well gosh i've been at bdr for well over 20 years and in the heating and air conditioning industry now for 31 years oh my gosh talk about making me feel old but man i love this love this industry. I started out at college. I got a job with a heating and air conditioning contractor, a HVAC contractor as their bookkeeper. And I drove away from that and I was thinking, what the hell? What's HVAC? I don't even know what that is. And here I am, 30 some odd years later, still in the industry. It's awesome. It's an awesome industry. Home services in general is just fun.

We get to impact people's health, their safety, their finances, their productivity. I mean, just so many good things that we get to bring to our communities. So it's a great industry. Very rewarding. I found out early on how much I really enjoyed just working with the entrepreneurs. You know, the United States, great country, was founded on entrepreneurs. I mean, look around us. I mean, there's hundreds of thousands of entrepreneurs running these small businesses.

And many of them, as some of your podcasts have suggested, you know, we just really don't understand that finance side. We're really good at the trade. We really get it, understand the trades and whatnot. Exceptional at what we do, but we're not really sure how to make money. And so I can't install a heater or an air conditioner or a garage door, but I do understand the financial side. And so my passion, my calling really has been to work with the entrepreneur and really help them achieve their goals, their why, or as Simon Sinek explained in one of his YouTube videos, freedom. How do we get freedom? And freedom comes in many different forms. And one of those happens to be profit. So I'm just super passionate about it.

I love it. Love the opportunity to be able to work with a contractor. Yeah, that's a four-letter word sometimes. People don't like, you know, what I've noticed about contractors is a lot of them have the technician mindset. They spend money as quick as they make it. This morning in my meeting, I said, guys, how many of you have a snowmobile? How many of you guys have a boat? How many of you guys have a motorcycle? And I went through like 10 things and most of the hands were

up. And I said, how many of you guys have a house? Not a lot of people had a hand up. And I said, you know, I call that delayed gratification. And I'm not lecturing you guys, but I said, all those things are depreciating assets. And there's another class called appreciating assets. And I've made a lot of money on appreciating assets. I've made, you know, whether it's the building, the houses, the apartments, and I don't have a boat. I don't have a motorcycle. And I said, I'm not bragging to you guys. I'm just saying that Einstein said it the best, the smartest thing in the world, the best thing in the world, the most powerful thing in the world is compound interest. If it's working for you, if it's working against you, you're in a bad spot.

And there's something about profit. Basically, if they have money money they use it all up they feel like if they got space they'll use it all up and I don't understand it first of all it's hard enough to make a profit why do you spend it but tell me a little bit about your experience with and I'll think of the word I was thinking of but what's the most entrepreneurs because there's a different class there's the guys that are a million there's one to five million there's five probably the twenty and there's a different class. There's the guys that are a million, there's one to 5 million, there's five, probably the 20. And there's probably beyond that. And there's certain class of a hundred million plus. I find that the ones under a million, they have a hard time really getting their first employee. They have a hard time

thinking of systems. They have a hard time not being a firefighter. But what is your take? What has your experience been? Yeah, I absolutely agree. I think that very first, what we call wall in business is very difficult to get through. So that one man shop just starting up and man, Kim, how do I get my first employer? How do I leverage my time? And that's it right there. They don't really understand yet the power of leverage of their time. And so they work and they work and they work and they work and they work, you know, 40, 60, 80 hours a week. They work until they're completely drained. And they're still like, man, what do I do? What do I do? How do I get past this next wall? How come I can't get past this? You know, right now, I know, you know, there's a lot of business owners that are

retiring. And many of these business owners, they never got their business up over a million dollars. They've been working for 40, 50 years in this business and never got over a million bucks. In one example, this client of mine recently purchased a company. The guy just wants to retire. He reached retirement age. He's ready to be done and selling his business for like $30,000. $30,000 after all those years of work and effort. And he's just tired. He wants to be done. And there's a lot of stories out there like that, but it doesn't have to be that way. And so I encourage everybody, every business owner to have a vision. Determine what your vision is.

What is it that you want to be? And don't think small. Thinking small isn't going to get you to that freedom thing that maybe you're really looking to get. You've got to think big. What is that thing that you really want to get? Where do you envision yourself? If you could have anything in the world, where will you be in five years, 10 years, and 20 years? And then once we can clarify that, then we start working on putting together a plan to get there. We just back into it. Well,

great. Now we know where we're headed. How do we get there? And so a lot of times these small business owners, they don't really have clarity of vision nor a pathway on how to get there. They don't understand those stepping stones to be able to get there. And that's where BDR, frankly, that's where we come in. We do, we host, well, this last year, just this last year, we hosted over a thousand attendees through our business planning segments. I lead those sessions and, you know, that's intended to really help these small business owners reach that next level. That's awesome.

You know, I like working with small companies. I like midsize. I like large companies and it's completely, like I said, it's apples and oranges. And it's the things that people ask me because I coach people. It's just a different set of questions. It's like you said, leverage time. The word I was looking for is Parkinson's law, by the way. It's whatever you have, you'll use all of it. But yeah, I think you should always build a company to sell it. And there's a good book called built to sell. And what you really do, people don't understand. They treat their business like a living.

Like the business is my job. It's my living. And they should treat it like their retirement. They're building this object up that the grand finale prize is your business. The problem is you don't pay yourself. You pay yourself what the company makes. So your company doesn't make anything. And you're right.

People work 40 years to get 30 grand for their business, but they think it's worth something. But they don't look at the past. They hate to look at the bank and realize they don't have much money. They don't really make a profit. And this is a good podcast. I'm excited about this because this is something I don't really care if I, if I hurt your feelings, not yours, but the people out there, this is meant to shift the way you

think. Most of the people probably listening are already trying to better themselves. The fact is the people that need this message the most probably aren't trying to read books or listen to podcasts or get audible books. So I hope that this is shared with people that need the message the most. Maybe if you guys listen to this tag, someone that needs to hear this because a lot of business owners need to understand their business, that they put this time, effort, energy, blood, sweat, tears, whatever you want to call it should be a profit center for you and your family and your friends and everybody around you. Yes, absolutely. You know, as a business owner, when we decided to sign that business license or own that business, we gained a responsibility.

We have a responsibility to ourselves. We have to make a profit we have a responsibility to our families we have a responsibility to our team members a responsibility to our communities and you know frankly responsibility to this great nation that we live in and the only way that we can do that is by running and operating a profitable business we're here to contribute to the community. And the only way we can really contribute is to make a profit. And dang it, we have to at least make a 10%. 10% is just base. We really, you know, the opportunities,

businesses goes in cycles. So we have the wall cycles, overhead cycles that we'll go through in business. As we go through business, you know, when we first start our business, we've got this revenue line that's shooting up. And we don't have a lot of overhead when we first started out. We don't have a facility. We got our truck, we got our tools, we're set to go. We don't have any employees. And so at that small stage, we're running and running and running, and we're doing a lot,

as many transactions as we possibly can. And then eventually what comes along is the overhead Pac-Man, right? Now we need a facility and now we need to hire this person. And now I got depreciation and now I got insurance. I got all this overhead that's constantly chasing that revenue. And if I don't see that, or if I don't have a plan to ensure that my revenues will outpace my overheads, I'm going to end up in a position where my overheads and my revenues intersect. And when those two intersect, I'm making zero net profit or I'm losing money. And then I start building debt and then I can't pay off my debt. And I can't figure out how to get out of it now. Now I'm just sitting here and I'm like, how the heck do I ever get out of this? I'm miserable.

I hate this job and this shouldn't be a job. Business is a sport. This is fun. It shouldn't be fun anyway. But oftentimes we just don't know how to get up over that wall and we'll linger there for a long time until eventually it becomes our new normal. My new normal is I don't have any cash in my cash account. Oh, you know, I've had clients tell me this before. They say, oh, Kimmy, you worry more about my company than I do. I'm like, dude, you don't have any cash. We're not making any money. Yeah, I'm concerned about you. We need to make a profit so we can grow this business and you can achieve the freedom that you want or desire. Yeah. It's interesting because people, they don't think about that stuff. And I've always been in kind of growth mode

and I always say it takes money to make money. And I'm willing, I look at things as an investment, not a cost, but if I was negative, I mean, now I don't need to make a 5% month. It's still a monster month, but I want 20%. And we've got a goal of 20%. But I also, people are like, how do you hire such amazing people?

And I'm like, because I give them a lot. I give them a new truck. I give them iPads. I give them good vacations. We upped our PTO to, you could earn up to freaking eight weeks now if you're here for five years or more. I mean, we built a place,

but why is it okay for every other business in the world to have, you could earn up to eight weeks off, but you can't in home service. Well, guess what? We got a charge for that. But we have happy employees. We get the job done right.

And I'm going to raise my prices again and again and again and again. And today I got the, there's this big HVAC company guy that bought this Phoenix garage door company. And I looked at their prices and I was, you know, I consider ourselves kind of the higher end of the, or not the cheapest for sure.

These guys make us look like the penny saver. I'm like, dude, this is good though. This industry needs this. Because they're treating it like HVAC. For some reason, HVAC treats everything, it's like these business owners get together and they're like, we're going to sell units. We pay $2,400 for the unit, but we're going to charge $15,000 because we want to go take

the guys to NASCAR. We want to take them to dinner. We want to buy good equipment. We want to have brand new tools. We want to use service site or a better CRM. And why is that not okay? My question for you, Kim, is why do most other industries say they envy the guy that gets to spend money on Google? They say they're just sales company. They charge way too

much. Why is it that the small and no offense, shitty companies that don't do nice things for their employees, they treat their employees like crap. Why is it that they always say the guys that do the nice things, the guys that always say the guys that do the nice things, the guys that can afford to advertise, that have the nice office, why is it that they always say that they're ripping people off? Wow. Yeah. I believe it's because they don't understand the value model of what we provide for our team members or our clients. I mean, we need to go into business with a heart to serve. So oftentimes when I'm working with or one of our coaches is working with the clients, when they first come to a program with us, we'll go through and we'll do

a value building study with them. What do you do to deliver value? And let's put a dollar amount to that. What is that worth? What is that dollar amount worth to the client? And then we go through, and then I think a lot of these guys really don't understand the cost of doing business. The average cost for service, overhead cost only for a service technician

in the HVAC world is anywhere between $55 and $75 an hour. Cost, overhead, yikes. That's not even counting direct labor. In the HVAC world, it's anywhere between $55 and $75 an hour. Cost. Overhead. Yikes. That's not even counting direct labor, the cost of them. That's a low. Like most of the companies that I've worked with, they got to charge $400 an hour for when they're in the home.

Absolutely. To make even a 10% margin. So people say $400. My lawyer doesn't even make that much money. But you're not paying the lawyer. You're paying the technician, the truck, the overhead, the CSR, the dispatcher, the trainer, the recruiter. You don't know what you're paying for. And if you knew how to do it yourself and do it, but you want our service and we should get rewarded for that. And I got to tell

you this, as I'm honestly, I'm playing the same game and i love playing the sport i love this sport because you know i had the bank in here and they asked me because i'm trying to get a huge line i'm a consolidator now i'm consolidating companies and she said you know your goal is always to sell a new door then even on service both i said no absolutely not my goal is to do the best thing possible for the customer i'm going to do a needs analysis i'm going to ask them the questions and i'm going to do whatever i can to do the best possible thing. If you use your grassroot every day as your front door, you're going to stand there for 10 more years. Then I'm going to give you the best possible outcome. I'm the doctor and I'm just prescribing you what I think is what you need, but I'm going to give you the choice. I'll give you some options,

but I'm definitely going to lean towards what I believe. But if you're a real estate agent, the flip in a house, I'm going to make the door work for you. And I'm going to do what you want and what you asked for. I'm not going to leave the door unsafe or I'm going to make you sign a waiver. But I think people have a hard time with that. They're like, how could he charge for that? I'm like, because we've got a popcorn machine. We've got a hot dog machine. We've got a coffee machine. We've got nice things. And people say, but I can't afford that. Right, Kim? They say, I can't afford that. Right. But I'm like, you'll never be able to. Right. You're right. You'll never be able to. If you don't start charging, you have to know your numbers. And this is where most people don't know

their numbers. And so they think when you're charging, because we're $300, $400 an hour as well. We make good gross profit margins. We got clients making well over 20% net profit consistently, even through 2020. We had some of our clients have the best year ever in 2020. Me. Yeah, I know. Hello. And so we got to be excused. We got to quit making the excuse. You know what? It costs you money to make, I mean, the service you provide costs you money and you have a responsibility to make a profit.

You have a responsibility. For fiduciary responsibility, that's the number one thing for a CEO to his stockholders, which is typically yourself and your family. You have a responsibility right under the law. We'll break it. This is the one of your responsibility to your business is to make a profit. Absolutely. Absolutely. And how do we do that? We do that by really knowing our numbers and knowing where we have to be at for a price standpoint. So we can produce the profit dollars that will allow us to grow.

You have to be profitable to grow. If you're not making money, you can't grow. And you're not going to be able to attract the good talent. As you said, we've got to be able to provide some of these great benefits for our team members so we can attract the best. Yeah. I pride myself. Like I said, these people were just in here and they said, are you having a talent problem? I said, no, I got people lining up. We've got thousands of applicants a month or a week, I should say. And I said, the difference is we do a lot more. I put a lot more back in because I'm, I'm content with what I have. And I said, you know, ultimately it's so much fun when the people feel appreciated. It's so much fun when

they get the love back. And I have a buddy of mine, he's got an HVAC company. He's interviewing his first two guys today. And he goes, Tommy, he goes, I just don't. He said, you want to share with your employees. You talked to me. So last night I called him at 10 and I said, dude, I'm not going to have time tomorrow. So let's go through this. I said, is what can I offer them? I said, number one, they're getting in on the ground floor. You built a really good business for 14 years as a Han Solo. And I said, so what you're going to tell them is I've got a lot of customers that I'm going to protect.

They're not going to get charged the same, but what I'm going to do is I'm going to pay you extra on those customers because there's no acquisition costs. They Trust me. I'm going to have to raise their price a little bit. Number two is I'm going to give you guys a little bit more stake in the outcome, a little bit more pay. And I'm going to give you guys, think of every way I told George, think of every way you could pay these guys. Maybe pay them 20 bucks for a review because you need a lot of reviews. Maybe you could give them self-generated leads, give them a little bit of the action. Definitely tell them if it's their mom, their uncle, or their neighbor, that they can take care of them at a little bit over cost. Because you can't be like, I need to charge full price for everybody. And I said, they're going to have a stake in who

becomes the CSR because you want their input. And he just said, I'm so sick of riding in the truck alone. I'm so sick of having to do this. My body's taking a beating. And I said, dude, your brain's going to take a beating. Because trust me, when you're an owner, you got a lot't buy. You know, that, that is, it's limited belief. It's the fact is because you don't believe it. It's the fact that you are small minded in a way to say, that's not what the industry is charging. Well, I don't give the industry charges. I'm not the industry. I am Tommy Mello. I own this business. I know what I need to survive. And I just tell customers, this is what it is. And I thought, but I, but we're so much different. It's not, I don't even look at this as a garage industry or home service. This is a company that's always perfecting strategies. It's always perfecting tactics, always thinking of better, more lean ways of doing things

that are better performing. And some of it's sales trading, but most of it is you can't sell if you don't believe in it. And if you don't believe it, I'll give you a chance. Kim, if you don't believe with what I'm putting down, I'm going to give you the opportunity to work for my competitor. Yeah. And so it's really important that we understand that we have to get out of the commodity market. Yes. Yes. We can't be a commodity. And so many of us think we're a commodity. Oh, well, you can't charge that. The guy down the road is charging this or they're charging that. You know what? I really don't care. This is about you and your company and the value that you deliver. And so you have to understand what your differentiators are. So once you identify, so that's kind of the value exercise

that we talked about earlier. Once you understand what your value really is and the value is that you bring, then you can start building your differentiators. And when you're building those differentiators, then you can start building that into your scripting, into your mission statement, into your values, into everything. It becomes part of your company's culture is, you know what, we're the badasses, man. And the reason why we're badass is because we do this, this, this, this, and this. And then our customers, everybody just starts automatically coming out of everybody's mouth. And our customers start hearing this from, you know, customers, they don't want to buy cheap. 4% of the customers buy on price, 4%. And those customers,

hopefully you're not advertising to them. And most of them don't own a house. Right. Amen. And if you want to read a good book on really differentiating yourself, it's called Creating Competitive Advantage by Janie Smith. And it's give your customers a reason to choose you over your competitors. Think you know your company's competitive advantage. Think again.

It's not nights and weekends. It's not drug tests and background checks. It's very important things. This book, I got to tell you, it completely changed my mind on what competitive advantages are, but it really gets you to start thinking outside of the box. And I've got books, you know, Kim, I've got a book on every single thing, but it's so important that you can understand what are your differentiators? Because everybody does nice and weak. Everybody's got a rap truck. Everybody's got a four or five star on Yelp or Google. Like those don't make you better. No.

Like that's not what's going to make you charge more. You know, and the deal is people like facts. Out of the last 2,700 doors that we did, 2,698 started on time. The two of which were handled within 24 hours and got resolved. We do a checklist on every single call to make sure that there's no this, no that, no this. Here's the checklist that we actually use. And we're going to do this after we get done. We have a quality assurance team.

I want you to know that we're going to do this after we get done. We have a quality assurance team. I want you to know that we're going to make sure this is done. I want to make sure that when you need a warranty, here's it in fine print writing exactly how everything works. There's no hidden cost. Those are the things that make us different. Yes, absolutely. And that's peace of mind. Go ahead. I'm sorry. And that's peace of mind for the customer. I mean, that's really what they're looking for. We have to deliver on peace of mind. I love this stuff. I can just geek out on this. I know, so do I. But you know, I also love all the other stuff too. So tell me a little bit about grow, no growth strategy. What does that mean?

So grow, no growth strategy is this. So many people feel like in order for them to improve profitability in the company, they've got to do more transactions. They've got to do more business. I just need more business. Just bring me more business. If I only have more business, I would be so much more profitable. Well, no, not necessarily, because you may not be maximizing the opportunities that you have with the transactions you have currently. So the grow, no grow strategy is taking a look at where you're at with an average ticket,

your average service ticket, your average install ticket. And am I leveraging each one of those opportunities to the maximum extent possible? I mean, I've worked with some clients that do these really big revenue numbers, but you go in and you start looking at their average tickets and they suck. I mean, 40, 50 bucks. I mean, hell, you can't make money doing that. And then you look at their bottom line. We think that they're making, oh my gosh, they're doing $30 million a year. They've got to be rolling in the profit. No, they're not. Some of these big companies are making a lot less than what a smaller company is making by leveraging their transactions that

they currently have. So something you mentioned earlier is when you go into the home, you want to go into the home and you want to do the right thing for the customer. You're going to talk to them about their options. You're going to inform, educate, and offer is what you're doing. Inform, educate, and offer. And then you tell them about your prescriptive processes that you use, the checklists that you use. You give them peace of mind. And the next thing you know, they're signing the agreement with you. Heck yeah, I want to do business with you. You are going to do a good job. So when that starts to happen, what happens is you're leveraging that transaction. Instead of walking away from that job with a $1,000 ticket, you're walking away from that job with maybe an $8,000 ticket. And that overhead cost to process

that transaction was the same at $1,000 as as it was at 8,000. But your profit potential difference is huge. So sometimes what we have to do is we just, rather than just going out and getting more transactions, getting more business coming in, sometimes it's best to pause, clarify our systems, clarify our pricing, work on developing our scripting. So then we can drive higher gross profit dollars per transaction, maximizing then our bottom line net profit, building our cash flow. So then we can take growth to the next stage. That's the grow, no growth strategy.

You know, it's interesting. Jay Abraham the other day, you know, I was talking to him and he said, I could grow somebody's profit way faster than I can grow revenue. And what he means by that is it's easy to grow revenue, but profit is just a couple dials. You got to work on your booking rate. You got to work on your conversion rate. You got to work on your average ticket. Take everything.

You know, the Indians, this is a really stupid story, but I just thought of it. But the buffaloes, Indians used to kill a buffalo. There was not a piece that went to waste on that buffalo. I mean, from every single piece of that buffalo got used. I mean, I'm talking about every organ, every piece of the foot, the clothes, everything got used. And if we looked at every single job that we need to make the most out of this, we got to ask for referrals. We got to get reviews. We got to have a video testimonial. We got to make sure they're happy. We got to leave nothing on the table. No rock unturned. We cannot not book the phone call. We got to have a great follow-up system. Oh my gosh. But so many people are like, give me more calls because I want more lay down customers.

But you got to fight for it. The other day I saw something on Facebook about some guy on service side. He was saying it's the best revenue ever. He did 700,000 in a month. And it was a Facebook group. Call booking rate was 47%. And I'm going, I hope that's not right. Because if so, you're in the bed. You're literally in the bed. And people don't understand what a loss leader is.

They don't understand a lot of this stuff. And I look at things and I go, I'm going to pay Uncle Sam or I'm going to grow this business. Each guy, I put $20,000 into when they start. Each new market, I put $22,000 into the building. Just little things like the desks and the ping pong table and the wall art. I mean, it's bigger classes, bigger classes every month. And I'm outfitting more vans, more down payments. And I'm not where I want to be as a percentage. But also, I realize I'm investing in tomorrow.

And I'm really, it's more of a tax strategy, but if I'm hovering, if I want to do 22% and I'm hovering around 10 or 12 or 14, I know that when I slow down, that this thing's going to kick up past 20 and because I got the numbers and I could run those exercises through Excel. Most people say they're not growing at all. They're not investing in their future selves and they still have that low number. People go, how can you charge what you charge and not be at like 40%? I'm like,

because I have five full-time trainers. I have five full-time recruiters. The only company growing needs trainers and recruiters. Only if you plan on failing, would you not have that? You know what I mean? I don't know. It's just an interesting thought. And I love having bookkeepers and accountants and CPAs on the show because there's one thing in school we never talked about, and that's money. How to keep money, how to save money.

A good book I had Michael Michalowicz on here a long time ago, actually two years ago, not that keep money, how to save money. A good book I had, Michael Michalowicz on here a long time ago, actually two years ago, not that long ago, but Profit First. You've heard of Profit First, right? You have. I have. I heard you talk about it. I haven't written it, but I did. I've read it, but I did write it down on my to read list. Cool. Well, we're going to have to talk after you read that. Yeah. Well, you know, I think something that happens in business that people, well, they might miss, it's the growth cycle. So structure grows, structure grows, structure grows. That's how business moves, right? So we put the organizational structure in place and then we work to leverage those assets. And that asset

could be a dispatcher, it could be a CSR, it could be a facility, it could be a truck, it could be whatever it is. But in order to grow my business, I've got to add some structure to it. Once I get that structure there, my overheads might go up and my net profit might go down a little bit. My gross profit should stay the same, but my net profit might drop because I've just invested in the company. But that investment in that company, I didn't hire that service manager just to give away money. I hired that service manager to improve my ability to do more transactions or to leverage the transactions I'm doing now by selling the right stuff. And so next thing you know, you give it a few months, and now all of a sudden that service manager gets leveraged. Technicians have better accessory

sales. Their average ticket has gone up. All these other things have happened. So then what happens, revenue goes up, gross profit dollars go up. The overhead is staying the same because I didn't change that. And now all of a sudden, my profit starts growing. So there's this cycle that we go through. Structure grows, structure grows, structure grows. And also during that process, I think it's really important. Something that we forget is to... Some companies will just go, they'll just grow. Their revenues go up. All of a sudden, they're doing massive transactions. But back here, when they were down here at this stair step down here, they didn't take the time to build out their process

and procedures. And those process and procedures, if they don't get built out and maintained as you're growing, when things get bad, you'll fall all the way back down to the last spot where those process and procedures have been fully developed at. So if you know it, you've grown a very successful business. I'm sure you've seen it. The importance of the process and procedures of systems within the company, checklist, adherence to these processes is so important to profitability. You know, it's interesting. You can't do both. I'm just curious because I think a guy like me, and I'm just, this is a question, but are there companies that could have a staff that could actually start refining? I've got a project manager and I'm just wondering

because there's got to be someone looking at the systems all the time going, can take this out could we add a piece here could we refine this could we shorten the time could we get better inventory it's constant you know one of my favorite core values is always improving it's the first one on here do you think it has to be a cycle where it's structure grow or is it grow and build structure? Do you need to like just stop, go, stop, go? Because I know there's ups and flows. Yeah, yeah, no, I think they can go concurrently, but we have to do it to a plan.

If we're not growing to a plan, we can miss some of the opportunities that we have for developing profit. So I need to structure. I need to have a plan to put the structure in place that's going to support that next tier of growth. And to understand what that is, I really need to lay out a good business plan. And so while I'm adding the service manager, I might still be growing and doing stuff over here at the same time. So it's not necessarily just a structure and then go for it. You're doing it all concurrently.

It's moving together. But you'll reach a point at some point in time in your growth cycle where your overheads aren't increasing anymore, but rather you're improving your revenue, your average tickets, your gross profit dollars are increasing at a faster rate than your overheads are increasing, thereby producing 20% plus net profit. So really understanding, am I maximizing or leveraging every asset that I have in the company? And the asset is there. I mean, it's your facility, like inventory, right?

I mean, you have to have right-sized facilities so you can have the inventory on hand so you can reduce your cost of procurement. Anyway, it all works together. Now, this stuff is gold. I got to tell you, I got a lot of notes. And actually, you just made me think of something awesome. I'm selfishly taking my own notes from my own business. Well, good. Good.

Talk to me a little bit about the benefits of having an org chart as a reference and something that you share with the team. Yeah. So that's another real passion of mine is the organizational chart. Everything starts with the organizational chart. A lot of people, business owners, when they come to Profit Launch, say it's their first time at Profit Launch, which is our business planning worksheet, and they build out this organizational chart. And basically, it's one square. It's just them, or maybe it's three squares. But something I think we need to understand with the organizational chart is it really is a depiction of an accountability chart. Who's responsible for

what? And so when you build out the organizational chart, the organizational chart has, it has all the job roles on the organizational chart, not job descriptions, it's job roles. We have a CEO, the owner, we have a controller, we have a service manager, an installation manager. We have all these different roles that occur in every single company, no matter if you're a one-man shop. If you're a one-man shop, you're doing it all. So we look at the org chart. The org chart helps us map out our growth. And the org chart, it's very similar, but it can change and be different for each and every company

just because of the way their growth goals are and the types of things that they have or markets they're serving. So your chart is, this is where the build out of systems start. So internal systems are CRMs, how leads flow in and flow out and then flow through the company and then hit accounting. The organizational chart shows us where we're headed. It also identifies any skill gaps that we may have that we need to get filled. It also positions us for developing out our company systems for proper communication. I love it.

I got some good stuff there too. I love accountability chart. And when you go to the top of the org chart, you know, obviously I'm the one that's got to talk to the bank. I can't say, you know, my CFO really, he screwed up, sorry. We lost a lot of money.

You know, the guy at the top has to answer the questions but the guy at the top also they're the gal at the top whatever they need to ask the questions of each department head and actually create accountability what i think small owners you know beginning owners they tend to put a lot of accountability on one or two people they say hey you're i know you're the uh you're the office clerk, you're the call handler, you're the bookkeeper, you're the dispatcher. And by the way, I need this, this, this, and this done. And why the hell did you make a mistake? Well, you got to be wearing 25 hats. I'm juggling it up. The only thing I could do is fail. And I really think of Henry Ford when I think of this. I think

about what he did, which is revolutionary. He created a system where there's specialists. It's the assembly line where you're going to be really good at one thing. And you're going to be an expert. You're not going to be a jack of all trades. And so many business owners, they love people that just do everything. But they're not good at everything. And then they wonder why they fail. And then no one wants to work for someone like that, by the way. Yeah. I think it's real important to recognize people's gifts

and put them in positions where they can succeed and go home every day and feel really good. One of the worst things we can do is retain an employee who's not operating well in their position. Because usually the reason if they're not doing well in their position, they're not operating in their own personal gifts. And they go home every day feeling happy and you as an owner go unhappy and you as an owner go home feeling unhappy every day with your performance as well. So sometimes the best thing we can do is give them freedom, release them from that position and let them go find something that's going to really be fulfilling for them. I do think in a small business, as you were alluding to, is in a small business, you're right.

You hire that office staff finally. And now that office staff is reception, accounting, CSR, dispatch, warehouse. I mean, they're doing it all. And they can't maintain that for very long. They'll start to get burnout. And this is a very important reason on why it's so important to have a business plan in place. Clarify your vision, develop a plan to get there because you know what? You need your team members to come along. And if you're not growing your company, eventually your team members are going to say, I'm going nowhere here. I'm going to leave and go find another job. And then you start getting in that cycle of where you can't retain team members. And it's pretty

dang expensive to replace a good team member. And I think a lot of times the team members fail. And I always give the analogy of there's a rookie that comes out of college and goes plays for a coach and a NFL team. And he might not be very good because the coaching sucks. And then five years later, he'll go play for another coach that actually used him and understood the way and trained him in a better way. A lot of us, we don't have a manual. We don't teach people how to play the game. We don't teach them how to succeed. We don't think with them, what's in it think with them what's in it for them what's in it for me and i think that's a big mistake with owners is they go why won't this person work their ass off for my business right they don't care about your business they don't care about your success they care about their family and their success and until you can start thinking

that they're going to just work their butts off they should be working 12 hour days they should be doing this for me they should be doing this they just don't get well they're going to just work their butts off. They should be working 12 hour days. They should be doing this for me. They should be doing this. They just don't get it. Well, they're not an owner. There's a reason you have owners. There's a reason why you're accountable. And guess what? If business was easy, everybody would be doing it.

Right. People go, why can't they just think like me? Well, if they did, they'd be your competitor. And people are like, well, how do you get people to do the right thing? You create accountability, checks and balances. It's not what you expect, but give them a reason to win. Share with them a little bit and you'll watch what they'll do. They'll bend over backwards.

They'll give up their pay during COVID because they say, look, I've got money. Let's get through this hard time. Lots of people did that for me. We're a big company. I didn't need to do it. We were planning on taking some people up on the offer, and my COO did it, and I did it.

But at the end of the day, we lucked out. We went through it unscathed and actually grew. But I got a really good question here that I really like is the difference between training and coaching. What is the difference? So training is essentially, in short, is a transfer of knowledge. I'm just transferring knowledge to you. It's a learning experience. Whereas coaching, what we're really doing is coaching is more about goal achievement. It's laying out a plan to achieve that vision. It's bringing clarity to the goal. I know I've said that a lot, but there's so many business owners that have not

really solidified. They can't see their vision with absolute clarity. And if you can't see it with clarity, how the hell are you ever going to get there? So the training process is a transfer of knowledge. The coaching process is about mentoring, holding accountable, clarifying, bringing people to the point where they can actually achieve success or whatever their goal, whatever their definition of success is. Oh, God, I love that. I love that. The transfer of knowledge versus goal achievement and clarity. i'm a big fan of a scorecard in every department and i love it because the scorecard tells everybody how they're playing the game you know the one thing i know when i drive i got an eye on believe it or not i look at the

thermostat i've blown a few engines in the past although my truck now isn't at any issues i look at the gas because i ran out of gas before. I look at the speed limit because I've gotten speeding tickets. I look at all the signs because I need to stop and go and pay attention to traffic. These are my signs. And everybody should have a scorecard. And the hard part is getting to the point to automate it and using technology. And I'll tell you who are the badass black belt CEOs and COOs and CTOs are the guys and gals out there that learn how to leverage technology to run their business. And it's very few and far between, but once you do both,

it's amazing what can happen. And very few business owners that I know have adopted technology to the nth degree and also using technology to find out who their avatar is i mean they don't even understand who their clients are they say a track air conditioning anybody with a unit right no that's not it the smartest business owners in the world can narrow it down way more than that. They could go to the next, the next, the next, the next. They could say a 550 credit score, not a 750. They could say they know the age of the home is this year's old. They know everything. And then they start advertising to their avatar. And some of us, we call it spray and pray. We do whatever we can and we hope it sticks. Yeah. Yeah. I love the idea of scorecards. I am all about scorecards. And I think,

you know, everybody in your company has a number. Everybody has a number that they need to hit and we need to find one, you know, everybody should have a number and those scorecards and scorecards and financials are a little bit different. But one thing I like about the financial statements is that, you know, that's the big scorecard where it brings it all the whole company together. But, you know, it's an unbiased judge of operations. There's no emotion attached to a financial statement. And so this is where you can sit down and you look at a departmentalized financial statement and it's just black and white right there, man. Hey, that department's failing,

or this department's succeeding, or this is our revenue per ticket. All these different indicators come off those financials. And our unbiased judge of operations, super important to have a scorecard. And even more important is to, I've come across a lot of companies, they'll have a scorecard. And even more important is to, I've come across a lot of companies, they'll have a scorecard or somebody told them you should track this KPI or this number or that number. And pretty soon they just end up with so many numbers. And they don't even know, they don't even know what's important. I mean, what is a real important number? What should I really be looking at? And they think it lost in all the data. So having somebody that can take that

and really drill that down to the important numbers to be looking at every day. It should be a story. And I'll tell you what I look at data. I don't think you should have any more than five KPIs per department. And I should be able to say, just a quick story. Hey, dude, you're actually the best of the best, but here's what I'm going to challenge

you to do. Better your best. You're your own worst enemy now, because now we're going to set a bar bigger because you're the only one that can do it. You're number one in the company. I'm coaching my top guys more than I'm coaching my bottom guys, because they've got the ability to, they're coming up with innovations. And so many people focus on the bottom 20%.

Yeah. What if you focus on the bottom 20%. Yeah. What if you focus on the top? What if you get these people the cream of the crop? And I started scoring my technicians and I also started scoring my customers. And I score them beforehand. And that's a tough thing to do, but we figured it out.

And when we match up the scores, the highest customer rating gets the highest technician. You find money that never existed because these are finance buyers. This is about finance salesmen. And the ticket ends up bigger and the customer's actually happy. It's amazing how that works. We go out all the time to warranty calls and I'll have one of the higher rated technicians run a call and they'll be like, I love running this guy's calls.

The customer bought a new garage door. He didn't even offer it. You know, there's three people in the line here. You've got you, your company, and the customer. Most winners always focus on themselves and you. The people that don't do well, they focus on the company and the customers are the problem. That's one thing I realized. I realized that the first

month in business, we went out, taught a guy how to do the work. Two months later, he goes, yeah, customers just aren't buying rollers. It's just a bad economy. I went out and sold rollers to every customer for the first two, every single job. It was a no brainer. I'm like, dude, this is bad. And everybody wants to blame everything else. Right. I just love accountability. What are the usual reasons why breakdowns of communication happen in the team? I love the five dysfunctions of a team. Oh, gosh. Well, I think, you know, we have a saying here at BDR, verbal communication is

non-communication. We've got to meet with each team member and talk with them and have them, invite them to reflect that information back to us. Because sometimes the words that we're speaking or what we think we're communicating is not what we're communicating. What we said is not what they heard. So we ask them, hey, can you just go ahead and reflect that back? I do that with clients every day when I work with them. They'll share something with me and I'll say, okay, let me just reflect that back to you. Make sure I've got good understanding of what you're trying to communicate to me. And there's a lot of clarity that comes through that process of reflecting the communication. Once that communication is clarified and everybody understands, it needs to get in writing. It needs to be documented,

summarized, and sent out. So people say, oh yeah, that's exactly what we talked about. Totally agree. And as soon as we get that information in writing, now they own it. With deadlines and maybe even have them sign it. Yes, absolutely. Or reply back to the email, whatever it it might be we sign all of our meeting agendas when i haven't i have coach to coach meetings with my senior leadership team and we finish i type the notes up and we read through it we get agreement and i say hey is there anything on here that you don't understand or you're not in agreement with and then nope and then we're done you know we've got to get those written signatures. That's

commitment. Just like getting a signed proposal when you go out on a job. If you don't get a signature on that proposal, that customer is still out shopping. There's no commitment. Oh my gosh. I love that. I also think our words really matter. BDR, we have our own... We like to say it's our own language. We've developed our own internal language, so to speak, and we share it among our clients. So when we get out and we're talking with other people in the industry and they start talking BDR language, we know they're part of the family. They're part of the tribe, you know, but I think having a shared glossary of terms or this is the meaning of this, let's put

that down or the values. You showed me your values on your mouse pad there. You know, those shared values are a very important component of communication as well. I also think from a leadership standpoint, one thing that's real important is to know your audience. When you're meeting with somebody, there are certain people that I can meet with and I can be, ah, let's go kill, you know, and, there are certain people that I can meet with and I can be, let's go kill, you know? And then there's other people. If I go into a conversation with that much, you know, really aggressive, they're just like, oh my gosh, I can't do this.

I'm told I can be a little bit intense. So I really have to, as a leader, I really have to watch how I enter into the room, so to speak. How do I enter into the communication with the person I'm meeting with? That is very, very true. And, you know, I could be a little abrupt. You know, what I've always heard is you want to kind of mirror your people that you're talking, whether it's a client or an internal customer or your employees, is if they're

soft-spoken, you might want to speak a little slower. But if they're like, hey, listen, all I want to do is get my garage door fixed. I need to get this done. I need to, you can speed up a little bit. And if they're loud, be loud. If they're super quiet, don't scare them. And a lot of people don't do that mirroring technique.

Yeah. And it's important with your team members, you know, not just in the sales process, but with your team members. And because, I mean, really,, really, in the end, what we're doing is where you have your sales team that go out and they sell the jobs and they're working with the customers directly. But our job here is to influence our team members to follow us. So it's a sales process, really. We're still in sales. It's just a different audience that we're selling to, our own team members. Can you tell me one story? And then we'll ask some closeout questions.

But just a story, maybe how you guys have worked with the clients and maybe a few breakthroughs that they've had that you've just seen them go from zero to hero, from nail it to scale it, just like, like boom they figured out and i'd love to know your your insight on what those key elements were that caused it to take place well i certainly have a lot of stories i've been doing this for a while so and that wasn't in my notes so i'm trying to find something here quickly but there are a couple. I don't know. This is completely sporadic. That's totally okay. So there are a couple of stories. So one story, there was a client that had attended one of our training classes. We do training classes all over the United States. And we also have a BDR university. Somebody had attended this class and this guy owed $700,000 in payroll taxes to the IRS.

He's doing about $2 million a year in revenue. Yeah. He was about dead. And so I flew out and did an onsite with him, went to his place of business, complimentary. And we really, we just got into the numbers and really started talking to him about the value of a transaction. $1,000 gross profit per man day or $500 gross profit per man day, or you have a choice to make $3,000 gross profit per man day

on that same transaction. You don't need any more transactions. That one transaction, it's your choice. It's not anybody else's. You've got to fix your pricing. We always say at BDR, fix sales first. You go in and somebody's hurting, we go in and we fix sales first. And so oftentimes we just don't believe, we think we're a commodity and we don't get out there and separate, differentiate ourselves and realize the true value that we're bringing to that homeowner. If we really had heartfelt care and concern for our neighbor, we would offer them everything that we had. We would educate and form an offer. So he took that and he went out with that. We went and we assisted him with, provided some advice on his cashflow. How much could he afford to pay the IRS every month? We developed out a

plan. And it was two years ago. I'm sorry, I'm going to tear up. It was two years ago in June. He called me and said that he was making his final payment to the IRS. Oh, that's awesome. I know. Pretty badass, huh? But it all started with pricing. He had to believe in himself and believe in the power of educate, inform, and offer. Pretty incredible. I say this often, but this thing is definitely having a part too. I interrupted you a few times. This is what I need. I need more counseling from you. I just love the little things.

A lot of this stuff has just come second nature to us, but we can't put a word on it or we can't put a process around it. And we know it's kind of like, you know, a lot of guys tell me, hey, dude, i've been doing everything you talk about i just didn't know that i was doing it so it's very cool to kind of put i got so many good notes know your audience repeats up back to me write it down no commitment until it's signed grow the gross profit i got notes of the yin yang here let me ask you this someone wants to reach out to you they need help or just want to talk to you what's the best best way to do that? Well, certainly they can go to our website, bdrco.com, bdrco.com. Also, they can email me directly. I'm happy to be able to take an email. That email is kima.bdrco.com. If I can't assist you right away, I'll get you into contact with

somebody that can. We are here to assist in any way we can, but we have a whole bunch of resources on our website for people to reach out or learn more about our services. Cool. And let me ask you this. I always ask this, if there's three books you'd recommend and they don't have to be financial, maybe not even business. They can be fiction for all I care, but you know, let's not do, um, the point Hill or Dale Carnegie or Michael Gerber, because those are our favorites. I'll let you shoot from the hip here. Well, I love business books.

Usually when I read a story, I fall asleep within about two pages. But you get me in a business book. As a matter of fact, I just came back from vacation. And one of the books I was reading was Mastering Private Equity and Venture Capital. And that was really insightful. It was a very good book. And then some of my favorites are The Leadership Challenge. That's an exceptional book. And then some of my favorites are The Leadership Challenge. That's an exceptional book. It has a couple of different series as well as some workbooks that come along with it.

Basic Economics by Thomas Sowell. That's just really interesting to me. It really helps to understand that capitalism and how it was developed. And oh, look, do you have it? I had the Edward Demings out of crisis thinking of. And then another book that I really like is Traction. Yeah, Gina Wickman. Yeah, Gina Wickman. Yeah, that's a very good book. Very practical things that you can do to get traction in your business,

really develop your leadership team. And then my next read is Profit First. You know what? I'm going to send you my book too. You'll really enjoy Profit First though. I think so many people, what we do in our minds is we use what we have and then we use whatever left over as profit. So basically revenue minus expense equals profit. So basically revenue minus expense equals profit. Well, what he says in the book is revenue

minus profit equals expense. Because when you don't have the money to pay the expenses, you start, you pull your profit out first. And all of a sudden you make do with what you got for your expenses. And so many people learn to spend it all and they're doing it backwards. You got to reinvent your brain. Did you say mastering private equity and private capital? Mastering private equity and venture capital. And venture capital. Yeah. Okay. I'm going to check that out. I love the private equity playbook by Adam Coffey too. That's a good one. Oh yeah, that's a good one. Let me ask you, the thing that I do is just give the listeners just some value, some, maybe it's a go do this today or something inspirational

or whatever you want, but I'm going to give the floor to you to give some final thoughts and take it away for three, five minutes, whatever you need. Well, if I had one thing to say i think develop your vision with clarity and once you gain that vision and now you got to take action on it things aren't going to happen with any magic pixie dust or anything you got to go figure it out well now now that i know what my vision is and i see it with clarity now i need to write a plan to be able to get there. I have to back into it. I have to put it to paper. It's so important. A lot of people think a business plan is nothing more than a budget. It is much more than a budget is the result of the plan and the planning process. I've got to go through, clarify my vision,

figure out the steps I need to take to be able to get there, write the implementation plans, commit to one of those implementation plans, one of those key goals, and then go get that shit done. Go work on it, commit to it and get it done. When you're done, celebrate and then move right on to the next one. But really spend the time to develop your vision and your plan. And, you know, one of the biggest things I'll add to that is, is learn how to prioritize. For some reason, the big thing you need to get done today ends up being the last thing you do, and you put it off till tomorrow. You know, the one thing by Gary Keller just says, it's just a one big thing you need to get done today. The thing that's going to move your

business forward, start with that. Don't say, I'm going to get all these little tasks. Then you start putting out fires. And I talked to a buddy earlier, he's implementing EOS. And my time has been so much more productive because I've always been productive, but my time is just, I'm hitting the big things. And I said, great. You know, when you work on the business, you get so much more done than being in the midst of the business, just watching. Man, it's so many people that are so involved in the day-to-day outcome, not the strategic plan that you've been talking about. And it's very interesting. I got to tell you, I am going to get another session with you because this is, I'm going to be putting another book together.

And a lot of the stuff in here is just, I have a pretty good delegation sheet that I use every single time. It's eight steps and it's great, but I haven't been getting signatures and I've been having some stuff fall through the cracks. So I'm going to go back because you're right. I get a signature on every signature, put your John Hancock or something about it. Right. And a couple of months ago, the guys were doing some stuff. So I actually wrote

it down. I put my commitments to you guys. And then your commitment said, I may, I initialed everyone myself. There was like 10 from me and my signature. And I said, I want you to initial every single thing. And it changed the outcome. So I got to tell you, Kim, you're excellent. I really appreciate it coming on. Oh, thank you. Thank you. It's been a great pleasure to be able to meet you, talk to you. I'm excited to talk again. We will. I promise you I've set it up and just such a ball of energy and knowledge. Really appreciate it. Check out that book. I will get you on here. Maybe next month I'll have Brie reach out. She's my assistant and Gianni and Hannah and everybody. So thank you very much.

Tons of value. I appreciate you. All right. Appreciate you too. Thank you. Enjoy your evening. All right. Happy birthday. Thank you. Hey guys, I just wanted to thank you real quick for listening to the podcast. From the bottom of my heart, it means a lot to me. And I hope you're getting as much as I am out of this podcast. Our goal is to enrich your lives and enrich your businesses and your internal customers, which is your staff. And if you get a chance, please, please, please subscribe.

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